<PAGE> 1
As filed with the Securities and Exchange Commission on October 30, 1997
Securities Act File No. 33-27489
Investment Company Act File No. 811-5775
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /___/
POST-EFFECTIVE AMENDMENT NO. 27 / X /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /___/
AMENDMENT NO. 30 / X /
Sierra Trust Funds
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
9301 Corbin Avenue
Northridge, California 91324
----------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (818) 725-0200
James H. Overholt
9301 Corbin Avenue
Northridge, California 91324
---------------------------------------
(Name and Address of Agent for Service)
Copies to:
Richard W. Grant, Esq. W. John McGuire, Esq.
Morgan, Lewis & Bockius LLP Morgan, Lewis & Bockius LLP
2000 One Logan Square 1800 M Street, N.W.
Philadelphia, Pennsylvania 19103 Washington, D.C. 20036
It is proposed that this filing will become effective
(check appropriate box):
immediately upon filing pursuant to paragraph (b), or
-----
X on October 31, 1997 pursuant to paragraph (b),
60 days after filing pursuant to paragraph (a), or
-----
75 days after filing pursuant to paragraph (a), or
-----
on [date]pursuant to paragraph (a) of Rule 485
-----
Registrant's Rule 24f-2 Notice with respect to the U.S. Government, Corporate
Income, California Municipal, California Insured Intermediate Municipal,
National Municipal, Growth and Income, Emerging Growth, International Growth,
Short Term Global Government, Global Money, U.S. Government Money, California
Money, Short Term High Quality Bond, Growth, Florida Insured Municipal and
Target Maturity 2002 Funds for the fiscal year ended June 30, 1997 was filed
with the Securities and Exchange Commission on August 27th, 1997.
<PAGE> 2
SIERRA TRUST FUNDS
CROSS REFERENCE SHEET
---------------------
Part A - Information Required in a Prospectus
Location in Prospectus for the Sierra Trust Funds for the
Class A, Class B and Class I Shares of 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,
Form N-1A California Insured Intermediate Municipal Fund, National
Item No. Municipal Fund, Growth and Income Fund, Growth Fund,
Emerging Growth Fund and International Growth Fund
-------------------------------------------------------------
<TABLE>
<S> <C> <C>
1. Cover Page . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . The Sierra Trust Funds Family at a Glance; Summary of
Sierra Trust Funds Expenses
3. Condensed Financial Financial Highlights; Performance Information
Information . . . . . . . .
4. General Description of The Sierra Trust Funds Family at a Glance; Organization;
Registrant . . . . . . . . Sierra Advisors, Its Affiliates and Service Providers;
Investment Principles and Risk Considerations;
Securities and Investment Practices
5. Management of the Fund . . . The Sierra Trust Funds Family at a Glance; Organization;
Sierra Advisors, Its Affiliates and Service Providers;
Breakdown of Fund Expenses
5A. Management's Discussion of Not Applicable - Disclosure in Annual Report
Fund Performance . . . . .
6. Capital Stock and Other The Sierra Trust Funds Family at a Glance; Organization;
Securities . . . . . . . . Dividends, Capital Gains and Taxes
7. Purchase of Securities Ways to Set Up Your Account; How to Invest in the Funds;
Being Offered . . . . . . . How to Sell Shares; Transaction Details; Exchange
Privileges and Restrictions
8. Redemption or Repurchase . . How to Invest in the Funds; How to Sell Shares;
Transaction Details; Exchange Privileges and Restrictions
9. Pending Legal Proceedings. . Not Applicable
</TABLE>
(i)
<PAGE> 3
Location in Prospectus for the Sierra Trust Funds for the
Class A and Class S Shares of 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
Form N-1A Intermediate Municipal Fund, National Municipal Fund, Growth
Item No. and Income Fund, Growth Fund, Emerging Growth Fund and
International Growth Fund
-------------------------------------------------------------
<TABLE>
<S> <C> <C>
1. Cover Page . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . The Sierra Trust Funds Family at a Glance; Summary of
Sierra Trust Funds Expenses
3. Condensed Financial Financial Highlights; Performance Information
Information . . . . . . . .
4. General Description of The Sierra Trust Funds Family at a Glance; Organization;
Registrant . . . . . . . . Sierra Advisors, Its Affiliates and Service Providers;
Investment Principles and Risk Considerations; Securities
and Investment Practices
5. Management of the Fund . . . The Sierra Trust Funds Family at a Glance; Organization;
Sierra Advisors, Its Affiliates and Service Providers;
Breakdown of Fund Expenses
5A. Management's Discussion of Not Applicable - Disclosure in Annual Report
Fund Performance . . . . .
6. Capital Stock and Other The Sierra Trust Funds Family at a Glance; Organization;
Securities . . . . . . . . Dividends, Capital Gains and Taxes
7. Purchase of Securities Your Account; Ways to Set Up Your Account; How to Invest
Being Offered . . . . . . . in a SAM Account; How to Sell Shares; Transaction
Details; Exchange Privileges and Restrictions
8. Redemption or Repurchase . . How to Invest in a SAM Account; How to Sell Shares;
Transaction Details; Exchange Privileges and Restrictions
9. Pending Legal Proceedings. . Not Applicable
</TABLE>
(ii)
<PAGE> 4
Form N-1A Location in Prospectus for the Sierra Trust Funds for the
Item No. Class A Shares of the Target Maturity 2002 Fund
-------------------------------------------------------------
<TABLE>
<S> <C> <C>
1. Cover Page . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . The Target Maturity 2002 Fund at a Glance; Summary of
Fund Expenses
3. Condensed Financial Financial Highlights; Performance Information
Information . . . . . . . .
4. General Description of The Target Maturity 2002 Fund at a Glance; Organization;
Registrant . . . . . . . . Sierra Advisors, Its Affiliates and Service Providers;
Investment Principles and Risk Considerations; Securities
and Investment Practices
5. Management of the Fund . . . The Target Maturity 2002 Fund at a Glance; Organization;
Sierra Advisors, Its Affiliates and Service Providers;
Breakdown of Fund Expenses
5A. Management's Discussion of Not Applicable - Disclosure in Annual Report
Fund Performance . . . . .
6. Capital Stock and Other The Target Maturity 2002 Fund at a Glance; Organization;
Securities . . . . . . . . Dividends, Capital Gains and Taxes
7. Purchase of Securities Your Account; Ways to Set Up Your Account; How to Invest
Being Offered . . . . . . . in Class A Shares of the Fund; How to Sell Shares;
Transaction Details; Exchange Privileges and Restrictions
8. Redemption or Repurchase . . How to Sell Shares; Transaction Details; Exchange
Privileges and Restrictions
9. Pending Legal Proceedings. . Not Applicable
</TABLE>
(iii)
<PAGE> 5
Part B - Information Required in a Statement of Additional Information
Form N-1A
Item No. Location in Statement of Additional Information
<TABLE>
<S> <C> <C>
10. Cover Page . . . . . . . . . Cover Page
11. Table of Contents . . . . . Contents
12. General Information and
History . . . . . . . . . . See Prospectus -- The Sierra Trust Funds Family at a Glance
13. Investment Objectives and
Policies . . . . . . . . . Investment Objectives and Policies of the Funds
14. Management of the Fund . . . Management of the Trust
15. Control Persons and Principal
Holders of Securities . . . Management of the Trust
16. Investment Advisory and
Other Services . . . . . . How to Buy and Redeem Shares; Management of the Trust
17. Brokerage Allocation and
Other Practices . . . . . . Portfolio Turnover; Portfolio Transactions
18. Capital Stock and Other
Securities . . . . . . . . Management of the Trust; see Prospectus -- "Organization" and
"Dividends, Capital Gains and Taxes"
19. Purchase, Redemption and
Pricing of Securities
Being Offered . . . . . . . How to Buy and Redeem Shares; Net Asset Value; How to Exchange
Shares
20. Tax Status . . . . . . . . . Taxes; see Prospectus -- "Dividends, Capital Gains and Taxes"
21. Underwriters . . . . . . . . How to Buy and Redeem Shares; Distributor
22. Calculation of Performance
Data . . . . . . . . . . . Determination of Performance; See Prospectus -- "Performance"
23. Financial Statements . . . . Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
(iv)
<PAGE> 6
This prospectus describes the Class A, SIERRA TRUST FUNDS
Class B and Class I Shares of the GLOBAL MONEY FUND
Sierra Trust Funds (the "Trust"). The U.S. GOVERNMENT MONEY FUND
Trust consists of the fifteen separate CALIFORNIA MONEY FUND
investment funds (each, a "Fund") SHORT TERM HIGH QUALITY BOND FUND
listed to the right and the Target SHORT TERM GLOBAL GOVERNMENT FUND
Maturity 2002 Fund, which is described U.S. GOVERNMENT FUND
in a separate prospectus. The Class A CORPORATE INCOME FUND
and Class B Shares offer investors CALIFORNIA MUNICIPAL FUND
alternative ways of paying sales FLORIDA INSURED MUNICIPAL FUND
charges and distribution costs. Class CALIFORNIA INSURED INTERMEDIATE
I Shares are not offered or sold to MUNICIPAL FUND
individual investors. See "Class I NATIONAL MUNICIPAL FUND
Shares." Please read this prospectus GROWTH AND INCOME FUND
before investing, and keep it for GROWTH FUND
future reference. It contains useful EMERGING GROWTH FUND
information that can help you decide INTERNATIONAL GROWTH FUND
whether the investment goals of the
Funds are right for you. PROSPECTUS
OCTOBER 31, 1997
A Statement of Additional Information
("SAI") about the Trust, dated October SIERRA TRUST FUNDS
31, 1997, has been filed with the P.O. BOX 5118
Securities and Exchange Commission WESTBORO, MASSACHUSETTS 01581-5118
(the "SEC"), and is incorporated 800-222-5852
herein by reference (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. 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. IN ADDITION,
THE CALIFORNIA MONEY FUND MAY INVEST A
SIGNIFICANT PERCENTAGE OF ITS ASSETS
IN A SINGLE ISSUER, AND INVESTING IN
THE CALIFORNIA MONEY FUND MAY BE
RISKIER THAN INVESTING IN OTHER TYPES
OF MONEY MARKET FUNDS.
THE TRUST'S SHARES ARE NOT
OBLIGATIONS, DEPOSITS OR ACCOUNTS
(TRUST OR OTHERWISE) OF, OR ENDORSED
OR GUARANTEED BY A BANK OR ANY
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. THESE SECURITIES ARE SUBJECT
TO INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 7
CONTENTS PAGE
2 THE SIERRA TRUST FUNDS FAMILY
SUMMARY OF EXPENSES & FINANCIAL
HIGHLIGHTS 6 EXPENSES
12 FINANCIAL HIGHLIGHTS The financial
data the Funds will report.
THE FUNDS' INVESTMENTS AND RISK 20 INVESTMENT PRINCIPLES AND RISK
CONSIDERATIONS CONSIDERATIONS Each Fund's overall
approach to investing.
SECURITIES AND INVESTMENT PRACTICES 32 SECURITIES AND INVESTMENT PRACTICES
regarding each Fund's investments
and practices.
PERFORMANCE INFORMATION 48 PERFORMANCE How each Fund's
performance may be measured and
compared.
YOUR ACCOUNT 51 WAYS TO SET UP YOUR ACCOUNT Various
ways to set up your account,
including tax-sheltered retirement
plans.
58 HOW TO SELL SHARES Taking money out
and/or closing your account.
60 EXCHANGE PRIVILEGES AND RESTRICTIONS
Exchanging shares of one Fund for
another.
61 DIVIDENDS, CAPITAL GAINS AND TAXES
SHAREHOLDER AND ACCOUNT POLICIES 64 TRANSACTION DETAILS Share price
calculations.
64 ORGANIZATION How each Fund is
organized and managed.
THE FUNDS IN DETAIL 65 SIERRA ADVISORS, ITS AFFILIATES AND
SERVICE PROVIDERS
67 BREAKDOWN OF FUND EXPENSES How
operating costs are calculated and
what they include.
<PAGE> 8
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"). Please call 800-222-5852 if you would like to obtain
a prospectus and further information about the Target Maturity 2002 Fund. Each
Fund offers four classes of shares, Class A Shares, Class B Shares, Class I
Shares and Class S Shares. Subject to the following restrictions, investors may
invest in one or more of the different classes, which have different sales
charges, expenses and other features.
CLASS A AND CLASS B SHARES. Class A Shares have a front-end sales charge. Class
B Shares have sales charges only if they are redeemed within four or six years
of purchase, depending on the Fund involved. 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.
CLASS I SHARES. Initially, only Global Money Fund, U.S. Government Money Fund,
Short Term High Quality Bond Fund, Short Term Global Government Fund, U.S.
Government Fund, Corporate Income Fund, Growth and Income Fund, Growth Fund,
Emerging Growth Fund and International Growth Fund will offer and sell Class I
Shares. Class I Shares are sold exclusively to the various investment portfolios
of Sierra Asset Management Portfolios ("SAM Portfolios"), an open-end management
investment company, and are not available for direct purchase by investors. SAM
Portfolios offer investors the opportunity to pursue a selected asset allocation
strategy that is implemented through investment, by an investment portfolio of
the SAM Portfolios, in Class I Shares of certain of the Funds. Shares of the SAM
Portfolios are not offered through this prospectus. PLEASE CALL 800-222-5852 IF
YOU WOULD LIKE TO OBTAIN A PROSPECTUS FOR THE SHARES OF THE SAM PORTFOLIOS.
CLASS S SHARES. 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." 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
and further information about 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.
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 (the "Advisor" or
"Sierra Advisors") has overall responsibility for management of the Funds.
However, each Fund has an investment sub-advisor (the "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-
2
<PAGE> 9
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 nondiversified, 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.
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 primarily 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
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 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.
3
<PAGE> 10
STRATEGY: Investing at least 65% of its assets in a broad range of U.S.
Government securities, including mortgage-backed securities.
INVESTMENT MANAGEMENT: BlackRock Financial Management, Inc. ("BlackRock") is the
Sub-Advisor of the Fund.
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 Sub-
Advisor of the Fund.
THE MUNICIPAL FUNDS
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 at least 80% of its assets in intermediate- and long-term
California municipal securities.
INVESTMENT MANAGEMENT: Van Kampen American Capital Management Inc. ("Van
Kampen") is the 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 at least 80% of its assets 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 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 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 at least 80% of its assets in intermediate- and long-term
fixed income municipal obligations.
INVESTMENT MANAGEMENT: Van Kampen is the 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 Sub-Advisor of the Fund.
4
<PAGE> 11
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 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 Sub-Advisor of the Fund.
INTERNATIONAL GROWTH FUND
GOAL: Long-term capital appreciation by investing primarily in equity securities
of foreign issuers.
STRATEGY: Investing primarily in stock of leading companies located outside the
United States.
INVESTMENT MANAGEMENT: Warburg Pincus Asset Management, Inc. ("Warburg") is the
Sub-Advisor of the Fund.
5
<PAGE> 12
SUMMARY OF SIERRA TRUST FUNDS' EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
GLOBAL MONEY FUND U.S. GOVERNMENT MONEY FUND CALIFORNIA MONEY FUND
CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum
Sales Charge
Imposed on
Purchases
(as a
percentage
of offering
price) None None None None None None None None None
-------------------------- -------------------------- --------------------------
Maximum
Sales Charge
Imposed on
Reinvested
Dividends
(as a
percentage
of offering
price) None None None None None None None None None
-------------------------- -------------------------- --------------------------
Deferred
Sales Charge None(2) 5.00%(3) None None(2) 5.00%(3) None None(2) 5.00%(3) None
-------------------------- -------------------------- --------------------------
Redemption
Fees(4) None None None None None None None None None
-------------------------- -------------------------- --------------------------
Exchange
Fees(5) None None None None None None None None None
-------------------------- -------------------------- --------------------------
</TABLE>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management
Fees
(after
voluntary
waivers or
reimbursement)(6) 0.08% 0.08% 0.08% 0.00% 0.00% 0.00% 0.15% 0.15% 0.15%
-------------------------- -------------------------- --------------------------
12b-1
Fees(7) 0.25% 1.00% 0% 0.25% 1.00% 0% 0.25% 1.00% 0%
-------------------------- -------------------------- --------------------------
Other
Expenses(8)
(after
reimbursement) 0.52% 0.52% 0.52% 0.60% 0.60% 0.60% 0.45% 0.45% 0.45%
-------------------------- -------------------------- --------------------------
Total Fund
Operating
Expenses
(after
voluntary
waivers or
reimbursement)(9) 0.85% 1.60% 0.60% 0.85% 1.60% 0.60% 0.85% 1.60% 0.60%
-------------------------- -------------------------- --------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</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 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% contingent deferred sales charge ("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 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 Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD").
6
<PAGE> 13
SUMMARY OF SIERRA TRUST FUNDS' EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
SHORT TERM HIGH QUALITY SHORT TERM GLOBAL
BOND FUND GOVERNMENT FUND U.S. GOVERNMENT FUND CORPORATE INCOME FUND
CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum
Sales
Charge
Imposed
on
Purchases
(as a
percentage
of
offering
price) 3.50%(1) None None 3.50%(1) None None 4.50%(1) None None 4.50%(1) None None
--------------------- --------------------- --------------------- -----------------------
Maximum
Sales
Charge
Imposed
on
Reinvested
Dividends
(as a
percentage
of
offering
price) None None None None None None None None None None None None
--------------------- --------------------- --------------------- -----------------------
Deferred
Sales
Charge None(2) 4.00%(3) None None(2) 4.00%(3) None None(2) 5.00%(3) None None(2) 5.00%(3) None
--------------------- --------------------- --------------------- -----------------------
Redemption
Fees(4) None None None None None None None None None None None None
--------------------- --------------------- --------------------- -----------------------
Exchange
Fees(5) None None None None None None None None None None None None
--------------------- --------------------- --------------------- -----------------------
</TABLE>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management
Fees
(after
voluntary
waivers
or
reimbursement)(6) 0.01% 0.01% 0.01% 0.00% 0.00% 0.00% 0.22% 0.22% 0.22% 0.45% 0.45% 0.45%
------------------- --------------------- ---------------------- ------------------------
12b-1
Fees(7) 0.25% 1.00% 0% 0.25% 1.00% 0% 0.25% 1.00% 0% 0.25% 1.00% 0%
------------------- --------------------- ---------------------- ------------------------
Other
Expenses(8)
(after
reimbursement) 0.64% 0.64% 0.64% 0.65% 0.65% 0.65% 0.53% 0.53% 0.53% 0.50% 0.50% 0.50%
------------------- --------------------- ---------------------- ------------------------
Total
Fund
Operating
Expenses
(after
voluntary
waivers
or
reimbursement)(9) 0.90% 1.65% 0.65% 0.90% 1.65% 0.65% 1.00% 1.75% 0.75% 1.20% 1.95% 0.95%
------------------- --------------------- ---------------------- ------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
=
- -
(8) Other expenses for the U.S. Government Money and Short Term Global
Government Funds, without reimbursements, would be 0.73% and 0.67%,
respectively.
(9) The total fund operating expenses set forth in the foregoing table are
restated to reflect management fees and other expenses after voluntary
waivers or reimbursements. Actual expenses for each Fund may vary from day
to day. The Advisor and/or Administrator anticipate voluntarily waiving fees
and/or bearing expenses during the current fiscal year 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 below are total fund operating expenses absent such fee waivers and
expense reimbursements. Global Money Fund, Class A-1.17%, Class B-1.92%,
Class I-0.92%; U.S. Government Money Fund, Class A-1.38%, Class B-2.13%,
Class I-1.13%; California Money Fund, Class A-1.10%, Class B-1.85%, Class
I-0.85%; Short Term High Quality Bond Fund, Class A-1.39%, Class B-2.14%,
Class I-1.14%; Short Term Global Government Fund, Class A-1.57%, Class
B-2.32%, Class I-1.32%; U.S. Government Fund, Class A-1.33%, Class B-2.08%,
Class I-1.08%; Corporate Income Fund, Class A-1.40%, Class B-2.15%, Class
I-1.15%; California Municipal Fund, Class A-1.24%, Class B-1.99%, Class
I-0.99%; Florida Insured Municipal Fund, Class A-1.50%, Class B-2.25%, Class
I-1.25%; California Insured Intermediate Municipal Fund, Class A-1.30%,
Class B-2.05%, Class I-1.05%; National Municipal Fund, Class A-1.26%, Class
B-2.01%, Class I-1.01%; Growth and Income Fund, Class A-1.50%, Class
B-2.25%, Class I-1.25%; Growth Fund, Class A-1.72%, Class B-2.47%, Class
I-1.47%; International Growth Fund, Class A-1.68%, Class B-2.43%, Class
I-1.43%; and Emerging Growth Fund, Class A-1.74%, Class B-2.49%, Class
I-1.49%.
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, Class B and Class I 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. 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 for, and further information
about, Class S Shares.
7
<PAGE> 14
SUMMARY OF SIERRA TRUST FUNDS' EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CALIFORNIA INSURED
CALIFORNIA MUNICIPAL FUND FLORIDA INSURED
MUNICIPAL FUND INTERMEDIATE MUNICIPAL FUND
CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases
(as a percentage of
offering price) 4.50%(1) None None 4.50%(1) None None 4.50%(1) None None
--------------------- --------------------- ---------------------
Maximum Sales Charge
Imposed on Reinvested
Dividends
(as a percentage of
offering price) None None None None None None None None None
--------------------- --------------------- ---------------------
Deferred Sales Charge None(2) 5.00%(3) None None(2) 5.00%(3) None None(2) 5.00%(3) None
--------------------- --------------------- ---------------------
Redemption Fees(4) None None None None None None None None None
--------------------- --------------------- ---------------------
Exchange Fees(5) None None None None None None None None None
-----------------------------------------------------------------------------------------
<CAPTION>
NATIONAL MUNICIPAL FUND
CLASS A CLASS B CLASS I
------------------------------
<S> <C> <C> <C>
Maximum Sales Charge
Imposed on Purchases
(as a percentage of
offering price) 4.50%(1) None None
-----------------------------
Maximum Sales Charge
Imposed on Reinvested
Dividends
(as a percentage of
offering price) None None None
-----------------------------
Deferred Sales Charge None(2) 5.00%(3) None
-----------------------------
Redemption Fees(4) None None None
-----------------------------
Exchange Fees(5) None None None
------------------------------
</TABLE>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees
(after voluntary waivers
or reimbursement)(6) 0.41% 0.41% 0.41% 0.05% 0.05% 0.05% 0.25% 0.25% 0.25%
--------------------- --------------------- ---------------------
12b-1 Fees(7) 0.25% 1.00% 0% 0.25% 1.00% 0% 0.25% 1.00% 0%
--------------------- --------------------- ---------------------
Other Expenses(8)
(after reimbursement) 0.44% 0.44% 0.44% 0.70% 0.70% 0.70% 0.50% 0.50% 0.50%
--------------------- --------------------- ---------------------
Total Fund Operating
Expenses
(after voluntary waivers
or reimbursement)(9) 1.10% 1.85% 0.85% 1.00% 1.75% 0.75% 1.00% 1.75% 0.75%
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B CLASS I
-------------------------
<S> <C> <C> <C>
Management Fees
(after voluntary waivers
or reimbursement)(6) 0.39% 0.39% 0.39%
------------------------
12b-1 Fees(7) 0.25% 1.00% 0%
------------------------
Other Expenses(8)
(after reimbursement) 0.46% 0.46% 0.46%
------------------------
Total Fund Operating
Expenses
(after voluntary waivers
or reimbursement)(9) 1.10% 1.85% 0.85%
------------------------
</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 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% contingent deferred sales charge ("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 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 Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD").
8
<PAGE> 15
SUMMARY OF SIERRA TRUST FUNDS' EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND GROWTH FUND EMERGING GROWTH FUND INTERNATIONAL GROWTH FUND
CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum
Sales
Charge
Imposed
on
Purchases
(as a
percentage
of
offering
price) 5.75%(1) None None 5.75%(1) None None 5.75%(1) None None 5.75%(1) None None
-------------------- --------------------- ---------------------- ---------------------
Maximum
Sales
Charge
Imposed
on
Reinvested
Dividends
(as a
percentage
of
offering
price) None None None None None None None None None None None None
-------------------- --------------------- ---------------------- ---------------------
Deferred
Sales
Charge None(2) 5.00%(3) None None(2) 5.00%(3) None None(2) 5.00%(3) None None(2) 5.00%(3) None
-------------------- --------------------- ---------------------- ---------------------
Redemption
Fees(4) None None None None None None None None None None None None
-------------------- --------------------- ---------------------- ---------------------
Exchange
Fees(5) None None None None None None None None None None None None
-------------------- --------------------- ---------------------- ---------------------
</TABLE>
=
- -
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I CLASS A CLASS B CLASS I
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management
Fees
(after
voluntary
waivers
or
reimbursement)(6) 0.74% 0.74% 0.74% 0.91% 0.91% 0.91% 0.87% 0.87% 0.87% 0.83% 0.83% 0.83%
-------------------- --------------------- ---------------------- ---------------------
12b-1
Fees(7) 0.25% 1.00% 0% 0.25% 1.00% 0% 0.25% 1.00% 0% 0.25% 1.00% 0%
-------------------- ---------------------- --------------------- ---------------------
Other
Expenses(8)
(after
reimbursement) 0.51% 0.51% 0.51% 0.56% 0.56% 0.56% 0.62% 0.62% 0.62% 0.60% 0.60% 0.60%
------------------- --------------------- ---------------------- ---------------------
Total
Fund
Operating
Expenses
(after
voluntary
waivers
or
reimbursement)(9) 1.50% 2.25% 1.25% 1.72% 2.47% 1.47% 1.74% 2.49% 1.49% 1.68% 2.43% 1.43%
------------------- --------------------- --------------------- ---------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
=
- -
(8) Other expenses for the U.S. Government Money and Short Term Global
Government Funds, without reimbursements, would be 0.73% and 0.67%,
respectively.
(9) The total fund operating expenses set forth in the foregoing table are
restated to reflect management fees and other expenses after voluntary
waivers or reimbursements. Actual expenses for each Fund may vary from day
to day. The Advisor and/or Administrator anticipate voluntarily waiving fees
and/or bearing expenses during the current fiscal year 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 below are total fund operating expenses absent such fee waivers and
expense reimbursements. Global Money Fund, Class A-1.17%, Class B-1.92%,
Class I-0.92%; U.S. Government Money Fund, Class A-1.38%, Class B-2.13%,
Class I-1.13%; California Money Fund, Class A-1.10%, Class B-1.85%, Class
I-0.85%; Short Term High Quality Bond Fund, Class A-1.39%, Class B-2.14%,
Class I-1.14%; Short Term Global Government Fund, Class A-1.57%, Class
B-2.32%, Class I-1.32%; U.S. Government Fund, Class A-1.33%, Class B-2.08%,
Class I-1.08%; Corporate Income Fund, Class A-1.40%, Class B-2.15%, Class
I-1.15%; California Municipal Fund, Class A-1.24%, Class B-1.99%, Class
I-0.99%; Florida Insured Municipal Fund, Class A-1.50%, Class B-2.25%, Class
I-1.25%; California Insured Intermediate Municipal Fund, Class A-1.30%,
Class B-2.05%, Class I-1.05%; National Municipal Fund, Class A-1.26%, Class
B-2.01%, Class I-1.01%; Growth and Income Fund, Class A-1.50%, Class
B-2.25%, Class I-1.25%; Growth Fund, Class A-1.72%, Class B-2.47%, Class
I-1.47%; International Growth Fund, Class A-1.68%, Class B-2.43%, Class
I-1.43%; and Emerging Growth Fund, Class A-1.74%, Class B-2.49%, Class
I-1.49%.
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, Class B and Class I 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. 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 for, and further information
about, Class S Shares.
9
<PAGE> 16
SUMMARY OF SIERRA TRUST FUNDS' EXPENSES
EXAMPLE:
You would have paid the following expenses on a $1,000 investment at the end of
each time period, assuming (1) 5% annual return and (2) reinvestment of all
dividends and distributions.
<TABLE>
<CAPTION>
U.S. SHORT TERM SHORT TERM
GLOBAL GOVERNMENT CALIFORNIA HIGH GLOBAL U.S.
MONEY MONEY MONEY QUALITY GOVERNMENT GOVERNMENT
FUND FUND FUND BOND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
CLASS A(1)
1 YEAR $ 9 $ 9 $ 9 $ 44 $ 44 $ 55
3 YEARS 27 27 27 63 63 75
5 YEARS 47 47 47 83 83 98
10 YEARS 105 105 105 142 142 162
---------- ---------- ---------- ---------- ---------- ----------
CLASS B
(assuming a complete
redemption
at the end of period)(2)
1 YEAR $ 66 $ 66 $ 66 $ 57 $ 57 $ 68
3 YEARS 81 81 81 72 72 85
5 YEARS 107 107 107 90 90 115
10 YEARS(3) 190 190 190 195 195 206
---------- ---------- ---------- ---------- ---------- ----------
CLASS B
(assuming no
redemption)(4)
1 YEAR $ 16 $ 16 $ 16 $ 17 $ 17 $ 18
3 YEARS 51 51 51 52 52 55
5 YEARS 87 87 87 90 90 95
10 YEARS(3) 190 190 190 195 195 206
---------- ---------- ---------- ---------- ---------- ----------
CLASS I
1 YEAR $ 6 $ 6 $ 6 $ 7 $ 7 $ 8
3 YEARS 19 19 19 21 21 24
5 YEARS 33 33 33 36 36 42
10 YEARS 75 75 75 81 81 93
---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
CORPORATE
INCOME FUND
<S> <C>
CLASS A(1)
1 YEAR $ 57
3 YEARS 81
5 YEARS 108
10 YEARS 184
----------
CLASS B
(assuming a complete
redemption
at the end of period)(2)
1 YEAR $ 70
3 YEARS 91
5 YEARS 125
10 YEARS(3) 227
----------
CLASS B
(assuming no
redemption)(4)
1 YEAR $ 20
3 YEARS 61
5 YEARS 105
10 YEARS(3) 227
----------
CLASS I
1 YEAR $ 10
3 YEARS 30
5 YEARS 53
10 YEARS 117
----------
</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.
10
<PAGE> 17
SUMMARY OF SIERRA TRUST FUNDS' EXPENSES
<TABLE>
<CAPTION>
FLORIDA CALIFORNIA
CALIFORNIA INSURED INSURED NATIONAL
MUNICIPAL MUNICIPAL INTERMEDIATE MUNICIPAL GROWTH AND EMERGING
FUND FUND MUNICIPAL FUND FUND INCOME FUND GROWTH FUND GROWTH FUND
<S> <C> <C> <C> <C> <C> <C>
$ 56 $ 55 $ 55 $ 56 $ 72 $ 74 $ 74
78 75 75 78 102 109 109
103 98 98 103 135 145 146
173 162 162 173 226 249 251
--------- ---------- ---------- ---------- ---------- ---------- ----------
$ 69 $ 68 $ 68 $ 69 $ 73 $ 75 $ 75
88 85 85 88 100 107 108
120 115 115 120 140 152 153
217 206 206 217 258 281 283
--------- ---------- ---------- ---------- ---------- ---------- ----------
$ 19 $ 18 $ 18 $ 19 $ 23 $ 25 $ 25
58 55 55 58 70 77 78
100 95 95 100 120 132 133
217 206 206 217 258 281 283
--------- ---------- ---------- ---------- ---------- ---------- ----------
$ 9 $ 8 $ 8 $ 9 $ 13 $ 15 $ 15
27 24 24 27 40 46 47
47 42 42 47 69 80 81
105 93 93 105 151 176 178
--------- ---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
CALIFORNIA
MUNICIPAL INTERNATIONAL
FUND GROWTH FUND
<S> <C>
$ 56 $ 74
78 107
103 144
173 245
---------- ----------
$ 69 $ 75
88 106
120 150
217 277
---------- ----------
$ 19 $ 25
58 76
100 130
217 277
---------- ----------
$ 9 $ 15
27 45
47 78
105 171
---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE> 18
FINANCIAL HIGHLIGHTS
The following information, insofar as it relates to each of the respective
periods ended June 30, 1997 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 Shareholder
Services("Shareholder Services")at 800-222-5852.
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Net Realized Distributions Distributions
Net Asset & Unrealized Dividends In Excess Distributions In Excess
Value, Net Gain/(Loss) Total From From Net Of Net from Net Of Net Distributions
Beginning Investment on Investment Investment Investment Realized Realized From
FUND Of Period Income/(Loss) Investments Operations Income Income Gains Gains Capital
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GLOBAL MONEY
FUND
CLASS A
SHARES
Year
ended
6/30/97 $ 1.00 $0.048 $0.000 (17) $ 0.048 $(0.048) $ - $(0.000)(17) $ - $ -
Year
ended
6/30/96 1.00 0.051 0.000 (17) 0.051 (0.051) - (0.000)(17) - -
Year
ended
6/30/95 1.00 0.049 0.000 (17) 0.049 (0.049) - (0.000)(17) - -
Year
ended
6/30/94 1.00 0.030 0.000 (17) 0.030 (0.030) - (0.000)(17) - -
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
6/30/97 1.00 0.040 (0.000)(17) 0.040 (0.040) - (0.000)(17) - -
Year
ended
6/30/96 1.00 0.043 (0.000)(17) 0.043 (0.043) - (0.000)(17) - -
Year
ended
6/30/95* 1.00 0.042 (0.000)(17) 0.042 (0.042) - (0.000)(17) - -
CLASS I
SHARES
Period
ended
6/30/97* 1.00 0.047 (0.000)(17) 0.047 (0.047) - (0.000)(17) - -
------ ------- ---------- ------- -------- ------- ---------- ------- -------
U.S. GOVERNMENT MONEY FUND
CLASS A
SHARES
Year
ended
6/30/97 $ 1.00 $0.046 $ - $0.046 $ (0.046) $ - $ - $ - $ -
Year
ended
6/30/96 1.00 0.047 - 0.047 (0.047) - - - -
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) - (0.002) - -
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
6/30/97 1.00 0.038 - 0.038 (0.038) - - - -
Year
ended
6/30/96 1.00 0.040 - 0.040 (0.040) - - - -
Year
ended
6/30/95* 1.00 0.038 - 0.038 (0.038) - - - -
CLASS I
SHARES
Period
ended
6/30/97* 1.00 0.045 - 0.045 (0.045) - - - -
------ ------- ---------- ------- -------- ------- ---------- ------- -------
CALIFORNIA
MONEY FUND
CLASS A
SHARES
Year
ended
6/30/97 $ 1.00 $0.028 $ - $0.028 $ (0.028) $ - $ - $ - $ -
Year
ended
6/30/96 1.00 0.029 - 0.029 (0.029) - - - -
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
6/30/97 1.00 0.020 - 0.020 (0.020) - - - -
Year
ended
6/30/96 1.00 0.022 - 0.022 (0.022) - - - -
Year
ended
6/30/95* 1.00 0.020 - 0.020 (0.020) - - - -
CLASS I
SHARES
Period
ended
6/30/97* 1.00 0.028 - 0.028 (0.028) - - - -
------ ------- ---------- ------- -------- ------- ---------- ------- -------
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE> 19
<TABLE>
<CAPTION>
Ratio of Ratio of Net
Net Asset Net Assets, Operating Investment
Value, End Of Expenses to Income to Portfolio
Total End Total Period Average Average Turnover
Distributions Of Period Return(11) (In 000's) Net Assets Net Assets Rate
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$(0.048) $1.00 4.88% $104,302 0.75% 4.78% -%
(0.051) 1.00 5.22 153,786 0.65 5.04 -
(0.049) 1.00 5.06 110,012 0.54 5.08 -
(0.030) 1.00 3.04 53,973 0.45 2.99 -
(0.031) 1.00 3.17 48,283 0.41 3.15 -
(0.048) 1.00 4.95 71,492 0.42 4.90 -
(0.073) 1.00 7.51 92,334 0.30 6.99 -
(0.074) 1.00 7.64 22,834 1.00(10) 7.54(10) -
(0.040) 1.00 4.11 1,314 1.50 4.03 -
(0.043) 1.00 4.40 422 1.40 4.29 -
(0.042) 1.00 4.29 241 1.29 4.33 -
(0.047) 1.00 4.79 79,002 0.50(10) 5.03(10) -
-------- ----- ----- --------- -------- -------- ---
$(0.046) $1.00 4.66% $ 30,519 0.85% 4.56% -%
(0.047) 1.00 4.81 39,031 0.85 4.70 -
(0.046) 1.00 4.67 47,492 0.85 4.63 -
(0.027) 1.00 2.67 30,180 0.85 2.68 -
(0.027) 1.00 2.70 36,802 0.85 2.69 -
(0.044) 1.00 4.45 44,233 0.85 4.43 -
(0.065) 1.00 6.65 62,473 0.86 6.54 -
(0.073) 1.00 7.52 94,789 1.00(10) 7.52(10) -
(0.038) 1.00 3.87 1,801 1.60 3.81 -
(0.040) 1.00 4.02 112 1.60 3.95 -
(0.038) 1.00 3.91 123 1.60 3.88 -
(0.045) 1.00 4.60 1 0.60(10) 4.81(10) -
-------- ----- ----- --------- -------- -------- ---
$(0.028) $1.00 2.81% $ 42,923 0.85% 2.75% -%
(0.029) 1.00 3.00 51,211 0.85 2.94 -
(0.028) 1.00 2.79 48,836 0.85 2.73 -
(0.018) 1.00 1.81 62,500 0.85 1.80 -
(0.021) 1.00 2.07 68,404 0.85 2.06 -
(0.033) 1.00 3.35 94,607 0.85 3.31 -
(0.044) 1.00 4.52 113,392 0.83 4.48 -
(0.046) 1.00 4.64 147,487 1.00(10) 5.07(10) -
(0.020) 1.00 2.03 68 1.60 2.00 -
(0.022) 1.00 2.22 147 1.60 2.19 -
(0.020) 1.00 2.04 79 1.60 1.98 -
(0.028) 1.00 2.89 1 0.60(10) 3.00(10) -
-------- ----- ----- --------- -------- -------- ---
</TABLE>
<TABLE>
<CAPTION>
Ratio of
Net Operating
Investment Expenses
Income/(Loss) to Average
Per Share Ratio of Net Assets
Without Operating Without
Fee Waivers, Expenses Fee Waivers,
Expenses to Average Expenses
Absorbed Net Assets Absorbed
and/or Without and/or
Credits Credits Credits
Allowed Allowed Allowed
by the by the by the
Custodian Custodian Custodian
- ----------------------------- ------------
<S> <C> <C>
$0.044(18) 0.75%(18) 1.15%(18)
0.046(18) 0.65(18) 1.15(18)
0.043 N/A 1.18
0.021 N/A 1.35
0.022 N/A 1.32
0.039 N/A 1.34
0.060 N/A 1.51
0.067 N/A 1.74(10)
0.036(18) 1.50(18) 1.90(18)
0.038(18) 1.40(18) 1.90(18)
0.036 N/A 1.93
0.043(18) 0.50(10,18) 0.90(10,18)
---------- ----------- -----------
$0.043(18) 0.85%(18) 1.19%(18)
0.043(18) 0.85(18) 1.22(18)
0.042 N/A 1.25
0.022 N/A 1.32
0.022 N/A 1.34
0.037 N/A 1.35
0.058 N/A 1.52
0.067 N/A 1.64(10)
0.035(18) 1.60(18) 1.94(18)
0.036(18) 1.60(18) 1.97(18)
0.034 N/A 2.00
0.042(18) 0.60(10,18) 0.94(10,18)
---------- ----------- -----------
$0.025 N/A 1.14%
0.026 N/A 1.14
0.025 N/A 1.15
0.014 N/A 1.27
0.016 N/A 1.29
0.029 N/A 1.28
0.037 N/A 1.48
0.040 N/A 1.64(10)
0.017 N/A 1.89
0.019 N/A 1.89
0.017 N/A 1.90
0.025 N/A 0.89(10)
---------- ----------- --------
- ------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 20
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Net Realized
& Distributions Distributions
Net Asset Unrealized Dividends In Excess Distributions In Excess
Value, Net Gain/(Loss) Total From From Net Of Net from Net Of Net Distributions
Beginning Investment on Investment Investment Investment Realized Realized From
FUND of Period Income/(Loss) Investments Operations Income Income Gains Gains Capital
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHORT TERM
HIGH QUALITY
BOND FUND
CLASS A
SHARES
Year
ended
6/30/97 $ 2.32 $0.14 $ 0.00(12) $ 0.14 $(0.14) $ - $ - $ - $ -
Year
ended
6/30/96 2.35 0.15(15) (0.03) 0.12 (0.15) - - - (0.00)(12)
Year
ended
6/30/95 2.39 0.08 0.02 0.10 (0.08) (0.06) - - (0.00)(12)
Period
ended
6/30/94(3) 2.50 0.09 (0.11) (0.02) (0.09) - - - -
CLASS B
SHARES
Year
ended
6/30/97 2.32 0.12 0.00(12) 0.12 (0.12) - - - -
Year
ended
6/30/96 2.35 0.13(15) (0.03) 0.10 (0.13) - - - (0.00)(12)
Year
ended
6/30/95* 2.39 0.06 0.02 0.08 (0.06) (0.06) - - (0.00)(12)
CLASS I
SHARES
Period
ended
6/30/97* 2.32 0.14 0.00(12) 0.14 (0.14) - - - -
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
SHORT TERM
GLOBAL
GOVERNMENT
FUND
CLASS A
SHARES
Year
ended
6/30/97 $ 2.29 $ 0.15(15) $ 0.05 $ 0.20 $(0.19) $(0.00)(12) $ - $ - $ -
Year
ended
6/30/96 2.24 0.15(15) 0.07 0.22 (0.16) (0.01) - - -
Year
ended
6/30/95 2.34 0.17 (0.12) 0.05 (0.02) (0.00)(12) - (0.01) (0.12)
Year
ended
6/30/94 2.48 0.17 (0.14) 0.03 (0.13) (0.03) - (0.01) (0.00)(12,14)
Year
ended
6/30/93 2.56 0.19 (0.04) 0.15 (0.20) - - (0.03) -
Period
ended
6/30/92(4) 2.50 0.07 0.07 0.14 (0.08) - - - -
CLASS B
SHARES
Year
ended
6/30/97 2.29 0.13(15) 0.05 0.18 (0.17) (0.00)(12) - - -
Year
ended
6/30/96 2.24 0.13(15) 0.07 0.20 (0.14) (0.01) - - -
Year
ended
6/30/95* 2.34 0.15 (0.12) 0.03 (0.00)(12) (0.00)(12) - (0.01) (0.12)
CLASS I
SHARES
Period
ended
6/30/97* 2.29 0.14(15) 0.05 0.19 (0.18) (0.00)(12) - - -
----------- ----------- ----------- ----------- ----------- ---------- - ---------- ----------- ----------
U.S.
GOVERNMENT
FUND
CLASS A
SHARES
Year
ended
6/30/97 $ 9.41 $ 0.65 $ 0.15 $ 0.80 $(0.65) $ - $ - $ - $ -
Year
ended
6/30/96 9.67 0.67 (0.26) 0.41 (0.67) - - - -
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) - - (0.10) -
Year
ended
6/30/93 10.52 0.74 0.16 0.90 (0.74) - - - (0.03)(14)
Year
ended
6/30/92 10.04 0.84 0.49 1.33 (0.84) - - - (0.01)(14)
Year
ended
6/30/91 9.93 0.84 0.13 0.97 (0.85) - - - (0.01)(14)
Period
ended
6/30/90(5) 10.00 0.76 (0.09) 0.67 (0.74) - - - -
CLASS B
SHARES
Year
ended
6/30/97 9.41 0.58 0.15 0.73 (0.58) - - - -
Year
ended
6/30/96 9.67 0.60 (0.26) 0.34 (0.60) - - - -
Year
ended
6/30/95* 9.45 0.63 0.22 0.85 (0.63) - - - -
CLASS I
SHARES
Period
ended
6/30/97* 9.35 0.63 0.21 0.84 (0.63) - - - -
----------- ----------- ----------- ----------- ----------- ---------- ---------- ----------- ----------
CORPORATE
INCOME FUND
CLASS A
SHARES
Year
ended
6/30/97 $10.16 $ 0.76 $ 0.15 $ 0.91 $(0.76) $ - $ - $ - $ -
Year
ended
6/30/96 10.52 0.76 (0.36) 0.40 (0.76) - - - (0.00)(12)
Year
ended
6/30/95 9.87 0.68 0.78 1.46 (0.68) (0.09) - - (0.04)
Year
ended
6/30/94 11.33 0.80 (1.35) (0.55) (0.78) (0.01) (0.06) (0.06) -
Year
ended
6/30/93 10.52 0.84 0.84 1.68 (0.84) - - - (0.03)(14)
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
6/30/97 10.16 0.68 0.15 0.83 (0.68) - - - -
Year
ended
6/30/96 10.52 0.68 (0.36) 0.32 (0.68) - - - (0.00)(12)
Year
ended
6/30/95* 9.87 0.61 0.78 1.39 (0.61) (0.09) - - (0.04)
CLASS I
SHARES
Period
ended
6/30/97* 10.03 0.73 0.28 1.01 (0.73) - - - -
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE> 21
<TABLE>
<CAPTION>
Ratio of Ratio of Net
Net Asset Net Assets, Operating Investment
Value, End Of Expenses to Income to Portfolio
Total End Total Period Average Average Turnover
Distributions Of Period Return(11) (In 000's) Net Assets Net Assets Rate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (0.14) $ 2.32 6.15% $ 13,685 0.82% 6.50% 51%
(0.15) 2.32 5.05 32,440 0.75 6.22 225
(0.14) 2.35 4.42 43,811 0.75 6.10 137
(0.09) 2.39 (0.73) 21,771 0.00(10) 5.70(10) 95
(0.12) 2.32 5.37 2,994 1.57 5.75 51
(0.13) 2.32 4.27 3,437 1.50 5.47 225
(0.12) 2.35 3.64 3,015 1.50 5.35 137
(0.14) 2.32 5.94 2.752 0.57(10) 6.75(10) 51
-------- ------- ------ --------- -------- -------- ----
$ (0.19) $ 2.30 8.86% $ 44,256 0.90% 6.46% 83%
(0.17) 2.29 10.16 65,726 0.85 6.75 87
(0.15) 2.24 2.10 103,986 0.85 7.22 217
(0.17) 2.34 1.10 220,824 0.85 6.87 222
(0.23) 2.48 6.03 215,348 0.73 7.67 294
(0.08) 2.56 5.34 106,609 0.41(10) 8.65(10) 81
(0.17) 2.30 8.05 2,331 1.65 5.71 83
(0.15) 2.29 9.33 1,594 1.60 6.00 87
(0.13) 2.24 1.33 1,297 1.60 6.47 217
(0.18) 2.30 8.64 3,734 0.65(10) 6.71(10) 83
-------- ------- ------ --------- -------- -------- ----
$ (0.65) $ 9.56 8.75% $ 258,553 0.98%(16) 7.04% 389%
(0.67) 9.41 4.34 423,282 0.70(16) 7.34 356
(0.70) 9.67 10.17 459,968 0.95(16) 7.58 226
(0.74) 9.45 (4.59) 666,566 1.05(16) 7.26 27
(0.77) 10.65 8.87 842,277 0.91(16) 6.98 67
(0.85) 10.52 13.74 504,776 0.72(16) 7.67 35
(0.86) 10.04 10.14 166,920 1.12(16) 8.32 54
(0.74) 9.93 6.99 31,430 1.13(10,16) 8.50(10) 13
(0.58) 9.56 7.94 20,370 1.73(16) 6.29 389
(0.60) 9.41 3.56 23,668 1.45(16) 6.59 356
(0.63) 9.67 9.36 10,646 1.70(16) 6.83 226
(0.63) 9.56 9.21 81,920 0.73(10,16) 7.29(10) 389
-------- ------- ------ --------- -------- -------- ----
$ (0.76) $ 10.31 9.23% $ 195,531 1.18% 7.38% 20%
(0.76) 10.16 3.81 298,518 0.95 7.23 25
(0.81) 10.52 15.57 383,642 0.90 8.26 55
(0.91) 9.87 (5.32) 472,519 1.35 7.19 30
(0.87) 11.33 16.64 396,357 1.24 7.67 37
(0.90) 10.52 16.29 169,682 0.97 8.29 8
(0.81) 9.87 7.31 35,478 1.21(10) 9.01(10) 31
(0.68) 10.31 8.41 20,982 1.93 6.63 20
(0.68) 10.16 3.04 24,606 1.70 6.48 25
(0.74) 10.52 14.73 15,145 1.65 7.51 55
(0.73) 10.31 10.37 7,278 0.93(10) 7.63(10) 20
-------- ------- ------ --------- -------- -------- ----
</TABLE>
<TABLE>
<CAPTION>
Ratio of
Net Operating
Investment Expenses
Income/(Loss) to Average
Per Share Ratio of Net Assets
Without Operating Without
Fee Waivers, Expenses Fee Waivers,
Expenses to Average Expenses
Absorbed Net Assets Absorbed
and/or Without and/or
Credits Credits Credits
Allowed Allowed Allowed
by the by the by the
Custodian Custodian Custodian
- -------------------------------------------------------
<S> <C> <C> <C>
$0.13(18) 0.82%(18) 1.45%(18)
0.13(15,18) 0.75(18) 1.42(18)
0.07 N/A 1.39
0.06 N/A 1.61(10)
0.11(18) 1.57(18) 2.20(18)
0.11(15,18) 1.50(18) 2.17(18)
0.05 N/A 2.14
0.13(18) 0.57(10,18) 1.20(10,18)
------------ ----------- -----------
$0.14(15,18) 0.90%(18) 1.51%(18)
0.14(15,18) 0.85(18) 1.47(18)
0.16 N/A 1.44
0.16 N/A 1.52
0.17 N/A 1.55
0.06 N/A 1.92(10)
0.12(15,18) 1.65(18) 2.26(18)
0.12(15,18) 1.60(18) 2.22(18)
0.14 N/A 2.19
0.13(15,18) 0.65(10,18) 1.26(10,18)
------------ ----------- -----------
$0.62(18) 0.98%(18) 1.30%(18)
0.62(18) 0.71(18) 1.45(18)
0.66 N/A 1.59
0.72 N/A 1.34
0.70 N/A 1.34
0.77 N/A 1.39
0.79 N/A 1.57
0.69 N/A 1.89(10)
0.55(18) 1.73(18) 2.05(18)
0.55(18) 1.46(18) 2.20(18)
0.59 N/A 2.34
0.60(18) 0.73(10,18) 1.05(10,18)
------------ ----------- -----------
$0.74(18) 1.18%(18) 1.39%(18)
0.72(18) 0.95(18) 1.38(18)
0.64 N/A 1.40
0.80 N/A 1.42
0.82 N/A 1.42
0.85 N/A 1.48
0.76 N/A 1.78(10)
0.66(18) 1.93(18) 2.14(18)
0.64(18) 1.70(18) 2.13(18)
0.57 N/A 2.15
0.71(18) 0.93(10,18) 1.14(10,18)
------------ ----------- -----------
</TABLE>
- -------------------------------------------------------
15
<PAGE> 22
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Distributions Distributions
Net Asset Net Realized & Dividends In Distributions In
Value, Net Unrealized Total From From Net Excess Of Net From Net Excess Of Net
Beginning Investment Gain/(Loss) on Investment Investment Investment Realized Realized
FUND Of Period Income/(Loss) Investments Operations Income Income Gains Gains
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CALIFORNIA
MUNICIPAL
FUND
CLASS A
SHARES
Year
ended
6/30/97 $10.60 $ 0.59 $ 0.32 $ 0.91 $(0.59) $ - $ - $ -
Year
ended
6/30/96 10.53 0.60(15) 0.07 0.67 (0.60) - - -
Year
ended
6/30/95 10.38 0.61 0.15 0.76 (0.61) - (0.00)(12) -
Year
ended
6/30/94 11.22 0.61 (0.82) (0.21) (0.61) (0.00)(12) - (0.02)
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
6/30/97 10.60 0.51 0.32 0.83 (0.51) - - -
Year
ended
6/30/96 10.53 0.51(15) 0.07 0.58 (0.51) - - -
Year
ended
6/30/95* 10.38 0.53 0.15 0.68 (0.53) - (0.00)(12) -
CLASS I
SHARES
Period
ended
6/30/97* 10.62 0.58 0.30 0.88 (0.58) - - -
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
FLORIDA
INSURED
MUNICIPAL
FUND
CLASS A
SHARES
Year
ended
6/30/97 $ 9.64 $ 0.49(15) $ 0.30 $ 0.79 $(0.50) $(0.00)(12) $ - $ -
Year
ended
6/30/96 9.43 0.50 0.21 0.71 (0.50) - - -
Year
ended
6/30/95 9.40 0.52 0.03(13) 0.55 (0.52) - - -
Year
ended
6/30/94 10.05 0.52 (0.65) (0.13) (0.52) (0.00)(12) - (0.00)(12)
Period
ended
6/30/93(7) 10.00 0.00(12) 0.05 0.05 - - - -
CLASS B
SHARES
Year
ended
6/30/97 9.64 0.42(15) 0.30 0.72 (0.43) (0.00)(12) - -
Year
ended
6/30/96 9.43 0.42 0.21 0.63 (0.42) - - -
Year
ended
6/30/95* 9.40 0.45 0.03(13) 0.48 (0.45) - - -
CLASS I
SHARES
Period
ended
6/30/97* 9.68 0.49(15) 0.26 0.75 (0.50) (0.00)(12) - -
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
CALIFORNIA
INSURED
INTERMEDIATE
MUNICIPAL
FUND
CLASS A
SHARES
Year
ended
6/30/97 $10.56 $ 0.49(15) $ 0.23 $ 0.72 $(0.49) $ - $(0.05) $ -
Year
ended
6/30/96 10.45 0.49 0.15 0.64 (0.49) - (0.04) -
Year
ended
6/30/95 10.10 0.50 0.35 0.85 (0.50) - - -
Year
ended
6/30/94(8) 10.00 0.11 0.11(13) 0.22 (0.11) - (0.01) -
CLASS B
SHARES
Year
ended
6/30/97 10.56 0.41(15) 0.23 0.64 (0.41) - (0.05) -
Year
ended
6/30/96 10.45 0.41 0.15 0.56 (0.41) - (0.04) -
Year
ended
6/30/95* 10.10 0.43 0.35 0.78 (0.43) - - -
CLASS I
SHARES
Period
ended
6/30/97* 10.58 0.49(15) 0.21 0.70 (0.49) - (0.05) -
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
NATIONAL
MUNICIPAL
FUND
CLASS A
SHARES
Year
ended
6/30/97 $10.83 $ 0.61(15) $ 0.33 $ 0.94 $(0.61) $ - $ - $ -
Year
ended
6/30/96 10.76 0.61 0.07 0.68 (0.61) - - -
Year
ended
6/30/95 10.85 0.64 0.01(13) 0.65 (0.64) - (0.01) (0.09)
Year
ended
6/30/94 11.65 0.65 (0.73) (0.08) (0.65) (0.00)(12) (0.07) -
Year
ended
6/30/93 10.96 0.67 0.75 1.42 (0.67) - (0.06) -
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
6/30/97 10.83 0.53(15) 0.33 0.86 (0.53) - - -
Year
ended
6/30/96 10.76 0.53 0.07 0.60 (0.53) - - -
Year
ended
6/30/95* 10.85 0.56 0.01(13) 0.57 (0.56) - (0.01) (0.09)
CLASS I
SHARES
Period
ended
6/30/97* 10.82 0.60(15) 0.34 0.94 (0.60) - - -
</TABLE>
=
=
=
- -
- --------------------------------------------------------------------------------
16
<PAGE> 23
<TABLE>
<CAPTION>
Net
Investment
Income/(Loss)
Per Share
Without
Fee Waivers,
Expenses
Absorbed
Ratio of Ratio of Net and/or
Net Asset Net Assets, Operating Investment Credits
Distributions Value, End Of Expenses to Income to Portfolio Allowed
From Total End Total Period Average Average Turnover by the
Capital Distributions Of Period Return(11) (In 000's) Net Assets Net Assets Rate Custodian
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ - $ (0.59) $ 10.92 8.83% $318,251 0.97% 5.51% $36 $0.56(18)
- (0.60) 10.60 6.40 372,177 0.94 5.56 17 0.56(18)
- (0.61) 10.53 7.57 405,967 0.85 5.89 22 0.56
- (0.63) 10.38 (2.19) 509,223 0.79 5.45 50 0.54
- (0.62) 11.22 13.84 511,364 0.80 5.74 41 0.56
- (0.65) 10.45 10.56 309,146 0.94 6.08 29 0.60
- (0.63) 10.07 7.16 202,595 1.05 6.30 16 0.58
- (0.57) 10.01 5.99 92,972 1.01(10) 6.26(10) 38 0.49
- (0.51) 10.92 8.02 25,219 1.72 4.76 36 0.48(18)
- (0.51) 10.60 5.61 20,543 1.69 4.81 17 0.47(15,18)
- (0.53) 10.53 6.78 7,230 1.60 5.14 22 0.48
- (0.58) 10.92 8.49 1 0.72(10) 5.76(10) 36 0.55(18)
----------- ----------- ----------- ------------ ---------- ------------ ------------ ------------- ------------
$ - $ (0.50) $ 9.93 8.43% $ 22,761 0.82% 5.01% $53 $0.43(15,18)
- (0.50) 9.64 7.56 29,821 0.63 5.08 52 0.42(18)
- (0.52) 9.43 6.01 33,714 0.39 5.53 44 0.42
- (0.52) 9.40 (1.50) 38,541 0.00 5.09 83 0.36
- - 10.05 0.50 4,837 0.00(10) 0.48(10) 0 (0.02)
- (0.43) 9.93 7.63 5,067 1.57 4.26 53 0.36(15,18)
- (0.42) 9.64 6.76 5,428 1.38 4.33 52 0.34(18)
- (0.45) 9.43 5.23 3,330 1.14 4.78 44 0.35
- (0.50) 9.93 7.88 1 0.57(10) 5.26(10) 53 0.43(15,18)
----------- ----------- ----------- ------------ ---------- ------------ ------------ ------------- ------------
$ - $ (0.54) $ 10.74 6.97% $ 45,157 0.82% 4.61% $29 $0.44(15,18)
- (0.53) 10.56 6.25 54,518 0.73 4.62 27 0.42(18)
- (0.50) 10.45 8.71 54,507 0.42 4.95 13 0.40
- (0.12) 10.10 2.20 34,147 0.00(10) 4.25(10) 17 0.06
- (0.46) 10.74 6.17 20,992 1.57 3.86 29 0.36(15,18)
- (0.45) 10.56 5.46 20,948 1.48 3.87 27 0.34(18)
- (0.43) 10.45 7.90 12,391 1.17 4.20 13 0.33
- (0.54) 10.74 6.70 1 0.57(10) 4.86(10) 29 0.44(15,18)
----------- ----------- ----------- ------------ ---------- ------------ ------------ ------------- ------------
$ - $ (0.61) $ 11.16 8.91% $ 182,262 1.04% 5.55% $28 $0.58(15,18)
- (0.61) 10.83 6.41 233,359 1.04 5.58 25 0.58(18)
- (0.74) 10.76 6.32 269,033 0.83 5.97 23 0.59
- (0.72) 10.85 (0.90) 354,501 0.87 5.60 44 0.59
- (0.73) 11.65 13.41 390,187 0.86 5.89 83 0.61
- (0.71) 10.96 15.42 226,984 0.64 6.34 61 0.63
- (0.64) 10.16 8.27 44,915 0.55(10) 6.84(10) 81 0.53
- (0.53) 11.16 8.10 6,001 1.79 4.80 28 0.50(15,18)
- (0.53) 10.83 5.62 6,800 1.79 4.83 25 0.50(18)
- (0.66) 10.76 5.54 4,786 1.58 5.22 23 0.51
- (0.60) 11.16 8.87 1 0.79(10) 5.80(10) 28 0.57(15,18)
<CAPTION>
Ratio of
Expenses
to Average
Net Assets
Ratio of Without
Operating Fee Waivers,
Expenses Expenses
to Average Absorbed
Net Assets and
Credits Credits
Allowed Allowed
by the by the
Custodian Custodian
- --------------------------------------------------------------------------------------
<S> <C> <C>
0.97%(18) 1.26%(18)
0.94(18) 1.29(18)
N/A 1.29
N/A 1.39
N/A 1.41
N/A 1.40
N/A 1.60
N/A 1.84(10)
1.72(18) 2.01(18)
1.69(18) 2.04(18)
N/A 2.04
0.72(10,18) 1.01(10,18)
------------ ------------
0.84%(18) 1.46%(18)
0.66(18) 1.46(18)
N/A 1.51
N/A 1.55
N/A 5.59(10)
1.59(18) 2.21(18)
1.41(18) 2.21(18)
N/A 2.26
0.59(10,18) 1.21(10,18)
------------ ------------
0.83%(18) 1.31%(18)
0.75(18) 1.39(18)
N/A 1.41
N/A 1.95(10)
1.58(18) 2.06(18)
1.50(18) 2.14(18)
N/A 2.16
0.58(10,18) 1.06(10,18)
------------ ------------
1.04%(18) 1.28%(18)
1.04(18) 1.29(18)
N/A 1.30
N/A 1.36
N/A 1.37
N/A 1.40
N/A 1.68(10)
1.79(18) 2.03(18)
1.79(18) 2.04(18)
N/A 2.05
0.79(10,18) 1.03(10,18)
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE> 24
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Net Realized Distributions Distributions
Net Asset & Unrealized Dividends In Excess Distributions In Excess
Value, Net Gain/(Loss) Total From From Net Of Net from Net Of Net Distributions
Beginning Investment on Investment Investment Investment Realized Realized From
FUND Of Period Income/(Loss) Investments Operations Income Income Gains Gains Capital
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH AND
INCOME FUND
CLASS A
SHARES
Year
ended
6/30/97 $14.10 $ 0.04(15) $ 3.88 $ 3.92 $(0.03) $ - $(2.06) $ - $ -
Year
ended
6/30/96 12.58 0.08(15) 2.51 2.59 (0.08) - (0.99) - -
Year
ended
6/30/95 11.30 0.13 2.04 2.17 (0.12) - (0.77) - -
Year
ended
6/30/94 12.09 0.12 0.72 0.84 (0.12) - (1.51) - -
Year
ended
6/30/93 11.25 0.12 0.91 1.03 (0.12) - (0.07) - -
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
6/30/97 14.03 (0.06)(15) 3.84 3.78 - - (2.06) - -
Year
ended
6/30/96 12.55 (0.02)(15) 2.50 2.48 (0.01) - (0.99) - -
Year
ended
6/30/95* 11.30 0.05 2.04 2.09 (0.07) - (0.77) - -
CLASS I
SHARES
Period
ended
6/30/97* 13.12 0.07(15) 4.87 4.94 (0.06) - (2.06) - -
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
GROWTH FUND
CLASS A
SHARES
Year
ended
6/30/97 $15.69 $(0.03)(15) $ 1.58 $ 1.55 $ - $ - $(2.34) $ - $ -
Year
ended
6/30/96 14.18 (0.07)(15) 3.47 3.40 - - (1.89) - -
Year
ended
6/30/95 10.73 0.05(15) 3.42 3.47 (0.02) - (0.00)(12) - -
Year
ended
6/30/94 10.72 (0.02) 0.03(13) 0.01 - - - - -
Period
ended
6/30/93(9) 10.00 0.00(12) 0.72 0.72 - - - - -
CLASS B
SHARES
Year
ended
6/30/97 15.47 (0.14)(15) 1.54 1.40 - - (2.34) - -
Year
ended
6/30/96 14.10 (0.19)(15) 3.45 3.26 - - (1.89) - -
Year
ended
6/30/95* 10.73 (0.04)(15) 3.42 3.38 (0.01) - (0.00)(12) - -
CLASS I
SHARES
Period
ended
6/30/97* 14.21 0.00(12,15) 3.07 3.07 - - (2.34) - -
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
EMERGING
GROWTH FUND
CLASS A
SHARES
Year
ended
6/30/97 $20.17 $(0.21)(15) $(0.18) $(0.39) $ - $ - $(1.50) $ - $ -
Year
ended
6/30/96 15.47 (0.19)(15) 5.65 5.46 - - (0.76) - -
Year
ended
6/30/95 13.02 (0.00)(12,15) 2.77 2.77 - - (0.32) - -
Year
ended
6/30/94 13.76 (0.09) 0.68 0.59 - - (1.33) - -
Year
ended
6/30/93 11.67 (0.02) 2.31 2.29 - - (0.20) - -
Year
ended
6/30/92 9.62 (0.01)(15) 2.16 2.15 (0.01) - (0.08) - (0.01)(14)
Period
ended
6/30/91(6) 10.00 0.09 (0.40) (0.31) (0.07) - - - -
CLASS B
SHARES
Year
ended
6/30/97 19.88 (0.34)(15) (0.19) (0.53) - - (1.50) - -
Year
ended
6/30/96 15.37 (0.32)(15) 5.59 5.27 - - (0.76) - -
Year
ended
6/30/95* 13.02 (0.10)(15) 2.77 2.67 - - (0.32) - -
CLASS I
SHARES
Period
ended
6/30/97* 17.52 (0.16)(15) 2.47(13) 2.31 - - (1.50) - -
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
INTERNATIONAL
GROWTH FUND
CLASS A
SHARES
Year
ended
6/30/97 $10.49 $ 0.04(15) $ 1.55 $ 1.59 $(0.13) $ - $(0.10) $ - $ -
Year
ended
6/30/96 9.78 0.05(15) 1.21 1.26 (0.05) (0.04) (0.46) - -
Year
ended
6/30/95 10.74 (0.11)(15) (0.31) (0.42) (0.04) - (0.44) (0.06) -
Year
ended
6/30/94 9.80 0.06 1.15 1.21 (0.02) - (0.25) - -
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
6/30/97 10.39 (0.04)(15) 1.53 1.49 (0.08) - (0.10) - -
Year
ended
6/30/96 9.73 (0.03)(15) 1.21 1.18 (0.02) (0.04) (0.46) - -
Year
ended
6/30/95* 10.74 (0.17)(15) (0.31) (0.48) (0.03) - (0.44) (0.06) -
CLASS I
SHARES
Period
ended
6/30/97* 9.88 0.06(15) 2.15 2.21 (0.17) - (0.10) - -
</TABLE>
- --------------------------------------------------------------------------------
18
<PAGE> 25
<TABLE>
<CAPTION>
Net
Investment
Income/(Loss)
Per Share
Without
Fee Waivers,
Expenses
Absorbed
Ratio of Ratio of Net and/or
Net Asset Net Assets, Operating Investment Credits
Value, End Of Expenses to Income/Loss Average Portfolio Allowed
Total End Total Period Average to Average Commission Turnover by the
Distributions Of Period Return(11) (In 000's) Net Assets Net Assets Rate Paid Rate Custodian
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$(2.09) $15.93 30.30% $168,687 1.53% 0.30% $0.0476(19) 107% $ 0.04(15,18)
(1.07) 14.10 21.36 183,084 1.54 0.60 N/A 90 0.08(15,18)
(0.89) 12.58 20.47 170,177 1.56 1.11 N/A 72 0.13
(1.63) 11.30 6.67 125,249 1.50 1.04 N/A 127 0.11
(0.19) 12.09 9.20 97,873 1.46 1.01 N/A 47 0.12
(0.17) 11.25 8.65 83,825 1.50 1.51 N/A 16 0.16
(0.27) 10.51 6.70 33,930 1.52 2.48 N/A 19 0.21
(0.19) 10.12 3.17 20,964 1.37(10) 3.21(10) N/A 16 0.19
(2.06) 15.75 29.33 38,357 2.28 (0.45) 0.0476(19) 107 (0.06)(15,18)
(1.00) 14.03 20.53 23,924 2.29 (0.15) N/A 90 (0.02)(15,18)
(0.84) 12.55 19.67 6,918 2.31 0.36 N/A 72 0.05
(2.12) 15.94 40.42 140,807 1.28(10) 0.55(10) 0.0476(19) 107 0.07(15,18)
----------- ----------- ---------- ---------- ------------ ----------- ---------- ------------ ----------
$(2.34) $14.90 10.88% $111,187 1.70% (0.22)% $0.0433(19) 156% $(0.03)(15,18)
(1.89) 15.69 25.44 179,720 1.70 (0.49) N/A 205 (0.07)(15,18)
(0.02) 14.18 32.33 154,763 1.76 0.28 N/A 233 0.05(15,18)
- 10.73 0.00 126,808 1.75 (0.35) N/A 227 (0.02)
- 10.72 7.30 23,323 1.44(10) (0.63)(10) N/A 13 (0.01)
(2.34) 14.53 9.99 30,397 2.45 (0.97) 0.0433(19) 156 (0.14)(15,18)
(1.89) 15.47 24.54 25,067 2.45 (1.24) N/A 205 (0.19)(15,18)
(0.01) 14.10 31.46 6,928 2.51 (0.47) N/A 233 (0.04)
(2.34) 14.94 22.73 126,986 1.45(10) 0.03(10) 0.0433(19) 156 0.00(12,15,18)
----------- ----------- ---------- ---------- ------------ ----------- ---------- ------------ ----------
$(1.50) $18.28 (1.50)% $165,719 1.64% (1.17)% $0.0330(19) 81% $(0.21)(15,18)
(0.76) 20.17 35.93 283,747 1.64 (1.02) N/A 131 (0.19)(15,18)
(0.32) 15.47 21.54 185,722 1.68 (0.31) N/A 181 (0.00)(12)
(1.33) 13.02 3.40 124,941 1.66 (0.68) N/A 224 (0.09)
(0.20) 13.76 19.75 96,646 1.59 (0.32) N/A 28 (0.02)
(0.10) 11.67 22.47 27,652 1.93 (0.04) N/A 60 (0.01)
(0.07) 9.62 (2.95) 8,490 1.84(10) 1.10(10) N/A 17 0.07
(1.50) 17.85 (2.26) 29,123 2.39 (1.92) 0.0330(19) 81 (0.34)(15,18)
(0.76) 19.88 34.93 28,920 2.39 (1.77) N/A 131 (0.32)(15,18)
(0.32) 15.37 20.69 10,208 2.43 (1.06) N/A 181 N/A
(1.50) 18.33 13.69 52,199 1.39(10) (0.92)(10) 0.0330(19) 81 (0.16)(15,18)
----------- ----------- ---------- ---------- ------------ ----------- ---------- ------------ ----------
$(0.23) $11.85 15.50% $ 57,776 1.65% 0.35% $0.0057(19) 67% $ 0.04(15,18)
(0.55) 10.49 13.16 116,254 1.77 0.46 N/A 125 0.05(15,18)
(0.54) 9.78 (4.01) 91,763 1.69 0.62 N/A 81 (0.11)
(0.27) 10.74 12.39 127,764 1.69 0.54 N/A 44 0.06
(0.03) 9.80 11.51 56,962 1.80 1.07 N/A 63 0.07
(0.05) 8.82 7.28 24,479 2.25 0.69 N/A 66 0.04
- 8.27 (17.30) 11,647 2.24(10) 0.51(10) N/A 45 0.01
(0.18) 11.70 14.66 4,876 2.40 (0.40) 0.0057(19) 67 (0.04)(15,18)
(0.52) 10.39 12.34 4,447 2.52 (0.29) N/A 125 (0.03)(15,18)
(0.53) 9.73 (4.61) 2,268 2.44 (0.13) N/A 81 (0.17)
(0.27) 11.82 22.76 95,512 1.40(10) 0.60(10) 0.0057(19) 67 0.06(15,18)
<CAPTION>
Ratio of
Expenses
to Average
Ratio of Net Assets
Operating Without
Expenses Fee Waivers,
to Average Expenses
Net Assets Absorbed
Without and/or
Credits Credits
Allowed Allowed
by the by the
Custodian Custodian
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
1.53%(18) 1.53%(18)
1.54(18) 1.54(18)
N/A 1.56
N/A 1.59
N/A 1.46
N/A 1.55
N/A 1.78
N/A 2.01(10)
2.28(18) 2.28(18)
2.29(18) 2.29(18)
N/A 2.31
1.28(10,18) 1.28(10,18)
----------- -----------
1.70%(18) 1.70%(18)
1.71(18) 1.71(18)
N/A 1.76
N/A 1.75
N/A 2.52(10)
2.45(18) 2.45(18)
2.46(18) 2.46(18)
N/A 2.51
1.45(10,18) 1.45(10,18)
----------- -----------
1.64%(18) 1.64%(18)
1.65(18) 1.65(18)
N/A 1.68
N/A 1.66
N/A 1.59
N/A 1.93
N/A 2.11(10)
2.39(18) 2.39(18)
2.40(18) 2.40(18)
N/A 2.43
1.39(10,18) 1.39(10,18)
----------- -----------
1.65%(18) 1.65%(18)
1.77(18) 1.77(18)
N/A 1.69
N/A 1.69
N/A 1.80
N/A 2.29
N/A 2.47(10)
2.40(18) 2.40(18)
2.52(18) 2.52(18)
N/A 2.44
1.40(10,18) 1.40(10,18)
</TABLE>
- --------------------------------------------------------------------------------
19
<PAGE> 26
FINANCIAL HIGHLIGHTS (CONTINUED)
(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. On July 25, 1996 the Fund commenced
selling Class I 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 absorbed by
the investment advisor, administrator and/or distributor or without credits
allowed by the custodian.
(12) Amount represents less than $0.01 per share.
(13)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.
(14)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.
(15)Per share numbers have been calculated using the average shares method.
(16)Ratio of operating expenses to average net assets including interest expense
for the period ended June 30 each year, was, for Class A shares 1.17% for
1997, 0.82% for 1996, 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 1.92% for
1997, 1.57% for 1996, 1.97% for 1995; for the Class I Shares 0.92% for 1997.
(17) Amount represents less than $0.001 per share.
(18)The ratio and per share number include custodian fees before reduction by
credits allowed by the custodian as required by amended disclosure
requirements effective September 1, 1995.
(19)Average commission rate paid per share of securities purchased and sold by
the Fund as required by amended disclosure requirements effective for fiscal
years beginning on or after September 1, 1995.
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
20
<PAGE> 27
by the only NRSRO that has issued a rating, or (iii) if not so rated, the
security is determined to be of comparable quality. Since the Money Funds often
purchase securities supported by credit enhancements from banks and other
financial institutions, changes in the credit quality of these institutions
could cause losses to the Money Funds and affect share price. A description of
the rating systems of S&P and Moody's is contained in the SAI.
Up to 10% of the net 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. 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
21
<PAGE> 28
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
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. The average
maturity of the Fund may vary depending on anticipated market conditions. For
purposes of the weighted average maturity calculation, a mortgage instrument's
average life will be considered to be its maturity.
The Fund will invest substantially all of its assets in investment-grade debt
securities, which are securities that are rated in the top four rating
categories by one or more NRSROs or, if unrated, are judged to be of comparable
quality by the Fund's Sub-Advisor. All debt securities purchased by the Fund
will be investment-grade at the time of purchase. The Fund will invest at least
65% of its total assets in United States Government obligations, corporate debt
obligations or mortgage-related securities rated in one of the two highest
categories by an NRSRO. Securities are rated in the two highest rating
categories by an NRSRO if they are rated at least Aa by Moody's or at least AA
by S&P, Duff or Fitch or, if unrated, are judged to be of comparable quality by
the Fund's Sub-Advisor. Investment-grade bonds are generally of medium to high
quality. A bond rated in the lower end of the investment-grade category
(Baa/BBB), however, may have speculative characteristics and may be more
sensitive to economic changes and changes in the financial condition of the
issuer.
The fixed-income securities in which the Fund may invest include obligations
issued or guaranteed by domestic and foreign governments and government agencies
and instrumentalities and high-grade corporate debt obligations, such as bonds,
debentures, notes, equipment lease and trust certificates, mortgage-backed
securities, collateralized mortgage obligations and asset-backed securities.
The Fund may invest up to 10% of its assets in foreign fixed-income securities,
primarily bonds of foreign governments or their political subdivisions, foreign
companies and supranational organizations, including non-U.S. Dollar-denominated
securities and U.S. Dollar-denominated debt securities issued by foreign issuers
and foreign branches of U.S. banks. Investment in foreign securities is subject
to special risks; see "Securities and Investment Practices - Foreign
Investments."
The Fund may also invest in high-quality, short-term obligations (with
maturities of 12 months or less), such as commercial paper issued by domestic
and foreign corporations, bankers' acceptances issued by domestic and foreign
banks, certificates of deposit and demand and time deposits of domestic and
foreign banks and savings and loan associations and repurchase agreements. The
Fund may engage in certain options transactions, enter into financial futures
contracts and related options for the purpose of portfolio hedging and enter
into currency forwards or futures contracts and related options for the purpose
of currency hedging.
The Fund may invest in certain illiquid investments such as privately placed
obligations including restricted securities. The Fund may invest up to 10% of
its assets in securities of mutual funds that are not affiliated with Sierra
Advisors or any Sub-Advisor. See "Securities and Investment Practices - Holdings
in Other Investment Companies."
22
<PAGE> 29
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 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. The average maturity
of the Fund may vary depending on anticipated market conditions. This policy
helps minimize the effect of interest rate changes on the Fund's share price.
The Sub-Advisor's calculation of the expected average life of a portfolio
mortgage security is used as that security's maturity with regard to determining
the above average dollar-weighted portfolio maturity calculation. The Fund's
share price and yield will fluctuate primarily due to the movement of foreign
currencies against the U.S. Dollar and changes in worldwide interest rates. The
Fund seeks to maintain greater price stability than longer-term bond funds.
Under normal market conditions, the Fund will invest at least 65% of its assets
in: (i) obligations issued or guaranteed by foreign national governments, their
agencies, instrumentalities, or political subdivisions (including any security
which is majority owned by such government, agency, instrumentality, or
political subdivision); and (ii) U.S. Government Securities.
The Fund may also invest in non-government foreign and domestic debt securities,
including debt securities issued or guaranteed by supranational organizations,
corporate debt securities, bank or bank holding company obligations (e.g.,
certificates of deposit, bankers' acceptances and time deposits), mortgage-
backed or asset-backed securities, and repurchase agreements.
To protect against credit risk, the Fund invests primarily in high-grade debt
securities. At least 65% of the Fund's investments will consist of securities
rated within the three highest rating categories of S&P (AAA, AA, A) or Moody's
(Aaa, Aa, A), or, if unrated, are judged to be of comparable quality by the
Sub-Advisor.
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.
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
23
<PAGE> 30
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.
U.S. GOVERNMENT FUND. The Fund's investment objective is to maximize total rate
of return while providing a high level of current income, consistent with
reasonable safety of principal. The Fund pursues its objective by investing at
least 65% and up to 100% of its assets in intermediate- and long-term U.S.
Government Securities. The Fund may invest in U.S. Government Securities of
varying maturities. Securities in the Fund's portfolio are high quality
securities that will generally yield less income than lower quality securities;
higher quality securities, however, generally have less credit risk and are more
readily marketable than lower quality securities. Depending on market
conditions, the Fund's portfolio will consist of various types of U.S.
Government Securities in varying proportions; it may invest up to 35% of its
total assets in (i) the types of securities in which the Corporate Income Fund
may invest except as otherwise prohibited in the Prospectus and 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; and (ii) commercial
mortgage-backed securities, which are mortgage-backed securities that are issued
by a nongovernmental entity, such as a trust, and include collateralized
mortgage obligations and real estate mortgage investment conduits that are rated
in one of the top two rating categories. Commercial mortgage-backed securities
generally are structured with one or more types of credit enhancement and are
not guaranteed by a governmental agency or instrumentality. 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 Andrew J. Phillips. Mr. Anderson, a Managing Director of BlackRock, has been
co-head of the Portfolio Management Group since 1988. Mr. Phillips has been a
portfolio manager of BlackRock since 1991 and a Principal of BlackRock since
1996.
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 average maturity of the Fund
may vary depending on anticipated market conditions. 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
24
<PAGE> 31
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.
THE MUNICIPAL FUNDS
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, 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 the section "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 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. For an illustration of the benefits of
tax-free investing, see the section entitled "Performance Information."
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 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 although the average
maturity of the Fund will vary depending on anticipated market conditions. It is
a fundamental policy of the Fund that
25
<PAGE> 32
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 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 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.
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 January 1997, Thomas M. Byron, a Vice President of Van Kampen, has had
primary responsibility for the day-to-day management of the Fund's portfolio.
Mr. Byron has been at Van Kampen for over 15 years. Prior to taking over
responsibility for managing the Fund, Mr. Byron was Head Buyer and Manager of
Van Kampen's Unit Investment Trust desk.
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
26
<PAGE> 33
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
maturity date of Municipal Securities (regardless of call provisions), except
for pooled Single Family Mortgage Securities for which the effective maturity is
to be the 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
27
<PAGE> 34
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 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 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 Obligations
and 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."
28
<PAGE> 35
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 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 in 1990, 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 a Senior Vice President of Van Kampen
since January 1995 and a First Vice President since January 1993. Mr. Johnson
has been employed as a portfolio manager 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.
As the Fund's portfolio managers, William M. Riegel and Henry D. Cavanna,
Managing Directors of J.P. Morgan, have had primary management responsibility
for the Fund since September 1993. Mr. Riegel, who joined J.P. Morgan in 1979,
is a senior equity portfolio manager in its Equity and Balanced Accounts Group.
Mr. Cavanna, who joined J.P. Morgan in 1971, is a senior 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
29
<PAGE> 36
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 or 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.
Pursuant to an exemptive order granted by the SEC, the Growth Fund and Emerging
Growth Fund (and other funds advised by Janus Capital Corporation) may transfer
daily uninvested cash balances into one or more joint trading accounts. Assets
in the joint trading accounts are invested in money market instruments and the
proceeds are allocated to the participating funds on a pro-rata basis.
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 primarily in equity securities of companies with market
capitalization of less than $1.4 billion at the time of purchase. A company's
market capitalization is calculated by multiplying the total number of shares of
its common stock outstanding by the market price per share of its stock. The
Fund may invest up to 25% of its assets in 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 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
30
<PAGE> 37
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. Furthermore, the Emerging Growth Fund may transfer
daily uninvested cash balances into one or more joint trading accounts advised
by the Sub-Advisor. See "Growth Fund."
James P. Goff 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 and the Portfolio Manager of the Janus Enterprise
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. Generation of income is not an objective of the Fund, and any
income received will be incidental. 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. The Fund will emphasize established companies, although it may
invest in companies of varying sizes as measured by assets, sales and
capitalization.
More than 25% of the Fund's total assets may be invested in the securities of
issuers located in the same country. The relative strength or weakness of a
particular country's currency or economy may dictate whether securities of
issuers located in such country will be purchased or sold. Criteria for
determining the appropriate distribution of investments among various countries
and regions include prospects for relative economic growth among foreign
countries, expected levels of inflation, government policies influencing
business conditions, the outlook for currency relationships, and the range of
investment opportunities available to international investors.
The Fund invests in common stock and may invest in other securities with equity
characteristics, consisting of trust or limited partnership interests, preferred
stock, rights and warrants. The Fund may also invest in convertible securities,
consisting of debt securities or preferred stock that may be converted into
common stock or that carry the right to purchase common stock. The Fund invests
in securities listed on foreign or domestic securities exchanges and securities
traded in foreign or domestic over-the-counter markets, and may invest in
restricted or unlisted securities.
The Fund intends to stay invested in the securities described above to the
extent practical. Fund assets may be invested in short-term debt instruments to
meet anticipated day-to-day operating expenses, and for temporary defensive
purposes. In addition, when the Fund experiences large cash inflows, the Fund
may hold short-term investments pending availability of desirable equity
securities.
The short-term instruments in which the Fund may invest include foreign and
domestic: (i) short-term obligations of foreign governments, their agencies,
instrumentalities, authorities or political subdivisions; (ii) other short-term
debt securities rated A or higher by Moody's or S&P, or if unrated, of
comparable quality in the opinion of the Fund's Sub-Advisor; (iii) commercial
paper, including master notes; (iv) bank obligations, including negotiable
certificates of deposit, time deposits, bankers' acceptances, and Euro-currency
instruments and securities; and (v) repurchase agreements. At the time the Fund
invests in any commercial paper, bank obligations or repurchase agreements, the
issuer must have outstanding debt rated A or higher by Moody's or S&P; the
issuer's parent corporation, if any, must have outstanding commercial paper
rated Prime-1 by Moody's or A-1 by S&P; or, if no such ratings are available,
the investment must be of comparable quality in the opinion of the Fund's
Sub-Advisor.
The Fund may invest up to 30% of its assets in the securities of companies in or
governments of developing or emerging countries (sometimes referred to as
"emerging markets") approved by the Board of Trustees, provided that no more
than 5% of the Fund's total assets are invested in any one such country. For
temporary defensive purposes, the Fund may invest a major portion of its assets
in securities of United States issuers. Furthermore, the Fund may invest up to
5% of its total assets in corporate debt securities having maturities longer
than one year and which are rated BBB or better by S&P or Baa or better by
Moody's or of comparable quality in the opinion of the Fund's Sub-Advisor,
including Euro-currency instruments and securities.
The following people have been primarily responsible for managing the Fund since
April 8, 1996. Richard H. King, Senior Managing Director, joined Warburg to
found the international equity department and has 31 years of investment
experience. Prior to joining Warburg, Mr. King was chief investment officer and
a
31
<PAGE> 38
director of Fiduciary Trust Company International S.A. in London from 1984 until
1988. P. Nicholas Edwards, Managing Director, has 12 years of investment
experience. Prior to joining Warburg, Mr. Edwards was a director and senior
analyst at Jardine Fleming Investment Advisers in Tokyo from 1991 to 1995.
Harold W. Ehrlich, CFA, CIC, Managing Director, has 14 years of investment
experience. Prior to joining Warburg, Mr. Ehrlich was a senior vice president,
portfolio manager and analyst at Templeton Investment Counsel Inc. from 1987 to
1995. Vincent J. McBride, Senior Vice President, has 10 years of investment
experience. Prior to joining Warburg, Mr. McBride was an international equity
analyst at Smith Barney Inc. from 1993 to 1994. He was an international equity
analyst at General Electric Investments from 1992 to 1993.
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"), Global Depositary
Receipts ("GDRs") 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, which are sometimes referred to as Continental
Depositary Receipts ("CDRs"), 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
32
<PAGE> 39
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). Such
borrowings would constitute leverage, which is a speculative characteristic.
Leveraging will magnify declines as well as increases in the NAV of a Fund's
shares and increases in the yield on a Fund's investments. 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 not 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.
Under a credit agreement by and between the Trust and Deutsche Bank, AG, New
York ("Deutsche Bank") certain Funds may borrow money from Deutsche Bank
pursuant to a line of credit in compliance with its investment objective,
policies and limitations as set forth in the Prospectus and Statement of
Additional Information of the Trust.
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.
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 other than U.S. Government Securities 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 may attempt 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
33
<PAGE> 40
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, or other liquid assets 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 or other liquid assets 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
34
<PAGE> 41
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 Bond Funds 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 Bond Funds 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.
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
35
<PAGE> 42
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. 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.
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 1996-97 General
Revenue plus Working Capital and Budget Stabilization funds available total
$16,617.4 million, an increase of approximately 6.7% over comparable figures in
fiscal 1995-96. Total effective appropriations for the 1995-96 fiscal year were
$15,537.2 million, with unencumbered reserves at the end of 1995-96 estimated at
$1,080.2 million. Estimated fiscal year 1997-98 General Revenue plus Working
Capital and Budget Stabilization funds available total $17,537.3 million, an
increase of approximately 5.5% over comparable figures for fiscal year
1996-1997. Total effective appropriations for the 1997-98 fiscal year are
estimated to be $16,359.7 million, a 5.1% increase over the analogous figure in
1996-97.
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
36
<PAGE> 43
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. A
fund may use forward foreign currency contracts to hedge the value of the fund's
portfolio against potential adverse movements in foreign currency markets.
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
37
<PAGE> 44
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
38
<PAGE> 45
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
39
<PAGE> 46
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. Nonetheless, Growth Fund and Emerging Growth Fund may
invest Fund assets in money market funds affiliated with Janus, provided Janus
remits to the Fund the amount of any investment advisory and administrative
services fees paid to Janus as the investment manager of the money market fund,
based on the investment of Fund assets.
ILLIQUID SECURITIES. Up to 15% of the net assets of each Non-Money Fund, and up
to 10% of the net assets of each Money Fund, may be invested in securities that
are not readily marketable, including: (1) repurchase agreements with maturities
greater than seven calendar days; (2) time deposits maturing in more than seven
calendar days; (3) to the extent a liquid secondary market does not exist for
the instruments, futures contracts and options thereon; (4) certain
over-the-counter options, as described in the 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) securities the disposition of which is
restricted under federal securities laws (excluding Rule 144A Securities,
described below). The Funds will not include for purposes of the restrictions on
illiquid investments securities sold pursuant to Rule 144A under the Securities
Act of 1933, as amended, so long as such securities meet liquidity guidelines
established by the Trust's Board of Trustees. Under Rule 144A, securities which
would otherwise be restricted may be sold to persons other than issuers or
dealers to qualified institutional buyers.
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),
40
<PAGE> 47
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. In addition, the U.S. Government Fund may invest in commercial
Mortgage-Backed Securities, which are similar to the above Mortgage-Backed
Securities, except they are issued by non-governmental entities and are created
by pooling together commercial and multifamily mortgage loans into trusts that
are structured into different classes or series based upon the prioritization of
cash flows. Commercial Mortgage-Backed Securities include Collateralized
Mortgage Obligations and real estate mortgage investment conduits ("REMICs").
While commercial Mortgage-Backed Securities are generally structured with one or
more types of credit enhancement, they typically lack a guarantee by an entity
having the credit status of a governmental agency or instrumentality.
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
41
<PAGE> 48
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" 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.
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
42
<PAGE> 49
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 or other liquid assets
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
43
<PAGE> 50
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. All of the Funds except the U.S. Government Fund,
the Municipal Funds and the Money Funds may purchase and write put and call
options on foreign currencies for the purpose of hedging against declines in
U.S. Dollar value on 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
44
<PAGE> 51
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 other liquid assets 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 cash or other
liquid assets 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
45
<PAGE> 52
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.
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
46
<PAGE> 53
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 or other liquid assets in
an amount equal to the amount of its when-issued and delayed-delivery
commitments.
WHEN-ISSUED MUNICIPAL 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.
47
<PAGE> 54
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.
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.
TAX EQUIVALENT YIELDS
TABLE 1
<TABLE>
<CAPTION>
Combined
Federal
and
Federal California California
Marginal Marginal Marginal Tax-Exempt Yield
Tax Rate+ Tax Rate* Tax Rate** ----------------------------------------
--------- --------- ---------- ----------------------------------------
Sample 1997 Federal 2.00% 2.50% 3.00% 3.50% 4.00%
Taxable Income Brackets
----------------------------------------
Joint Return
Single Return
Taxable Yield
------------------ ------------------ ----------------------------------------
<S><C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$24,650 $0-$41,200 15% 6.00% 20.10% 2.50% 3.13% 3.75% 4.38% 5.01%
$24,650-$59,750 $41,200-$99,600 28% 9.30% 34.70% 3.06% 3.83% 4.59% 5.36% 6.13%
$59,750-$124,650 $99,600-$151,750 31% 9.30% 37.42% 3.20% 3.99% 4.79% 5.59% 6.39%
$124,650-$271,050 $151,750-$271,050 36% 9.30% 41.95% 3.44% 4.31% 5.17% 6.03% 6.89%
$271,050 and up $271,050 and up 39.6% 9.30% 45.22% 3.65% 4.56% 5.48% 6.39% 7.30%
</TABLE>
<TABLE>
<CAPTION>
Combined
Federal
and
Federal California California
Marginal Marginal Marginal Tax-Exempt Yield
Tax Rate+ Tax Rate* Tax Rate** ----------------------------------
--------- --------- ---------- ----------------------------------
Sample 1997 Federal 4.50% 5.00% 5.50% 6.00%
Taxable Income Brackets
----------------------------------------
Joint Return
Single Return
Taxable Yield
------------------ ------------------ ----------------------------------
<S><C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$24,650 $0-$41,200 15% 6.00% 20.10% 5.63% 6.26% 6.88% 7.51%
$24,650-$59,750 $41,200-$99,600 28% 9.30% 34.70% 6.89% 7.66% 8.42% 9.19%
$59,750-$124,650 $99,600-$151,750 31% 9.30% 37.42% 7.19% 7.99% 8.79% 9.59%
$124,650-$271,050 $151,750-$271,050 36% 9.30% 41.95% 7.75% 8.61% 9.47% 10.34%
$271,050 and up $271,050 and up 39.6% 9.30% 45.22% 8.21% 9.13% 10.04% 10.95%
<CAPTION>
6.50% 7.00%
<S><C> <C> <C>
8.14% 8.76%
9.95% 10.72%
10.39% 11.19%
11.20% 12.06%
11.87% 12.78%
</TABLE>
48
<PAGE> 55
TABLE 2
<TABLE>
<CAPTION>
Tax-Exempt Yield
Sample 1997 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> <C>
$0-$24,650 $0-$41,200 15% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$24,650-$59,750 $41,200-$99,600 28% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72%
$59,750-$124,650 $99,600-$151,750 31% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14%
$124,650-$271,050 $151,750-$271,050 36% 7.03% 7.81% 8.59% 9.38% 10.16% 10.94%
$271,050 and up $271,050 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.
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, Class B and Class I 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 Russell 2000 Index, the Lehman Brothers GNMA Index, the S&P
400 Index, the Lehman Brothers Index of Baa-rated Corporate Bonds, the Lehman
Brothers Mutual Fund Short (1-5) Investment Grade Debt Index, the Lehman
Brothers Mutual Fund Short World Multimarket Index, the Lehman Brothers Mutual
Fund U.S. General Government Index, the Lehman Brothers Municipal Bond Index and
the T-Bill Index. 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 and the Short Term Global Government Funds may compare
their performance to other investments or relevant indexes consisting of 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.
49
<PAGE> 56
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 earlier pages 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 earlier pages 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.
Performance information is computed separately for each Fund's Class A, Class B
and Class I 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 or Class I Shares.
Because Class I Shares do not bear any distribution or service fees, performance
for a Fund's Class I Shares will be higher than that for a Fund's Class A or
Class B Shares.
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 Authorized Dealer, or by calling
Shareholder Services at 800-222-5852.
50
<PAGE> 57
YOUR ACCOUNT
- --------------------------------------------------------------------------------
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT ACCOUNT
Individual accounts are owned by one person. Two types of joint accounts (having
two or more owners) can be opened:
(1) in a "joint tenancy" account, the surviving owner(s) automatically
receive(s) the shares of any owner(s) who die(s); and
(2) in a "tenants in common" account, the heir(s) of any deceased owner
receive(s) such owner's shares, rather than the surviving owners of the joint
account.
- --------------------------------------------------------------------------------
RETIREMENT
Retirement plans protect investment income and capital gains from current taxes.
Contributions to these accounts may be tax deductible. Retirement accounts
require special applications and typically have lower minimums.
- - INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") allow persons of legal age and under
70 1/2 years old with Adjusted Gross Income ("AGI") of less than $35,000 (or
$50,000 if married and filing jointly) to protect up to $2,000 (subject to
certain limitations for single persons with AGI equal to or greater than
$25,000 and married persons who file jointly with AGI equal to or greater than
$40,000) per tax year from certain tax effects. If your spouse does not work,
you can protect an additional $2,000 per year in your spouse's name.
- - ROTH IRAS allow persons of legal age with AGI not exceeding $110,000 (or
$160,000 if married and filing jointly) to protect up to $2,000 (subject to
certain limitations for single persons with AGI equal to or greater than
$95,000 and married persons who file jointly with AGI equal to or greater than
$150,000) per tax year from certain tax effects.
- - 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.
- --------------------------------------------------------------------------------
51
<PAGE> 58
HOW TO INVEST IN THE FUNDS
- --------------------------------------------------------------------------------
To Open an Account: Minimum $250 To Add to an Account: Minimum $100
<TABLE>
<S> <C> <C>
BY PHONE - Exchange from another Sierra Trust Fund, - Exchange from another Sierra Trust
SPIF or SAM Portfolios account with same Fund, SPIF or SAM Portfolios account
800-222-5852 registration, including name, address, and with the same registration, including
taxpayer ID number (social security number name, address, and taxpayer ID number.
for an individual). - Call Shareholder Services at 800-222-
- Call Shareholder Services at 800-222- 5852. 5852.
(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 6:00 a.m. to 3:00 p.m.,
Pacific Time/9:00 a.m. to 6:00 p.m.,
Eastern Time, on Saturdays)
- --------------------------------------------------------------------------------------------------------------
BY MAIL - Complete and sign the application. Make - Make your check payable to "Sierra
your check or negotiable bank draft Trust Funds." Indicate your Fund
payable to "Sierra Trust Funds." Third- account number on your check. Include
party checks are not accepted. the "next investment" stub from your
previous account statement. Mail the
Mail the completed application form and check and stub to the address printed
check to: on your account statement.
Sierra Trust Funds
c/o First Data Investor Services Group - Exchange by mail: call 800-222-5852
P.O. Box 5118 for instructions.
Westboro, MA 01581-5118
- --------------------------------------------------------------------------------------------------------------
BY WIRE 1. Telephone Shareholder Services and give - Instruct your bank/financial
the (a) name of the account as you wish it institution to wire Federal Funds as
to be registered; (b) address of the described at left 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
For credit to: Sierra Trust Funds
Account #132012
(Fund Name and Class of Shares)
(Customer's Name)
(Customer's Social Security Number)
3. Mail the completed application form to:
Sierra Trust Funds
c/o First Data Investor Services Group
P.O. Box 5118
Westboro, MA 01581-5118
- --------------------------------------------------------------------------------------------------------------
AUTOMATICALLY 1. Obtain and complete an application form. - Pre-authorized periodic investments
are now processed automatically.
(Minimum New Account 2. Attach a voided check or deposit slip (Minimum Amount $25)
amount $100) from the bank account you would like the
investments transferred from and indicate
either the day of the week or day(s) of
the month when the purchase would occur.
3. Mail the application to the address
listed above.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE> 59
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. SAM is an active investment management service offered by
Sierra Investment Services Corporation ("Sierra Services"), the SAM 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 an Authorized Dealer who
will review your situation and help you identify your long-term investment
objectives. After using SAM 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 the Funds' 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."
SALES TO SAM ACCOUNTS AND SAM PORTFOLIOS. From time to time, one or more of the
Funds used for investment by the SAM Accounts or SAM Portfolios may experience
relatively large investments or redemptions due to 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 or SAM Portfolios
transactions on the Funds; Sierra Services, representing the interest of the SAM
Accounts and SAM Portfolios, 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 and SAM Portfolios. 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 and SAM Portfolios 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 New York Stock
Exchange ("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 currently scheduled
to be closed on New Year's Day, Martin Luther King, Jr. Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day, and on the preceding Friday or subsequent Monday when any of
these holidays falls on a Saturday or Sunday, respectively.
Purchases of each Class of the Fund shares are effected at the Fund's Public
Offering Price next determined
53
<PAGE> 60
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 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 when the NYSE is closed and 6:00 a.m. to 3:00
p.m., Pacific Time/ 9:00 a.m. to 6:00 p.m., Eastern Time, on Saturdays.
TIMING OF DIVIDENDS. Shares of certain Funds are entitled to dividends and
distributions declared beginning the day after a purchase has been credited to
an investor's account and ending on the day a redemption order is effected.
CLASS A AND B SHARES: ALTERNATIVE PURCHASE ARRANGEMENTS. The alternative
purchase arrangements offered by the Trust enable you to choose the method of
purchasing Fund shares that is most beneficial given the amount of your
purchase, the length of time you expect to hold the shares and other
circumstances. You should consider whether, during the anticipated life of your
investment in the Trust, the accumulated continuing distribution and service
fees and CDSCs on Class B Shares would be less than the initial sales charge and
accumulated distribution fee on Class A Shares purchased at the same time, and
to what extent such differential would be offset by the anticipated higher
return of Class A Shares.
As an illustration, if you qualify for significantly reduced 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.
LARGE PURCHASES OF CLASS B SHARES. When choosing between classes, investors
should carefully consider the ongoing annual expenses along with the initial or
contingent deferred sales charges. The relative impact of the initial sales
charges, CDSCs and ongoing annual expenses will depend on the length of time a
share is held. In almost all cases, investors planning to purchase $250,000 or
more of Fund shares will pay lower aggregate charges and expenses by purchasing
Class A Shares.
INITIAL SALES CHARGE ALTERNATIVE: CLASS A SHARES. Class A Shares of the 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. 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 CDSC" 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.
54
<PAGE> 61
FOR CLASS A SHARES OF NON-MONEY FUNDS
OTHER THAN SHORT TERM GLOBAL GOVERNMENT FUND,
SHORT TERM HIGH QUALITY BOND FUND AND THE EQUITY FUNDS
<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
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>
FOR CLASS A SHARES OF THE EQUITY FUNDS
<TABLE>
<CAPTION>
DEALERS'
AS A % OF AS A % OF REALLOWANCE
OFFERING PRICE NET ASSET AS A % OF
AMOUNT OF TRANSACTION PER SHARE VALUE OFFERING PRICE
- ------------------------------------------------------ --------------- ---------- ---------------
<S> <C> <C> <C>
Less than $50,000..................................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000........................ 4.75% 4.99% 4.00%
$100,000 but less than $250,000....................... 3.75% 3.90% 3.00%
$250,000 but less than $500,000....................... 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000..................... 2.00% 2.04% 1.75%
$1,000,000 and over................................... 0% 0% 0%+
</TABLE>
- --------------------------------------------------------------------------------
+Investors do not pay a sales charge at time of purchase on purchases of $1
million or more; however, Sierra Services may pay the investment dealers of
record on purchases of Class A Shares of $1 million or more a fee of up to 1.00%
of the net asset value of such purchase.
Sierra Services, the distributor of the shares of the 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.
55
<PAGE> 62
REDUCED SALES CHARGES AT PURCHASE.
As described below, the sales charge on purchases of Class A Shares of the Funds
may be reduced through: (1) a Right of Accumulation; (2) Quantity Discounts; (3)
a Letter of Intent; and (4) Reinvestment Privileges. Reduced sales charges may
be modified or terminated at any time as to new purchases and/or letters of
intent and are subject to confirmation of an investor's holdings. For more
information about reduced sales charges, contact your investment representative
or call 800-222-5852.
RIGHT OF ACCUMULATION. Under the Right of Accumulation, the current value of an
investor's (including the investor's spouse and minor children) existing Class A
Shares in the Non-Money Fund(s), Class B and Class S Shares in all the funds of
the Trust, Class A Common Shares of Sierra Prime Income Fund ("SPIF") and Class
A and Class B Shares of the SAM Portfolios may be combined with the amount of
the investor's current purchase of Non-Money Fund Class A Shares in determining
the sales charge applicable to such Class A Shares. In order to receive the
cumulative quantity reduction, the investor or the securities dealer must call
previous purchases of such Class A Common Shares of SPIF, Class A, Class B and
Class S Shares of the Trust and Class A and Class B Shares of the SAM Portfolios
to the attention of Shareholder Services at the time of the current purchase.
QUANTITY DISCOUNTS. As shown in the tables previously and under the "Right of
Accumulation" section, larger purchases of the Non-Money Fund Class A Shares of
the Funds combined with Class B Shares and Class S Shares of the Funds, Class A
Common Shares of SPIF and Class A and Class B Shares of the SAM Portfolios
reduce the sales charge paid on the Non-Money Fund Class A Shares. The Funds
will combine purchases of the Non-Money Fund Class A Shares with Class B and
Class S Shares of the Funds, Class A Common Shares of SPIF and Class A and Class
B Shares of the SAM Portfolios made on the same day by the investor, spouse, and
any minor children when calculating the Non-Money Fund Class A Shares sales
charge. In order to receive the cumulative quantity reduction, the investor or
the securities dealer must call related purchases of such Class A Common Shares
of SPIF, Class A, Class B and Class S Shares of the Trust and Class A and Class
B Shares of the SAM Portfolios to the attention of Shareholder Services at the
time of the current purchase.
LETTER OF INTENT. An investor may qualify for a reduced sales charge on
Non-Money Fund Class A Shares immediately by signing a "Letter of Intent"
stating the investor's intention to invest during the following 13 months a
specified amount in the Non-Money Fund Class A Shares, Class A Common Shares of
SPIF and/or Class A Shares of the SAM Portfolios, which, if made at one time,
would qualify for a reduced sales charge. Any redemptions or repurchases of
Class A Shares or Class A Common Shares of SPIF made during the 13-month period
will be subtracted from the amount of purchases of Class A Shares or Class A
Common Shares of SPIF in determining whether the terms of the Letter of Intent
have been met. During the term of a Letter of Intent, Shareholder Services will
hold Non-Money Fund Class A Shares representing 5.00% of the amount purchased in
escrow for payment of a higher sales load if the full amount specified in the
Letter of Intent is not purchased within the 13-month period. The escrowed
shares will be released when the full amount specified has been purchased. The
investor is not bound to purchase the full amount specified, but 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 Non-Money Fund Class A
Shares if the total of such purchases had been made at a single time.
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 of the
redemption from the Fund. This reinvestment privilege does not apply to
reinvestments made through the Sierra Automatic Investment Plan. To receive the
privilege, 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
56
<PAGE> 63
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 (investors may be charged an additional service or
transaction fee by the Authorized Dealer or bank).
Additional groups of investors that are not subject to an initial sales charge
on purchases of Class A Shares through an Authorized Dealer include either (a)
investors purchasing Class A Shares of a Fund through an employee benefit trust
created pursuant to a 401(k) Plan 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 $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.
APPLICATION OF CLASS A SHARES CDSC. 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 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 in a 403(b) Plan within two years of the plan
participant's purchase of such Class A Shares. This CDSC will be waived on
redemptions in connection with certain involuntary distributions, including
distributions arising out of the death or disability of a shareholder (including
one who owns the shares as joint tenant). See "How to Buy and Redeem Shares" in
the SAI.
WAIVERS OF CLASS A SHARES CDSC. The Class A CDSC is waived for redemptions of
Class A Shares (i) that are part of exchanges for Class A Shares of other Funds;
(ii) for distributions to pay benefits to participants from a retirement plan
qualified under Section 401(a) or 401(k) of the Code, including distributions
due to the death or disability of the participant (including one who owns the
shares as a joint tenant); (iii) for distributions from a 403(b) Plan or an IRA
due to death, disability, or attainment of age 70 1/2, including certain
involuntary distributions; (iv) for tax-free returns of excess contributions to
an IRA; (v) for distributions by other employee benefit plans to pay benefits;
(vi) in connection with certain involuntary distributions; (vii) for systematic
withdrawals in amounts of 1% or less per month; and (viii) by a 401(k) Plan
participant so long as the shares were purchased through the 401(k) Plan and the
401(k) Plan continues in effect with investments in
57
<PAGE> 64
Class A Shares of the Fund. 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 below. CDSC payments and distribution fees on Class B Shares may be
used to fund commissions payable to Authorized Dealers.
No charge will be imposed with respect to shares having a value equal to any net
increase in the value of shares purchased during the preceding 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:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Year of Redemption ------------------------------------
After Purchase 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>
All purchases are considered made on the last day of the month of purchase. To
determine the CDSC payable on a redemption of Class B Shares, a Fund will first
redeem Class B Shares not subject to a CDSC. Thereafter, to determine the
applicability and rate of any CDSC, it will be assumed that shares representing
the reinvestment of dividends and capital gain distributions are redeemed first
and shares held for the longest period of time are redeemed next. Using this
method, your sales charge, if any, will be at the lowest possible CDSC rate.
The Trust will adopt procedures to convert Class B Shares, without payment of
any sales charges, into Class A Shares, which have lower distribution fees,
after the passage of a number of years after purchase. Such conversion may occur
in approximately eight years.
WAIVERS OF 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 or attainment of age 70 1/2, from IRAs. The
foregoing waivers may be changed at any time.
HOW TO SELL SHARES
You can arrange to take money out of your Fund account on any Business Day by
selling (redeeming) some or all of your shares. Your shares will be sold at the
NAV next determined after your order is received and accepted. Certain Class A
Shares may be subject to a CDSC as described in the "Application of Class A
Shares CDSC" 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
Shareholder Services. However, if a shareholder is redeeming shares recently
purchased with a check, the redemption proceeds will not be paid to the
shareholder until the check has cleared. The check may take up to 15 days to
clear for deposit of the shareholder's funds into the 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.
58
<PAGE> 65
WAYS TO SELL SHARES OF YOUR SIERRA TRUST FUND
- --------------------------------------------------------------------------------
Account Type Special
Requirements
<TABLE>
<S> <C> <C>
BY CHECKWRITING All Money Fund Class A Shares - Before redeeming Class A Shares through
account types checkwriting, you must complete the
signature card. Call 800-222-5852 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 certain other funds
800-222-5852 retirement of the Trust, SPIF or SAM Portfolios if
both accounts are registered with the
same name(s), address, and taxpayer ID
number. You may also redeem amounts by
telephone. Checks will be mailed to the
address of record exactly as account is
registered.
- ---------------------------------------------------------------------------------------------------------
BY MAIL Individual, Joint Accounts, Sole - The letter of instruction must be signed
Proprietorships, UGMA, UTMA** by all persons required to sign for
transactions, exactly as their names
appear on the account.** Checks will be
mailed to the address of record.
- Signature guarantee is required on
amounts of more than $50,000 and on any
requests for checks to be mailed to an
alternate address.
- ---------------------------------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL All Shareholder(s) - When shares are valued at NAV at $10,000
PLAN or more shareholders may elect to
establish a Systematic Withdrawal Plan
and receive a monthly, quarterly,
semiannual or annual check of at least
$100. Privilege may be terminated by the
shareholder(s) on thirty days' written
notice or by the Trust at any time.
- ---------------------------------------------------------------------------------------------------------
BY WIRE All account types except - You must sign up for the wire feature
retirement before using it. To verify that it is in
place, call 800-222-5852.
- Your wire redemption request must be
received by Sierra 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.
- ---------------------------------------------------------------------------------------------------------
</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 800-222-5852 to verify you have
the correct paperwork and to avoid delays.
59
<PAGE> 66
- - 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
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 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. You also may exchange Class A Shares of a Money Fund for Class B Shares
of a Non-Money Fund or a SAM Portfolio. Shareholders exercising the exchange
privilege with any of the Funds of the Sierra Trust Funds, SPIF or SAM
Portfolios 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 and state income tax purposes.
Class A Shares of a Non-Money Fund may be exchanged for Class A Shares of any of
SPIF, SAM Portfolios or the other Funds of the Trust, including the Money Funds
(the foregoing funds together, the "Eligible Funds") without a sales charge at
purchase. If shares of the Money Funds so acquired are subsequently exchanged
again for Class A Shares of a Non-Money Fund, SAM Portfolio or SPIF, no sales
charge at purchase will be assessed. The availability of the exchange privilege
with respect to shares of SPIF is subject to the availability of shares of SPIF
for exchange purposes as stated in the prospectus and statement of additional
information ("SAI") of SPIF. Also, although shares of SPIF may be exchanged for
shares of the Funds, such exchanges of SPIF shares for shares of the Funds are
permitted approximately once every calendar quarter so long as SPIF makes a
repurchase offer for its shares in such quarter and so long as the SPIF
repurchase offer is sufficiently large to include the SPIF shares tendered for
exchange. See the prospectus and SAI of SPIF for additional information
regarding the exchange privilege applicable to SPIF shares and the availability
of such exchange privilege. Please call 800-222-5852 if you would like to obtain
a prospectus for SPIF or the SAM Portfolios.
Class A Shares of a Money Fund may be exchanged for Class A Shares of the other
Money Funds and Class B Shares of Non-Money Funds or SAM Portfolios without a
sales charge at purchase. Class B Shares of a Non-Money Fund will be subject to
any applicable CDSC upon redemption, based solely upon the period of time during
which the investment is
60
<PAGE> 67
invested in Class B Shares. When Class A Shares of the Money Funds are exchanged
for Class A Shares of a Non-Money Fund, SAM Portfolio or SPIF, the initial sales
charge applicable to such Non-Money Fund, SAM Portfolio or SPIF 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, SAM Portfolio or SPIF.
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 CDSC"
section. The CDSC applicable to Class A Shares will not be assessed on a
redemption that is part of an exchange for Class A Shares of another Eligible
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, or Class B Shares of the SAM
Portfolios without having to pay any CDSC at the time of the exchange. If you
exchange into Class B Shares of another Fund or Class B Shares of the SAM
Portfolios and subsequently redeem such shares, the period of time during which
you held your investment in Class B Shares of the previous Fund will be included
in the period during which that investment is deemed to be invested in the Trust
or SAM Portfolios 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
800-222-5852 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 5118, Westboro, Massachusetts 01581-5118. 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.
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
61
<PAGE> 68
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 800-222-5852. Each Fund offers
three options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will be
automatically reinvested in additional shares of the same Fund, unless you
instruct the Fund on the application form or later in writing or by telephone to
pay all distributions in cash. Distributions from a class of one Fund may be
reinvested in the same class of the same Fund or a different Fund. If the Fund
in which the reinvestment is made has an initial sales charge or CDSC, you will
not pay the initial sales charge or CDSC on the reinvested amount.
2. CASH OPTION. You will be sent a check for each dividend and capital gain
distribution.
3. SYSTEMATIC WITHDRAWAL PLAN. If you have more than $10,000 invested in any
Fund, you can elect to receive a check for at least $100 on a 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 without tax
penalties for early withdrawal.
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 certain 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 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.
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. No portion of the dividends from 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, and
National Municipal Funds is expected to qualify for the corporate dividends
received deduction, and only a portion of the dividends from the Growth and
Income, Growth, Emerging Growth, and International Growth Funds is expected to
qualify for the corporate dividends received deduction. 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.
62
<PAGE> 69
TAXES ON TRANSACTIONS. The sale, exchange or redemption of Fund shares will be a
taxable event. 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.
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
63
<PAGE> 70
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. If, at the close of each quarter of its taxable year, at least 50% of the
value of the total assets of each of the California Money Fund, California
Municipal Fund and California Insured Intermediate Municipal Fund (the
"California Funds") consist 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 each of the California
Funds continues to qualify as a regulated investment company for federal income
tax purposes, then each respective 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 each of the California Funds to each of the
California Fund's non-corporate shareholders with respect to any taxable year
cannot exceed the amount of interest received by such California 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 will be taxable to
shareholders at ordinary tax rates for California personal income tax purposes.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT A COMPLETE DESCRIPTION OF
THE FEDERAL, STATE OR LOCAL TAX CONSEQUENCES OF INVESTING IN THE FUNDS. YOU
SHOULD CONSULT YOUR TAX ADVISOR BEFORE INVESTING IN THE FUNDS.
SHAREHOLDER AND ACCOUNT
POLICIES
TRANSACTION DETAILS
THE NAV of each class of the Fund is the value of a single share of the
respective class. The NAV is calculated separately for each class of the Funds
and is calculated by adding up the value of the Fund's investments, cash and
other assets, subtracting its liabilities (including the liabilities
attributable exclusively to that class), and then dividing the result by the
number of shares of that class outstanding.
Although the legal rights of Class A, Class B and Class I 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 and Class I 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.
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.
EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF CLASS A, CLASS B OR
CLASS I 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
64
<PAGE> 71
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.
Sierra Advisors became a registered investment advisor in 1988. Sierra Advisors
is an indirectly wholly owned subsidiary of Washington Mutual, Inc. ("Washington
Mutual"). Washington Mutual is a publicly owned financial services company. As
of June 30, 1997, Sierra Advisors and its affiliates had total assets under
management of $3.7 billion.
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 Assurance
Society of the United States, is the general partner of Alliance. As of May 31,
1997, total assets under management were over $194 billion.
BLACKROCK is located at 345 Park Avenue, 30th floor, New York, New York 10154.
BlackRock is a wholly owned corporate subsidiary of PNC Asset Management Group
Inc., the holding company for the asset management businesses of PNC Bank Corp.
("PNC"). PNC is a multibank holding company incorporated under the laws of the
Commonwealth of Pennsylvania in 1983 and registered under the Bank Holding
Company Act of 1956, as amended. BlackRock provides investment advice to a wide
variety of institutional and investment company-related clients. As of June 30,
1997, BlackRock had aggregate assets under management or supervision of more
than $50 billion.
JANUS is located at 100 Fillmore Street, 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, 1997, Janus had approximately
$60 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, 1997, J.P. Morgan and its affiliates had
investment management authority with respect to approximately $234 billion of
assets.
65
<PAGE> 72
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 June 30, 1997, Scudder's assets under management were in excess of $125
billion.
On June 27, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The Zurich
Group ("Zurich") announced that they had entered into a definitive agreement to
form a global investment organization. Zurich is a leading international
insurance and financial services organization. Under the agreement, Zurich's
wholly owned subsidiary, Zurich Kemper Investments, Inc. will combine with
Scudder, with combined assets of $200 billion. Subject to certain conditions
being met, it is currently anticipated that the transaction will close in the
fourth quarter of 1997.
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, 1997, TCW
Management and its affiliated advisers had just over $50.1 billion under
management or committed to management.
VAN KAMPEN is located at One Parkview Plaza, Oakbrook, 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 a
wholly owned subsidiary of MSAM Holding, Inc., which in turn is a wholly owned
subsidiary of Morgan Stanley, Dean Witter, Discover & Co., a publicly held
company. Van Kampen provides investment advice to a wide variety of individual,
institutional and investment company clients and, together with its affiliates,
had aggregate assets under management or supervision, as of June 30, 1997, of
more than $64.3 billion.
WARBURG is located at 466 Lexington Avenue, New York, New York 10017-3147.
Warburg is a professional investment counseling firm which provides investment
services to investment companies, employee benefit plans, endowment funds,
foundations and other institutions and individuals. As of June 30, 1997, Warburg
managed approximately $19.7 billion of assets, including approximately $11.5
billion of investment company assets. Incorporated in 1970, Warburg is
indirectly controlled by Warburg, Pincus & Co. ("WP & Co."), which has no
business other than being a holding company of Warburg and its affiliates.
Lionel I. Pincus, the managing partner of WP & Co., may be deemed to control
both WP & Co. and Warburg.
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 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. First Data Investor
Services Group, Inc. ("First Data"), a subsidiary of First Data Corp., serves as
sub-administrator and Transfer Agent of the Trust. First Data is located at One
Exchange Place, 53 State Street, Boston, Massachusetts 02109 and 4400 Computer
Drive, Westboro, Massachusetts 01581. Sierra Administration pays First Data for
its services as sub-administrator and Transfer Agent. Sierra Administration also
pays Boston Safe Deposit and Trust Co. ("Boston Safe"), One Boston Place,
Boston, MA 02108, for its services as custodian of the Trust. The Trust pays
certain of the Transfer Agent's and sub-administrator's out-of-pocket expenses
and pays Boston Safe certain custodial transaction charges.
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
Washington Mutual, 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
66
<PAGE> 73
"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.
Activities that may be financed under the Rule 12b-1 Plan for Class A Shares and
the Rule 12b-1 Plan for Class B Shares (collectively, the "Plans") include, but
are not limited to: printing prospectuses and statements of additional
information and reports for other than existing shareholders, overhead,
preparation and distribution of advertising material and sales literature,
expense of organizing and conducting sales seminars, supplemental payments to
Authorized Dealers and other institutions such as asset-based sales charges or
as payments of service fees under shareholder service arrangements, and the cost
of administering the Plans.
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.
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. Broker-dealers are selected on the basis of
their ability to obtain best price and execution for a Fund's transactions and
recognizing brokerage, research and other services provided to the Fund and to
the Fund's Advisor or Sub-Advisor. 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.
Each Fund's turnover rate varies from year to year, depending on market
conditions and investment strategies. High turnover rates (over 100%) 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.
67
<PAGE> 74
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>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Amount of
Assets After 50; After 75; After 100; After 125; After 150; After 200; After 300; After 400;
($ Mil.) First 50 next 25 next 25 next 25 next 25 next 50 next 100 next 100 next 100
-----------------------------------------------------------------------------------------------------------------------
Each Money Fund* .50% .50% .50% .50% .50% .50% .50% .50% .50%
-----------------------------------------------------------------------------------------------------------------------
Short Term High Quality
Bond Fund .50% .50% .50% .50% .50% .50% .45% .45% .45%
-----------------------------------------------------------------------------------------------------------------------
Short Term Global
Government Fund .65% .65% .65% .65% .65% .65% .65% .65% .65%
-----------------------------------------------------------------------------------------------------------------------
U.S. Government Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60%
-----------------------------------------------------------------------------------------------------------------------
Corporate Income Fund .65% .65% .65% .65% .65% .65% .65% .65% .65%
-----------------------------------------------------------------------------------------------------------------------
California Municipal
Fund* .65% .65% .65% .65% .65% .65% .65% .65% .65%
-----------------------------------------------------------------------------------------------------------------------
Florida Insured
Municipal Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60%
-----------------------------------------------------------------------------------------------------------------------
California Insured
Intermediate Municipal
Fund* .65% .65% .65% .65% .65% .65% .65% .65% .65%
-----------------------------------------------------------------------------------------------------------------------
National Municipal Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60%
-----------------------------------------------------------------------------------------------------------------------
Growth and Income Fund .80% .80% .80% .75% .75% .75% .70% .70% .65%
-----------------------------------------------------------------------------------------------------------------------
Growth Fund .95% .95% .95% .90% .90% .90% .875% .875% .875%
-----------------------------------------------------------------------------------------------------------------------
Emerging Growth Fund .90% .90% .90% .85% .85% .85% .85% .85% .85%
-----------------------------------------------------------------------------------------------------------------------
International Growth Fund .95% .85% .85% .85% .65% .65% .65% .65% .65%
-----------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
=======================
Amount of
Assets Over
($ Mil.) 500
-----------------------
Each Money Fund* .40%
-----------------------
Short Term High Quality
Bond Fund .40%
-----------------------
Short Term Global
Government Fund .55%
-----------------------
U.S. Government Fund* .50%
-----------------------
Corporate Income Fund .50%
-----------------------
California Municipal
Fund* .50%
-----------------------
Florida Insured
Municipal Fund* .45%
-----------------------
California Insured
Intermediate Municipal
Fund* .50%
-----------------------
National Municipal Fund* .45%
-----------------------
Growth and Income Fund .575%
-----------------------
Growth Fund .875%
-----------------------
Emerging Growth Fund .75%
-----------------------
International Growth Fund .65%
=======================
</TABLE>
* 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.
68
<PAGE> 75
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, a monthly
fee at an annual rate of the following percentages of the average net assets of
each Fund:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Amount of
Assets After 50; After 75; After 100; After 125; After 150; After 200; After 300; After 400;
($ Mil.) First 50 next 25 next 25 next 25 next 25 next 50 next 100 next 100 next 100
-----------------------------------------------------------------------------------------------------------------------
Each Money
Fund .15% .15% .15% .15% .15% .15% .15% .15% .15%
-----------------------------------------------------------------------------------------------------------------------
Short Term
High Quality
Bond Fund .15% .15% .15% .15% .15% .15% .10% .10% .10%
-----------------------------------------------------------------------------------------------------------------------
Short Term
Global
Government
Fund(1) .28% .28% .28% .28% .28% .28% .10% .10% .10%
-----------------------------------------------------------------------------------------------------------------------
U.S.
Government
Fund (2) (2) (2) (2) (2) (2) (2) (2) (2)
-----------------------------------------------------------------------------------------------------------------------
Corporate
Income Fund .30% .30% .30% .30% .30% .30% .30% .30% .30%
-----------------------------------------------------------------------------------------------------------------------
California
Municipal
Fund(3) .20% .20% .20% .20% .20% .15% .15% .15% .15%
-----------------------------------------------------------------------------------------------------------------------
Florida
Insured
Municipal
Fund .20% .20% .125% .125% .125% .125% .125% .125% .125%
-----------------------------------------------------------------------------------------------------------------------
California
Insured
Intermediate
Municipal
Fund .20% .20% .125% .125% .125% .125% .125% .125% .125%
-----------------------------------------------------------------------------------------------------------------------
National
Municipal
Fund(3) .20% .20% .20% .20% .20% .15% .15% .15% .15%
-----------------------------------------------------------------------------------------------------------------------
Growth and
Income Fund .45% .45% .45% .40% .40% .40% .35% .35% .30%
-----------------------------------------------------------------------------------------------------------------------
Growth Fund .55% .55% .55% .50% .50% .50% .50% .50% .50%
-----------------------------------------------------------------------------------------------------------------------
Emerging
Growth Fund .55% .55% .55% .50% .50% .50% .50% .50% .50%
-----------------------------------------------------------------------------------------------------------------------
International
Growth Fund .50% .50% .50% .50% .50% .50% .50% .50% .50%
-----------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
=================
Amount of
Assets Over
($ Mil.) 500
-----------------
Each Money
Fund .15%
-----------------
Short Term
High Quality
Bond Fund .10%
-----------------
Short Term
Global
Government
Fund(1) .10%
-----------------
U.S.
Government
Fund (2)
-----------------
Corporate
Income Fund .25%
-----------------
California
Municipal
Fund(3) .15%
-----------------
Florida
Insured
Municipal
Fund .125%
-----------------
California
Insured
Intermediate
Municipal
Fund .125%
-----------------
National
Municipal
Fund(3) .15%
-----------------
Growth and
Income Fund .30%
-----------------
Growth Fund .50%
-----------------
Emerging
Growth Fund .50%
-----------------
International
Growth Fund .50%
=================
</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
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.
69
<PAGE> 76
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.
================================================================================
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.
================================================================================
70
<PAGE> 77
SIERRA (800) 222-5852
TRUST FUNDS P.O. Box 5118
A FAMILY OF MUTUAL FUNDS Westboro, Massachusetts 01581-5118
1. YOUR ACCOUNT REGISTRATION Check one box for the account you wish to open and
complete information.
[ ] INDIVIDUAL NAME: SS/TAX ID#
-------------------------- ---------------
STREET ADDRESS
-------------------------------------------
CITY STATE ZIP
-------------------------- ------- --------
HOME PHONE ( ) BUSINESS PHONE ( )
--------- --------
[ ] 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
STATE
------- Minor's SS# --------------------
AGE
[ ] OTHER NAME: SS/TAX ID#
--------------------------- -----------
Indicate name of Corporation, other organization or
fiduciary; if Trust, include date of instrument
(additional forms, such as a Corporate Resolution may be
required -- call 800-222-5852 for information)
[ ] I AM A UNITED STATES CITIZEN IF NOT, PLEASE SPECIFY COUNTRY
-------------
- --------------------------------------------------------------------------------
2. YOUR INVESTMENT SELECTION Minimum initial $250; Minimum subsequent $100
<TABLE>
<S> <C>
U.S. GOVERNMENT MONEY FUND CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
Class A Shares $________ Class A Shares $________ Class B Shares $________
CALIFORNIA MONEY FUND FLORIDA INSURED MUNICIPAL FUND
Class A Shares $________ Class A Shares $________ Class B Shares $________
GLOBAL MONEY FUND NATIONAL MUNICIPAL FUND
Class A Shares $________ Class A Shares $________ Class B Shares $________
SHORT TERM HIGH QUALITY BOND FUND GROWTH AND INCOME FUND
Class A Shares $________ Class B Shares $________ Class A Shares $________ Class B Shares $________
SHORT TERM GLOBAL GOVERNMENT FUND GROWTH FUND
Class A Shares $________ Class B Shares $________ Class A Shares $________ Class B Shares $________
U.S .GOVERNMENT FUND EMERGING GROWTH FUND
Class A Shares $________ Class B Shares $________ Class A Shares $________ Class B Shares $________
CORPORATE INCOME FUND INTERNATIONAL GROWTH FUND
Class A Shares $________ Class B Shares $________ Class A Shares $________ Class B Shares $________
CALIFORNIA MUNICIPAL FUND OTHER ___________________________ Amount $________
Class A Shares $________ Class B Shares $________
TOTAL INVESTMENT $________
</TABLE>
- --------------------------------------------------------------------------------
3. YOUR PAYMENT METHOD FOR INITIAL INVESTMENT
/ / CHECK.......... MAKE CHECK PAYABLE TO: SIERRA TRUST FUNDS
/ / WIRE........... CALL 800-222-5852 FOR INSTRUCTIONS
<PAGE> 78
4. YOUR BROKER/DEALER
DEALER NUMBER____________ BRANCH NUMBER___________ REPRESENTATIVE'S NUMBER______
FILE NAME___________________________ REPRESENTATIVE'S LAST NAME_________________
BRANCH ADDRESS_______________________________ CITY____________ STATE___ ZIP_____
- --------------------------------------------------------------------------------
5. SPECIAL FEATURES AND PRIVILEGES
A. TELEPHONE PRIVILEGES -- permits transfer of money by wire ($1,000 minimum)
between your Sierra Trust Fund(s) and your designated
bank account
/ / YES / / NO..... IF "YES," PLEASE WIRE MONIES TO THE FOLLOWING BANK:
NAME OF YOUR BANK_____________________________________________________________
ACCOUNT NAME______________________ ACCOUNT NUMBER_____________________________
BANK ADDRESS_______________________________ CITY____________ STATE___ ZIP_____
B. DIVIDEND AND DISTRIBUTION PLANS -- check only one; 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 provided in Section "A"
/ / pay all income dividends and distributions by check and mail
to the address provided in Section "1"
/ / SYSTEMATIC 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 Trust's Agent to withdraw funds from the bank account
provided below in the amount of $__________ (minimum $100), on the Days/Dates
indicated below and on the Day/Date of each week/month thereafter.
FREQUENCY: / / - Weekly______ / / - Bi-monthly____&____ / / - Monthly________
(choose one) Day of the week Date Date Date
If the date falls on a weekend or holiday, funds will be invested on the next
Business Day. The investment will be applied to this Portfolio account.
NAME OF BANK____________________________________________ BANK ACCOUNT NO._______
(The account must have check or draft writing privileges)
ADDRESS_________________________________________________________________________
CITY_______________________________________ STATE___________ ZIP________________
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 PRIOR TO
Effective Date TODAY'S DATE.
___________________________________________________ ____________________________
Signature(s) Date
APPLICATION CONTINUED ON THE NEXT PAGE
<PAGE> 79
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 Shareholder Services at 800-222-5852 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, Sierra Asset Management
Portfolios or Sierra Prime Income Fund which may entitle this purchase to
have a reduced sales charge under the provisions in the fund Prospectus. My
other account numbers (including accounts held by my spouse and minor
children) are:
_______________________________________ ___________________________________
_______________________________________ ___________________________________
______________________________________________________ _____________________
Signature(s) Date
6. CLIENT SIGNATURES AND TAXPAYER CERTIFICATION Please read and sign below.
I am of legal age, have received and read the Prospectus, agree to its terms
and understand that by signing below (a) neither the 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 the
application and agree that the Funds, 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 the Application Form and, if signing on
behalf of the beneficial owner, represent and warrant that I am duly
authorized to sign the 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. THE INTERNAL REVENUE
SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THE DOCUMENT OTHER
THAN THE CERTIFICATION REQUIRED TO AVOID BACKUP WITHHOLDING.
___________________________________________ X_______________________________
Registered Representative's Name and Number Signature
___________________________________________ X_______________________________
Date Signature
________________________________________________________________________________
SIGNATURE CARD ACCOUNT NUMBER_______________________________________
________________________ Please check the Fund(s) for which you wish to have
SIERRA Checkwriting Privileges:
TRUST FUNDS / / U.S. Government Money Fund
________________________ / / California Money Fund
A FAMILY OF MUTUAL FUNDS / / Global Money Fund
BOSTON SAFE DEPOSIT PLEASE PRINT
AHD TRUST CO. Last Name________ First Name_______ Mid.Init.______
Signature X________________________________________
ALL REGISTERED OWNERS MUST Last Name________ First Name_______ Mid.Init.______
SIGN THIS SIGNATURE CARD. Signature X________________________________________
/ / Only one signature is required on checks.
/ / Both signatures are required on checks.
IF NEITHER BOX IS CHECKED, ALL CHECKS WILL
REQUIRE BOTH SIGNATURES.
<PAGE> 80
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 5118
WESTBORO, MA 01581-5118
<PAGE> 81
<TABLE>
<S> <C>
PROSPECTUS SIERRA TRUST FUNDS
OCTOBER 31, 1997 P.O. BOX 5118
WESTBORO, MASSACHUSETTS 01581-5118
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
</TABLE>
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.
A Statement of Additional Information ("SAI") about the Trust, dated October 31,
1997, has been filed with the Securities and Exchange Commission (the "SEC"),
and is incorporated herein by reference (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.
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. IN ADDITION, THE CALIFORNIA MONEY FUND MAY INVEST A SIGNIFICANT
PERCENTAGE OF ITS ASSETS IN A SINGLE ISSUER, AND INVESTING IN THE CALIFORNIA
MONEY FUND MAY BE RISKIER THAN INVESTING IN OTHER TYPES OF MONEY MARKET FUNDS.
THE TRUST'S SHARES ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS (TRUST OR
OTHERWISE) OF, OR ENDORSED OR GUARANTEED BY A BANK OR ANY 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.
THESE SECURITIES ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Sierra Trust Funds Family............................................................................ 1
Summary of Expenses & Financial Highlights............................................................... 5
The Funds' Investments and Risk Considerations........................................................... 19
Securities and Investment Practices...................................................................... 31
Performance Information.................................................................................. 46
Your Account............................................................................................. 50
How to Invest in a SAM Account........................................................................... 51
How to Sell Shares....................................................................................... 57
Exchange Privileges and Restrictions..................................................................... 59
Dividends, Capital Gains and Taxes....................................................................... 60
Shareholder and Account Policies......................................................................... 63
The Funds in Detail...................................................................................... 64
Sierra Advisors, Its Affiliates and Service Providers.................................................... 64
Breakdown of Fund Expenses............................................................................... 67
</TABLE>
<PAGE> 82
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"). Please call 800-222-5852 if you would like to obtain
a prospectus and further information about the Target Maturity 2002 Fund. The
Global Money, U.S. Government Money and California Money Funds (the "Money
Funds") are money market funds. The rest of the Funds (the "Non-Money Funds")
are classified as either "Bond Funds" or "Equity Funds." Each Fund offers four
classes of shares, Class A Shares, Class B Shares, Class I Shares and Class S
Shares. Subject to the following restrictions, investors may invest in one or
more of the different classes, which have different sales charges, expenses and
other features.
CLASS A AND CLASS S SHARES: Class A Shares have a front-end sales charge. Class
S Shares have sales charges only if they are redeemed within six 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 THE CLASS B SHARES AND CLASS I
SHARES ARE NOT OFFERED THROUGH THIS PROSPECTUS. Class I Shares are currently
sold exclusively to the various investment portfolios of Sierra Asset Management
Portfolios ("SAM Portfolios"), an open-end management investment company, and
are not available for direct purchase by investors. PLEASE CALL 800-222-5852 IF
YOU WOULD LIKE TO OBTAIN A PROSPECTUS AND FURTHER INFORMATION ABOUT THE TARGET
MATURITY 2002 FUND, THE CLASS B SHARES OF THE FUNDS OR THE SAM PORTFOLIOS.
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 and these strategies entail varying degrees of risk. Generally, investors
seeking higher returns must assume greater risks.
INVESTMENT MANAGEMENT: Sierra Investment Advisors Corporation (the "Advisor" or
"Sierra Advisors") has overall responsibility for management of the Funds.
However, each Fund has an investment sub-advisor (the "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
1
<PAGE> 83
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.
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 primarily 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
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 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 at least 65% of its assets in a broad range of U.S.
Government securities, including mortgage-backed securities.
2
<PAGE> 84
INVESTMENT MANAGEMENT: BlackRock Financial Management, Inc. ("BlackRock") is the
Sub-Advisor of the Fund.
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
Sub-Advisor of the Fund.
THE MUNICIPAL FUNDS
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 at least 80% of its assets in intermediate- and long-term
California municipal securities.
INVESTMENT MANAGEMENT: Van Kampen American Capital Management Inc. ("Van
Kampen") is the 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 at least 80% of its assets 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 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 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 at least 80% of its assets in intermediate- and long-term
fixed income municipal obligations.
INVESTMENT MANAGEMENT: Van Kampen is the Sub-Advisor of the Fund.
3
<PAGE> 85
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 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 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 Sub-Advisor of the Fund.
INTERNATIONAL GROWTH FUND
GOAL: Long-term capital appreciation by investing primarily in equity securities
of foreign issuers. STRATEGY: Investing primarily in stock of leading companies
located outside the United States.
INVESTMENT MANAGEMENT: Warburg Pincus Asset Management, Inc. ("Warburg") is the
Sub-Advisor of the Fund.
4
<PAGE> 86
SUMMARY OF SIERRA TRUST FUNDS' EXPENSES*
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
GLOBAL MONEY FUND U.S. GOVERNMENT MONEY FUND CALIFORNIA MONEY FUND
CLASS A CLASS S CLASS A CLASS S CLASS A CLASS S
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales
Charge Imposed
on Purchases
(as a percentage
of offering
price) None None None None None None
----------------------- ----------------------- -----------------------
Maximum Sales
Charge Imposed
on Reinvested
Dividends
(as a percentage
of offering
price) None None None None None None
----------------------- ----------------------- -----------------------
Deferred Sales
Charge None(2) 5.00%(3) None(2) 5.00%(3) None(2) 5.00%(3)
----------------------- ----------------------- -----------------------
Redemption
Fees(4) None None None None None None
----------------------- ----------------------- -----------------------
Exchange Fees(5) None None None None None None
</TABLE>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CLASS A CLASS S CLASS A CLASS S CLASS A CLASS S
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Management Fees
(after voluntary
waivers or
reimbursement)(6) 0.08% 0.08% 0.00% 0.00% 0.15% 0.15%
----------------------- ----------------------- -----------------------
12b-1 Fees(7) 0.25% 1.00% 0.25% 1.00% 0.25% 1.00%
----------------------- ----------------------- -----------------------
Other
Expenses(8)
(after
reimbursement) 0.52% 0.52% 0.60% 0.60% 0.45% 0.45%
----------------------- ----------------------- -----------------------
Total Fund
Operating
Expenses (after
voluntary
waivers or
reimbursement)(9) 0.85% 1.60% 0.85% 1.60% 0.85% 1.60%
</TABLE>
=
- --------------------------------------------------------------------------------
(*) Fees charged for the SAM Service, which are in addition to and separate from
the fees and expenses paid directly or indirectly by an investor in the
Funds, are not reflected in the expense summary. See "Investment in Funds
through a SAM Account."
(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 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 CDSC."
(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 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 Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD").
5
<PAGE> 87
SUMMARY OF SIERRA TRUST FUNDS' EXPENSES*
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
SHORT TERM HIGH SHORT TERM GLOBAL GOVERNMENT
QUALITY BOND FUND FUND U.S. GOVERNMENT FUND CORPORATE INCOME FUND
CLASS A CLASS S CLASS A CLASS S CLASS A CLASS S CLASS A CLASS S
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales
Charge Imposed on
Purchases
(as a percentage
of offering price) 3.50%(1) None 3.50%(1) None 4.50%(1) None 4.50%(1) None
------------------- ------------------- ------------------- -------------------
Maximum Sales
Charge Imposed
on Reinvested
Dividends
(as a percentage
of offering price) None None None None None None None None
------------------- ------------------- ------------------- -------------------
Deferred Sales
Charge None(2) 5.00%(3) None(2) 5.00%(3) None(2) 5.00%(3) None(2) 5.00%(3)
------------------- ------------------- ------------------- -------------------
Redemption Fees(4) None None None None None None None None
------------------- ------------------- ------------------- -------------------
Exchange Fees(5) None None None None None None None None
</TABLE>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CLASS A CLASS S CLASS A CLASS S CLASS A CLASS S CLASS A CLASS S
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees
(after voluntary
waivers or
reimbursement)(6) 0.01% 0.01% 0.00% 0.00% 0.22% 0.22% 0.45% 0.45%
------------------- ------------------- ------------------- -------------------
12b-1 Fees(7) 0.25% 1.00% 0.25% 1.00% 0.25% 1.00% 0.25% 1.00%
------------------- ------------------- ------------------- -------------------
Other Expenses(8)
(after
reimbursement) 0.64% 0.64% 0.65% 0.65% 0.53% 0.53% 0.50% 0.50%
------------------- ------------------- ------------------- -------------------
Total Fund
Operating Expenses
(after voluntary
waivers or
reimbursement)(9) 0.90% 1.65% 0.90% 1.65% 1.00% 1.75% 1.20% 1.95%
</TABLE>
- --------------------------------------------------------------------------------
(8) Other expenses for the U.S. Government Money and Short Term Global
Government Funds, without reimbursements, would be 0.73% and 0.67%,
respectively.
(9) The total fund operating expenses set forth in the foregoing table are
restated to reflect management fees and other expenses (after voluntary
waivers or reimbursements). Actual expenses for each Fund may vary from day
to day. The Advisor and/or Administrator anticipate voluntarily waiving fees
and/or bearing expenses during the current fiscal year 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 below are total fund operating expenses absent such fee waivers
and expense reimbursements. Global Money Fund, Class A-1.17%, Class S-1.92%,
U.S. Government Money Fund, Class A-1.38%, Class S-2.13%; California Money
Fund, Class A-1.10%, Class S-1.85%; Short Term High Quality Bond Fund, Class
A-1.39%, Class S-2.14%; Short Term Global Government Fund, Class A-1.57%,
Class S-2.32%; U.S. Government Fund, Class A-1.33%, Class S-2.08%; Corporate
Income Fund, Class A-1.40%, Class S-2.15%; California Municipal Fund, Class
A-1.24%, Class S-1.99%; Florida Insured Municipal Fund, Class A-1.50%, Class
S-2.25%; California Insured Intermediate Municipal Fund, Class A-1.30%,
Class S-2.05%; National Municipal Fund, Class A-1.26%, Class S-2.01%; Growth
& Income Fund, Class A-1.50%, Class S-2.25%; Growth Fund, Class A-1.72%,
Class S-2.47%; International Growth Fund, Class A-1.68%, Class S-2.43%; and
Emerging Growth Fund, Class A-1.74%, Class S-2.49%.
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, and
Class I Shares, which are currently sold exclusively to SAM Portfolios. CLASS B
AND CLASS I SHARES ARE DESCRIBED IN MORE DETAIL IN A SEPARATE PROSPECTUS.
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
for, and further information about, Class B Shares.
6
<PAGE> 88
SUMMARY OF SIERRA TRUST FUNDS' EXPENSES*
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CALIFORNIA FLORIDA INSURED CALIFORNIA INSURED NATIONAL
MUNICIPAL FUND MUNICIPAL FUND INTERMEDIATE MUNICIPAL FUND MUNICIPAL FUND
CLASS A CLASS S CLASS A CLASS S CLASS A CLASS S CLASS A CLASS S
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales
Charge Imposed on
Purchases
(as a percentage
of offering price) 4.50%(1) None 4.50%(1) None 4.50%(1) None 4.50%(1) None
------------------ ------------------ ------------------ ------------------
Maximum Sales
Charge Imposed
on Reinvested
Dividends
(as a percentage
of offering price) None None None None None None None None
------------------ ------------------ ------------------ ------------------
Deferred Sales
Charge None(2) 5.00%(3) None(2) 5.00%(3) None(2) 5.00%(3) None(2) 5.00%(3)
------------------ ------------------ ------------------ ------------------
Redemption Fees(4) None None None None None None None None
------------------ ------------------ ------------------ ------------------
Exchange Fees(5) None None None None None None None None
</TABLE>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CLASS A CLASS S CLASS A CLASS S CLASS A CLASS S CLASS A CLASS S
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees
(after voluntary
waivers or
reimbursement)(6) 0.41% 0.41% 0.05% 0.05% 0.25% 0.25% 0.39% 0.39%
------------------ ------------------ ------------------ ------------------
12b-1 Fees(7) 0.25% 1.00% 0.25% 1.00% 0.25% 1.00% 0.25% 1.00%
------------------ ------------------ ------------------ ------------------
Other Expenses(8)
(after
reimbursement) 0.44% 0.44% 0.70% 0.70% 0.50% 0.50% 0.46% 0.46%
------------------ ------------------ ------------------ ------------------
Total Fund
Operating Expenses
(after voluntary
waivers or
reimbursement)(9) 1.10% 1.85% 1.00% 1.75% 1.00% 1.75% 1.10% 1.85%
</TABLE>
- --------------------------------------------------------------------------------
(*) Fees charged for the SAM Service, which are in addition to and separate from
the fees and expenses paid directly or indirectly by an investor in the
Funds, are not reflected in the expense summary. See "Investment in Funds
through a SAM Account."
(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 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 CDSC."
(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 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 Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD").
7
<PAGE> 89
SUMMARY OF SIERRA TRUST FUNDS' EXPENSES*
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
GROWTH AND INTERNATIONAL
INCOME FUND GROWTH FUND EMERGING GROWTH FUND GROWTH FUND
CLASS A CLASS S CLASS A CLASS S CLASS A CLASS S CLASS A CLASS S
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales
Charge Imposed on
Purchases
(as a percentage
of offering price) 5.75%(1) None 5.75%(1) None 5.75%(1) None 5.75%(1) None
------------------ ------------------ ------------------ ------------------
Maximum Sales
Charge Imposed
on Reinvested
Dividends
(as a percentage
of offering price) None None None None None None None None
------------------ ------------------ ------------------ ------------------
Deferred Sales
Charge None(2) 5.00%(3) None(2) 5.00%(3) None(2) 5.00%(3) None(2) 5.00%(3)
------------------ ------------------ ------------------ ------------------
Redemption Fees(4) None None None None None None None None
------------------ ------------------ ------------------ ------------------
Exchange Fees(5) None None None None None None None None
</TABLE>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CLASS A CLASS S CLASS A CLASS S CLASS A CLASS S CLASS A CLASS S
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees
(after voluntary
waivers or
reimbursement)(6) 0.74% 0.74% 0.91% 0.91% 0.87% 0.87% 0.83% 0.83%
------------------ ------------------ ------------------ ------------------
12b-1 Fees(7) 0.25% 1.00% 0.25% 1.00% 0.25% 1.00% 0.25% 1.00%
------------------ ------------------ ------------------ ------------------
Other Expenses(8)
(after
reimbursement) 0.51% 0.51% 0.56% 0.56% 0.62% 0.62% 0.60% 0.60%
------------------ ------------------ ------------------ ------------------
Total Fund
Operating Expenses
(after voluntary
waivers or
reimbursement)(9) 1.50% 2.25% 1.72% 2.47% 1.74% 2.49% 1.68% 2.43%
</TABLE>
- --------------------------------------------------------------------------------
(8) Other expenses for the U.S. Government Money and Short Term Global
Government Funds, without reimbursements, would be 0.73% and 0.67%,
respectively.
(9) The total fund operating expenses set forth in the foregoing table are
restated to reflect management fees and other expenses (after voluntary
waivers or reimbursements). Actual expenses for each Fund may vary from day
to day. The Advisor and/or Administrator anticipate voluntarily waiving fees
and/or bearing expenses during the current fiscal year 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 below are total fund operating expenses absent such fee waivers
and expense reimbursements. Global Money Fund, Class A-1.17%, Class S-1.92%,
U.S. Government Money Fund, Class A-1.38%, Class S-2.13%; California Money
Fund, Class A-1.10%, Class S-1.85%; Short Term High Quality Bond Fund, Class
A-1.39%, Class S-2.14%; Short Term Global Government Fund, Class A-1.57%,
Class S-2.32%; U.S. Government Fund, Class A-1.33%, Class S-2.08%; Corporate
Income Fund, Class A-1.40%, Class S-2.15%; California Municipal Fund, Class
A-1.24%, Class S-1.99%; Florida Insured Municipal Fund, Class A-1.50%, Class
S-2.25%; California Insured Intermediate Municipal Fund, Class A-1.30%,
Class S-2.05%; National Municipal Fund, Class A-1.26%, Class S-2.01%; Growth
& Income Fund, Class A-1.50%, and Class S-2.25%; Growth Fund, Class A-1.72%,
Class S-2.47%; International Growth Fund, Class A-1.68%, Class S-2.43%; and
Emerging Growth Fund, Class A-1.74%, Class S-2.49%.
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, and
Class I Shares, which are currently sold exclusively to SAM Portfolios. CLASS B
AND CLASS I SHARES ARE DESCRIBED IN MORE DETAIL IN A SEPARATE PROSPECTUS.
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
for, and further information about, Class B Shares.
8
<PAGE> 90
SUMMARY OF SIERRA TRUST FUNDS' EXPENSES
EXAMPLE:
You would have paid the following expenses on a $1,000 investment at the end of
each time period, assuming (1) 5% annual return and (2) reinvestment of all
dividends and distributions.
<TABLE>
<CAPTION>
U.S. SHORT TERM SHORT TERM
GLOBAL GOVERNMENT CALIFORNIA HIGH GLOBAL U.S.
MONEY MONEY MONEY QUALITY GOVERNMENT GOVERNMENT
FUND FUND FUND BOND FUND FUND FUND
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Class A(1)
1 YEAR $ 9 $ 9 $ 9 $ 44 $ 44 $ 55
3 YEARS 27 27 27 63 63 75
5 YEARS 47 47 47 83 83 98
10 YEARS 105 105 105 142 142 162
---------- ---------- ---------- ---------- ---------- ----------
CLASS S
(assuming a complete
redemption
at end of period)(2)
1 YEAR $ 66 $ 66 $ 66 $ 67 $ 67 $ 68
3 YEARS 81 81 81 82 82 85
5 YEARS 107 107 107 110 110 115
10 YEARS(3) 190 190 190 195 195 206
---------- ---------- ---------- ---------- ---------- ----------
CLASS S
(assuming no
redemption)(4)
1 YEAR $ 16 $ 16 $ 16 $ 17 $ 17 $ 18
3 YEARS 51 51 51 52 52 55
5 YEARS 87 87 87 90 90 95
10 YEARS(3) 190 190 190 195 195 206
<CAPTION>
CORPORATE
INCOME
FUND
<S> <C>
Class A(1)
1 YEAR $ 57
3 YEARS 81
5 YEARS 108
10 YEARS 184
----------
CLASS S
(assuming a complete
redemption
at end of period)(2)
1 YEAR $ 70
3 YEARS 91
5 YEARS 125
10 YEARS(3) 227
----------
CLASS S
(assuming no
redemption)(4)
1 YEAR $ 20
3 YEARS 61
5 YEARS 105
10 YEARS(3) 227
</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.
9
<PAGE> 91
SUMMARY OF SIERRA TRUST FUNDS' EXPENSES
<TABLE>
<CAPTION>
FLORIDA CALIFORNIA
CALIFORNIA INSURED INSURED NATIONAL
MUNICIPAL MUNICIPAL INTERMEDIATE MUNICIPAL GROWTH AND EMERGING
FUND FUND MUNICIPAL FUND FUND INCOME FUND GROWTH FUND GROWTH FUND
<S> <C> <C> <C> <C> <C> <C>
$ 56 $ 55 $ 55 $ 56 $ 72 $ 74 $ 74
78 75 75 78 102 109 109
103 98 98 103 135 145 146
173 162 162 173 226 249 251
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 69 $ 68 $ 68 $ 69 $ 73 $ 75 $ 75
88 85 85 88 100 107 108
120 115 115 120 140 152 153
217 206 206 217 258 281 283
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 19 $ 18 $ 18 $ 19 $ 23 $ 25 $ 25
58 55 55 58 70 77 78
100 95 95 100 120 132 133
217 206 206 217 258 281 283
- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
CALIFORNIA
MUNICIPAL INTERNATIONAL
FUND GROWTH FUND
<S> <C>
$ 56 $ 74
78 107
103 144
173 245
- ---------- -----------
$ 69 $ 75
88 106
120 150
217 277
- ---------- -----------
$ 19 $ 25
58 76
100 130
217 277
- ---------- -----------
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE> 92
FINANCIAL HIGHLIGHTS
The following information, insofar as it relates to each of the respective
periods ended June 30, 1997 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 Shareholder
Services ("Shareholder Services") at 800-222-5852.
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Net Realized
& Distributions Distributions
Net Asset Unrealized Dividends In Distributions In
Value, Net Gain/(Loss) Total From From Net Excess Of Net from Net Excess Of Net
Beginning Investment on Investment Investment Investment Realized Realized
FUND Of Period Income/(Loss) Investments Operations Income Income Gains Gains
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GLOBAL MONEY FUND
CLASS A SHARES
Year ended
6/30/97 $1.00 $0.048 $0.000(17) $0.048 $(0.048) $ - $(0.000)(17) $ -
Year ended
6/30/96 1.00 0.051 0.000(17) 0.051 (0.051) - (0.000)(17) -
Year ended
6/30/95 1.00 0.049 0.000(17) 0.049 (0.049) - (0.000)(17) -
Year ended
6/30/94 1.00 0.030 0.000(17) 0.030 (0.030) - (0.000)(17) -
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
6/30/97 1.00 0.040 0.000(17) 0.040 (0.040) - (0.000)(17) -
Year ended
6/30/96 1.00 0.043 0.000(17) 0.043 (0.043) - (0.000)(17) -
Year ended
6/30/95* 1.00 0.042 0.000(17) 0.042 (0.042) - (0.000)(17) -
------ ------- --------- ------ ------ ------- ---------- -------
U.S. GOVERNMENT
MONEY FUND
CLASS A SHARES
Year ended
6/30/97 $1.00 $ 0.046 $ - $ 0.046 $(0.046) $ - $ - $ -
Year ended
6/30/96 1.00 0.047 - 0.047 (0.047) - - -
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) - (0.002) -
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
6/30/97 1.00 0.038 - 0.038 (0.038) - - -
Year ended
6/30/96 1.00 0.040 - 0.040 (0.040) - - -
Year ended
6/30/95* 1.00 0.038 - 0.038 (0.038) - - -
------ ------- --------- ------ ------ ------- ---------- -------
CALIFORNIA MONEY
FUND
CLASS A SHARES
Year ended
6/30/97 $1.00 $ 0.028 $ - $ 0.028 $(0.028) $ - $ - $ -
Year ended
6/30/96 1.00 0.029 - 0.029 (0.029) - - -
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
6/30/97 1.00 0.020 - 0.020 (0.020) - - -
Year ended
6/30/96 1.00 0.022 - 0.022 (0.022) - - -
Year ended
6/30/95* 1.00 0.020 - 0.020 (0.020) - - -
------ ------- --------- ------ ------ ------- ---------- -------
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE> 93
<TABLE>
<CAPTION>
Net
Investment
Income/(Loss)
Per Share
Without
Fee Waivers,
Expenses
Absorbed
Ratio of Ratio of Net and/or
Net Asset Net Assets, Operating Investment Credits
Distribution Value, End Of Expenses to Income to Portfolio Allowed
From Total End Of Total Period Average Average Turnover by the
Capital Distributions Period Return(11) (in 000's) Net Assets Net Assets Rate Custodian
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ - $ (0.048) $ 1.00 4.88% $104,302 0.75% 4.78% -% $0.044(18)
- (0.051) 1.00 5.22 153,786 0.65 5.04 - 0.046(18)
- (0.049) 1.00 5.06 110,012 0.54 5.08 - 0.043
- (0.030) 1.00 3.04 53,973 0.45 2.99 - 0.021
- (0.031) 1.00 3.17 48,283 0.41 3.15 - 0.022
- (0.048) 1.00 4.95 71,492 0.42 4.90 - 0.039
- (0.073) 1.00 7.51 92,334 0.30 6.99 - 0.060
- (0.074) 1.00 7.64 22,834 1.00(10) 7.54(10) - 0.067
- (0.040) 1.00 4.11 6,909 1.50 4.03 - 0.036(18)
- (0.043) 1.00 4.40 20,848 1.40 4.29 - 0.038(18)
- (0.042) 1.00 4.29 7,399 1.29 4.33 - 0.036
------- -------- ------ ---- -------- ---- ---- ----- ------
$ - $ (0.046) $ 1.00 4.66% $ 30,519 0.85% 4.56% -% $0.043(18)
- (0.047) 1.00 4.81 39,031 0.85 4.70 - 0.043(18)
- (0.046) 1.00 4.67 47,492 0.85 4.63 - 0.042
- (0.027) 1.00 2.67 30,180 0.85 2.68 - 0.022
- (0.027) 1.00 2.70 36,802 0.85 2.69 - 0.022
- (0.044) 1.00 4.45 44,233 0.85 4.43 - 0.037
- (0.065) 1.00 6.65 62,473 0.86 6.54 - 0.058
- (0.073) 1.00 7.52 94,789 1.00(10) 7.52(10) - 0.067
- (0.038) 1.00 3.87 346 1.60 3.81 - 0.035(18)
- (0.040) 1.00 4.02 439 1.60 3.95 - 0.036(18)
- (0.038) 1.00 3.91 737 1.60 3.88 - 0.034
------- -------- ------ ---- -------- ---- ---- ----- ------
$ - $ (0.028) $ 1.00 2.81% $ 42,923 0.85% 2.75% -% $0.025
- (0.029) 1.00 3.00 51,211 0.85 2.94 - 0.026
- (0.028) 1.00 2.79 48,836 0.85 2.73 - 0.025
- (0.018) 1.00 1.81 62,500 0.85 1.80 - 0.014
- (0.021) 1.00 2.07 68,404 0.85 2.06 - 0.016
- (0.033) 1.00 3.35 94,607 0.85 3.31 - 0.029
- (0.044) 1.00 4.52 113,392 0.83 4.48 - 0.037
- (0.046) 1.00 4.64 147,487 1.00(10) 5.07(10) - 0.040
- (0.020) 1.00 2.03 1 1.60 2.00 - 0.017
- (0.022) 1.00 2.22 10 1.60 2.19 - 0.019
- (0.020) 1.00 2.04 10 1.60 1.98 - 0.017
<CAPTION>
Ratio of
Operating
Expenses
to Average
Ratio of Net Assets
Operating Without
Expenses Fee Waivers,
to Average Expenses
Net Assets Absorbed
Without and/or
Credits Credits
Allowed Allowed
by the by the
Custodian Custodian
- ------------------------------
<S> <C> <C>
0.75%(18) 1.15%(18)
0.65(18) 1.15(18)
N/A 1.18
N/A 1.35
N/A 1.32
N/A 1.34
N/A 1.51
N/A 1.74(10)
1.50(18) 1.90(18)
1.40(18) 1.90(18)
N/A 1.93
---- ----
0.85%(18) 1.19%(18)
0.85 (18) 1.22 (18)
N/A 1.25
N/A 1.32
N/A 1.34
N/A 1.35
N/A 1.52
N/A 1.64(10)
1.60(18) 1.94(18)
1.60(18) 1.97(18)
N/A 2.00
---- ----
N/A 1.14%
N/A 1.14
N/A 1.15
N/A 1.27
N/A 1.29
N/A 1.28
N/A 1.48
N/A 1.64(10)
N/A 1.89
N/A 1.89
N/A 1.90
</TABLE>
- --------------------------------------------------------------------------------
12
<PAGE> 94
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Net Realized
& Distributions Distributions
Net Asset Unrealized Dividends In Distributions In
Value, Net Gain/(Loss) Total From From Net Excess Of Net from Net Excess Of Net
Beginning Investment on Investment Investment Investment Realized Realized
FUND Of Period Income/(Loss) Investments Operations Income Income Gains Gains
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHORT TERM HIGH
QUALITY BOND FUND
CLASS A SHARES
Year ended
6/30/97 $ 2.32 $0.14 $ 0.00(12) $ 0.14 $ (0.14) $ - $ - $ -
Year ended
6/30/96 2.35 0.15(15) (0.03) 0.12 (0.15) - - -
Year ended
6/30/95 2.39 0.08 0.02 0.10 (0.08) (0.06) - -
Period ended
6/30/94(3) 2.50 0.09 (0.11) (0.02) (0.09) - - -
CLASS S SHARES
Year ended
6/30/97 2.32 0.12 0.00(12) 0.12 (0.12) - - -
Year ended
6/30/96 2.35 0.13(15) (0.03) 0.10 (0.13) - - -
Year ended
6/30/95* 2.39 0.06 0.02 0.08 (0.06) (0.06) - -
-------- -------- -------- ------- -------- -------- --------- --------
SHORT TERM GLOBAL
GOVERNMENT FUND
CLASS A SHARES
Year ended
6/30/97 $ 2.29 $0.15(15) $ 0.05 $ 0.20 $ (0.19) $ (0.00)(12) $ - $ -
Year ended
6/30/96 2.24 0.15(15) 0.07 0.22 (0.16) (0.01) - -
Year ended
6/30/95 2.34 0.17 (0.12) 0.05 (0.02) (0.00)(12) - (0.01)
Year ended
6/30/94 2.48 0.17 (0.14) 0.03 (0.13) (0.03) - (0.01)
Year ended
6/30/93 2.56 0.19 (0.04) 0.15 (0.20) - - (0.03)
Period ended
6/30/92(4) 2.50 0.07 0.07 0.14 (0.08) - - -
CLASS S SHARES
Year ended
6/30/97 2.29 0.13(15) 0.05 0.18 (0.17) (0.00)(12) - -
Year ended
6/30/96 2.24 0.13(15) 0.07 0.20 (0.14) (0.01) - -
Year ended
6/30/95* 2.34 0.15 (0.12) 0.03 (0.00)(12) (0.00)(12) - (0.01)
------- -------- -------- -------- -------- --------- --------- -------
U. S. GOVERNMENT
FUND
CLASS A SHARES
Year ended
6/30/97 $ 9.41 $0.65 $ 0.15 $ 0.80 $ (0.65) $ - $ - $ -
Year ended
6/30/96 9.67 0.67 (0.26) 0.41 (0.67) - - -
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) - - (0.10)
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
6/30/97 9.41 0.58 0.15 0.73 (0.58) - - -
Year ended
6/30/96 9.67 0.60 (0.26) 0.34 (0.60) - - -
Year ended
6/30/95* 9.45 0.63 0.22 0.85 (0.63) - - -
------- -------- -------- -------- -------- --------- --------- --------
CORPORATE INCOME
FUND
CLASS A SHARES
Year ended
6/30/97 $ 10.16 $0.76 $ 0.15 $ 0.91 $ (0.76) $ - $ - $ -
Year ended
6/30/96 10.52 0.76 (0.36) 0.40 (0.76) - - -
Year ended
6/30/95 9.87 0.68 0.78 1.46 (0.68) (0.09) - -
Year ended
6/30/94 11.33 0.80 (1.35) (0.55) (0.78) (0.01) (0.06) (0.06)
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
6/30/97 10.16 0.68 0.15 0.83 (0.68) - - -
Year ended
6/30/96 10.52 0.68 (0.36) 0.32 (0.68) - - -
Year ended
6/30/95* 9.87 0.61 0.78 1.39 (0.61) (0.09) - -
------- -------- -------- -------- -------- --------- --------- --------
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE> 95
<TABLE>
<CAPTION>
Net
Investment
Income/(loss)
Per Share
Without
Fee Waivers,
Expenses
Absorbed
Ratio of Ratio of Net and/or
Net Asset Net Assets, Operating Investment Credits
Distribution Value, End Of Expenses Income to Portfolio Allowed
From Total End Of Total Period To Average Average Turnover by the
Capital Distribution Period Return(11) (in 000's) Net Assets Net Assets Rate Custodian
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ - $(0.14) $ 2.32 6.15% $ 13,685 0.82% 6.50% 51% $0.13(18)
(0.00)(12) (0.15) 2.32 5.05 32,440 0.75 6.22 225 0.13(15,18)
(0.00)(12) (0.14) 2.35 4.42 43,811 0.75 6.10 137 0.07
- (0.09) 2.39 (0.73) 21,771 0.00(10) 5.70(10) 95 0.06
- (0.12) 2.32 5.37 800 1.57 5.75 51 0.11(18)
(0.00)(12) (0.13) 2.32 4.27 3,531 1.50 5.47 225 0.11(15,18)
(0.00)(12) (0.12) 2.35 3.64 2,303 1.50 5.35 137 0.05
-------- -------- ------- -------- -------- ------- -------- -------- --------
$ - $(0.19) $ 2.30 8.86% $ 44,256 0.90% 6.46% 83% $0.14(15,18)
- (0.17) 2.29 10.16 65,726 0.85 6.75 87 0.14(15,18)
(0.12) (0.15) 2.24 2.10 103,986 0.85 7.22 217 0.16
(0.00)(12,14) (0.17) 2.34 1.10 220,824 0.85 6.87 222 0.16
- (0.23) 2.48 6.03 215,348 0.73 7.67 294 0.17
- (0.08) 2.56 5.34 106,609 0.41(10) 8.65(10) 81 0.06
- (0.17) 2.30 8.05 474 1.65 5.71 83 0.12(15,18)
- (0.15) 2.29 9.33 2,211 1.60 6.00 87 0.12(15,18)
(0.12) (0.13) 2.24 1.33 2,286 1.60 6.47 217 0.14
-------- -------- ------- -------- -------- ------- -------- -------- --------
$ - $(0.65) $ 9.56 8.75% $258,553 0.98%(16) 7.04% 389% $0.62(18)
- (0.67) 9.41 4.34 423,282 0.70(16) 7.34 356 0.62(18)
- (0.70) 9.67 10.17 459,968 0.95(16) 7.58 226 0.66
- (0.74) 9.45 (4.59) 666,566 1.05(16) 7.26 27 0.72
(0.03)(14) (0.77) 10.65 8.87 842,277 0.91(16) 6.98 67 0.70
(0.01)(14) (0.85) 10.52 13.74 504,776 0.72(16) 7.67 35 0.77
(0.01)(14) (0.86) 10.04 10.14 166,920 1.12(16) 8.32 54 0.79
- (0.74) 9.93 6.99 31,430 1.13(10,16) 8.50(10) 13 0.69
- (0.58) 9.56 7.94 9,088 1.73(16) 6.29 389 0.55(18)
- (0.60) 9.41 3.56 35,667 1.45(16) 6.59 356 0.55(18)
- (0.63) 9.67 9.36 6,839 1.70(16) 6.83 226 0.59
-------- -------- ------- -------- -------- ------- -------- -------- --------
$ - $(0.76) $10.31 9.23% $195,531 1.18% 7.38% 20% $0.74(18)
(0.00)(12) (0.76) 10.16 3.81 298,518 0.95 7.23 25 0.72(18)
(0.04) (0.81) 10.52 15.57 383,642 0.90 8.26 55 0.64
- (0.91) 9.87 (5.32) 472,519 1.35 7.19 30 0.80
(0.03)(14) (0.87) 11.33 16.64 396,357 1.24 7.67 37 0.82
- (0.90) 10.52 16.29 169,682 0.97 8.29 8 0.85
- (0.81) 9.87 7.31 35,478 1.21(10) 9.01(10) 31 0.76
- (0.68) 10.31 8.41 2,121 1.93 6.63 20 0.66(18)
(0.00)(12) (0.68) 10.16 3.04 12,011 1.70 6.48 25 0.64(18)
(0.04) (0.74) 10.52 14.73 8,701 1.65 7.51 55 0.57
-------- -------- -------- -------- -------- ------- -------- -------- --------
<CAPTION>
Ratio of
Operating
Expenses to
Average Net
Ratio of Assets
Operating Without
Expenses Fee Waivers,
to Average Expenses
Net Assets Absorbed
Without and/or
Credits Credits
Allowed Allowed by
by the the
Custodian Custodian
- -----------------------------------
<S> <C> <C>
0.82%(18) 1.45%(18)
0.75 (18) 1.42(18)
N/A 1.39
N/A 1.61(10)
1.57 (18) 2.20(18)
1.50 (18) 2.17(18)
N/A 2.14
------ ----
0.90%(18) 1.51%(18)
0.85 (18) 1.47(18)
N/A 1.44
N/A 1.52
N/A 1.55
N/A 1.92(10)
1.65 (18) 2.26(18)
1.60 (18) 2.22(18)
N/A 2.19
------ ----
0.98%(18) 1.30%(18)
0.71 (18) 1.45(18)
N/A 1.59
N/A 1.34
N/A 1.34
N/A 1.39
N/A 1.57
N/A 1.89(10)
1.73 (18) 2.05(18)
1.46 (18) 2.20(18)
N/A 2.34
------ ----
1.18%(18) 1.39%(18)
0.95 (18) 1.38(18)
N/A 1.40
N/A 1.42
N/A 1.42
N/A 1.48
N/A 1.78(10)
1.93 (18) 2.14(18)
1.70 (18) 2.13(18)
N/A 2.15
------ ----
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE> 96
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Net Realized
& Dividends Distributions Distributions
Net Asset Unrealized From In Excess Distributions In Excess
Value, Net Gain/(Loss) Total From Net Of Net From Net Of Net
Beginning Investment on Investment Investment Investment Realized Realized
FUND Of Period Income/(Loss) Investments Operations Income Income Gains Gains
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/97 $10.60 $ 0.59 $ 0.32 $ 0.91 $(0.59) $ - $ - $ -
Year ended 6/30/96 10.53 0.60(15) 0.07 0.67 (0.60) - - -
Year ended 6/30/95 10.38 0.61 0.15 0.76 (0.61) - (0.00)(12) -
Year ended 6/30/94 11.22 0.61 (0.82) (0.21) (0.61) (0.00)(12) - (0.02)
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 6/30/97 10.60 0.51 0.32 0.83 (0.51) - - -
Year ended 6/30/96 10.53 0.51(15) 0.07 0.58 (0.51) - - -
Year ended 6/30/95* 10.38 0.53 0.15 0.68 (0.53) - $(0.00)(12) -
------ --------- ------ ------ ------ ---------- ---------- ------
FLORIDA INSURED MUNICIPAL
FUND
CLASS A SHARES
Year ended 6/30/97 $ 9.64 $ 0.49(15) $ 0.30 $ 0.79 $(0.50) $(0.00)(12) $ - $ -
Year ended 6/30/96 9.43 0.50 0.21 0.71 (0.50) - - -
Year ended 6/30/95 9.40 0.52 0.03(13) 0.55 (0.52) (0.00)(12) - -
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(12) 0.05 0.05 - (0.00)(12) - (0.00)(12)
CLASS S SHARES
Year ended 6/30/97 9.64 0.42(15) 0.30 0.72 (0.43) (0.00)(12) - -
Year ended 6/30/96 9.43 0.42 0.21 0.63 (0.42) - - -
Year ended 6/30/95* 9.40 0.45 0.03(13) 0.48 (0.45) - - -
------ --------- ------ ------ ------ ---------- ---------- ------
CALIFORNIA INSURED
INTERMEDIATE
MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/97 $10.56 $ 0.49(15) $ 0.23 $ 0.72 $(0.49) $ - $(0.05) $ -
Year ended 6/30/96 10.45 0.49 0.15 0.64 (0.49) - (0.04) -
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(13) 0.22 (0.11) - (0.01) -
CLASS S SHARES
Year ended 6/30/97 10.56 0.41(15) 0.23 0.64 (0.41) - (0.05) -
Year ended 6/30/96 10.45 0.41 0.15 0.56 (0.41) - (0.04) -
Year ended 6/30/95* 10.10 0.43 0.35 0.78 (0.43) - - -
------ --------- ------ ------ ------ ---------- ---------- ------
NATIONAL MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/97 $10.83 $ 0.61(15) $ 0.33 $ 0.94 $(0.61) $ - $ - $ -
Year ended 6/30/96 10.76 0.61 0.07 0.68 (0.61) - - -
Year ended 6/30/95 10.85 0.64 0.01(13) 0.65 (0.64) - (0.01) (0.09)
Year ended 6/30/94 11.65 0.65 (0.73) (0.08) (0.65) (0.00)(12) (0.07) -
Year ended 6/30/93 10.96 0.67 0.75 1.42 (0.67) - (0.06) -
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 6/30/97 10.83 0.53(15) 0.33 0.86 (0.53) - - -
Year ended 6/30/96 10.76 0.53 0.07 0.60 (0.53) - - -
Year ended 6/30/95* 10.85 0.56 0.01(13) 0.57 (0.56) - (0.01) (0.09)
------ --------- ------ ------ ------ ---------- ---------- ------
<CAPTION>
Distributions
From
FUND Capital
-----------------
<S> <C>
CALIFORNIA MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/97 $ -
Year ended 6/30/96 -
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(5) -
CLASS S SHARES
Year ended 6/30/97 -
Year ended 6/30/96 -
Year ended 6/30/95* -
FLORIDA INSURED MUNICIPAL
FUND
CLASS A SHARES
Year ended 6/30/97 $ -
Year ended 6/30/96 -
Year ended 6/30/95 -
Year ended 6/30/94 -
Period ended 6/30/93(7) -
CLASS S SHARES
Year ended 6/30/97 -
Year ended 6/30/96 -
Year ended 6/30/95* -
-----------
CALIFORNIA INSURED
INTERMEDIATE
MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/97 $ -
Year ended 6/30/96 -
Year ended 6/30/95 -
Period ended 6/30/94(8) -
CLASS S SHARES
Year ended 6/30/97 -
Year ended 6/30/96 -
Year ended 6/30/95* -
-----------
NATIONAL MUNICIPAL FUND
CLASS A SHARES
Year ended 6/30/97 $ -
Year ended 6/30/96 -
Year ended 6/30/95 -
Year ended 6/30/94 -
Year ended 6/30/93 -
Year ended 6/30/92 -
Period ended 6/30/91(6) -
CLASS S SHARES
Year ended 6/30/97 -
Year ended 6/30/96 -
Year ended 6/30/95* -
-----------
</TABLE>
- -------------------------------------------
15
<PAGE> 97
<TABLE>
<CAPTION>
Net
Investment
Income/(Loss)
Per Share Ratio of
Without Fee Operating
Waivers, Expenses
Expenses to Average
Ratio of Net Absorbed Net Assets
Ratio of Investment and/or Without
Net Asset Net Assets, Operating Income/Loss Credits Credits
Value, End Expenses to To Portfolio Allowed by Allowed by
Total End Total Of Period Average Average Net Turnover the the
Distributions Of Period Return(11) (in 000's) Net Assets Assets Rate Custodian Custodian
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (0.59) $ 10.92 8.83% $ 318,251 0.97% 5.51% 36% $ 0.56(18) 0.97%(18)
(0.60) 10.60 6.40 372,177 0.94 5.56 17 0.56(15,18) 0.94(18)
(0.61) 10.53 7.57 405,967 0.85 5.89 22 0.56 N/A
(0.63) 10.38 (2.19) 509,223 0.79 5.45 50 0.54 N/A
(0.62) 11.22 13.84 511,364 0.80 5.74 41 0.56 N/A
(0.65) 10.45 10.56 309,146 0.94 6.08 29 0.60 N/A
(0.63) 10.07 7.16 202,595 1.05 6.30 16 0.58 N/A
(0.57) 10.01 5.99 92,972 1.01(10) 6.26(10) 38 0.49 N/A
(0.51) 10.92 8.02 7 1.72 4.76 36 0.48(18) 1.72(18)
(0.51) 10.60 5.61 11 1.69 4.81 17 0.47(18) 1.69(18)
(0.53) 10.53 6.78 11 1.60 5.14 22 0.48 N/A
------ ------ ------- -------- ------ ------ ----- ----- -----
$ (0.50) $ 9.93 8.43% $ 22,761 0.82% 5.01% 53% $ 0.43(15,18) 0.84%(18)
(0.50) 9.64 7.56 29,821 0.63 5.08 52 0.42(18) 0.66(18)
(0.52) 9.43 6.01 33,714 0.39 5.53 44 0.42 N/A
(0.52) 9.40 (1.50) 38,541 0.00 5.09 83 0.36 N/A
- 10.05 0.50 4,837 0.00(10) 0.48(10) 0 (0.02) N/A
(0.43) 9.93 7.63 29 1.57 4.26 53 0.36(15,18) 1.59(18)
(0.42) 9.64 6.76 11 1.38 4.33 52 0.34(18) 1.41(18)
(0.45) 9.43 5.23 11 1.14 4.78 44 0.35 N/A
------ ------ ------- -------- ------ ------ ----- ----- -----
$ (0.54) $ 10.74 6.97% $ 45,157 0.82% 4.61% 29% $ 0.44(15,18) 0.83%(18)
(0.53) 10.56 6.25 54,518 0.73 4.62 27 0.42(18) 0.75(18)
(0.50) 10.45 8.71 54,507 0.42 4.95 13 0.40 N/A
(0.12) 10.10 2.20 34,147 0.00(10) 4.25(10) 17 0.06 N/A
(0.46) 10.74 6.17 2 1.57 3.86 29 0.36(15,18) 1.58(18)
(0.45) 10.56 5.46 11 1.48 3.87 27 0.34(18) 1.50
(0.43) 10.45 7.90 11 1.17 4.20 13 0.33 N/A
------ ------ ------- -------- ------ ------ ----- ----- -----
$ (0.61) $ 11.16 8.91% $ 182,262 1.04% 5.55% 28% $ 0.58(15,18) 1.04%(18)
(0.61) 10.83 6.41 233,359 1.04 5.58 25 0.58(18) 1.04(18)
(0.74) 10.76 6.32 269,033 0.83 5.97 23 0.59 N/A
(0.72) 10.85 (0.90) 354,501 0.87 5.60 44 0.59 N/A
(0.73) 11.65 13.41 390,187 0.86 5.89 83 0.61 N/A
(0.71) 10.96 15.42 226,984 0.64 6.34 61 0.63 N/A
(0.64) 10.16 8.27 44,915 0.55(10) 6.84(10) 81 0.53 N/A
(0.53) 11.16 8.10 1 1.79 4.80 28 0.50(15,18) 1.79(18)
(0.53) 10.83 5.62 11 1.79 4.83 25 0.50(18) 1.79(18)
(0.66) 10.76 5.54 11 1.58 5.22 23 0.51 N/A
------ ------ ------- -------- ------ ------ ----- ----- -----
<CAPTION>
Ratio of
operating
Expenses
to Average
Net Assets
Without Fee
Waivers,
Expenses
Absorbed
and/or
Credits
Allowed by
Total the
Distributions Custodian
- -----------------------------------------------------------------------
<S> <C>
$ (0.59) 1.26%(18)
(0.60) 1.29(18)
(0.61) 1.29
(0.63) 1.39
(0.62) 1.41
(0.65) 1.40
(0.63) 1.60
(0.57) 1.84(10)
(0.51) 2.01(18)
(0.51) 2.04(18)
(0.53) 2.04
------- --------
$ (0.50) 1.46%(18)
(0.50) 1.46(18)
(0.52) 1.51
(0.52) 1.55
- 5.59(10)
(0.43) 2.21(18)
(0.42) 2.21(18)
(0.45) 2.26
------- --------
$ (0.54) 1.31%(18)
(0.53) 1.39(18)
(0.50) 1.41
(0.12) 1.95(10)
(0.46) 2.06(18)
(0.45) 2.14(18)
(0.43) 2.16
------- --------
$ (0.61) 1.28%(18)
(0.61) 1.29(18)
(0.74) 1.30
(0.72) 1.36
(0.73) 1.37
(0.71) 1.40
(0.64) 1.68(10)
(0.53) 2.03(18)
(0.53) 2.04(18)
(0.66) 2.05
------- --------
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE> 98
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Net Realized
& Dividends Distributions Distributions
Net Asset Unrealized From In Excess Distributions In Excess
Value, Net Gain/(Loss) Total From Net Of Net From Net Of Net
Beginning Investment on Investment Investment Investment Realized Realized
FUND Of Period Income/(Loss) Investments Operations Income Income Gains Gains
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH AND INCOME FUND
CLASS A SHARES
Year ended 6/30/97 $14.10 $ 0.04(15) $ 3.88 $ 3.92 $(0.03) $ - $(2.06) $
Year ended 6/30/96 12.58 0.08(15) 2.51 2.59 (0.08) - (0.99) -
Year ended 6/30/95 11.30 0.13 2.04 2.17 (0.12) - (0.77) -
Year ended 6/30/94 12.09 0.12 0.72 0.84 (0.12) - (1.51) -
Year ended 6/30/93 11.25 0.12 0.91 1.03 (0.12) - (0.07) -
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 6/30/97 14.04 (0.06)(15) 3.83 3.77 - - (2.06) -
Year ended 6/30/96 12.55 (0.02)(15) 2.51 2.49 (0.01) - (0.99) -
Year ended 6/30/95* 11.30 0.05 2.04 2.09 (0.07) - (0.77) -
------ ------ ------ ------ ------ ------ ------ -------
GROWTH FUND
CLASS A Shares
Year ended 6/30/97 $15.69 $(0.03)(15) $ 1.58 $ 1.55 $ - $ - $(2.34) $ -
Year ended 6/30/96 14.18 (0.07)(15) 3.47 3.40 - - (1.89) -
Year ended 6/30/95 10.73 0.05(15) 3.42 3.47 (0.02) - (0.00)(12) -
Year ended 6/30/94 10.72 (0.02) 0.03(13) 0.01 - - - -
Period ended 6/30/93(9) 10.00 0.00(12) 0.72 0.72 - - - -
CLASS S SHARES
Year ended 6/30/97 15.47 (0.14)(15) 1.55 1.41 - - (2.34) -
Year ended 6/30/96 14.11 (0.19)(15) 3.44 3.25 - - (1.89) -
Year ended 6/30/95* 10.73 (0.04)(15) 3.42 3.38 (0.00)(12) - (0.00)(12) -
------ ------ ------ ------ ------ ------ ------ -------
EMERGING GROWTH FUND
CLASS A SHARES
Year ended 6/30/97 $20.17 $(0.21)(15) $(0.18) $(0.39) $ - $ - $(1.50) $ -
Year ended 6/30/96 15.47 (0.19)(15) 5.65 5.46 - - (0.76) -
Year ended 6/30/95 13.02 (0.00)(12,15) 2.77 2.77 - - (0.32) -
Year ended 6/30/94 13.76 (0.09) 0.68 0.59 - - (1.33) -
Year ended 6/30/93 11.67 (0.02) 2.31 2.29 - - (0.20) -
Year ended 6/30/92 9.62 (0.01)(15) 2.16 2.15 (0.01) - (0.08) -
Period ended 6/30/91(6) 10.00 0.09 (0.40) (0.31) (0.07) - - -
CLASS S SHARES
Year ended 6/30/97 19.88 (0.34)(15) (0.19) (0.53) - - (1.50) -
Year ended 6/30/96 15.37 (0.32)(15) 5.59 5.27 - - (0.76) -
Year ended 6/30/95* 13.02 (0.10)(15) 2.77 2.67 - - (0.32) -
------ ------ ------ ------ ------ ------ ------ -------
INTERNATIONAL GROWTH FUND
CLASS A SHARES
Year ended 6/30/97 $10.49 $ 0.04(15) $ 1.55 $ 1.59 $(0.13) $ - $(0.10) $ -
Year ended 6/30/96 9.78 0.05(15) 1.21 1.26 (0.05) (0.04) (0.46) -
Year ended 6/30/95 10.74 (0.11)(15) (0.31) (0.42) (0.04) - (0.44) (0.06)
Year ended 6/30/94 9.80 0.06 1.15 1.21 (0.02) - (0.25) -
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 6/30/97 10.38 (0.04)(15) 1.53 1.49 - - (0.10) -
Year ended 6/30/96 9.73 (0.03)(15) 1.20 1.17 (0.02) (0.04) (0.46) -
Year ended 6/30/95* 10.74 (0.17)(15) (0.31) (0.48) (0.03) - (0.44) (0.06)
------ ------ ------ ------ ------ ------ ------ -------
<CAPTION>
Distributions
From
FUND Capital
----------------
<S> <C>
GROWTH AND INCOME FUND
CLASS A SHARES
Year ended 6/30/97 $ -
Year ended 6/30/96 -
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(5) -
CLASS S SHARES
Year ended 6/30/97 -
Year ended 6/30/96 -
Year ended 6/30/95* -
-------
GROWTH FUND
CLASS A Shares
Year ended 6/30/97 $ -
Year ended 6/30/96 -
Year ended 6/30/95 -
Year ended 6/30/94 -
Period ended 6/30/93(9) -
CLASS S SHARES
Year ended 6/30/97 -
Year ended 6/30/96 -
Year ended 6/30/95* -
-------
EMERGING GROWTH FUND
CLASS A SHARES
Year ended 6/30/97 $ -
Year ended 6/30/96 -
Year ended 6/30/95 -
Year ended 6/30/94 -
Year ended 6/30/93 -
Year ended 6/30/92 (0.01)(14)
Period ended 6/30/91(6) -
CLASS S SHARES
Year ended 6/30/97 -
Year ended 6/30/96 -
Year ended 6/30/95* -
-------
INTERNATIONAL GROWTH FUND
CLASS A SHARES
Year ended 6/30/97 $ -
Year ended 6/30/96 -
Year ended 6/30/95 -
Year ended 6/30/94 -
Year ended 6/30/93 -
Year ended 6/30/92 -
Period ended 6/30/91(6) -
CLASS S SHARES
Year ended 6/30/97 -
Year ended 6/30/96 -
Year ended 6/30/95* -
-------
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE> 99
<TABLE>
<CAPTION>
Net
Investment
Income/(Loss)
Per Share Ratio of
Without Fee Operating
Waivers, Expenses
Expenses to Average
Absorbed Net Assets
Ratio of Ratio of Net and/or Without
Net Asset Net Assets, Operating Investment Credits Credits
Value End Expenses to Income/Loss Average Portfolio Allowed by Allowed by
Total End Total Of Period Average To Average Commission Turnover the the
Distributions Of Period Return(11) (in 000's) Net Assets Net Assets Rate Paid Rate Custodian Custodian
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$(2.09) $15.93 30.30% $168,687 1.53% 0.30% $ 0.0476(19) 107% $0.04(15,18) 1.53%(18)
(1.07) 14.10 21.36 183,084 1.54 0.60 N/A 90 0.08(15,18) 1.54(18)
(0.89) 12.58 20.47 170,177 1.56 1.11 N/A 72 0.13 N/A
(1.63) 11.30 6.67 125,249 1.50 1.04 N/A 127 0.11 N/A
(0.19) 12.09 9.20 97,873 1.46 1.01 N/A 47 0.12 N/A
(0.17) 11.25 8.65 83,825 1.50 1.51 N/A 16 0.16 N/A
(0.27) 10.51 6.70 33,930 1.52 2.48 N/A 19 0.21 N/A
(0.19) 10.12 3.17 20,964 1.37(10) 3.21(10) N/A 16 0.19 N/A
(2.06) 15.75 29.24 13,726 2.28 (0.45) 0.0476(19) 107 (0.06)(15,18) 2.28(18)
(1.00) 14.04 20.51 29,481 2.29 (0.15) N/A 90 (0.02)(15,18) 2.29(18)
(0.84) 12.55 19.75 14,368 2.31 0.36 N/A 72 0.05 N/A
- ----------- ----------- ----------- ----------- ------------ ----------- ---------- ------------ --------- ----------
$(2.34) $14.90 10.88% $111,187 1.70% (0.22)% $ 0.0433(19) 156% $(0.03)(15,18) 1.70%(18)
(1.89) 15.69 25.44 179,720 1.70 (0.49) N/A 205 (0.07)(15,18) 1.71(18)
(0.02) 14.18 32.33 154,763 1.76 0.28 N/A 233 0.05(15,18) N/A
- 10.73 0.00 126,808 1.75 (0.35) N/A 227 (0.02) N/A
- 10.72 7.30 23,323 1.44(10) (0.63)(10) N/A 13 (0.01) N/A
(2.34) 14.54 10.06 14,038 2.45 (0.97) 0.0433(19) 156 (0.14)(15,18) 2.45(18)
(1.89) 15.47 24.54 45,652 2.45 (1.24) N/A 205 (0.19)(15,18) 2.46(18)
(0.00) 14.11 31.44 18,730 2.51 (0.47) N/A 233 N/A N/A
- ----------- ----------- ----------- ----------- ------------ ----------- ---------- ------------ --------- ----------
$(1.50) $18.28 (1.50)% $165,719 1.64% (1.17)% $ 0.0330(19) 81% $(0.21)(15,18) 1.64%(18)
(0.76) 20.17 35.93 283,747 1.64 (1.02) N/A 131 (0.19)(15,18) 1.65(18)
(0.32) 15.47 21.54 185,722 1.68 (0.31) N/A 181 (0.00)(12) N/A
(1.33) 13.02 3.40 124,941 1.66 (0.68) N/A 224 (0.09) N/A
(0.20) 13.76 19.75 96,646 1.59 (0.32) N/A 28 (0.02) N/A
(0.10) 11.67 22.47 27,652 1.93 (0.04) N/A 60 (0.01) N/A
(0.07) 9.62 (2.95) 8,490 1.84(10) 1.10(10) N/A 17 0.07 N/A
(1.50) 17.85 (2.26) 8,341 2.39 (1.92) 0.0330(19) 81 (0.34)(15,18) 2.39(18)
(0.76) 19.88 34.91 43,645 2.39 (1.77) N/A 131 (0.32)(15,18) 2.40(18)
(0.32) 15.37 20.76 11,840 2.43 (1.06) N/A 181 N/A N/A
- ----------- ----------- ----------- ----------- ------------ ----------- ---------- ------------ --------- ----------
$(0.23) $11.85 15.50% $ 57,776 1.65% 0.35% $ 0.0057(19) 67% $0.04(15,18) 1.65%(18)
(0.55) 10.49 13.16 116,254 1.77 0.46 N/A 125 0.05(15,18) 1.77(18)
(0.54) 9.78 (4.01) 91,763 1.69 0.62 N/A 81 (0.11) N/A
(0.27) 10.74 12.39 127,764 1.69 0.54 N/A 44 0.06 N/A
(0.03) 9.80 11.51 56,962 1.80 1.07 N/A 63 0.07 N/A
(0.05) 8.82 7.28 24,479 2.25 0.69 N/A 66 0.04 N/A
- 8.27 (17.30) 11,647 2.24(10) 0.51(10) N/A 45 0.01 N/A
(0.10) 11.77 14.61 11,991 2.40 (0.40) 0.0057(19) 67 (0.04)(15,18) 2.40(18)
(0.52) 10.38 12.29 38,900 2.52 (0.29) N/A 125 (0.13)(15,18) 2.52(18)
(0.53) 9.73 (4.61) 11,120 2.44 (0.13) N/A 81 N/A N/A
- ----------- ----------- ----------- ----------- ------------ ----------- ---------- ------------ --------- ----------
<CAPTION>
Ratio of
Operating
Expenses
to Average
Net Assets
Without Fee
Waivers,
Expenses
Absorbed
and/or
Credits
Allowed by
Total the
Distribution Custodian
- -------------------------
<S> <C>
$(2.09) 1.53%(18)
(1.07) 1.54(18)
(0.89) 1.56
(1.63) 1.59
(0.19) 1.46
(0.17) 1.55
(0.27) 1.78
(0.19) 2.01(10)
(2.06) 2.28(18)
(1.00) 2.29(18)
(0.84) 2.31
- ----------- ----------
$(2.34) 1.70%(18)
(1.89) 1.71(18)
(0.02) 1.76
- 1.75
- 2.52(10)
(2.34) 2.45(18)
(1.89) 2.46(18)
(0.00) 2.51
- ----------- ----------
$(1.50) 1.64%(18)
(0.76) 1.65(18)
(0.32) 1.68
(1.33) 1.66
(0.20) 1.59
(0.10) 1.93
(0.07) 2.11(10)
(1.50) 2.39(18)
(0.76) 2.40(18)
(0.32) 2.43
- ----------- ----------
$(0.23) 1.65%(18)
(0.55) 1.77(18)
(0.54) 1.69
(0.27) 1.69
(0.03) 1.80
(0.05) 2.29
- 2.47(10)
(0.10) 2.40(18)
(0.52) 2.52(18)
(0.53) 2.44
- ----------- ----------
</TABLE>
- --------------------------------------------------------------------------------
18
<PAGE> 100
FINANCIAL HIGHLIGHTS (CONTINUED)
(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
absorbed by the investment advisor, administrator and/or distributor or
without credits allowed by the custodian.
(12) Amount represents less than $0.01 per share.
(13) 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.
(14) 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.
(15) Per share numbers have been calculated using the average shares method.
(16) Ratio of operating expenses to average net assets including interest
expense for the period ended June 30 each year, was, for Class A shares
1.17% for 1997, 0.82% for 1996, 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 1.92% for 1997, 1.57% for 1996, 1.97% for 1995.
(17) Amount represents less than $0.001 per share.
(18) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective
September 1, 1995.
(19) Average commission rate paid per share of securities purchased and sold by
the Fund as required by amended disclosure requirements effective for
fiscal years beginning on or after September 1, 1995.
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.
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. Since the Money Funds often purchase securities
supported by the credit enhancements from banks and other financial
institutions, changes in credit quality of these institutions
19
<PAGE> 101
could cause losses to the Money Funds and affect share price. A description of
the rating systems of S&P and Moody's is contained in the SAI.
Up to 10% of the net 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. 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
20
<PAGE> 102
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. The average
maturity of the Fund may vary depending on anticipated market conditions. 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
21
<PAGE> 103
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 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. The average maturity
of the Fund may vary depending on anticipated market conditions. This policy
helps minimize the effect of interest rate changes on the Fund's share price.
The Sub-Advisor's calculation of the expected average life of a portfolio
mortgage security is used as that security's maturity with regard to determining
the above average dollar-weighted portfolio maturity calculation. The Fund's
share price and yield will fluctuate primarily due to the movement of foreign
currencies against the U.S. Dollar and changes in worldwide interest rates. The
Fund seeks to maintain greater price stability than longer-term bond funds.
Under normal market conditions, the Fund will invest at least 65% of its assets
in: (i) obligations issued or guaranteed by foreign national governments, their
agencies, instrumentalities, or political subdivisions (including any security
which is majority owned by such government, agency, instrumentality, or
political subdivision); and (ii) U.S. Government Securities.
The Fund may also invest in non-government foreign and domestic debt securities,
including debt securities issued or guaranteed by supranational organizations,
corporate debt securities, bank or bank holding company obligations (e.g.,
certificates of deposit, bankers' acceptances and time deposits),
mortgage-backed or asset-backed securities, and repurchase agreements.
To protect against credit risk, the Fund invests primarily in high-grade debt
securities. At least 65% of the Fund's investments will consist of securities
rated within the three highest rating categories of S&P (AAA, AA, A) or Moody's
(Aaa, Aa, A), or, if unrated, are judged to be of comparable quality by the
Sub-Advisor. 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.
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
22
<PAGE> 104
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 1, 1995.
U.S. GOVERNMENT FUND. The Fund's investment objective is to maximize total rate
of return while providing a high level of current income, consistent with
reasonable safety of principal. The Fund pursues its objective by investing at
least 65% and up to 100% of its assets in intermediate- and long-term U.S.
Government Securities. The Fund may invest in U.S. Government Securities of
varying maturities. Securities in the Fund's portfolio are high quality
securities that will generally yield less income than lower quality securities;
higher quality securities, however, generally have less credit risk and are more
readily marketable than lower quality securities. Depending on market
conditions, the Fund's portfolio will consist of various types of U.S.
Government Securities in varying proportions; it may invest up to 35% of its
total assets in (i) the types of securities in which the Corporate Income Fund
may invest except as otherwise prohibited in the Prospectus and 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; and (ii) commercial
mortgage-backed securities, which are mortgage-backed securities that are issued
by a nongovernmental entity, such as a trust, and include collateralized
mortgage obligations and real estate mortgage investment conduits that are rated
in one of the top two rating categories. Commercial mortgage-backed securities
generally are structured with one or more types of credit enhancement and are
not guaranteed by a governmental agency or instrumentality. 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 Andrew J. Phillips. Mr. Anderson, a Managing Director of BlackRock, has been
co-head of the Portfolio Management Group since 1988. Mr. Phillips has been a
portfolio manager of BlackRock since 1991 and a Principal of BlackRock since
1996.
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 average maturity of the Fund
may vary depending on anticipated market conditions. 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%
23
<PAGE> 105
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.
THE MUNICIPAL FUNDS
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, 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 the section "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 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. For an illustration of the benefits of
tax-free investing, see the section entitled "Performance Information."
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 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 although the average
maturity of the Fund will vary depending on anticipated market conditions. It is
a
24
<PAGE> 106
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 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 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.
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 January 1997, Thomas M. Byron, a Vice President of Van Kampen, has had
primary responsibility for the day-to-day management of the Fund's portfolio.
Mr. Byron has been at Van Kampen for over 15 years. Prior to taking over
responsibility for managing the Fund, Mr. Byron was Head Buyer and Manager of
Van Kampen's Unit Investment Trust desk.
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
25
<PAGE> 107
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
maturity date of Municipal Securities (regardless of call provisions), except
for pooled single family Mortgage Securities for which the effective maturity is
to be the 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
26
<PAGE> 108
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 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 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 Obligations
and 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."
27
<PAGE> 109
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 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 in 1990, 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 a Senior Vice President of Van Kampen
since January 1995 and a First Vice President since January 1993. Mr. Johnson
has been employed as portfolio manager 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.
As the Fund's portfolio managers, William M. Riegel and Henry D. Cavanna,
Managing Directors of J.P. Morgan, have had primary management responsibility
for the Fund since September 1993. Mr. Riegel, who joined J.P. Morgan in 1979,
is a senior equity portfolio manager in its Equity and Balanced Accounts Group.
Mr. Cavanna, who joined J.P. Morgan in 1971, is a senior 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,
28
<PAGE> 110
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 or 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.
Pursuant to an exemptive order granted by the SEC, the Growth Fund and Emerging
Growth Fund (and other funds advised by Janus Capital Corporation) may transfer
daily uninvested cash balances into one or more joint trading accounts. Assets
in the joint trading accounts are invested in money market instruments and the
proceeds are allocated to the participating funds on a pro-rata basis.
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 primarily in equity securities of companies with market
capitalization of less than $1.4 billion at the time of purchase. A company's
market capitalization is calculated by multiplying the total number of shares of
its common stock outstanding by the market price per share of its stock. The
Fund may invest up to 25% of its assets in 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 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
29
<PAGE> 111
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. Furthermore, the Emerging Growth Fund may transfer
daily uninvested cash balances into one or more joint trading accounts advised
by the Sub-Advisor. See "Growth Fund."
James P. Goff 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 and the Portfolio Manager of the Janus Enterprise
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. Generation of income is not an objective of the Fund, and any
income received will be incidental. 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. The Fund will emphasize established companies, although it may
invest in companies of varying sizes as measured by assets, sales and
capitalization.
More than 25% of the Fund's total assets may be invested in the securities of
issuers located in the same country. The relative strength or weakness of a
particular country's currency or economy may dictate whether securities of
issuers located in such country will be purchased or sold. Criteria for
determining the appropriate distribution of investments among various countries
and regions include prospects for relative economic growth among foreign
countries, expected levels of inflation, government policies influencing
business conditions, the outlook for currency relationships, and the range of
investment opportunities available to international investors.
The Fund invests in common stock and may invest in other securities with equity
characteristics, consisting of trust or limited partnership interests, preferred
stock, rights and warrants. The Fund may also invest in convertible securities,
consisting of debt securities or preferred stock that may be converted into
common stock or that carry the right to purchase common stock. The Fund invests
in securities listed on foreign or domestic securities exchanges and securities
traded in foreign or domestic over-the-counter markets, and may invest in
restricted or unlisted securities.
The Fund intends to stay invested in the securities described above to the
extent practical. Fund assets may be invested in short-term debt instruments to
meet anticipated day-to-day operating expenses, and for temporary defensive
purposes. In addition, when the Fund experiences large cash inflows, the Fund
may hold short-term investments pending availability of desirable equity
securities.
The short-term instruments in which the Fund may invest include foreign and
domestic: (i) short-term obligations of foreign governments, their agencies,
instrumentalities, authorities or political subdivisions; (ii) other short-term
debt securities rated A or higher by Moody's or S&P, or if unrated, of
comparable quality in the opinion of the Fund's Sub-Advisor; (iii) commercial
paper, including master notes; (iv) bank obligations, including negotiable
certificates of deposit, time deposits, bankers' acceptances, and Euro-currency
instruments and securities; and (v) repurchase agreements. At the time the Fund
invests in any commercial paper, bank obligations or repurchase agreements, the
issuer must have outstanding debt rated A or higher by Moody's or S&P; the
issuer's parent corporation, if any, must have outstanding commercial paper
rated Prime-1 by Moody's or A-1 by S&P; or, if no such ratings are available,
the investment must be of comparable quality in the opinion of the Fund's
Sub-Advisor.
The Fund may invest up to 30% of its assets in the securities of companies in or
governments of developing or emerging countries (sometimes referred to as
"emerging markets") approved by the Board of Trustees, provided that no more
than 5% of the Fund's total assets are invested in any one such country. For
temporary defensive purposes, the Fund may invest a major portion of its assets
in securities of United States issuers. Furthermore, the Fund may invest up to
5% of its total assets in corporate debt securities having maturities longer
than one year and which are rated BBB or better by S&P or Baa or better by
Moody's or of comparable quality in the opinion of the Fund's Sub-Advisor,
including Euro-currency instruments and securities.
30
<PAGE> 112
The following people have been primarily responsible for managing the Fund since
April 8, 1996. Richard H. King, Senior Managing Director, joined Warburg to
found the international equity department and has 31 years of investment
experience. Prior to joining Warburg, Mr. King was chief investment officer and
a director of Fiduciary Trust Company International S.A. in London from 1984
until 1988. P. Nicholas Edwards, Managing Director, has 12 years of investment
experience. Prior to joining Warburg, Mr. Edwards was a director and senior
analyst at Jardine Fleming Investment Advisers in Tokyo from 1991 to 1995.
Harold W. Ehrlich, CFA, CIC, Managing Director, has 14 years of investment
experience. Prior to joining Warburg, Mr. Ehrlich was a senior vice president,
portfolio manager and analyst at Templeton Investment Counsel Inc. from 1987 to
1995. Vincent J. McBride, Vice President, has 10 years of investment experience.
Prior to joining Warburg, Mr. McBride was an international equity analyst at
Smith Barney Inc. from 1993 to 1994. He was an international equity analyst at
General Electric Investments from 1992 to 1993.
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"), Global Depositary
Receipts ("GDRs") 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, which are sometimes referred to as Continental
Depositary Receipts ("CDRs"), 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.
31
<PAGE> 113
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). Such
borrowings would constitute leverage, which is a speculative characteristic.
Leveraging will magnify declines as well as increases in the NAV of a Fund's
shares and increases in the yield on a Fund's investments. 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 not 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.
Under a credit agreement by and between the Trust and Deutsche Bank, AG, New
York ("Deutsche Bank") certain Funds may borrow money from Deutsche Bank
pursuant to a line of credit in compliance with its investment objective,
policies and limitations as set forth in the Prospectus and Statement of
Additional Information of the Trust.
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.
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 other than U.S. Government Securities 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 may attempt 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.
32
<PAGE> 114
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.
The Fund will establish a segregated account with its custodian in which it will
maintain cash, or other liquid assets 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 or other liquid assets 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
33
<PAGE> 115
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 Bond Funds 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 Bond Funds 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.
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
34
<PAGE> 116
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. 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.
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 1996-97 General
Revenue plus Working Capital and Budget Stabilization funds available total
$16,617.4 million, an increase of approximately 6.7% over comparable figures in
fiscal 1995-96. Total effective appropriations for the 1995-96 fiscal year were
$15,537.2 million, with unencumbered reserves at the end of 1995-96 estimated at
$1,080.2 million. Estimated fiscal year 1997-98 General Revenue plus Working
Capital and Budget Stabilization funds available total $17,537.3 million, an
increase of approximately 5.5% over comparable figures for fiscal year 1996-97.
Total effective appropriations for the 1997-98 fiscal year are estimated to be
$16,359.7 million, a 5.1% increase over the analogous figures in 1996-97.
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
35
<PAGE> 117
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. A
Fund may use forward foreign currency contracts to hedge the value of the Fund's
portfolio against potential adverse movements in foreign currency markets.
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
36
<PAGE> 118
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
37
<PAGE> 119
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
38
<PAGE> 120
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. Nonetheless, Growth Fund and Emerging Growth Fund may
invest Fund assets in money market funds affiliated with Janus, provided Janus
remits to the Fund the amount of any investment advisory and administrative
services fees paid to Janus as the investment manager of the money market fund,
based on the investment of Fund assets.
ILLIQUID SECURITIES. Up to 15% of the net assets of each Non-Money Fund, and up
to 10% of the net assets of each Money Fund, may be invested in securities that
are not readily marketable, including: (1) repurchase agreements with maturities
greater than seven calendar days; (2) time deposits maturing in more than seven
calendar days; (3) to the extent a liquid secondary market does not exist for
the instruments, futures contracts and options thereon; (4) certain
over-the-counter options, as described in the 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) securities the disposition of which is
restricted under federal securities laws (excluding Rule 144A Securities,
described below). The Funds will not include for purposes of the restrictions on
illiquid investments securities sold pursuant to Rule 144A under the Securities
Act of 1933, as amended, so long as such securities meet liquidity guidelines
established by the Trust's Board of Trustees. Under Rule 144A, securities which
would otherwise be restricted may be sold by persons other than issuers or
dealers to qualified institutional buyers.
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
39
<PAGE> 121
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. In addition, the U.S. Government Fund may invest in commercial
Mortgage-Backed Securities, which are similar to the above Mortgage-Backed
Securities, except they are issued by non-governmental entities and are created
by pooling together commercial and multifamily mortgage loans into trusts that
are structured into different classes or series based upon the prioritization of
cash flows. Commercial Mortgage-Backed Securities include Collateralized
Mortgage Obligations and real estate mortgage investment conduits ("REMICs").
While commercial Mortgage-Backed Securities are generally structured with one or
more types of credit enhancement, they typically lack a guarantee by an entity
having the credit status of a governmental agency or instrumentality.
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.
40
<PAGE> 122
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" 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.
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
41
<PAGE> 123
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, or other liquid assets
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
42
<PAGE> 124
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. All of the Funds except the U.S. Government Fund,
the Municipal Funds and the Money Funds may purchase and write put and call
options on foreign currencies for the purpose of hedging against declines in
U.S. Dollar value on 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
43
<PAGE> 125
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 other liquid assets 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 cash or other
liquid assets 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).
44
<PAGE> 126
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
45
<PAGE> 127
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 or other liquid assets in an amount equal to the amount
of its when-issued and delayed-delivery commitments.
WHEN-ISSUED MUNICIPAL 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 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.
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-
46
<PAGE> 128
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.
TAX EQUIVALENT YIELDS
TABLE 1
<TABLE>
<CAPTION>
Combined
Federal Tax-Exempt Yield
Sample 1997 Federal and ----------------------------------------
Taxable Income Brackets Federal California California 2.00% 2.50% 3.00% 3.50% 4.00%
---------------------------------------- Marginal Marginal Marginal ----------------------------------------
Single Return Joint Return Tax Rate+ Tax Rate* Tax Rate** Taxable Yield
------------------ ------------------ --------- --------- ---------- ----------------------------------------
<S><C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$24,650 $0-$41,200 15% 6.00% 20.10% 2.50% 3.13% 3.75% 4.38% 5.01%
$24,650-$59,750 $41,200-$99,600 28% 9.30% 34.70% 3.06% 3.83% 4.59% 5.36% 6.13%
$59,750-$124,650 $99,600-$151,750 31% 9.30% 37.42% 3.20% 3.99% 4.79% 5.59% 6.39%
$124,650-$271,050 $151,750-$271,050 36% 9.30% 41.95% 3.44% 4.31% 5.17% 6.03% 6.89%
$271,050 and up $271,050 and up 39.6% 9.30% 45.22% 3.65% 4.56% 5.48% 6.39% 7.30%
</TABLE>
<TABLE>
<CAPTION>
Combined
Federal Tax-Exempt Yield
Sample 1997 Federal and ---------------------------------
Taxable Income Brackets Federal California California 4.50% 5.00% 5.50% 6.00%
---------------------------------------- Marginal Marginal Marginal ---------------------------------
Single Return Joint Return Tax Rate+ Tax Rate* Tax Rate** Taxable Yield
------------------ ------------------ --------- --------- ---------- ---------------------------------
<S><C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$24,650 $0-$41,200 15% 6.00% 20.10% 5.63% 6.26% 6.88% 7.51%
$24,650-$59,750 $41,200-$99,600 28% 9.30% 34.70% 6.89% 7.66% 8.42% 9.19%
$59,750-$124,650 $99,600-$151,750 31% 9.30% 37.42% 7.19% 7.99% 8.79% 9.59%
$124,650-$271,050 $151,750-$271,050 36% 9.30% 41.95% 7.75% 8.61% 9.47% 10.34%
$271,050 and up $271,050 and up 39.6% 9.30% 45.22% 8.21% 9.13% 10.04% 10.95%
</TABLE>
<TABLE>
<CAPTION>
----------------
6.50% 7.00%
----------------
<S><C> <C> <C>
8.14% 8.76%
9.95% 10.72%
10.39% 11.19%
11.20% 12.06%
11.87% 12.78%
</TABLE>
TABLE 2
<TABLE>
<CAPTION>
Tax-Exempt Yield
Sample 1997 Federal ---------------------------------------------------
Taxable Income Brackets 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
---------------------------------------- Federal Marginal ---------------------------------------------------
Single Return Joint Return Tax Rate+ Taxable Yield
------------------ ------------------ ---------------- ---------------------------------------------------
<S><C> <C> <C> <C> <C> <C> <C> <C> <C>
$0-$24,650 $0-$41,200 15% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24%
$24,650-$59,750 $41,200-$99,600 28% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72%
$59,750-$124,650 $99,600-$151,750 31% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14%
$124,650-$271,050 $151,750-$271,050 36% 7.03% 7.81% 8.59% 9.38% 10.16% 10.94%
$271,050 and up $271,050 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.
47
<PAGE> 129
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 Russell 2000 Index, the Lehman Brothers GNMA Index, the S&P 400 Index, the
Lehman Brothers Index of Baa-rated Corporate Bonds, the Lehman Brothers Mutual
Fund Short (1-5) Investment Grade Debt Index, the Lehman Brothers Mutual Fund
Short World Multimarket Index, the Lehman Brothers Mutual Fund U.S. General
Government Index, the Lehman Brothers Mutual Fund U.S. Mortgage Index, the
Lehman Brothers Municipal Bond Index and the T-Bill Index. 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 and the Short Term
Global Government Funds may compare their performance to other investments or
relevant indexes consisting of 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 previous 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 previous 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.
48
<PAGE> 130
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.
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 Authorized Dealer, or by calling
Shareholder Services at 800-222-5852.
49
<PAGE> 131
YOUR ACCOUNT
- --------------------------------------------------------------------------------
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT ACCOUNT
Individual accounts are owned by one person. Two types of joint accounts (having
two or more owners) can be opened:
(1) in a "joint tenancy" account, the surviving owner(s) automatically
receive(s) the shares of any owner(s) who die(s); and
(2) in a "tenants in common" account, the heir(s) of any deceased owner
receive(s) such owner's shares, rather than the surviving owners of the joint
account.
- --------------------------------------------------------------------------------
RETIREMENT
Retirement plans protect investment income and capital gains from current taxes.
Contributions to these accounts may be tax deductible. Retirement accounts
require special applications and typically have lower minimums.
- - INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS") allow persons of legal age and under
70 1/2 years old with Adjusted Gross Income ("AGI") of less than $35,000 (or
$50,000 if married and filing jointly) to protect up to $2,000 (subject to
certain limitations for single persons with AGI equal to or greater than
$25,000 and married persons who file jointly with AGI equal to or greater than
$40,000) per tax year from certain tax effects. If your spouse does not work,
you can protect an additional $2,000 per year in your spouse's name.
- - ROTH IRAS allow persons of legal age with AGI not exceeding $110,000 (or
$160,000 if married and filing jointly) to protect up to $2,000 (subject to
certain limitations for single persons with AGI equal to or greater than
$95,000 and married persons who file jointly with AGI equal to or greater than
$150,000) per tax year from certain tax effects.
- - 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.
- --------------------------------------------------------------------------------
50
<PAGE> 132
HOW TO INVEST IN A SAM ACCOUNT
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
NEW ADDITIONAL
METHOD INVESTMENTS INVESTMENTS
------------------------------------------------------------------------
MINIMUM $10,000 MINIMUM $2,000
($5,000 IRA/401(K)/KEOGH) ($1,000 IRA/401(K)/KEOGH)
- ------------------------------------------------------------------------------------------------------------
IN PERSON: Visit the Representative Visit the Representative
To Open a SAM Account of an Authorized Dealer of an Authorized Dealer
Through an Authorized Dealer
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
BY TELEPHONE: A SAM Account cannot Call Shareholder Services
be opened by telephone. at 800-222-5852,
Monday through Friday,
6:00 a.m. to 6:00 p.m.,
Pacific Time/
9:00 a.m. to 9:00 p.m.,
Eastern Time
and 6:00 a.m. to 3:00 p.m.,
Pacific Time/
9:00 a.m. to 6:00 p.m.,
Eastern Time, on Saturdays.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
BY MAIL: A SAM Account cannot Make your check payable to
be opened by mail. "Sierra Trust Funds," and send to:
Sierra Trust Funds
c/o First Data Investor Services
Group
P.O. Box 5118
Westboro, MA 01581-5118
Indicate your Fund account number
and class of shares purchased on
your check.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
BY WIRE: A SAM Account cannot Instruct your bank to wire Federal
be opened by wire. Funds exactly as follows:
Boston Safe Deposit Trust
Boston, MA
ABA# 011-001234
For Credit to:
Sierra Trust Funds
Account # 132012
(Fund Name and Class of Shares)
(Customer's Name)
(Customer's Social Security Number)
</TABLE>
- --------------------------------------------------------------------------------
51
<PAGE> 133
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 Funds that each have different
risk and return characteristics. SAM is an active investment management service
offered by Sierra Investment Services Corporation ("Sierra Services"), the SAM
investment advisor, that allocates your SAM Account investments across a
combination of either Class A or Class S Shares of the 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 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 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 the Funds' performance unbalances the strategy's mix. You will
pay Sierra Services a fee for the SAM 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 New York Stock
Exchange ("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 currently scheduled
to be closed on New Year's Day, Martin Luther King, Jr. Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day, and on the preceding Friday or subsequent Monday when any of
these holidays falls on a Saturday or Sunday, respectively.
Purchases of each Class of 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
52
<PAGE> 134
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 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 when the NYSE is closed and 6:00 a.m. to 3:00 p.m., Pacific Time/9:00
a.m. to 6:00 p.m., Eastern Time, on Saturdays.
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 the SAM
Income Strategy (the "Income Strategy"), one of the six SAM investment
strategies. 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 Fund will be automatically reinvested in
additional Class A or Class S Shares, respectively, of the 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 CDSC 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.
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. 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 CDSC" subsection in this section. For other waivers of Class A Shares
sales charges, see the section "Waivers of Class A Initial Sales
53
<PAGE> 135
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 SHORT TERM GLOBAL GOVERNMENT
FUND,
SHORT TERM HIGH QUALITY BOND FUND AND THE EQUITY FUNDS
<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
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>
FOR CLASS A SHARES OF THE EQUITY FUNDS
<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 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75% 4.99% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 2.75% 2.83% 2.25%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 and over 0% 0% 0%+
</TABLE>
+Investors do not pay a sales charge at time of purchase on purchases of $1
million or more; however, Sierra Services may pay the investment dealers of
record on purchases of Class A Shares of $1 million or more a fee of up to 1.00%
of the net asset value of such purchases.
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.
54
<PAGE> 136
REDUCED SALES CHARGES AT PURCHASE
As described below, the sales charge on purchases of Class A Shares of the Funds
may be reduced through: (1) a Right of Accumulation; (2) Quantity Discounts; (3)
a Letter of Intent; and (4) Reinvestment Privilege. 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 investment representative or call
800-222-5852.
RIGHT OF ACCUMULATION. Under the Right of Accumulation, the current value of an
investor's (including the investor's spouse and minor children) existing Class A
Shares in the Non-Money Fund(s), Class B and Class S Shares in all the funds of
the Trust, Class A Common Shares of Sierra Prime Income Fund ("SPIF") and Class
A and Class B Shares of the SAM Portfolios may be combined with the amount of
the investor's current purchase of Non-Money Fund Class A Shares in determining
the sales charge applicable to such Class A Shares. In order to receive the
cumulative quantity reduction, the investor or the securities dealer must call
previous purchases of such Class A Common Shares of SPIF, Class A, Class B and
Class S Shares of the Trust and Class A and Class B of the SAM Portfolios to the
attention of Shareholder Services at the time of the current purchase.
QUANTITY DISCOUNTS. As shown in the tables previously and under the "Right of
Accumulation" section, larger purchases of the Non-Money Fund Class A Shares of
the Funds combined with purchases of Class B Shares and Class S Shares of the
Funds, Class A Common Shares of SPIF and Class A and Class B Shares of the SAM
Portfolios reduce the sales charge paid on the Non-Money Fund Class A Shares.
The Funds will combine purchases of the Non-Money Fund Class A Shares with Class
B and Class S Shares of the Funds, Class A Common Shares of SPIF and Class A and
Class B Shares of the SAM Portfolios made on the same day by the investor,
spouse, and any minor children when calculating the Non-Money Fund Class A
Shares sales charge. In order to receive the cumulative quantity reduction, the
investor or the securities dealer must call related purchases of such Class A
Common Shares of SPIF, Class A, Class B and Class S Shares of the Trust and
Class A and Class B Shares of the SAM Portfolios to the attention of Shareholder
Services at the time of the current purchase.
LETTER OF INTENT. An investor may qualify for a reduced sales charge on
Non-Money Fund Class A Shares immediately by signing a "Letter of Intent"
stating the investor's intention to invest during the following 13 months a
specified amount in the Non-Money Fund Class A Shares, Class A Common Shares of
SPIF and/or Class A Shares of the SAM Portfolios, which, if made at one time,
would qualify for a reduced sales charge. Any redemptions or repurchases of
Class A Shares or Class A Common Shares of SPIF made during the 13-month period
will be subtracted from the amount of purchases of Class A Shares or Class A
Common Shares of SPIF in determining whether the terms of the Letter of Intent
have been met. During the term of a Letter of Intent, Shareholder Services will
hold Non-Money Fund Class A Shares representing 5.00% of the amount purchased in
escrow for payment of a higher sales load if the full amount specified in the
Letter of Intent is not purchased within the 13-month period. The escrowed
shares will be released when the full amount specified has been purchased. The
investor is not bound to purchase the full amount specified, but 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 Non-Money Fund Class A
Shares if the total of such purchases had been made at a single time.
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 of the
redemption from the Fund. This reinvestment privilege does not apply to
reinvestments made through the Sierra Automatic Investment Plan. To receive the
privilege, 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
55
<PAGE> 137
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 (investors may
be charged an additional services transaction fee by the Authorized Dealer or
bank).
Additional groups of investors that are not subject to an initial sales charge
on purchases of Class A Shares through an Authorized Dealer include either (a)
investors purchasing Class A Shares of a Fund through an employee benefit trust
created pursuant to a 401(k) Plan 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 $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.
APPLICATION OF CLASS A SHARES CDSC. 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 CDSC for Class A
Shares is 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 in a 403(b) Plan within two years of the plan
participant's purchase of such Class A Shares. This CDSC will be waived on
redemptions in connection with certain involuntary distributions, including
distributions arising out of the death or disability of a shareholder (including
one who owns the shares as joint tenant). See "How to Buy and Redeem Shares" in
the Statement of Additional Information ("SAI").
WAIVERS OF THE CLASS A SHARES CDSC. The Class A CDSC is waived for redemptions
of Class A Shares (i) that are part of exchanges for Class A Shares of other
Funds; (ii) for distributions to pay benefits to participants from a retirement
plan qualified under Section 401(a) or 401(k) of the Code, including
distributions due to the death or disability of the participant (including one
who owns the shares as a joint tenant); (iii) for distributions from a 403(b)
Plan or an IRA due to death, disability, or attainment of age 70 1/2, including
certain involuntary distributions; (iv) for tax-free returns of excess
contributions to an IRA; (v) for distributions by other employee benefit plans
to pay benefits; (vi) in connection with certain involuntary distributions;
(vii) for systematic withdrawals in amounts of 1% or less per month; and (viii)
by a 401(k) Plan participant so long as the shares were purchased through the
401(k) Plan and the 401(k) Plan continues in effect with investments in Class A
Shares of the Fund. See "How to Buy and Redeem Shares" in the Statement of
Additional Information.
56
<PAGE> 138
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.
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. 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:
<TABLE>
<CAPTION>
Year of Contingent
Redemption Deferred Sales
After Purchase Charge
------------------------------------------ --------------
<S> <C>
First..................................... 5%
Second.................................... 4%
Third..................................... 3%
Fourth.................................... 3%
Fifth..................................... 2%
Sixth..................................... 1%
Seventh and following..................... 0
</TABLE>
All purchases are considered made on the last day of the month of purchase. To
determine the CDSC payable on a redemption of Class 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, redemptions in
connection with certain involuntary distributions, including distributions
arising out of the death or disability of a shareholder, from IRAs. The
foregoing waivers may be changed at any time.
HOW TO SELL SHARES
You can arrange to take money out of your Fund account on any Business Day by
selling (redeeming) some or all of your shares. Your shares will be sold at the
NAV next determined after your order is received and accepted. Certain Class A
Shares may be subject to a CDSC as described in the "Application of Class A
Shares CDSC" 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
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
57
<PAGE> 139
take up to 15 days 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
- --------------------------------------------------------------------------------
Account Type Special Requirements
<TABLE>
<S> <C> <C>
BY PHONE All account types, except - You may exchange to certain other
800-222-5852 retirement funds of the Trust, SPIF or SAM
Portfolios if both accounts are
registered with the same name(s),
address, and taxpayer ID number. You
may also redeem amounts by telephone.
Checks will be mailed to the address
of record exactly as account is
registered.
- --------------------------------------------------------------------------------------------------------------
BY MAIL Individual, Joint Accounts, Sole - The letter of instruction must be
Proprietorships, UGMA, UTMA* 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.
- 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 800-222-5852.
- 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.
Minimum amount is $1,000.
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* Corporations, trusts and retirement plans may require additional paperwork
before shares may be redeemed. Please call 800-222-5852 to verify you have the
correct paperwork and to avoid delays.
58
<PAGE> 140
- - 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:
- - 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
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 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. You also may exchange Class A Shares of a Money Fund for Class B Shares
of a Non-Money Fund or a SAM Portfolio. Shareholders exercising the exchange
privilege with any of the Funds of the Sierra Trust Funds, SPIF or SAM
Portfolios 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.
Class A Shares of a Non-Money Fund may be exchanged for Class A Shares of SPIF,
SAM Portfolios or any of the other Funds of the Trust, including the Money
Funds, (the foregoing funds together, the "Eligible Funds") without a sales
charge at purchase. If shares of the Money Funds so acquired are subsequently
exchanged again for Class A Shares of a Non-Money Fund, SAM Portfolio or SPIF,
no sales charge at purchase will be assessed. The availability of the exchange
privilege with respect to shares of SPIF is subject to the availability of
shares of SPIF for exchange purposes as stated in the prospectus and statement
of additional information ("SAI") of SPIF. Also, although shares of SPIF may be
exchanged for shares of the Funds, such exchanges of SPIF shares for shares of
the Funds are permitted approximately once every calendar quarter so long as
SPIF makes a repurchase offer for its shares in such quarter and so long as the
SPIF repurchase offer is sufficiently large to include the SPIF shares tendered
for exchange. See the prospectus and SAI of SPIF for additional information
regarding the exchange privilege applicable to SPIF shares and the availability
of such exchange privilege. Please call 800-222-5852 if you would like to obtain
a prospectus for SPIF or the SAM Portfolios.
Class A Shares of a Money Fund may be exchanged for Class A Shares of the other
Money Funds and Class B Shares of the Non-Money Funds or SAM Portfolios without
a sales charge at purchase. Class B Shares of a Non-Money Fund will be subject
to any applicable CDSC upon redemption, based solely upon the period of time
during which the investment is invested in Class B Shares. When Class A Shares
of the Money Funds are exchanged for Class A Shares of a Non-Money Fund, SAM
Portfolio or SPIF, the initial sales charge applicable to
59
<PAGE> 141
such Non-Money Fund, SAM Portfolio or SPIF 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, SAM Portfolio or
SPIF.
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 CDSC"
section. The CDSC applicable to Class A Shares will not be assessed on a
redemption that is part of an exchange for Class A Shares of another Eligible
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, or Class B Shares of the
SAM Portfolios without having to pay any CDSC at the time of the exchange. If
you exchange into Class S Shares of another Fund or Class B Shares of the SAM
Portfolios 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
or SAM Portfolios 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 Shareholder Services by
telephone, an investor may deliver the transaction request to Shareholder
Services at P.O. Box 5118, Westboro, Massachusetts 01581-5118. 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.
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
60
<PAGE> 142
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 800-222-5852. 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 without tax
penalties for early withdrawal.
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 certain 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 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.
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. No portion of the dividends from 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, and
61
<PAGE> 143
National Municipal Funds is expected to qualify for the corporate dividends
received deduction, and only a portion of the dividends from the Growth and
Income, Growth, Emerging Growth, and International Growth Funds is expected to
qualify for the corporate dividends received deduction. 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.
TAXES ON TRANSACTIONS. The sale, exchange or redemption of Fund shares will be a
taxable event. 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.
62
<PAGE> 144
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.
ADDITIONAL CONSIDERATIONS FOR SHAREHOLDERS OF THE CALIFORNIA MONEY FUND,
CALIFORNIA MUNICIPAL FUND AND CALIFORNIA INSURED INTERMEDIATE MUNICIPAL
FUND. If, at the close of each quarter of its taxable year, at least 50% of the
value of the total assets of each of the California Money Fund, California
Municipal Fund and California Insured Intermediate Municipal Fund (the
"California Funds") consist 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 each of the California
Funds continues to qualify as a regulated investment company for federal income
tax purposes, then each respective 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 each of the California Funds to each of the California Fund's
non-corporate shareholders with respect to any taxable year cannot exceed the
amount of interest received by such California 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 will be taxable to shareholders at ordinary income tax
rates for California personal income tax purposes.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT A COMPLETE DESCRIPTION OF
THE FEDERAL, STATE OR LOCAL TAX CONSEQUENCES OF INVESTING IN THE FUNDS. YOU
SHOULD CONSULT YOUR TAX ADVISOR BEFORE INVESTING IN THE FUNDS.
SHAREHOLDER AND ACCOUNT POLICIES
TRANSACTION DETAILS
THE NAV of each class of the Fund is the value of a single share of the
respective class. The NAV is calculated separately for each class of the Funds
and is calculated by adding up the value of the Fund's investments, cash and
other assets, subtracting its liabilities (including the liabilities
attributable exclusively to that class), and then dividing the result by the
number of shares of that class outstanding.
Although the legal rights of Class A and Class 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.
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.
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.
63
<PAGE> 145
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.
Sierra Advisors became a registered investment advisor in 1988. Sierra Advisors
is an indirectly wholly owned subsidiary of Washington Mutual, Inc. ("Washington
Mutual"). Washington Mutual is a publicly owned financial services company. As
of June 30, 1997, Sierra Advisors and its affiliates had total assets under
management of $3.7 billion.
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 May 31, 1997, total assets under management were over $194 billion.
BLACKROCK is located at 345 Park Avenue, 30th floor, New York, New York 10154.
BlackRock is a wholly owned corporate subsidiary of PNC Asset Management Group
Inc., the holding company for the asset management businesses of PNC Bank Corp.
("PNC"). PNC is a multibank holding company incorporated under the laws of the
Commonwealth of Pennsylvania in 1983 and registered under the Bank Holding
Company Act of 1956, as amended. BlackRock provides investment advice to a wide
variety of institutional and investment company-related clients. As of June 30,
1997, BlackRock had aggregate assets under management or supervision of more
than $50 billion.
JANUS is located at 100 Fillmore Street, 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
64
<PAGE> 146
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, 1997 Janus had
approximately $60 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, 1997 J.P. Morgan and its affiliates had
investment management authority with respect to approximately $234 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 June 30, 1997 Scudder's assets under management were in excess of $125
billion.
On June 27, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The Zurich
Group ("Zurich") announced that they had entered into a definitive agreement to
form a global investment organization. Zurich is a leading international
insurance and financial services organization. Under the agreement, Zurich's
wholly owned subsidiary, Zurich Kemper Investments, Inc. will combine with
Scudder, with combined assets of $200 billion. Subject to certain conditions
being met, it is currently anticipated that the transaction will close in the
fourth quarter of 1997.
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, 1997, TCW
Management and its affiliated advisers had just over $50.1 billion under
management or committed to management.
VAN KAMPEN is located at One Parkview Plaza, Oakbrook, 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 a
wholly owned subsidiary of MSAM Holdings, Inc., which in turn is a wholly owned
subsidiary of Morgan Stanley, Dean Witter, Discover & Co., a publicly held
company. 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, as of June 30, 1997, of more than $64.3
billion.
WARBURG is located at 466 Lexington Avenue, New York, New York 10017-3147.
Warburg is a professional investment counselling firm which provides investment
services to investment companies, employee benefit plans, endowment funds,
foundations and other institutions and individuals. As of June 30, 1997, Warburg
managed approximately $19.7 billion of assets, including approximately $11.5
billion of investment company assets. Incorporated in 1970, Warburg is
indirectly controlled by Warburg, Pincus & Co. ("WP & Co."), which has no
business other than being a holding company of Warburg and its affiliates.
Lionel I. Pincus, the managing partner of WP & Co., may be deemed to control
both WP & Co. and Warburg.
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 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% each Money Fund's average daily net assets. First Data Investor
Services Group, Inc. ("First Data"), a subsidiary of First Data Corp., serves as
sub-administrator and Transfer Agent of the Trust. First Data is located at One
Exchange Place, 53 State Street, Boston, Massachusetts 02109-2873 and 4400
Computer Drive, Westboro, Massachusetts 01581. Sierra Administration pays First
Data for its services as sub-administrator and Transfer Agent. Sierra
Administration also pays Boston Safe Deposit and Trust Co. ("Boston Safe"), One
Boston Place, Boston, MA 02108, for its services as custodian of the
65
<PAGE> 147
Trust. The Trust pays certain of the Transfer Agent's and sub-administrator's
out-of-pocket expenses and pays Boston Safe certain custodial transaction
charges.
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
Washington Mutual, 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
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.
Activities that may be financed under the Rule 12b-1 Plan for Class A Shares and
the Rule 12b-1 Plan for Class S Shares (collectively, the "Plans") include, but
are not limited to: printing prospectuses and statements of additional
information and reports for other than existing shareholders, overhead,
preparation and distribution of advertising material and sales literature,
expense of organizing and conducting sales seminars, supplemental payments to
Authorized Dealers and other institutions such as asset-based sales charges or
as payments of service fees under shareholder service arrangements, and the cost
of administering the Plans.
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.
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. Broker-dealers are selected on the basis of
their ability to obtain best price and execution for a Fund's transactions and
recognizing brokerage, research and other services provided to the Fund and to
the Fund's Advisor or Sub-Advisor. 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.
Each Fund's turnover rate varies from year to year, depending on market
conditions and investment strategies. High turnover rates (over 100%) 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 their 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.
66
<PAGE> 148
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.
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>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
===========================================================================================================================
Amount of
Assets After 50; After 75; After 100; After 125; After 150; After 200; After 300; After 400;
($ Mil.) First 50 next 25 next 25 next 25 next 25 next 50 next 100 next 100 next 100
-----------------------------------------------------------------------------------------------------------------------
Each Money Fund* .50% .50% .50% .50% .50% .50% .50% .50% .50%
-----------------------------------------------------------------------------------------------------------------------
Short Term High Quality
Bond Fund .50% .50% .50% .50% .50% .50% .45% .45% .45%
-----------------------------------------------------------------------------------------------------------------------
Short Term Global
Government Fund .65% .65% .65% .65% .65% .65% .65% .65% .65%
-----------------------------------------------------------------------------------------------------------------------
U.S. Government Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60%
-----------------------------------------------------------------------------------------------------------------------
Corporate Income Fund .65% .65% .65% .65% .65% .65% .65% .65% .65%
-----------------------------------------------------------------------------------------------------------------------
California Municipal
Fund* .65% .65% .65% .65% .65% .65% .65% .65% .65%
-----------------------------------------------------------------------------------------------------------------------
Florida Insured Municipal
Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60%
-----------------------------------------------------------------------------------------------------------------------
California Insured
Intermediate Municipal
Fund* .65% .65% .65% .65% .65% .65% .65% .65% .65%
-----------------------------------------------------------------------------------------------------------------------
National Municipal Fund* .60% .60% .60% .60% .60% .60% .60% .60% .60%
-----------------------------------------------------------------------------------------------------------------------
Growth and Income Fund .80% .80% .80% .75% .75% .75% .70% .70% .65%
-----------------------------------------------------------------------------------------------------------------------
Growth Fund .95% .95% .95% .90% .90% .90% .875% .875% .875%
-----------------------------------------------------------------------------------------------------------------------
Emerging Growth Fund .90% .90% .90% .85% .85% .85% .85% .85% .85%
-----------------------------------------------------------------------------------------------------------------------
International Growth Fund .95% .85% .85% .85% .65% .65% .65% .65% .65%
===========================================================================================================================
<CAPTION>
=====================================
Amount of
Assets Over
($ Mil.) 500
- -------------------------------------
Each Money Fund* .40%
- -------------------------------------
Short Term High Quality
Bond Fund .40%
- -------------------------------------
Short Term Global
Government Fund .55%
- -------------------------------------
U.S. Government Fund* .50%
- -------------------------------------
Corporate Income Fund .50%
- -------------------------------------
California Municipal
Fund* .50%
- -------------------------------------
Florida Insured Municipal
Fund* .45%
- -------------------------------------
California Insured
Intermediate Municipal
Fund* .50%
- -------------------------------------
National Municipal Fund* .45%
- -------------------------------------
Growth and Income Fund .575%
- -------------------------------------
Growth Fund .875%
- -------------------------------------
Emerging Growth Fund .75%
- -------------------------------------
International Growth Fund .65%
=====================================
</TABLE>
* 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.
67
<PAGE> 149
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, a monthly
fee at an annual rate of the following percentages of the average net assets of
each Fund:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Amount of
Assets After 50; After 75; After 100; After 125; After 150; After 200; After 300; After 400;
($ Mil.) First 50 next 25 next 25 next 25 next 25 next 50 next 100 next 100 next 100
-----------------------------------------------------------------------------------------------------------------------
Each Money
Fund .15% .15% .15% .15% .15% .15% .15% .15% .15%
-----------------------------------------------------------------------------------------------------------------------
Short Term
High Quality
Bond Fund .15% .15% .15% .15% .15% .15% .10% .10% .10%
-----------------------------------------------------------------------------------------------------------------------
Short Term
Global
Government
Fund(1) .28% .28% .28% .28% .28% .28% .10% .10% .10%
-----------------------------------------------------------------------------------------------------------------------
U.S.
Government
Fund (2) (2) (2) (2) (2) (2) (2) (2) (2)
-----------------------------------------------------------------------------------------------------------------------
Corporate
Income Fund .30% .30% .30% .30% .30% .30% .30% .30% .30%
-----------------------------------------------------------------------------------------------------------------------
California
Municipal
Fund(3) .20% .20% .20% .20% .20% .15% .15% .15% .15%
-----------------------------------------------------------------------------------------------------------------------
Florida
Insured
Municipal
Fund .20% .20% .125% .125% .125% .125% .125% .125% .125%
-----------------------------------------------------------------------------------------------------------------------
California
Insured
Intermediate
Municipal
Fund .20% .20% .125% .125% .125% .125% .125% .125% .125%
-----------------------------------------------------------------------------------------------------------------------
National
Municipal
Fund(3) .20% .20% .20% .20% .20% .15% .15% .15% .15%
-----------------------------------------------------------------------------------------------------------------------
Growth and
Income Fund .45% .45% .45% .40% .40% .40% .35% .35% .30%
-----------------------------------------------------------------------------------------------------------------------
Growth Fund .55% .55% .55% .50% .50% .50% .50% .50% .50%
-----------------------------------------------------------------------------------------------------------------------
Emerging
Growth Fund .55% .55% .55% .50% .50% .50% .50% .50% .50%
-----------------------------------------------------------------------------------------------------------------------
International
Growth Fund .50% .50% .50% .50% .50% .50% .50% .50% .50%
-----------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=================
Amount of
Assets Over
($ Mil.) 500
-----------------
Each Money
Fund .15%
-----------------
Short Term
High Quality
Bond Fund .10%
-----------------
Short Term
Global
Government
Fund(1) .10%
-----------------
U.S.
Government
Fund (2)
-----------------
Corporate
Income Fund .25%
-----------------
California
Municipal
Fund(3) .15%
-----------------
Florida
Insured
Municipal
Fund .125%
-----------------
California
Insured
Intermediate
Municipal
Fund .125%
-----------------
National
Municipal
Fund(3) .15%
-----------------
Growth and
Income Fund .30%
-----------------
Growth Fund .50%
-----------------
Emerging
Growth Fund .50%
-----------------
International
Growth Fund .50%
=================
</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
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.
68
<PAGE> 150
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.
================================================================================
69
<PAGE> 151
PROSPECTUS SIERRA TRUST FUNDS
OCTOBER 31, 1997 P.O. BOX 5118
WESTBORO, MASSACHUSETTS 01581-5118
800-222-5852
TARGET MATURITY 2002 FUND
This prospectus describes the Class A Shares of the Target Maturity 2002 Fund
(the "Fund"), a diversified portfolio, of the Sierra Trust Funds (the "Trust").
The Fund seeks to provide as high a level of return by December 31, 2002 as is
consistent with preservation of capital at the end of the target maturity year
and, thereafter, current income consistent with the creditworthiness of U.S.
Treasury securities. 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 Fund are right for you.
A Statement of Additional Information ("SAI") about the Trust, dated October 31,
1997, has been filed with the Securities and Exchange Commission (the "SEC"),
and is incorporated herein by reference (considered legally a part of this
prospectus). The SAI is available free upon request by calling the Trust at
800-222-5852.
THE TRUST'S SHARES ARE NOT OBLIGATIONS, DEPOSITS OR ACCOUNTS (TRUST OR
OTHERWISE) OF, OR ENDORSED OR GUARANTEED BY A BANK OR ANY 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.
THESE SECURITIES ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Sierra Trust Funds Family.................................................................. 1
Summary of Fund Expenses & Financial Highlights................................................ 3
The Fund's Investments and Risk Considerations................................................. 5
Performance Information........................................................................ 8
Your Account
-- Ways to Set Up Your Account............................................................... 9
-- How to Invest in Class A Shares of the Fund............................................... 10
How to Sell Shares............................................................................. 14
Exchange Privileges and Restrictions........................................................... 16
Dividends, Capital Gains and Taxes............................................................. 17
Shareholder and Account Policies............................................................... 19
The Fund in Detail
-- Organization.............................................................................. 19
-- Sierra Advisors, Its Affiliates and Service Providers..................................... 19
-- Breakdown of Fund Expenses................................................................ 21
</TABLE>
<PAGE> 152
TARGET MATURITY 2002 FUND AT A GLANCE
The Fund offers Class A Shares, which have a front-end sales charge.
GOAL: To provide as high a level of return by December 31, 2002 as is consistent
with preservation of capital at the end of the target maturity year and,
thereafter, current income consistent with the creditworthiness of U.S. Treasury
securities. See "The Fund's Investments and Risk Considerations."
STRATEGY: Investing primarily in zero-coupon U.S. Treasury securities maturing
in the year 2002. After the year 2002, the Fund will invest in coupon-bearing
U.S. Treasury securities with maturities of up to three years and money market
instruments. See "The Fund's Investments and Risk Considerations."
INVESTMENT MANAGEMENT: Sierra Investment Advisors Corporation (the "Advisor" or
"Sierra Advisors") has overall responsibility for management of the Fund.
BlackRock Financial Management, Inc. (the "Sub-Advisor" or "BlackRock") is the
investment sub-advisor of the Fund and selects the investments made by the Fund
subject to oversight and direction by Sierra Advisors. See "The Fund in Detail -
Sierra Advisors, Its Affiliates and Service Providers."
THE SIERRA TRUST FUNDS FAMILY
The Sierra Trust Funds (the "Trust") is an open-end management investment
company with sixteen separate diversified and nondiversified investment funds,
each with its own investment objectives and policies. Each investment fund of
the Trust, except for the Target Maturity 2002 Fund (the "Non-Target Maturity
Funds"), offers four classes of shares, Class A Shares, Class B Shares, Class I
Shares and Class S Shares. Subject to the following restrictions, 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 Class B Shares have sales charges only if they are redeemed within
four or six years, depending on the Non-Target Maturity Fund involved, Class S
Shares are sold to investors who select the Sierra Asset Management ("SAM")
service, an active investment management service offered by Sierra Investment
Services Corporation, and have sales charges only if they are redeemed within
six years. Class I Shares are sold exclusively to the various portfolios of
Sierra Asset Management Portfolios ("SAM Portfolios"), an open-end management
investment company that operates as a "fund of funds." Currently, only the
Global Money Fund, U.S. Government Money Fund, Short Term High Quality Bond
Fund, Short Term Global Government Fund, U.S. Government Fund, Corporate Income
Fund, Growth and Income Fund, Growth Fund, Emerging Growth Fund and
International Growth Fund offer and sell Class S and Class I Shares.
The Non-Target Maturity Funds fall into several basic categories which are
presented below in descending order of risk. Generally, investors seeking the
highest returns must assume greater risks.
1
<PAGE> 153
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
Shares of the Non-Target Maturity Funds are not offered through this prospectus.
PLEASE CALL 800-222-5852 IF YOU WOULD LIKE TO OBTAIN PROSPECTUSES FOR THE
NON-TARGET MATURITY FUNDS. You should review any such prospectus carefully
before investing or sending money.
2
<PAGE> 154
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
TARGET MATURITY 2002 FUND
CLASS A SHARES
- ---------------------------------------------------------------------------------------------------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)(1)................................................................. 2.00 %
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price)........................................................... None
Deferred Sales Load(2)...................................................... None
Redemption Fees(3).......................................................... None
Exchange Fees(4)............................................................ None
ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (after voluntary waiver or reimbursement)(5)(7)............. 0.00 %
12b-1 Fees(6)............................................................... 0.25 %
Other Expenses (after voluntary waiver or reimbursement)(7)................. 0.45 %
Total Fund Operating Expenses (after voluntary waiver or reimbursement)(7).. 0.70 %
- ---------------------------------------------------------------------------------------------------------
</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.
(2) Certain investors who purchase Class A Shares at net asset value based on a
purchase amount of $1 million or more may be subject to a 1.0% or 0.5% CDSC
on redemptions within one or two years of purchase, respectively. See
"Purchase of Class A Shares" and "Application of Class A Shares CDSC."
(3) 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.
(4) See "Your Account -- Exchange Privileges and Restrictions."
(5) Reflects voluntary waivers of management fees by the Advisor. In the absence
of such voluntary waivers, management fees would be 0.25%.
(6) 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 Conduct Rules of the National
Association of Securities Dealers, Inc. ("NASD").
(7) 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 the Fund may vary
from day to day. The Advisor and the Administrator anticipate voluntarily
waiving fees and/or bearing expenses during the current fiscal year 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. In the absence of
such voluntary waivers and/or bearing of expenses, other expenses would be
2.25% and total fund operating expenses would be 2.75%. See "Breakdown of
Fund Expenses."
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
EXAMPLE:
You would pay the following on a $1,000 investment, assuming
(1) 5% annual return, (2) deduction at the time of purchase of
the maximum sales charge, and (3) redemption at the end of the
time period. $27 $42 $58 $105
</TABLE>
THE EXAMPLE IS NOT MEANT TO STATE ACTUAL OR EXPECTED EXPENSES OR RATES OF
RETURN, WHICH MAY BE GREATER OR LESS THAN AS SHOWN. The Advisor and/or the
Administrator each reserves the right, at their sole discretion, to terminate
voluntary fee waivers and reimbursements at any time. 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 Fund.
3
<PAGE> 155
FINANCIAL HIGHLIGHTS
The following information 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"). Further information about the performance
of the Fund is also contained in the Annual Report. The SAI and Annual Report
can be obtained at no charge by calling Shareholder Services at 800-222-5852.
The following financial information should be read in conjunction with the
Trust's financial statements and notes thereto.
TARGET MATURITY 2002 FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
CLASS A SHARES
--------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
06/30/97 06/30/96 6/30/95*
---------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of year............................. $10.72 $10.78 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.......................................... 0.62++ 0.63 0.12
Net realized and unrealized investment gain/(loss) on
investments.................................................. 0.11 (0.30) 0.66
------ ------ ------
Total from investment operations............................... 0.73 0.33 0.78
LESS DISTRIBUTIONS:
Dividends from net investment income........................... (0.71) (0.39) --
Distributions from net realized gains.......................... (0.05) -- --
------ ------ ------
Total distributions............................................ (0.76) (0.39) --
------ ------ ------
Net asset value, end of year................................... $10.69 $10.72 $10.78
====== ====== ======
Total return+.................................................. 6.95% 2.91% 7.80%
====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)............................. $2,816 $3,125 $2,626
Ratio of operating expenses to average net assets.............. 0.64% 0.62% 0.74%**
Ratio of net investment income to average net assets........... 5.80% 5.66% 5.22%**
Portfolio turnover rate........................................ 0% 5% 0%
Ratio of operating expenses to average net assets without
credits allowed by the custodian............................. 0.72%(a) 0.70%(a) N/A
Ratio of operating expenses to average net assets without fee
waivers, expenses absorbed and/or credits allowed by the
custodian.................................................... 2.89%(a) 2.55%(a) 4.71%**
Net investment income per share without fee waivers, expenses
absorbed and/or credits allowed by the custodian............. $ 0.39++(a) $ 0.41(a) $ 0.03
</TABLE>
- ------------------------------------
* The Fund commenced operations on March 20, 1995.
** Annualized.
+ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges. The total return would have
been lower if certain fees had not been waived and expenses absorbed by the
investment advisor and administrator or without credits allowed by the
custodian.
++ Per share numbers have been calculated using the average shares method.
(a) The ratio and per share number includes custodian fees before reduction by
credits allowed by the custodian as required by amended disclosure
requirements effective September 1, 1995.
4
<PAGE> 156
THE FUND'S INVESTMENTS AND RISK CONSIDERATIONS
The following section describes the investment objective and policies of the
Fund and some of the risk considerations related to investing in the Fund. The
investment objective of the Fund is not a fundamental policy of the Fund and,
upon notice to the Fund's shareholders, may be changed. The "Securities and
Investment Practices" section that follows provides more information about the
types of securities and investment practices that the Fund may use, and the risk
considerations related to such securities and investment practices.
INVESTMENT PRINCIPLES AND RISK CONSIDERATIONS
The objective of the Fund is to provide as high a level of return by December
31, 2002 as is consistent with preservation of capital at the end of the target
maturity year and, thereafter, current income consistent with the
creditworthiness of U.S. Treasury securities.
The Fund will pursue this objective by investing at least 90% of its net assets
in zero-coupon U.S. Treasury securities (each such security, a "Zero-Coupon
Security") maturing during 2002. Generally, the Fund will endeavor to purchase
those Zero-Coupon Securities that mature towards the end of 2002. See
"Securities and Investment Practices - Zero-Coupon U.S. Treasury Securities."
Until December 31, 2002, the Fund may also invest up to 10% of its net assets in
coupon-bearing (income-producing) U.S. Treasury securities maturing on or before
December 31, 2002 and money market instruments. If the Sub-Advisor determines
that securities meeting the Fund's investment objective and policies are not
otherwise readily available for purchase, the Fund may invest in zero-coupon and
income-producing U.S. Government securities maturing on or before December 31,
2002 and money market instruments. See "Securities and Investment
Practices - Other Investments and Practices."
To the extent that a Fund holds Zero-Coupon Securities that mature prior to
December 31, 2002, the proceeds of such Zero-Coupon Securities at their maturity
will be reinvested in short term coupon-bearing U.S. Treasury securities or
money market instruments until December 31, 2002. Therefore, towards the end of
the target maturity year, 2002, the percentage of the Fund's assets invested in
coupon-bearing U.S. Treasury securities and money market instruments may
increase up to 100%. After December 31, 2002, the Fund intends to remain open
and all assets will be invested in coupon-bearing U.S. Treasury securities with
maturities of up to three years and money market instruments, and the Fund will
be managed as a relatively short-term bond fund. After December 31, 2002, the
normal risks of a bond fund will apply. The market value of fixed-income
securities held by the 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.
In order to maintain liquidity or for temporary defensive purposes, the Fund may
invest in cash and cash equivalents.
The Fund seeks to achieve a predictable dollar amount that approximates (net of
Fund expenses) the return on a direct investment in a Zero-Coupon Security that
matures during the Fund's target maturity year. However, the share price of the
Fund will fluctuate with changes in the market value of the Fund's investments.
In this regard, Zero-Coupon Securities tend to fluctuate more in response to
changes in interest rates than do comparable interest-paying debt obligations.
Consequently, redemptions made prior to the end of the Fund's target maturity
year may result in substantial capital gains or losses.
The Fund will pursue professional management of market risk. To approximate the
return an investor would receive if he or she purchased Zero-Coupon Securities
directly, the Sub-Advisor manages the Fund to track as closely as possible the
price behavior of Zero-Coupon Securities maturing towards the end of 2002. To
correct for factors such as shareholder purchase and redemption activity (and
related transaction costs) that differentiate investing in a portfolio of
Zero-Coupon Securities from investing directly in a Zero-Coupon Security, the
Sub-Advisor executes portfolio transactions necessary to accommodate net
shareholder activity each business day.
5
<PAGE> 157
By adhering to these investment parameters, the Advisor and the Sub-Advisor
expect that a shareholder who holds his or her shares and does not effect any
redemptions until the Fund's target maturity date of December 31, 2002 (the
"Target Maturity Date"), and who reinvests all dividends and capital gain
distributions, will realize a maturity value that does not differ substantially
from the anticipated value at maturity ("AVM"), as calculated on the purchase
date, that investors may expect for the period from the purchase date to the
Fund's maturity date of December 31, 2002. There can be no assurance, however,
that these objectives will be achieved. Furthermore, if a shareholder does not
reinvest all dividends and capital gain distributions, then the AVM cannot be
estimated accurately.
The Advisor or the Sub-Advisor calculates the Fund's AVM each day the Trust is
open for business. Daily calculations are necessary because AVM calculations
assume, among other factors, that the Fund's expense ratio and portfolio
composition remain constant until the end of the target maturity year and that
dividends and distributions are reinvested in the Fund.
The Fund's AVM may vary from day to day, due to redemptions and distributions,
as well as transaction costs, interest rate changes, and the Sub-Advisor's
efforts to improve total return by taking advantage of market opportunities.
Nevertheless, it is expected that the Fund's AVM will tend to fluctuate within
narrow ranges.
Zero-coupon U.S. Treasury securities evidence the right to receive a fixed
payment at a future date (i.e., the maturity date) from the U.S. Government, and
are backed by the full faith and credit of the U.S. Government. The guarantee of
the U.S. Government, however, does not apply to the market value of the
Zero-Coupon Securities owned by the Fund or to the Class A Shares of the Fund.
The value of a Zero-Coupon Security may fluctuate dramatically over the term of
the security. The values of Zero-Coupon Securities fluctuate inversely with
changes in interest rates. As interest rates rise, the value of Zero-Coupon
Securities will tend to decline and as interest rates fall, the value of
Zero-Coupon Securities will tend to increase. With their long-term goals in
mind, investors in the Fund should plan to hold their shares until the Fund's
target maturity date to reduce their exposure to the volatility produced by
fluctuations in interest rates.
There are relatively few mutual funds with investment objectives and policies
similar to those of the Fund that have reached their target maturity date.
Therefore, there is relatively little experience regarding the types of risk
involved in investing in the Fund. There is no assurance that the Fund will
achieve its investment objective and policies, or that an investor will be able
to redeem his or her shares at the end of the target maturity year for the
amount that he or she originally paid for such shares. The Advisor and the
Sub-Advisor also cannot accurately predict the amount of variation a shareholder
will experience in share price or in the Fund's AVM. There can be no assurance
by the Fund, the Advisor, the Sub-Advisor, or any of their affiliates, that the
AVM can be achieved.
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 its inception on March 20, 1995 and is supervised by
Keith Anderson and Andrew J. Phillips. Mr. Anderson, a Managing Director of
BlackRock, has been co-head of the Portfolio Management Group since 1988. Mr.
Phillips has been a portfolio manager of BlackRock since 1991 and a Principal of
BlackRock since 1996.
SECURITIES AND INVESTMENT PRACTICES
This section contains more detailed information about types of securities in
which the Fund may invest, and strategies the Sub-Advisor may employ in pursuit
of the Fund's investment objective. A summary of risks and restrictions
associated with these security types and investment practices is included as
well, except that the risks and restrictions of Zero-Coupon Securities and
coupon-bearing U.S. Treasury securities are discussed in "Investment Principles
and Risk Considerations." 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.
The 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 the 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.
6
<PAGE> 158
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 which cannot be changed without the approval
of a majority of the Fund's outstanding shares is contained in the SAI.
ZERO-COUPON U.S. TREASURY SECURITIES
Zero-coupon U.S. Treasury securities are the underlying principal portions of
U.S. Treasury securities. Unlike U.S. Treasury securities with coupons attached,
which pay interest periodically, Zero-Coupon Securities pay no interest.
Instead, these securities are issued at a substantial discount from their
maturity value, and this discount is amortized over the life of the security.
Investment return comes from the difference between the price at which a
Zero-Coupon Security is issued (or purchased) and the price at which it matures
(or is sold).
Zero-Coupon Securities currently appear in two basic types, those created by
separating the interest and principal components of previously issued
interest-paying U.S. Treasury securities and those originally issued in the form
of face amount only U.S. Treasury securities paying no interest ("original issue
zeroes"). The former type was created originally by broker-dealers who bought
Treasury securities, deposited these securities with a custodian bank for
safekeeping and then sold, separately, receipts representing ownership interests
in the coupon payments and the underlying principal payments that were generated
by these securities. Some examples of zeroes sold through custodial receipt
programs are Certificates of Accrual on Treasury Securities ("CATS"), Treasury
Investment Growth Receipts ("TIGRs") and generic Treasury Receipts ("TRs").
The U.S. Treasury subsequently introduced a program called Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") in order to
facilitate the secondary market stripping of selected U.S. Treasury securities
into individual interest and principal components. Such securities may
thereafter be maintained in the book-entry system operated by the Federal
Reserve in a manner that permits the separate ownership and trading of the
interest and principal payments. Book-entry trading eliminates the bank credit
risks associated with broker-dealer sponsored custodial receipt programs. STRIPS
are direct obligations of the U.S. Government and have the same credit risks as
other U.S. Treasury securities.
Zero-coupon securities purchased by the Fund accrue interest (commonly referred
to as "imputed income") for federal income tax purposes even though Zero-Coupon
Securities do not pay current interest. The Fund must distribute this imputed
income to shareholders as ordinary income dividends. If shareholders do not
elect to receive such dividends in cash, but instead opt to reinvest such
dividends in the Fund, they will nonetheless be liable to pay tax on such
dividends. See the "Taxes - Taxes on Distributions" section.
OTHER INVESTMENTS AND PRACTICES
BORROWING. The Fund may borrow money temporarily for extraordinary or emergency
purposes. However, if the 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. Leveraging will magnify declines as well as increases in
the NAV of a Fund's shares and increases in the yield on a Fund's investments.
The Fund may borrow money from banks solely for temporary or emergency purposes,
but not in an amount exceeding 30% of its total assets. Whenever borrowings by a
Fund, including reverse repurchase agreements, exceed 5% of the value of its
total assets, the Fund will not purchase any securities.
COUPON-BEARING U.S. TREASURY SECURITIES. The Fund may invest up to 15% of its
net assets in coupon-bearing U.S. Treasury securities and money market
instruments. U.S. Treasury bills, notes, and bonds are direct obligations of the
U.S. Treasury. Historically, they have involved no risk of loss of principal if
held to maturity. Between issuance and maturity, however, the prices of these
securities change in response to changes in market interest rates.
Coupon-bearing securities generate current interest payments, and part of a
Fund's return may come from reinvesting interest earned on these securities.
7
<PAGE> 159
PERFORMANCE INFORMATION
YIELD
From time to time, advertisements or shareholder reports concerning the Fund may
describe 30-day YIELD. The 30-day YIELD refers to the income generated by an
investment in the 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 Fund may advertise a similar
30-day YIELD computed in the same manner except that the NAV per share is used
in place of the Public Offering Price per share.
TOTAL RETURN
From time to time, the 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. During
the first year of the Fund's operation, figures will be given for the period
from commencement of the Fund's operations, or on a year-by-year basis. In the
future, figures will be given for one-, five- and ten-year periods, as
applicable, and may be given for other periods as well (such as from the
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, the Fund
may provide yield quotations in investor communications based on the Fund's net
asset value ("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,
the Fund may compare the performance of its Class A Shares with that of other
mutual funds as listed in the rankings prepared by Lipper Analytical Services,
Inc., CDA Technologies, Inc. or similar independent services that monitor the
performance of mutual funds or with other appropriate indexes of investment
securities. In addition, certain indexes may be used to illustrate historic
performance of select asset classes. These may include, among others, the Lehman
1 to 3 Year Treasury Index, Lehman Treasury Intermediate Index, Merrill Lynch 5
to 7 year Treasury Index, Lehman Mutual Fund Intermediate Index, Lehman Mutual
Fund General U.S. Treasury Index. The performance information may also include
evaluations of the Fund 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. If
the Fund compares its performance to other funds or to relevant indexes, the
Fund's performance will be stated in the same terms in which such comparative
data and indexes are stated, which is normally total return rather than yield.
For these purposes the performance of the Fund, as well as the performance of
such investment companies or indexes, may not reflect sales charges, which, if
reflected, would reduce performance results.
OBTAINING PERFORMANCE INFORMATION
The 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 the Fund's performance. Shareholders may call Shareholder
Services at 800-222-5852 for performance information. Shareholders may also make
inquiries regarding the Fund, including current total return figures, to any
Authorized Dealer.
8
<PAGE> 160
YOUR ACCOUNT
- --------------------------------------------------------------------------------
WAYS TO SET UP YOUR ACCOUNT
INDIVIDUAL OR JOINT ACCOUNT
Individual accounts are owned by one person. Two types of joint accounts (having
two or more owners) can be opened:
(1) in a "joint tenancy" account, the surviving owner(s) automatically
receive(s) the shares of any owner(s) who die(s); and
(2) in a "tenants in common" account, the heir(s) of any deceased owner
receive(s) such owner's shares, rather than the surviving owners of the joint
account.
- --------------------------------------------------------------------------------
RETIREMENT
Retirement plans protect investment income and capital gains from current taxes.
Contributions to these accounts may be tax deductible. Retirement accounts
require special applications and typically have lower minimums.
- - INDIVIDUAL RETIREMENT ACCOUNTS ("IRAs") allow persons of legal age and under
70 1/2 years old with Adjusted Gross Income ("AGI") of less than $35,000 (or
$50,000 if married and filing jointly) to protect up to $2,000 (subject to
certain limitations for single persons with AGI equal to or greater than
$25,000 and married persons who file jointly with AGI equal to or greater than
$40,000) per tax year from certain tax effects. If your spouse does not work,
you can protect an additional $2,000 per year in your spouse's name.
- - ROTH IRAs allow persons of legal age with AGI not exceeding $110,000 (or
$160,000 if married and filing jointly) to protect up to $2,000 (subject to
certain limitations for single persons with AGI equal to or greater than
$95,000 and married persons who file jointly with AGI equal to or greater than
$150,000) per tax year from certain tax effects.
- - 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.
- --------------------------------------------------------------------------------
9
<PAGE> 161
HOW TO INVEST IN CLASS A SHARES OF THE FUND
- --------------------------------------------------------------------------------
TO OPEN AN ACCOUNT: MINIMUM $250 TO ADD TO AN ACCOUNT: MINIMUM $100
<TABLE>
<S> <C> <C>
BY PHONE - Exchange from another Sierra Trust - Exchange from another Sierra Trust
800-222-5852 Fund, SPIF or SAM Portfolios account Fund, SPIF or SAM Portfolios account
with same registration, including with the same registration, including
name, address, and taxpayer ID number name, address, and taxpayer ID
(social security number for an number.
individual).
- Call Shareholder Services at 800-222- - Call Shareholder Services at 800-222-
5852. (Monday through Friday, 6:00 5852.
a.m. to 6:00 p.m., Pacific Time and
9:00 a.m. to 9:00 p.m., Eastern Time.
Saturday from 6:00 a.m. to 3:00 p.m.,
Pacific Time and 9:00 a.m. to 6:00
p.m., Eastern Time).
- ----------------------------------------------------------------------------------------------------------
BY MAIL - Complete and sign the application. - Make your check payable to "Sierra
Make your check or negotiable bank draft Trust Funds." Indicate your Fund
payable to "Sierra Trust Funds." account number on your check. Include
Third party checks are not accepted. the "next investment" stub from your
previous account statement. Mail the
Mail the completed application form check and stub to the address printed
and check to: on your account statement.
Sierra Trust Funds
c/o First Data Investor Services - Exchange by mail: call 800-222-5852
Group for instructions.
P.O. Box 5118
Westboro, MA 01581-5118
- ----------------------------------------------------------------------------------------------------------
BY WIRE - 1. Telephone Shareholder Services and - Instruct your bank/financial
give the (a) name of the account as institution to wire Federal Funds as
you wish it to be registered; (b) described at left under paragraph 2
address of the account; (c) taxpayer and inform Shareholder Services at
ID number (social security number for 800-222-5852 of the incoming wire.
an individual); and (d) Fund name.
2. Instruct your bank to wire Federal
Funds exactly as follows:
Boston Safe Deposit Trust
Boston, MA
ABA #011-001234
For credit to:
Sierra Trust Funds
Account #132012
Target Maturity Fund
(Customer's Name)
(Customer's Social Security
Number)
3. Mail the completed application form
to:
Sierra Trust Funds
c/o First Data Investor Services
Group
P.O. Box 5118
Westboro, MA 01581-5118
</TABLE>
- --------------------------------------------------------------------------------
10
<PAGE> 162
TO PURCHASE SHARES. Purchase, sale and exchange orders received by First Data
Investor Services Group, Inc. ("First Data" or the "transfer agent") prior to
the close of trading on any day that the New York Stock Exchange ("NYSE") is
open (a "Business Day") are effected at that day's NAV for 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 the transfer
agent by the close of trading on the NYSE the same day and failure to do so will
result in an investor being unable to obtain that day's NAV. The NYSE is open
Monday through Friday, although it is currently scheduled to be closed on New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day, and on the
preceding Friday or subsequent Monday when any of these holidays falls on a
Saturday or Sunday, respectively.
Purchases of Class A Shares of the Fund 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 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 when
the NYSE is closed and from 6:00 a.m. to 3:00 p.m., Pacific Time/9:00 a.m. to
6:00 p.m., Eastern Time on Saturday.
DIVIDEND REINVESTMENT PLAN. A Dividend Reinvestment Plan will be established
automatically for each shareholder unless the shareholder specifies otherwise by
completing the appropriate section of the Fund's Account Application or
otherwise notifies the transfer agent 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 Fund at the NAV determined
on the dividend payment date. The election of reinvestment of dividends and
distributions may be made or changed by writing to First Data or by telephoning
Shareholder Services at 800-222-5852. Write to Sierra Trust Funds, c/o First
Data at P.O. Box 5118, Westboro, Massachusetts 01581-5118.
TIMING OF DIVIDENDS. Shares of the Fund 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.
PURCHASE OF CLASS A SHARES. Class A Shares of the Fund are sold at the Public
Offering Price. Investors purchasing Class A Shares of the Fund incur an initial
sales charge as described in the following table. 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 within two years of purchase (the "Class
A CDSC"), including redemptions of Money Fund Class A Shares acquired through
exchange for such Class A Shares of the Fund. No sales charge at time of
purchase and no CDSC will be assessed on Class A Shares purchased through the
reinvestment of dividends or distributions on Class A Shares or purchased under
the 180-day reinvestment privilege described in a following section. See
"Application of Class A Shares CDSC" subsection in this section. For other
waivers of Class A Shares sales charges, see the subsection "Waivers of Class A
Initial Sales Charges" in this section. The table on the following page
illustrates the sales charges applicable at purchase to Class A Shares at
various investment levels.
11
<PAGE> 163
FOR CLASS A SHARES OF THE 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 2.00% 2.04% 1.75%
$50,000 but less than $100,000 1.50% 1.52% 1.25%
$100,000 but less than $500,000 1.00% 1.01% 0.75%
$500,000 but less than $1,000,000 0.50% 0.50% 0.50%
$1,000,000 and over 0% 0% 0%*
</TABLE>
- --------------------------------------------------------------------------------
* Investors do not pay a sales charge at time of purchase 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 up to 1.00% of the NAV of such
purchases.
Sierra Services, the distributor of the Class A Shares of the Fund, will pay the
appropriate dealers' reallowance to 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 certain Authorized Dealers.
REDUCED SALES CHARGES AT PURCHASE
As described below, the sales charge on purchases of Class A Shares of the Fund
may be reduced through: (1) a Right of Accumulation; (2) Quantity Discounts; (3)
a Letter of Intent; and (4) Reinvestment Privilege. Reduced sales charges may be
modified or terminated at any time as to new purchases and/or letters of intent
and are subject to confirmation of an investor's holdings. For more information
about reduced sales charges, contact your representative or call 800-222-5852.
RIGHT OF ACCUMULATION. Under the Right of Accumulation, the current value of an
investor's (including the investor's spouse and any minor children) existing
Class A Shares in the Fund and the Non-Money Funds, Class B and Class S Shares
in all the funds of the Trust, Class A Common Shares of the Sierra Prime Income
Fund ("SPIF") and Class A and Class B Shares of the SAM Portfolios
(collectively, "Shares of qualifying Sierra Funds") may be combined with the
amount of the investor's current purchase of the Fund's Class A Shares in
determining the sales charge applicable to such Class A Shares. In order to
receive the cumulative quantity reduction, the investor or the securities dealer
must notify Shareholder Services of any purchases of Shares of qualifying Sierra
Funds at the time of the current purchase.
QUANTITY DISCOUNTS. As shown in the above table and under the "Right of
Accumulation" section, larger purchases of the Fund's Class A Shares combined
with Shares of qualifying Sierra Funds reduce the sales charge paid on the
Fund's Class A Shares. The Fund will combine purchases of such Shares of
qualifying Sierra Funds made on the same day by the investor, spouse, and any
minor children when calculating the Fund's Class A Shares sales charge. In order
to receive the cumulative quantity reduction, the investor or the securities
dealer must notify Shareholder Services of any related purchases of Shares of
qualifying Sierra Funds at the time of the current purchase.
LETTER OF INTENT. An investor may qualify for a reduced sales charge on the
Fund's Class A Shares immediately by signing a "Letter of Intent" stating the
investor's intention to invest during the following 13 months a specified amount
in the Fund's Class A Shares, Non-Money Fund Class A Shares, Class A Common
Shares of SPIF and/or Class A Shares of the SAM Portfolios, which, if made at
one time, would qualify for a reduced sales charge. Any redemptions or
repurchases of Class A Shares or Class A Common Shares made during the 13-month
period will be subtracted from the amount of purchases of Class A Shares or
Class A Common Shares in determining whether the terms of the Letter of Intent
have been met. During the term of a Letter of Intent, Shareholder Services will
hold the Fund's Class A Shares representing 5.0% 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. The
12
<PAGE> 164
investor is not bound to purchase the full amount specified, but 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 the Fund's Class A
Shares if the total of such purchases had been made at a single time.
REINVESTMENT PRIVILEGE. Upon redemption of Class A Shares, a shareholder may
reinvest the redemption proceeds in Class A Shares of the Fund without any sales
charge provided the reinvestment is within 180 days of the redemption from the
Fund. To receive the privilege, the shareholder must notify Shareholder Services
or the Authorized Dealer 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 Internal Revenue Code of 1986, as amended (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 (the transfer agent 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 Trust's 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 (investors may
be charged an additional service or transaction fee by the Authorized Dealer or
bank).
Additional groups of investors that are not subject to an initial sales charge
on purchases of Class A Shares through an Authorized Dealer include either (a)
investors purchasing Class A Shares of the Fund through an employee benefit
trust created pursuant to a 401(k) Plan that has invested in the aggregate more
than $1 million in the Fund, or (b) investors purchasing Class A Shares of the
Fund through a 403(b) Plan that has more than $1 million in the Fund. Investors
through 401(k) and 403(b) Plans may be subject to various account fees and
purchase and redemption procedures designated by the employer who has
established the 401(k) Plan or 403(b) Plan. Such investors should consult their
employer and/or account agreements for information relating to their accounts.
The foregoing waivers may be changed at any time.
APPLICATION OF CLASS A SHARES CDSC. 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 (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 (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 CDSC for Class A Shares are calculated on the lower
of the shares' cost or current net asset value, and in determining whether the
CDSC is payable, the Trust will first redeem shares not subject to any CDSC.
WAIVERS OF THE CLASS A SHARES CDSC. The Class A CDSC is waived for redemptions
of Class A Shares (i) that are part of exchanges for Class A Shares of other
Funds; (ii) for distributions to pay benefits to participants from a retirement
plan qualified under Section 401(a) or 401(k) of the Code, including
distributions due to the death or disability of the participant (including one
who owns the shares as a joint tenant); (iii) for distributions from a 403(b)
Plan or an IRA due to death, disability, or attainment of age 70 1/2, including
certain involuntary distributions; (iv) for tax-free returns of excess
contributions to an IRA; (v) distributions to a 401(k) Plan participant so long
as the shares were purchased through the 401(k) Plan and the 401(k) Plan
continues in effect with investments in Class A Shares of the Fund and (vi) for
distributions by other employee benefit plans to pay benefits. See "HOW TO BUY
AND REDEEM SHARES" in the Statement of Additional Information.
13
<PAGE> 165
IRA INVESTMENTS. Generally, the Fund is a suitable investment for IRA accounts
because it is designed for a long term investment strategy of holding the amount
invested in the Fund until the Fund's target maturity date and reinvesting all
dividends and capital gains distributions. Such a strategy matches the tax
deferral benefits of investing in an IRA account. IRA account investments in the
Fund combine the federal tax savings available to IRA accounts with the state
tax savings available to investments in the Fund, as described in the
"Performance Information" section of this prospectus.
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 subjected to a CDSC as described in the "Application of Class A
Shares CDSC." If you sell shares of the Fund, the maturity value of your
remaining shares of the Fund may differ substantially from the AVM for such
shares, as calculated on the purchase date.
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 the
transfer agent, until such time as regulations may require the Fund to redeem
proceeds within five days. However, if a shareholder is redeeming shares
recently purchased with a check, the redemption proceeds will not be paid to the
shareholder until the check has cleared. The check may take up to 15 days to
clear for deposit of the shareholder's funds into the 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 Shares account open, leave at least $250 worth
of shares in your account.
- - The table on the following page highlights the ways in which you can redeem
shares in your Fund account.
14
<PAGE> 166
WAYS TO SELL SHARES OF YOUR SIERRA TRUST FUND
- --------------------------------------------------------------------------------
Account Type Special Requirements
<TABLE>
<S> <C> <C>
BY PHONE - All account types, except - You may exchange to certain other
800-222-5852 retirement funds of the Trust, SPIF or SAM
Portfolios if both accounts are
registered with the same name(s),
address and taxpayer ID number. (If
you exchange to a Fund of the Trust
that has a higher initial sales
load, you may have to pay up to the
difference between the sales load
amount previously paid and such
higher sales load.) You may also
redeem amounts by telephone. Checks
will be mailed to the address of
record exactly as account is
registered.
- ---------------------------------------------------------------------------------------------------
BY MAIL - Individual, Joint Accounts, Sole - The letter of instruction must be
Proprietorships, UGMA, UTMA* signed by all persons required to
sign for transactions, exactly as
- Signature guarantee is required on their names appear on the account.*
amounts of more than $50,000 and on Checks will be mailed to the
any requests for checks to be address of record.
mailed to an alternate address.
- ---------------------------------------------------------------------------------------------------
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.
Minimum amount is $1,000.
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Corporations, trusts, and retirement plans may require additional paperwork
before shares may be redeemed. Please call 800-222-5852 to verify you have the
correct paperwork and to avoid delays.
15
<PAGE> 167
- - 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. For a wire
transfer, if a telephone redemption is received by the transfer agent or
Shareholder Services before 8:00 a.m., Pacific Time/11:00 a.m., Eastern Time,
the proceeds will be sent by wire to the designated preauthorized 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
the transfer agent or Shareholder Services 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 Trust Funds, c/o First Data with a signature guarantee (for
more information regarding signature guarantees, see the following). (For joint
accounts, all owners must sign and have their signatures guaranteed.)
KEY ASPECTS OF TELEPHONE TRANSACTIONS. 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 Sierra Trust Funds
at P.O. Box 5118, Westboro, Massachusetts 01581-5118. Upon 30 days' prior
written notice to shareholders, the telephone transaction privileges may be
modified or terminated.
- - 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 Business Day on which your Authorized Dealer is
given the redemption order. The Fund makes no charge for this transaction but
your Authorized Dealer may charge you a service fee.
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 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
The Class A Shares of the Fund may be exchanged for Class A Shares of any of the
other Funds of the Trust, including the Money Funds, SAM Portfolios or SPIF (the
foregoing funds together, the "Eligible Funds"), but if the shares acquired in
the exchange are subject to a higher sales load, a sales load may be charged in
an amount up to the difference between the sales load amount that was previously
paid to purchase the Class A Shares that are being exchanged and the initial
sales load applicable to the Class A Shares of the Eligible Fund that are
acquired in the exchange. If Class A Shares of the Money Funds, which do not
have a sales load at purchase, are acquired in
16
<PAGE> 168
such exchange no sales load is charged, but if such Class A Shares of a Money
Fund are subsequently exchanged again for Class A Shares of SPIF, a SAM
Portfolio or any of the Non-Money Funds of the Trust other than the Fund, a
sales load may be charged in an amount up to the difference between the sales
load amount that was previously paid to purchase the Class A Shares that are
being exchanged and the initial sales load applicable to the Class A Shares of
the Eligible Funds that are acquired in the exchange for the Money Fund Class A
Shares. Class A Shares of a Money Fund may be exchanged for Class A Shares of
other Money Funds and Class B Shares of Non-Money Funds and SAM Portfolios
without a sales charge at purchase. Class B Shares of a Non-Money Fund or a SAM
Portfolio will be subject to any applicable CDSC upon redemption, based solely
upon the period of time during which the investment is invested in Class B
Shares. If the initial Class A Shares of the Eligible Fund purchased by the
investor was not subject to any sales load on such shares, then no sales load
for Class A Shares will be imposed on any subsequent exchanges involving such
shares. No initial sales charge will be assessed, however, and any applicable
CDSC will not be imposed when Class A Shares of any of the Eligible Funds,
including a Money Fund, are exchanged for Class A Shares of a Non-Money Fund
where the purchase of Class A Shares of the Non-Money Fund through the exchange
is of any of the types described in "Waivers of Class A Initial Sales Charges."
The availability of the exchange privilege with respect to shares of SPIF is
subject to the availability of shares of SPIF for exchange purposes as stated in
the prospectus and statement of additional information ("SAI") of SPIF. Also,
although shares of SPIF may be exchanged for shares of the Funds, such exchanges
of SPIF shares for shares of the Funds are permitted only once every calendar
quarter so long as SPIF makes a repurchase offer for its shares in such quarter
and so long as SPIF repurchase offer is sufficiently large to include SPIF
shares tendered for exchange. See the prospectus and SAI of SPIF for additional
information regarding the exchange privilege applicable to SPIF shares and the
availability of such exchange privilege.
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 CDSC"
section. The CDSC applicable to Class A Shares will not be assessed on a
redemption that is a part of an exchange for Class A Shares of another Eligible
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 in the exchange or series of exchanges, the CDSC would be
assessed.
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 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. Shareholders exercising the exchange
privilege with any of the Funds of the Trust, SPIF or SAM Portfolios 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.
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. The 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 for the
Fund. Dividends from the net investment income of the Fund will be declared and
paid annually. Distributions of any net long-term capital gains earned by the
Fund will be made annually. Distributions of any net short-term capital gains
earned by the 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 Trust Funds or by calling 800-222-5852. The Fund offers the
following options:
1. REINVESTMENT OPTION. Your dividend and capital gain distributions will be
automatically reinvested in additional shares of the Fund, unless you instruct
the Fund on the application form or later in writing or by
17
<PAGE> 169
telephone to pay all distributions in cash. 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 certain 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 the Fund or
its shareholders. Accordingly, shareholders are urged to consult their tax
advisors regarding specific questions as to federal, state and local income
taxes.
The Fund intends to qualify separately each year as a "regulated investment
company" as defined under Subchapter M of the Code. The requirements for
qualification may cause the 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. The Fund will distribute all or substantially all of its
net investment income and net capital gains to shareholders each year.
Zero-coupon securities purchased by the Fund accrue interest (commonly referred
to as "imputed income") for federal income tax purposes even though Zero-Coupon
Securities do not pay current interest. The Fund must distribute this imputed
income to shareholders as ordinary income dividends. If shareholders do not
elect to receive such dividends in cash, but instead opt to reinvest such
dividends in the Fund, they will nonetheless be liable to pay tax on such
dividends.
Distributions generally are subject to federal income tax, but may be exempt
from certain 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.
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. No portion of the dividends from the Fund is expected to
qualify for the corporate dividends received deduction. 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.
TAXES ON TRANSACTIONS. The sale, exchange, or redemption of Fund shares will be
a taxable event. 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. 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. Whenever you sell shares of the Fund, the Trust will send you
a
18
<PAGE> 170
confirmation statement showing how many shares you sold and at what price. You
also will receive a consolidated transaction statement every January. However,
it is up to you or your tax preparer to determine whether this sale resulted in
a capital gain and, if so, the amount of tax to be paid. You should retain your
regular account statements; the information they contain will be essential in
calculating the amount of your capital gains.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT A COMPLETE DESCRIPTION OF
THE FEDERAL, STATE OR LOCAL TAX CONSEQUENCES OF INVESTING IN THE FUND. YOU
SHOULD CONSULT YOUR TAX ADVISOR BEFORE INVESTING IN THE FUND.
SHAREHOLDER AND ACCOUNT POLICIES
TRANSACTION DETAILS
THE NAV of the Class A Shares of the Fund is the value of a single share of the
respective class. The NAV of the Fund is calculated by adding up the value of
the Fund's investments, cash and other assets, subtracting its liabilities, and
then dividing the result by the number of Class A Shares outstanding. 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.
THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF CLASS A SHARES for a
period of time. The Fund also reserves the right to reject any specific purchase
order. Purchase orders may be refused if, in the opinion of Sierra
Administration, they are of a size that would disrupt management of the 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 FUND 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 Fund, 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 FUND MAY HOLD SPECIAL MEETINGS AND MAIL PROXY MATERIALS. As a Massachusetts
business trust, the Fund is 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 the Fund 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 the Fund.
SIERRA ADVISORS, ITS AFFILIATES AND SERVICE PROVIDERS
ADVISOR
Sierra Advisors, located at 9301 Corbin Avenue, Northridge, California 91324, is
the investment advisor of the Fund. Responsibilities of Sierra Advisors include
formulating the Fund's investment policies (subject to the terms
19
<PAGE> 171
of this Prospectus), analyzing economic trends and directing and evaluating the
investment services provided by the Sub-Advisor and monitoring the Fund's
investment performance. In connection with these activities, Sierra Advisors may
initiate action to change the Sub-Advisor if it deems such action to be in the
best interest of shareholders of the Fund.
Sierra Advisors became a registered investment advisor in 1988. Sierra Advisors
is an indirectly wholly owned subsidiary of Sierra Capital Management
Corporation ("SCMC"), which is a wholly-owned subsidiary of Washington Mutual,
Inc. ("Washington Mutual"). Washington Mutual is a publicly owned financial
services company.
SUB-ADVISOR
BlackRock is located at 345 Park Avenue, 30th Floor, New York, New York, 10154.
BlackRock is a wholly owned corporate subsidiary of PNC Asset Management Group
Inc., the holding company for the asset management businesses of PNC Bank Corp.
("PNC"). PNC is a publicly owned multibank holding company incorporated under
the laws of the Commonwealth of Pennsylvania in 1983 and registered under the
Bank Holding Company Act of 1956, as amended. BlackRock provides investment
advice to a wide variety of institutional and investment company-related
clients. As of June 30, 1997, BlackRock had aggregate assets under management or
supervision of more than $50 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 is entitled to a monthly fee at an annual
rate of 0.35% of the Fund's average daily net assets. First Data Investor
Services Group, Inc. ("First Data"), a subsidiary of First Data Corp., serves as
sub-administrator and transfer agent of the Trust. First Data is located at One
Exchange Place, 53 State Street, Boston, Massachusetts 02109 and 4400 Computer
Drive, Westboro, Massachusetts 01581. Sierra Administration pays First Data for
its services as sub-administrator and for its service as transfer agent. Sierra
Administration also pays Boston Safe Deposit and Trust Co. ("Boston Safe"), One
Boston Place, Boston, Massachusetts 02108, for its services as custodian of the
Trust. The Trust pays certain of the transfer agent's and sub-administrator's
out-of-pocket expenses and pays Boston Safe certain custodial transaction
charges.
DISTRIBUTOR
Sierra Services is the distributor of the Class A Shares of the Fund. Sierra
Services is located at 9301 Corbin Avenue, Northridge, California 91324. Sierra
Services, an indirectly wholly owned subsidiary of SCMC, was established in 1992
and is a registered broker-dealer with the NASD and a registered investment
advisor.
The Fund has a distribution plan (the "Rule 12b-1 Plan"), pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended (the "Investment Company
Act") . The Fund intends to operate the Rule 12b-1 Plan in accordance with its
terms and the NASD Rules concerning sales charges. Under the Rule 12b-1 Plan,
Sierra Services (the "Distributor") is paid an annual fee as compensation in
connection with the offering and sale of Class A Shares of the Fund. The annual
fees to be paid to the Distributor under the Rule 12b-1 Plan 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. These fees may be used to cover
the respective expenses of the Distributor primarily intended to result in the
sale of Class A Shares of the Fund, including payments to a Distributor's
representatives or others for selling shares. The Distributor may retain any
amount of its fee that is not so expended.
In addition to providing for the expenses discussed above, the 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. The Distributors
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.
20
<PAGE> 172
PORTFOLIO TRANSACTIONS AND TURNOVER. All orders for the purchase or sale of
securities on behalf of the Fund are placed by the Fund's Sub-Advisor with
broker-dealers that it selects. The 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 Commission when the Fund's
Sub-Advisor believes that such broker's charge for the transaction does not
exceed usual and customary levels.
The 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. See "Dividends, Capital Gains and
Taxes - Taxes." The Fund's annual portfolio turnover rate is expected to be less
than 50%. The Fund 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, the Fund pays expenses related to its daily operations.
Expenses paid out of the Fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted from
shareholder accounts. The 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-Advisor, who provide assistance with these
services. The 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 Fund for management fees and other expenses above a
specified limit. Sierra Advisors and Sierra Administration retain the ability to
be repaid by the Fund if expenses fall below the specified limit prior to the
end of the fiscal year.
MANAGEMENT FEE
The management fee will be calculated and paid to Sierra Advisors every month.
The management fee for the Fund is based upon a percentage of its average net
assets. Absent fee waivers, the total management fee for the Fund as provided in
the investment advisory agreement of the Fund is at the annual rate of .25% for
the first $500 million in assets and .20% for assets over $500 million.
The Advisor retains only the net amount of the foregoing management fees after
the advisory fees paid to the Sub-Advisor, described below, are deducted. Out of
the total management fee received by the Advisor for the Fund, the Advisor would
pay to the Sub-Advisor, absent fee waivers by the Sub-Advisor, the annual rate
of .05% of the Fund's average net assets, subject to a minimum annual fee of
$25,000.
OTHER EXPENSES
While the management fee is a significant component of the Fund's annual
operating costs, the Fund has other expenses as well. In addition to the
management fee and other fees described previously, the 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.
================================================================================
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.
================================================================================
21
<PAGE> 173
- ---------------------------
S I E R R A (800) 222-5852
T R U S T F U N D S P.O. BOX 5118
A FAMILY OF MUTUAL FUNDS WESTBORO, MASSACHUSETTS 01581-5118
- --------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION Check one box for the account you wish to open and
complete information.
<TABLE>
<S> <C>
[ ] Individual Name _________________ SS#/Tax ID _____
[ ] Joint Tenant Name of Add'l Owner ____________________ SS#/Tax ID _____
[ ] Tenants in
Common
[ ] Transfer to
Minors
__________________________________ As Custodian For __________________________________
NAME OF CUSTODIAN NAME OF MINOR
Under the _________ Uniform Transfers (Gifts) to Minors Act ____ Minor's SS#
(STATE) (AGE)
[ ] Other Indicate name of Corporation, other organization or fiduciary; if Trust, include date of instrument:
(Additional forms, such as a Corporate Resolution may be required. Call (800) 222-5852 for information)
Name __________________________ Tax ID __________
[ ] I am a United States Citizen. If not, please specify Country _____________________________________
Street Address ____________________________________ Home Phone ( ) _________________________________
City _____________________________ State ______ Zip ___________ Business Phone ( ) _________________________________
</TABLE>
- -------------------------------------------------------------------------------
2. YOUR INVESTMENT SELECTION (Minimum initial $250; Minimum subsequent $100).
<TABLE>
<S> <C> <C>
INVESTMENT AMOUNT
TARGET MATURITY 2002 FUND CLASS A SHARES $ __________________
</TABLE>
- -------------------------------------------------------------------------------
3. YOUR PAYMENT METHOD FOR INITIAL INVESTMENT
[ ] CHECK: $ _________________ Make check payable to Sierra Trust Funds.
[ ] WIRE: Call (800) 222-5852 for instructions.
- -------------------------------------------------------------------------------
4. YOUR BROKER/DEALER
Representative Name ________________________ Representative Number __________
Branch Number ________________________
Firm 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.
<PAGE> 174
C. 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 Sierra Trust Non-Money Funds, SPIF or SAM Portfolios an aggregate amount at
least equal to the amount indicated below:
[ ] $50,000 [ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
Effective Date _______________ Note: The effective date can be no more than
90 days prior to today's date.
___________________ _______________
Signature(s) Date
D. 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 Trust Funds (800-222-5852) or the Fund's transfer
agent of the total holdings in our group each time an order is placed.
[ ] I own shares in other Sierra Trust Funds, Sierra Prime Income Fund or Sierra
Asset Management Portfolios which may entitle this purchase to have a reduced
sales charge under the provisions in the Fund prospectus. My other account
numbers (including accounts held by my spouse and minor children) 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. THE INTERNAL REVENUE
SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER
THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
<TABLE>
<S> <C>
X
___________________________________________________________ __________________________________________________________________
Registered Representative's Name and Number SIGNATURE
Date X
______________________________________________________ __________________________________________________________________
SIGNATURE
</TABLE>
<PAGE> 175
SIERRA TRUST FUNDS
P.O. BOX 5118
WESTBORO, MASSACHUSETTS 01581-5118
STATEMENT OF ADDITIONAL INFORMATION
October 31, 1997
o Global Money Fund* o Florida Insured Municipal Fund
o U.S. Government Money Fund* o National Municipal Fund
o California Money Fund o Growth and Income Fund*
o Short Term High Quality o Emerging Growth Fund*
Bond Fund*
o U.S. Government Fund* o International Growth Fund*
o Corporate Income Fund* o Short Term Global Government Fund*
o California Municipal Fund o Growth Fund*
o California Insured Intermediate o Target Maturity 2002 Fund
Municipal Fund
This Statement of Additional Information ("SAI") supplements the information
contained in the current Prospectuses of Sierra Trust Funds (the "Trust") which
are dated October 31, 1997, and should be read in conjunction with the
appropriate Prospectus. Two Prospectuses dated October 31, 1997 describe the
first fifteen investment series funds of the Trust that are listed above (the
"Non-Target Maturity Funds"). One relates to the Class A, Class B and Class I
Shares of the Non-Target Maturity Funds and the other relates to the Class A and
Class S Shares of the Non-Target Maturity Funds. An additional Prospectus dated
October 31, 1997 describes the Class A Shares of the last investment series fund
of the Trust that is listed above, the Target Maturity 2002 Fund (the "Target
Maturity Fund").
The Trust's Prospectuses may be obtained without charge by writing to the
Trust at P.O. Box 5118, Westboro, Massachusetts 01581-5118 or by calling the
Trust at 800-222-5852. This Statement of Additional Information provides
information applicable to the Class A, Class B, Class I and Class S Shares of
the Non-Target Maturity Funds and the Class A Shares of the Target Maturity
Fund. This Statement of Additional Information, although not in itself a
prospectus, is incorporated by reference into the Prospectuses in its entirety.
* Only ten Funds are currently offering and selling Class I Shares, which are
sold exclusively to Sierra Asset Management Portfolios ("SAM Portfolios"), an
open-end management investment company.
<PAGE> 176
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MANAGEMENT OF THE TRUST............................................ 3
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS.................... 18
PORTFOLIO TURNOVER................................................. 65
PORTFOLIO TRANSACTIONS............................................. 65
NET ASSET VALUE.................................................... 69
HOW TO BUY AND REDEEM SHARES....................................... 71
HOW TO EXCHANGE SHARES............................................. 74
DETERMINATION OF PERFORMANCE....................................... 74
TAXES.............................................................. 81
DISTRIBUTOR........................................................ 86
APPENDIX............................................................ A-1
</TABLE>
-2-
<PAGE> 177
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS OF THE TRUST
The names, addresses and ages of the Trustees and executive officers of the
Trust, together with information as to their principal business occupations
during the past five years, are set forth below. Unless otherwise indicated, the
address of all persons listed below is 9301 Corbin Avenue, Northridge,
California 91324. The executive officers of the Trust are employees of
organizations that provide services to the separate investment funds (the
"Funds") offered by the Trust. Each Trustee who is an "interested person" of the
Trust, as defined in the Investment Company Act of 1940, as amended (the "1940
Act"), is indicated by an asterisk.
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE THE TRUST DURING THE LAST 5 YEARS
<S> <C> <C>
KEITH B. PIPES (41) President and Senior Vice President, Chief Financial Officer and
Chief Executive Secretary, SCMC, 1988 to 1997; Chief Financial
Officer Officer, Secretary and Treasurer, Sierra
Administration, 1988 to 1997; Executive Vice
President and Secretary, Sierra Advisors, 1988 to
1997; Senior Vice President, Chief Financial
Officer and Secretary, Sierra Investment Services,
1992 to 1997.
ARTHUR H. BERNSTEIN, ESQ. (72) Chairman of the President, Bancorp Capital Group, Inc., 1988 to
11661 San Vicente Blvd., Board and Trustee present; President, Bancorp Venture Capital, Inc.,
Suite 701 1988 to present.
Los Angeles, CA 90049
DAVID E. ANDERSON (70) Trustee Retired; President and Chief Executive Officer,
17960 Seabreeze Drive GTE California, Inc., 1979 to 1988.
Pacific Palisades, CA 90272
EDMOND R. DAVIS, ESQ. (69) Trustee Partner, Brobeck, Phleger & Harrison (law firm),
550 South Hope Street, 21st Floor 1987 to present.
Los Angeles, CA 90071-2604
JOHN W. ENGLISH (64) Trustee Retired; Vice President and Chief Investment
50 H New England Ave. Officer, Ford Foundation, 1981 to 1993; Chairman
P.O. Box 640 of the Board and Director, The China Fund, Inc. (a
Summit, NJ 07902-0640 closed-end mutual fund), 1993 to present; Trustee,
Retail Property Trust (a company providing
management services for shopping centers), 1994 to
1997; Director, The Northern Trust Company's
Benchmark Funds (open-end mutual funds), 1994
to present.
</TABLE>
-3-
<PAGE> 178
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE THE TRUST DURING THE LAST 5 YEARS
<S> <C> <C>
ALFRED E. OSBORNE, JR. PH.D. (52) Trustee Professor, The Anderson School and
110 Westwood Plaza, Suite C305 Director, The Harold Price Center for
Los Angeles, CA 90095-1481 Entrepreneurial Studies at UCLA, 1972 to present;
Director, Times Mirror Company, 1980 to present;
Director, United States Filter Corporation, 1991 to
present; Director, Nordstrom, Inc., 1987 to present;
Director, Greyhound Lines, Inc., 1994 to present.
Independent general partner, Technology
Funding Venture Partners V, 1990 to present; former
Governor, National Association of Securities
Dealers, Inc., 1994 to 1996; former Director,
NASD Regulation, September 1996 to December 1996.
MICHAEL D. GOTH (52) Senior Vice Chief Operating Officer, Sierra Advisers, 1991 to
President present.
STEPHEN C. SCOTT (52) Senior Vice President and Chief Investment Officer, Sierra
President Advisers, 1988 to present; Senior Vice President
and Chief Investment Officer, Sierra Services,
1996 to present.
CRAIG M. MILLER (38) Treasurer and Vice President and Controller, SCMC, Sierra
Chief Financial Administration and Sierra Services, 1993 to
Officer present; Audit Manager, Coopers & Lybrand,
L.L.P., 1987 to 1993
RICHARD H. ROSE (42) Assistant Currently acts as Vice President Division Manager
Treasurer of First Data Investor Services Group, Inc., a
subsidiary of First Data Corp. (prior to May 6,
1994, a Senior Vice President in a division of The
Boston Company Advisors, Inc. ("Boston
Advisors")). He joined Boston Advisors in 1988 as
Vice President and Group Manager in the Fund
Accounting Department. Prior to 1988, he acted as
Senior Audit Manager for Peat Marwick Main
(KPMG Peat Marwick) & Co. He holds a Master's
degree in Accounting from Northeastern University,
and a B.A. in Economics from Dartmouth.
</TABLE>
-4-
<PAGE> 179
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE THE TRUST DURING THE LAST 5 YEARS
<S> <C> <C>
RICHARD W. GRANT (52) Secretary Partner, Morgan, Lewis & Bockius LLP,
2000 One Logan Square 1989 to present.
Philadelphia, PA 19103
DARREN S. KISHIMOTO (31) Assistant Fund Administration Manager, Sierra
Secretary Administration, 1994 to present; Senior
Fund Administrator, 1992 to 1994.
BRADLEY F. HERSH (29) Assistant Finance Manager, Sierra Administration,
Treasurer 1996 to present; Senior Financial Analyst,
GW Securities, 1991 to 1995.
</TABLE>
Each of the Trustees and officers of the Trust is also a trustee or officer
of The Sierra Variable Trust ("SVT"). Furthermore, with the exception of Mr.
Rose, each of the Trustees and officers of the Trust is also a trustee or
officer of Sierra Prime Income Fund ("SPIF") and Sierra Asset Management
Portfolios ("SAMP"). Each of SVT, SPIF and SAMP is an investment company advised
by Sierra Advisors or Sierra Services.
The address of each trustee and officer of the Trust affiliated with Sierra
Advisors or Sierra Services is 9301 Corbin Avenue, Suite 333, Northridge,
California 91324.
REMUNERATION. No director, officer or employee of Sierra Advisors, the
investment sub-advisors of the Funds (the "Sub-Advisors") or First Data, the
Sub-Administrator and Transfer Agent of the Funds, or any affiliate of Sierra
Advisors, the Sub-Advisors or First Data will receive any compensation from the
Trust for serving as an officer or Trustee of the Trust. The Trust pays each
Trustee, who is not a director, officer or employee of Sierra Advisors, the
Sub-Advisors, First Data or any of their affiliates, a fee of $7,500 per annum
plus $1,500 per Board meeting attended and $1,000 per Audit and Nominating
Committee meeting attended, and reimburses them for travel and out-of-pocket
expenses. The Chairman receives one and one half times the normal Trustee
compensation. The Chairman of the Audit Committee receives a fee of $1,500 per
Audit Committee meeting.
The following Compensation Table shows aggregate compensation paid to each of
the Fund's Trustees by the Fund and the Fund Complex, respectively in the year
ended June 30, 1997.
-5-
<PAGE> 180
COMPENSATION TABLE
<TABLE>
<CAPTION>
==========================================================================================================
(1) (2) (3) (4)
NAME OF AGGREGATE COMPENSATION PENSION OR ESTIMATED TOTAL
PERSON, FROM REGISTRANT RETIREMENT COMPENSATION FROM
POSITION FOR THE FISCAL BENEFITS ACCRUED REGISTRANT AND FUND
YEAR ENDED AS PART OF FUND EXPENSES COMPLEX PAID TO TRUSTEES
JUNE 30, 1997** FOR THE
FISCAL YEAR ENDED
JUNE 30, 1997**
==========================================================================================================
<S> <C> <C> <C>
Arthur H. Bernstein, Esq. $22,938* 0 $54,063 for service on
Chairman of the Board 4 boards*
and Trustee
David E. Anderson $18,000 0 $42,000 for service on
Trustee 4 boards
Edmond R. Davis, Esq. $18,000 0 $42,000 for service on
Trustee 4 boards
John W. English $18,000 0 $42,000 for service on
Trustee 4 boards
Alfred E. Osborne, Jr. $18,000 0 $42,000 for service
Trustee on 4 boards
==========================================================================================================
</TABLE>
* Mr. Bernstein was paid $1,500 for the Audit Committee Meeting held by
the Trust and SVT.
** Including deferred compensation.
The aggregate remuneration paid to Trustees by the Trust for attendance
at Board and committee meetings for the fiscal year ended June 30, 1997 was
$113,043 (including reimbursement for travel and out-of-pocket expenses). For
the same period, Sierra Advisors reimbursed the Trust in an amount of $80,500
for certain expenses associated with special meetings of the Board, held with
regard to the contemplation of the sale of SCMC and the merger of Great Western
Financial Securities Corporation and Washington Mutual, Inc. As of June 30,
1997, the Trustees and officers of the Trust owned, in the aggregate, less than
1% of the outstanding shares of any of the Funds. In addition, as of October 1,
1997, to the knowledge of the Trust the following shareholders owned 5% or more
of the outstanding shares of any of the Funds:
GLOBAL MONEY FUND - CLASS B: BSDT Ttee IRA R, FBO Darlene Porter, 22 Santa Ana
Avenue, Long Beach, CA 90803, 9.19%.
GWB TTee IRA R, Otto O. Tallent, 4210 Mesa Court, Rocklin, CA 95677, 7.76%.
Peter Canale, 3275 Sand Road, Cape Coral, FL 33993, 5.94%.
Louis Foster, 1000 Colony Pointe Circle #512, Pembroke Pines, FL 33026, 5.84%.
BSDT Cust IRA FBO, Roger T. Gelineau, 7 Francis Drive, Dudley, MA 01571, 5.57%.
-6-
<PAGE> 181
GLOBAL MONEY FUND- CLASS I: SAM Balanced Portfolio, C/O Sierra Advisors, 9301
Corbin Avenue, Suite 333, Northridge, CA 91324, 51.51%.
SAM Growth Portfolio, C/O Sierra Advisors, 9301 Corbin Avenue, Suite 333,
Northridge, CA 91324, 34.37%.
SAM Capital Growth Portfolio, C/O Sierra Advisors, 9301 Corbin Avenue, Suite
333, Northridge, CA 91324, 6.80%.
SAM Value Portfolio, C/O Sierra Advisors, 9301 Corbin Avenue, Suite 333,
Northridge, CA 91324, 5.27%.
U.S. GOVERNMENT MONEY FUND - CLASS B: Patricia A. Burke, 60 De Hart Drive, Belle
Head, NJ 08502, 23.75%.
M. George Cassell, Ruth D. Cassell and Marie Cassell, 13338 St. Tropez Circle,
Palm Beach Gardens, FL 33410, 21.46%.
BSDT Cust Rollover IRA FBO, Raymond E. Gross Sr., 10103 Hamby Road, Soddy-Daisy,
TN 37379, 14.86%.
BSDT Cust IRA FBO, John Simonetti, 8 Oak Hill Lane, Shelton, CT, 06484, 14.48%.
BSDT Cust IRA FBO, Betty W. Gross, 10103 Hamby Road, Soddy-Daisy, TN 37379,
13.05%.
U.S. GOVERNMENT MONEY FUND- CLASS I: Sierra Fund Administration, 9301 Corbin
Avenue, Northridge, CA 91324, 100.00%.
U.S. GOVERNMENT MONEY FUND - CLASS S: William & Tamara H. Pullman Trust, FBO
Pullman Trust, U/A Dated 6/13/94, c/o Marie Ambrosino Mgmt, 612 N. Sepulveda
Blvd. #10, Los Angeles, CA 90049, 47.25%.
Raymond James & Assoc. Inc. CSDN, Hans Knickrehm IRA, 513 Rancho Bauer Drive,
Houston, TX 77079, 17.14%.
CALIFORNIA MONEY FUND - CLASS A: Edward B. Baker Ttee FBO The Baker Family
Trust, DTD 7/10/94, 1650 16th Avenue, San Francisco, CA 94122, 18.28%.
CALIFORNIA MONEY FUND - CLASS B: Oscar L. Roehl Trustee, FBO: The Oscar L. Roehl
Trust UTA DTD 12/15/89, 1826 Harding Avenue, Redwood City, CA 94062, 81.27%.
Ella M. Brown, 29094 Cobblestone Street, Nuevo, CA 92567, 15.47%.
-7-
<PAGE> 182
CALIFORNIA MONEY FUND - CLASS I: Sierra Fund Administration, 9301 Corbin Avenue,
Northridge, CA 91324, 100.00%.
SHORT TERM HIGH QUALITY BOND FUND- CLASS I: SAM Income Portfolio, C/O Sierra
Advisors, 9301 Corbin Avenue, Suite 333, Northridge, CA 91324, 66.00%.
SAM Value Portfolio, C/O Sierra Advisors, 9301 Corbin Avenue, Suite 333,
Northridge, CA 91324, 34.00%.
SHORT TERM HIGH QUALITY BOND FUND- CLASS S: KY Cabinet for Human Resources
Trustee for the Marian K. Burns Irrevocable Charitable Remainder Trust, 275 E.
Main Street, 6th Floor West, Frankfort, KY 40621, 11.81%.
Alec P. Morrison and Sandra K. Morrison JTWROS, 16975 Stag Thicket Lane,
Strongsville, OH 44136, 10.88%.
BSDT Ttee IRA R FBO Mauro Fardo, 143 Los Altos Ave., Walnut Creek, CA 94598,
7.20%.
Harold P. Jewell and Oveta B. Jewell JTWROS, 1001 Urell Place NE, Washington,
D.C. 20017, 5.01%.
U.S. GOVERNMENT FUND- CLASS I: SAM Balanced Portfolio, C/O Sierra Advisors, 9301
Corbin Avenue, Suite 333, Northridge, CA 91324, 5.33%.
CORPORATE INCOME FUND- CLASS I: SAM Income Portfolio, C/O Sierra Advisors, 9301
Corbin Avenue, Suite 333, Northridge, CA 91324, 65.68%.
SAM Value Portfolio, C/O Sierra Advisors, 9301 Corbin Avenue, Suite 333,
Northridge, CA 91324, 34.31%.
CORPORATE INCOME FUND- CLASS S: KY Cabinet for Human Resources Trustee for the
Marian K. Burns Irrevocable Charitable Remainder Trust, 275 E. Main Street, 6th
Floor West, Frankfort, KY 40621, 7.18%.
Alec P. Morrison and Sandra K. Morrison JTWROS, 16975 Stag Thicket Lane,
Strongsville, OH 44136, 5.53%.
CALIFORNIA MUNICIPAL FUND- CLASS I: Sierra Fund Administration Corp., 9301
Corbin Avenue, Northridge, CA 91324, 100.00%.
CALIFORNIA MUNICIPAL FUND - CLASS S: Josefina F. Perungoa and Reynaldo Fernando
JTWROS, 5480 Avenida El Cid, Yorba Linda, CA 92686, 76.34%
-8-
<PAGE> 183
Sierra Fund Administration Corp., 9301 Corbin Avenue, Northridge, CA 91324,
23.66%
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND - CLASS I: Sierra Fund
Administration Corp., 9301 Corbin Avenue, Northridge, CA 91324, 100.00%
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND - CLASS S: Sierra Fund
Administration Corp., 9301 Corbin Avenue, Northridge, CA 91324, 100.00%.
FLORIDA INSURED MUNICIPAL FUND - CLASS B: Joseph R. Ott and Stella C. Ott
JTWROS, 5800 SW 99th Terrace, Miami, FL 33156, 7.55%.
FLORIDA INSURED MUNICIPAL FUND - CLASS S: Jill Kuharcik, 5696 High Flyer Road
South, Palm Beach Gardens, FL 33418, 94.54%.
Sierra Fund Administration Corp., 9301 Corbin Avenue, Northridge, CA 91324,
5.46%
NATIONAL MUNICIPAL FUND- CLASS I: Sierra Fund Administration Corp., 9301 Corbin
Avenue, Northridge, CA 91324, 100.00%.
NATIONAL MUNICIPAL FUND - CLASS S: Sierra Fund Administration Corp., 9301 Corbin
Avenue, Northridge, CA 91324, 100%.
GROWTH AND INCOME FUND - CLASS I: SAM Balanced Portfolio, C/O Sierra Advisors,
9301 Corbin Avenue, Suite 333, Northridge, CA 91324, 42.29%.
SAM Growth Portfolio, C/O Sierra Advisors, 9301 Corbin Avenue, Suite 333,
Northridge, CA 91324, 42.22%.
SAM Capital Growth Portfolio, C/O Sierra Advisors, 9301 Corbin Avenue, Suite
333, Northridge, CA 91324, 13.18%.
EMERGING GROWTH FUND - CLASS A: Chase Manhattan Bank Ttee FBO: GWB ESIP Plan
Trust A/C #29000108, 7700 Broadway, 10th Floor, New York, NY 10003, 14.98%.
EMERGING GROWTH FUND- CLASS I: SAM Growth Portfolio, C/O Sierra Advisors, 9301
Corbin Avenue, Suite 333, Northridge, CA 91324, 89.02%.
SAM Capital Growth Portfolio, C/O Sierra Advisors, 9301 Corbin Avenue, Suite
333, Northridge, CA 91324, 10.98%.
INTERNATIONAL GROWTH FUND- CLASS I: SAM Growth Portfolio, C/O Sierra Advisors,
9301 Corbin Avenue, Suite 333, Northridge, CA 91324, 61.45%.
SAM Balanced Portfolio, C/O Sierra Advisors, 9301 Corbin Avenue, Suite 333,
Northridge, CA 91324, 32.66%.
-9-
<PAGE> 184
SAM Capital Growth Portfolio, C/O Sierra Advisors, 9301 Corbin Avenue, Suite
333, Northridge, CA 91324, 5.89%.
SHORT TERM GLOBAL GOVERNMENT FUND - CLASS B: Wedbush Morgan Securities, P.O. Box
30014, Los Angeles, CA 90030, 14.35%.
Wedbush Morgan Securities, 1000 Wilshire Blvd., Los Angeles, CA 90017, 13.46%.
Wedbush Morgan Securities, 1000 Wilshire Blvd., Los Angeles, CA 90017, 6.43%.
SHORT TERM GLOBAL GOVERNMENT FUND- CLASS I: SAM Income Portfolio, C/O Sierra
Advisors, 9301 Corbin Avenue, Suite 333, Northridge, CA 91324, 100.00%.
SHORT TERM GLOBAL GOVERNMENT FUND- CLASS S: KY Cabinet for Human Resources
Trustee for the Marian K. Burns Irrevocable Charitable Remainder Trust, 275 E.
Main Street, 6th Floor West, Frankfort, KY 40621, 21.58%.
Carole Hurst & Judith Chinello & Stan R. Mandell Tr., The Frederick S. Tobias
Non-Marital Trust U/A DTD 11/4/81, P.O. Box 1449, La Canada, CA 91012, 8.89%.
Harold P. Jewell and Oveta B. Jewell JTWROS, 1001 Urell Place NE, Washington,
D.C. 20017, 8.46%.
Alec P. Morrison and Sandra K. Morrison JTWROS, 16975 Stag Thicket Lane,
Strongsville, OH 44136, 7.96%.
GROWTH FUND - CLASS I: SAM Growth Portfolio, C/O Sierra Advisors, 9301 Corbin
Avenue, Suite 333, Northridge, CA 91324, 57.97%.
SAM Balanced Portfolio, C/O Sierra Advisors, 9301 Corbin Avenue, Suite 333,
Northridge, CA 91324, 26.84%.
SAM Capital Growth Portfolio, C/O Sierra Advisors, 9301 Corbin Avenue, Suite
333, Northridge, CA 91324, 15.18%.
INVESTMENT ADVISOR AND SUB-ADVISORS, ADMINISTRATOR AND SUB-ADMINISTRATOR,
CUSTODIAN AND TRANSFER AGENT
Sierra Advisors serves as Investment Advisor to each of the Funds and
each Sub-Advisor serves as Investment Sub-Advisor to one or more Funds pursuant
to separate written agreements. Sierra Administration serves as Administrator to
each of the Funds and First Data serves as Sub-Administrator and Transfer Agent
to each of the Funds pursuant to separate written agreements. Certain of the
services provided by, and the fees paid to, Sierra Advisors, the
-10-
<PAGE> 185
Sub-Advisors, Sierra Administration and First Data are described in the
Prospectuses. Sierra Advisors, the Sub-Advisors, Sierra Administration and First
Data each compensates its respective Directors and pays the salaries of its
respective officers and employees employed by such companies respectively and by
the Trust and maintains office facilities for the Trust.
CUSTODIAN. Boston Safe Deposit and Trust Company ("Boston Safe") serves
as Custodian for the Funds. Under its custodial agreement with the Trust, Boston
Safe is authorized to appoint one or more U.S. banking institutions as
sub-custodians of assets owned by any of the Funds. In addition, the Trust may
employ foreign sub-custodians that are approved by the Board of Trustees to hold
foreign assets.
MANAGEMENT FEES. For the fiscal years ended June 30, 1995, 1996 and 1997,
the Trust paid Sierra Advisors the following management fees:
<TABLE>
<CAPTION>
1997
--------------------------------------------------
Expenses
Fees Paid Fees Waived Reimbursed
<S> <C> <C> <C>
Global Money Fund $701,336 $695,889 $0
U.S. Government Money Fund $135, 916 $118,128 $0
California Money Fund $187,084 $135,495 $0
Corporate Income Fund $1,901,382 $604,172 $0
U.S. Government Fund $2,407,855 $1,373,736 $0
Short Term Global Government Fund $394,684 $369,426 $0
Short Term High Quality Bond Fund $153,348 $153,348 $40,836
National Municipal Fund $1,179,610 $498,457 $0
California Municipal Fund $2,063,242 $1,080,813 $0
Florida Insured Municipal Fund $173,618 $173,618 $22,193
California Insured Intermediate Municipal
Fund $398,681 $350,384 $0
Growth and Income Fund $2,121,809 $0 $0
Emerging Growth Fund $2,600,399 $0 $0
Growth Fund $2,418,645 $0 $0
International Growth Fund $1,444,004 $0 $0
Target Maturity 2002 Fund $7,756 $7,756 $59,718
</TABLE>
-11-
<PAGE> 186
<TABLE>
<CAPTION>
1996
----------------------------------------------------
Expenses
Fees Paid Fees Waived Reimbursed
<S> <C> <C> <C>
Global Money Fund $622,915 $622,915 $143,417
U.S. Government Money Fund $175,521 $162,368
California Money Fund $206,796 $148,062
Corporate Income Fund $2,403,914 $1,606,290
U.S. Government Fund $2,581,417 $2,581,417 $187,726
Short Term Global Government Fund $552,582 $513,501
Short Term High Quality Bond Fund $262,885 $262,885 $13,583
National Municipal Fund $1,418,103 $645,198
California Municipal Fund $2,233,979 $1,398,796
Florida Insured Municipal Fund $201,769 $201,769 $74,295
California Insured Intermediate Municipal
Fund $393,599 $393,599 $47,057
Growth and Income Fund $1,769,245
Emerging Growth Fund $2,464,903
Growth Fund $2,023,665
International Growth Fund $1,062,220
Target Maturity 2002 Fund $7,915 $7,915 $47,054
</TABLE>
<TABLE>
<CAPTION>
1995
---------------------------------------------------------
Expenses
Fees Paid Fees Waived Reimbursed
<S> <C> <C> <C>
Global Money Fund $342,696 $342,696
U.S. Government Money Fund $153,991 $112,718
California Money Fund $215,043 $108,224
Corporate Income Fund $2,663,842 $1,503,986
U.S. Government Fund $2,864,170 $1,537,203
Short Term Global Government Fund $1,070,631 $633,137
Short Term High Quality Bond Fund $270,744 $228,615
National Municipal Fund $1,666,333 $1,038,174
California Municipal Fund $2,419,708 $1,403,390
Florida Insured Municipal Fund $200,364 $200,364 $80,852
California Insured Intermediate Municipal
Fund $319,780 $319,780 $52,835
Growth and Income Fund $1,323,807
Emerging Growth Fund $1,400,644
Growth Fund $1,365,171
International Growth Fund $1,097,217
Target Maturity 2002 Fund $1,207 $1,207 $16,281
</TABLE>
-12-
<PAGE> 187
For the fiscal years ended June 30, 1995, 1996, and 1997, Sierra Advisors
paid the Sub- Advisors the following sub-advisory fees:*
<TABLE>
<CAPTION>
FEES PAID FEES PAID FEES PAID
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Global Money Fund $263,001 $233,593 $128,511
U.S. Government Fund $809,915 $868,295 $814,920
California Money Fund $70,156 $77,549 $80,641
Corporate Income Fund $877,561 $1,109,499 $1,229,465
U.S. Government Money Fund $50,968 $65,820 $57,747
Short Term Global Government Fund $170,018 $238,035 $456,016
Short Term High Quality Bond Fund $46,004 $78,866 $81,222
National Municipal Fund $396,712 $461,755 $467,306
California Municipal Fund $637,702 $684,267 $667,343
Florida Insured Municipal Fund $63,134 $73,371 $72,860
California Insured Intermediate Municipal Fund $144,771 $143,109 $116,283
Growth and Income Fund $1,135,905 $959,559 $721,411
Emerging Growth Fund $1,550,235 $1,470,531 $844,497
Growth Fund $1,374,940 $1,149,390 $780,651
International Growth Fund $880,003 $640,950 $646,343
Target Maturity 2002 Fund* $25,000 $25,000 $7,055
</TABLE>
* The Target Maturity 2002 Fund commenced operations on March 20, 1995.
For the fiscal years ended June 30, 1995, 1996, and 1997 the Trust paid
the Administrator the following administration fees*:
-13-
<PAGE> 188
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
FEES FEES FEES FEES
PAID FEES WAIVED PAID FEES WAIVED PAID WAIVED
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Global Money Fund $526,002 $0 $467,187 $5,352 $257,022 $203,124
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Government Money Fund $101,937 $0 $131,641 $0 $115,493 $43,310
- ---------------------------------------------------------------------------------------------------------------------------
California Money fund $140,313 $0 $155,097 $0 $161,282 $50,408
- ---------------------------------------------------------------------------------------------------------------------------
Corporate Income Fund $1,023,821 $0 $1,294,415 $0 $1,434,376 $558,930
- ---------------------------------------------------------------------------------------------------------------------------
U.S. Government Fund $1,532,271 $0 $1,642,720 $127,314 $1,822,654 $405,720
- ---------------------------------------------------------------------------------------------------------------------------
Short Term High Quality $107,344 $0 $809,686 $11,630 $189,519 $117,460
Bond Fund
- ---------------------------------------------------------------------------------------------------------------------------
Short Term Global $212,522 $0 $297,544 $15,947 $576,494 $343,700
Government Fund
- ---------------------------------------------------------------------------------------------------------------------------
National Municipal Fund $750,661 $0 $902,429 $0 $1,060,394 $391,004
- ---------------------------------------------------------------------------------------------------------------------------
California Municipal Fund $1,312,972 $0 $1,421,633 $0 $1,539,815 $511,663
- ---------------------------------------------------------------------------------------------------------------------------
Florida Insured Municipal Fund $110,484 $0 $128,399 $20,472 $127,505 $127,505
- ---------------------------------------------------------------------------------------------------------------------------
California Insured Intermediate
Municipal Fund $253,706 $0 $250,472 $14,288 $203,496 $203,496
- ---------------------------------------------------------------------------------------------------------------------------
Growth and Income Fund $985,905 $0 $184,020 $0 $594,453 $0
- ---------------------------------------------------------------------------------------------------------------------------
Emerging Growth Fund $1,050,164 $0 $994,372 $0 $556,148 $0
- ---------------------------------------------------------------------------------------------------------------------------
Growth Fund $927,458 $0 $769,573 $0 $511,456 $0
- ---------------------------------------------------------------------------------------------------------------------------
International Growth Fund $616,002 $0 $422,563 $0 $454,734 $0
- ---------------------------------------------------------------------------------------------------------------------------
Target Maturity 2002 Fund* $10,859 $0 $11,080 $3,805 $1,690 $1,690
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Target Maturity 2002 Fund commenced operations on March 20, 1995.
For the fiscal years ended June 30, 1995, 1996, and 1997 the
Administrator paid First Data the following fees (that do not include
out-of-pocket expenses and certain transaction charges and net of waivers of
fees) for sub-administration and custody services provided to each Fund:
<TABLE>
<CAPTION>
FEES PAID FEES PAID FEES PAID
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Global Money Fund $141,344 $122,357 $157,724
U.S. Government Money Fund $27, 328 $65,820 $71,171
California Money Fund $37,649 $40,546 $84,360
Corporate Income Fund $235,247 $289,871 $617,943
U.S. Government Fund $352,268 $367,978 $749,131
Short Term High Quality Bond Fund $24,633 $41,119 $152,405
Short Term Global Government Fund $48,859 $66,512 $360,039
</TABLE>
-14-
<PAGE> 189
<TABLE>
<CAPTION>
FEES PAID FEES PAID FEES PAID
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
National Municipal Fund $172,623 $202,099 $303,537
California Municipal Fund $302,048 $318,453 $436,521
Florida Insured Municipal Fund $25,408 $28,762 $37,321
California Insured Intermediate Municipal Fund $58,360 $56,128 $54,451
Growth and Income Fund $227,511 $181,544 $334,542
Emerging Growth Fund $241,257 $222,994 $380,867
Growth Fund $213,556 $172,561 $312,093
International Growth Fund $141,808 $94,735 $263,659
Target Maturity 2002 Fund* $2,499 $2,485 $692
</TABLE>
* The Target Maturity 2002 Fund commenced operations on March 20, 1995.
-15-
<PAGE> 190
COUNSEL AND AUDITOR
Morgan, Lewis & Bockius LLP serves as counsel to the Trust and provides
legal services to GW Securities, Sierra Advisors, Sierra Administration and
Sierra Services. Paul, Hastings, Janofsky & Walker serves as counsel to the
Trustees who are not "interested persons" of the Trust.
Price Waterhouse LLP, independent accountants, located at 160 Federal
Street, Boston, Massachusetts 02110, serves as auditor of the Trust.
ORGANIZATION OF THE TRUST
The Trust is organized as an unincorporated business trust under the laws
of the Commonwealth of Massachusetts pursuant to a Master Trust Agreement dated
February 22, 1989, as amended from time to time (the "Trust Agreement"). In the
interest of economy and convenience, certificates representing shares in the
Trust are not physically issued. Boston Safe, the Trust's Custodian, and First
Data, the Trust's Transfer Agent, maintain a record of each shareholder's
ownership of Trust shares. Shares do not have cumulative voting rights, which
means that holders of more than 50% of the shares voting for the election of
Trustees can elect all Trustees. Shares are transferable but have no preemptive,
conversion or subscription rights. Shareholders generally vote by Fund or Class,
except with respect to the election of Trustees and the selection of independent
accountants.
Under normal circumstances, there will be no meetings of shareholders for
the purpose of electing Trustees unless and until such time as less than a
majority of the Trustees holding office have been elected by shareholders, at
which time the Trustees then in office promptly will call a shareholders'
meeting for the election of Trustees. Under the 1940 Act, shareholders of record
of no less than two-thirds of the outstanding shares of the Trust may remove a
Trustee through a declaration in writing or by vote cast in person or by proxy
at a meeting called for that purpose. Under the Trust Agreement, the Trustees
are required to call a meeting of shareholders for the purpose of voting upon
the question of removal of any such Trustee when requested in writing to do so
by the shareholders of record of not less than 10% of the Trust's outstanding
shares.
Massachusetts law provides that shareholders, under certain
circumstances, could be held personally liable for the obligations of the Trust.
However, the Trust Agreement disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or a Trustee. The Trust Agreement provides for indemnification from the Trust's
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust would be unable to meet its obligations, a possibility that
the Trust's management believes is remote. Upon payment of any liability
incurred by the Trust, the shareholder paying the liability will be entitled to
reimbursement from the general assets of the Trust. The Trustees intend to
conduct the operations of the Trust in such
-16-
<PAGE> 191
a way so as to avoid, to the extent possible, ultimate liability of the
shareholders for liabilities of the Trust.
CERTAIN MATTERS RELATING TO J.P. MORGAN INVESTMENT MANAGEMENT INC. AND ITS
AFFILIATES
J.P. Morgan Investment Management Inc. ("J.P. Management"), the
Sub-Advisor to the Global Money Fund and Growth and Income Fund, and Morgan
Guaranty Trust Company of New York ("Morgan Guaranty") are both wholly owned
subsidiaries of J.P. Morgan & Co. Incorporated ("J.P. Morgan"). Through its
Finance and Advisory Division, Morgan Guaranty has relationships as a bank of
deposit, as a lender, as a financial advisor and in other capacities, with a
significant number of United States corporations. Such corporate customers of
Morgan Guaranty obtain short-term funds to finance the operation of their
business generally through two sources: (i) short-term bank borrowings from
commercial banks such as Morgan Guaranty; and (ii) the issuance of commercial
paper of the type in which certain of the Funds may invest. Normally the
decision of a corporation as to which medium of short-term financing to utilize
will be influenced primarily by interest rate differentials between the
available sources of short-term funds. When interest rate differentials between
short-term bank borrowings and the commercial paper market narrow, the Corporate
Finance Division of Morgan Guaranty may be competing with the commercial paper
market to provide short-term funds to corporate borrowers.
J.P. Morgan Securities Inc. ("J.P. Securities"), a wholly owned
subsidiary of J.P. Morgan, is a broker-dealer registered with the Securities and
Exchange Commission ("SEC") and a member of the National Association of
Securities Dealers, Inc. ("NASD"). J.P. Securities is active as a dealer in the
securities of United States Government and an underwriter of and dealer in
securities of the United States Government agencies and money market securities.
To a limited extent, J.P. Securities also underwrites and deals in commercial
paper, corporate debt and equity securities. J.P. Morgan Securities Limited
("J.P. Limited"), also a wholly owned subsidiary of J.P. Morgan, underwrites,
distributes and trades international securities, including Eurobonds, commercial
paper and foreign government bonds. To the extent that the Global Money Fund or
the Growth and Income Fund are permitted to invest in such securities, the
foregoing activities of J.P. Securities and J.P. Limited may affect the manner
in which J.P. Management makes investments for such Funds and may affect such
Funds' portfolios or the markets for the securities in which such portfolios are
invested. Such effects would be primarily on: (1) the price of securities
already held in the Global Money Fund or the Growth and Income Fund or
securities considered for purchase, which are the same as or similar to issues
underwritten or traded by J.P. Securities, J.P. Limited, J.P. Morgan or Morgan
Guaranty ("Morgan Affiliates"), and (2) the supply of issues available for
purchase by the Global Money Fund or the Growth and Income Fund. Particularly,
where the positions of Morgan Affiliates constitute a large percentage of a
given issue, the price at which that issue is traded may influence the price of
securities of that issue or of similar securities in the Global Money Fund or
the Growth and Income Fund or securities being considered for purchase. Also,
since the Global Money Fund and the Growth and Income Fund will not purchase
directly from Morgan Affiliates, if the positions of Morgan Affiliates in given
issues is large, it may limit the selection of available securities in that
particular maturity, yield or price range.
-17-
<PAGE> 192
In addition, the Global Money Fund and the Growth and Income Fund will
not purchase securities during the existence of any underwriting or selling
group of which a Morgan Affiliate is a member except to the extent permitted by
law. Portfolio securities may not be purchased from or sold to J.P. Management
or any affiliated person (as defined in the 1940 Act) of J.P.
Management except as may be permitted by law.
J.P. Morgan issues commercial paper and long-term debt securities, and
Morgan Guaranty and some of its affiliates issue certificates of deposit and
create bankers' acceptances. The Global Money Fund and the Growth and Income
Fund will not invest in the commercial paper or other debt securities of J.P.
Morgan or in certificates of deposit or bankers' acceptances of Morgan Guaranty
or such affiliates. However, the activities of J.P. Morgan and Morgan Guaranty
and any of such affiliates in the market for such instruments might affect the
portfolios of such Funds or the market for such instruments.
The limitations discussed in the preceding three paragraphs, in the
opinion of J.P. Management, will not significantly affect the ability of the
Global Money Fund and the Growth and Income Fund to pursue their respective
investment objectives. However, in the future in other circumstances, such Funds
may be at a disadvantage because of such limitations in comparison to other
funds with similar investment objectives which are not subject to such
limitations. The management of Sierra Advisors believes that the effects of such
limitations are more than offset by the experience and expertise J.P. Management
provides to such Funds.
In acting for its fiduciary accounts, including such Funds, J.P.
Management will not discuss its investment decisions or positions with the
personnel of any Morgan Affiliates. J.P. Management will not execute any
transactions for such Funds with Morgan Affiliates and will execute such
transactions only with unaffiliated dealers.
The commercial banking divisions of Morgan Guaranty or its affiliates may
have deposit, loan and other commercial banking relationships with issuers of
securities purchased by the Global Money Fund and the Growth and Income Fund,
including outstanding loans to such issuers that may be repaid in whole or in
part with the proceeds of securities purchased by such Funds in primary public
offerings. Such Funds will not purchase, except as may be permitted by
applicable law, securities in any primary public offering when the prospectus
discloses that the proceeds will be used to repay in whole or in part the loans
to such issuers. J.P. Management will not cause such Funds to make investments
for the direct purpose of benefitting other commercial interests of Morgan
Affiliates at the expense of such Funds. J.P. Management has advised such Funds
that, in making investment decisions, J.P. Management will not obtain or use
material inside information in the possession of any other division or
department of J.P. Management or from Morgan Affiliates. J.P. Management has
also advised such Funds that its investment personnel do not disclose any
material inside information in their possession regarding such Funds to any
other division or department of J.P. Management or Morgan Affiliates.
-18-
<PAGE> 193
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
The Prospectuses discuss the investment objective or objectives of each
of the Funds and the policies to be employed to achieve such objectives. This
section contains supplemental information concerning the types of securities and
other instruments in which the Funds may invest, the investment policies and
portfolio strategies that the Funds may utilize and certain risks attendant to
such investments, policies and strategies.
STRATEGIES AVAILABLE TO ALL FUNDS EXCEPT THE TARGET MATURITY FUND
RATINGS AS INVESTMENT CRITERIA. In general, the ratings of NRSROs, such
as Moody's Investors Service, Inc. ("Moody's") Standard & Poor's Corporation
("S&P"), and Duff and Fitch, represent the opinions of these agencies as to the
quality of securities which they rate. It should be emphasized, however, that
such ratings are relative and subjective and are not absolute standards of
quality. These ratings will be used by the Funds as initial criteria for the
selection of portfolio securities, but the Funds will also rely upon the
independent advice of their respective Sub-Advisors to evaluate potential
investments. The Appendix to this Statement of Additional Information contains
further information concerning the ratings of these services and their
significance. See the Prospectuses with respect to the Global Money, U.S.
Government Money and California Money Funds (the "Money Funds") in the section
entitled "The Funds' Investments and Risk Considerations - Investment Principles
and Risk Considerations - The Money Funds" for additional information concerning
certain rating criteria.
To the extent that the rating given by Moody's or S&P for securities may
change as a result of changes in such organizations or their rating systems,
each Fund will attempt to use comparable ratings as standards for its
investments in accordance with the investment policies contained in the
Prospectuses and in this Statement of Additional Information.
U.S. GOVERNMENT SECURITIES. U.S. Government Securities include debt
obligations of varying maturities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities. U.S. Government securities include direct
obligations of the U.S. Treasury, and securities issued or guaranteed by the
Federal Housing Administration, Farmers Home Administration, Export-Import Bank
of the United States, Small Business Administration, Government National
Mortgage Association ("GNMA"), General Services Administration, Central Bank for
Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation ("FHLMC"), Federal Intermediate Credit Banks,
Resolution Trust Corporation, Federal Land Banks, Federal National Mortgage
Association ("FNMA"), Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board and Student Loan Marketing Association. Direct
obligations of the U.S. Treasury include a variety of securities that differ in
their interest rates, maturities and dates of issuance. Because the U.S.
Government is not obligated by law to provide support to an instrumentality it
sponsors, a Fund will invest in obligations issued by such an instrumentality
only if the Fund's Sub-Advisor determines that the credit risk with respect to
the instrumentality does not make its securities unsuitable for investment by
the Fund.
-19-
<PAGE> 194
ILLIQUID INVESTMENTS. These securities generally cannot be sold or
disposed of in the ordinary course of business within seven days at
approximately the value at which the Fund has valued the investments. These
factors may have an adverse effect on the Fund's ability to dispose of the
particular securities at fair market value and may limit the fund's ability to
obtain accurate market quotations for purposes of valuing the securities and
calculating the net asset value of shares of the Fund. The Funds may also
purchase securities that are not registered under the Securities Act of 1933, as
amended (the "Act"), but that can be sold to qualified institutional buyers in
accordance with Rule 144A under that Act ("Rule 144A securities"). Rule 144A
securities generally must be sold to other qualified institutional buyers. If a
particular investment in Rule 144A securities is not determined to be liquid,
that investment will be treated as an illiquid security.
COMBINED TRANSACTIONS. As permitted by each Fund's investment polices and
restrictions, the Funds may enter into multiple transactions, including multiple
options transactions, multiple futures transactions, multiple foreign currency
transactions (including forward foreign currency exchange contracts) and any
combination of futures, options and foreign currency transactions (each
separately, a "component" transaction), instead of a single transaction, as part
of a single hedging strategy when, in the opinion of the Sub-Advisor, it is in
the best interest of the Fund to do so. A combined transaction, while part of a
single hedging strategy, may contain elements of risk that are present in each
of its component transactions.
BANK OBLIGATIONS. Domestic commercial banks organized under federal law
are supervised and examined by the Comptroller of the Currency and are required
to be members of the Federal Reserve System and to be insured by the Federal
Deposit Insurance Corporation (the "FDIC"). Domestic banks organized under state
law are supervised and examined by state banking authorities but are members of
the Federal Reserve System only if they elect to join. Most state banks are
insured by the FDIC (although such insurance may not be of material benefit to a
Fund, depending upon the principal amount of certificates of deposit ("CDs") of
each state bank held by a Fund) and are subject to federal examination and to a
substantial body of federal law and regulation. As a result of federal and state
laws and regulations, domestic branches of domestic banks are, among other
things, generally required to maintain specific levels of reserves, and are
subject to other supervision and regulation designed to promote financial
soundness.
Obligations of foreign branches of U.S. banks and of foreign branches of
foreign banks, such as CDs and time deposits ("TDs"), may be general obligations
of the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and governmental regulation. Obligations of
foreign branches of U.S. banks and foreign banks are subject to the risks
associated with investing in foreign securities generally. Foreign branches of
U.S. banks and foreign branches of foreign banks are not necessarily subject to
the same or similar regulatory requirements that apply to U.S. banks, such as
mandatory reserve requirements, loan limitations, and accounting, auditing and
financial recordkeeping requirements. In addition, less information may be
publicly available about a foreign branch of a U.S. bank or about a foreign bank
than about a U.S. bank.
-20-
<PAGE> 195
Obligations of U.S. branches of foreign banks may be general obligations
of the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and by federal and state regulation as well as
governmental action in the country in which the foreign bank has its head
office. A U.S. branch of a foreign bank may or may not be subject to reserve
requirements imposed by the Federal Reserve System or by the state in which the
branch is located if the branch is licensed in that state. In addition, branches
licensed by the Comptroller of the Currency and branches licensed by certain
states ("State Branches") may or may not be required to (1) pledge to the
regulator by depositing assets with a designated bank within the state an amount
of its assets equal to 5% of its total liabilities, or (2) maintain assets
within the state in an amount equal to a specified percentage of the aggregate
amount of liabilities of the foreign bank payable at or through all of its
agencies or branches within the state. The deposits of State Branches may not
necessarily be insured by the FDIC. In addition, there may be less publicly
available information about a U.S. branch of a foreign bank than about a U.S.
bank.
In view of the foregoing factors associated with the purchase of CDs and
TDs issued by foreign banks and foreign branches of U.S. banks, the Funds'
respective Sub-Advisors will carefully evaluate such investments on a
case-by-case basis.
A Fund may purchase a CD, TD or bankers' acceptances issued by a bank,
savings and loan association or other banking institution with less than $1
billion in assets (a "Small Issuer Bank Obligation") only so long as the issuer
is a member of the FDIC or supervised by the Office of Thrift Supervision (the
"OTS") and so long as the principal amount of the Small Issuer Bank Obligation
is fully insured by the FDIC and is no more than $100,000. Each of the Funds
will at any one time hold only one Small Issuer Bank Obligation from any one
issuer.
Savings and loan associations whose CDs, TDs and bankers' acceptances may
be purchased by the Funds are supervised by the OTS and insured by the Savings
Association Insurance Fund, which is administered by the FDIC and is backed by
the full faith and credit of the United States Government. As a result, such
savings and loan associations are subject to regulation and examination.
MORTGAGE-BACKED SECURITIES. The mortgage-backed securities in which the
Funds may invest may be classified as governmental or government-related,
depending on the issuer or guarantor. Governmental mortgage-backed securities
are backed by the full faith and credit of the United States. GNMA, the
principal U.S. guarantor of such securities, is a wholly-owned U.S. Government
corporation within the Department of Housing and Urban Development.
Government-related mortgage-backed securities which are not backed by the full
faith and credit of the United States include those issued by FNMA and FHLMC.
FNMA is a government-sponsored corporation owned entirely by private
stockholders, which is subject to general regulation by the Secretary of Housing
and Urban Development. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA. FHLMC is a corporate
instrumentality of the United States, the stock of which is owned by the Federal
Home Loan Banks. Participation certificates representing interests in mortgages
from FHLMC's national portfolio are guaranteed as to the timely payment of
interest and ultimate
-21-
<PAGE> 196
collection of principal by FHLMC. In addition, the U.S. Government Fund may
invest in commercial mortgage-backed securities. While these securities
generally are structured with one or more types of credit enhancement, they are
issued by non-governmental entities and are not guaranteed by a governmental
agency or instrumentality.
Entities may create mortgage loan pools offering pass-through investments
in addition to those described above. The mortgages underlying these securities
may be alternative mortgage instruments, that is, mortgage instruments in which
principal or interest payments may vary or terms to maturity may be shorter than
previously customary. As new types of mortgage-backed securities are developed
and offered to investors, the Funds will, consistent with their respective
investment objectives and policies, consider making investments in such new
types of securities.
The average maturity of pass-through pools of mortgage-backed securities
varies with the maturities of the underlying mortgage instruments. In addition,
a pool's stated maturity may be shortened by unscheduled payments on the
underlying mortgages. Factors affecting mortgage prepayments include the level
of interest rates, general economic and social conditions, the location of the
mortgaged property and the age of the mortgage. Because prepayment rates of
individual mortgage pools vary widely, it is not possible to accurately predict
the average life of a particular pool. Common industry practice, for example, is
to assume that prepayments will result in a 7- to 9-year average life for pools
of fixed-rate 30-year mortgages. Pools of mortgages with other maturities of
different characteristics will have varying average life assumptions.
REPURCHASE AGREEMENTS. The Funds may invest in repurchase agreements
without limitation, except that the California Municipal Fund may invest no more
than 20%, in the aggregate, of its assets in repurchase agreements and certain
other securities or instruments, but this 20% limit does not apply to
investments for temporary defensive purposes.
STRATEGIES AVAILABLE TO ALL FUNDS EXCEPT THE MONEY FUNDS AND THE
TARGET MATURITY FUND
REVERSE REPURCHASE AGREEMENTS. Under the 1940 Act, reverse repurchase
agreements may be considered borrowings by the seller; accordingly each of the
Funds will limit its investments in reverse repurchase agreements and other
borrowings to no more than 33-1/3% of its total assets. A Fund will not engage
in reverse repurchase transactions for the purpose of leverage.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. A segregated
account in the name of the Fund consisting of cash or other liquid assets equal
to the amount of when-issued or delayed-delivery commitments will be established
at Boston Safe, the Trust's custodian. For the purpose of determining the
adequacy of the securities in the accounts, the deposited securities will be
valued at market or fair value. If the market or fair value of the securities
declines, additional cash or securities will be placed in the account daily so
that the value of the account will equal the amount of such commitments by the
Fund. On the settlement date, the Fund will meet its obligations from
then-available cash flow, the sale of securities held in the segregated account,
the sale of other securities or, although it would not normally expect to do so,
from the
-22-
<PAGE> 197
sale of securities purchased on a when-issued or delayed-delivery basis
themselves (which may have a greater or lesser value than the Fund's payment
obligations).
STRATEGIC TRANSACTIONS. No Fund currently intends to enter into Strategic
Transactions, excluding Strategic Transactions that are "covered" or entered
into for bona fide hedging purposes, that are in the aggregate principal amount
in excess of 15% of the Fund's net assets.
Strategic Transactions have associated risks including possible default
by the other party to the transaction, illiquidity and, to the extent the
Sub-Advisor's view as to certain market movements is incorrect, losses greater
than if they had not been used. Use of put and call options, currency
transactions or options and futures transactions entails certain risks as
described herein and in the Appendix to the Prospectuses in sections relating to
such investment or instruments. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized.
The Funds may enter into multiple transactions, including multiple
options transactions, multiple futures transactions, multiple foreign currency
transactions (including forward foreign currency exchange contracts) and any
combination of futures, options and foreign currency transactions (each
separately, a "component" transaction), instead of a single transaction, as part
of a single strategy when, in the opinion of the Sub-Advisor, it is in the best
interest of the Fund to do so. A combined transaction may contain elements of
risk that are present in each of its component transactions.
The use of Strategic Transactions for portfolio management purposes
involves special considerations and risks. Additional risks pertaining to
particular strategies that make up Strategic Transactions are described in other
sections to this SAI. Successful use of most Strategic Transactions depends upon
the Sub-Advisor's ability to predict movements of the overall securities and
interest rate markets, which requires different skills than predicting changes
in the prices of individual securities. There can be no assurance that any
particular strategy adopted will succeed. There may be imperfect correlation, or
even no correlation, between price movements of Strategic Transactions and price
movements of the related portfolio or currency positions. Such a lack of
correlation might occur due to factors unrelated to the value of the related
portfolio or currency positions, such as speculative or other pressures on the
markets in which Strategic Transactions are traded. Strategic Transactions, if
successful, can reduce risk of loss or enhance income, by wholly or partially
offsetting the negative effect of, or accurately predicting, unfavorable price
movements or currency fluctuations in the related portfolio or currency
position. However, Strategic Transactions can also reduce the opportunity for
gain by offsetting the positive effect of favorable price movements in the
positions. In addition, a Fund might be required to maintain assets as "cover,"
maintain segregated accounts or make margin payments when it takes positions in
Strategic Transactions involving obligations to third parties (i.e., Strategic
Transactions other than purchased options). These requirements might impair the
Fund's ability to sell a portfolio security or currency position or make an
investment at a time when it would otherwise be favorable to do so, or require
that the Fund sell a portfolio security or
-23-
<PAGE> 198
currency position at a disadvantageous time.
SWAPS, CAPS, FLOORS AND COLLARS. Among the Strategic Transactions into
which a Fund may enter, consistent with the Fund's investment policies and
restrictions, are interest rate, currency and index swaps and the purchase or
sale of related caps, floors and collars. A Fund would enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio, to protect against currency fluctuations, as a
duration management technique or to protect against any increase in the price of
securities the Fund anticipates purchasing at a later date. A Fund will use
these transactions as hedges and not speculative investments and will not sell
interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Fund may be obligated to pay.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed rate payments with respect to a notional amount of
principal. A currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value differential among
them and an index swap is an agreement to swap cash flows on a notional amount
based on changes in the values of the reference indices. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount from
the party selling such cap to the extent that a specified index exceeds a
predetermined interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from the party
selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or value.
A Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, Sierra
Advisors and the Trust believe such obligations do not constitute senior
securities under the 1940 Act and, accordingly, will not treat them as being
subject to the Fund's borrowing restrictions. If there is a default by the
counterpart, a Fund may have contractual remedies pursuant to the agreements
related to the transaction. The swap market has grown substantially in recent
years with a large number of banks and investment banking firms acting both as
principles and as agents utilizing standardized swap documentation. As a result,
the swap market has become relatively liquid. Caps, floors and collars are more
recent innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than swaps.
-24-
<PAGE> 199
STRATEGIES AVAILABLE TO U.S. GOVERNMENT, CALIFORNIA MUNICIPAL, CALIFORNIA
INSURED INTERMEDIATE MUNICIPAL, FLORIDA INSURED MUNICIPAL, NATIONAL MUNICIPAL,
CORPORATE INCOME, SHORT TERM GLOBAL GOVERNMENT, SHORT TERM HIGH QUALITY BOND,
GROWTH, EMERGING GROWTH, GROWTH AND INCOME AND INTERNATIONAL GROWTH FUNDS
FUTURES ACTIVITIES. The Funds may enter into futures contracts and
options on futures contracts that are traded on a U.S. exchange or board of
trade. These investments may be made by the Fund involved for the purpose of
hedging against changes in the value of its portfolio securities due to
anticipated changes in interest rates and market conditions, and for otherwise
permitted Strategic Transactions. In the case of the California Municipal, the
California Insured Intermediate and the Florida Insured Municipal Funds, such
investments will be made only in unusual circumstances, such as when that Funds'
Sub-Advisor anticipates an extreme change in interest rates or market
conditions. The ability of a Fund to trade in futures contracts and options on
futures contracts may be materially limited by the requirement of the Internal
Revenue Code of 1986, as amended, (the "Code"), applicable to a regulated
investment company. See "Taxes" below. In addition to the uses of futures
described above, all Funds except the Global Money Fund may use futures for
certain other purposes. See "Strategic Transactions."
FUTURES CONTRACTS. An interest rate futures contract provides for the
future sale by one party and the purchase by the other party of a certain amount
of a specific financial instrument (debt security) at a specified price, date,
time and place. A bond index futures contract is an agreement pursuant to which
two parties agree to take or make delivery of an amount of cash equal to the
difference between the value of the index at the close of the last trading day
of the contract and the price at which the index contract was originally
written. No physical delivery of the underlying securities in the index is made.
The purpose of entering into a futures contract by a Fund is to protect
the Fund from fluctuations in the value of its securities caused by anticipated
changes in interest rates or market conditions without necessarily buying or
selling the securities. For example, if the California Municipal Fund, the
California Insured Intermediate Fund or the Florida Insured Municipal Fund owns
long-term bonds and tax-exempt rates are expected to increase, the Fund might
enter into futures contracts to sell a municipal bond index. This transaction
would have much the same effect as the Fund's selling some of the long-term
bonds in its portfolio. If tax-exempt rates increase as anticipated, the value
of certain long-term municipal securities in the portfolio would decline, but
the value of the Fund's futures contracts would increase at approximately the
same rate, thereby keeping the net asset value of the Fund from declining as
much as it otherwise would have. Of course, since the value of portfolio
securities will far exceed the value of the futures contracts entered into by a
Fund, an increase in the value of the futures contract would only mitigate --
but not totally offset -- the decline in the value of the portfolio.
No consideration is paid or received by a Fund upon entering into a
futures contract. Initially, a Fund would be required to deposit with the broker
an amount of cash or cash equivalents equal to approximately 1% to 10% of the
contract amount (this amount is subject to change by the board of trade on which
the contract is traded and members of such board of trade
-25-
<PAGE> 200
may charge a higher amount). This amount is known as "initial margin" and is in
its nature the equivalent of a performance bond or good faith deposit on the
contract, which is returned to a Fund upon termination of the futures contract,
assuming all contractual obligations have been satisfied. Subsequent payments,
known as "variation margin," to and from the broker, will be made daily as the
price of the index or securities underlying the futures contract fluctuates,
making the long and short positions in the futures contract more or less
valuable, a process known as "marking-to-market." At any time prior to the
expiration of a futures contract, a Fund may elect to close the position by
taking an opposite position, which will operate to terminate the Fund's existing
position in the contract.
There are several risks in connection with the use of futures contracts
as a hedging device. Successful use of futures contracts by a Fund is subject to
the ability of the Fund's Sub-Advisor to correctly predict movements in the
direction of interest rates or changes in market conditions. These predictions
involve skills and techniques that may be different from those involved in the
management of the portfolio being hedged. In addition, there can be no assurance
that there will be a correlation between movements in the price of the
underlying index or securities and movements in the price of the securities
which are the subject of the hedge. A decision of whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of market behavior or unexpected trends
in interest rates.
Although the Funds intend to enter into futures contracts only if there
is an active market for such contracts, there is no assurance that an active
market will exist for the contracts at any particular time. Most U.S. futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a price
beyond that limit. It is possible that futures contract prices would move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses. In such event, and in the event of
adverse price movements, a Fund would be required to make daily cash payments of
variation margin. In such circumstances, an increase in the value of the portion
of the portfolio being hedged, if any, may partially or completely offset losses
on the futures contract. However, as described above, there is no guarantee that
the price of the securities being hedged will, in fact, correlate with the price
movements in a futures contract and thus provide an offset to losses on the
futures contract.
To ensure that transactions constitute bona fide hedges in instances
involving the purchase or sale of a futures contract, the Funds will be required
to either (i) segregate sufficient cash or high-grade liquid assets to cover the
outstanding position or (ii) cover the futures contract by either owning the
instruments underlying the futures contract or by holding a portfolio of
securities with characteristics substantially similar to the underlying index or
stock index comprising the futures contract or by holding a separate option
permitting it to purchase or sell the same futures contract. Because of the
imperfect correlation between the movements in the price of underlying indexes
or stock indexes of various futures contracts and the movement of the price of
securities in the Funds' portfolios, the Funds will periodically make
adjustments to its
-26-
<PAGE> 201
index futures contracts positions to appropriately reflect the relationship
between the underlying portfolio and the indexes. The Fund will not maintain
short positions in index or stock index futures contracts, options written on
index or stock index futures contracts and options written on indexes or stock
indexes, if in the aggregate, the value of these positions exceeds the current
market value of its securities portfolio plus or minus the unrealized gain or
loss on those positions, adjusted for the historical volatility relationship
between the portfolio and the index contracts.
OPTIONS ON FUTURES CONTRACTS. An option on a futures contract, as
contrasted with the direct investment in such a contract, gives the purchaser
the right, in return for the premium paid, to assume a position in the futures
contract at a specified exercise price at any time prior to the expiration date
of the option. Upon exercise of an option, the delivery of the futures position
by the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures margin account,
which represents the amount by which the market price of the futures contract
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract. The potential loss related
to the purchase of an option on futures contracts is limited to the premium paid
for the option (plus transaction costs). Because the price of the option to the
purchaser is fixed at the point of sale, there are no daily cash payments to
reflect changes in the value of the underlying contract; however, the value of
the option does change daily and that change would be reflected in the net asset
value of the Fund holding the options.
The Funds may purchase and write put and call options on futures
contracts that are traded on a U.S. exchange or board of trade as a hedge
against changes in the value of its portfolio securities, and may enter into
closing transactions with respect to such options to terminate existing
positions. There is no guarantee that such closing transactions can be effected.
There are several risks relating to options on futures contracts. The
ability to establish and close out positions on such options will be subject to
the existence of a liquid market. In addition, the purchase of put or call
options will be based upon predictions as to anticipated interest rate and
market trends by the Funds' Sub-Advisors, which could prove to be inaccurate.
Even if the expectations of the Sub-Advisors are correct, there may be an
imperfect correlation between the change in the value of the options and the
portfolio securities hedged. In addition to the uses of options described above,
all Funds except the Global Money Fund may use options for certain other
purposes. See "Strategic Transactions."
STRATEGIES AVAILABLE TO U.S. GOVERNMENT, CORPORATE INCOME, SHORT TERM HIGH
QUALITY BOND, GROWTH AND INCOME, EMERGING GROWTH, SHORT TERM GLOBAL GOVERNMENT,
GROWTH AND INTERNATIONAL GROWTH FUNDS
OPTIONS ON SECURITIES. The Funds may write covered put options and
covered call options on securities, purchase put and call options on securities
and enter into closing transactions. The Funds may not write put options with
respect to more than 50% of their total assets.
-27-
<PAGE> 202
Options written by a Fund will normally have expiration dates between one
and nine months from the date written. The exercise price of the options may be
below, equal to or above the market values of the underlying securities at the
times the options are written. In the case of call options, these exercise
prices are referred to as "in-the-money," "at-the-money" and "out-of-the-money,"
respectively. A Fund may write (1) in-the-money call options when its
Sub-Advisor expects that the price of the underlying security will remain flat
or decline moderately during the option period, (2) at-the-money call options
when its Sub-Advisor expects that the price of the underlying security will
remain flat or advance moderately during the option period and (3)
out-of-the-money call options when its Sub-Advisor expects that the premiums
received from writing the call option plus the appreciation in the market price
of the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. In any of the
preceding situations, if the market price of the underlying security declines
and the security is sold at this lower price, the amount of any realized loss
will be offset wholly or in part by the premium received. Out-of-the-money,
at-the-money and in-the-money put options (the reverse of call options as to the
relation of exercise price to market price) may be utilized in the same market
environments as such call options described above.
So long as the obligation of the Fund as the writer of an option
continues, the Fund may be assigned an exercise notice by the broker-dealer
through which the option was sold, requiring the Fund to deliver, in the case of
a call, or take delivery of, in the case of a put, the underlying security
against payment of the exercise price. This obligation terminates when the
option expires or the Fund effects a closing purchase transaction. The Fund can
no longer effect a closing purchase transaction with respect to an option once
it has been assigned an exercise notice. To secure its obligation to deliver the
underlying security when it writes a call option, or to pay for the underlying
security when it writes a put option, the Fund will be required to deposit in
escrow the underlying security or other assets in accordance with the rules of
the Options Clearing Corporation (the "OCC") and of the securities exchange on
which the option is written.
An option may be closed out only when there exists a secondary market for
an option of the same series on a recognized securities exchange or in the
over-the-counter market. In light of this fact and current trading conditions,
the Fund expects to purchase or write call or put options issued by the OCC,
except that options on U.S. Government securities may be purchased or written in
the over-the-counter market. Over-the-counter options can be closed out only by
agreement with the primary dealer in the transaction. National securities
exchanges on which options are traded are: The Chicago Board Options Exchange
(CBOE), The Board of Trade of the City of Chicago (CBT), American Stock Exchange
(AMEX), Philadelphia Stock Exchange (PHLX), Pacific Stock Exchange (PSE) and the
New York Stock Exchange (NYSE). Any over-the-counter option written by a Fund
will be with a qualified dealer pursuant to an agreement under which the Fund
may repurchase the option at a formula price at which the Fund would have the
absolute right to repurchase an over-the-counter option it has sold. Such
options will be considered illiquid in an amount equal to the formula price,
less the amount by which the option is "in-the-money." In the event of the
insolvency of the primary dealer, the Fund may not be able to liquidate its
position in over-the-counter options, and the ability of the Fund to enter
-28-
<PAGE> 203
into closing purchase transactions on options written by the Fund may result in
a material loss to the Fund.
The Fund may realize a profit or loss upon entering into closing
transactions. In cases where the Fund has written an option, it will realize a
profit if the cost of the closing purchase transaction is less than the premium
received upon writing the original option, and will incur a loss if the cost of
the closing purchase transaction exceeds the premium received upon writing the
original option. Similarly, when the Fund has purchased an option and engages in
a closing sale transaction, the Fund will realize a profit or loss to the extent
that the amount received in the closing sale transaction is more or less than
the premium the Fund initially paid for the original option plus the related
transaction costs.
To facilitate closing transactions, the Fund will generally purchase or
write only those options for which its Sub-Advisor believes there is an active
secondary market although there is no assurance that sufficient trading interest
to create a liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may cease to
exist for a variety of reasons. In the past, for example, higher than
anticipated trading activity or order flow, or other unforeseen events, have at
times rendered certain of the facilities of the OCC and the securities exchanges
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such events, it might not be possible to
effect closing transactions in particular options. If as a covered call option
writer the Fund is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise.
Securities exchanges have established limitations governing the maximum
number of calls and puts of each class which may be held or written, or
exercised within certain time periods, by an investor or group of investors
acting in concert (regardless of whether the options are written on the same or
different securities exchanges or are held, written or exercised in one or more
accounts or through one or more brokers). It is possible that the particular
Fund and other clients of Sierra Advisors and its Sub-Advisors and certain of
their affiliates may be considered to be such a group. A securities exchange may
order the liquidation of positions found to be in violation of these limits and
it may impose certain other sanctions.
In the case of options written by a Fund that are deemed covered by
virtue of the Fund's holding convertible or exchangeable preferred stock or debt
securities, the time required to convert or exchange and obtain physical
delivery of the underlying security with respect to which the Fund has written
options may exceed the time within which the Fund must make delivery in
accordance with an exercise notice. In these instances, the Fund may purchase or
temporarily borrow the underlying securities for purposes of physical delivery.
By so doing, the Fund will not bear any market risk, since the Fund will have
the absolute right to receive from the issuer of
-29-
<PAGE> 204
the underlying security an equal number of shares to replace the borrowed stock.
The Fund may however, incur additional transaction costs or interest expenses in
connection with any such purchase or borrowing.
Additional risks exist with respect to mortgage-backed U.S. Government
securities for which the Fund may write covered call options. If a Fund writes
covered call options on a mortgage-backed security, the security that it holds
as cover may, because of scheduled amortization of unscheduled prepayments,
cease to be sufficient cover. The Fund will compensate by purchasing an
appropriate additional amount of mortgage-backed securities.
STRATEGIES AVAILABLE TO SHORT TERM GLOBAL GOVERNMENT, GROWTH AND INCOME,
EMERGING GROWTH, INTERNATIONAL GROWTH, SHORT TERM HIGH QUALITY BOND,
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL AND GROWTH FUNDS
OPTIONS ON SECURITIES INDEXES. In addition to options on securities, the
Funds may also purchase and sell call and put options on securities indexes.
Such options give the holder the right to receive a cash settlement during the
term of the option based upon the difference between the exercise price and the
value of the index.
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
purchase or write such an option only if its Sub-Advisor believes the option can
be closed out.
Use of options on securities indexes also entails the risk that trading
in such options may be interrupted if trading in certain securities included in
the index is interrupted. The Fund will not purchase such options unless its
Sub-Advisor believes the market is sufficiently developed for the risk of
trading in such options to be no greater than the risk of trading in options on
securities.
Price movements in the Fund's portfolio may not correlate precisely with
movements in the level of an index and, therefore, the use of options on
securities indexes cannot serve as a complete hedge. Because options on
securities indexes require settlement in cash, the Fund may be forced to
liquidate portfolio securities to meet settlement obligations.
STRATEGIES AVAILABLE TO CORPORATE INCOME, EMERGING GROWTH, SHORT TERM GLOBAL
GOVERNMENT, SHORT TERM HIGH QUALITY BOND, GROWTH AND INCOME, GROWTH AND
INTERNATIONAL GROWTH FUNDS
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Funds may engage in currency
exchange transactions to protect against uncertainty in the level of future
exchange rates. The Funds' dealings in forward currency exchange contracts will
be limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is the purchase or sale of
-30-
<PAGE> 205
forward foreign currency with respect to specific receivables or payables of the
Fund generally arising in connection with the purchase or sale of its portfolio
securities. Position hedging is the sale of forward foreign currency with
respect to portfolio security positions denominated or quoted in such foreign
currency. A Fund may not position hedge with respect to a particular currency to
an extent greater than the aggregate market value (at the time of making such
sale) of the securities held in its portfolio denominated or quoted in or
currently convertible into that particular currency.
If a Fund enters into a position hedging transaction, the Trust's
custodian or sub-custodian will, except in circumstances where segregated
accounts are not required by the 1940 Act and the rules adopted thereunder,
place cash or other liquid assets in a segregated account for the Fund in an
amount at least equal to the value of the Fund's total assets committed to the
consummation of the forward contract. For each forward foreign currency exchange
contract that is used to hedge a securities position denominated in a foreign
currency, but for which the hedging position no longer provides, in the opinion
of the Sub-Advisor or the Advisor, sufficient protection to consider the
contract to be a hedge, the Fund maintains with its custodian a segregated
account of cash or other liquid assets in an amount at least equal to the
portion of the contract that is no longer sufficiently covered by such hedge. If
the value of the securities placed in the segregated account declines,
additional cash or securities will be placed in the account so that the value of
the account will equal the amount of the Fund's unhedged exposure (in the case
of securities denominated in a foreign currency) or commitment with respect to
the contract. Hedging transactions may be made from any foreign currency into
U.S. dollars or into other appropriate currencies.
At or before the maturity of a forward contract, a Fund may either sell a
portfolio security and make delivery of the currency, or retain the security and
offset its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Fund will obtain, on the same maturity date, the
amount of the currency that it is obligated to deliver. If the Fund retains the
portfolio security and engages in an offsetting transaction, the Fund, at the
time of execution of the offsetting transaction, will incur a gain or a loss to
the extent that movement has occurred in forward contract prices. Should forward
prices decline during the period between the Fund's entering into a forward
contract for the sale of currency and the date it enters into an offsetting
contract for the purchase of the currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the Fund
will suffer a loss to the extent the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.
The cost to a Fund of engaging in currency transactions with factors such
as, the currency involved, the length of the contract period and the prevailing
market conditions. Because transactions in currency exchange are usually
conducted on a principal basis, no fees or commissions are involved. The use of
forward currency contracts does not eliminate fluctuations in the underlying
prices of the securities, but it does establish a rate of exchange that can be
achieved in the future. In addition, forward currency contracts may limit the
risk of loss due to a decline in the value of the hedged currency increase.
-31-
<PAGE> 206
If a devaluation of a currency is generally anticipated, a Fund may not
be able to contract to sell the currency at a price above the devaluation level
it anticipates.
The Funds, in addition, may combine forward currency exchange contracts
with investments in securities denominated in other currencies in an attempt to
create a combined investment position, the overall performance of which will be
similar to that of a security denominated in a Fund's underlying currency. For
instance, a Fund could purchase a U.S. dollar-denominated security and at the
same time enter into a forward currency exchange contract to exchange U.S.
dollars for its underlying currency at a future date. By matching the amount of
U.S. dollars to be exchanged with the anticipated value of the U.S.
dollar-denominated security, the Fund may be able to "lock in" the foreign
currency value of the security and adopt a synthetic investment position whereby
the Fund's overall investment return from the combined position is similar to
the return from purchasing a foreign currency-denominated instrument.
There is a risk in adopting a synthetic investment position. It is
impossible to forecast with absolute precision what the market value of a
particular security will be at any given time. If the value of a security
denominated in the U.S. dollar or other foreign currency is not exactly matched
with a Fund's obligation under a forward currency exchange contract on the date
of maturity, the Fund may be exposed to some risk of loss from fluctuations in
that currency. Although each Fund's Sub-Advisor will attempt to hold such
mismatching to a minimum, there can be no assurance that the Fund's Sub-Advisor
will be able to do so.
Although the foreign currency market is not believed to be necessarily
more volatile than the market in other commodities, there is less protection
against defaults in the forward trading to currencies than there is in trading
such currencies on an exchange because such forward contracts are not guaranteed
by an exchange or clearing house. The CFTC has indicated that it may assert
jurisdiction over forward contracts in foreign currencies and attempt to
prohibit certain entities from engaging in such transactions. In the event that
such prohibition included the Fund, it would cease trading such contracts.
Cessation of trading might adversely affect the performance of a Fund.
STRATEGIES AVAILABLE TO SHORT TERM HIGH QUALITY BOND, SHORT TERM GLOBAL
GOVERNMENT, CORPORATE INCOME, GROWTH AND INCOME, GROWTH, EMERGING GROWTH AND
INTERNATIONAL GROWTH FUNDS
OPTIONS ON FOREIGN CURRENCIES. The Funds may purchase and write put and
call options on foreign currencies for the purpose of hedging against declines
in the U.S. dollar value of foreign currency-denominated portfolio securities
and against increases in the U.S. dollar cost of such securities to be acquired.
Such hedging includes cross hedging and proxy hedging where the options to buy
or sell currencies involve other currencies besides the U.S. dollar. As one
example, a decline in the U.S. dollar value of a foreign currency in which
securities are denominated will reduce the U.S. dollar value of the securities,
even if their value in the foreign currency remains constant. To protect against
diminutions in the value of securities held by a Fund in a particular foreign
currency, the Fund may purchase put options on the foreign currency. If the
value of the currency does decline, the Fund will have the right to sell the
currency for a
-32-
<PAGE> 207
fixed amount in U.S. dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio that otherwise would have resulted. When an
increase in the U.S. dollar value of a currency in which securities to be
acquired are denominated is projected, thereby increasing the cost of the
securities, the Fund conversely may purchase call options on the currency. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Fund deriving from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, if currency exchange rates do not move in the direction, or
to the extent anticipated, the Fund could sustain losses on transactions in
foreign currency options that would require it to forego a portion or all of the
benefits of advantageous changes in the rates.
The Funds may also write covered call options on foreign currencies for
the types of hedging purposes described above. As one example, when a Fund
anticipates a decline in the U.S. dollar value of foreign currency-denominated
securities due to adverse fluctuations in exchange rates it could, instead of
purchasing a put option, write a covered call option on the relevant currency.
If the expected decline occurs, the option will most likely not be exercised,
and the diminution in value of portfolio securities will be offset by the amount
of the premium received. As in the case of other types of options, however, the
writing of a foreign currency option will constitute only a partial hedge up to
the amount of the premium, and only if rates move in the expected direction. If
this does not occur, the option may be exercised and the Fund would be required
to purchase or sell the underlying currency at a loss that may not be offset-by
the amount of the premium. Through the writing of options on foreign currencies,
the Fund may also be required to forego all or a portion of the benefits that
might otherwise have been obtained from favorable movements in exchange rates.
A call option written on a foreign currency by a Fund is "covered" if the
Fund owns the underlying foreign currency covered by the call or has an absolute
and immediate right to acquire the foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by Boston Safe, or by a designated sub-custodian) upon conversion or exchange of
other foreign currency held by the Fund. A call option also is covered if the
Fund has a call on the same foreign currency and in the same principal amount as
the call written when the exercise price of the call held (1) is equal to or
less than the exercise price of the call written or (2) is greater than the
exercise price of the call written if the difference is maintained by the Fund
in cash, U.S. Government Securities and other high-grade liquid debt securities
in a segregated account with Boston Safe or with a designated sub-custodian.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on those
exchanges. As a result, many of the projections provided to traders on organized
exchanges will be available with respect to those transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation, thereby
reducing the risk of counterpart default. Further, a liquid secondary market in
options traded on a national securities exchange may exist, potentially
permitting the Fund to liquidate open
-33-
<PAGE> 208
positions at a profit prior to their exercise or expiration, or to limit losses
in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options are
subject to the risks of the availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margaining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and
economic events. In addition, exercise and settlement of exchange-traded foreign
currency options must be made exclusively through the OCC, which has established
banking relationships in applicable foreign countries for this purpose. As a
result, the OCC may, if it determines that foreign governmental restrictions or
taxes would prevent the orderly settlement of foreign currency option exercises,
or would result in undue burdens on the OCC or its clearing member, impose
special procedures on exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
SPECIAL CONSIDERATIONS RELATING TO INTERNATIONAL GROWTH AND GROWTH FUNDS
SECURITIES IN DEVELOPING COUNTRIES. Although most of the investments of
the International Growth, Emerging Growth and Growth Funds are made in
securities of companies in (or governments of) developed countries, up to 30% of
the total assets of the International Growth Fund, up to 5% of the total assets
of the Emerging Growth Fund and up to 5% of the total assets of the Growth Fund
may be invested in securities of companies in (or governments of) developing or
emerging countries (sometimes referred to as "emerging markets") as well. A
developing or emerging country is generally considered to be a country that is
in the initial stages of its industrialization cycle. Investing in the equity
and fixed-income markets of developing or emerging in 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.
Price movements in the Fund's portfolio may not correlate precisely with
movements in the level of an index and, therefore, the use of options on
securities indexes cannot serve as a complete hedge. Because options on
securities indexes require settlement in cash, the Fund may be forced to
liquidate portfolio securities to meet settlement obligations.
STRATEGY AVAILABLE TO CORPORATE INCOME, NATIONAL MUNICIPAL, SHORT TERM GLOBAL
GOVERNMENT, GROWTH, GROWTH AND INCOME, EMERGING GROWTH, INTERNATIONAL GROWTH,
GLOBAL MONEY, U.S. GOVERNMENT MONEY, CALIFORNIA MONEY, CALIFORNIA INSURED
INTERMEDIATE MUNICIPAL AND SHORT TERM HIGH QUALITY BOND FUNDS
LENDING OF PORTFOLIO SECURITIES. Each of the Funds will adhere to the
following conditions whenever its portfolio securities are loaned: (1) the Fund
must receive at least 100%
-34-
<PAGE> 209
cash collateral or equivalent securities from the borrower; (2) the borrower
must increase the collateral whenever the market value of the securities rises
above the level of the collateral; (3) the Fund must be able to terminate the
loan at any time; (4) the Fund must receive reasonable interest on the loan, as
well as any dividends, interest or other distributions on the loaned securities
and any increase in market value; (5) the Fund may pay only reasonable custodian
fees in connection with the loan; and (6) voting rights on the loaned securities
may pass to the borrower, provided that if a material event adversely affecting
the investment occurs, the Trust's Board of Trustees must terminate the loan and
regain the right to vote the securities. From time to time, the Funds may pay a
part of the interest earned from the investment of the collateral received for
securities loaned to the borrower and/or a third party that is unaffiliated with
the Trust and that is acting as a "finder". The Funds will not lend more than
20% of their respective total assets.
STRATEGIES AVAILABLE TO CALIFORNIA MONEY, CALIFORNIA MUNICIPAL,
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL, FLORIDA INSURED MUNICIPAL
AND NATIONAL MUNICIPAL FUNDS
MUNICIPAL SECURITIES. Municipal Securities are securities, the interest
on which qualifies for exclusion from gross income for federal income tax
purposes in the opinion of bond counsel to the issuer. The three principal
classifications of Municipal Securities are Municipal Bonds, Municipal
Commercial Paper and Municipal Notes.
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 below.
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.
-35-
<PAGE> 210
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.
California has a variety of Special Tax District debt obligations, such
as Act 1911 and 1915 Special Assessment Bonds, Mello-Roos Bonds and Tax
Allocation bonds, which are defined as property-backed general obligation
substitutes (because the assessments for improvement do not require voter
approval). The proceeds from the issuance of these essential purpose Special Tax
District Bonds are generally used to develop raw land. As a result, these issues
tend not to carry a credit rating.
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. Municipal Notes
include:
1. TAX ANTICIPATION NOTES. 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.
2. REVENUE ANTICIPATION NOTES. 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.
3. BOND ANTICIPATION NOTES. 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.
4. CONSTRUCTION LOAN 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
-36-
<PAGE> 211
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.
From time to time, proposals to restrict or eliminate the federal income
tax exemption for interest on Municipal Securities have been introduced before
Congress. Similar proposals may be introduced in the future. In addition, the
Internal Revenue Code, as amended, currently provides that small issue private
activity bonds will not be tax-exempt if the bonds are issued after December 31,
1986 and the proceeds are used to finance projects other than manufacturing
facilities. Interest on certain small issue private activity bonds used to
finance manufacturing facilities will not be tax-exempt if such bonds are issued
after December 31, 1989. If these deadlines are not extended, or, if a proposal
to restrict or eliminate the federal tax exemption for interest on Municipal
Securities were enacted, the availability of Municipal Securities for investment
by the Municipal Funds would be adversely affected. In such event, the Municipal
Funds would reevaluate their respective investment objectives and policies and
submit possible changes in the structure of the Funds for the consideration of
shareholders.
PARTICIPATION INTERESTS. The Municipal Funds may invest in participation
interests purchased from banks in floating rate or variable rate municipal
securities (such as AMT-Subject Bonds) owned by banks. A participation interest
gives the purchaser an undivided interest in the municipal security in the
proportion that the relevant Fund's participation interest bears to the total
principal amount of the municipal security and provides a demand repurchase
feature. Each participation is backed by an irrevocable letter of credit or
guarantee of a bank that meets the prescribed quality standards of the Fund. A
Fund has the right to sell the instrument back to the issuing bank or draw on
the letter of credit on demand for all or any part of the Fund's participation
interest in the municipal security, plus accrued interest. Banks will retain or
receive a service fee, letter of credit fee and a fee for issuing repurchase
commitments in an amount equal to the excess of the interest paid on the
municipal securities over the negotiated yield at which the instruments were
purchased by the Fund. Participation interests in the form to be purchased by
the Fund are new instruments, and no ruling of the Internal Revenue Service has
been secured relating to their tax-exempt status. The Funds intend to purchase
participation interests based upon opinions of counsel to the issuer to the
effect that income from them is tax-exempt to the Fund.
STAND-BY COMMITMENTS. The Municipal Funds may acquire stand-by
commitments with respect to municipal securities held in their respective
portfolios. Under a stand-by commitment, a broker-dealer, dealer or bank would
agree to purchase, at the relevant Funds' option, a specified municipal security
at a specified price. Thus, a stand-by commitment may be viewed as the
equivalent of a "put" option acquired by a Fund with respect to a particular
municipal security held in the Fund's portfolio.
-37-
<PAGE> 212
The amount payable to a Fund upon its exercise of a stand-by commitment
normally would be (1) the acquisition cost of the municipal security (excluding
any accrued interest that the Fund paid on the acquisition), less any amortized
market premium or plus any amortized market or original issue discount during
the period the Fund owned the security, plus, (2) all interest accrued on the
security since the last interest payment date during the period the security was
owned by the Fund. Absent unusual circumstances, the Fund would value the
underlying municipal security at amortized cost. As a result, the amount payable
by the broker-dealer, dealer or bank during the time a stand-by commitment is
exercisable would be substantially the same as the value of the underlying
municipal security.
A Fund's right to exercise a stand-by commitment would be unconditional
and unqualified. Although a Fund could not transfer a stand-by commitment, it
could sell the underlying municipal security to a third party at any time. It is
expected that stand-by commitments generally will be available to the Funds
without the payment of any direct or indirect consideration. The Funds may,
however, pay for stand-by commitments if such action is deemed necessary. In any
event, the total amount paid for outstanding stand-by commitments held in a
Fund's portfolio would not exceed 1/2 of 1% of the value of a Fund's total
assets calculated immediately after each stand-by commitment is acquired.
The Funds intend to enter into stand-by commitments only with
broker-dealers, dealers or banks that their Sub-Advisor believes present minimum
credit risks. A Fund's ability to exercise a stand-by commitment will depend on
the ability of the issuing institution to pay for the underlying securities at
the time the stand-by commitment is exercised. The credit of each institution
issuing a stand-by commitment to a Fund will be evaluated on an ongoing basis by
its Sub-Advisor in accordance with procedures established by the Board of
Trustees.
A Fund intends to acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its right thereunder for
trading purposes. The acquisition of a stand-by commitment would not affect the
valuation of the underlying municipal security. Each stand-by commitment will be
valued at zero in determining net asset value. Should a Fund pay directly or
indirectly for a stand-by commitment, its costs will be reflected in realized
gain or loss when the commitment is exercised or expires. The maturity of a
municipal security purchased by a Fund will not be considered shortened by any
stand-by commitment to which the obligation is subject. Thus, stand-by
commitments will not affect the dollar-weighted average maturity of a Fund's
portfolio.
SPECIAL CONSIDERATIONS RELATING TO CALIFORNIA MUNICIPAL SECURITIES
The ability of issuers to pay interest on, and repay principal of,
California municipal securities ("California Municipal Securities") may be
affected by (1) amendments to the California Constitution and related statutes
that limit the taxing and spending authority of California government entities,
(2) voter initiatives, (3) a wide variety of California laws and regulations,
including laws related to the operation of health care institutions and laws
related to secured interests in real property and (4) the general financial
condition of the State of California.
-38-
<PAGE> 213
The following information constitutes only a brief summary, and is not intended
as a complete description. The information has been drawn, in some cases by
excerpt, from official statements relating to securities offerings of the State
of California available as of the date of this Statement of Additional
Information. While the information has not been independently verified by the
California Money Fund, the California Municipal Fund, or the California Insured
Intermediate Municipal Tax Exempt Fund (the "California Fund"), the California
Fund has no reason to believe that such information is not correct in all
material respects.
AMENDMENTS TO THE CALIFORNIA CONSTITUTION AND RELATED STATUTES. Certain
of the California Municipal Securities may be obligations of issuers who rely in
whole or in part on ad valorem real property taxes as a source of revenue. On
June 6, 1978, California voters approved an amendment to the California
Constitution known as Proposition 13, which added Article XIIIA to the
California Constitution. The effect of Article XIIIA is to limit ad valorem
taxes on real property, and to restrict the ability of taxing entities to
increase real property tax revenues. On November 7, 1978, California voters
approved Proposition 8, on June 3, 1986, California voters approved Proposition
46, and on November 4, 1986, California voters approved Proposition 62, all of
which amended Article XIIIA.
Section 1 of Article XIIIA limits the maximum ad valorem tax on real
property to 1% of full cash value (as defined in Section 2), to be collected by
the counties and apportioned according to law; provided that the 1% limitation
does not apply to ad valorem taxes or special assessments to pay the interest
and redemption charges on (i) any indebtedness approved by the voters prior to
July 1, 1978, or (ii) any bonded indebtedness for the acquisition or improvement
of real property approved on or after July 1, 1978, by two-thirds of the votes
cast by the voters voting on the proposition. Section 2 of Article XIIIA defines
"full cash value" to mean "the County Assessor's valuation of real property as
shown on the 1975/76 tax bill under 'full cash value' or, thereafter, the
appraised value of real property when purchased, newly constructed, or a change
in ownership has occurred after the 1975 assessment." The "full cash value" may
be adjusted annually to reflect inflation at a rate not to exceed 2% per year,
or reduction in the consumer price index or comparable local data, or reduced in
the event of declining property value caused by damage, destruction or other
factors. The California State Board of Equalization has adopted regulations,
binding on county assessors, interpreting the meanings of "change in ownership"
and "new construction" for purposes of determining full cash value of property
under Article XIIIA.
Legislation enacted by the California Legislature to implement Article
XIIIA (Statutes of 1978, Chapter 292, as amended) provides that notwithstanding
any other law, local agencies may not levy any ad valorem property tax except to
pay debt service on indebtedness approved by the voters prior to July 1, 1978,
and that each county will levy the maximum tax permitted by Article XIIIA of
$4.00 per $100 assessed valuation (based on the former practice of using 25%,
instead of 100%, of full cash value as the assessed value for tax purposes). The
legislation further provided that, for the 1978/79 fiscal year only, the tax
levied by each county was to be apportioned among all taxing agencies within the
county in proportion to their average share of taxes levied in certain previous
years. The apportionment of property taxes in fiscal years after
-39-
<PAGE> 214
1978/79 has been revised pursuant to Statutes of 1979, Chapter 282, which
provides relief funds from State moneys beginning in fiscal year 1979/80 and is
designed to provide a permanent system for sharing State taxes and budget funds
with local agencies. Under Chapter 282, cities and counties receive more of the
remaining property tax revenues collected under Proposition 13 instead of direct
State aid. School districts receive a correspondingly reduced amount of property
taxes, but receive compensation directly from the State and are given additional
relief. Chapter 282 does not affect the derivation of the base levy ($4.00 per
$100 of assessed valuation) and the bonded debt tax rate.
On November 6, 1979, an initiative known as "Proposition 9" or the "Gann
Initiative" was approved by the California voters, which added Article XIIIB to
the California Constitution. In June 1990, Article XIIIB was amended by the
voters through their adoption of Proposition 111. Under Article XIIIB, State and
local governmental entities have an annual "appropriations limit" and are not
allowed to spend certain moneys called "appropriations subject to limitation" in
an amount higher than the "appropriations limit." Article XIIIB does not affect
the appropriation of moneys which are excluded from the definition of
"appropriations subject to limitation," including debt service on indebtedness
existing or authorized as of January 1, 1979, or bonded indebtedness
subsequently approved by the voters. Furthermore, in 1990, Article XIII B was
amended to exclude from the appropriations limit all "qualified outlay projects,
as defined by the Legislature," from proceeds of taxes. In general terms, the
"appropriations limit" is required to be based on certain 1978/79 expenditures,
and is to be tested over consecutive two-year periods to reflect changes in
consumer prices, population and certain services provided by these entities.
Article XIIIB also provides that if these entities' revenues in any year exceed
the amounts permitted to be spent, the excess is to be returned by revising the
tax rates or fee schedules over the subsequent two years.
Article XIIIB, like XIIIA, may require further interpretation by both the
Legislature and the courts to determine its applicability to specific situations
involving the State and local taxing authorities. Depending upon the
interpretation, Article XIIIB may limit significantly a governmental entity's
ability to budget sufficient funds to meet debt service on bonds and other
obligations.
On November 5, 1996, the voters of the State approved Proposition 218,
known as the "Right to Vote on Taxes Act." Proposition 218 adds Articles XIII C
and XIII D to the California Constitution and contains a number of interrelated
provisions affecting the ability of governmental entities to levy and collect
both existing and future taxes, assessments, fees and charges. The
interpretation and application of Proposition 218 will ultimately be determined
by the courts with respect to a number of the matters discussed below, and it is
not possible at this time to predict with certainty the outcome of such
determination.
Proposition 218 (Article XIII C) requires that all new local taxes be
submitted to the electorate before they become effective. Taxes for general
governmental purposes of cities and counties require a majority vote and taxes
for specific purposes, even if deposited in the governmental entity's general
fund, require a two-thirds vote. Further, any general purpose tax
-40-
<PAGE> 215
which the governmental entity imposed, extended or increased without voter
approval after December 31, 1994 may continue to be imposed only if approved by
a majority vote in an election which must be held within two years of November
5, 1996.
Proposition 218 (Article XIII D) also adds several provisions making it
generally more difficult for local agencies to levy and maintain fees, charges,
and assessments for municipal services and programs. These provisions include,
among other things, (i) a prohibition against assessments which exceed the
reasonable cost of the proportional special benefit conferred on a parcel, (ii)
a requirement that assessments must confer a "special benefit," as defined in
Article XIII D, over and above any general benefits conferred, (iii) a majority
protest procedure for assessments which involves the mailing of notice and a
ballot to the record owner of each affected parcel, a public hearing and the
tabulation of ballots weighted according to the proportional financial
obligation of the affected party, and (iv) a prohibition against fees and
charges which are used for general governmental services, including police, fire
or library services, where the service is available to the public at large in
substantially the same manner as it is to property owners.
Proposition 218 (Article XIII C) also removes limitations on the
initiative power in matters of reducing or repealing local taxes, assessments,
fees or charges. Legislation is currently pending in California to implement the
provisions of Proposition 218.
VOTER INITIATIVES. On June 3, 1986, California voters approved
Proposition 46, which added an additional exemption to the 1% tax limitation
imposed by Article XIII A. Under this amendment to Article XIII A, local
governments and school districts may increase the property tax rate above 1% for
the period necessary to retire new general obligation bonds, if two-thirds of
those voting in a local election approve the issuance of such bonds and the
money raised through the sale of the bonds is used exclusively to purchase or
improve real property.
On November 8, 1988, voters of the State approved Proposition 98, a
combined initiative constitutional amendment and statute called the "Classroom
Instructional Improvement and Accountability Act." Proposition 98 changed State
funding of public education below the university level and the operation of the
State Appropriations Limit, primarily by guaranteeing K- 14 schools a minimum
share of General Fund revenues. Under Proposition 98 (as modified by Proposition
111, which was enacted on June 5, 1990), K-14 schools are guaranteed the greater
of (a) in general, a fixed percent of General Fund revenues ("Test 1"), (b) the
amount appropriated to K-14 schools in the prior year, adjusted for changes in
the cost of living (measured as in Article XIII B by reference to State per
capita personal income) and enrollment ("Test 2"), or (c) a third test, which
would replace "Test 2" in any year when the percentage growth in per capita
General Fund revenues from the prior year plus one half of one percent is less
than the percentage growth in State per capita personal income ("Test 3"). Under
"Test 3," schools would receive the amount appropriated in the prior year
adjusted for changes in enrollment and per capita General Fund revenues, plus an
additional small adjustment factor. If "Test 3" is used in any year, the
difference between "Test 3" and "Test 2" would become a "credit" to schools
which would be the basis of payments in future years when per capita General
Fund revenue growth
-41-
<PAGE> 216
exceeds per capita personal income growth. Legislation adopted prior to the end
of the 1988-89 Fiscal Year, implementing Proposition 98, determined the K-14
schools' funding guarantee under Test 1 to be 40.3 percent of the General Fund
Tax revenues, based on 1986-87 appropriations. However, that percent would be
adjusted to account for redirection of local property taxes, since such a
subsequent redirection directly affects the share of General Fund revenues to
schools.
Proposition 98 permits the Legislature by two-thirds vote of both houses,
with the Governor's concurrence, to suspend the K-14 schools' minimum funding
formula for a one-year period. Proposition 98 also contains provisions
transferring certain State tax revenues in excess of the Article XIII B limit to
K-14 schools.
During the recent recession, General Fund revenues for several years were
less than originally projected, so that the original Proposition 98
appropriations turned out to be higher than the minimum percentage provided in
the law. The Legislature responded to these developments by designating the
"extra" Proposition 98 payments in one year as a "loan" from future years'
Proposition 98 entitlements, and also intended that the "extra" payments would
not be included in the Proposition 98 "base" for calculating future years'
entitlements. By implementing these actions, per-pupil funding from Proposition
98 sources stayed almost constant at approximately $4,220 from Fiscal Year
1991-92 to Fiscal Year 1993-94.
In 1992, a lawsuit was filed, called California Teachers' Association v.
Gould, which challenged the validity of these off-budget loans. The oral
settlement of this case, finalized in July 1996, provides that both the State
and K-14 schools share in the repayment of prior years' emergency loans to
schools. Of the total $1.76 billion in loans, the State will repay $935 million
by forgiveness of the amount owed, while schools will repay $825 million. The
State share of the repayment will be reflected as expenditures above the current
Proposition 98 base calculation. The schools' share of the repayment will count
as appropriations that count toward satisfying the Proposition 98 guarantee, or
from "below" the current base. Repayments are spread over the eight-year period
of 1994-95 through 2001-02 to mitigate any adverse fiscal impact. Substantially
increased State General Fund revenues, above initial budget projections in the
1994-95, 1995-96 and 1996-97 fiscal years have resulted or will result in
retroactive increases in Proposition 98 appropriations from subsequent fiscal
year's budgets.
On November 4, 1986, California voters approved an initiative statute
known as Proposition 62. This initiative (i) requires that any tax for general
governmental purposes imposed by local governments be approved by resolution or
ordinance adopted by a two-thirds vote of the governmental entity's legislative
body and by a majority vote of the electorate of the governmental entity, (ii)
requires that any special tax (defined as taxes levied for other than general
governmental purposes) imposed by a local governmental entity be approved by a
two-thirds vote of the voters within that jurisdiction, (iii) restricts the use
of revenues from a special tax to the purposes or for the service for which the
special tax was imposed, (iv) prohibits the imposition of ad valorem taxes on
real property by local governmental entities except as permitted by Article
XIIIA, (v) prohibits the imposition of transaction taxes and sales taxes on
-42-
<PAGE> 217
the sale of real property by local governments, (vi) requires that any tax
imposed by a local government on or after August 1, 1985 be ratified by a
majority vote of the electorate within two years of the adoption of the
initiative or be terminated by November 15, 1988, (vii) requires that, in the
event a local government fails to comply with the provisions of this measure, a
reduction in the amount of property tax revenue allocated to such local
government occurs in an amount equal to the revenues received by such entity
attributable to the tax levied in violation of the initiative, and (viii)
permits these provisions to be amended exclusively by the voters of the State of
California.
On September 28, 1995, the California Supreme Court, in the case of Santa
Clara County Local Transportation Authority v. Guardino, upheld the
constitutionality of Proposition 62. In this case, the court held that a
county-wide sales tax of one-half of one percent was a special tax that, under
Section 53722 of the Government Code, required a two-thirds vote approval.
Because the tax received an affirmative vote of only 54.1%, this special tax was
found to be invalid.
On November 8, 1988, California voters approved Proposition 87.
Proposition 87 amended Article XVI, Section 16, of the California Constitution
by authorizing the California Legislature to prohibit redevelopment agencies
from receiving any of the property tax revenue raised by increased property tax
rates levied to repay bonded indebtedness of local governments which is approved
by voters on or after January 1, 1989. It is not possible to predict whether the
California Legislature will enact such a prohibition nor is it possible to
predict the impact of Proposition 87 on redevelopment agencies and their ability
to make payments on outstanding debt obligations.
OTHER RELEVANT CALIFORNIA LAWS. A wide variety of California laws and
regulations may affect, directly or indirectly, the payment of interest on, or
the repayment of the principal of, California Municipal Securities in which the
California Fund may invest. The impact of such laws and regulations on
particular California Municipal Securities may vary depending upon numerous
factors including, among others, the particular type of Municipal Security
involved, the public purpose funded by the Municipal Security and the nature and
extent of insurance or other security for payment of principal and interest on
the Municipal Security. For example, California Municipal Securities which are
payable only from the revenues derived from a particular facility may be
adversely affected by California laws or regulations which make it more
difficult for the particular facility to generate revenues sufficient to pay
such interest and principal, including, among others, laws and regulations which
limit the amount of fees, rates or other charges which may be imposed for use of
the facility or which increase competition among facilities of that type or
which limit or otherwise have the effect of reducing the use of such facilities
generally, thereby reducing the revenues generated by the particular facility.
California Municipal Securities, the payment of interest and principal on which
is insured in whole or in part by a California governmentally created fund, may
be adversely affected by California laws or regulations which restrict the
aggregate insurance proceeds available for payment of principal and interest in
the event of a default on such Municipal Securities.
-43-
<PAGE> 218
Certain California Municipal Securities in which the California Fund may
invest may be obligations that are payable solely from the revenues of health
care institutions. Certain provisions under California law may adversely affect
such revenues and, consequently, payment on those California Municipal
Securities.
The Federally sponsored Medicaid program for health care services to
eligible welfare beneficiaries in California is known as the Medi-Cal program.
Historically, the Medi-Cal program has provided for a cost-based system of
reimbursement for inpatient care furnished to Medi-Cal beneficiaries by any
hospital wanting to participate in the Medi-Cal program, provided such hospital
met applicable requirements for participation. California law now provides that
the State of California shall selectively contract with hospitals to provide
acute inpatient services to Medi-Cal patients. Medi-Cal contracts currently
apply only to acute inpatient services. Generally, such selective contracting is
made on a flat per diem payment basis for all services to Medi-Cal
beneficiaries, and generally such payment has not increased in relation to
inflation, costs or other factors. Other reductions or limitations may be
imposed in payment for services rendered to Medi-Cal beneficiaries in the
future.
Under this approach, in most geographical areas of California, only those
hospitals which enter into a Medi-Cal contract with the State of California will
be paid for non- emergency acute inpatient services rendered to Medi-Cal
beneficiaries. The State may also terminate these contracts without notice under
certain circumstances and is obligated to make contractual payments only to the
extent the California legislature appropriates adequate funding therefor.
In February 1987, the Governor of the State of California announced that
payments to Medi-Cal providers for certain services (not including hospital
acute inpatient services) would be decreased by ten percent through June 1987.
However, a federal district court issued a preliminary injunction preventing
application of any cuts until a trial on the merits can be held. If the
injunction is deemed to have been granted improperly, the State of California
would be entitled to recapture the payment differential for the intended
reduction period. It is not possible to predict at this time whether any
decreases will ultimately be implemented.
California enacted legislation in 1982 that authorizes private health
plans and insurers to contract directly with hospitals for services to
beneficiaries on negotiated terms. Some insurers have introduced plans known as
"preferred provider organizations" ("PPOs"), which offer financial incentives
for subscribers who use only the hospitals which contract with the plan. Under
an exclusive provider plan, which includes most health maintenance organizations
("HMOs"), private payors limit coverage to those services provided by selected
hospitals. Discounts offered to HMOs and PPOs may result in payment to the
contracting hospital of less than actual cost and the volume of patients
directed to a hospital under an HMO or PPO contract may vary significantly from
projections. Often, HMO or PPO contracts are enforceable for a stated term,
regardless of provider losses or of bankruptcy of the respective HMO or PPO. It
is expected that failure to execute and maintain such PPO and HMO contracts
would reduce a hospital's patient base or gross revenues. Conversely,
participation may maintain or increase the patient base, but may result in
reduced payment and lower net income to the contracting
-44-
<PAGE> 219
hospitals.
These Debt Obligations may also be insured by the State of California
pursuant to an insurance program implemented by the Office of Statewide Health
Planning and Development for health facility construction loans. If a default
occurs on insured Debt Obligations, the State Treasurer will issue debentures
payable out of a reserve fund established under the insurance program or will
pay principal and interest on an unaccelerated basis from unappropriated State
funds. At the request of the Office of Statewide Health Planning and
Development, Arthur D. Little, Inc. prepared a study in December, 1983, to
evaluate the adequacy of the reserve fund established under the insurance
program and based on certain formulations and assumptions found the reserve fund
substantially underfunded. In September of 1986, Arthur D. Little, Inc. prepared
an update of the study and concluded that an additional 10% reserve be
established for "multi-level" facilities. For the balance of the reserve fund,
the update recommended maintaining the current reserve calculation method. In
March of 1990, Arthur D. Little, Inc. prepared a further review of the study and
recommended that separate reserves continue to be established for "multi-level"
facilities at a reserve level consistent with those that would be required by an
insurance company.
Certain California Municipal Securities in which the California Fund may
invest may be obligations which are secured in whole or in part by a mortgage or
deed of trust on real property. California has five principal statutory
provisions which limit the remedies of a creditor secured by a mortgage or deed
of trust, two of which limit the creditor's right to obtain a deficiency
judgment. One of the limitations is based on the method of foreclosure and the
other on the type of debt secured. Under the former, a deficiency judgment is
barred when the foreclosure is accomplished by means of a nonjudicial trustee's
sale. Under the latter, a deficiency judgment is barred when the foreclosed
mortgage or deed of trust secures certain purchase money obligations. Another
California statute, commonly known as the "one form of action" rule, requires
the creditors secured by real property to exhaust their real property security
by foreclosure before bringing a personal action against the debtor. The fourth
statutory provision limits any deficiency judgment obtained by a creditor
secured by real property following a judicial sale of such property to the
excess of the outstanding debt over the fair value of the property at the time
of the sale, thus preventing the creditor from obtaining a large deficiency
judgment against the debtor as the result of low bids at a judicial sale. The
fifth statutory provision gives the debtor the right to redeem the real property
from any judicial foreclosure sale as to which a deficiency judgment may be
ordered against the debtor.
Upon the default of a mortgage or deed of trust with respect to
California real property, the creditor's nonjudicial foreclosure rights under
the power of sale contained in the mortgage or deed of trust are subject to the
constraints imposed by California law upon transfers of title to real property
by private power of sale. During the three-month period beginning with the
filing of a formal notice of default, the debtor is entitled to reinstate the
mortgage by making any overdue payments. Under standard loan servicing
procedures, the filing of the formal notice of default does not occur unless at
least three full monthly payments have become due and remain unpaid. The power
of sale is exercised by posting and publishing a notice of sale for at least 20
-45-
<PAGE> 220
days after expiration of the three-month reinstatement period. Therefore, the
effective minimum period for foreclosing on a home mortgage could be in excess
of seven months after the initial default. Such time delays in collections could
disrupt the flow of revenues available to an issuer for the payment of debt
service on the outstanding obligations if such defaults occur with respect to a
substantial number of mortgages or deeds of trust securing an issuer's
obligations.
In addition, a court could find that there is sufficient involvement of
the issuer in the nonjudicial sale of property securing a mortgage for such
private sale to constitute "state action," and could hold that the
private-right-of-sale proceedings violate the due process requirements of the
Federal or State Constitutions, consequently preventing an issuer from using the
nonjudicial foreclosure remedy described above.
Certain California Municipal Securities in which the California Fund may
invest may be obligations which finance the acquisition of single family home
mortgages for low and moderate income mortgagors. These obligations may be
payable solely from revenues derived from the home mortgages, and are subject to
the California statutory limitations described above applicable to obligations
secured by real property. Under California anti-deficiency legislation, there is
no personal recourse against a mortgagor of a single family residence purchased
with the loan secured by the mortgage, regardless of whether the creditor
chooses judicial or nonjudicial foreclosure.
Under California law, mortgage loans secured by single family
owner-occupied dwellings may be prepaid at any time. Prepayment charges on such
mortgage loans may be imposed only with respect to voluntary prepayments made
during the first five years during the term of the mortgage loan, and cannot in
any event exceed six months' advance interest on the amount prepaid in any
twelve month period in excess of 20% of the original amount of the mortgage
loan. This limitation could affect the flow of revenues available to an issuer
for debt service on the outstanding debt obligations which financed such home
mortgages.
Because of the diverse nature of such laws and regulations and the
impossibility of either predicting in which specific California Municipal
Securities the California Fund will invest from time to time or predicting the
nature or extent of future changes in existing laws or regulations or the future
enactment or adoption of additional laws or regulations, it is not presently
possible to determine the impact of such laws and regulations on the Municipal
Securities in which the California Fund may invest and, therefore, on the units
of the California Fund.
THE GENERAL FINANCIAL CONDITION OF THE STATE OF CALIFORNIA. The 1989-90
Fiscal Year ended with revenues below estimates, so that the State's budget
reserve (the Special Fund for Economic Uncertainties or "SFEU") was fully
depleted by June 30, 1990. A recession began in mid-1990, which severely
affected State General Fund revenues, and increased expenditures above initial
budget appropriations due to greater health and welfare costs. The State's
budget problems in recent years have also been caused by a structural imbalance
in that the largest General Fund Programs -- K-14 education, health, welfare and
corrections -- were increasing
-46-
<PAGE> 221
faster than the revenue base, driven by the State's rapid population growth.
These pressures are expected to continue as population trends maintain strong
demand for health and welfare services, as the school age population continues
to grow, and as the State's corrections program responds to a "Three Strikes"
law enacted in 1994, which requires mandatory life prison terms for certain
third-time felony offenders.
As a result of these factors and others, from the late 1980's until
1992-93, the State had a period of budget imbalance. During this period,
expenditures exceeded revenues in four out of six years, and the State
accumulated and sustained a budget deficit in the SFEU approaching $2.8 billion
at its peak at June 30, 1993. Starting in the 1990-91 Fiscal Year and for each
fiscal year thereafter, each budget required multibillion dollar actions to
bring projected revenues and expenditures into balance. The Legislature and
Governor agreed on the following principal steps to produce Budget Acts in the
years 1991-92 to 1994-95, although not all these actions were taken in each
year:
o significant cuts in health and welfare program expenditures;
o transfers of program responsibilities and funding from the State
to local governments (referred to as "realignment"), coupled with
some reduction in mandates on local government;
o transfer of about $3.6 billion in local property tax revenues
from cities, counties, redevelopment agencies and some other
districts to local school districts, thereby reducing State
funding for schools under Proposition 98;
o reduction in growth of support for higher education programs,
coupled with increases in student fees through the 1994-95 fiscal
year;
o maintenance of the minimum Proposition 98 funding guarantee for
K-14 schools, and the disbursement of additional funds to keep a
constant level of about $2,400 per K-12 pupil through the 1993-94
fiscal year;
o revenue increases (particularly in the 1991-92 Fiscal Year
budget), most of which were of a short duration;
o increased reliance on aid from the federal government to offset
the costs of incarcerating, educating and providing health and
welfare services to illegal immigrants; and
o various one-time adjustments and accounting changes.
Despite these budget actions, as noted, the effects of the recession led
to large, unanticipated deficits in the budget reserve, the SFEU, as compared to
projected positive balances. By the 1993-94 Fiscal Year, the accumulated deficit
was so large that it was impractical
-47-
<PAGE> 222
to budget to retire it in one year, so a two-year program was implemented, using
the issuance of revenue anticipation warrants to carry a portion of the deficit
over the end of the fiscal year. When the economy failed to recover sufficiently
in 1993-94, a second two-year plan was implemented in 1994-95, again using
cross-fiscal year revenue warrants to partly finance the deficit into the
1995-96 fiscal year.
Another consequence of the accumulated budget deficits, together with
other factors such as disbursement of funds to local school districts "borrowed"
from future fiscal years and hence not shown in the annual budget, was to
significantly reduce the State's cash resources available to pay its ongoing
obligations. When the Legislature and the Governor failed to adopt a budget for
the 1992-93 Fiscal Year by July 1, 1992, which would have allowed the state to
carry out its normal annual cash flow borrowing to replenish its cash reserves,
the State Controller issued registered warrants to pay a variety of obligations
representing prior years' or continuing appropriations, and mandates from court
orders. Available funds were used to make constitutionally-mandated payments,
such as debt service on bonds and warrants. Between July 1 and September 4, 1992
the State Controller issued a total of approximately $3.8 billion of registered
warrants. After that date, all remaining outstanding registered warrants (about
$2.9 billion) were called for redemption from proceeds of the issuance of 1992
Interim Notes after the budget was adopted.
During the past several fiscal years the State was forced to rely
increasingly on external debt markets to meet its cash needs, as a succession of
notes and warrants were issued in the period from June 1992 to July 1994, often
needed to pay previously maturing notes or warrants. These borrowings were used
also in part to spread out the repayment of the accumulated budget deficit over
the end of a fiscal year, as noted earlier. The last and largest of these
borrowings was $4.0 billion of revenue anticipation warrants, which were issued
in July, 1994 and matured on April 25, 1996.
1995-96 FISCAL YEAR
The 1995-96 Budget Act was signed by the Governor on August 3, 1995, 34
days after the start of the fiscal year. The Budget Act projected General Fund
revenues and transfers of $44.1 billion, a 3.5 percent increase from the prior
year. Expenditures were budgeted at $43.4 billion, a 4 percent increase. The
Budget Act also projected Special Fund revenues of $12.7 billion and
appropriated Special Fund expenditures of $13.0 billion.
Final data for the 1995-96 Fiscal Year showed revenues and transfers of
$46.1 billion, some $2 billion over the original fiscal year estimate, which was
attributed to the strong economic recovery. Expenditures also increased, to an
estimated $45.4 billion, as a result of the requirement to expend revenues for
schools under Proposition 98, and, among other things, failure of the federal
government to enact welfare reform during the fiscal year and to budget new aid
for illegal immigrant costs, both of which had been counted on to allow
reductions in State costs. The SFEU had a small negative balance of about $87
million at June 30, 1996, all but eliminating the accumulated budget deficit
from the early 1990's. Available internal borrowable
-48-
<PAGE> 223
resources (available cash, after payment of all obligations due) on June 30,
1996 was about $3.8 billion, representing a significant improvement in the
State's cash position, and ending the need for deficit borrowing over the end of
the fiscal year. The State's improved cash position allowed it to repay the $4.0
billion Revenue Anticipation Warrant issue on April 25, 1996, and to issue only
$2.0 billion of revenue anticipation notes during the fiscal year, which matured
on June 28, 1996.
The 1995-96 Budget Act included substantial additional funding under
Proposition 98 for schools and community colleges (about $1.0 billion General
Fund and $1.2 billion total above 1994-95 levels). Because of higher than
projected revenues in 1994-95, an additional $561 million ($92 per K-12 ADA) was
appropriated to the 1994-95 Proposition 98 entitlement. A large part of this was
a block grant of about $50 per pupil for any one-time purpose. For the first
time in several years, a full 2.7 percent cost of living allowance was funded.
The budget was based on the settlement of the CTA v. Gould litigation described
above. Cuts in health and welfare costs totaled about $220 million, almost $700
million less than had been anticipated, because of the failure by the federal
government to approve certain of these actions in a timely manner. The federal
government also failed to appropriate all but $31 million of an anticipated $500
million in new federal aid for incarceration and health care costs of illegal
immigrants. Funding from the General Fund for the University of California was
increased by $106 million and for the California State University system by $97
million, with no increases in student fees.
CURRENT STATE BUDGET
The discussion below of the 1996-97 Fiscal Year budget, the proposed
1997-98 Fiscal Year budget below are based on estimates and projections of
revenues and expenditures for the current and upcoming fiscal year and must not
be construed as statements of fact. These estimates and projections are based
upon various assumptions which may be affected by numerous factors, including
future economic conditions in the State and the nation, and there can be no
assurance that the estimates will be achieved.
Periodic reports on revenues and expenditures during the fiscal year are
issued by the Administration, the State Controller's Office and the Legislative
Analyst's Office. The Department of Finance issues a monthly Bulletin which
reports the most recent revenue receipts, comparing them to Budget projections,
and reports on other current developments affecting the Budget. The
Administration also formally updates its budget projections twice during each
fiscal year, generally in January and May.
1996-97 FISCAL YEAR
1996-97 Budget Act
The 1996-97 Budget Act was signed by the Governor on July 15, 1996, along
with various implementing bills. The Governor vetoed about $82 million of
appropriations (both General Fund and Special Fund). With the signing of the
Budget Act, the State implemented its regular cash flow
-49-
<PAGE> 224
borrowing program with the issuance of $3.0 billion of Revenue Anticipation
Notes to mature on June 30, 1997. The Budget Act appropriated a modest budget
reserve in the SFEU of $305 million, as of June 30, 1997. The Department of
Finance projected that, on June 30, 1997, the State's available internal
borrowable (cash) resources will be $2.9 billion, after payment of all
obligations due by that date, so that no cross-fiscal year borrowing will be
needed.
Revenues - The Legislature rejected the Governor's proposed 15% cut in
personal income taxes (to be phased over three years), but did approve a 5% cut
in bank and corporation taxes, to be effective for income years starting on
January 1, 1997. As a result, revenues for the Fiscal Year were estimated to
total $47.643 billion, a 3.3 percent increase over the final estimated 1995-96
revenues. Special Fund revenues were estimated to be $13.3 billion.
Expenditures - The Budget Act contained General Fund appropriations
totaling $47.251 billion, a 4.0 percent increase over the final estimated
1995-96 expenditures. Special Fund expenditures were budgeted at $12.6 billion.
The following are principal features of the 1996-97 Budget Act:
1. Proposition 98 funding for schools and community college
districts increased by almost $1.6 billion (General Fund) and $1.65 billion
total above revised 1995-96 levels. Almost half of this money was budgeted to
fund class-size reductions in kindergarten and grades 1-3. Also, for the second
year in a row, the full cost of living allowance (3.2 percent) was funded. The
Proposition 98 increases have brought K-12 expenditures to almost $4,800 per
pupil (also called per ADA, or Average Daily Attendance), an almost 15 %
increase over the level prevailing during the recession years. Community
colleges will receive an increase in funding of $157 million for 1996- 97 out of
this $1.6 billion total.
Because of the higher than projected revenues in 1995-96, an additional
$1.1 billion ($190 per K-12 ADA and $145 million for community colleges) was
appropriated and retroactively applied towards the 1995-96 Proposition 98
guarantee, bringing K-12 expenditures in that year to over $4,600 per ADA. These
new funds were appropriated for a variety of purposes, including block grants,
allocations for each school site, facilities for class size reduction, and a
reading initiative. Similar retroactive increases totaling $230 million, based
on final figures on revenues and State population growth, were made to the
1991-92 and the 1994-95 Proposition 98 guarantees, most of which was allocated
to each school site.
2. The Budget Act assumed savings of approximately $660 million
in health and welfare costs which required changes in federal law, including
federal welfare reform. The Budget Act further assumed federal law changes in
August 1996 which would allow welfare cash grant levels to be reduced by October
1, 1996. These cuts totaled approximately $163 million of the anticipated $660
million savings.
3. A 4.9 percent increase in funding for the University of
California ($130 million General Fund) and the California State University
system ($101 million General Fund), with
-50-
<PAGE> 225
no increases in student fees, maintaining the second year of the Governor's
four-year "Compact" with the State's higher education units.
4. The Budget Act assumed the federal government will provide
approximately $700 million in new aid for incarceration and health care costs of
illegal immigrants. These funds reduce appropriations in these categories that
would otherwise have to be paid from the General Fund. (For purposes of cash
flow projections, the Department of Finance expects $540 million of this amount
to be received during the 1996-97 fiscal year.)
5. General Fund support for the Department of Corrections was
increased by about 7 percent over the prior year, reflecting estimates of
increased prison population.
6. With respect to aid to local governments, the principal new
programs included in the Budget Act are $100 million in grants to cities and
counties for law enforcement purposes, and budgeted $50 million for competitive
grants to local governments for programs to combat juvenile crime.
The Budget Act did not contain any tax increases. As noted, there was a
reduction in corporate taxes. In addition, the Legislature approved another
one-year suspension of the Renters Tax Credit, saving $520 million in
expenditures.
Federal Welfare Reform - Following enactment of the 1996-97 Budget Act,
Congress passed and the President signed (on August 22, 1996) the Personal
Responsibility and Work Opportunity Act of 1996 (P.L. 104-193, the "Law") making
a fundamental reform of the current welfare system. Among many provisions, the
Law includes: (i) conversion of Aid to Families with Dependent Children from an
entitlement program to a block grant titled Temporary Assistance for Needy
Families (TANF), with lifetime time limits on TANF recipients, work requirements
and other changes; (ii) provisions denying certain federal welfare and Public
benefits to legal noncitizens, allowing states to elect to deny additional
benefits (including TANF) to legal noncitizens, and generally denying almost all
benefits to illegal immigrants; and (iii) changes in the Food Stamp program,
including reducing maximum benefits and imposing work requirements.
The law requires states to implement the new TANF program not later than
July 1, 1997 and provides California approximately $3.7 billion in block grant
funds for Fiscal Year 1996-97 for the provisions of the Law. States are
allowed to implement TANF as soon as possible and will receive a prorated block
grant effective the date of application. The California State Plan was approved
November 27, 1996 to allow grant reductions to be implemented effective January
1, 1997 and to allow the State to capture approximately $267 million in
additional federal block grant funds over the currently budgeted level. None of
the other federal changes needed to achieve the balance of the $660 million cost
savings were enacted. Thus, in lieu of the $660 million savings initially
assumed, it is now projected that savings will total approximately $320 million.
A preliminary analysis of the Law by the Legislative Analyst's Office
indicates that an overall assessment of how these changes will affect the
State's General Fund will not be known for some
-51-
<PAGE> 226
time, and will depend on how the State implements the Law. There are many
choices including how quickly the State implements the law; the degree to which
the State elects to make up for cuts in federal aid, provide more aid to
counties, or cut some of its own existing programs for noncitizens; and the
State's ability to avoid certain penalties written into the Law.
Other Subsequent Developments - With the continued strong economic
recovery in the State, the Department of Finance has estimated, in connection
with the release of Governor's 1997-98 Budget Proposal, that revenues for the
1996-97 Fiscal Year will exceed initial projections by about $760 million. This
increase will be offset by higher expenditures for K-14 school aid (pursuant to
Proposition 98) and for health and welfare costs, because federal law changes
and other federal actions did not provide as much assistance to the State as was
initially planned in the Budget Act. The Department's updated projections show a
balance in the SFEU of $197 million, slightly lower than projected in July,
1996. The Department also projects the State's cash position will be stronger
than originally estimated, with unused internal borrowable resources at June 30,
1997 of about $4.3 billion.
1997-98 FISCAL YEAR PROPOSED BUDGET
On January 9, 1997, the Governor released his proposed budget for the
1997-98 Fiscal Year (the "Governor's Budget"). The Governor's Budget projects
General Fund revenues and transfers in 1997-98 of $50.7 billion, a 4.6% increase
from revised 1996-97 figures. The Governor proposes expenditures of $50.3
billion, a 3.9 % increase from 1996-97. The Governor's Budget projects a balance
in the SFEU of $553 million on June 30, 1998. The Governor's Budget also
anticipates about $3 billion of external borrowing for cash flow purposes during
the year, with no requirement for cross-fiscal year borrowing.
Among the major initiatives and features of the Governor's Budget are the
following:
1. A proposed 10% cut in the Bank and Corporation Tax rate, to be phased
in over two years.
2. Proposition 98 funding for K-14 schools will be increased again, as a
result of stronger revenues. Per-pupil funding for K-12 schools will reach
$5,010, compared to $4,220 as recently as the 1993-94 Fiscal Year. Part of the
new funding is proposed to be dedicated to the completion of the current program
to reduce class size to 20 pupils in lower elementary grades, and to expand the
program by one grade, so that it will cover K-3rd grade.
3. Funding for higher education will be increased consistent with a
four-year "compact" established in 1995-96. There is not projected to be any
increase in student fees at any of the three levels of the State higher
education system.
4. The 1997-98 proposed Governor's Budget assumes approximately $500
million in savings contingent upon federal action. The Budget assumes that
federal law will be enacted to
-52-
<PAGE> 227
remove the maintenance-of-effort requirement for Supplemental Security Income
(SSI) payments, thereby enabling the state to reduce grant levels pursuant to
previously enacted state law ($279 million). The Budget also assumes the federal
government will fund $216 million in costs of health care for illegal
immigrants.
The Revenue and Expenditure assumptions set forth above have been based
upon certain estimates of the performance of the California and national
economies in 1996 through 1998. As set forth in the 1997-98 Governor's Budget,
released on January 9, 1997, the Department of Finance projects that, despite
some slowdown in the national economy, California will continue steady economic
growth, as it recovers from the recent recession. The Department set out the
following estimates which were used in predicting revenues and expenditures for
the 1996-97 and 1997-98 Fiscal Year Budgets; also set forth are the Department's
most recent previous estimates as set forth in the May Revision of the 1996-97
Governor's Budget, released May 21, 1996:
ECONOMIC ASSUMPTIONS
<TABLE>
<CAPTION>
1996 1997
May Governor's May Governor's
Revision Budget Revision Budget
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Nonfarm wage and salary 12,791 12,771 13,118 13,100
employment (000)
Percent Change 2.7 2.7 2.6 2.6
Personal income ($ billions) 795.0 815.0 843.0 869.1
Percent Change 6.1 7.2 6.0 6.6
Housing Permits (Units 000) 101 94 121 110
Consumer Price Index 2.7 2.0a/ 3.1 2.7
Percent Change
a/actual
</TABLE>
- -------------
SOURCE: State of California, Department of Finance, January 9, 1997 (for
"Governor's Budget") and May, 1996 (for "May Revision").
ADDITIONAL CONSIDERATIONS. With respect to 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, the Trust cannot
predict what legislation, if any, may be proposed in the California State
Legislature as regards the California State personal income tax status of
interest on such obligations, or which proposals, if any, might be enacted. Such
proposals, if enacted, might materially adversely affect the availability of
California Municipal Securities for
-53-
<PAGE> 228
investment by the California Fund and the value of the Fund's investments. In
such event, the Trustees would reevaluate the investment objective and policies
of the California Fund and consider changes in its investments structure or
possible dissolution.
SPECIAL CONSIDERATIONS RELATING TO FLORIDA MUNICIPAL SECURITIES
The following information constitutes only a brief summary, and does not
purport to be a complete description. The information in this section is updated
periodically. While the Fund has not independently verified such information, it
has no reason to believe that such information is not correct in all material
respects. The source of the 1994-95, 1995-96 and 1996-97 figures set forth below
is the Revenue and Economic Analysis Unit of the Executive Office of the
Governor of the State of Florida. Such figures are preliminary and subject to
change without notice.
POPULATION. In 1980, Florida was ranked seventh among the fifty states
with a population of 9.7 million people. The State has grown dramatically since
then and as of April 1, 1996 ranks fourth with an estimated population of 14.4
million. Since the beginning of the eighties, Florida has surpassed Ohio,
Illinois, and Pennsylvania in total population. Florida's attraction, as both a
growth and retirement state, has kept net migration at an average of 230,000 new
residents per year, from 1987 through 1996.
INCOME. Over the years, Florida's personal income has grown at a strong
pace and has generally outperformed both the U.S. as a whole and the southeast
in particular. The reasons for this are twofold: first, as mentioned above,
Florida's population has expanded at a very strong pace; and second, the State's
economy since the early seventies has diversified in such a way as to provide a
broader economic base. As a result, Florida's per capita personal income has
tracked closely with the national average. Furthermore, the State's per capita
personal income has historically tracked above the southeast. From 1985 through
1995, Florida's per capita income rose an average 5.0% per year, while national
per capita income increased an average 4.9%.
The structure of Florida's income differs from that of the nation and the
southeast. Because Florida has a proportionally greater retirement age
population, property income (dividends, interest, and rent) and transfer
payments (social security and pension benefits, among other sources of income)
are a relatively more important source of income. For example, Florida's
employment income in 1995 represented 60.6% of total personal income, while the
nation's share of total personal income in the form of wages and salaries and
other labor benefits was 70.8%. Florida's income is dependent upon transfer
payments controlled by the federal government.
-54-
<PAGE> 229
EMPLOYMENT. Since 1987, the State's population has increased an estimated
24%. In the same period of time, Florida's total non-farm employment has
increased by over 35.6%. The average rate of unemployment for Florida since 1987
is 6.2% while the national average is 6.2%. Though the State has grown by an
average of 274,830 people per year, the strength of the economy has created an
environment that has more than absorbed new residents seeking employment. The
job creation rate for the State of Florida is almost twice the rate for the
nation as a whole, since 1987.
CONSTRUCTION. Florida's dependency on the highly cyclical construction
and construction-related manufacturing sectors has declined. For example, total
contract construction employment as a share of total non-farm employment reached
a peak of over 10% in 1973. In 1980, the share was roughly 7.5%, and in 1996,
the share had edged downward to 5%. This trend is expected to continue as
Florida's economy continues to diversify. Florida, nevertheless, has a dynamic
construction industry, with single and multi-family housing starts accounting
for approximately 8.1% of total U.S. housing starts in 1996, while the State's
population is 5.5% of the nation's population. Since 1985, total housing starts
have averaged 148,000 per year.
A driving force behind Florida's construction industry is of course its
rapid growth in population. While annual growth in the State's population is
projected to slow somewhat, it is still expected to grow close to 230,000 new
residents per year throughout the 1990's.
TOURISM. Tourism is one of Florida's most important industries.
Approximately 42.9 million people visited the State in 1995, as reported by the
Florida Department of Commerce. As discussed below, tourism in Florida appears
to be recovering from the effects of negative publicity regarding crime.
OUTLOOK. The current Florida Economic Consensus Estimating Conference
forecast shows that the Florida economy is expected to grow at a moderate pace,
but will continue to outperform the U.S. as a whole as a result of relatively
rapid population growth. Single and multi-family housing starts are projected to
reach a combined level of nearly 118,400 in 1996 and 115,500 in 1997.
Multi-family starts have been slow to recover, but they are showing some strong
growth lately and should maintain a level of 30,300 in 1996-97 and 30,900 in
1997-98. Single family starts are expected to exceed 85,800 this year and reach
a level of 84,600 next year. Total construction expenditures are forecasted to
increase 7.6% this year and increase 3.1% next year.
Real personal income in Florida is estimated to increase 4.2% in 1996-97
and increase 4.2% in 1997-98 while real personal income per capita is projected
to grow at 2.3% in 1996-97 and 2.3% in 1997-98.
Florida tourism appears to be recovering from the effects of negative
publicity regarding crime against tourists in the state. Tourist arrivals are
expected to increase by 3.1% this fiscal year and 4.7% next year. Air tourists
are expected to increase by 4.8% this year and increase by 4.5% next year, while
auto tourists are expected to increase by 1.1% in 1996-97 and increase 4.9% in
1997-98. By the end of this fiscal year, 42.7 million domestic and international
tourists are expected to have visited the State. In 1997-98, tourist arrivals
should approximate 44.7 million.
REVENUES AND EXPENDITURES. Financial operations of the State of Florida
covering all
-55-
<PAGE> 230
receipts and expenditures are maintained through the use of four fund types -
the General Revenue Fund, Trust Funds, the Working Capital Fund and beginning in
fiscal year 1995-96, the Budget Stabilization Fund. The General Revenue Fund
receives the majority of State tax revenues. The Trust Funds consist of monies
received by the State which under law or trust agreement are segregated for a
purpose authorized by law. Revenues in the General Revenue Fund which are in
excess of the amount needed to meet appropriations may be transferred to the
Working Capital Fund. 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 State fiscal year.
Estimated fiscal year 1996-97 General Revenue plus Working Capital and
Budget Stabilization funds available total $16,617.4 million, a 6.7% increase
over 1995-96. With combined General Revenue, Working Capital Fund and Budget
Stabilization Fund appropriations at $15,537.2 million, unencumbered reserves at
the end of 1996-97 are estimated at $1,080.2 million.
Estimated fiscal year 1997-98 General Revenue plus Working Capital and
Budget stabilization funds available total $17,537.3 million, a 5.5% increase
over 1996-97.
In fiscal year 1995-96, the State derived approximately 66% of its total
direct revenues to these funds from State taxes and fees. Federal funds and
other special revenues accounted for the remaining revenues. Major sources of
tax revenues to the General Revenue Fund are the sales and use tax, corporate
income tax, intangible personal property tax, and beverage tax, which amounted
to 69%, 7%, 4% and 4%, respectively, of total General Revenue Funds available.
State expenditures are categorized for budget and appropriation purposes
by type of fund and spending unit, which are further subdivided by line item. In
fiscal year 1995-96, appropriations from the General Revenue Fund for education,
health and welfare, and public safety amounted to 51%, 31% and 14%,
respectively, of total General Revenue Funds available.
SALES AND USE TAX. The greatest single source of tax receipts in Florida
is the sales and use tax. The sales tax is 6% of the sales price of tangible
personal property sold at retail in the State. The use tax is 6% of the cost
price of tangible personal property when the same is not sold but is used, or
stored for use, in the State. The use tax also applies to the use in the State
of tangible personal property purchased outside Florida which would have been
subject to the sales tax if purchased from a Florida dealer. Slightly less than
10% of the sales tax is designated for local governments and is distributed to
the respective counties in which collected for use by such counties and
municipalities therein. In addition to this distribution, local governments may
(by referendum) assess a .5% or 1% discretionary sales surtax within their
county. Proceeds from this local option sales tax are earmarked for funding
local infrastructure programs and acquiring land for public recreation or
conservation or protection of natural resources. In addition, non-consolidated
counties with a population in excess of 800,000 may levy a local option sales
tax to fund indigent health care. The tax rate cannot exceed .5% and the
combined levy of this indigent health care surtax and the aforementioned
infrastructure surtax cannot exceed 1%. Furthermore, charter counties which
adopted a charter prior to June 1, 1976, and each county with a consolidated
county/municipal government, may (by referendum) assess up to a 1% discretionary
sales surtax within their county.
-56-
<PAGE> 231
Proceeds from this tax are earmarked for the development, construction,
maintenance and operation of a fixed guideway rapid transit system or may be
remitted to an expressway or transportation authority for use on county roads
and bridges, for a bus system, or to service bonds financing roads and bridges.
The two taxes, sales and use, stand as complements to each other, and taken
together provide a uniform tax upon either the sale at retail or the use of all
tangible personal property irrespective of where it may have been purchased.
This tax also includes a levy on the following: (i) rentals on tangible personal
property and transient lodging and non-residential real property; (ii)
admissions to places of amusements, most sports and recreation events; (iii)
utilities (at a 7% rate), except those used in homes; and (iv) restaurant meals.
Exemptions include: groceries; medicines; hospital rooms and meals; fuels used
to produce electricity; purchases by religious, charitable and educational
nonprofit institutions; most professional, insurance and personal service
transactions; apartments used as permanent dwellings; the trade-in value of
motor vehicles; and residential utilities.
All receipts of the sales and use tax, with the exception of the tax on
gasoline and special fuels, are credited to either the General Revenue Fund, the
Solid Waste Management Trust Fund, or counties and cities. For the State fiscal
year which ended June 30, 1996, receipts from this source were $11,461 million,
an increase of 7.4% over fiscal year 1994-95.
MOTOR FUEL TAX. The second largest source of State tax receipts is the
tax on motor fuels. Preliminary data show collections from this source in the
State fiscal year ended June 30, 1996, were $1,923 million. However, these
revenues are almost entirely dedicated trust funds for specific purposes and are
not included in the State's General Revenue Fund.
State and local taxes on motor fuels (gasoline and special fuel) include
several distinct fuel taxes: (i) the State sales tax on motor fuels, levied at
6% of the average retail price per gallon of fuel, not to fall below 6.9 cents
per gallon; (ii) the State excise tax of four cents per gallon of motor fuel,
proceeds distributed to local governments; (iii) the State Comprehensive
Enhanced Transportation System (SCETS) tax, which is levied at a rate in each
county equal to two-thirds of the sum of the county's local option motor fuel
taxes; (iv) aviation fuel, which depending on the air carrier's choice, can
either be taxed at 6.9 cents per gallon or eight percent of the retail price of
fuel, not to be less than 4.4 cents per gallon; and (v) local option motor fuel
taxes, which may range between one cent to twelve cents per gallon.
ALCOHOLIC BEVERAGE TAX. Florida's alcoholic beverage tax is an excise tax
on beer, wine, and liquor. This tax is one of the State's major tax sources,
with revenues totaling $441.5 million in the State fiscal year ended June 30,
1996, an increase of $4.2 million from the previous year's total. The revenues
collected from this tax are deposited into the State's General Revenue Fund.
The 1990 Legislature established a surcharge on alcoholic beverages. This
charge is levied on alcoholic beverages sold for consumption on premises. The
surcharge is ten cents per ounce of liquor, ten cents per four ounces of wine,
and four cents per twelve ounces of beer. Most of these proceeds are deposited
into the General Revenue Fund. In fiscal 1995-96, $100.6 million was collected.
CORPORATE INCOME TAX. Pursuant to an amendment to the State Constitution,
the State
-57-
<PAGE> 232
Legislature adopted, effective January 1, 1972, the "Florida Income Tax Code"
imposing a tax upon the net income of corporations, organizations, associations
and other artificial entities for the privilege of conducting business, deriving
income or existing within the State. This tax does not apply to natural persons
who engage in a trade or business or profession under their own or any
fictitious name, whether individually as proprietorships or in partnerships with
others, estates of decedents or incompetents, or testamentary trusts.
The tax is imposed in an amount equal to 5.5% of the taxpayer's net
corporate income for the taxable year, less a $5,000 exemption. Net income is
defined as that share of a taxpayer's adjusted federal income for such year
which is apportioned to the State of Florida. Apportionment is by weighted
factors of sales (50%), property (25%) and payroll (25%). All business income is
apportioned and non-business income is allocated to a single jurisdiction,
usually the state of commercial domicile.
All receipts of the corporate income tax are credited to the General
Revenue Fund. For the fiscal year ended June 30, 1996, receipts from this source
were $1,162.7 million, an increase of 9.3% from fiscal year 1994-95.
DOCUMENTARY STAMP TAX. Deeds and other documents relating to realty are
taxed at 70 cents per $100 of consideration, while corporate shares, bonds,
certificates of indebtedness, promissory notes, wage assignments and retail
charge accounts are taxed at 35 cents per $100 of face value, or actual value if
issued without face value. Documentary stamp tax collections totaled $775.2
million during fiscal year 1995-96, posting an 11.5% increase from the previous
fiscal year.
GROSS RECEIPTS TAX. A 2.5% tax is levied on the gross receipts of
electric, natural gas and telecommunications services. In fiscal year 1995-96,
gross receipts utilities tax collections totaled $543.3 million, an increase of
6.9% over the previous fiscal year. All gross receipts utility tax collections
are credited to the Public Education Capital Outlay and Debt Services Fund.
INTANGIBLE PERSONAL PROPERTY TAX. The intangible personal property tax is
levied on two distinct bases. First, stocks, bonds (including bonds secured by
liens on State realty), notes, governmental leaseholds, interests in limited
partnerships registered with the SEC, and other miscellaneous intangible
personal property not secured by liens on State realty are taxed annually at a
rate of 2 mills. Second, there is a non-recurring 2 mill tax on mortgages and
other obligations secured by liens on State realty. The Department of Revenue
uses part of the proceeds for administrative costs. Of the tax proceeds
remaining, 33.5% is distributed to the County Revenue Sharing Trust Fund and
66.5% is distributed to the General Revenue Fund. In fiscal year 1995-96, total
intangible personal property tax collections were $895.9 million, a 9.5%
increase from the previous fiscal year.
SEVERANCE TAXES. The severance tax includes the taxation of oil, gas and
sulfur production and a tax on the severance of primarily phosphate rock and
other solid minerals. Total collections from severance taxes totaled $77.2
million during fiscal year 1995-96, up 26.1% from the previous year.
-58-
<PAGE> 233
LOTTERY. The 1987 Legislature created the Department of the Lottery to
operate the State Lottery and set forth the allocation of the lottery revenues.
Of the revenues generated by the lottery, 50% is to be returned to the public as
prizes; at least 38% is to be deposited in the Educational Enhancement Trust
Fund (for public education); and no more than 12% can be spent on the
administrative cost of operating the lottery.
Fiscal year 1995-96 produced ticket sales of $2.07 billion of which
education received approximately $788.1 million.
MISCELLANEOUS. The State Constitution does not permit a state or local
personal income tax. An amendment to the State Constitution by the electors of
the State is required to impose a personal income tax in the State.
Property valuations for homestead property is subject to a growth cap.
Growth in the just (market) value of property qualifying for the homestead
exemption will be limited to 3% or the change in the Consumer Price Index,
whichever is less. If the property changes ownership or homestead status, it is
to be re-valued at full just value on the next tax roll. Although the impact of
the growth cap cannot be determined, it may have the effect of causing local
government units in the State to rely more on non-ad valorem revenues to meet
operating expenses and other requirements normally funded with ad valorem tax
revenues.
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.
-59-
<PAGE> 234
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.
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.
Hurricanes continue to threaten Florida resulting in significant property
damages. The 1995 hurricane season was especially active. The Fund cannot
predict the impact on state finances resulting from repeated hurricane damage.
SPECIAL CONSIDERATIONS RELATING TO SHORT TERM GLOBAL GOVERNMENT, EMERGING GROWTH
AND GROWTH FUNDS
LOWER-RATED SECURITIES. The Short Term Global Government Fund may invest
up to 10%, and the Growth and Emerging Growth Funds may invest up to 35% of the
total assets of the Fund, respectively, in non-investment grade securities
(rated Ba and lower by Moody's and BB and lower by Standard & Poor's) or unrated
securities. Such securities carry a high degree of risk (including the
possibility of default or bankruptcy of the issuer of such securities),
generally involve greater volatility of price and risk of principal and income,
and may be less liquid, than securities in the higher rating categories and are
considered speculative. See the Appendix to this Statement of Additional
Information for a more complete description of the ratings assigned by ratings
organizations and their respective characteristics.
The current economic downturn disrupted the high yield market and
impaired the ability of issuers to repay principal and interest. Also, an
increase in interest rates could further adversely affect the value of such
obligations held by the Fund. Prices and yields of high yield securities will
fluctuate over time and may affect the Fund's net asset value. In addition,
investments in high yield zero coupon or pay-in-kind bonds, rather than
income-bearing high yield securities, may be more speculative and may be subject
to greater fluctuations in value due to changes in interest rates.
The trading market for high yield securities may be thin to the extent
that there is no established retail secondary market or because of a decline in
the value of such securities. A thin trading market may limit the ability of the
Trustees to accurately value high yield securities in the Fund's portfolio and
to dispose of those securities. Adverse publicity and investor perceptions may
decrease the value and liquidity of high yield securities. These securities may
also involve special registration responsibilities, liabilities and costs.
Credit quality in the high yield securities market can change suddenly
and unexpectedly, and even recently-issued credit ratings may not fully reflect
the actual risks posed by a particular high yield security. For these reasons,
it is the policy of the Sub-Advisor of each of the Funds not to rely exclusively
on ratings issued by established credit rating agencies, but to supplement such
ratings with its own independent and ongoing review of credit quality. The
achievement of the Fund's
-60-
<PAGE> 235
investment objectives by investment in such securities may be more dependent on
its Sub-Advisor's credit analysis than is the case for higher quality bonds.
Should the rating of a portfolio security be downgraded the Fund's Sub-Advisor
will determine whether it is in the best interest of the Fund to retain or
dispose of the security.
Prices for below investment-grade securities may be affected by
legislative and regulatory developments. For example, new federal rules require
savings and loan institutions to gradually reduce their holdings of this type of
security. Also, Congress from time to time has considered legislation which
would restrict or eliminate the corporate tax deduction for interest payments on
these securities and would regulate corporate restructurings. Such legislation
may significantly depress the prices of outstanding securities of this type.
INVESTMENT RESTRICTIONS
The investment restrictions numbered 1 through 16 below have been adopted
by the Trust with respect to the Funds as fundamental policies. A fundamental
policy may not be changed without the vote of a majority of the outstanding
voting securities of the Trust, as defined in the 1940 Act. Majority is defined
in the 1940 Act as the lesser of (a) 67% or more of the shares present at a
Trust meeting, if the holders of more than 50% of the outstanding shares of the
Trust are present or represented by proxy, or (b) more than 50% of the
outstanding shares. A fundamental policy affecting a particular Fund may not be
changed without the vote of a majority of the outstanding shares of the affected
Fund. Investment restrictions 17 through 22 may be changed by vote of a majority
of the Trust's Board of Trustees at any time.
The investment policies adopted by the Trust prohibit a Fund from:
1. Purchasing the securities of any issuer (other than U.S. Government
securities) if as a result more than 5% of the value of the Fund's total
assets would be invested in the securities of the issuer (the "5%
Limitation"), except that up to 25% of the value of the Fund's total
assets may be invested without regard to the 5% Limitation; provided that
this restriction shall not apply to the California Money, California
Municipal, California Insured Intermediate Municipal, Florida Insured
Municipal and Short Term Global Government Funds.
2. Purchasing more than 10% of the securities of any class of any one
issuer; provided that this limitation shall not apply to investments in
U.S. Government securities; provided further that this restriction shall
not apply to the California Money, California Municipal, California
Insured Intermediate Municipal, Florida Insured Municipal, Growth Fund
and Short Term Global Government Funds; and provided further that the
Growth Fund may not own more than 10% of the outstanding voting
securities of a single issuer.
3. Purchasing securities on margin, except that the Fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of
initial or variation margin in connection with futures contracts or
related options will not be deemed to be a purchase of securities on
margin.
-61-
<PAGE> 236
4. Making short sales of securities or maintaining a short position;
provided that this restriction shall not apply to the International
Growth, Growth and Short Term Global Government Funds.
5. Borrowing money, except that (a) the Funds may (i) enter into reverse
repurchase agreements or (ii) borrow from banks for temporary or
emergency (not leveraging) purposes including the meeting of redemption
requests that might otherwise require the untimely disposition of
securities in an aggregate amount not exceeding 30% of the value of the
Fund's total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the borrowing
is made, (b) the U.S. Government, California Municipal, California
Insured Intermediate Municipal, Florida Insured Municipal, International
Growth, National Municipal, Corporate Income, Short Term High Quality
Bond, Growth, Emerging Growth, Growth and Income, and Short Term Global
Government Funds may enter into futures contracts, and (c) the U.S.
Government, Corporate Income and Short Term High Quality Bond Funds may
engage in dollar roll transactions; provided that whenever borrowings
pursuant to (a) above (except that with respect to the U.S. Government,
Corporate Income and Short Term High Quality Bond Funds, whenever
borrowings pursuant to (a)(ii) above) exceed 5% of the value of a Fund's
total assets, the Fund will not purchase any securities; and provided
further that each of the U.S. Government, Corporate Income and Short Term
High Quality Bond Funds is prohibited from borrowing money or entering
into reverse repurchase agreements or dollar roll transactions in the
aggregate in excess of 33 1/3% of the Fund's total assets (after giving
effect to any such borrowing).
6. Pledging, hypothecating, mortgaging or otherwise encumbering more than
30% of the value of the Fund's total assets. For purposes of this
restriction, (a) the deposit of assets in escrow in connection with the
writing of covered put or call options and the purchase of securities on
a when-issued or delayed-delivery basis and (b) collateral arrangements
with respect to (i) the purchase and sale of options on securities,
options on indexes and options on foreign currencies, and (ii) initial or
variation margin for futures contracts will not be deemed to be pledges
of a Fund's assets.
7. Underwriting the securities of other issuers, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933, as
amended, by virtue of disposing of portfolio securities.
8. Purchasing or selling real estate or interests in real estate, except
that the Fund may purchase and sell securities that are secured, directly
or indirectly, by real estate and may purchase securities issued by
companies that invest or deal in real estate.
9. Investing in commodities, except that the U.S. Government, California
Municipal, California Insured Intermediate Municipal, Florida Insured
Municipal, International Growth, National Municipal, Corporate Income,
Growth, Emerging Growth, Growth and Income, Short Term High Quality Bond
and Short Term Global Government Funds may invest in futures contracts
and options on futures contracts. The entry into forward foreign currency
exchange contracts is not and shall not be deemed to involve investing in
commodities.
-62-
<PAGE> 237
10. Investing in oil, gas or other mineral exploration or development
programs.
11. Making loans to others, except through the purchase of qualified debt
obligations, loans of portfolio securities (except in the case of the
U.S. Government, California Municipal, and Florida Insured Municipal
Funds) and the entry into repurchase agreements.
12. Investing in securities of other investment companies registered or
required to be registered under the 1940 Act, except as they may be
acquired as part of a consolidation, reorganization, acquisition of
assets or an offer of exchange or as otherwise permitted by law,
including the 1940 Act.
13. Purchasing any securities that would cause more than 25% of the value of
the Fund's total assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in
the same industry, except in the case of the Global Money Fund, which
under normal market conditions shall have at least 25% of its total
assets invested in bank obligations; provided that this limitation shall
not apply to the purchase of (a) U.S. Government securities, (b)
municipal securities issued by governments or political subdivisions of
governments or (c) with respect to the U.S. Government Money, California
Money and Short Term Global Government Funds, U.S. dollar-denominated
bank instruments such as certificates of deposit, time deposits, bankers'
acceptances and letters of credit that have been issued by U.S. banks.
14. Purchasing, writing or selling puts, calls, straddles, spreads or
combinations thereof; provided that this restriction shall not apply to
the California Insured Intermediate Municipal, Growth, Short Term Global
Government and Short Term High Quality Bond Funds; and provided further
that (a) the U.S. Government, Corporate Income, Growth and Income,
Emerging Growth and International Growth Funds may purchase, write and
sell covered put and call options on securities, (b) U.S. Government,
California Municipal, Florida Insured Municipal, National Municipal,
Corporate Income, Emerging Growth, Growth and Income and International
Growth Funds may purchase, write and sell futures contracts and options
on futures contracts, (c) the California Municipal, Florida Insured
Municipal, National Municipal and California Money Funds may acquire
stand-by commitments, (d) the Growth and Income, Emerging Growth and
International Growth Funds may purchase and write put and call options on
stock indexes, and (e) the International Growth Fund may purchase put and
call options and write covered call options on foreign currency
contracts.
15. With respect to the Growth Fund, investing more than 35% of the fund's
assets in non-investment grade debt securities.
16. With respect to the Short Term High Quality Bond Fund, having a
dollar-weighted average portfolio maturity in excess of five years.
17. With respect to the Growth Fund, investing more than 25% of the fund's
assets in foreign securities.
-63-
<PAGE> 238
18. Purchasing securities that are not readily marketable if more than 10% of
the net of a Money Fund, or more than 15% of the net assets of a
Non-Money Fund, would be invested in such securities, including, but not
limited to: (1) repurchase agreements with maturities greater than seven
calendar days; (2) time deposits maturing in more than seven calendar
days; (3) to the extent a liquid secondary market does not exist for the
instruments, futures contracts and options thereon; (4) certain
over-the-counter options, as described in this SAI; (5) except for the
Short Term Global Government Fund, certain variable rate demand notes
having a demand period of more than seven days; and (6) certain Rule 144A
restricted securities that are deemed to be illiquid.
19. Investing more than 10% of its total assets in time deposits maturing in
more than seven calendar days; provided that this restriction shall not
apply to the Growth Fund, Short Term Global Government Fund and Short
Term High Quality Bond Fund.
20. Making investments for the purpose of exercising control or management.
21. Purchasing or selling interests in real estate limited partnerships.
22. Entering into Strategic Transactions otherwise prohibited by the Fund's
investment restrictions or in the aggregate in excess of 25% of the
Fund's net assets, for purposes other than bona fide hedging positions or
that are not "covered," subject to such greater percentage limitations as
may be imposed by Sierra Advisors from time to time.
With respect to the first investment limitation set forth above, as a
result of recent amendments to a rule promulgated under the 1940 Act, the entire
investment portfolio of the Global Money Fund is subject to the 5% limitation.
However, the Global Money Fund will be able to invest more than 5% of its total
assets in the securities of a single issuer for a period of up to three Business
Days after the purchase thereof; provided that the Fund may not hold more than
one such investment at any time.
The dollar amount of short sales of securities by the Growth Fund or
International Growth Fund at any one time shall not exceed 25% of the net assets
of each Fund, respectively, and the value of securities of any one issuer in
which each Fund is short may not exceed the lesser of 2.0% of the net assets of
the Fund or 2.0% of the securities of any class of any issuer, and short sales
of securities by each Fund shall be subject to the other conditions and
exclusions of Rule 123.2(7) of the Texas state securities regulations.
For purposes of the investment restrictions described above, the issuer
of a municipal security is deemed to be the entity (public or private)
ultimately responsible for the payment of the principal of and interest on the
security. For purposes of investment restriction Number 13 above, AMT-Subject
Bonds and Revenue Bonds, the payment of principal and interest on which is the
ultimate responsibility of companies within the same industry, are grouped
together as an "industry." The Trust may make commitments more restrictive than
the restrictions listed above with respect to a Fund so as to permit the sale of
shares of the Fund in certain states. Should the Trust determine that any such
commitment is no longer in the best interests of the Fund and its shareholders,
the
-64-
<PAGE> 239
Trust will revoke the commitment by terminating the sale of shares of the Fund
in the state involved. The percentage limitations contained in the restrictions
listed above apply at the time of purchase of securities.
PORTFOLIO TURNOVER
The Money Funds attempt to increase yields by trading to take advantage
of short-term market variations, which result in high portfolio turnover.
Because purchases and sales of money market instruments are usually effected as
principal transactions, this policy does not result in high brokerage
commissions to these Funds. The Growth and Income, Emerging Growth, Growth and
International Growth Funds (together, the "Equity Funds"), the U.S. Government,
Corporate Income, Short Term High Quality Bond, Short Term Global Government,
California Municipal, Florida Insured Municipal, California Insured Intermediate
Municipal and National Municipal Funds (the "Bond Funds") and the Target
Maturity Fund do not intend to seek profits through short-term trading.
Nevertheless, the Funds will not consider portfolio turnover rate a limiting
factor in making investment decisions.
Under certain market conditions, the U.S. Government, Corporate Income,
Growth, Emerging Growth, Growth and Income, International Growth, Short Term
High Quality Bond or Short Term Global Government Funds may experience increased
portfolio turnover as a result of such Fund's options activities. It is
anticipated that the portfolio turnover rate for the Short Term High Quality
Bond Fund will exceed 200%. It is anticipated that the portfolio turnover rate
for the Target Maturity Fund will exceed 150%. For instance, the exercise of a
substantial number of options written by the Fund (due to appreciation of the
underlying security in the case of call options or depreciation of the
underlying security in the case of put options) could result in a turnover rate
in excess of 100%. A portfolio turnover rate of 100% would occur if all of the
Fund's securities that are included in the computation of turnover were replaced
once during a period of one year. The portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities for the year
by the monthly average value of portfolio securities. Securities with remaining
maturities of one year or less at the date of acquisition are excluded from the
calculation.
Certain other practices that may be employed by the Funds could result in
high portfolio turnover. For example, portfolio securities may be sold in
anticipation of a rise in interest rates (market decline) or purchased in
anticipation of a decline in interest rates (market rise) and later sold. In
addition, a security may be sold and another of comparable quality purchased at
approximately the same time to take advantage of what a Fund's Sub-Advisor
believes to be a temporary disparity in the normal yield relationship between
the two securities. These yield disparities may occur for reasons not directly
related to the investment quality of particular issues or the general movement
of interest rates, such as changes in the overall demand for, or supply of,
various types of securities.
PORTFOLIO TRANSACTIONS
Most of the purchases and sales of securities for a Fund, whether
transacted on a securities exchange or over-the-counter, will be effected in the
primary trading market for the securities. Decisions to buy and sell securities
for a Fund are made by its Sub-Advisor, which also is
-65-
<PAGE> 240
responsible for placing these transactions, subject to the overall review of the
Trust's Trustees. Although investment decisions for each Fund are made
independently from those of the other accounts managed by its Sub-Advisor,
investments of the type the Fund may make may also be made by those other
accounts. When a Fund and one or more other accounts managed by its Sub-Advisor
are prepared to invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner believed by
the Sub-Advisor to be equitable to each. In some cases, this procedure may
adversely affect the price paid or received by a Fund or the size of the
position obtained or disposed of by the Fund. In other cases, however, it is
believed that coordination and the ability to participate in volume transactions
will be to the benefit of the Fund.
Transactions on U.S. exchanges involve the payment of negotiated
brokerage commissions. With respect to exchanges on which commissions are
negotiated, the cost of transactions may vary among different brokers. There is
generally no stated commission in the case of securities traded in the
over-the-counter markets, but the prices of those securities include undisclosed
commissions or concessions, and the prices at which securities are purchased
from and sold to dealers include a dealer's mark-up or mark-down. U.S.
Government securities may be purchased directly from the U.S. Treasury or from
the issuing agency or instrumentality.
In selecting brokers or dealers to execute portfolio transactions on
behalf of a Fund, the Fund's Sub-Advisor seeks the best overall terms available.
In assessing the best overall terms available for any transaction, each
Sub-Advisor will consider the factors the Sub-Advisor deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on a
continuing basis. In addition, each advisory agreement among the Trust, Sierra
Advisors and a Sub-Advisor authorizes the Sub-Advisor, in selecting brokers or
dealers to execute a particular transaction and in evaluating the best overall
terms available, to consider the brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934, as amended)
provided to the Trust, the other Funds and/or other accounts over which the
Sub-Advisor or its affiliates exercise investment discretion. The fees under the
advisory agreements between the Trust and the Sub-Advisors are not reduced by
reason of their receiving such brokerage and research services. The Trust's
Trustees will periodically review the commissions paid by the Funds to determine
if the commissions paid over representative periods of time were reasonable in
relation to the benefits received by the Trust.
Consistent with applicable provisions of the 1940 Act, the rules and
exemptions adopted by the Commission thereunder, and relevant interpretive and
"no-action" positions taken by the Commission's staff, the Trust's Board of
Trustees has adopted procedures pursuant to Rule 17e-1 under the 1940 Act to
ensure that all portfolio transactions with affiliates will be fair and
reasonable. Under the procedures adopted, portfolio transactions for a Fund may
be executed through GW Securities or any other affiliated broker (other than
affiliated persons of the Trust solely because the broker is an affiliated
person of a sub-adviser of another Fund) if, subject to other conditions in the
Rule 17e-1 procedures, in the judgment of the Fund's Sub-Advisor, the use of GW
Securities or an affiliated broker is likely to result in price and execution at
least as favorable as those of other qualified broker-dealers, and if, in the
transaction, GW Securities or such other affiliated broker charges the Fund a
rate consistent with those charged for comparable transactions in comparable
-66-
<PAGE> 241
accounts of the broker's most favored unaffiliated clients. Over-the-counter
purchases and sales are transacted directly with principal market makers except
in those cases in which better prices and executions may be obtained elsewhere.
For the three fiscal years ended June 30, 1995, 1996 and 1997, the Trust paid
brokerage commissions of approximately $6,089, $23,059 and $39,147,
respectively, to J.P. Morgan, an affiliate of J.P. Morgan Investment Management.
For the fiscal year ended June 30, 1995, 1996 and 1997, commissions paid to J.P.
Morgan represented approximately .25%, .76% and 1.61%, respectively, of the
total amount of brokerage commissions paid in such period and which were paid on
transactions that represented .25%, .76% and 1.61%, respectively, of the
aggregate dollar amount of transactions that incurred commissions paid by the
Trust during such period. For the three fiscal years ended June 30, 1995, 1996
and 1997, the Trust paid brokerage commissions of approximately $21,155, $60,995
and $49,517, respectively, to Donaldson, Lufkin & Jenrette, an affiliate of
Janus Capital Corporation. For the fiscal year ended June 30, 1995, 1996 and
1997, commissions paid to Donaldson, Lufkin & Jenrette represented approximately
.88%, 2.02% and 2.03%, respectively, of the total amount of brokerage
commissions paid in such period and which were paid on transactions that
represented .88%, 2.02% and 2.03%, respectively, of the aggregate dollar amount
of transactions that incurred commissions paid by the Trust during such period.
For the fiscal years ended December 31, 1995, 1996 and 1997, the Funds paid the
following brokerage commissions:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
TOTAL BROKERAGE COMMISSIONS PAID
- ---------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended
Fund 6/30/97 6/30/96 6/30/95
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Money Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
U.S. Government Money Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
California Money Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
Corporate Income Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
U.S. Government Fund $23,912 $87,000 $60,745
- ---------------------------------------------------------------------------------------------------------
Short Term Global Government Fund $3,250 $5,000 $2,060
- ---------------------------------------------------------------------------------------------------------
Short Term High Quality Bond Fund $6,064 $20,378 $7,320
- ---------------------------------------------------------------------------------------------------------
National Municipal Fund $0 $19,942 $12,500
- ---------------------------------------------------------------------------------------------------------
California Municipal Fund $0 $20,982 $0
- ---------------------------------------------------------------------------------------------------------
Florida Insured Municipal Fund $7,935 $0 $0
- ---------------------------------------------------------------------------------------------------------
California Insured Intermediate Municipal Fund $7,102 $0 $0
- ---------------------------------------------------------------------------------------------------------
Growth and Income Fund $593,025 $439,677 $350,781
- ---------------------------------------------------------------------------------------------------------
Emerging Growth Fund $480,975 $849,149 $757,574
- ---------------------------------------------------------------------------------------------------------
Growth Fund $616,898 $723,100 $635,228
- ---------------------------------------------------------------------------------------------------------
International Growth Fund $696,191 $860,863 $583,298
- ---------------------------------------------------------------------------------------------------------
</TABLE>
-67-
<PAGE> 242
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Target Maturity 2002 Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
TOTAL BROKERAGE COMMISSIONS PAID TO AFFILIATED PERSONS
- ---------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended
Fund 6/30/97 6/30/96 6/30/95
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Money Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
U.S. Government Money Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
California Money Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
Corporate Income Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
U.S. Government Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
Short Term Global Government Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
Short Term High Quality Bond Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
National Municipal Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
California Municipal Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
Florida Insured Municipal Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
California Insured Intermediate Municipal Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
Growth and Income Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
Emerging Growth Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
Growth Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
International Growth Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
Target Maturity 2002 Fund $0 $0 $0
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
TOTAL AMOUNT OF
TRANSACTIONS WHERE
TOTAL BROKERAGE COMMISSIONS BROKERAGE COMMISSIONS
PAID TO BROKERS THAT PROVIDED WERE PAID TO BROKERS THAT
RESEARCH PROVIDED RESEARCH
Year ended Year ended
Fund 6/30/97 6/30/97
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Global Money Fund $0 $0
- -------------------------------------------------------------------------------------------------------
U.S. Government Money Fund $0 $0
- -------------------------------------------------------------------------------------------------------
California Money Fund $0 $0
- -------------------------------------------------------------------------------------------------------
Corporate Income Fund $0 $0
- -------------------------------------------------------------------------------------------------------
U.S. Government Fund $0 $0
- -------------------------------------------------------------------------------------------------------
Short Term Global Government Fund $0 $0
- -------------------------------------------------------------------------------------------------------
</TABLE>
-68-
<PAGE> 243
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
Short Term High Quality Bond Fund $0 $0
- -------------------------------------------------------------------------------------------------------
National Municipal Fund $0 $0
- -------------------------------------------------------------------------------------------------------
California Municipal Fund $0 $0
- -------------------------------------------------------------------------------------------------------
Florida Insured Municipal Fund $0 $0
- -------------------------------------------------------------------------------------------------------
California Insured Intermediate Municipal Fund $0 $0
- -------------------------------------------------------------------------------------------------------
Growth and Income Fund $0 $0
- -------------------------------------------------------------------------------------------------------
Emerging Growth Fund $961 $676,876
- -------------------------------------------------------------------------------------------------------
Growth Fund $1,310 $936,110
- -------------------------------------------------------------------------------------------------------
International Growth Fund* $65,416 $118,936,350
- -------------------------------------------------------------------------------------------------------
Target Maturity 2002 Fund $0 $0
- -------------------------------------------------------------------------------------------------------
</TABLE>
*Represents figures for period from October 18, 1996 to June 30, 1997.
The Trust is required to identify any securities of its "regular brokers
or dealers" (as such term is defined in the 1940 Act) which the Trust has
acquired during its most recent fiscal year. As of June 30, 1997, none of the
Funds held any securities of any "regular broker or dealer" of the Trust.
NET ASSET VALUE
The Trust will not calculate the net asset value of the Funds' Class A,
Class B, Class I and Class S Shares on certain holidays. On those days,
securities held by a Fund may nevertheless be actively traded, and the value of
the Fund's shares could be significantly affected.
A security that is primarily traded on a U.S. exchange (including
securities traded through the NASDAQ National Market System) is valued at the
last sale price on that exchange or, if there were no sales during the day, at
the current quoted bid price. Over-the-counter securities that are not traded
through the NASDAQ National Market System are valued on the basis of the bid
price at the close of business on each day. An option is generally valued at the
last sale price or, in the absence of a last sale price, the last offer price.
Investments in U.S. Government securities (other than short-term securities) are
valued at the average of the quoted bid and asked prices in the over-the-counter
market. Short term investments that mature in 60 days or less are valued at
amortized cost when the Board of Trustees determines that this constitutes fair
value; assets of the Money Funds are also valued at amortized cost. The value of
a futures contract equals the unrealized gain or loss on the contract, which is
determined by marking the contract to the current settlement price for a like
contract acquired on the day on which the futures contract is being valued. A
settlement price may not be used if the market makes a limited move with respect
to the security or index underlying the futures contract. In such event, the
futures contract will be valued at a fair market value to be determined by or
under the direction of the Board of Trustees.
In carrying out the Board's valuation policies, First Data, as
Sub-Administrator, may consult with one or more independent pricing services
("Pricing Service") retained by the Trust. Debt securities of U.S. issuers
(other than U.S. Government securities and short-term investments),
-69-
<PAGE> 244
including Municipal Securities, are valued by First Data, as Sub-Administrator,
after consultation with the Pricing Service. When, in the judgment of the
Pricing Service, quoted bid prices for investments of the Municipal Funds are
readily available and are representative of the bid side of the market, these
investments are valued at the mean between the quoted bid prices and asked
prices. Investments of the Municipal Funds that are not regularly quoted are
carried at fair market value as determined by the Board of Trustees, which may
rely on the assistance of the Pricing Service. The procedures of the Pricing
Service are reviewed periodically by the officers of the Trust under the general
supervision and responsibility of the Board of Trustees.
VALUATION OF THE MONEY FUNDS. The valuation of the portfolio securities
of the Money Funds is based upon their amortized costs, which does not take into
account unrealized capital gains or losses. Amortized cost valuation involves
initially valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price a Fund
would receive if it sold the instrument.
The use by the Money Funds of the amortized cost method of valuing their
respective portfolio securities is permitted by a rule adopted by the SEC. Under
this rule, the Money Funds must maintain dollar-weighted average portfolio
maturities of 90 days or less, purchase only instruments having remaining
maturities of thirteen months or less and invest only in securities determined
by the Board of Trustees of the Trust to present minimal credit risks and meet
certain rating criteria described in the Prospectus of the Money Funds under
"The Funds' Investments and Risk Considerations - Investment Principles and Risk
Considerations - The Money Funds." Pursuant to the rule, the Board of Trustees
also has established procedures designed to stabilize, to the extent reasonably
possible, the Funds' price per share as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the Funds' portfolio
holdings by the Board of Trustees, at such intervals as it may deem appropriate,
to determine whether the Funds' net asset values calculated by using available
market quotations or market equivalents deviates from $1.00 per share based on
amortized cost.
The rule also provides that the extent of any deviation between the
Funds' net asset values based upon available market quotations or market
equivalents and the $1.00 per share net asset values based on amortized cost
must be examined by the Board of Trustees. In the event the Board of Trustees
determines that a deviation exists which may result in material dilution or
other unfair results to investors or existing shareholders, pursuant to the rule
the Board of Trustees must cause the Trust to take such corrective action as the
Board deems necessary and appropriate including: selling portfolio instruments
prior to maturity to realize capital gains or losses or to shorten average
portfolio maturity; withholding dividends or paying distributions from capital
or capital gains; redeeming shares in kind; or establishing a net asset value
per share by using available market quotations.
-70-
<PAGE> 245
HOW TO BUY AND REDEEM SHARES
Class A, Class B, Class I and Class S Shares of the Funds may be
purchased and redeemed in the manner described in the Prospectuses and in this
Statement of Additional Information. Class I Shares are currently offered and
sold only to SAM Portfolios.
COMPUTATION OF PUBLIC OFFERING PRICES
The Funds offer their shares to the public on a continuous basis. The
public offering price per Class A Share of the Funds is equal to the respective
net asset value per Class A Share next computed after receipt of a purchase
order, plus the applicable front-end sales charge, if any. The public offering
price per Class B Share, Class I Share or Class S Share of the Funds is equal to
the net asset value per such Class B Share, Class I Share or Class S Share next
computed after receipt of a purchase order.
An illustration of the computation of the Public Offering Price per Class
A Share of the U.S. Government, Corporate Income, California Municipal, Florida
Insured Municipal, California Insured Intermediate Municipal, National
Municipal, Growth and Income, Growth, Emerging Growth, International Growth,
Short Term High Quality Bond, Short Term Global Government and Target Maturity
Funds is provided in the table below. The computation is based on the value of
each Fund's net assets, the number of Class A Shares outstanding on June 30,
1997 and the application of the maximum sales charge for the Funds, as set forth
in the table below.
<TABLE>
<CAPTION>
California Florida National
U.S. Corporate Municipal Insured Municipal Growth and
Class A Shares Government Fund(1) Income Fund(1) Fund(1) Municipal Fund(1) Fund(1) Income Fund(2)
-------------- ----------------- -------------- ------------- ------------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net Assets.............. $258,553,449 $195,530,521 $318,251,461 $22,761,049 $182,262,402 $168,687,115
Outstanding Shares...... 27,040,300 18,966,729 29,146,582 2,291,279 16,332,950 10,590,644
Net Asset Value
Per Share.............. $9.56 $10.31 $10.92 $9.93 $11.16 $15.93
Sales Charge, as a
percentage of the
offering price......... 4.50% 4.50% 4.50% 4.50% 4.50% 5.75%
Offering to Public...... $10.01 $10.80 $11.43 $10.40 $11.69 $16.90
</TABLE>
<TABLE>
<CAPTION>
California
Short Term Insured Target
Global Short Term Intermediate Maturity
Emerging International Government High Quality Municipal 2002
Growth Fund(2) Growth Fund(2) Growth Fund(2) Fund(3) Bond Fund(3) Fund(1) Fund(4)
-------------- -------------- -------------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Assets............. $165,719,142 $111,186,791 $57,776,390 $44,255,652 $13,685,006 $45,156,682 $2,815,868
Outstanding Shares..... 9,066,672 7,462,279 4,876,565 19,252,637 5,898,076 4,205,143 263,366
Net Asset Value
Per Share............. $18.28 $14.90 $11.85 $2.30 $2.32 $10.74 $10.69
Sales Charge, as a
percentage of the
offering price ........ 5.75% 5.75% 5.75% 3.50% 3.50% 4.50% 2.00%
Offering to Public..... $19.40 $15.81 $12.57 $2.38 $2.40 $11.25 $10.91
</TABLE>
-71-
<PAGE> 246
- ----------------
1. The maximum sales charge for the U.S. Government, Corporate Income,
California Municipal, Florida Insured Municipal, National Municipal and
California Insured Intermediate Municipal Funds is 4.5%.
2. The maximum sales charge for the Growth and Income, Growth, Emerging Growth
and International Growth Funds is 5.75%.
3. The maximum sales charge for the Short Term Global Government and Short Term
High Quality Bond Funds is 3.5%.
4. The maximum sales charge for the Target Maturity 2002 Fund is 2.0%.
In addition to the purchases on which the sales charge is waived as
listed in the prospectus, no sales charge will be assessed on a purchase by any
other investment company in connection with the combination of such company with
the Trust by merger, acquisition of assets or otherwise.
REDEMPTIONS
The procedures for redemption of Class A, Class B and Class S Shares of
each Fund are summarized in the Prospectuses under "Your Account - How to Sell
Shares." The right of redemption of Class A, Class B and Class S Shares of a
Fund may be suspended or the date of payment postponed (1) for any periods
during which the New York Stock Exchange is closed (other than for customary
weekend and holiday closings), (2) when trading in the markets the Fund normally
utilizes is restricted, or an emergency, as defined by the rules and regulations
of the SEC, exists making disposal of the Fund's investments or determination of
its net assets value not reasonably practicable or (3) for such other periods as
the SEC by order may permit for protection of the Fund's shareholders.
CERTAIN WAIVERS OF THE CONTINGENT DEFERRED SALES CHARGES. Contingent
deferred sales charges (each, a "CDSC") imposed upon redemptions of Class A,
Class B and Class S Shares will be waived in certain instances.
The CDSC of 1.0% or 0.5% imposed on redemptions of Class A Shares for
which the entire sales charge at purchase was waived as described in
"Application of Class A Shares CDSC" in the prospectuses of the Funds will be
waived in certain instances as described in "Waivers of Class A Shares CDSC" in
the prospectuses. For purposes of the waivers described in such section of the
prospectuses, a person will be deemed "disabled" only if the person is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or be of long-continued and indefinite duration.
The CDSC applicable to the Class B Shares and the Class S Shares may be
waived as described in the sections of the prospectuses that describe waivers of
the sales charges for the various classes of the Funds. The CDSC applicable to
the Class B Shares is waived for withdrawals under the Systematic Withdrawal
Plan under certain circumstances as described in "Systematic Withdrawal Plan"
below.
DISTRIBUTIONS IN KIND. If the Board of Trustees determines that it would
be detrimental to the best interests of the remaining shareholders of a Fund to
make a redemption payment wholly in cash, the Trust may pay, in accordance with
SEC rules, any portion of a redemption in excess of the lesser of $250,000 or 1%
of the Fund's net assets by distribution in kind of portfolio securities in lieu
of cash. Securities issued in a distribution in kind will be readily marketable,
although shareholders receiving distributions in kind may incur brokerage
commissions when subsequently redeeming
-72-
<PAGE> 247
shares of those securities.
SYSTEMATIC WITHDRAWAL PLAN. As described in the Prospectuses, a
Systematic Withdrawal Plan may be established by a shareholder who owns either
Class A or Class B Shares of a Fund with a value exceeding $10,000 and who
wishes to receive specific amounts of cash periodically. Monthly, quarterly,
semiannual or annual withdrawals in a minimum amount of $100 may be made under
the Systematic Withdrawal Plan by redeeming as many shares of the Fund as may be
necessary to cover the stipulated withdrawal payment. The CDSC on Class B Shares
is waived for withdrawals under a Systematic Withdrawal Plan that meets certain
conditions as described in "Your Account - Ways To Set Up Your Account - Waivers
of Class B CDSCs" in the prospectuses. To the extent that withdrawals exceed
dividends, distributions and appreciation of a shareholder's investment in a
Fund, there will be a reduction in the value of the shareholder's investment in
the relevant class of the Fund and continued withdrawal payments may reduce the
shareholder's investment and ultimately exhaust it. Withdrawal payments should
not be considered as income from investment in a Fund. For additional
information regarding the Systematic Withdrawal Plan, write to the Trust at P.O.
Box 5118, Westboro, Massachusetts 01581-5118 or by calling the Trust at
800-222-5852.
CHECK REDEMPTION PRIVILEGE. Checkwriting is available for the Class A
Shares of the Money Funds only. Checks to redeem shares of any of the Money
Funds are drawn on the Trust's account at Boston Safe and shareholders will be
subject to the same rules and regulations that Boston Safe applies to checking
accounts and, will have the same rights and duties with respect to stop payment
orders, "stale" checks, and unauthorized endorsements as bank checking account
customers do under Massachusetts Uniform Commercial Code. All notices with
regard to those rights and duties must be given to Boston Safe.
HOW TO EXCHANGE SHARES
A shareholder 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. 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, the SAM
Portfolios or the Sierra Prime Income Fund ("SPIF") and (the foregoing funds
together, the "Eligible Funds") without a sales charge at purchase. 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. 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 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. 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 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. See the Prospectuses,
"Your Account - Exchange Privileges and Restrictions" for information regarding
the application of sales charges to certain exchanges. An exchange of shares is
treated for federal income tax purposes as a redemption (sale) of shares given
in exchange by the
-73-
<PAGE> 248
shareholder, and an exchanging shareholder may, therefore, realize a taxable
gain or loss in connection with the exchange. See "Taxes" below. Upon 60 days
prior written notice to shareholders, the exchange privilege may be modified or
terminated and the Trust may impose a charge of up to $5 for exchanges.
The exchange privilege enables a shareholder to acquire the same class
of shares in a Fund with different investment objectives or policies when the
shareholder believes that a shift between Funds is an appropriate investment
decision. This privilege is available to shareholders residing in any state in
which shares of the Fund being acquired may legally be sold.
Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the then-current net
asset value and the proceeds are immediately invested, at a price as described
above, in the same class of shares of the Fund being acquired. The Trust
reserves the right to reject any exchange request.
DETERMINATION OF PERFORMANCE
From time to time, the Trust may quote the performance of a Fund's Class
A, Class B and Class S Shares in terms of yield, actual distributions, total
return or capital appreciation in reports or other communications to
shareholders or in advertising material. The yield for the Class A, Class B and
Class S Shares of the Money Funds is computed by: (1) determining the net
change, exclusive of capital changes, in the value of a hypothetical
pre-existing account in each Fund having a balance of one share at the beginning
of a seven calendar day period for which yield is to be quoted, (2) subtracting
a hypothetical change reflecting deductions from shareholder accounts, (3)
dividing the net change by the value of the account at the beginning of the
period to obtain the base period return, and (4) annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value of the
account reflects the value of additional shares purchased with dividends
declared on the original share and any such additional shares, but does not
include realized gains and losses or unrealized appreciation or depreciation. In
addition, the Money Funds may calculate a compounded effective annualized yield
by adding 1 to the base period return (calculated as described above), raising
the sum to a power equal to 365/7 and subtracting 1.
The current yield for the Money Funds and the Target Maturity Fund may
be obtained by calling 800-222-5862. For the seven-day period ended June 30,
1997, the yield for the outstanding shares of the Target Maturity Fund was
5.67%. For the seven-day period ended June 30, 1997, the yields for the
outstanding shares of the Global Money, U.S. Government Money and California
Money Funds that are treated as Class A Shares were 4.91%, 4.76% and 3.28%,
respectively, and the effective yields of such shares of each such Fund for the
same period were 5.03%, 4.87% and 3.33%, respectively. The California Money Fund
may also calculate its tax equivalent yield as described on the following page.
The Bond Funds may quote a 30-day yield figure (the "SEC Yield") which
is calculated according to a formula prescribed by the SEC. The formula can be
expressed as follows:
YIELD = 2[(a-b + 1)6 - 1]
cd
-74-
<PAGE> 249
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
For the purpose of determining the interest earned (variable "a" in the
formula) on debt obligations that were purchased by one of the Bond Funds at a
discount or premium, the formula generally calls for amortization of the
discount or premium; the amortization schedule will be adjusted monthly to
reflect changes in the market values of the debt obligations.
Based on the foregoing calculation, the SEC Yields relating to the
outstanding shares treated as Class A Shares for the 30-day period ended June
30, 1997 are as follows:
<TABLE>
<CAPTION>
Fund Yield
---- -----
<S> <C>
U.S. Government Fund 6.53%
Corporate Income Fund 6.72%
California Municipal Fund 4.91%
Florida Insured Municipal Fund 4.77%
California Insured Intermediate Municipal Fund 4.06%
Short Term Global Government Fund 4.83%
Short Term High Quality Bond Fund 5.86%
National Municipal Fund 4.58%
Target Maturity 2002 Fund 5.54%
</TABLE>
In addition, the Fund may quote a 30-day yield based on actual
distributions during a 30-day period that is computed by dividing the net
investment income per share earned by the Fund during the period by the maximum
Public Offering Price per share on the last day of the 30-day period. This
income is "annualized" by assuming that the amount of income is generated each
month over a one-year period and is compounded semiannually. The annualized
income is then shown as a percentage of the maximum Public Offering Price. In
addition, the 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. These 30-day average yields for the period ended June
30, 1997 for the outstanding shares of the California Municipal, Florida Insured
Municipal, California Insured Intermediate Municipal and National Municipal
Funds were 5.26%, 4.79%, 4.42% and 5.31%, respectively.
-75-
<PAGE> 250
The tax equivalent yield for the California Money, California Municipal,
California Insured Intermediate Municipal, Florida Insured Municipal, National
Municipal and Target Maturity Funds is computed by dividing that portion of the
Fund's yield which is tax-exempt by one minus a stated federal and/or state
income tax rate and adding the product to that portion, if any, of the Fund's
yield that is not tax-exempt. The tax-equivalent yield for the outstanding
shares of the California Money Fund, that are treated as Class A Shares, for the
7-day period ended June 30, 1997 was 6.08%. The tax equivalent SEC 30-day yields
for the period ended June 30, 1997 for the outstanding shares of the California
Municipal, Florida Insured Municipal, California Insured Intermediate Municipal,
National Municipal and Target Maturity Funds were 10.86%, 7.90%, 8.98%, 7.58%
and 9.17%, respectively. The tax equivalent yield based on the 30-day average
yield for the period ended June 30, 1997 for the outstanding shares of the
California Municipal, Florida Insured Municipal, California Insured Intermediate
Municipal and the National Municipal Funds were 10.06%, 8.30%, 8.46% and 9.20%,
respectively. Tax-equivalent yields assume the payment of federal income taxes
at a rate of 39.6% and, if applicable, California state income taxes at a rate
of 9.3%.
Capital appreciation for Class A, Class B and Class S Shares of the Bond
Funds and the Equity Funds shows principal changes for the period shown, and
total return combines principal changes and dividend and interest income
reinvested for the periods shown. Principal changes are based on the difference
between the beginning and closing net asset values for the period. Actual
distributions include short-term capital gains derived from option writing or
other sources. The period selected for performance data will depend upon the
purpose of reporting the performance.
The total return of the Funds' Class A, Class B and Class S Shares may
be calculated on an "average annual total return" basis, and may also be
calculated on an "aggregate total return" basis, for various periods. Average
annual total return reflects the average annual percentage change in the value
of an investment in a Fund over the particular measuring period. Aggregate total
return reflects the cumulative percentage change in value over the measuring
period. Average annual total return figures provided for Class A, Class B and
Class S Shares of the Bond and Equity Funds will be computed according to a
formula prescribed by the SEC. The formula can be expressed as follows:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return/aggregate total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10
years (or other) periods or the life of the Fund
The formula for calculating aggregate total return can be expressed as
follows:
Aggregate Total Return = [ (ERV) - 1 ]
---
P
-76-
<PAGE> 251
The calculation of average annual total return and aggregate total
return assumes reinvestment of all income dividends and capital gain
distributions on the reinvestment dates during the period and includes all
recurring fees charged to all shareholder accounts. In addition, with respect to
Class A Shares, the maximum 4.5% sales charge is deducted from the initial
$1,000 payment (variable "P" in the formula).
The ERV assumes complete redemption of the hypothetical investment at
the end of the measuring period and reflects deduction of all nonrecurring
charges at the end of the measuring period covered by the computation. A Fund's
net investment income changes in response to fluctuations in interest rates and
the expenses of the Fund.
The Average annual rates of return (unless otherwise noted) for the
Funds for the one year and five year periods ended June 30, 1997 and for the
period from inception through June 30, 1997 are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Aggregate
Since Date Total Return
of from Date of
One Year Five Year Inception Inception
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT TERM HIGH QUALITY BOND FUND
CLASS A SHARES 11/1/93
Adjusted for Maximum Sales Charge 2.44% N/A 3.03% 11.56%
Not Adjusted for Sales Charge 6.15% N/A 4.03% 15.60%
CLASS B SHARES 6/30/94
Adjusted for Maximum Sales Charge 1.37% N/A 3.83% 11.93%
Not Adjusted for Sales Charge 5.37% N/A 4.43% 13.87%
CLASS S SHARES 6/30/94
Adjusted for Maximum Sales Charge .37% N/A 3.52% 10.95%
Not Adjusted for Sales Charge 5.37% N/A 4.42% 13.87%
- --------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT FUND
CLASS A SHARES 7/25/89
Adjusted for Maximum Sales Charge 3.85% 4.39% 6.61% 66.16%
Not Adjusted for Sales Charge 8.75% 5.36% 7.23% 73.99%
CLASS B SHARES 6/30/94
Adjusted for Maximum Sales Charge 2.94% N/A 6.04% 19.24%
Not Adjusted for Sales Charge 7.94% N/A 6.93% 22.24%
CLASS S SHARES 6/30/94
Adjusted for Maximum Sales Charge 2.94% N/A 6.04% 19.25%
Not Adjusted for Sales Charge 7.94% N/A 6.93% 22.25%
- --------------------------------------------------------------------------------------------------------
CORPORATE INCOME FUND
CLASS A SHARES 7/18/90
Adjusted for Maximum Sales Charge 4.31% 6.68% 8.16% 72.45%
Not Adjusted for Sales Charge 9.23% 7.67% 8.87% 80.57%
CLASS B SHARES 6/30/94
Adjusted for Maximum Sales Charge 3.41% N/A 7.76% 25.15%
Not Adjusted for Sales Charge 8.41% N/A 8.62% 28.15%
CLASS S SHARES 6/30/94
Adjusted for Maximum Sales Charge 3.41% N/A 7.77% 25.16%
Not Adjusted for Sales Charge 8.41% N/A 8.62% 28.16%
- --------------------------------------------------------------------------------------------------------
</TABLE>
-77-
<PAGE> 252
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Aggregate
Since Date Total Return
of from Date of
One Year Five Year Inception Inception
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA MUNICIPAL FUND
CLASS A SHARES 7/25/89
Adjusted for Maximum Sales Charge 3.94% 5.78% 6.62% 66.33%
Not Adjusted for Sales Charge 8.83% 6.76% 7.24% 74.17%
CLASS B SHARES 6/30/94
Adjusted for Maximum Sales Charge 3.02% N/A 5.92% 18.82%
Not Adjusted for Sales Charge 8.02% N/A 6.80% 21.82%
CLASS S SHARES 6/30/94
Adjusted for Maximum Sales Charge 3.02% N/A 5.92% 18.82%
Not Adjusted for Sales Charge 8.02% N/A 6.80% 21.82%
- --------------------------------------------------------------------------------------------------------
CALIFORNIA INSURED INTERMEDIATE MUNICIPAL FUND
CLASS A SHARES 4/4/94
Adjusted for Maximum Sales Charge
Not Adjusted for Sales Charge 2.15% N/A 5.97% 20.66%
CLASS B SHARES 6/30/94 6.97% N/A 7.49% 26.34%
Adjusted for Maximum Sales Charge
Not Adjusted for Sales Charge 1.17% N/A 5.62% 17.81%
CLASS S SHARES 6/30/94 6.17% N/A 6.51% 20.81%
Adjusted for Maximum Sales Charge
Not Adjusted for Sales Charge 1.17% N/A 5.62% 17.81%
6.17% N/A 6.50% 20.81%
- --------------------------------------------------------------------------------------------------------
FLORIDA INSURED MUNICIPAL FUND
CLASS A SHARES 6/7/93
Adjusted for Maximum Sales Charge 3.55% N/A 3.91% 16.89%
Not Adjusted for Sales Charge 8.43% N/A 5.10% 22.40%
CLASS B SHARES 6/30/94
Adjusted for Maximum Sales Charge 2.63% N/A 5.65% 17.91%
Not Adjusted for Sales Charge 7.63% N/A 6.53% 20.91%
CLASS S SHARES 6/30/94
Adjusted for Maximum Sales Charge 2.63% N/A 5.65% 17.91%
Not Adjusted for Sales Charge 7.63% N/A 6.53% 20.91%
- --------------------------------------------------------------------------------------------------------
NATIONAL MUNICIPAL FUND
CLASS A SHARES 7/18/90
Adjusted for Maximum Sales Charge 4.01% 5.75% 7.50% 65.28%
Not Adjusted for Sales Charge 8.91% 6.73% 8.21% 73.07%
CLASS B SHARES 6/30/94
Adjusted for Maximum Sales Charge 3.10% N/A 5.52% 17.50%
Not Adjusted for Sales Charge 8.10% N/A 6.41% 20.50%
CLASS S SHARES 6/30/94
Adjusted for Maximum Sales Charge 3.10% N/A 5.52% 17.50%
Not Adjusted for Sales Charge 8.10% N/A 6.41% 20.50%
- --------------------------------------------------------------------------------------------------------
GROWTH AND INCOME FUND
CLASS A SHARES 7/25/89
Adjusted for Maximum Sales Charge 22.81% 15.92% 12.26% 150.33%
Not Adjusted for Sales Charge 30.30% 17.30% 13.11% 165.60%
CLASS B SHARES 6/30/94
Adjusted for Maximum Sales Charge 24.33% N/A 22.44% 83.54%
Not Adjusted for Sales Charge 29.33% N/A 23.11% 86.54%
CLASS S SHARES 6/30/94
Adjusted for Maximum Sales Charge 24.24% N/A 22.43% 83.50%
Not Adjusted for Sales Charge 29.24% N/A 23.09% 86.50%
- --------------------------------------------------------------------------------------------------------
</TABLE>
-78-
<PAGE> 253
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Aggregate
Since Date Total Return
of from Date of
One Year Five Year Inception Inception
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GROWTH FUND
CLASS A SHARES 4/5/93
Adjusted for Maximum Sales Charge 4.50% N/A 15.80% 86.13%
Not Adjusted for Sales Charge 10.88% N/A 17.43% 97.49%
CLASS B SHARES 6/30/94
Adjusted for Maximum Sales Charge 5.30% N/A 20.98% 77.09%
Not Adjusted for Sales Charge 9.99% N/A 21.66% 80.09%
CLASS S SHARES 6/30/94
Adjusted for Maximum Sales Charge 5.36% N/A 21.00% 77.16%
Not Adjusted for Sales Charge 10.06% N/A 21.68% 80.16%
- --------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND
CLASS A SHARES 7/18/90
Adjusted for Maximum Sales Charge 8.86% 8.19% 4.02% 31.49%
Not Adjusted for Sales Charge 15.50% 9.47% 4.91% 39.51%
CLASS B SHARES 6/30/94
Adjusted for Maximum Sales Charge 9.66% N/A 6.23% 19.87%
Not Adjusted for Sales Charge 14.66% N/A 7.11% 22.87%
CLASS S SHARES 6/30/94
Adjusted for Maximum Sales Charge 9.61% N/A 6.20% 19.77%
Not Adjusted for Sales Charge 14.61% N/A 7.08% 22.77%
- --------------------------------------------------------------------------------------------------------
SHORT TERM GLOBAL GOVERNMENT FUND
CLASS A SHARES 2/11/92
Adjusted for Maximum Sales Charge 5.05% 4.83% 5.52% 33.58%
Not Adjusted for Sales Charge 8.86% 5.58% 6.22% 38.43%
CLASS B SHARES 6/30/94
Adjusted for Maximum Sales Charge 4.05% N/A 5.88% 17.73%
Not Adjusted for Sales Charge 8.05% N/A 6.17% 19.69%
CLASS S SHARES 6/30/94
Adjusted for Maximum Sales Charge 3.05% N/A 5.29% 16.74%
Not Adjusted for Sales Charge 8.05% N/A 6.17% 19.69%
- --------------------------------------------------------------------------------------------------------
EMERGING GROWTH FUND
CLASS A SHARES 7/18/90
Adjusted for Maximum Sales Charge -7.17% 13.68% 12.42% 125.72%
Not Adjusted for Sales Charge -1.50% 15.04% 13.38% 139.49%
CLASS B SHARES 6/30/94
Adjusted for Maximum Sales Charge -6.75% N/A 16.04% 56.24%
Not Adjusted for Sales Charge -2.26% N/A 16.78% 59.24%
CLASS S SHARES 6/30/94
Adjusted for Maximum Sales Charge -6.75% N/A 16.03% 56.23%
Not Adjusted for Sales Charge -2.26% N/A 16.77% 59.23%
- --------------------------------------------------------------------------------------------------------
TARGET MATURITY 2002 FUND
CLASS A SHARES 3/20/95
Adjusted for Maximum Sales Charge 4.81% N/A 6.83% 16.28%
Not Adjusted for Sales Charge 6.95% N/A 7.78% 18.65%
- --------------------------------------------------------------------------------------------------------
</TABLE>
The performance of a Fund's Class A, Class B and Class S Shares will
vary from time to time depending upon market conditions, the composition of the
Fund's portfolio and the Fund's operating expenses. Consequently, any given
performance quotation should not be considered representative of the Fund's
performance for any specified period in the future. In addition, because
performance will fluctuate, it may not provide a basis for comparing an
investment in a Fund with certain bank deposits or other investments that pay a
fixed yield or return for a stated period of time.
Investors should recognize that, because the Funds other than the Equity
Funds will have a high component of fixed-income securities, in periods of
declining interest rates the yields of the Funds will tend to be somewhat higher
than prevailing market rates, and in periods of rising interest
-79-
<PAGE> 254
rates yields will tend to be somewhat lower. In addition, when interest rates
are falling, the inflow of net new money to the Funds from the continuous sale
of shares will likely be invested in portfolio instruments producing lower
yields than the balance of the Fund's securities, thereby reducing the current
yields of the Funds. In periods of rising interest rates, the opposite can be
expected to occur. Comparative performance information may be used from time to
time in advertising the Trust's Class A, Class B and Class S Shares, including
data from Lipper Analytical Services, Inc., the S&P 500 Composite Stock Price
Index, the Dow Jones Industrial Average and other industry publications. The
International Growth Fund may compare its performance to other investments or
relevant indexes consisting of Morgan Stanley Capital International EAFE Index,
the Standard & Poor's 500 Index, the Lipper International Fund Index and The
Financial Times World Stock Index. The Short Term Global Government Fund may
also compare its performance to other investments or relevant indexes consisting
of The Europe/Asia/Far East (EAFE) Index, Morgan Stanley Capital International
World Index, The J.P. Morgan Global Traded Bond Index, the Lipper International
Fund Index, The Solomon Brothers World Government Bond Index and The Financial
Times World Stock Index.
PERFORMANCE COMPARISONS
In reports or other communications to shareholders or in advertising
material, a Fund may make certain performance comparisons as described in the
prospectuses of the Funds. Another performance comparison one or more of the
Funds may use is the following comparison of the return on IRA accounts to the
return on conventional savings plans:
[THE FOLLOWING IS A TABULAR REPRESENTATION THAT REPLACES GRAPHIC
MATERIAL FOR EDGAR FILING PURPOSES.]
The following replaces a bar graph that indicates years of investment
in increments of five years beginning at five years and ending at twenty years
on the horizontal axis and amount of total return for "Tax-Deferred Growth
(after-tax contributions and tax-deferred earnings)" and for "Conventional
Savings Plan (after-tax contributions and earnings)" on the vertical axis.
IRAs CAN HELP YOU EARN MORE
For $100,000 compounded annually at 8%
<TABLE>
<S> <C> <C>
$146,933+ $215,892+ $466,096+
$128,359++ $164,761++ $271,461++
---------- ---------- ----------
5 Years 10 Years 20 Years
</TABLE>
+ Tax-Deferred Growth *(after-tax contributions and tax-deferral earnings)
++ Conventional Savings Plan (after-tax contributions and earnings)
[END OF TABULAR REPRESENTATION THAT REPLACES GRAPHIC MATERIAL FOR
EDGAR FILING PURPOSES.]
* When you make withdrawals from your IRA account, you must pay taxes on the
earnings as well as on any tax- deductible contributions. Earnings on
conventional
-80-
<PAGE> 255
savings plans invested in various asset mediums are taxed annually, but you are
not taxed on withdrawals from such savings plans. If any payment from your IRA
account is taken before age 59 1/2, a 10% tax penalty may be imposed.
The sole purpose of this chart is to illustrate your tax-deferred
earnings from an IRA savings account in comparison to earnings from a taxable
conventional savings plan over a period of 20 years, and the chart translates
federal tax savings from a tax-free investment into an equivalent yield from a
taxable investment. The chart assumes a 36% tax rate for all periods (before the
deduction of any fees, charges or expenses) at a fixed rate of 8%. The chart
assumes no withdrawals from the savings plans and reinvestment of all dividends
and/or income during the 20-year period shown.
This chart is for illustrative purposes only and does not represent
past, current or future yields of any of the funds of the Sierra Trust Funds,
nor does it illustrate the effect of fluctuations in principal value.
TAXES
The following discussion of federal income tax consequences is based on
the Internal Revenue Code of 1986, as amended (the "Code") and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly alter the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.
Each Fund is treated as a separate entity for federal income tax
purposes and is not combined with the Trust's other Funds. Each of the Funds
intends to continue qualifying as a "regulated investment company" ("RIC") as
defined under Subchapter M of the Code. A Fund that is a RIC and distributes to
its shareholders at least 90% of its taxable net investment income (including,
for this purpose, its net realized short-term capital gains) and 90% of its
tax-exempt interest income (reduced by certain expenses), will not be liable for
federal income taxes to the extent its taxable net investment income and its net
realized long-term and short-term capital gains, if any, are distributed to its
shareholders.
In order to qualify as a RIC under the Code, in addition to satisfying
the distribution requirement described above, each Fund must (a) derive at least
90% of its gross income each taxable year from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stock, securities, or foreign currencies, and certain other related income,
including, generally, certain gains from options futures, and forward contracts;
and (b) diversify its holdings so that, at the end of each fiscal quarter of the
Fund's taxable year, (i) at least 50% of the market value of the Fund's assets
is represented by cash and cash items, U.S. government securities, securities of
other RICs, and other securities, with such other securities limited, in respect
to any one issuer, to an amount that does not represent more than 10% of the
outstanding voting securities of such issuer or exceed 5% of the value of the
Fund's total assets and (ii) not more than 25% of the value of its assets is
invested in the securities (other than U.S. government securities and securities
of other RICs) of any one issuer or of two or more issuers which the Fund
controls and which are engaged in the same, similar, or related trades or
businesses.
Notwithstanding the distribution requirement described above, which only
requires a Fund
-81-
<PAGE> 256
to distribute at least 90% of its annual investment company taxable income and
tax-exempt interest income and does not require any minimum distribution of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), a Fund will be subject to a nondeductible 4% federal excise tax
to the extent it fails to distribute by the end of any calendar year at least
98% of its ordinary income for that year and at least 98% of its capital gain
net income (the excess of short-and long-term capital gains over short- and
long-term capital losses) for the one-year period ending on October 31 of that
year, plus certain other amounts.
Because the California Money, California Municipal, California Insured
Intermediate, Florida Insured Municipal and National Municipal Funds will
distribute exempt-interest dividends, interest on indebtedness incurred or
continued by a shareholder to purchase or carry shares of these funds will not
be deductible for federal income tax purposes or, in the case of the California
and Florida Funds, for California and Florida income tax purposes. Any loss on
the sale or exchange of shares in these Funds held for six months or less will
be disallowed to the extent of any exempt-interest dividend received by the
shareholders with respect to such shares. In addition, the Code may require a
shareholder who receives exempt-interest dividends to treat as taxable income a
portion of certain otherwise non-taxable social security and railroad retirement
benefit payments. Municipal funds 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 "industrial development bonds." For
these purposes, the term "substantial user" is defined generally to include a
"non-exempt person" who regularly uses in a trade or business a part of a
facility financed from the proceeds of such bonds. Moreover, as noted in the
Prospectuses, (1) some or all of these Funds' dividends may be a specific
preference item, or a component of an adjustment item, for purposes of the
federal individual and corporate alternative minimum taxes and (2) the receipt
of these Funds' dividends and distributions may affect a corporate shareholder's
federal environmental tax liability. In addition, the receipt of dividends and
distributions may affect a foreign corporate shareholder's federal "branch
profits" tax liability and a Subchapter S corporate shareholder's federal
"excess net passive income" tax liability. Similar rules apply for California
State personal income tax purposes. Shareholders should consult their own tax
advisers as to whether they are (1) "substantial users" with respect to a
facility or "related" to such users within the meaning of the Code or (2)
subject to federal alternative minimum tax, the federal "environmental" tax, the
federal "branch profits" tax, or the federal "excess net passive income" tax.
Issuers of bonds purchased by the Municipal Funds (or the beneficiary of such
bonds) may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Shareholders should be aware
that exempt-interest dividends may become subject to federal income taxation
retroactively to the date of issuance of the bonds to which such dividends are
attributable if such representations are determined to have been inaccurate or
if the issuers (or the beneficiary) of the bonds fail to comply with certain
covenants made at that time.
If a Fund fails to qualify as a regulated investment company for any
year, all of its income will be subject to tax at corporate rates, and its
distributions (including capital gains distributions) will be taxable as
ordinary income dividends to its shareholders, subject to the dividends received
deduction for corporate shareholders. Otherwise, distributions made by the Bond
Funds generally
-82-
<PAGE> 257
will not be eligible for the dividends received deduction otherwise available to
corporate tax payers.
As described above and in the Prospectuses, certain of the Funds may
invest in certain types of futures contracts and options. The Funds anticipate
that these investment activities will not prevent the Funds from qualifying as
regulated investment companies. As a general rule, these investment activities
may increase or decrease the amount of long-term and short-term capital gains or
losses realized by a Fund and, accordingly, will affect the amount of capital
gains distributed to a Fund's shareholders.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues interest or other receivables
(or accrues expenses or other liabilities) denominated in a foreign currency and
the time the Fund actually collects such receivables or pays such liabilities,
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of debt securities denominated in a foreign currency and on
disposition of certain options, futures and forward contracts, gains or losses
attributable to fluctuations in the value of the foreign currency between the
dates of acquisition and disposition also are treated as ordinary gain or loss.
These gains or losses, referred to under the Code as "Section 988" gains or
losses, may increase or decrease the amount of the Fund's investment company
taxable income to be distributed to its shareholders as ordinary income.
Many futures contracts entered into by a Fund, certain forward foreign
currency contracts, and all listed nonequity options written or purchased by the
Fund will be governed by Section 1256 of the Code. On the last trading day of a
Fund's fiscal year, all such outstanding Section 1256 positions will be marked
to market (i.e., treated as if such positions were closed out at their closing
price on such day), with any resulting gain or loss recognized as 60% long-term
and 40% short-term capital gain or loss. Under certain circumstances, entry into
a futures contract to sell a security may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of the
underlying security or a substantially identical security in the Fund's
portfolio.
Positions of the Fund which consist of at least one position not
governed by Section 1256 and at least one position governed by Section 1256
which substantially diminishes the Fund's risk of loss with respect to such
other position will be treated as a "mixed straddle." Generally, a "straddle" is
governed by Section 1092 of the Code, the operation of which may cause deferral
of losses, adjustments in holding periods of securities and conversion of
short-term capital losses into long-term capital losses. Although mixed
straddles are subject to the straddle rules of Section 1092 of the Code, certain
tax elections exist for them which may affect the operations of these rules.
Each Fund intends to monitor its transactions in options and futures and may
make certain tax elections in connection with those investments.
As a general rule, a Fund's gain or loss on a sale or exchange of an
investment will be a long-term capital gain or loss if the Fund has held the
investment for more than eighteen months, mid-term capital gain if it has held
the investment for more than twelve months, but not more than eighteen months,
and will be a short-term capital gain or loss if it has held the investment for
twelve months or less. Furthermore, as a general rule, a shareholder's gain or
loss on a sale or redemption
-83-
<PAGE> 258
of Fund shares will be a long-term capital gain or loss if the shareholder has
held the Fund shares for more than eighteen months, mid-term capital gain if it
has held the investment for more than twelve months, but not more than eighteen
months, and will be a short-term capital gain or loss if the shareholder has
held the Fund shares for twelve months or less.
While only the Equity Funds expect to realize a significant amount of
net long-term capital gains, any such realized gains will be distributed as
described in the Prospectus. Such distributions ("capital gain dividends"), if
any, will be taxable to shareholders as gains from the sale of assets held for
more than twelve months regardless of how long a shareholder has held Fund
shares, and will be designated as capital gain dividends in a written notice
mailed to the shareholder after the close of the Fund's taxable year. Any loss
on the sale or exchange of shares in a Fund that have been held for six months
or less will be treated as a long-term capital loss to the extent of any capital
gain dividend received by the shareholder with respect to such shares.
FLORIDA TAXES
Taxation of Fund Shares. Florida does not impose an income tax on
individuals. Thus, dividends and distributions paid by the Florida Insured
Municipal Fund to individuals who are residents of Florida are not taxable by
Florida. Florida imposes an income tax on corporations and similar entities at a
rate of 5.5%. Distributions of investment income and capital gains by the
Florida Insured Municipal Fund will be subject to Florida corporate income tax.
Accordingly, investors in the Florida Insured Municipal Fund, including, in
particular, investors that may be subject to the Florida corporate income tax,
should consult their tax advisors with respect to the application of the Florida
corporate income tax to the receipt of Fund dividends and distributions and to
the investor's Florida tax situation in general.
Florida imposes a tax on intangible personal property owned by Florida
residents. Shares in the Florida Insured Municipal Fund constitute intangible
personal property for purposes of the Florida intangible personal property tax.
Thus, unless an exemption applies, shares in the Florida Insured Municipal Fund
will be subject to the Florida intangible personal property tax. Florida
provides an exemption for shares in an investment fund if the fund's portfolio
of assets consists solely of assets exempt from the 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.
The Florida Insured Municipal Fund has received a ruling from the
Florida Department of Revenue that if, on the last business day of any calendar
year, the Insured Municipal Fund's assets consist solely of assets exempt from
the Florida intangible personal property tax, shares of the Florida Insured
Municipal Fund will be exempt from the Florida intangible personal property tax
in the following year. Based on the ruling, if the Insured Municipal Fund's
assets consist, on the last business day of the calendar year, solely of assets
exempt from the Florida intangible personal property tax, shares of the Florida
Insured Municipal Fund owned by Florida residents will be exempt from the
Florida intangible personal property tax. If shares of the Fund are subject to
the
-84-
<PAGE> 259
Florida intangible personal property tax because less than 100% of the Fund's
assets on the last business day of the calendar year consists of assets exempt
from the Florida intangible personal property tax, only the portion of the net
asset value of a share of the Florida Insured Municipal Fund that is
attributable to obligations of the United States Government will be exempt from
taxation.
Taxation of the Florida Insured Municipal Fund. If the Fund does not
have a taxable nexus to Florida, such as through the location of the Florida
Fund's activities or those of its advisors within the state, under present
Florida law, the Fund is not subject to Florida corporate income taxation.
Additionally, if the Fund's assets do not have a taxable situs in Florida as of
January 1 of each calendar year, the Fund will not be subject to the Florida
intangible personal property tax. If the Fund has a taxable nexus to Florida or
the Fund's assets have a taxable situs in Florida, the Fund will be subject to
Florida taxation. The Florida Insured Municipal Fund intends to operate so as
not to be subject to Florida taxation.
SHAREHOLDER STATEMENTS
Each shareholder will receive after the close of the calendar year an
annual statement and such other written notices as are appropriate as to the
federal income and California State personal income tax status of the
shareholder's dividends and distributions received from the Fund for the prior
calendar year. These statements will also inform shareholders as to the amount
of exempt-interest dividends that is a specific preference item for purposes of
the federal individual and corporate alternative minimum taxes and as to the
exempt portion, if any, of the shareholder's shares of the Florida Insured
Municipal Fund for purposes of the Florida State intangible personal property
tax for the current tax year. Shareholders should consult their tax advisers as
to any other state and local taxes that may apply to these dividends and
distributions. The dollar amount of dividends excluded or exempt from federal
income taxation or California State personal income taxation and the dollar
amount of dividends subject to federal income taxation or California State
personal income taxation, if any, will vary for each shareholder depending upon
the size and duration of each shareholder's investment in a Fund. To the extent
that the California Money, California Municipal, California Insured Intermediate
Municipal, Florida Insured Municipal or National Municipal Funds earns taxable
net investment income, it intends to designate as taxable dividends the same
percentage of each day's dividend (or of each day's taxable net investment
income) as its taxable net investment income bears to its total net investment
income earned on that day. Therefore, the percentage of each day's dividend
designated as taxable, if any, may vary from day to day.
If a shareholder fails to furnish a correct taxpayer identification
number, fails to report fully dividend or interest income, or fails to certify
that the taxpayer identification number is correct and that the shareholder is
not subject to "backup withholding," then the shareholder may be subject to a
31% "backup withholding" tax with respect to (1) taxable dividends and
distributions and (2) the proceeds of any redemptions of Fund shares. An
individual's taxpayer identification number is his or her social security
number. The 31% "backup withholding" tax is not an additional tax and may be
credited against a taxpayer's regular federal income tax liability.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN TAX CONSIDERATIONS GENERALLY
AFFECTING A
-85-
<PAGE> 260
FUND AND ITS SHAREHOLDERS, AND IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX
PLANNING. SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISERS WITH SPECIFIC
REFERENCE TO THEIR OWN TAX SITUATIONS, INCLUDING THEIR STATE AND LOCAL TAX
LIABILITIES.
DISTRIBUTOR
Sierra Services serves as the Trust's distributor for the Class A, Class
B and Class S Shares on a best efforts basis pursuant to two separate
distribution agreements between the Trust and Sierra Services. To compensate
Sierra Services for the distribution-related services it provides, and
broker-dealers authorized by Sierra Services, the Trust has adopted three plans
of distribution (the "Plans") pursuant to Rule 12b-1 under the 1940 Act, one
with respect to each of the classes of shares, the Class A, Class B and Class S
Shares. Under the Plan for the Class A Shares, Sierra Services will be entitled
to receive a distribution fee, accrued daily and paid monthly, calculated with
respect to Class A Shares at the annual rate of up to .25% of the average daily
net assets of the Class A Shares of each Fund. Under the Plans for the Class B
Shares and Class S Shares, the Class B Shares and Class S Shares will be
charged, respectively, distribution fees at an annual rate of up to .75% of the
average daily net assets of such class of each Fund. Payments under the Plans
may be used to defray a portion of the costs incurred in rendering distribution
services to respective classes of the Funds, including costs such as costs of
advertising or sales literature or payment of commissions on the sale of shares
of the Funds. Class B Shares and Class S Shares are also subject to a service
fee at an annual rate of .25% of the average daily net assets of each Fund. This
service fee may be used for personal service and maintenance of shareholder
accounts.
The Plans are designed to enable Sierra Services, through its authorized
broker-dealers to compensate the representatives of such broker-dealers and
others for selling Trust shares. Payments under the Plans are not tied
exclusively to the distribution expenses actually incurred by Sierra Services or
its authorized broker-dealers, and such payments may exceed distribution
expenses actually incurred by Sierra Services or its authorized broker-dealers.
Sierra Services anticipates, however, that for the foreseeable future
distribution expenses incurred will greatly exceed amounts paid under the Plans.
The Board of Trustees, including a majority of the Trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan ("Independent Trustees"), will evaluate
the appropriateness of the Plans and their payment terms on a continuing basis
and in doing so will consider all relevant factors, including expenses borne by
Sierra Services and its authorized broker-dealers in the current year and in
prior years and amounts received under the Plans.
Under their terms, the Plans remain in effect from year to year,
provided such continuance is approved annually by vote of the Board of Trustees,
including a majority of the Independent Trustees. Each of the Plans may not be
amended to increase materially the amount to be spent for the services provided
by Sierra Services without approval by the shareholders of the class of shares
of the Fund to which the Plan applies, and all material amendments of the Plans
also require Board approval. Each of the Plans may be terminated at any time,
without penalty, by vote of a majority of the Independent Trustees, or, with
respect to any class of shares of any of the Funds, by a vote of a majority of
the outstanding voting securities of the class of shares of the Fund (as such
vote is
-86-
<PAGE> 261
defined in the 1940 Act). If a Plan is terminated (or not renewed) with respect
to any class of any one or more Funds, it may continue in effect with respect to
the same class of any Fund as to which it has not been terminated (or has been
renewed). Pursuant to the distribution agreements, Sierra Services will provide
the Board of Trustees periodic reports of any amounts expended under the Plans
and purpose for which such expenditures were made.
For the fiscal years ended June 30, 1997, 1996 and 1995, Sierra Services
received distribution fees totaling (after waivers of fees) $5,278,281,
$6,430,836 and $6,715,281, respectively, in the aggregate, from the Funds under
the Class A Plan. For the same periods, Sierra Services received $13,944, $0 and
$58,212, respectively, representing contingent deferred sales charges on
redemptions of Class A Shares of the Funds. In addition, for the fiscal years
ended June 30, 1997, 1996 and 1995, Sierra Services received $303,490, $637,291
and $7,099,863, respectively, representing compensation from front-end sales
charges on Fund shares sold. For each fiscal year ended June 30, 1997, 1996 and
1995, Sierra Services voluntarily waived no distribution fees in the aggregate.
During the fiscal year ended June 30, 1997, Sierra Services incurred
distribution and operating expenses with respect to Class A Shares of the Funds
totaling $6,079,202 consisting of $27,338 for advertising; $30,593 for marketing
promotion; $570,250 for preparation, printing and distribution of sales
literature and shareholders reports; $398,006 for fulfillment; $88,956 for
seminars; $390,128 for salaries to the Sierra Services' personnel; $777,480 in
commissions and additional compensation to the Sierra Services' personnel;
$136,410 for occupancy; $105,953 for telephone; and $577,885 in administration
expenses.
Sierra Services serves as distributor of Class B and S Shares of the
Trust. For the fiscal year ended June 30, 1997, Sierra services received
distribution fees from the Funds totaling $666,137, in the aggregate under the
Class B Distribution Plan and $474,374, in the aggregate under the Class S
Distribution Plan. For the same period, Sierra services received $487,579,
representing CDSC on redemptions of Class B Shares of the Funds and $210,159,
representing CDSC on redemptions of Class S Shares of the Funds. For the fiscal
year ended June 30, 1997, Sierra Services did not waive any distribution fees.
Sierra Services paid out all of the distribution related fees it received for
each of the Class B and Class S Shares to the financier of the sales commissions
paid on sale of Class B and S Shares, respectively.
Prior to December 20, 1995, Funds Distributor Inc. ("FDI") served as a
co-distributor of Class B and Class S Shares of the Trust. For the fiscal year
ended June 30, 1997, FDI received distribution fees from the Funds totaling
$850,960, in the aggregate under the Class B Distribution Plan and $568,659, in
the aggregate under the Class S Distribution Plan. For the same period, FDI
received $593,638, representing CDSC on redemptions of Class B Shares of the
Funds and $317,053, representing CDSC on redemptions of Class S Shares of the
Funds. For the fiscal year ended June 30, 1997 FDI did not waive any
distribution fees. FDI paid out all of the distribution related fees it received
for each of the Class B and Class S Shares to the financier of the sales
commissions paid on sale of Class B Shares and Class S Shares, respectively.
-87-
<PAGE> 262
APPENDIX
DESCRIPTION OF BOND, NOTES AND COMMERCIAL PAPER RATINGS
DESCRIPTION OF S&P CORPORATE BOND RATINGS
AAA: Bonds rated AAA have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
DESCRIPTION OF MOODY'S CORPORATE BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as for Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic
rating classification from Aa through B. The modifier 1 indicates that the issue
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
A-1
<PAGE> 263
DESCRIPTION OF DUFF'S CORPORATE BOND RATINGS
Bonds rated AAA by Duff are judged by Duff to be of the highest credit
quality, with negligible risk factors being only slightly more than for
risk-free U.S. Treasury debt. Bonds rated AA by Duff are judged by Duff to be of
high credit quality with strong protection factors and risk that is modest but
that may vary slightly from time to time because of economic conditions. Bonds
rated A by Duff are judged by Duff to have average but adequate protection
factors. However, risk factors are more variable and greater in periods of
economic stress. Bonds rated BBB by Duff are judged by Duff as having below
average protection factors but still considered sufficient for prudent
investment, with considerable variability in risk during economic cycles.
DESCRIPTION OF FITCH'S CORPORATE BOND RATINGS
Bonds rated AAA by Fitch are considered to be investment grade and of
the highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA by Fitch are considered to be investment
grade and of very high credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong as bonds rated AAA.
Bonds rated A by Fitch are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings. Bonds rated BBB by
Fitch are considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
DESCRIPTION OF S&P MUNICIPAL BOND RATINGS
AAA - Prime - These bonds have the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
General Obligation Bonds - In a period of economic stress, the issuers
will suffer the smallest declines in income and will be least susceptible to
autonomous decline. Debt burden is moderate. A strong revenue structure appears
more than adequate to meet future expenditure requirements. Quality of
management appears superior.
Revenue Bonds - Debt service coverage has been, and is expected to
remain, substantial. Stability of the pledged revenues is also exceptionally
strong due to the competitive position of the municipal enterprise or to the
nature of the revenues. Basic security provisions (including rate covenant,
earnings test for issuance of additional bonds, debt service reserve
requirements) are rigorous. There is evidence of superior management.
A-2
<PAGE> 264
AA - High Grade - Bonds in this group have a very strong capacity to
pay interest and repay principal and differ from the highest rated debt only in
small degree.
A - Good Grade - Bonds in this category have a strong capacity to pay
interest and repay principal, although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than bonds
in higher rated categories. Regarding municipal bonds, the rating differs from
the two higher ratings because:
General Obligation Bonds - There is some weakness, either in the local
economic base, in debt burden, in the balance between revenues and expenditures
or in quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date.
Revenue Bonds - Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB - Medium Grade - Bonds in this group are regarded as having an
adequate capacity to pay interest and repay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category than for bonds in higher rated
categories.
General Obligation Bonds - Under certain adverse conditions, several of
the above factors could contribute to a lesser capacity for payment of debt
service. The difference between A and BBB ratings is that the latter shows more
than one fundamental weakness, or one very substantial fundamental weakness,
whereas the former shows only one deficiency among the factors considered.
Revenue Bonds - Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations, with the revenue flow possibly being
subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger.
BB, B, CCC, CC and C - Bonds rated BB, B, CCC, CC and C are regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the least degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.
D - Bonds rated D are in default, or the obligor has filed for
bankruptcy. The D rating is issued when interest or principal payments are not
made on the date due, even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such grace period.
A-3
<PAGE> 265
S&P's letter ratings may be modified by the addition of a plus or a
minus sign, which is used to show relative standing within the major rating
categories, except in the AAA-Prime Grade category.
DESCRIPTION OF S&P MUNICIPAL NOTE RATINGS
Municipal notes with maturities of three years or less are usually
given note ratings (designated SP-1, -2 or -3) to distinguish more clearly the
credit quality of notes as compared to bonds. Notes rated SP-1 have a strong
capacity to pay principal and interest. Those issues determined to possess a
very strong capacity to pay debt service are given the designation of SP-1+.
Notes rated SP-2 have a satisfactory capacity to pay principal and interest,
with some vulnerability to adverse financial and economic changes over the term
of the notes.
DESCRIPTION OF MOODY'S MUNICIPAL BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment.
A-4
<PAGE> 266
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Moody's applies the numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through B. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issuer
ranks in the lower end of its generic rating category.
DESCRIPTION OF MOODY'S MUNICIPAL NOTE RATINGS
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade (MIG) and for variable rate demand
obligations are designated Variable Moody's Investment Grade (VMIG). This
distinction recognizes the differences between short-term credit risk and
long-term risk. Loans bearing the designation MIG 1/VMIG 1 are of the best
quality, enjoying strong protection from established cash flows of funds for
their servicing, from superior liquidity support, or from established and
broad-based access to the market for refinancing, or both. Loans bearing the
designation of MIG 2/VMIG 2 are of high quality, with margins of protection
ample, although not as large as the preceding group. Loans bearing the
designation MIG 3/VMIG 3 are of favorable quality, with all security elements
accounted for but lacking the undeniable strength of the preceding grades.
Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established. Loans bearing the designation
MIG 4/VMIG 4 are of adequate quality. Protection commonly regarded as required
of an investment security is present and although not distinctly or
predominantly speculative, there is specific risk.
DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS
Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payments is strong. Those issues determined to possess
extremely strong safety characteristics are denoted A-1+. Capacity for timely
payment on commercial paper rated A-2 is satisfactory, but the relative degree
of safety is not as high as for issues designated A-1.
DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term promissory
obligations. Issuers rated Prime-2 (or related supporting institutions) are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics of
issuers rated Prime-1 but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternative liquidity is maintained.
DESCRIPTION OF DUFF'S COMMERCIAL PAPER RATINGS
A-5
<PAGE> 267
Paper rated Duff-1 is regarded as having very high certainty of timely
payment with excellent liquidity factors which are supported by good fundamental
protection factors. Risk factors are minor. Ratings of Duff-1 are further
refined by the gradations of "1+" and "1-". Issues rated Duff-1+ have the
highest certainty of timely payment, outstanding short term liquidity, and
safety just below risk-free U.S. Treasury short-term obligations. Issues rated
Duff-1- have high certainty of timely payment, strong liquidity factors
supported by good fundamental protection factors, and small risk factors. Paper
rated Duff-2 is regarded as having good certainty of timely payment, good access
to capital markets and sound liquidity factors and company fundamentals. Risk
factors are small.
DESCRIPTION OF FITCH'S COMMERCIAL PAPER RATINGS
The rating F-1+ (Exceptionally Strong Credit Quality) is the highest
commercial rating assigned by Fitch and is assigned to issues regarded as having
the strongest degree of assurance for timely payment. Paper rated F-1 (Very
Strong Credit Quality) is regarded as having an assurance of timely payment only
slightly less in degree than issues rated F-1+. The rating F-2 (Good Credit
Quality) reflects an assurance of timely payment, but the margin of safety is
not as great as for issues assigned F-1+ or F-1 ratings.
A-6
<PAGE> 268
FINANCIAL STATEMENTS
The following are the audited financial statements for the fiscal year
ended June 30, 1997, and the Report of Independent Accountants of Price
Waterhouse LLP dated August 12, 1997 relating to the financial statements and
financial highlights of each of the fund series constituting the Sierra Trust
Funds.
FS-1
<PAGE> 269
SIERRA TRUST FUNDS
PART C
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements (included in Part A)
(i) Audited Financial Highlights for the Global Money
Fund, U.S. Government Money Fund, California Money
Fund, U.S. Government Fund, Corporate Income Fund,
California Municipal Fund, National Municipal Fund,
Short Term Global Government Fund, Short Term High
Quality Bond Fund, Growth and Income Fund, Emerging
Growth Fund, International Growth Fund, Growth Fund,
California Insured Intermediate Municipal Fund,
Florida Insured Municipal Fund and Target Maturity
2002 Fund for the fiscal year ended June 30, 1997.
Financial Statements (included in Part B)
(i) The following audited Financial Statements as of June
30, 1997 and the Report of Price Waterhouse, LLP
dated August 12, 1997 are hereby incorporated by
reference to the Statement of Additional Information
from Form N-30D, the Annual Report to Shareholders,
as filed with the Securities and Exchange Commission
on August 28, 1997 with Accession Number
0000950156-97-000774.
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Statements of Changes in Net Assets -
Capital Stock Activity
Financial Highlights
Portfolio of Investments
Notes to Financial Statements
Report of Independent Accountants
(b) Exhibits (See numbered footnotes at end of list of Exhibits)
1(a) Master Trust Agreement of the Registrant dated February 22,
1989, was originally filed as an exhibit to Registration
Statement on Form N-1A March 10, 1989 and is incorporated by
reference to Post-Effective Amendment ("PEA") No. 26 filed
with the SEC on August 28, 1997.
1(a)-1 Amendment No. 1, to Master Trust Agreement, dated May 10, 1989
was originally filed as an exhibit to Pre-Effective Amendment
No. 1 on May 12, 1989 and is incorporated by reference to PEA
No. 26 filed with the SEC on August 28, 1997.
1(a)-2 Amendment No. 2, to Master Trust Agreement, dated May 22, 1989
was originally filed as an exhibit to Pre-Effective Amendment
No. 3 on July 6, 1989 and is incorporated by reference to PEA
No. 26 filed with the SEC on August 28, 1997.
C - 1
<PAGE> 270
1(a)-3 Amendment No. 3, to Master Trust Agreement, dated May 24, 1989
was originally filed as an exhibit to Pre-Effective Amendment
No. 3 on July 6, 1989 and is incorporated by reference to PEA
No. 26 filed with the SEC on August 28, 1997.
1(a)-4 Amendment No. 4, to Master Trust Agreement, dated May 7, 1990
was originally filed as an exhibit to PEA No. 2 on May 9, 1990
and is incorporated by reference to PEA No. 26 filed with the
SEC on August 28, 1997.
1(a)-5 Amendment No. 5, to Master Trust Agreement, dated December 4,
1991 was originally filed as an exhibit to PEA No. 8 on
December 5, 1991 and is incorporated by reference to PEA No.
26 filed with the SEC on August 28, 1997.
1(a)-6 Amendment No. 6, to Master Trust Agreement, dated January 30,
1992 was originally filed as an exhibit to PEA No. 10 on
October 14, 1992 and is incorporated by reference to PEA No.
26 filed with the SEC on August 28, 1997.
1(a)-7 Amendment No. 7, to Master Trust Agreement, dated September
10, 1992 was originally filed as an exhibit to PEA No. 10 on
October 14, 1992 and is incorporated by reference to PEA No.
26 filed with the SEC on August 28, 1997.
1(a)-8 Amendment No. 8, to Master Trust Agreement, dated September
22, 1993 was originally filed as an exhibit to PEA No. 16 on
March 15, 1994 and is incorporated by reference to PEA No. 26
filed with the SEC on August 28, 1997.
1(a)-9 Amendment No. 9, to Master Trust Agreement, dated March 13,
1994 was originally filed as an exhibit to PEA No. 16 on March
15, 1994 and is incorporated by reference to PEA No. 26 filed
with the SEC on August 28, 1997.
1(a)-10 Amendment No. 10, to Master Trust Agreement, dated January 20,
1995 was originally filed as an exhibit to PEA No. 21 on
September 1, 1995 and is incorporated by reference to PEA No.
26 filed with the SEC on August 28, 1997.
1(a)-11 Amendment No. 11, to Master Trust Agreement, dated July 19,
1996 is incorporated by reference to Exhibit 1(l) of PEA No.
23 filed with the SEC on August 30, 1996.
2(a) By-Laws of the Registrant, dated February 22, 1989, were filed
as Exhibit 2 to Registration Statement on Form N-1A March 10,
1989.
2(b) By-laws of the Registrant, as amended through November 18,
1992 are incorporated by reference to PEA No. 26 filed with
the SEC on August 28, 1997.
3 Not Applicable
4 Not Applicable
C - 2
<PAGE> 271
5(a)-1 Investment Advisory Agreement, dated July 7, 1989, with
respect to the Global Money Fund was originally filed as
Exhibit 5(a) to PEA No. 1 on January 30, 1990 and is
incorporated by reference to PEA No. 26 filed with the SEC on
August 28, 1997.
5(a)-1.1 Amendment, dated June 30, 1994, to the Investment Advisory
Agreement relating to the Global Money Fund, was originally
filed as Exhibit 5(r) to PEA No. 17 on September 1, 1994 and
is incorporated by reference to PEA No. 26 filed with the SEC
on August 28, 1997.
5(a)-2 Investment Advisory Agreement, dated July 7, 1989, with
respect to the U.S. Government Money Fund was originally filed
as Exhibit 5(a) to PEA No. 1 on January 30, 1990 and is
incorporated by reference to PEA No. 26 filed with the SEC on
August 28, 1997.
5(a)-2.1 Amendment, dated June 30, 1994, to the Investment Advisory
Agreement relating to the U.S. Government Money Fund, was
originally filed as Exhibit 5(s) to PEA No. 17 on September 1,
1994 and is incorporated by reference to PEA No. 26 filed with
the SEC on August 28, 1997.
5(a)-3 Investment Advisory Agreement, dated July 7, 1989, with
respect to the California Money Fund was originally filed as
Exhibit 5(a) to PEA No. 1 on January 30, 1990 and is
incorporated by reference to PEA No. 26 filed with the SEC on
August 28, 1997.
5(a)-3.1 Amendment, dated June 30, 1994, to the Investment Advisory
Agreement relating to the California Money Fund, was
originally filed as Exhibit 5(x) to PEA No. 17 on September 1,
1994 and is incorporated by reference to PEA No. 26 filed with
the SEC on August 28, 1997.
5(a)-4 Investment Advisory Agreement, dated July 7, 1989, with
respect to the U.S. Government Fund was originally filed as
Exhibit 5(a) to PEA No. 1 on January 30, 1990 and is
incorporated by reference to PEA No. 26 filed with the SEC on
August 28, 1997.
5(a)-4.1 Amendment, dated June 30, 1994, to the Investment Advisory
Agreement relating to the U.S. Government Fund was originally
filed as Exhibit 5(t) to PEA No. 17 on September 1, 1994 and
is incorporated by reference to PEA No. 26 filed with the SEC
on August 28, 1997.
5(a)-5 Investment Advisory Agreement, dated July 7, 1989, with
respect to the California Municipal Fund was originally filed
as Exhibit 5(a) to PEA No. 1 on January 30, 1990 and is
incorporated by reference to PEA No. 26 filed with the SEC on
August 28, 1997.
5(a)-5.1 Amendment, dated June 30, 1994, to the Investment Advisory
Agreement relating to the California Municipal Fund, was
originally filed as Exhibit 5(q) to PEA No. 17 on September 1,
1994 and is incorporated by reference to PEA No. 26 filed with
the SEC on August 28, 1997.
5(a)-6 Investment Advisory Agreement, dated July 7, 1989, with
respect to the Growth and Income Fund was filed as Exhibit
5(a) to PEA No. 1 on January 30, 1990 and replaced by Exhibit
5(a)-6.1.
C - 3
<PAGE> 272
5(a)-6.1 Investment Advisory Agreement, dated October 22, 1993, with
respect to the Growth and Income Fund, originally filed as
Exhibit 5(l) to PEA No. 18 on October 28, 1994, replaces
Exhibit 5(a)-6 and is incorporated by reference to PEA No. 26
filed with the SEC on August 28, 1997.
5(a)-7 Investment Advisory Agreement, dated July 18, 1990, with
respect to the Corporate Income Fund was originally filed as
Exhibit 5(b) to PEA No. 4 on October 29, 1990 and is
incorporated by reference to PEA No. 26 filed with the SEC on
August 28, 1997.
5(a)-8 Investment Advisory Agreement, dated July 18, 1990, with
respect to the National Municipal Fund was originally filed as
Exhibit 5(b) to PEA No. 4 on October 29, 1990 and is
incorporated by reference to PEA No. 26 filed with the SEC on
August 28, 1997.
5(a)-8.1 Amendment, dated June 30, 1994, to the Investment Advisory
Agreement relating to the National Municipal Fund, was
originally filed as Exhibit 5(v) to PEA No. 17 on September 1,
1994 and is incorporated by reference to PEA No. 26 filed with
the SEC on August 28, 1997.
5(a)-9 Investment Advisory Agreement, dated July 18, 1990, with
respect to the Emerging Growth Fund (formerly the Equity
Opportunity Fund) was originally filed as Exhibit 5(b) to PEA
No. 4 on October 29, 1990 and replaced by Exhibit 5(a)-9.1.
5(a)-9.1 Investment Advisory Agreement, dated October 22, 1993, with
respect to the Emerging Growth Fund, originally filed as
Exhibit 5(l) to PEA No.18 on October 28, 1994, replaces
Exhibit 5(a)-9 and is incorporated by reference to PEA No. 26
filed with the SEC on August 28, 1997.
5(a)-10 Investment Advisory Agreement, dated July 18, 1990, with
respect to the International Growth Fund (formerly the
Strategic International Fund) was originally filed as Exhibit
5(b) to PEA No. 4 on October 29, 1990 and replaced by Exhibit
5(a)-10.1.
5(a)-10.1 Investment Advisory Agreement, dated November 1, 1994, with
respect to the International Growth Fund was originally filed
as Exhibit 5(y) to PEA No. 21 on September 1, 1995 and is
incorporated by reference to PEA No. 26 filed with the SEC on
August 28, 1997.
5(a)-11 Investment Advisory Agreement, dated February 3, 1992, with
respect to the Short Term Global Government Fund was
originally filed as Exhibit 5(c) to PEA No. 9 on August 31,
1992 and is incorporated by reference to PEA No. 26 filed with
the SEC on August 28, 1997.
5(a)-11.1 Amendment, dated June 30, 1994, to the Investment Advisory
Agreement relating to the Short Term Global Government Fund,
was originally filed as Exhibit 5(w) to PEA No. 17 on
September 1, 1994 and is incorporated by reference to PEA No.
26 filed with the SEC on August 28, 1997.
5(a)-12 Investment Advisory Agreement, dated April 1, 1993, with
respect to the Growth Fund was originally filed as Exhibit
5(i) to PEA No. 18 on October 28, 1994 and is filed herewith.
C - 4
<PAGE> 273
5(a)-13 Investment Advisory Agreement, dated June 2, 1993, with
respect to the Florida Insured Municipal Fund was originally
filed as Exhibit 5(j) to PEA No. 18 on October 28, 1994 and is
filed herewith.
5(a)-13.1 Amendment, dated June 30, 1994, to the Investment Advisory
Agreement relating to the Florida Insured Municipal Fund, was
originally filed as Exhibit 5(u) to PEA No. 17 on September 1,
1994 and is filed herewith.
5(a)-14 Investment Advisory Agreement, dated September 6, 1993, with
respect to the Short Term High Quality Bond Fund was
originally filed as Exhibit 5(l) to PEA No. 18 on October 28,
1994 and is filed herewith.
5(a)-15 Investment Advisory Agreement, dated April 1, 1994, with
respect to the California Insured Intermediate Municipal Fund
was originally filed as Exhibit 5(n) to PEA No. 18 on October
28, 1994 and is filed herewith.
5(a)-15.1 Amendment, dated June 30, 1994, to the Investment Advisory
Agreement relating to the California Insured Intermediate
Municipal Fund, was originally filed as Exhibit 5(p) to PEA
No. 17 on September 1, 1994 and is incorporated by reference
to PEA No. 26 filed with the SEC on August 28, 1997.
5(a)-16 Investment Advisory Agreement, dated March 17, 1995, with
respect to the Target Maturity 2002 Fund was originally filed
as Exhibit 5(aa) to PEA No. 21 on September 1, 1995 and is
filed herewith.
5(b)-1 Investment Sub-Advisory Agreement, dated July 7, 1989, with
respect to the Global Money Fund was originally filed as
Exhibit 5(b) to PEA No. 1 on January 30, 1990 and is filed
herewith.
5(b)-2 Investment Sub-Advisory Agreement, dated July 7, 1989, with
respect to the U.S. Government Money Fund was originally
filed as Exhibit 5(b) to PEA No. 1 on January 30, 1990 and is
filed herewith.
5(b)-3 Investment Sub-Advisory Agreement, dated July 7, 1989, with
respect to the California Money Fund was originally filed as
Exhibit 5(b) to PEA No. 1 on January 30, 1990 and is filed
herewith.
5(b)-4 Investment Sub-Advisory Agreement, dated July 7, 1989, with
respect to the California Municipal Fund was originally filed
as Exhibit 5(b) to PEA No. 1 on January 30, 1990 and replaced
by Exhibit 5(b)-4.1.
5(b)-4.1 Investment Sub-Advisory Agreement, dated July 25, 1991, with
respect to the California Municipal Fund was originally filed
as Exhibit 5(e) to PEA No. 6 on August 29, 1991 and replaced
by Exhibit 5(b)-4.2.
5(b)-4.2 Investment Sub-Advisory Agreement, dated February 17, 1993,
with respect to the California Municipal Fund was originally
filed as Exhibit 5(gg) to PEA No. 21 on September 1, 1995 and
replaced by Exhibit 5(b)-4.3.
5(b)-4.3 Investment Sub-Advisory Agreement, dated October 31, 1996,
with respect to the California Municipal Fund, National
Municipal Fund, Florida Insured Municipal Fund and California
Insured Intermediate Municipal Fund is incorporated by
reference to PEA No. 26 filed with the SEC on August 28, 1997.
C - 5
<PAGE> 274
5(b)-5 Investment Sub-Advisory Agreement, dated July 7, 1989, with
respect to the U.S. Government Fund was originally filed as
Exhibit 5(b) to PEA No. 1 on January 30, 1990 and replaced by
Exhibit 5(b)-5.1.
5(b)-5.1 Investment Sub-Advisory Agreement, dated February 17, 1993,
with respect to the U.S. Government Fund was originally filed
as Exhibit 5(cc) to PEA No. 21 on September 1, 1995 and
replaced by Exhibit 5(b)-5.2.
5(b)-5.2 Investment Sub-Advisory Agreement, dated December 8, 1994,
with respect to the U.S. Government Fund was originally filed
as Exhibit 5(dd) to PEA No. 21 on September 1, 1995 and
replaced by Exhibit 5(b)-5.3.
5(b)-5.3 Investment Sub-Advisory Agreement, dated February 28, 1995,
with respect to the U.S. Government Fund was originally filed
as Exhibit 5(ee) to PEA No. 21 on September 1, 1995 and is
filed herewith.
5(b)-6 Investment Sub-Advisory Agreement, dated July 7, 1989, with
respect to the Growth and Income Fund was originally filed as
Exhibit 5(b) to PEA No. 1 on January 30, 1990 and replaced by
Exhibit 5(b)-6.1.
5(b)-6.1 Investment Sub-Advisory Agreement, dated September 20, 1993,
with respect to the Growth and Income Fund was originally
filed as Exhibit 5(m) to PEA No. 18 on October 28, 1994 and is
filed herewith.
5(b)-7 Investment Sub-Advisory Agreement, dated July 18, 1990, with
respect to the Corporate Income Fund was originally filed as
Exhibit 5(d) to PEA No. 4 on October 29, 1990 and is filed
herewith.
5(b)-8 Investment Sub-Advisory Agreement, dated July 18, 1990, with
respect to the National Municipal Fund was originally filed as
Exhibit 5(d) to PEA No. 4 on October 29, 1990 and replaced by
exhibit 5(b)-8.1.
5(b)-8.1 Investment Sub-Advisory Agreement, dated February 17, 1993,
with respect to the National Municipal Fund was originally
filed as Exhibit 5(hh) to PEA No. 21 on September 1, 1995 and
replaced by Exhibit 5(b)-4.3.
5(b)-9 Investment Sub-Advisory Agreement, dated July 18, 1990, with
respect to the Emerging Growth Fund (formerly the Equity
Opportunity Fund) was originally filed as Exhibit 5(d) to PEA
No. 4 on October 29, 1990 and replaced by Exhibit 5(b)-9.1.
5(b)-9.1 Investment Sub-Advisory Agreement, dated September 20, 1993,
with respect to the Emerging Growth Fund was originally filed
as Exhibit 5(m) to PEA No. 18 on October 28, 1994 and is filed
herewith.
5(b)-10 Investment Sub-Advisory Agreement, dated July 18, 1990, with
respect to the International Growth Fund (formerly the
Strategic International Fund) was originally filed as Exhibit
5(d) to PEA No. 4 on October 29, 1990 and replaced by Exhibit
5(b)-10.1.
5(b)-10.1 Investment Sub-Advisory Agreement, dated November 1, 1994,
with respect to the International Growth Fund was originally
filed as Exhibit 5(z) to PEA No. 21 on September 1, 1995 and
replaced by Exhibit 5(b)-10.2.
C - 6
<PAGE> 275
5(b)-10.2 Investment Sub-Advisory Agreement, dated April 8, 1996, with
respect to the International Growth Fund is incorporated by
reference to Exhibit 5(ii) of PEA No. 23 filed with the SEC on
August 30, 1996.
5(b)-11 Investment Sub-Advisory Agreement, dated February 3, 1992,
with respect to the Short Term Global Government Fund was
originally filed as Exhibit 5(g) to PEA No. 9 on August 31,
1992 and is filed herewith.
5(b)-12 Investment Sub-Advisory Agreement, dated April 2, 1993, with
respect to the Growth Fund was originally filed as Exhibit
5(ff) to PEA No. 21 on September 1, 1995 and replaced by
Exhibit 5(b)-12.1.
5(b)-12.1 Amended and Restated Investment Sub-Advisory Agreement, dated
November 22, 1993, with respect to the Growth Fund was
originally filed as Exhibit 5(h) to PEA No. 21 on September 1,
1995 and is filed herewith.
5(b)-13 Investment Sub-Advisory Agreement, dated June 7, 1993, with
respect to the Florida Insured Municipal Fund was originally
filed as Exhibit 5(k) to PEA No. 18 on October 28, 1994 and
replaced by Exhibit 5(b)-4.3
5(b)-14 Investment Sub-Advisory Agreement, dated September 6, 1993,
with respect to the Short Term High Quality Bond Fund was
originally filed as Exhibit 5(m) to PEA No. 18 on October 28,
1994 and is filed herewith.
5(b)-15 Investment Sub-Advisory Agreement, dated April 1, 1994, with
respect to the California Insured Intermediate Municipal Fund
was originally filed as Exhibit 5(o) to PEA No. 21 on
September 1, 1995 and replaced by Exhibit 5(b)-4.3.
5(b)-16 Investment Sub-Advisory Agreement, dated March 17, 1995, with
respect to the Target Maturity 2002 Fund was originally filed
as Exhibit 5(bb) to PEA No. 21 on September 1, 1995 and is
filed herewith.
6(a)-1 Distribution Agreement (Class A Shares), dated July 7, 1989,
relating to the Global Money Fund, U.S. Government Money Fund,
California Money Fund, U.S. Government Fund, California
Municipal Fund and Growth and Income Fund was filed as Exhibit
6(a) to PEA No. 1 on January 30, 1990 and replaced by Exhibit
6(a)-1.9.
6(a)-1.1 Supplement to Distribution Agreement, dated July 18, 1990,
relating to the National Municipal Fund, Corporate Income
Fund, Emerging Growth Fund and International Growth Fund was
filed as Exhibit 6(b) to PEA No. 4 on October 29, 1990 and
replaced by Exhibit 6(a)- 1.9.
6(a)-1.2 Supplement to Distribution Agreement relating to the Short
Term Global Government Fund was filed as Exhibit 6(c) to PEA
No. 9 on August 31, 1992 and replaced by Exhibit 6(a)-1.9.
6(a)-1.3 Amendment No. 1 to Distribution Agreement, dated January 2,
1991, was filed as Exhibit 6(c) to PEA No. 7 on October 28,
1991 and replaced by Exhibit 6(a)-1.9.
6(a)-1.4 Form of Supplement to Distribution Agreement relating to the
Growth Fund was filed as Exhibit 6(e) to PEA No. 12 on March
25, 1993 and replaced by Exhibit 6(a)-1.9.
C - 7
<PAGE> 276
6(a)-1.5 Form of Supplement to Distribution Agreement relating to the
Florida Insured Municipal Fund was filed as Exhibit 6(f) to
PEA No. 12 on March 25, 1993 and replaced by Exhibit 6(a)-1.9.
6(a)-1.6 Supplement to Distribution Agreement, dated October 29, 1993,
relating to the Short Term High Quality Bond Fund was filed as
Exhibit 6(g) to PEA No. 21 on September 1, 1995 and replaced
by Exhibit 6(a)-1.9.
6(a)-1.7 Supplement to Distribution Agreement, dated April 1, 1994,
relating to the California Insured Intermediate Municipal Fund
was filed as Exhibit 6(h) to PEA 21 on September 1, 1995 and
replaced by Exhibit 6(a)-1.9.
6(a)-1.8 Supplement to Distribution Agreement, dated March 17, 1995,
relating to the Target Maturity 2002 Fund was filed as Exhibit
6(j) to PEA No. 22 on August 30, 1996 and replaced by Exhibit
6(a)-1.9
6(a)-1.9 Class A Distribution Agreement, dated July 7, 1989, with
Sierra Investment Services Corporation, as amended and
supplemented July 1, 1995 is incorporated by reference to
Exhibit 6(m) of PEA No. 24 filed with the SEC on October 30,
1996.
6(b)-1 Amended and Restated Class B and S Distribution Agreement with
Funds Distributor, Inc., dated December 20, 1995, relating to
all series Funds of Registrant is incorporated by reference to
Exhibit 6(l) of PEA No. 23 filed with the SEC on August 30,
1996 and replaced by Exhibit 6(b)-2.
6(b)-2 Class B and Class S Distribution Agreement with Sierra
Investment Services Corporation, dated December 20, 1995,
relating to all series Funds of Registrant, is incorporated by
reference to Exhibit 6(k) of PEA No. 23 filed with the SEC on
August 30, 1996.
7 Not Applicable
8(a)-1 Custody Agreement, dated July 7, 1989, relating to the Global
Money Fund, U.S. Government Money Fund, California Money Fund,
U.S. Government Fund, California Municipal Fund and Growth and
Income Fund was originally filed as Exhibit 8(a) to PEA No. 3
on July 9, 1990 and is filed herewith.
8(a)-1.1 Amendment No. 1 to Custody Agreement, dated February 5, 1991,
was originally filed as Exhibit 8(c) to PEA No. 6 on August
29, 1991 and is filed herewith.
8(a)-1.2 Supplement to Custody, Transfer Agency and Registrar and
Sub-Administration Agreements, dated July 18, 1990, relating
to the Corporate Income Fund, National Municipal Fund,
Emerging Growth Fund and International Growth Fund was
originally filed as Exhibit 8(b) to PEA No. 6 on August 29,
1991.
8(a)-1.3 Supplement to Custody, Transfer Agency and Registrar and
Sub-Administration Agreements, dated February 3, 1992,
relating to the Short Term Global Government Fund was
originally filed as Exhibit 8(c) to PEA No. 9 on August 31,
1992.
8(a)-1.4 Form of Supplement to Custody, Transfer Agency and Registrar
and Sub-Administration Agreements, dated April 1, 1993,
relating to the Growth Fund was filed as Exhibit 8(f) to PEA
No. 12 on March 25, 1993.
C - 8
<PAGE> 277
8(a)-1.5 Form of Supplement to Custody, Transfer Agency and Registrar,
and Sub-Administration Agreements, dated June 2, 1993,
relating to the Florida Insured Municipal Fund was filed as
Exhibit 8(g) to PEA No. 12 on March 25, 1993.
8(a)-1.6 Supplement to Custody, Transfer Agency and Registrar, and
Sub-Administration Agreements, dated October 29, 1993,
relating to the Short Term High Quality Bond Fund was
originally filed as Exhibit 8(h) to PEA No. 21 on September 1,
1995.
8(a)-1.7 Supplement to Custody, Transfer Agency and Registrar, and
Sub-Administration Agreements, dated April 1, 1994, relating
to the California Insured Intermediate Municipal Fund was
filed as Exhibit 8(i) to PEA No. 21 on September 1, 1995.
8(a)-1.8 Revised Custodian, Transfer Agency and Registrar and
Sub-Administration Fees, dated July 18, 1990, relating to each
Fund of the Registrant was originally filed as Exhibit 8(k)
to PEA 21 on September 1, 1995 and is filed herewith.
8(a)-1.9 Supplement to Custody, Transfer Agency and Registrar, and
Sub-Administration Agreements, dated March 17, 1995, relating
to the Target Maturity 2002 Fund was originally filed as
Exhibit 8(j) to PEA No. 22 on October 30, 1995 and is filed
herewith.
8(a)-1.10 Supplement to Custody and Sub-Administration Agreement, dated
February 3, 1992, relating to the Short Term Global Government
Fund is incorporated by reference to Exhibit 8(l) of PEA 24
filed with the SEC on October 30, 1996.
8(b) Sub-Custodian Agreement, dated March 11, 1994, was originally
filed as Exhibit 8(e) to PEA No. 21 on September 1, 1995 and
is filed herewith.
9(a)-1 Transfer Agency and Registrar Agreement, dated June 1, 1989,
relating to the Global Money Fund, U.S. Government Money Fund,
California Money Fund, U.S. Government Fund, California
Municipal Fund and Growth and Income Fund was originally filed
as Exhibit 9(a) to PEA No. 6 on August 29, 1991 and replaced
by 9(a)-2. [Supplemented by Exhibits 8(a)-1.2, 8(a)-1.3,
8(a)-1.4, 8(a)-1.5, 8(a)-1.6, 8(a)-1.7, 8(a)- 1.8 and
8(a)-1.9]
9(a)-1.1 Amendment to Transfer Agency and Registrar Agreement, for GW
Short Term Global Government Fund, dated February 3, 1992 was
originally filed as Exhibit 9(l) to PEA No. 21 on September 1,
1995 and replaced by Exhibit 9(a)-3.
9(a)-1.2 Amendment to Transfer Agency and Registrar Agreement, for GW
Sierra Trust Funds, dated March 12, 1992 was originally filed
as Exhibit 9(m) to PEA No. 21 on September 1, 1995 and
replaced by Exhibit 9(a)-3.
9(a)-2 Transfer Agency and Registrar Agreement dated as of January 1,
1992 is incorporated by reference to Exhibit 9(n) of PEA No.
24 filed with the SEC on October 30, 1996 and is replaced by
Exhibit 9(a)-3.
9(a)-3 Transfer Agency and Services Agreement dated May 1, 1996 is
incorporated by reference to PEA No. 26 filed with the SEC on
August 28, 1997.
C - 9
<PAGE> 278
9(b)-1 Sub-Administration Agreement, dated July 7, 1989, relating to
the Global Money Fund, U.S. Government Money Fund, California
Money Fund, U.S. Government Fund, California Municipal Fund
and Growth and Income Fund was originally filed as Exhibit
9(d) to PEA No. 6 on August 29, 1991.
[Supplemented by Exhibits 8(a)-1.2, 8(a)-1.3, 8(a)-1.4,
8(a)-1.5, 8(a)-1.6, 8(a)-1.7, 8(a)- 1.8, 8(a)-1.9 and
8(a)-1.10]
9(b)-2 Form of Sub-Administration Agreement, dated May 1, 1997,
relating to each investment fund of the Trust is incorporated
by reference to PEA No. 26 filed with the SEC on August 28,
1997.
9(c)-1 Administration Agreement, dated December 14, 1989, was filed
as Exhibit 9(b) to PEA No. 1 on January 30, 1990 and replaced
by Exhibit 9(c)-2.
9(c)-1.1 Supplement to Administration Agreement, dated July 18, 1990,
was filed as Exhibit 9(c) to PEA No. 6 on August 31, 1991 and
replaced by Exhibit 9(c)-2.
9(c)-1.2 Supplement to Administration Agreement was filed as Exhibit
9(d) to PEA No. 9 on August 31, 1992 and replaced by Exhibit
9(c)-2.
9(c)-1.3 Supplement to Administration Agreement, dated October 29,
1993, was filed as Exhibit 9(h) to PEA No. 21 on September 1,
1995 and replaced by Exhibit 9(c)-2.
9(c)-1.4 Supplement to Administration Agreement, dated April 1, 1994,
was filed as Exhibit 9(i) to PEA No. 21 on September 1, 1995
and replaced by Exhibit 9(c)-2.
9(c)-2 Administration Agreement, dated July 1, 1994, relating to all
series funds of the Registrant was originally filed as Exhibit
9(b) to PEA No. 22 filed on October 30, 1995 and replaced by
Exhibit 9(c)-3.
9(c)-3 Administration Agreement dated July 1, 1996, relating to all
series funds of the Registrant, is incorporated by reference
to Exhibit 9(p) of PEA No. 24 filed with the SEC on October
30, 1996.
9(d) Service Agency Agreement with The Shareholder Services Group,
Inc., dated September 1, 1993, is incorporated by reference to
Exhibit 9(q) of PEA No. 24 filed on October 30, 1996.
10(a) Consent and Opinions of Counsel, dated July 3, 1989, relating
to the GW Global Income Money Market Fund, U.S. Government
Money Fund, California Money Fund, U.S. Government Fund,
California Municipal Fund and Growth and Income Fund was
originally filed as Exhibit 10 to Pre-Effective Amendment No.
3 on July 6, 1989.
10(b) Consent and Opinions of Counsel, dated July 6, 1990, relating
to the GW Sierra Trust Funds, Corporate Income Fund, National
Municipal Fund, Emerging Growth Fund and International Growth
Fund was originally filed as an exhibit to PEA No. 3 on July
9, 1990.
10(c) Consents and Opinions of Counsel, dated October 24, 1991,
relating to the registration of shares pursuant to Rule 24e-2
was originally filed as an exhibit to PEA No. 7 on October 28,
1991.
C - 10
<PAGE> 279
10(d) Consents and Opinions of Counsel, dated December 2, 1991
relating to the Short Term Global Government Fund was
originally filed as an exhibit to PEA No. 8 on December 5,
1991.
10(e) Consent and Opinion of Counsel, dated June 20, 1997, relating
to the registration of shares pursuant to Rule 24e-2 is
incorporated by reference to PEA No. 26 filed with the SEC on
August 28, 1997.
11 Consent of Independent Accountants dated October 27, 1997 is
filed herewith.
12 Not Applicable
13(a) Purchase Agreement, dated July 10, 1989, relating to the
Global Money Fund, U.S. Government Money Fund, California
Money Fund, U.S. Government Fund, California Municipal Fund
and Growth and Income Fund was originally filed as Exhibit 13
to PEA No. 1 on January 30, 1990 and is filed herewith.
13(b) Purchase Agreement, dated July 6, 1990, relating to the
Corporate Income Fund, National Municipal Fund, Emerging
Growth Fund and International Growth Fund was originally filed
as an exhibit to PEA No. 3 on July 9, 1990 and is filed
herewith.
13(c) Form of Purchase Agreement relating to the Short Term Global
Government Fund is incorporated by reference to PEA No. 26
filed with the SEC on August 28, 1997.
14 Copies of Model Retirement Plans were originally filed as an
exhibit to Pre-Effective Amendment No. 3 on July 6, 1989 and
are filed herewith.
15(a)-1 Distribution Plan as of July 7, 1989 was filed as Exhibit 15
to Pre-Effective Amendment No. 3 on July 6, 1989 and replaced
by Exhibit 15(a)-1.1.
15(a)-1.1 Distribution Plan dated July 7, 1989, as amended January 2,
1991 was filed as Exhibit 15(b) to PEA No. 7 on October 28,
1991 and replaced by Exhibit 15(a)-1.2.
15(a)-1.2 Class A Distribution Plan, dated July 7, 1989 and amended
December 14, 1992, was filed as Exhibit 15(a) to PEA No. 22 on
October 30, 1995 and replaced by Exhibit 15(a)-1.3.
15(a)-1.3 Class A Distribution Plan, dated July 7, 1989 and amended July
1, 1995, is incorporated by reference to Exhibit 15(e) of PEA
No. 24 filed with the SEC on October 30, 1996.
15(b)-1 Class B Distribution Plan was filed as Exhibit 15(c) to PEA
No. 17 on September 1, 1994 and replaced by Exhibit 15(b)-1.1.
15(b)-1.1 Amended and Restated Class B Distribution Plan, dated December
20, 1995, is incorporated by reference to Exhibit 15(c) of PEA
No. 23 filed with the SEC on August 30, 1996.
15(c)-1 Class S Distribution Plan was filed as Exhibit 15(d) to PEA
No. 17 on September 1, 1994 and replaced by Exhibit 15(c)-1.1.
C - 11
<PAGE> 280
15(c)-1.1 Amended and Restated Class S Distribution Plan, dated December
20, 1995, is incorporated by reference to Exhibit 15(d) of PEA
No. 23 filed with the SEC on August 30, 1996.
16(a) Certain Performance Data relating to the California Municipal
Fund was originally filed as Exhibit 16 to PEA No. 1 on
January 30, 1990.
16(b) Certain Performance Data relating to the California Money
Fund, U.S. Government Fund, California Municipal Fund and
Growth and Income Fund was originally filed as an exhibit to
PEA No. 2 on May 9, 1990.
16(c) Certain Performance Data relating to the U.S. Government Fund,
California Municipal Fund and Growth and Income Fund was
originally filed as an exhibit to PEA No. 4 on October 29,
1990.
16(d) Certain Performance Data relating to the U.S. Government Fund,
Corporate Income Fund, California Municipal Fund, National
Municipal Fund, Growth and Income Fund, Emerging Growth Fund
and International Growth Fund was originally filed as an
exhibit to PEA No. 5 on December 28, 1990 and is filed
herewith.
16(e) Certain Performance Data relating to the National Municipal
Fund, Corporate Income Fund, Emerging Growth Fund and
International Growth Fund was originally filed as an exhibit
to PEA No. 7 on October 28, 1991 and is filed herewith.
16(f) Certain Performance Data relating to the Short Term Global
Government Fund is incorporated by reference to PEA No. 26
filed with the SEC on August 28, 1997.
17 Financial Data Schedules for the fiscal year ended June 30,
1997 are filed herewith.
18 Rule 18f-3 Multiple Class Plan, dated June 13, 1995 was
originally filed as Exhibit 17 to PEA No. 21 on September 1,
1995 and is filed herewith.
19 Not Applicable
20 Not Applicable
21 Not Applicable
22 Not Applicable
23 Not Applicable
24 Powers of Attorney with respect to Registration Statement and
Amendments thereto signed by the following person in their
capacities as Trustees and, where applicable, Officers of the
Trust: Arthur H. Bernstein, David E. Anderson, Edmond R.
Davis, John W. English and Alfred E. Osborne, Jr. are
incorporated by reference to PEA No. 24 filed on October 30,
1996.
ITEM 25. Persons Controlled by or Under Common Control with
Registrant
Not Applicable
C - 12
<PAGE> 281
ITEM 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record Holders
at October 15, 1997
CLASS CLASS CLASS CLASS
----- ----- ----- -----
"A" "B" "S" "I"
<S> <C> <C> <C> <C>
Shares of the Global Money Fund, without
par value ................................. 17,506 71 1,994 5
Shares of the U.S. Government Money Fund,
without par value ......................... 2,242 32 15 1
Shares of the California Money Fund,
without par value ......................... 2,082 9 6 3
Shares of the U.S. Government Fund, without
par value ................................. 15,594 1,285 1,786 4
Shares of the Corporate Income Fund,
without par value ......................... 13,440 1,904 403 2
Shares of the California Municipal Fund,
without par value ......................... 7,386 737 7 1
Shares of the National Municipal Fund,
without par value ......................... 4,196 211 6 1
Shares of the Growth and Income Fund,
without par value ......................... 18,367 6,279 2,066 4
Shares of the Emerging Growth Fund, without
par value ................................. 22,731 7,747 1,786 2
Shares of the International Growth Fund,
without par value ......................... 10,008 1,803 2,007 3
Shares of the Short Term Global Government
Fund, without par value ................... 3,815 194 70 1
Shares of the Growth Fund, without par
value ..................................... 16,128 6,475 2,029 3
Shares of the Florida Insured Municipal
Fund, without par value ................... 593 152 5 1
Shares of the Short Term High Quality Bond
Fund, without par Value ................... 1,749 354 115 2
Shares of the California Insured
Intermediate Municipal Fund, without par
value ..................................... 1,032 539 4 1
Target Maturity 2002 Fund ................. 294 N/A N/A N/A
</TABLE>
C - 13
<PAGE> 282
ITEM 27. Indemnification
Under Section 6.4 of Registrant's Master Trust Agreement, as
amended, any past or present Trustee or officer of Registrant (including
persons who serve at Registrant's request as directors, officers or trustees of
another organization in which Registrant has any interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person"), is
indemnified to the fullest extent permitted by law against liability and all
expenses reasonably incurred by him in connection with any action, suit or
proceeding to which he may be a party or otherwise involved by reason of his
being or having been a Covered Person. This provision does not authorize
indemnification when it is determined, in the manner specified in the Master
Trust Agreement, that a Covered Person has not acted in good faith in the
reasonable belief that his actions were in or not opposed to the best interests
of Registrant. Moreover, this provision does not authorize indemnification
when it is determined, in the manner specified in the Master Trust Agreement,
that the Covered Person would otherwise be liable to Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties. Expenses may be paid by Registrant in
advance of the final disposition of any action, suit or proceeding upon receipt
of an undertaking by a Covered Person to repay those expenses to Registrant in
the event that it is ultimately determined that indemnification of the expenses
is not authorized under the Master Trust Agreement and the Covered Person
either provides security for such undertaking or insures Registrant against
losses from such advances or the disinterested Trustees or independent legal
counsel determines, in the manner specified in the Master Trust Agreement, that
there is reason to believe the Covered Person will be found to be entitled to
indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be permitted to
Trustees, officers and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or paid
by a Trustee, officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by such Trustee, officer
or controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will by governed by the final adjudication of
such issue.
ITEM 28(a). Business and Other Connections of Investment Advisor
-- Sierra Investment Advisors Corporation, formerly
Great Western Financial Advisors Corporation
As of October 9, 1992, the name of Great Western Financial
Advisors Corporation was changed to Sierra Investment Advisors Corporation
("Sierra Advisors"). Sierra Advisors is an investment advisor registered under
the Investment Advisers Act of 1940, as amended, (the "Advisers Act").
The list required by this Item 28 of officers and directors of
Sierra Advisors, together with information as to any other business,
profession, vocation or employment of substantial nature engaged in by such
officers and directors during the past two years, is incorporated by reference
to Schedules A and D of Form ADV filed by Sierra Advisors pursuant to the
Advisers Act (SEC File No. 801-32921).
ITEM 28(b). Business and Other Connections of Investment Sub-Advisor
-- Alliance Capital Management L.P.
Alliance Capital Management L.P. ("Alliance Capital") is a
Delaware limited partnership. 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. Alliance
C - 14
<PAGE> 283
Capital is an investment advisor registered under the Advisers Act and renders
investment advice to a wide variety of individual, non-investment company
institutional clients and investment company clients.
The list required by this Item 28 of officers, directors and
partners of Alliance Capital, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers, directors and partners during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by Alliance
Capital pursuant to the Advisers Act (SEC File No. 801-32361).
ITEM 28(c). Business and Other Connections of Investment Sub-Advisor
-- Van Kampen American Capital Management, Inc.
Van Kampen American Capital Management Inc., ("Van Kampen") is
a wholly-owned subsidiary of VK/AC Holding, Inc. VK/AC Holding, Inc. is a
wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover & Co. Van
Kampen provides investment advice to a wide variety of individual, institutional
and investment company clients.
The list required by this Item 28 of officers and directors of
Van Kampen, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules
A and D of Form ADV filed by Van Kampen pursuant to the Advisers Act (SEC File
No. 801-40808).
ITEM 28(d). Business and Other Connections of Investment Sub-Advisor
-- J.P. Morgan Investment Management Inc.
J.P. Morgan Investment Management Inc. ("J.P. Morgan") is a
wholly owned subsidiary of J.P. Morgan & Co. Incorporated, a bank holding
company. J.P. Morgan is an investment advisor registered under the Advisers
Act and manages employee benefit funds of corporations, labor unions and state
and local governments and the accounts of other institutional investors.
The list required by this Item 28 of officers and directors of
J.P. Morgan, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules
A and D of Form ADV filed by J.P. Morgan pursuant to the Advisers Act (SEC File
No. 801-21011).
ITEM 28(e). Business and Other Connections of Investment Sub-Advisor
-- TCW Funds Management, Inc.
TCW Funds Management, Inc. ("TCW") is an investment advisor
registered under the Advisers Act, and acts as investment advisor for
registered investment companies and foreign investment companies. TCW, and its
affiliates, including Trust Company of the West, provide a variety of trust,
investment management and investment advisory services.
The list required by this Item 28 of officers and directors of
TCW, together with information as to any other business, profession, vocation
or employment of a substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by TCW pursuant to the Advisers Act (SEC File No. 801-29075).
ITEM 28(f). Business and Other Connections of Investment Sub-Advisor
-- Scudder, Stevens & Clark, Inc.
Scudder, Stevens & Clark, Inc. ("Scudder") is an investment
advisor registered under the Advisers Act, and acts as investment advisor for
registered investment companies and foreign
C - 15
<PAGE> 284
investment companies. Scudder, and its affiliates, provide a variety of trust,
investment management and investment advisory services.
The list required by this Item 28 of officers and directors of
Scudder, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules
A and D of Form ADV, filed by Scudder pursuant to the Advisers Act (SEC File
No. 801-252).
ITEM 28(g). Business and Other Connections of Investment Sub-Advisor
-- Janus Capital Corporation
Janus Capital Corporation ("Janus") is an investment advisor
registered under the Advisers Act, and acts as investment advisor for
registered investment companies, foreign investment companies and for
individual, charitable, corporate and retirement accounts. Janus, and its
affiliates, provide a variety of trust, investment management and investment
advisory services.
The list required by this Item 28 of officers and directors of
Janus, together with information as to any other business, profession, vocation
or employment of a substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV, filed by Janus pursuant to the Advisers Act (SEC File No. 801-13991).
ITEM 28(h). Business and Other Connections of Investment Sub-Advisor
-- BlackRock Financial Management, Inc.
BlackRock Financial Management, Inc. ("BlackRock") is an
investment advisor registered under the Advisers Act, and acts as investment
advisor for registered investment companies and foreign investment companies.
BlackRock, and its affiliates, provide a variety of trust, investment
management and investment advisory services.
The list required by this Item 28 of officers and directors of
BlackRock, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules
A and D of Form ADV, filed by BlackRock, pursuant to the Advisers Act (SEC File
No. 801-32183).
ITEM 28(i). Business and Other Connections of Investment Sub- Advisor
-- Warburg, Pincus Counsellors, Inc.
Warburg, Pincus Counsellors, Inc. ("Warburg") is an investment advisor
registered under the Advisers Act, and acts as investment advisor for
registered investment companies and foreign investment companies. Warburg
provides investment services to investment endowment funds, foundations and
other institutions and individuals.
The list required by this Item 28 of officers and directors of
Warburg, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules
A and D of Form ADV, filed by Warburg, pursuant to the Advisers Act (SEC File
No. 801-07321).
ITEM 29. Principal Underwriter -- Class A, Class B, Class S and Class I
Shares
Sierra Investment Services Corporation ("Sierra Services") is
the principal underwriter of the Class A, Class B and Class S Shares of the
Funds.
C - 16
<PAGE> 285
Sierra Services does not currently act as distributor,
depositor or investment advisor for any other investment company.
The information required by this Item 29 with respect to each
director and officer of Sierra Services is incorporated by reference to
Schedule A of Form BD filed by Sierra Services pursuant to the Securities
Exchange Act of 1934 (SEC File No. 8-45144).
ITEM 30. Location of Accounts and Records
(1) Sierra Trust Funds
9301 Corbin Avenue
Northridge, California 91324
(master trust agreement and by-laws)
(2) Sierra Investment Advisors Corporation
9301 Corbin Avenue
Northridge, California 91324
(with respect to their services as investment
advisor)
(3) Great Western Financial Securities
Corporation
9301 Corbin Avenue
Northridge, California 91324
(with respect to their services as a dealer)
(4) Sierra Fund Administration Corporation
9301 Corbin Avenue
Northridge, California 91324
(with respect to their services as
administrator)
(5) Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
(with respect to their services as custodian)
(6) First Data Investor Services Group, Inc.
One Exchange Place
53 State Street
Boston, Massachusetts 02109
(with respect to their services as a
sub-administrator)
(7) First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
(with respect to their services as a transfer
agent)
(8) Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(with respect to their services as investment
sub-advisor)
(9) Van Kampen American Capital Management Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
(with respect to their services as investment
sub-advisor)
C - 17
<PAGE> 286
(10) J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
(with respect to their services as investment
sub-advisor)
(11) TCW Funds Management, Inc.
865 South Figueroa Street, Suite 1800
Los Angeles, California 90017
(with respect to their services as investment
sub-advisor)
(12) Scudder, Stevens & Clark, Inc.
Two International Place
Boston, Massachusetts 02110
(with respect to their services as investment
sub-advisor)
(13) BlackRock Financial Management, Inc.
345 Park Avenue
New York, New York 10154
(with respect to their services as investment
sub-advisor)
(14) Sierra Investment Services Corporation
9301 Corbin Avenue
Northridge, California 91324
(with respect to their services as a
principal underwriter)
(15) Janus Capital Corporation
100 Fillmore Street, Suite 300
Denver, Colorado 80206
(with respect to their services as investment
sub-advisor)
(16) Warburg Pincus Asset Manager, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(with respect to their services as investment
sub-advisor)
(17) Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103
(with respect to their services as
counsel to the Fund)
ITEM 31. Management Services
Not applicable.
ITEM 32. Undertakings
(a) Registrant hereby undertakes to call a meeting of its
shareholders for the purpose of voting upon the question of removal of a
trustee or trustees of Registrant when requested to do so by the holders of at
least 10% of Registrant's outstanding shares. Registrant undertakes further,
in connection with the meeting, to comply with the provisions of Section 16(c)
of the Investment Company Act of 1940, as amended, relating to communications
with the shareholders of certain common-law trusts.
C - 18
<PAGE> 287
(b) Registrant undertakes to furnish each person to whom
a prospectus is delivered with a copy of the Registrant's latest annual report
to shareholders, upon request and without charge.
C - 19
<PAGE> 288
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Post-Effective Amendment No. 27 pursuant to Rule 485(b) under the 1933 Act and
has duly caused this Post-Effective Amendment No.27 to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Northridge and
State of California on the 20th day of October, 1997.
SIERRA TRUST FUNDS
By: /s/ James H. Overholt
-------------------------------
James H. Overholt
President
Pursuant to the requirements of the 1933 Act, as amended, this
Post-Effective Amendment No. 27 has been signed below by the following persons
in the capacities and on the date(s) indicated.
<TABLE>
<CAPTION>
Signature Title(s) Date
--------- -------- ----
<S> <C> <C>
President October 20, 1997
/s/ James H. Overholt
- --------------------------------------------
James H. Overholt
(Principal Executive Officer)
Executive Vice President, October 20, 1997
/s/ Keith B. Pipes Treasurer and Secretary
- --------------------------------------------
Keith B. Pipes
(Principal Financial and Accounting Officer)
* Trustee October 20, 1997
- --------------------------------------------
David E. Anderson
* Chairman of the Board and October 20, 1997
- --------------------------------------------
Arthur H. Bernstein Trustee
* Trustee October 20, 1997
- --------------------------------------------
Edmond R. Davis
* Trustee October 20, 1997
- --------------------------------------------
John W. English
* Trustee October 20, 1997
- --------------------------------------------
Alfred E. Osborne, Jr., Ph.D.
*By:/s/ Keith B. Pipes
----------------------------------------
Keith B. Pipes
Attorney-In-Fact
</TABLE>
C - 20
<PAGE> 289
EXHIBIT INDEX
EDGAR
Exhibit Exhibit
No. No. Description
------- ------- -----------
1(a) Master Trust Agreement of the Registrant dated
February 22, 1989, was originally filed as an exhibit
to Registration Statement on Form N-1A March 10, 1989
and is incorporated by reference to Post-Effective
Amendment ("PEA") No. 26 filed with the SEC on August
28, 1997.
1(a)-1 Amendment No. 1, to Master Trust Agreement, dated May
10, 1989 was originally filed as an exhibit to
Pre-Effective Amendment No. 1 on May 12, 1989 and is
incorporated by reference to PEA No. 26 filed with the
SEC on August 28, 1997.
1(a)-2 Amendment No. 2, to Master Trust Agreement, dated May
22, 1989 was originally filed as an exhibit to
Pre-Effective Amendment No. 3 on July 6, 1989 and is
incorporated by reference to PEA No. 26 filed with the
SEC on August 28, 1997.
1(a)-3 Amendment No. 3, to Master Trust Agreement, dated May
24, 1989 was originally filed as an exhibit to
Pre-Effective Amendment No. 3 on July 6, 1989 and is
incorporated by reference to PEA No. 26 filed with the
SEC on August 28, 1997.
1(a)-4 Amendment No. 4, to Master Trust Agreement, dated May
7, 1990 was originally filed as an exhibit to PEA No.
2 on May 9, 1990 and is incorporated by reference to
PEA No. 26 filed with the SEC on August 28, 1997.
1(a)-5 Amendment No. 5, to Master Trust Agreement, dated
December 4, 1991 was originally filed as an exhibit to
PEA No. 8 on December 5, 1991 and is incorporated by
reference to PEA No. 26 filed with the SEC on August
28, 1997.
1(a)-6 Amendment No. 6, to Master Trust Agreement, dated
January 30, 1992 was originally filed as an exhibit to
PEA No. 10 on October 14, 1992 and is incorporated by
reference to PEA No. 26 filed with the SEC on August
28, 1997.
1(a)-7 Amendment No. 7, to Master Trust Agreement, dated
September 10, 1992 was originally filed as an exhibit
to PEA No. 10 on October 14, 1992 and is incorporated
by reference to PEA No. 26 filed with the SEC on
August 28, 1997.
1(a)-8 Amendment No. 8, to Master Trust Agreement, dated
September 22, 1993 was originally filed as an exhibit
to PEA No. 16 on March 15, 1994 and is incorporated by
reference to PEA No. 26 filed with the SEC on August
28, 1997.
1(a)-9 Amendment No. 9, to Master Trust Agreement, dated
March 13, 1994 was originally filed as an exhibit to
PEA No. 16 on March 15, 1994 and is incorporated by
reference to PEA No. 26 filed with the SEC on August
28, 1997.
1(a)-10 Amendment No. 10, to Master Trust Agreement, dated
January 20, 1995 was originally filed as an exhibit to
PEA No. 21 on September 1, 1995 and is incorporated by
reference to PEA No. 26 filed with the SEC on August
28, 1997.
1(a)-11 Amendment No. 11, to Master Trust Agreement, dated
July 19, 1996 is incorporated by reference to Exhibit
1(l) of PEA No. 23 filed with the SEC on August 30,
1996.
-1-
<PAGE> 290
2(a) By-Laws of the Registrant, dated February 22, 1989,
were filed as Exhibit 2 to Registration Statement on
Form N-1A March 10, 1989.
2(b) By-laws of the Registrant, as amended through November
18, 1992 are incorporated by reference to PEA No. 26
filed with the SEC on August 28, 1997.
3 Not Applicable
4 Not Applicable
5(a)-1 Investment Advisory Agreement, dated July 7, 1989,
with respect to the Global Money Fund was originally
filed as Exhibit 5(a) to PEA No. 1 on January 30, 1990
and is incorporated by reference to PEA No. 26 filed
with the SEC on August 28, 1997.
5(a)-1.1 Amendment, dated June 30, 1994, to the Investment
Advisory Agreement relating to the Global Money Fund,
was originally filed as Exhibit 5(r) to PEA No. 17 on
September 1, 1994 and is incorporated by reference to
PEA No. 26 filed with the SEC on August 28, 1997.
5(a)-2 Investment Advisory Agreement ,dated July 7, 1989,
with respect to the U.S. Government Money Fund was
originally filed as Exhibit 5(a) to PEA No. 1 on
January 30, 1990 and is incorporated by reference to
PEA No. 26 filed with the SEC on August 28, 1997.
5(a)-2.1 Amendment, dated June 30, 1994, to the Investment
Advisory Agreement relating to the U.S. Government
Money Fund, was originally filed as Exhibit 5(s) to
PEA No. 17 on September 1, 1994 and is incorporated by
reference to PEA No. 26 filed with the SEC on August
28, 1997.
5(a)-3 Investment Advisory Agreement, dated July 7, 1989,
with respect to the California Money Fund was
originally filed as Exhibit 5(a) to PEA No. 1 on
January 30, 1990 and is incorporated by reference to
PEA No. 26 filed with the SEC on August 28, 1997.
5(a)-3.1 Amendment, dated June 30, 1994, to the Investment
Advisory Agreement relating to the California Money
Fund, was originally filed as Exhibit 5(x) to PEA No.
17 on September 1, 1994 and is incorporated by
reference to PEA No. 26 filed with the SEC on August
28, 1997.
5(a)-4 Investment Advisory Agreement, dated July 7, 1989,
with respect to the U.S. Government Fund was
originally filed as Exhibit 5(a) to PEA No. 1 on
January 30, 1990 and is incorporated by reference to
PEA No. 26 filed with the SEC on August 28, 1997.
5(a)-4.1 Amendment, dated June 30, 1994, to the Investment
Advisory Agreement relating to the U.S. Government
Fund was originally filed as Exhibit 5(t) to PEA No.
17 on September 1, 1994 and is incorporated by
reference to PEA No. 26 filed with the SEC on August
28, 1997.
5(a)-5 Investment Advisory Agreement, dated July 7, 1989,
with respect to the California Municipal Fund was
originally filed as Exhibit 5(a) to PEA No. 1 on
January 30, 1990 and is incorporated by reference to
PEA No. 26 filed with the SEC on August 28, 1997.
5(a)-5.1 Amendment, dated June 30, 1994, to the Investment
Advisory Agreement relating to the California
Municipal Fund, was originally filed as Exhibit 5(q)
to PEA No. 17 on September 1, 1994 and is incorporated
by reference to PEA No. 26 filed with the SEC on
August 28, 1997.
-2-
<PAGE> 291
5(a)-6 Investment Advisory Agreement, dated July 7, 1989,
with respect to the Growth and Income Fund was filed
as Exhibit 5(a) to PEA No. 1 on January 30, 1990 and
replaced by Exhibit 5(a)-6.1.
5(a)-6.1 Investment Advisory Agreement, dated October 22, 1993,
with respect to the Growth and Income Fund, originally
filed as Exhibit 5(l) to PEA No. 18 on October 28,
1994, replaces Exhibit 5(a)-6 and is incorporated by
reference to PEA No. 26 filed with the SEC on August
28, 1997.
5(a)-7 Investment Advisory Agreement, dated July 18, 1990,
with respect to the Corporate Income Fund was
originally filed as Exhibit 5(b) to PEA No. 4 on
October 29, 1990 and is incorporated by reference to
PEA No. 26 filed with the SEC on August 28, 1997.
5(a)-8 Investment Advisory Agreement, dated July 18, 1990,
with respect to the National Municipal Fund was
originally filed as Exhibit 5(b) to PEA No. 4 on
October 29, 1990 and is incorporated by reference to
PEA No. 26 filed with the SEC on August 28, 1997.
5(a)-8.1 Amendment, dated June 30, 1994, to the Investment
Advisory Agreement relating to the National Municipal
Fund, was originally filed as Exhibit 5(v) to PEA No.
17 on September 1, 1994 and is incorporated by
reference to PEA No. 26 filed with the SEC on August
28, 1997.
5(a)-9 Investment Advisory Agreement, dated July 18, 1990,
with respect to the Emerging Growth Fund (formerly the
Equity Opportunity Fund) was originally filed as
Exhibit 5(b) to PEA No. 4 on October 29, 1990 and
replaced by Exhibit 5(a)-9.1.
5(a)-9.1 Investment Advisory Agreement, dated October 22, 1993,
with respect to the Emerging Growth Fund, originally
filed as Exhibit 5(l) to PEA No.18 on October 28,
1994, replaces Exhibit 5(a)-9 and is incorporated by
reference to PEA No. 26 filed with the SEC on August
28, 1997.
5(a)-10 Investment Advisory Agreement, dated July 18, 1990,
with respect to the International Growth Fund
(formerly the Strategic International Fund) was
originally filed as Exhibit 5(b) to PEA No. 4 on
October 29, 1990 and replaced by Exhibit 5(a)-10.1.
5(a)-10.1 Investment Advisory Agreement, dated November 1, 1994,
with respect to the International Growth Fund was
originally filed as Exhibit 5(y) to PEA No. 21 on
September 1, 1995 and is incorporated by reference to
PEA No. 26 filed with the SEC on August 28, 1997.
5(a)-11 Investment Advisory Agreement, dated February 3, 1992,
with respect to the Short Term Global Government Fund
was originally filed as Exhibit 5(c) to PEA No. 9 on
August 31, 1992 and is incorporated by reference to
PEA No. 26 filed with the SEC on August 28, 1997.
5(a)-11.1 Amendment, dated June 30, 1994, to the Investment
Advisory Agreement relating to the Short Term Global
Government Fund, was originally filed as Exhibit 5(w)
to PEA No. 17 on September 1, 1994 and is incorporated
by reference to PEA No. 26 filed with the SEC on
August 28, 1997.
Ex-99.B 5(a)-12 Investment Advisory Agreement, dated April 1, 1993,
with respect to the Growth Fund was originally filed
as Exhibit 5(i) to PEA No. 18 on October 28, 1994 and
is filed herewith.
Ex-99.B 5(a)-13 Investment Advisory Agreement, dated June 2, 1993,
with respect to the Florida Insured Municipal Fund was
originally filed as Exhibit 5(j) to PEA No. 18 on
October 28, 1994 and is filed herewith.
-3-
<PAGE> 292
Ex-99.B 5(a)-13.1 Amendment, dated June 30, 1994, to the Investment
Advisory Agreement relating to the Florida Insured
Municipal Fund, was originally filed as Exhibit 5(u)
to PEA No. 17 on September 1, 1994 and is filed
herewith.
Ex-99.B 5(a)-14 Investment Advisory Agreement, dated September 6,
1993, with respect to the Short Term High Quality Bond
Fund was originally filed as Exhibit 5(l) to PEA No.
18 on October 28, 1994 and is filed herewith.
Ex-99.B 5(a)-15 Investment Advisory Agreement, dated April 1, 1994,
with respect to the California Insured Intermediate
Municipal Fund was originally filed as Exhibit 5(n) to
PEA No. 18 on October 28, 1994 and is filed herewith.
Ex-99.B 5(a)-15.1 Amendment, dated June 30, 1994, to the Investment
Advisory Agreement relating to the California Insured
Intermediate Municipal Fund, was originally filed as
Exhibit 5(p) to PEA No. 17 on September 1, 1994 and is
incorporated by reference to PEA No. 26 filed with
the SEC on August 28, 1997.
Ex-99.B 5(a)-16 Investment Advisory Agreement, dated March 17, 1995,
with respect to the Target Maturity 2002 Fund was
originally filed as Exhibit 5(aa) to PEA No. 21 on
September 1, 1995 and is filed herewith.
Ex-99.B 5(b)-1 Investment Sub-Advisory Agreement, dated July 7, 1989,
with respect to the Global Money Fund was originally
filed as Exhibit 5(b) to PEA No. 1 on January 30, 1990
and is filed herewith.
Ex-99.B 5(b)-2 Investment Sub-Advisory Agreement, dated July 7, 1989,
with respect to the U.S. Government Money Fund was
originally filed as Exhibit 5(b) to PEA No. 1 on
January 30, 1990 and is filed herewith.
Ex-99.B 5(b)-3 Investment Sub-Advisory Agreement, dated July 7, 1989,
with respect to the California Money Fund was
originally filed as Exhibit 5(b) to PEA No. 1 on
January 30, 1990 and is filed herewith.
5(b)-4 Investment Sub-Advisory Agreement, dated July 7, 1989,
with respect to the California Municipal Fund was
originally filed as Exhibit 5(b) to PEA No. 1 on
January 30, 1990 and replaced by Exhibit 5(b)-4.1.
5(b)-4.1 Investment Sub-Advisory Agreement, dated July 25,
1991, with respect to the California Municipal Fund
was originally filed as Exhibit 5(e) to PEA No. 6 on
August 29, 1991 and replaced by Exhibit 5(b)-4.2.
5(b)-4.2 Investment Sub-Advisory Agreement, dated February 17,
1993, with respect to the California Municipal Fund
was originally filed as Exhibit 5(gg) to PEA No. 21 on
September 1, 1995 and replaced by Exhibit 5(b)-4.3.
5(b)-4.3 Investment Sub-Advisory Agreement, dated October 31,
1996, with respect to the California Municipal Fund,
National Municipal Fund, Florida Insured Municipal
Fund and California Insured Intermediate Municipal
Fund is incorporated by reference to PEA No. 26 filed
with the SEC on August 28, 1997.
5(b)-5 Investment Sub-Advisory Agreement, dated July 7, 1989,
with respect to the U.S. Government Fund was
originally filed as Exhibit 5(b) to PEA No. 1 on
January 30, 1990 and replaced by Exhibit 5(b)-5.1.
5(b)-5.1 Investment Sub-Advisory Agreement, dated February 17,
1993, with respect to the U.S. Government Fund was
originally filed as Exhibit 5(cc) to PEA No. 21 on
September 1, 1995 and replaced by Exhibit 5(b)-5.2.
5(b)-5.2 Investment Sub-Advisory Agreement, dated December 8,
1994, with respect to the U.S. Government Fund was
originally filed as Exhibit 5(dd) to PEA No. 21 on
September 1, 1995 and replaced by Exhibit 5(b)-5.3.
-4-
<PAGE> 293
Ex-99.B 5(b)-5.3 Investment Sub-Advisory Agreement, dated February 28,
1995, with respect to the U.S. Government Fund was
originally filed as Exhibit 5(ee) to PEA No. 21 on
September 1, 1995 and is filed herewith.
5(b)-6 Investment Sub-Advisory Agreement, dated July 7, 1989,
with respect to the Growth and Income Fund was
originally filed as Exhibit 5(b) to PEA No. 1 on
January 30, 1990 and replaced by Exhibit 5(b)-6.1.
Ex-99.B 5(b)-6.1 Investment Sub-Advisory Agreement, dated September 20,
1993, with respect to the Growth and Income Fund was
originally filed as Exhibit 5(m) to PEA No. 18 on
October 28, 1994 and is filed herewith.
Ex-99.B 5(b)-7 Investment Sub-Advisory Agreement, dated July 18,
1990, with respect to the Corporate Income Fund was
originally filed as Exhibit 5(d) to PEA No. 4 on
October 29, 1990 and is filed herewith.
5(b)-8 Investment Sub-Advisory Agreement, dated July 18,
1990, with respect to the National Municipal Fund was
originally filed as Exhibit 5(d) to PEA No. 4 on
October 29, 1990 and replaced by exhibit 5(b)-8.1.
5(b)-8.1 Investment Sub-Advisory Agreement, dated February 17,
1993, with respect to the National Municipal Fund was
originally filed as Exhibit 5(hh) to PEA No. 21 on
September 1, 1995 and replaced by Exhibit 5(b)-4.3.
5(b)-9 Investment Sub-Advisory Agreement, dated July 18,
1990, with respect to the Emerging Growth Fund
(formerly the Equity Opportunity Fund) was originally
filed as Exhibit 5(d) to PEA No. 4 on October 29, 1990
and replaced by Exhibit 5(b)-9.1.
Ex-99.B 5(b)-9.1 Investment Sub-Advisory Agreement, dated September 20,
1993, with respect to the Emerging Growth Fund was
originally filed as Exhibit 5(m) to PEA No. 18 on
October 28, 1994 and is filed herewith.
5(b)-10 Investment Sub-Advisory Agreement, dated July 18,
1990, with respect to the International Growth Fund
(formerly the Strategic International Fund) was
originally filed as Exhibit 5(d) to PEA No. 4 on
October 29, 1990 and replaced by Exhibit 5(b)-10.1.
5(b)-10.1 Investment Sub-Advisory Agreement, dated November 1,
1994, with respect to the International Growth Fund
was originally filed as Exhibit 5(z) to PEA No. 21 on
September 1, 1995 and replaced by Exhibit 5(b)-10.2.
5(b)-10.2 Investment Sub-Advisory Agreement, dated April 8,
1996, with respect to the International Growth Fund is
incorporated by reference to Exhibit 5(ii) of
PEA No. 23 filed with the SEC on August 30, 1996.
Ex-99.B 5(b)-11 Investment Sub-Advisory Agreement, dated February 3,
1992, with respect to the Short Term Global Government
Fund was originally filed as Exhibit 5(g) to PEA No. 9
on August 31, 1992 and is filed herewith.
5(b)-12 Investment Sub-Advisory Agreement, dated April 2,
1993, with respect to the Growth Fund was originally
filed as Exhibit 5(ff) to PEA No. 21 on September 1,
1995 and replaced by Exhibit 5(b)-12.1.
Ex-99.B 5(b)-12.1 Amended and Restated Investment Sub-Advisory
Agreement, dated November 22, 1993, with respect to
the Growth Fund was originally filed as Exhibit 5(h)
to PEA No. 21 on September 1, 1995 and is filed
herewith.
5(b)-13 Investment Sub-Advisory Agreement, dated June 7, 1993,
with respect to the Florida Insured Municipal Fund was
originally filed as Exhibit 5(k) to PEA No. 18 on
October 28, 1994 and replaced by Exhibit 5(b)-4.3
-5-
<PAGE> 294
Ex-99.B 5(b)-14 Investment Sub-Advisory Agreement, dated September 6,
1993, with respect to the Short Term High Quality Bond
Fund was originally filed as Exhibit 5(m) to PEA No.
18 on October 28, 1994 and is filed herewith.
5(b)-15 Investment Sub-Advisory Agreement, dated April 1,
1994, with respect to the California Insured
Intermediate Municipal Fund was originally filed as
Exhibit 5(o) to PEA No. 21 on September 1, 1995 and
replaced by Exhibit 5(b)-4.3.
Ex-99.B 5(b)-16 Investment Sub-Advisory Agreement, dated March 17,
1995, with respect to the Target Maturity 2002 Fund
was originally filed as Exhibit 5(bb) to PEA No. 21 on
September 1, 1995 and is filed herewith.
6(a)-1 Distribution Agreement (Class A Shares), dated July 7,
1989, relating to the Global Money Fund, U.S.
Government Money Fund, California Money Fund, U.S.
Government Fund, California Municipal Fund and Growth
and Income Fund was filed as Exhibit 6(a) to PEA No. 1
on January 30, 1990 and replaced by Exhibit 6(a)-1.9.
6(a)-1.1 Supplement to Distribution Agreement, dated July 18,
1990, relating to the National Municipal Fund,
Corporate Income Fund, Emerging Growth Fund and
International Growth Fund was filed as Exhibit 6(b) to
PEA No. 4 on October 29, 1990 and replaced by Exhibit
6(a)-1.9.
6(a)-1.2 Supplement to Distribution Agreement relating to the
Short Term Global Government Fund was filed as Exhibit
6(c) to PEA No. 9 on August 31, 1992 and replaced by
Exhibit 6(a)-1.9.
6(a)-1.3 Amendment No. 1 to Distribution Agreement, dated
January 2, 1991, was filed as Exhibit 6(c) to PEA No.
7 on October 28, 1991 and replaced by Exhibit
6(a)-1.9.
6(a)-1.4 Form of Supplement to Distribution Agreement relating
to the Growth Fund was filed as Exhibit 6(e) to PEA
No. 12 on March 25, 1993 and replaced by Exhibit
6(a)-1.9.
6(a)-1.5 Form of Supplement to Distribution Agreement relating
to the Florida Insured Municipal Fund was filed as
Exhibit 6(f) to PEA No. 12 on March 25, 1993 and
replaced by Exhibit 6(a)-1.9.
6(a)-1.6 Supplement to Distribution Agreement, dated October
29, 1993, relating to the Short Term High Quality Bond
Fund was filed as Exhibit 6(g) to PEA No. 21 on
September 1, 1995 and replaced by Exhibit 6(a)-1.9.
6(a)-1.7 Supplement to Distribution Agreement, dated April 1,
1994, relating to the California Insured Intermediate
Municipal Fund was filed as Exhibit 6(h) to PEA 21 on
September 1, 1995 and replaced by Exhibit 6(a)-1.9.
6(a)-1.8 Supplement to Distribution Agreement, dated March 17,
1995, relating to the Target Maturity 2002 Fund was
filed as Exhibit 6(j) to PEA No. 22 on August 30, 1996
and replaced by Exhibit 6(a)-1.9
6(a)-1.9 Class A Distribution Agreement, dated July 7, 1989,
with Sierra Investment Services Corporation, as
amended and supplemented July 1, 1995 is incorporated
by reference to Exhibit 6(m) of PEA No. 24 filed with
the SEC on October 30, 1996.
6(b)-1 Amended and Restated Class B and S Distribution
Agreement with Funds Distributor, Inc., dated December
20, 1995, relating to all series Funds of Registrant
is incorporated by reference to Exhibit 6(l) of PEA
No. 23 filed with the SEC on August 30, 1996 and
replaced by Exhibit 6(b)-2.
-6-
<PAGE> 295
6(b)-2 Class B and Class S Distribution Agreement with Sierra
Investment Services Corporation, dated December 20,
1995, relating to all series Funds of Registrant, is
incorporated by reference to Exhibit 6(k) of PEA No.
23 filed with the SEC on August 30, 1996.
7 Not Applicable
Ex-99.B 8(a)-1 Custody Agreement, dated July 7, 1989, relating to the
Global Money Fund, U.S. Government Money Fund,
California Money Fund, U.S. Government Fund,
California Municipal Fund and Growth and Income Fund
was originally filed as Exhibit 8(a) to PEA No. 3 on
July 9, 1990 and is filed herewith.
Ex-99.B 8(a)-1.1 Amendment No. 1 to Custody Agreement, dated February
5, 1991, was originally filed as Exhibit 8(c) to PEA
No. 6 on August 29, 1991 and is filed herewith.
8(a)-1.2 Supplement to Custody, Transfer Agency and Registrar
and Sub-Administration Agreements, dated July 18,
1990, relating to the Corporate Income Fund, National
Municipal Fund, Emerging Growth Fund and International
Growth Fund was originally filed as Exhibit 8(b) to
PEA No. 6 on August 29, 1991.
8(a)-1.3 Supplement to Custody, Transfer Agency and Registrar
and Sub-Administration Agreements, dated February 3,
1992, relating to the Short Term Global Government
Fund was originally filed as Exhibit 8(c) to PEA No. 9
on August 31, 1992.
8(a)-1.4 Form of Supplement to Custody, Transfer Agency and
Registrar and Sub-Administration Agreements, dated
April 1, 1993, relating to the Growth Fund was filed
as Exhibit 8(f) to PEA No. 12 on March 25, 1993.
8(a)-1.5 Form of Supplement to Custody, Transfer Agency and
Registrar, and Sub- Administration Agreements, dated
June 2, 1993, relating to the Florida Insured
Municipal Fund was filed as Exhibit 8(g) to PEA No. 12
on March 25, 1993.
8(a)-1.6 Supplement to Custody, Transfer Agency and Registrar,
and Sub-Administration Agreements, dated October 29,
1993, relating to the Short Term High Quality Bond
Fund was originally filed as Exhibit 8(h) to PEA No.
21 on September 1, 1995.
8(a)-1.7 Supplement to Custody, Transfer Agency and Registrar,
and Sub-Administration Agreements, dated April 1,
1994, relating to the California Insured Intermediate
Municipal Fund was filed as Exhibit 8(i) to PEA No. 21
on September 1, 1995.
Ex-99.B 8(a)-1.8 Revised Custodian, Transfer Agency and Registrar and
Sub-Administration Fees, dated July 18, 1990, relating
to each Fund of the Registrant was originally filed
as Exhibit 8(k) to PEA 21 on September 1, 1995 and is
filed herewith.
Ex-99.B 8(a)-1.9 Supplement to Custody, Transfer Agency and Registrar,
and Sub-Administration Agreements, dated March 17,
1995, relating to the Target Maturity 2002 Fund was
originally filed as Exhibit 8(j) to PEA No. 22 on
October 30, 1995 and is filed herewith.
8(a)-1.10 Supplement to Custody and Sub-Administration
Agreement, dated February 3, 1992, relating to the
Short Term Global Government Fund is incorporated by
reference to Exhibit 8(l) of PEA 24 filed with the SEC
on October 30, 1996.
Ex-99.B 8(b) Sub-Custodian Agreement, dated March 11, 1994, was
originally filed as Exhibit 8(e) to PEA No. 21 on
September 1, 1995 and is filed herewith.
-7-
<PAGE> 296
9(a)-1 Transfer Agency and Registrar Agreement, dated June 1,
1989, relating to the Global Money Fund, U.S.
Government Money Fund, California Money Fund, U.S.
Government Fund, California Municipal Fund and Growth
and Income Fund was originally filed as Exhibit 9(a)
to PEA No. 6 on August 29, 1991 and replaced by
9(a)-2. [Supplemented by Exhibits 8(a)-1.2, 8(a)-1.3,
8(a)-1.4, 8(a)-1.5, 8(a)-1.6, 8(a)- 1.7, 8(a)-1.8 and
8(a)-1.9]
9(a)-1.1 Amendment to Transfer Agency and Registrar Agreement,
for GW Short Term Global Government Fund, dated
February 3, 1992 was originally filed as Exhibit 9(l)
to PEA No. 21 on September 1, 1995 and replaced by
Exhibit 9(a)-3.
9(a)-1.2 Amendment to Transfer Agency and Registrar Agreement,
for GW Sierra Trust Funds, dated March 12, 1992 was
originally filed as Exhibit 9(m) to PEA No. 21 on
September 1, 1995 and replaced by Exhibit 9(a)-3.
9(a)-2 Transfer Agency and Registrar Agreement dated as of
January 1, 1992 is incorporated by reference to
Exhibit 9(n) of PEA No. 24 filed with the SEC on
October 30, 1996 and is replaced by Exhibit 9(a)-3.
9(a)-3 Transfer Agency and Services Agreement dated May 1,
1996 is incorporated by reference to PEA No. 26 filed
with the SEC on August 28, 1997.
9(b)-1 Sub-Administration Agreement, dated July 7, 1989,
relating to the Global Money Fund, U.S. Government
Money Fund, California Money Fund, U.S. Government
Fund, California Municipal Fund and Growth and Income
Fund was originally filed as Exhibit 9(d) to PEA No. 6
on August 29, 1991. [Supplemented by Exhibits
8(a)-1.2, 8(a)-1.3, 8(a)-1.4, 8(a)-1.5, 8(a)-1.6,
8(a)- 1.7, 8(a)-1.8, 8(a)-1.9 and 8(a)-1.10]
9(b)-2 Form of Sub-Administration Agreement, dated May 1,
1997, relating to each investment fund of the Trust is
incorporated by reference to PEA No. 26 filed with the
SEC on August 28, 1997.
9(c)-1 Administration Agreement, dated December 14, 1989, was
filed as Exhibit 9(b) to PEA No. 1 on January 30, 1990
and replaced by Exhibit 9(c)-2.
9(c)-1.1 Supplement to Administration Agreement, dated July 18,
1990, was filed as Exhibit 9(c) to PEA No. 6 on August
31, 1991 and replaced by Exhibit 9(c)-2.
9(c)-1.2 Supplement to Administration Agreement was filed as
Exhibit 9(d) to PEA No. 9 on August 31, 1992 and
replaced by Exhibit 9(c)-2.
9(c)-1.3 Supplement to Administration Agreement, dated October
29, 1993, was filed as Exhibit 9(h) to PEA No. 21 on
September 1, 1995 and replaced by Exhibit 9(c)-2.
9(c)-1.4 Supplement to Administration Agreement, dated April 1,
1994, was filed as Exhibit 9(i) to PEA No. 21 on
September 1, 1995 and replaced by Exhibit 9(c)-2.
9(c)-2 Administration Agreement, dated July 1, 1994, relating
to all series funds of the Registrant was originally
filed as Exhibit 9(b) to PEA No. 22 filed on October
30, 1995 and replaced by Exhibit 9(c)-3.
9(c)-3 Administration Agreement dated July 1, 1996, relating
to all series funds of the Registrant, is incorporated
by reference to Exhibit 9(p) of PEA No. 24 filed with
the SEC on October 30, 1996.
9(d) Service Agency Agreement with The Shareholder Services
Group, Inc., dated September 1, 1993, is incorporated
by reference to Exhibit 9(q) of PEA No. 24 filed on
October 30, 1996.
-8-
<PAGE> 297
10(a) Consent and Opinions of Counsel, dated July 3, 1989,
relating to the GW Global Income Money Market Fund,
U.S. Government Money Fund, California Money Fund,
U.S. Government Fund, California Municipal Fund and
Growth and Income Fund was originally filed as Exhibit
10 to Pre-Effective Amendment No. 3 on July 6, 1989.
10(b) Consent and Opinions of Counsel, dated July 6, 1990,
relating to the GW Sierra Trust Funds, Corporate
Income Fund, National Municipal Fund, Emerging Growth
Fund and International Growth Fund was originally
filed as an exhibit to PEA No. 3 on July 9, 1990.
10(c) Consents and Opinions of Counsel, dated October 24,
1991, relating to the registration of shares pursuant
to Rule 24e-2 was originally filed as an exhibit to
PEA No. 7 on October 28, 1991.
10(d) Consents and Opinions of Counsel, dated December 2,
1991 relating to the Short Term Global Government Fund
was originally filed as an exhibit to PEA No. 8 on
December 5, 1991.
10(e) Consent and Opinion of Counsel, dated June 20, 1997,
relating to the registration of shares pursuant to
Rule 24e-2 is incorporated by reference to PEA No. 26
filed with the SEC on August 28, 1997.
Ex-99.B 11 Consent of Independent Accountants dated October 27,
1997 is filed herewith.
12 Not Applicable
Ex-99.B 13(a) Purchase Agreement, dated July 10, 1989, relating to
the Global Money Fund, U.S. Government Money Fund,
California Money Fund, U.S. Government Fund,
California Municipal Fund and Growth and Income Fund
was originally filed as Exhibit 13 to PEA No. 1 on
January 30, 1990 and is filed herewith.
Ex-99.B 13(b) Purchase Agreement, dated July 6, 1990, relating to
the Corporate Income Fund, National Municipal Fund,
Emerging Growth Fund and International Growth Fund was
originally filed as an exhibit to PEA No. 3 on July 9,
1990 and is filed herewith.
13(c) Form of Purchase Agreement relating to the Short Term
Global Government Fund is incorporated by reference to
PEA No. 26 filed with the SEC on August 28, 1997.
Ex-99.B 14 Copies of Model Retirement Plans were originally filed
as an exhibit to Pre- Effective Amendment No. 3 on
July 6, 1989 and are filed herewith.
15(a)-1 Distribution Plan as of July 7, 1989 was filed as
Exhibit 15 to Pre-Effective Amendment No. 3 on July 6,
1989 and replaced by Exhibit 15(a)-1.1.
15(a)-1.1 Distribution Plan dated July 7, 1989, as amended
January 2, 1991 was filed as Exhibit 15(b) to PEA No.
7 on October 28, 1991 and replaced by
Exhibit 15(a)-1.2.
15(a)-1.2 Class A Distribution Plan, dated July 7, 1989 and
amended December 14, 1992, was filed as Exhibit 15(a)
to PEA No. 22 on October 30, 1995 and replaced by
Exhibit 15(a)-1.3.
15(a)-1.3 Class A Distribution Plan, dated July 7, 1989 and
amended July 1, 1995, is incorporated by reference to
Exhibit 15(e) of PEA No. 24 filed with the SEC on
October 30, 1996.
15(b)-1 Class B Distribution Plan was filed as Exhibit 15(c)
to PEA No. 17 on September 1, 1994 and replaced by
Exhibit 15(b)-1.1.
-9-
<PAGE> 298
15(b)-1.1 Amended and Restated Class B Distribution Plan, dated
December 20, 1995, is incorporated by reference to
Exhibit 15(c) of PEA No. 23 filed with the SEC on
August 30, 1996.
15(c)-1 Class S Distribution Plan was filed as Exhibit 15(d)
to PEA No. 17 on September 1, 1994 and replaced by
Exhibit 15(c)-1.1.
15(c)-1.1 Amended and Restated Class S Distribution Plan, dated
December 20, 1995, is incorporated by reference to
Exhibit 15(d) of PEA No. 23 filed with the SEC on
August 30, 1996.
16(a) Certain Performance Data relating to the California
Municipal Fund was originally filed as Exhibit 16 to
PEA No. 1 on January 30, 1990.
16(b) Certain Performance Data relating to the California
Money Fund, U.S. Government Fund, California Municipal
Fund and Growth and Income Fund was originally filed
as an exhibit to PEA No. 2 on May 9, 1990.
16(c) Certain Performance Data relating to the U.S.
Government Fund, California Municipal Fund and Growth
and Income Fund was originally filed as an exhibit to
PEA No. 4 on October 29, 1990.
Ex-99.B 16(d) Certain Performance Data relating to the U.S.
Government Fund, Corporate Income Fund, California
Municipal Fund, National Municipal Fund, Growth and
Income Fund, Emerging Growth Fund and International
Growth Fund was originally filed as an exhibit to PEA
No. 5 on December 28, 1990 and is filed herewith.
Ex-99.B 16(e) Certain Performance Data relating to the National
Municipal Fund, Corporate Income Fund, Emerging Growth
Fund and International Growth Fund was originally
filed as an exhibit to PEA No. 7 on October 28, 1991
and is filed herewith.
16(f) Certain Performance Data relating to the Short Term
Global Government Fund is incorporated by reference
to PEA No. 26 filed with the SEC on August 28, 1997.
17 Not Applicable
Ex-99.B 18 Rule 18f-3 Multiple Class Plan, dated June 13, 1995
was originally filed as Exhibit 17 to PEA No. 21 on
September 1, 1995 and is filed herewith.
19 Not Applicable
20 Not Applicable
21 Not Applicable
22 Not Applicable
23 Not Applicable
24 Powers of Attorney with respect to Registration
Statement and Amendments thereto signed by the
following person in their capacities as Trustees and,
where applicable, Officers of the Trust: Arthur H.
Bernstein, David E. Anderson, Edmond R. Davis, John W.
English and Alfred E. Osborne, Jr. are incorporated by
reference to PEA No. 24 filed on October 30, 1996.
25 Not Applicable
26 Not Applicable
-10-
<PAGE> 299
Ex-99.B 27 Financial Data Schedules relating to the fiscal year
ended June 30, 1997 and are filed herewith.
-11-
<PAGE> 1
Exhibit 5(a)-12
INVESTMENT ADVISORY AGREEMENT
April 1, 1993
Sierra Investment Advisors Corporation
888 South Figueroa Street
Suite 1100
Los Angeles, California 90017
Dear Sirs:
Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, hereby agrees
with Sierra Investment Advisors Corporation ("Sierra Advisors"), a corporation
organized under the laws of the state of California, as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of the Company's Growth Fund
(the "Fund") by investing and reinvesting in investments of the kind and in
accordance with the limitations specified in its Master Trust Agreement, as
amended, and in its Prospectus and Statement of Additional Information relating
to the Fund as from time to time in effect, and in such manner and to such
extent as may from time to time be approved by the Board of Trustees of the
Company. Copies of the Fund's Prospectus and Statement of Additional Information
and the Company's Master Trust Agreement, as amended, have been or will be
submitted to Sierra Advisors. The Company agrees to provide copies of all
amendments to the Fund's Prospectus and Statement of Additional Information and
the Company's Master Trust Agreement to Sierra Advisors on an on-going basis.
The Company desires to employ and hereby appoints Sierra Advisors to act as
investment advisor to the Fund. Sierra Advisors accepts the appointment and
agrees to furnish the services described herein for the compensation set forth
below.
2. Services as Investment Advisor
Subject to the supervision and direction of the Board of Trustees of
the Company, Sierra Advisors has general oversight responsibility for the
investment advisory services provided to the Fund and will exercise this
responsibility in accordance with the Company's Master Trust Agreement, the
Investment Company Act of 1940 and the Investment Advisers Act of 1940, as the
same may from time to time be amended, and with the Fund's investment
objective(s) and policies as stated in the Fund's Prospectus and Statement of
Additional Information relating to the Fund as from time to time in effect. In
connection therewith, Sierra Advisors will, among other things, (a) participate
in the formulation of the Fund's investment policies, (b) analyze economic
trends
<PAGE> 2
affecting the Fund, (c) monitor the expenses incurred by the Fund, (d) monitor
the brokerage and research services (as those terms are defined in Section 28(e)
of the Securities Act of 1934) that are provided to the Fund and may be
considered by the Fund's investment sub-advisor in selecting brokers or dealers
to execute particular transactions and (e) monitor and evaluate the services
provided by the Fund's investment sub-advisor under its investment sub-advisory
agreement, including, without limitation, the sub-advisor's adherence to the
Fund's investment objective(s) and policies and the Fund's investment
performance.
3. Information Provided to the Company
Sierra Advisors will keep the Company informed of developments
materially affecting the Fund, and will, on its own initiative, furnish the
Company from time to time with whatever information Sierra Advisors believes is
appropriate for this purpose.
4. Standard of Care
Sierra Advisors shall exercise its best judgment in rendering the
services described in paragraph 2 above. Sierra Advisors shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except (a) a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the Investment
Company Act of 1940, as amended) or (b) a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement (each such breach, act or omission described in (a) or (b) shall be
referred to as "Disqualifying Conduct").
5. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Company will pay Sierra Advisors on the first business day of each month a
fee for the previous month at the annual rate of .95% of the Fund's average net
assets up to $200 million and .875% of the Fund's average net assets exceeding
$200 million, out of which fee Sierra Advisors shall pay to the sub-investment
advisor of the Fund (the "Sub-Advisor") the fee required under the Investment
Sub-Advisory Agreement relating to the Fund among the Company, Sierra Advisors
and the Sub-Advisor. Upon any termination of this
-2-
<PAGE> 3
Agreement before the end of a month, the fee for such part of that month shall
be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to Sierra Advisors, the
value of the Fund's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus or Statement of Additional Information
relating to the Fund as from time to time in effect.
6. Expenses
Sierra Advisors will bear all expenses in connection with the
performance of its services under this Agreement, including, without limitation,
payment of the sub-advisory fee to the Sub-Advisor. The Company will bear
certain other expenses to be incurred in its operation, including but not
limited to: organizational expenses; taxes, interest, brokerage fees and
commissions, if any; fees of trustees of the Company who are not officers,
directors, or employees of Sierra Advisors, the Company's sub-investment
advisors, the Fund's sub-administrator or any of their affiliates; Securities
and Exchange Commission fees and state Blue Sky qualification fees;
out-of-pocket expenses of custodians, transfer and dividend disbursing agents
and the Company's sub-administrator and transaction charges of custodians;
insurance premiums; outside auditing and legal expenses; costs of maintenance of
the Company's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the shareholders of the Company and of the officers or
Board of Trustees of the Company; and any extraordinary expenses. In addition,
the Fund pays a distribution fee pursuant to the terms of a Distribution Plan
adopted under Rule 12b-1 of the Investment Company Act of 1940, as amended.
7. Reimbursement to the Company
If in any fiscal year of the Fund the aggregate expenses of the Fund
(including fees pursuant to this Agreement, the sub advisory agreement with the
Sub-Advisor and the Fund's administration and sub-administration agreements, but
excluding interest, taxes, brokerage, distribution fees relating to the Fund
paid pursuant to the Company's Distribution Plan and, if permitted by the
relevant state securities commissions, extraordinary expenses) exceed the
expense limitations of any state having jurisdiction over the Fund, Sierra
Advisors will reimburse the Fund for the excess expense to the extent required
by state law. A fee reduction pursuant to this paragraph 7, if any, will be
estimated and reconciled monthly. Sierra Advisors shall not be required to
reimburse any amount in excess of the advisory fee paid to it pursuant to this
Agreement.
-3-
<PAGE> 4
8. Services to Other Companies or Accounts
The Company understands that Sierra Advisors now acts as investment
adviser to the other investment funds of the Company, and may act in the future
as investment adviser to fiduciary and other managed accounts and as investment
adviser to one or more other investment companies or series of investment
companies, and the Company has no objection to Sierra Advisors so acting. The
Company understands that the persons employed by Sierra Advisors to assist in
the performance of Sierra Advisors' duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict the right of Sierra Advisors or any affiliate of Sierra Advisors to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
9. Term of Agreement
This Agreement shall become effective as of the date the Fund commences
its investment operations and shall continue for an initial two-year term and
shall continue thereafter so long as such continuance is specifically approved
at least annually by (i) the Board of Trustees of the Company or (ii) a vote of
a "majority" (as defined in the Investment Company Act of 1940, as amended) of
the Fund's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in said Act) of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable, without penalty, on 60 days' written
notice, by the Board of Trustees of the Company or by vote of holders of a
majority of the Fund's shares, or upon 90 days' written notice, by Sierra
Advisors. This Agreement will also terminate automatically in the event of its
assignment (as defined in said Act). Sierra Advisors agrees to notify the
Company of any circumstances that might result in this Agreement being deemed to
be assigned.
10. Representations of the Company and Sierra Advisors
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in
the office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of Sierra Advisors has been duly authorized and (iii) it has acted
and will continue to act in conformity with the requirements of the Investment
Company Act of 1940, as amended, and other applicable laws.
Sierra Advisors represents that it is authorized to perform the
services described herein.
-4-
<PAGE> 5
11. Indemnification
The Company shall indemnify and hold harmless Sierra Advisors from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys fees other related expenses), howsoever arising from or in connection
with this Agreement or the performance by Sierra Advisors of its duties
hereunder; provided, however, that nothing contained herein shall require that
Sierra Advisors be indemnified for Disqualifying Conduct.
12. Limitation of Liability
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Company individually.
13. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
14. Governing Law
This Agreement shall be governed in accordance with laws of the
Commonwealth of Massachusetts.
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
SIERRA TRUST FUNDS
By: /s/ F. Brian Cerini
-----------------------------
President
Accepted:
SIERRA INVESTMENT ADVISORS CORPORATION
By: /s/ KEITH PIPES
----------------------------------
Title:
-5-
<PAGE> 1
Exhibit 5(a)-13
INVESTMENT ADVISORY AGREEMENT
June 2, 1993
Sierra Investment Advisors Corporation
9301 Corbin Avenue
Northridge, California 91324
Dear Sirs:
Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, hereby agrees
with Sierra Investment Advisors Corporation ("Sierra Advisors"), a corporation
organized under the laws of the state of California, as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of the Company's Florida
Insured Municipal Fund (the "Fund") by investing and reinvesting in investments
of the kind and in accordance with the limitations specified in its Master Trust
Agreement, as amended, and in its Prospectus and Statement of Additional
Information relating to the Fund as from time to time in effect, and in such
manner and to such extent as may from time to time be approved by the Board of
Trustees of the Company. Copies of the Fund's Prospectus and Statement of
Additional Information and the Company's Master Trust Agreement, as amended,
have been or will be submitted to Sierra Advisors. The Company agrees to provide
copies of all amendments to the Fund's Prospectus and Statement of Additional
Information and the Company's Master Trust Agreement to Sierra Advisors on an
on-going basis. The Company desires to employ and hereby appoints Sierra
Advisors to act as investment advisor to the Fund. Sierra Advisors accepts the
appointment and agrees to furnish the services described herein for the
compensation set forth below.
2. Services as Investment Advisor
Subject to the supervision and direction of the Board of Trustees of
the Company, Sierra Advisors has general oversight responsibility for the
investment advisory services provided to the Fund and will exercise this
responsibility in accordance with the Company's Master Trust Agreement, the
Investment Company Act of 1940 and the Investment Advisers Act of 1940, as the
same may from time to time be amended, and with the Fund's investment
objective(s) and policies as stated in the Fund's Prospectus and Statement of
Additional Information relating to the Fund as from time to time in effect. In
connection therewith, Sierra Advisors will, among other things, (a) participate
in the formulation of the Fund's investment policies, (b) analyze economic
trends affecting the Fund, (c) monitor the expenses incurred by the
<PAGE> 2
Fund, (d) monitor the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Act of 1934) that are provided to the
Fund and may be considered by the Fund's investment sub-advisor in selecting
brokers or dealers to execute particular transactions and (e) monitor and
evaluate the services provided by the Fund's investment sub-advisor under its
investment sub-advisory agreement, including, without limitation, the
sub-advisor's adherence to the Fund's investment objective(s) and policies and
the Fund's investment performance.
3. Information Provided to the Company
Sierra Advisors will keep the Company informed of developments
materially affecting the Fund, and will, on its own initiative, furnish the
Company from time to time with whatever information Sierra Advisors believes is
appropriate for this purpose.
4. Standard of Care
Sierra Advisors shall exercise its best judgment in rendering the
services described in paragraph 2 above. Sierra Advisors shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except (a) a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the Investment
Company Act of 1940, as amended) or (b) a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement (each such breach, act or omission described in (a) or (b) shall be
referred to as "Disqualifying Conduct").
5. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Company will pay Sierra Advisors on the first business day of each month a
fee for the previous month at the annual rate of .60% of the Fund's average net
assets up to $500 million and .45% of the Fund's average net assets exceeding
$500 million, out of which fee Sierra Advisors shall pay to the sub-investment
advisor of the Fund (the "Sub-Advisor") the fee required under the Investment
Sub-Advisory Agreement relating to the Fund among the Company, Sierra Advisors
and the Sub-Advisor. Upon any termination of this Agreement before the end of a
month, the fee for such part of that month shall be prorated according to the
proportion that such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. For the purpose of
determining fees payable to
-2-
<PAGE> 3
Sierra Advisors, the value of the Fund's net assets shall be computed at the
times and in the manner specified in the Fund's Prospectus or Statement of
Additional Information relating to the Fund as from time to time in effect.
6. Expenses
Sierra Advisors will bear all expenses in connection with the
performance of its services under this Agreement, including, without limitation,
payment of the sub-advisory fee to the Sub-Advisor. The Company will bear
certain other expenses to be incurred in its operation, including but not
limited to: organizational expenses; taxes, interest, brokerage fees and
commissions, if any; fees of trustees of the Company who are not officers,
directors, or employees of Sierra Advisors, the Company's sub-investment
advisors, the Fund's sub-administrator or any of their affiliates; Securities
and Exchange Commission fees and state Blue Sky qualification fees;
out-of-pocket expenses of custodians, transfer and dividend disbursing agents
and the Company's sub-administrator and transaction charges of custodians;
insurance premiums; outside auditing and legal expenses; costs of maintenance of
the Company's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the shareholders of the Company and of the officers or
Board of Trustees of the Company; and any extraordinary expenses. In addition,
the Fund pays a distribution fee pursuant to the terms of a Distribution Plan
adopted under Rule 12b-1 of the Investment Company Act of 1940, as amended.
7. Reimbursement to the Company
If in any fiscal year of the Fund the aggregate expenses of the Fund
(including fees pursuant to this Agreement, the sub-advisory agreement with the
Sub-Advisor and the Fund's administration and sub-administration agreements, but
excluding interest, taxes, brokerage, distribution fees relating to the Fund
paid pursuant to the Company's Distribution Plan and, if permitted by the
relevant state securities commissions, extraordinary expenses) exceed the
expense limitations of any state having jurisdiction over the Fund, Sierra
Advisors will reimburse the Fund for the excess expense to the extent required
by state law. A fee reduction pursuant to this paragraph 7, if any, will be
estimated and reconciled monthly. Sierra Advisors shall not be required to
reimburse any amount in excess of the advisory fee paid to it pursuant to this
Agreement.
8. Services to Other Companies or Accounts
-3-
<PAGE> 4
The Company understands that Sierra Advisors now acts as investment
adviser to the other investment funds of the Company, and may act in the future
as investment adviser to fiduciary and other managed accounts and as investment
adviser to one or more other investment companies or series of investment
companies, and the Company has no objection to Sierra Advisors so acting. The
Company understands that the persons employed by Sierra Advisors to assist in
the performance of Sierra Advisors' duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict the right of Sierra Advisors or any affiliate of Sierra Advisors to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
9. Term of Agreement
This Agreement shall become effective as of the date the Fund commences
its investment operations and shall continue for an initial two-year term and
shall continue thereafter so long as such continuance is specifically approved
at least annually by (i) the Board of Trustees of the Company or (ii) a vote of
a "majority" (as defined in the Investment Company Act of 1940, as amended) of
the Fund's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in said Act) of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable, without penalty, on 60 days' written
notice, by the Board of Trustees of the Company or by vote of holders of a
majority of the Fund's shares, or upon 90 days' written notice, by Sierra
Advisors. This Agreement will also terminate automatically in the event of its
assignment (as defined in said Act). Sierra Advisors agrees to notify the
Company of any circumstances that might result in this Agreement being deemed to
be assigned.
10. Representations of the Company and Sierra Advisors
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of Sierra Advisors has been duly authorized and (iii) it has acted
and will continue to act in conformity with the requirements of the Investment
Company Act of 1940, as amended, and other applicable laws.
Sierra Advisors represents that it is authorized to perform the
services described herein.
-4-
<PAGE> 5
11. Indemnification
The Company shall indemnify and hold harmless Sierra Advisors from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys fees other related expenses), howsoever arising from or in connection
with this Agreement or the performance by Sierra Advisors of its duties
hereunder; provided, however, that nothing contained herein shall require that
Sierra Advisors be indemnified for Disqualifying Conduct.
12. Limitation of Liability
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Company individually.
13. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
14. Governing Law
This Agreement shall be governed in accordance with laws of the
Commonwealth of Massachusetts.
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
SIERRA TRUST FUNDS
By: /s/ Brian Cerini
----------------------------------
President
Accepted:
SIERRA INVESTMENT ADVISORS CORPORATION
By: /s/ Keith Pipes
-----------------------------
Title:
-5-
<PAGE> 1
Exhibit 5(a)-13.1
AMENDMENT OF INVESTMENT ADVISORY AGREEMENT
June 30, 1994
Sierra Investment Advisors Corporation
9301 Corbin Avenue, Suite 333
P.O. Box 1160
Northridge, California 91328-1160
Dear Sirs:
Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, hereby agrees
with Sierra Investment Advisors Corporation ("Sierra Advisors"), a corporation
organized under the laws of the State of California, to amend as follows the
Investment Advisory Agreement (the "Agreement") by and between the Company and
Sierra Advisors dated June 2, 1993 with respect to employing the capital of the
Florida Insured Municipal Fund (the "Fund," a series investment fund of the
Company):
1. Amendment of Investment Advisory Agreement
Section 5 of the Agreement is amended by adding the following at the
end of the section: "Notwithstanding the compensation payable to Sierra Advisors
as provided above, the Company shall not pay to Sierra Advisors annually more
than 0.55% of the average daily net assets of the Fund calculated on a trailing
three-month basis."
2. Effective Date
This amendment to the Agreement shall be effective as of July 1, 1994.
<PAGE> 2
Sierra Investment Advisors Corporation
June 30, 1994
Page 2
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
SIERRA TRUST FUNDS
By: /s/ F. Brian Cerini
--------------------------------
Name: F. Brian Cerini
Title: President
Accepted:
SIERRA INVESTMENT ADVISORS CORPORATION
By: /s/ MICHAEL D. GOTH
---------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
<PAGE> 1
Exhibit 5(a)-14
INVESTMENT ADVISORY AGREEMENT
Short Term High Quality Bond Fund
September 6, 1993
Sierra Investment Advisors Corporation
9301 Corbin Avenue, Suite 333
P.O. Box 1160
Northridge, California 91328-1160
Dear Sirs:
Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, hereby agrees
with Sierra Investment Advisors Corporation ("Sierra Advisors"), a corporation
organized under the laws of the state of California, as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of the Company's Short Term
High Quality Bond Fund (the "Fund") by investing and reinvesting in investments
of the kind and in accordance with the limitations specified in its Master Trust
Agreement, as amended, and in its Prospectus and Statement of Additional
Information relating to the Fund as from time to time in effect, and in such
manner and to such extent as may from time to time be approved by the Board of
Trustees of the Company. Copies of the Fund's Prospectus and Statement of
Additional Information and the Company's Master Trust Agreement, as amended,
have been or will be submitted to Sierra Advisors. The Company agrees to provide
copies of all amendments to the Fund's Prospectus and Statement of Additional
Information and the Company's Master Trust Agreement to Sierra Advisors on an
on-going basis. The Company desires to employ and hereby appoints Sierra
Advisors to act as investment advisor to the Fund. Sierra Advisors accepts the
appointment and agrees to furnish the services described herein for the
compensation set forth below.
-7-
<PAGE> 2
2. Services as Investment Advisor
Subject to the supervision and direction of the Board of Trustees of
the Company, Sierra Advisors has general oversight responsibility for the
investment advisory services provided to the Fund and will exercise this
responsibility in accordance with the Company's Master Trust Agreement, the
Investment Company Act of 1940 and the Investment Advisors Act of 1940, as the
same may from time to time be amended, and with the Fund's investment
objective(s) and policies as stated in the Fund's Prospectus and Statement of
Additional Information relating to the Fund as from time to time in effect. In
connection therewith, Sierra Advisors will, among other things, (a) participate
in the formulation of the Fund's investment policies, (b) analyze economic
trends affecting the Fund, (c) monitor the expenses incurred by the Fund, (d)
monitor the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Act of 1934, as amended) that are provided to
the Fund and may be considered by the Fund's investment sub-advisor in selecting
brokers or dealers to execute particular transactions and (e) monitor and
evaluate the services provided by the Fund's investment sub-advisor under its
investment sub-advisory agreement, including, without limitation, the
sub-advisor's adherence to the Fund's investment objective(s) and policies and
the Fund's investment performance.
3. Information Provided to the Company
Sierra Advisors will keep the Company informed of developments
materially affecting the Fund, and will, on its own initiative, furnish the
Company from time to time with whatever information Sierra Advisors believes is
appropriate for this purpose.
4. Standard of Care
Sierra Advisors shall exercise its best judgment in rendering the
services described in paragraph 2 above. Sierra Advisors shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except (a) a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the Investment
Company Act of 1940, as amended) or (b) a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement (each such breach, act or omission described in (a) or (b) shall be
referred to as "Disqualifying Conduct").
-2-
<PAGE> 3
5. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Company will pay Sierra Advisors on the first business day of each month a
fee for the previous month at the annual rate of 0.50% of the Fund's average net
assets up to $200 million, 0.45% of the Fund's average net assets between $200
million and $500 million and 0.40% of the Fund's average net assets exceeding
$500 million, out of which fee Sierra Advisors shall pay to the sub-investment
advisor of the Fund (the "Sub-Advisor") the fee required under the Investment
Sub-Advisory Agreement relating to the Fund among the Company, Sierra Advisors
and the Sub-Advisor. Upon any termination of this Agreement before the end of a
month, the fee for such part of that month shall be prorated according to the
proportion that such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. For the purpose of
determining fees payable to Sierra Advisors, the value of the Fund's net assets
shall be computed at the times and in the manner specified in the Fund's
Prospectus or Statement of Additional Information relating to the Fund as from
time to time in effect.
6. Expenses
Sierra Advisors will bear all expenses in connection with the
performance of its services under this Agreement, including, without limitation,
payment of the sub-advisory fee to the Sub-Advisor. The Company will bear
certain other expenses to be incurred in its operation, including but not
limited to: organizational expenses; taxes, interest, brokerage fees and
commissions, if any; fees of trustees of the Company who are not officers,
directors, or employees of Sierra Advisors, the Company's sub-investment
advisors, the Fund's sub-administrator or any of their affiliates; Securities
and Exchange Commission fees and state Blue Sky qualification fees;
out-of-pocket expenses of custodians, transfer and dividend disbursing agents
and the Company's sub-administrator and transaction charges of custodians;
insurance premiums; outside auditing and legal expenses; costs of maintenance of
the Company's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the shareholders of the Company and of the officers or
Board of Trustees of the Company; and any extraordinary expenses. In addition,
the Fund pays a distribution fee pursuant to the terms of a Distribution Plan
adopted under Rule 12b-1 of the Investment Company Act of 1940, as amended.
-3-
<PAGE> 4
7. Reimbursement to the Company
If in any fiscal year of the Fund the aggregate expenses of the Fund
(including fees pursuant to this Agreement, the sub-advisory agreement with the
Sub-Advisor and the Fund's administration and sub-administration agreements, but
excluding interest, taxes, brokerage, distribution fees relating to the Fund
paid pursuant to the Company's Distribution Plan and, if permitted by the
relevant state securities commissions, extraordinary expenses) exceed the
expense limitations of any state having jurisdiction over the Fund, Sierra
Advisors will reimburse the Fund for the excess expense to the extent required
by state law. A fee reduction pursuant to this paragraph 7, if any, will be
estimated and reconciled monthly. Sierra Advisors shall not be required to
reimburse any amount in excess of the advisory fee paid to it pursuant to this
Agreement.
8. Services to Other Companies or Accounts
The Company understands that Sierra Advisors now acts as investment
adviser to the other investment funds of the Company, and may act in the future
as investment adviser to fiduciary and other managed accounts and as investment
adviser to one or more other investment companies or series of investment
companies, and the Company has no objection to Sierra Advisors so acting. The
Company understands that the persons employed by Sierra Advisors to assist in
the performance of Sierra Advisors' duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict the right of Sierra Advisors or any affiliate of Sierra Advisors to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
9. Term of Agreement
This Agreement shall become effective as of the date the Fund commences
its investment operations and shall continue for an initial two-year term and
shall continue thereafter so long as such continuance is specifically approved
at least annually by (i) the Board of Trustees of the Company or (ii) a vote of
a "majority" (as defined in the Investment Company Act of 1940, as amended) of
the Fund's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in said Act) of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable, without penalty, on 60 days' written
notice, by the Board of Trustees of the Company or by vote of holders of a
majority of the Fund's shares, or upon 90 days' written notice, by Sierra
Advisors. This Agreement will also terminate automatically in the event of its
assignment (as defined in said Act). Sierra Advisors agrees
-4-
<PAGE> 5
to notify the Company of any circumstances that might result in this Agreement
being deemed to be assigned.
10. Representations of the Company and Sierra Advisors
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of Sierra Advisors has been duly authorized and (iii) it has acted
and will continue to act in conformity with the requirements of the Investment
Company Act of 1940, as amended, and other applicable laws.
Sierra Advisors represents that it is authorized to perform the
services described herein.
11. Indemnification
The Company shall indemnify and hold harmless Sierra Advisors from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys fees other related expenses), howsoever arising from or in connection
with this Agreement or the performance by Sierra Advisors of its duties
hereunder; provided, however, that nothing contained herein shall require that
Sierra Advisors be indemnified for Disqualifying Conduct.
12. Limitation of Liability
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Company individually.
13. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
14. Governing Law
This Agreement shall be governed in accordance with laws of the
Commonwealth of Massachusetts.
-5-
<PAGE> 6
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
SIERRA TRUST FUNDS
By: /s/ KEITH PIPES
-------------------------------------
Name: Keith Pipes
Title: Executive Vice President,
Treasurer & Secretary
Accepted:
SIERRA INVESTMENT ADVISORS CORPORATION
By: /s/ MICHAEL D. GOTH
------------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
-6-
<PAGE> 1
Exhibit 5(a)-15
INVESTMENT ADVISORY AGREEMENT
April 1, 1994
Sierra Investment Advisors Corporation
9301 Corbin Avenue, Suite 333
P.O. Box 1160
Northridge, California 91328-1160
Dear Sirs:
Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, hereby agrees
with Sierra Investment Advisors Corporation ("Sierra Advisors"), a corporation
organized under the laws of the state of California, as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of the Company's California
Insured Intermediate Municipal Fund (the "Fund") by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in its
Master Trust Agreement, as amended, and in its Prospectus and Statement of
Additional Information relating to the Fund as from time to time in effect, and
in such manner and to such extent as may from time to time be approved by the
Board of Trustees of the Company. Copies of the Fund's Prospectus and Statement
of Additional Information and the Company's Master Trust Agreement, as amended,
have been or will be submitted to Sierra Advisors. The Company agrees to provide
copies of all amendments to the Fund's Prospectus and Statement of Additional
Information and the Company's Master Trust Agreement to Sierra Advisors on an
on-going basis. The Company desires to employ and hereby appoints Sierra
Advisors to act as investment advisor to the Fund. Sierra Advisors accepts the
appointment and agrees to furnish the services described herein for the
compensation set forth below.
2. Services as Investment Advisor
Subject to the supervision and direction of the Board of Trustees of
the Company, Sierra Advisors has general oversight responsibility for the
investment advisory services provided to the Fund and will exercise this
responsibility in accordance with the Company's Master Trust Agreement, the
Investment Company Act of 1940 and the Investment Advisors Act of 1940, as the
same may from time to time be amended, and with the Fund's investment
objective(s) and policies as stated in the Fund's Prospectus and Statement of
Additional Information relating to the Fund as from time to time in effect. In
connection therewith, Sierra Advisors will, among other things, (a) participate
in the formulation of
<PAGE> 2
the Fund's investment policies, (b) analyze economic trends affecting the Fund,
(c) monitor the expenses incurred by the Fund, (d) monitor the brokerage and
research services (as those terms are defined in Section 28(e) of the Securities
Act of 1934) that are provided to the Fund and may be considered by the Fund's
investment sub-advisor in selecting brokers or dealers to execute particular
transactions and (e) monitor and evaluate the services provided by the Fund's
investment sub-advisor under its investment sub-advisory agreement, including,
without limitation, the sub-advisor's adherence to the Fund's investment
objective(s) and policies and the Fund's investment performance.
3. Information Provided to the Company
Sierra Advisors will keep the Company informed of developments
materially affecting the Fund, and will, on its own initiative, furnish the
Company from time to time with whatever information Sierra Advisors believes is
appropriate for this purpose.
4. Standard of Care
Sierra Advisors shall exercise its best judgment in rendering the
services described in paragraph 2 above. Sierra Advisors shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except (a) a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the Investment
Company Act of 1940, as amended) or (b) a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement (each such breach, act or omission described in (a) or (b) shall be
referred to as "Disqualifying Conduct").
5. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Company will pay Sierra Advisors on the first business day of each month a
fee for the previous month at the annual rate of 0.65% of the Fund's average net
assets up to $500 million and 0.50% of the Fund's average net assets exceeding
$500 million, out of which fee Sierra Advisors shall pay to the sub-investment
advisor of the Fund (the "Sub-Advisor") the fee required under the Investment
Sub-Advisory Agreement relating to the Fund among the Company, Sierra Advisors
and the Sub-Advisor. Upon any termination of this Agreement before the end of a
month, the fee for such part of that month shall be prorated according to the
proportion that such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. For the purpose of
determining fees payable to Sierra
<PAGE> 3
Advisors, the value of the Fund's net assets shall be computed at the times and
in the manner specified in the Fund's Prospectus or Statement of Additional
Information relating to the Fund as from time to time in effect.
6. Expenses
Sierra Advisors will bear all expenses in connection with the
performance of its services under this Agreement, including, without limitation,
payment of the sub-advisory fee to the Sub-Advisor. The Company will bear
certain other expenses to be incurred in its operation, including but not
limited to: organizational expenses; taxes, interest, brokerage fees and
commissions, if any; fees of trustees of the Company who are not officers,
directors, or employees of Sierra Advisors, the Company's sub-investment
advisors, the Fund's sub-administrator or any of their affiliates; Securities
and Exchange Commission fees and state Blue Sky qualification fees;
out-of-pocket expenses of custodians, transfer and dividend disbursing agents
and the Company's sub-administrator and transaction charges of custodians;
insurance premiums; outside auditing and legal expenses; costs of maintenance of
the Company's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the shareholders of the Company and of the officers or
Board of Trustees of the Company; and any extraordinary expenses. In addition,
the Fund pays a distribution fee pursuant to the terms of a Distribution Plan
adopted under Rule 12b-1 of the Investment Company Act of 1940, as amended.
7. Reimbursement to the Company
If in any fiscal year of the Fund the aggregate expenses of the Fund
(including fees pursuant to this Agreement, the sub- advisory agreement with the
Sub-Advisor and the Fund's administration and sub-administration agreements, but
excluding interest, taxes, brokerage, distribution fees relating to the Fund
paid pursuant to the Company's Distribution Plan and, if permitted by the
relevant state securities commissions, extraordinary expenses) exceed the
expense limitations of any state having jurisdiction over the Fund, Sierra
Advisors will reimburse the Fund for the excess expense to the extent required
by state law. A fee reduction pursuant to this paragraph 7, if any, will be
estimated and reconciled monthly. Sierra Advisors shall not be required to
reimburse any amount in excess of the advisory fee paid to it pursuant to this
Agreement.
<PAGE> 4
8. Services to Other Companies or Accounts
The Company understands that Sierra Advisors now acts as investment
adviser to the other investment funds of the Company, and may act in the future
as investment adviser to fiduciary and other managed accounts and as investment
adviser to one or more other investment companies or series of investment
companies, and the Company has no objection to Sierra Advisors so acting. The
Company understands that the persons employed by Sierra Advisors to assist in
the performance of Sierra Advisors' duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict the right of Sierra Advisors or any affiliate of Sierra Advisors to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
9. Term of Agreement
This Agreement shall become effective as of the date the Fund commences
its investment operations and shall continue for an initial two-year term and
shall continue thereafter so long as such continuance is specifically approved
at least annually by (i) the Board of Trustees of the Company or (ii) a vote of
a "majority" (as defined in the Investment Company Act of 1940, as amended) of
the Fund's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in said Act) of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable, without penalty, on 60 days' written
notice, by the Board of Trustees of the Company or by vote of holders of a
majority of the Fund's shares, or upon 90 days' written notice, by Sierra
Advisors. This Agreement will also terminate automatically in the event of its
assignment (as defined in said Act). Sierra Advisors agrees to notify the
Company of any circumstances that might result in this Agreement being deemed to
be assigned.
10. Representations of the Company and Sierra Advisors
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of Sierra Advisors has been duly authorized and (iii) it has acted
and will continue to act in conformity with the requirements of the Investment
Company Act of 1940, as amended, and other applicable laws.
Sierra Advisors represents that it is authorized to perform the
services described herein.
11. Indemnification
<PAGE> 5
The Company shall indemnify and hold harmless Sierra Advisors from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys fees other related expenses), howsoever arising from or in connection
with this Agreement or the performance by Sierra Advisors of its duties
hereunder; provided, however, that nothing contained herein shall require that
Sierra Advisors be indemnified for Disqualifying Conduct.
12. Limitation of Liability
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Company individually.
13. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
14. Governing Law
This Agreement shall be governed in accordance with laws of the
Commonwealth of Massachusetts.
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
SIERRA TRUST FUNDS
By: /s/ F. Brian Cerini
-------------------------------------
President
Accepted:
SIERRA INVESTMENT ADVISORS CORPORATION
By: /s/ MICHAEL D. GOTH
-------------------------------------
Title: Chief Operating Officer
<PAGE> 1
Exhibit 5(a)-15.1
AMENDMENT OF INVESTMENT ADVISORY AGREEMENT
June 30, 1994
Sierra Investment Advisors Corporation
9301 Corbin Avenue, Suite 333
P.O. Box 1160
Northridge, California 91328-1160
Dear Sirs:
Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, hereby agrees
with Sierra Investment Advisors Corporation ("Sierra Advisors"), a corporation
organized under the laws of the State of California, to amend as follows the
Investment Advisory Agreement (the "Agreement") by and between the Company and
Sierra Advisors dated April 1, 1994 with respect to employing the capital of the
California Insured Intermediate Municipal Fund (the "Fund," a series investment
fund of the Company):
1. Amendment of Investment Advisory Agreement
Section 5 of the Agreement is amended by adding the following at the
end of the section: "Notwithstanding the compensation payable to Sierra Advisors
as provided above, the Company shall not pay to Sierra Advisors annually more
than 0.55% of the average daily net assets of the Fund calculated on a trailing
three-month basis."
2. Effective Date
This amendment to the Agreement shall be effective as of July 1, 1994.
<PAGE> 2
Sierra Investment Advisors Corporation
June 30, 1994
Page 2
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
SIERRA TRUST FUNDS
By: /s/ F. Brian Cerini
--------------------------------
Name: F. Brian Cerini
Title: President
Accepted:
SIERRA INVESTMENT ADVISORS CORPORATION
By: /s/ MICHAEL D. GOTH
--------------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
<PAGE> 1
Exhibit 5(a)-16
INVESTMENT ADVISORY AGREEMENT
March 17, 1995
Sierra Investment Advisors Corporation
9301 Corbin Avenue, Suite 333
P.O. Box 1160
Northridge, California 91328-1160
Dear Sirs:
Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, hereby agrees
with Sierra Investment Advisors Corporation ("Sierra Advisors"), a corporation
organized under the laws of the state of California, as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of the Company's Target
Maturity 2002 Fund (the "Fund") by investing and reinvesting in investments of
the kind and in accordance with the limitations specified in its Master Trust
Agreement, as amended, and in its Prospectus and Statement of Additional
Information relating to the Fund as from time to time in effect, and in such
manner and to such extent as may from time to time be approved by the Board of
Trustees of the Company. Copies of the Fund's Prospectus and Statement of
Additional Information and the Company's Master Trust Agreement, as amended,
have been or will be submitted to Sierra Advisors. The Company agrees to provide
copies of all amendments to the Fund's Prospectus and Statement of Additional
Information and the Company's Master Trust Agreement to Sierra Advisors on an
on-going basis. The Company desires to employ and hereby appoints Sierra
Advisors to act as investment advisor to the Fund. Sierra Advisors accepts the
appointment and agrees to furnish the services described herein for the
compensation set forth below.
2. Services as Investment Advisor
Subject to the supervision and direction of the Board of Trustees of
the Company, Sierra Advisors has general oversight responsibility for the
investment advisory services provided to the Fund and will exercise this
responsibility in accordance with the Company's Master Trust Agreement, the
Investment Company Act of 1940 and the Investment Advisors Act of 1940, as the
same may from time to time be amended, and with the Fund's investment
objective(s) and policies as stated in the Fund's Prospectus and
<PAGE> 2
Statement of Additional Information relating to the Fund as from time to time in
effect. In connection therewith, Sierra Advisors will, among other things, (a)
participate in the formulation of the Fund's investment policies, (b) analyze
economic trends affecting the Fund, (c) monitor the expenses incurred by the
Fund, (d) monitor the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Act of 1934) that are provided to the
Fund and may be considered by the Fund's investment sub-advisor in selecting
brokers or dealers to execute particular transactions and (e) monitor and
evaluate the services provided by the Fund's investment sub-advisor under its
investment sub-advisory agreement, including, without limitation, the
sub-advisor's adherence to the Fund's investment objective(s) and policies and
the Fund's investment performance.
3. Information Provided to the Company
Sierra Advisors will keep the Company informed of developments
materially affecting the Fund, and will, on its own initiative, furnish the
Company from time to time with whatever information Sierra Advisors believes is
appropriate for this purpose.
4. Standard of Care
Sierra Advisors shall exercise its best judgment in rendering the
services described in paragraph 2 above. Sierra Advisors shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except (a) a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the Investment
Company Act of 1940, as amended) or (b) a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement (each such breach, act or omission described in (a) or (b) shall be
referred to as "Disqualifying Conduct").
5. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Company will pay Sierra Advisors on the first business day of each month a
fee for the previous month at the annual rate of 0.25% of the Fund's average net
assets up to $500 million and 0.20% of the Fund's average net assets exceeding
$500
2
<PAGE> 3
million, out of which fee Sierra Advisors shall pay to the sub-investment
advisor of the Fund (the "Sub-Advisor") the fee required under the Investment
Sub-Advisory Agreement relating to the Fund among the Company, Sierra Advisors
and the Sub-Advisor. Upon any termination of this Agreement before the end of a
month, the fee for such part of that month shall be prorated according to the
proportion that such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. For the purpose of
determining fees payable to Sierra Advisors, the value of the Fund's net assets
shall be computed at the times and in the manner specified in the Fund's
Prospectus or Statement of Additional Information relating to the Fund as from
time to time in effect.
6. Expenses
Sierra Advisors will bear all expenses in connection with the
performance of its services under this Agreement, including, without limitation,
payment of the sub-advisory fee to the Sub-Advisor. The Company will bear
certain other expenses to be incurred in its operation, including but not
limited to: organizational expenses; taxes, interest, brokerage fees and
commissions, if any; fees of trustees of the Company who are not officers,
directors, or employees of Sierra Advisors, the Company's sub-investment
advisors, the Fund's sub-administrator or any of their affiliates; Securities
and Exchange Commission fees and state Blue Sky qualification fees;
out-of-pocket expenses of custodians, transfer and dividend disbursing agents
and the Company's sub-administrator and transaction charges of custodians;
insurance premiums; outside auditing and legal expenses; costs of maintenance of
the Company's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the shareholders of the Company and of the officers or
Board of Trustees of the Company; and any extraordinary expenses. In addition,
the Fund pays a distribution fee pursuant to the terms of a Distribution Plan
adopted under Rule 12b-1 of the Investment Company Act of 1940, as amended.
7. Reimbursement to the Company
If in any fiscal year of the Fund the aggregate expenses of the Fund
(including fees pursuant to this Agreement, the sub-advisory agreement with the
Sub-Advisor and the Fund's administration and sub-administration agreements, but
excluding interest, taxes, brokerage, distribution fees relating to the
3
<PAGE> 4
Fund paid pursuant to the Company's Distribution Plan and, if permitted by the
relevant state securities commissions, extraordinary expenses) exceed the
expense limitations of any state having jurisdiction over the Fund, Sierra
Advisors will reimburse the Fund for the excess expense to the extent required
by state law. A fee reduction pursuant to this paragraph 7, if any, will be
estimated and reconciled monthly. Sierra Advisors shall not be required to
reimburse any amount in excess of the advisory fee paid to it pursuant to this
Agreement.
8. Services to Other Companies or Accounts
The Company understands that Sierra Advisors now acts as investment
adviser to the other investment funds of the Company, and may act in the future
as investment adviser to fiduciary and other managed accounts and as investment
adviser to one or more other investment companies or series of investment
companies, and the Company has no objection to Sierra Advisors so acting. The
Company understands that the persons employed by Sierra Advisors to assist in
the performance of Sierra Advisors' duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict the right of Sierra Advisors or any affiliate of Sierra Advisors to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
9. Term of Agreement
This Agreement shall become effective as of the date first written
above and shall continue for an initial two-year term and shall continue
thereafter so long as such continuance is specifically approved at least
annually by (i) the Board of Trustees of the Company or (ii) a vote of a
"majority" (as defined in the Investment Company Act of 1940, as amended) of the
Fund's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in said Act) of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable, without penalty, on 60 days' written
notice, by the Board of Trustees of the Company or by vote of holders of a
majority of the Fund's shares, or upon 90 days' written notice, by Sierra
Advisors. This Agreement will also terminate automatically in the event of its
assignment (as defined in said Act). Sierra Advisors agrees to notify the
Company of any circumstances that might result in this Agreement being deemed to
be assigned.
4
<PAGE> 5
10. Representations of the Company and Sierra Advisors
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of Sierra Advisors has been duly authorized and (iii) it has acted
and will continue to act in conformity with the requirements of the Investment
Company Act of 1940, as amended, and other applicable laws.
Sierra Advisors represents that it is authorized to perform the
services described herein.
11. Limitation of Liability
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Company individually.
12. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
13. Governing Law
This Agreement shall be governed in accordance with laws of the
Commonwealth of Massachusetts.
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
SIERRA TRUST FUNDS
By: /s/ KEITH B. PIPES
--------------------------------
Name: Keith B. Pipes
Title: Executive Vice President
5
<PAGE> 6
Accepted:
SIERRA INVESTMENT ADVISORS CORPORATION
By: /s/ MICHAEL D. GOTH
-----------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
6
<PAGE> 1
Exhibit 5(b)-1
INVESTMENT SUB-ADVISORY AGREEMENT
July 7, 1989
J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Dear Sirs:
GW Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, and Great Western
Financial Advisors Corporation ("GW Advisors"), a corporation organized under
the laws of the state of California, hereby agree with J.P. Morgan Investment
Management Inc. (the "Sub-Adviser") as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of GW Global Income Money
Market Fund (the "Fund") by investing and reinvesting in investments of the kind
and in accordance with the limitations specified in its Master Trust Agreement,
as amended, and in its Prospectus and Statement of Additional Information
relating to the Fund as from time to time in effect, and in such manner and to
such extent as may from time to time be approved by the Board of Trustees of the
Company. Copies of the Company's Prospectus, Statement of Additional Information
and Master Trust Agreement, as amended, have been or will be submitted to the
Sub- Adviser. The Company agrees to provide copies of all amendments to the
Company's Prospectus, Statement of Additional Information and Master Trust
Agreement to the Sub-Adviser on an on-going basis. The Company desires to employ
and hereby appoints the Sub-Adviser to act as investment sub-adviser to the
Fund. The Sub-Adviser accepts the appointment and agrees to furnish the services
described herein for the compensation set forth below.
2. Services as Investment Sub-Adviser
Subject to the supervision of the Board of Trustees of the Company and
of GW Advisors, the Fund's investment adviser, the Sub-Adviser will (a) act in
conformity with the Company's Master Trust Agreement, the Investment Company Act
of 1940 and the Investment Advisers Act of 1940, as the same may from time to
time be amended, (b) make investment decisions for the Fund in accordance with
the Fund's investment objective(s) and policies as stated in the Company's
Prospectus and Statement of
<PAGE> 2
Additional Information as from time to time in effect and (c) place purchase and
sale orders on behalf of the Fund to effectuate the investment decisions made.
In providing those services, the Sub-Adviser will supervise the Fund's
investments and conduct a continual program of investment, evaluation and, if
appropriate, sale and reinvestment of the Fund's assets. In addition, the
Sub-Advisor will furnish the Fund or GW Advisors with whatever statistical
information the Fund or GW Advisors may reasonably request with respect to the
instruments that the Fund may hold or contemplate purchasing.
3. Brokerage
In executing transactions for the Fund and selecting brokers or
dealers, the Sub-Adviser will use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any Fund
transaction, the Sub-Adviser will consider all factors it deems relevant
including, but not limited to, breadth of the market in the security, the price
of the security, the financial condition and execution capability of the broker
or dealer and the reasonableness of any commission for the specific transaction
and on a continuing basis. In selecting brokers or dealers to execute a
particular transaction and in evaluating the best overall terms available, the
Sub-Adviser may consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the
Fund and/or other accounts over which the Sub-Adviser, GW Advisors or one of
their affiliates exercises investment discretion.
4. Information Provided to the Company
The Sub-Adviser will keep the Company and GW Advisors informed of
developments materially affecting the Fund, and will, on its own initiative,
furnish the Company and GW Advisors from time to time with whatever information
the Sub-Adviser believes is appropriate for this purpose.
5. Standard of Care
The Sub-Adviser shall exercise its best judgment in rendering the
services described in Paragraphs 2 and 3 above. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates, except
(a) a loss resulting from a breach of fiduciary duty with respect to the receipt
of compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of the
Investment
-2-
<PAGE> 3
Company Act of 1940) or (b) a loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement
(each such breach, act or omission described in (a) or (b) shall be referred to
as "Disqualifying Conduct").
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
GW Advisors will pay the Sub-Adviser on the first business day of each month a
fee for the previous month at the annual rate of .15% of the Fund's average
daily net assets. The Sub-Adviser shall have no right to obtain compensation
directly from the Fund or the Company for services provided hereunder and agrees
to look solely to GW Advisors for payment of fees due. The fee for the period
from the date the Company's initial registration statement is declared effective
by the Securities and Exchange Commission to the end of the month during which
the initial registration statement is declared effective shall be prorated
according to the proportion that such period bears to the full monthly period.
Upon any termination of this Agreement before the end of a month, the fee for
such part of that month shall be prorated according to the proportion that such
period bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Sub-Adviser, the value of the Fund's net assets shall be computed at the
times and in the manner specified in the Company's Prospectus or Statement of
Additional Information relating to the Fund as from time to time in effect.
7. Expenses
The Sub-Adviser will bear all expenses in connection with the
performance of its services under this Agreement, which expenses shall not
include brokerage fees or commissions in connection with the effectuation of
securities transactions. The Company will bear certain other expenses to be
incurred in its operation, including but not limited to: organizational
expenses, taxes, interest, brokerage fees and commissions, if any; fees of
trustees of the Company who are not officers, directors or employees of the
Sub-Adviser, GW Advisors, the Fund's sub-administrator or any of their
affiliates; Securities and Exchange Commission fees and state Blue Sky
qualification fees; out-of-pocket expenses of custodians, transfer and dividend
disbursing agents and the Company's sub-administrator and transaction charges of
custodians; insurance premiums; outside auditing and legal expenses; costs of
maintenance of
-3-
<PAGE> 4
the Company's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the shareholders of the Fund and of the officers or
Board of Trustees of the Company; and any extraordinary expenses. In addition,
the Fund pays a distribution fee pursuant to the terms of a Distribution Plan
adopted under Rule 12b-1 of the Investment Company Act of 1940.
8. Services to Other Companies or Accounts
The Company understands that the Sub-Adviser now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Company has no objection to
the Sub-Adviser so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Adviser have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Company recognizes that in some cases this procedure may adversely
affect the size of the position that may be acquired or disposed of for the
Fund. In addition, the Company understands that the persons employed by the
Sub-Adviser to assist in the performance of the Sub-Adviser's duties hereunder
will not devote their full time to such service and nothing contained herein
shall be deemed to limit or restrict the right of the Sub-Adviser or any
affiliate of the Sub-Adviser to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
9. Term of Agreement
This Agreement shall become effective as of the date the Fund commences
its investment operations and shall continue for an initial two-year term and
shall continue thereafter so long as such continuance is specifically approved
at least annually by (i) the Board of Trustees of the Company or (ii) a vote of
a "majority" (as defined in the Investment Company Act of 1940) of the Fund's
outstanding voting securities, provided that in either event the continuance is
also approved by a majority of the Board of Trustees who are not "interested
persons" (as defined in said Act) of any party to this Agreement, by vote cast
in person at a meeting called for the purpose of voting on
-4-
<PAGE> 5
such approval. This Agreement is terminable, without penalty, on 60 days'
written notice, by the Board of Trustees of the Company or by vote of holders of
a majority of the Fund's shares, or upon 90 days' written notice, by the
Sub-Adviser or GW Advisors. This Agreement will also terminate automatically in
the event of its assignment (as defined in said Act). The Sub-Adviser agrees to
notify the Company of any circumstances that might result in this Agreement
being deemed to be assigned.
10. Representations of the Company and the Sub-Adviser
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of the Sub-Adviser has been duly authorized and (iii) it has acted
and will continue to act in conformity with the Investment Company Act of 1940
and other applicable laws.
The Sub-Adviser represents that it is authorized to perform the
services described herein.
11. Indemnification
GW Advisors shall indemnify and hold harmless the Sub-Adviser from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys fees and other related expenses), howsoever arising from or in
connection with this Agreement or the performance by Sub-Adviser of its duties
hereunder; provided, however that nothing contained herein shall require that
the Sub-Adviser be indemnified for Disqualifying Conduct.
12. Limitation of Liability
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Company individually.
13. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
-5-
<PAGE> 6
14. Governing Law
This Agreement shall be governed in accordance with the laws of the
State of Massachusetts.
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
GW SIERRA TRUST FUNDS
By: /s/
--------------------------------
President
GREAT WESTERN FINANCIAL ADVISORS
CORPORATION
By: /s/
--------------------------------
Title:
Accepted:
J.P. MORGAN INVESTMENT MANAGEMENT INC.
By: /s/
--------------------------------
Title: Vice President
-6-
<PAGE> 1
Exhibit 5(b)-2
INVESTMENT SUB-ADVISORY AGREEMENT
July 7, 1989
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
GW Sierra Trust Funds (the "Company"), an unincorporated
business trust organized under the laws of the Commonwealth of
Massachusetts, and Great Western Financial Advisors Corporation ("GW
Advisors"), a corporation organized under the laws of the state of
California, hereby agree with Alliance Capital Management L.P. (the
"Sub-Adviser") as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of GW U.S.
Government Money Market Fund (the "Fund") by investing and reinvesting
in investments of the kind and in accordance with the limitations
specified in its Master Trust Agreement, as amended, and in its
Prospectus and Statement of Additional Information relating to the
Fund as from time to time in effect, and in such manner and to such
extent as may from time to time be approved by the Board of Trustees
of the Company. Copies of the Company's Prospectus, Statement of
Additional Information and Master Trust Agreement, as amended, have
been or will be submitted to the Sub-Adviser. The Company agrees to
provide copies of all amendments to the Company's Prospectus,
Statement of Additional Information and Master Trust Agreement to the
Sub-Adviser on an on-going basis. The Company desires to employ and
hereby appoints the Sub-Adviser to act as investment sub-adviser to
the Fund. The Sub-Adviser accepts the appointment and agrees to
furnish the services described herein for the compensation set forth
below.
2. Services as Investment Sub-Adviser
Subject to the supervision of the Board of Trustees of the
Company and of GW Advisors, the Fund's investment adviser, the
Sub-Adviser will (a) act in conformity with the Company's Master Trust
Agreement, the Investment Company Act of 1940 and the Investment
Advisers Act of 1940, as the same may from time to time be amended,
(b) make investment decisions for the Fund in accordance with the
Fund's investment objective(s) and policies as stated in the Company's
Prospectus and Statement of
<PAGE> 2
Additional Information as from time to time in effect and (c) place
purchase and sale orders on behalf of the Fund to effectuate the
investment decisions made. In providing those services, the Sub-
Adviser will supervise the Fund's investments and conduct a continual
program of investment, evaluation and, if appropriate, sale and
reinvestment of the Fund's assets. In addition, the Sub-Adviser will
furnish the Fund or GW Advisors with whatever statistical information
the Fund or GW Advisors may reasonably request with respect to the
instruments that the Fund may hold or contemplate purchasing.
3. Brokerage
In executing transactions for the Fund and selecting brokers
or dealers, the Sub-Adviser will use its best efforts to seek the best
overall terms available. In assessing the best overall terms available
for any Fund transaction, the Sub-Adviser will consider all factors it
deems relevant including, but not limited to, breadth of the market in
the security, the price of the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of
any commission for the specific transaction and on a continuing basis.
In selecting brokers or dealers to execute a particular transaction
and in evaluating the best overall terms available, the Sub-Adviser
may consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Fund and/or other accounts over which the Sub-
Adviser, GW Advisors or one of their affiliates exercises investment
discretion.
4. Information Provided to the Company
The Sub-Adviser will keep the Company and GW Advisors
informed of developments materially affecting the Fund, and will, on
its own initiative, furnish the Company and GW Advisors from time to
time with whatever information the Sub-Adviser believes is appropriate
for this purpose.
5. Standard of Care
The Sub-Adviser shall exercise its best judgment in rendering
the services described in Paragraphs 2 and 3 above. The Sub-Adviser
shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the matters to which
this Agreement relates, except (a) a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for
services (in which case any award of damages shall be limited to the
period and the amount set forth in Section 36(b)(3) of the Investment
-2-
<PAGE> 3
Company Act of 1940) or (b) a loss resulting from willful misfeasance,
bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties
under this Agreement (each such breach, act or omission described in
(a) or (b) shall be referred to as "Disqualifying Conduct").
6. Compensation
In consideration of the services rendered pursuant to this
Agreement, GW Advisors will pay the Sub-Adviser on the first business
day of each month a fee for the previous month at the annual rate of
.15% of the Fund's average daily net assets. The Sub-Adviser shall
have no right to obtain compensation directly from the Fund or the
Company for services provided hereunder and agrees to look solely to
GW Advisors for payment of fees due. The fee for the period from the
date the Company's initial registration statement is declared
effective by the Securities and Exchange Commission to the end of the
month during which the initial registration statement is declared
effective shall be prorated according to the proportion that such
period bears to the full monthly period. Upon any termination of this
Agreement before the end of a month, the fee for such part of that
month shall be prorated according to the proportion that such period
bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees
payable to the Sub-Adviser, the value of the Fund's net assets shall
be computed at the times and in the manner specified in the Company's
Prospectus or Statement of Additional Information relating to the Fund
as from time to time in effect.
7. Expenses
The Sub-Adviser will bear all expenses in connection with the
performance of its services under this Agreement, which expenses shall
not include brokerage fees or commissions in connection with the
effectuation of securities transactions. The Company will bear certain
other expenses to be incurred in its operation, including but not
limited to: organizational expenses, taxes, interest, brokerage fees
and commissions, if any; fees of trustees of the Company who are not
officers, directors or employees of the Sub-Adviser, GW Advisors, the
Fund's sub-administrator or any of their affiliates; Securities and
Exchange Commission fees and state Blue Sky qualification fees;
out-of-pocket expenses of custodians, transfer and dividend disbursing
agents and the Company's sub-administrator and transaction charges of
custodians; insurance premiums; outside auditing and legal expenses;
costs of maintenance of
-3-
<PAGE> 4
the Company's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the shareholders of the Fund and of the officers or
Board of Trustees of the Company; and any extraordinary expenses. In addition,
the Fund pays a distribution fee pursuant to the terms of a Distribution Plan
adopted under Rule 12b-1 of the Investment Company Act of 1940.
8. Services to Other Companies or Accounts
The Company understands that the Sub-Adviser now acts, will
continue to act and may act in the future as investment adviser to
fiduciary and other managed accounts and as investment adviser to one
or more other investment companies or series of investment companies,
and the Company has no objection to the Sub-Adviser so acting,
provided that whenever the Fund and one or more other accounts or
investment companies advised by the Sub-Adviser have available funds
for investment, investments suitable and appropriate for each will be
allocated in accordance with procedures believed to be equitable to
each entity. Similarly, opportunities to sell securities will be
allocated in an equitable manner. The Company recognizes that in some
cases this procedure may adversely affect the size of the position
that may be acquired or disposed of for the Fund. In addition, the
Company understands that the persons employed by the Sub-Adviser to
assist in the performance of the Sub-Adviser's duties hereunder will
not devote their full time to such service and nothing contained
herein shall be deemed to limit or restrict the right of the
Sub-Adviser or any affiliate of the Sub-Adviser to engage in and
devote time and attention to other businesses or to render services of
whatever kind or nature.
9. Term of Agreement
This Agreement shall become effective as of the date the Fund
commences its investment operations and shall continue for an initial
two-year term and shall continue thereafter so long as such
continuance is specifically approved at least annually by (i) the
Board of Trustees of the Company or (ii) a vote of a "majority" (as
defined in the Investment Company Act of 1940) of the Fund's
outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees
who are not "interested persons" (as defined in said Act) of any party
to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on
-4-
<PAGE> 5
such approval. This Agreement is terminable, without penalty, on 60 days'
written notice, by the Board of Trustees of the Company or by vote of holders of
a majority of the Fund's shares, or upon 90 days' written notice, by the
Sub-Adviser, or GW Advisors. This Agreement will also terminate automatically in
the event of its assignment (as defined in said Act). The Sub-Adviser agrees to
notify the Company of any circumstances that might result in this Agreement
being deemed to be assigned. The Sub-Adviser agrees to notify the Company of any
changes in the membership of the general partners of the Sub-Advisor within a
reasonable time.
10. Representations of the Company and the Sub-Adviser
The Company represents that (i) a copy of its Master Trust
Agreement, dated February 22, 1989, together with all amendments
thereto, is on file in the office of the Secretary of the Commonwealth
of Massachusetts, (ii) the appointment of the Sub-Adviser has been
duly authorized and (iii) it has acted and will continue to act in
conformity with the Investment Company Act of 1940 and other
applicable laws.
The Sub-Adviser represents that it is authorized to perform
the services described herein.
11. Indemnification
GW Advisors shall indemnify and hold harmless the Sub-
Adviser from and against any and all claims, losses, liabilities or
damages (including reasonable attorneys fees and other related
expenses), howsoever arising from or in connection with this Agreement
or the performance by Sub-Adviser of its duties hereunder; provided,
however that nothing contained herein shall require that the
Sub-Adviser be indemnified for Disqualifying Conduct.
12. Limitation of Liability
This Agreement has been executed on behalf of the Company by
the undersigned officer of the Company in his capacity as an officer
of the Company. The obligations of this Agreement shall be binding
upon the assets and property of the Fund only and not upon the assets
and property of any other investment fund of the Company and shall not
be binding upon any Trustee, officer or shareholder of the Fund and/or
the Company individually.
13. Entire Agreement
This Agreement constitutes the entire agreement between the
parties hereto.
-5-
<PAGE> 6
14. Governing Law
This Agreement shall be governed in accordance with the laws
of the State of Massachusetts.
If the foregoing accurately sets forth our agreement, kindly
indicate your acceptance hereof by signing and returning the enclosed
copy hereof.
Very truly yours,
GW SIERRA TRUST FUNDS
By: /s/
-------------------------------------
President
GREAT WESTERN FINANCIAL ADVISORS
CORPORATION
By: /s/
-------------------------------------
Title: President
Accepted:
Alliance Capital Management L.P.
By: Alliance Capital Management
Corporation, General Partner
/s/David R. Brewer
By:_______________________________
Title:David R. Brewer
Assistant Secretary
-6-
<PAGE> 1
Exhibit 5(b)-3
INVESTMENT SUB-ADVISORY AGREEMENT
July 7, 1989
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
GW Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, and Great Western
Financial Advisors Corporation ("GW Advisors"), a corporation organized under
the laws of the state of California, hereby agree with Alliance Capital
Management L.P. (the "Sub-Adviser") as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of GW California Municipal
Money Market (the "Fund") by investing and reinvesting in investments of the
kind and in accordance with the limitations specified in its Master Trust
Agreement, as amended, and in its Prospectus and Statement of Additional
Information relating to the Fund as from time to time in effect, and in such
manner and to such extent as may from time to time be approved by the Board of
Trustees of the Company. Copies of the Company's Prospectus, Statement of
Additional Information and Master Trust Agreement, as amended, have been or will
be submitted to the Sub-Adviser. The Company agrees to provide copies of all
amendments to the Company's Prospectus, Statement of Additional Information and
Master Trust Agreement to the Sub-Adviser on an on-going basis. The Company
desires to employ and hereby appoints the Sub-Adviser to act as investment
sub-adviser to the Fund. The Sub-Adviser accepts the appointment and agrees to
furnish the services described herein for the compensation set forth below.
2. Services as Investment Sub-Adviser
Subject to the supervision of the Board of Trustees of the Company and
of GW Advisors, the Fund's investment adviser, the Sub-Adviser will (a) act in
conformity with the Company's Master Trust Agreement, the Investment Company Act
of 1940 and the Investment Advisers Act of 1940, as the same may from time to
time be amended, (b) make investment decisions for the Fund in accordance with
the Fund's investment objective(s) and policies as stated in the Company's
Prospectus and Statement of
<PAGE> 2
Additional Information as from time to time in effect and (c) place purchase and
sale orders on behalf of the Fund to effectuate the investment decisions made.
In providing those services, the Sub-Adviser will supervise the Fund's
investments and conduct a continual program of investment, evaluation and, if
appropriate, sale and reinvestment of the Fund's assets. In addition, the
Sub-Adviser will furnish the Fund or GW Advisors with whatever statistical
information the Fund or GW Advisors may reasonably request with respect to the
instruments that the Fund may hold or contemplate purchasing.
3. Brokerage
In executing transactions for the Fund and selecting brokers or
dealers, the Sub-Adviser will use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any Fund
transaction, the Sub-Adviser will consider all factors it deems relevant
including, but not limited to, breadth of the market in the security, the price
of the security, the financial condition and execution capability of the broker
or dealer and the reasonableness of any commission for the specific transaction
and on a continuing basis. In selecting brokers or dealers to execute a
particular transaction and in evaluating the best overall terms available, the
Sub-Adviser may consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934) provided to the
Fund and/or other accounts over which the Sub-Adviser, GW Advisors or one of
their affiliates exercises investment discretion.
4. Information Provided to the Company
The Sub-Adviser will keep the Company and GW Advisors informed of
developments materially affecting the Fund, and will, on its own initiative,
furnish the Company and GW Advisors from time to time with whatever information
the Sub-Adviser believes is appropriate for this purpose.
5. Standard of Care
The Sub-Adviser shall exercise its best judgment in rendering the
services described in Paragraphs 2 and 3 above. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates, except
(a) a loss resulting from a breach of fiduciary duty with respect to the receipt
of compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of the
Investment Company Act of 1940) or (b) a loss resulting from willful
<PAGE> 3
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement (each such breach, act or omission described in (a) or (b) shall be
referred to as "Disqualifying Conduct").
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
GW Advisors will pay the Sub-Adviser on the first business day of each month a
fee for the previous month at the annual rate of .15% of the Fund's average
daily net assets. The Sub-Adviser shall have no right to obtain compensation
directly from the Fund or the Company for services provided hereunder and agrees
to look solely to GW Advisors for payment of fees due. The fee for the period
from the date the Company's initial registration statement is declared effective
by the Securities and Exchange Commission to the end of the month during which
the initial registration statement is declared effective shall be prorated
according to the proportion that such period bears to the full monthly period.
Upon any termination of this Agreement before the end of a month, the fee for
such part of that month shall be prorated according to the proportion that such
period bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Sub-Adviser, the value of the Fund's net assets shall be computed at the
times and in the manner specified in the Company's Prospectus or Statement of
Additional Information relating to the Fund as from time to time in effect.
7. Expenses
The Sub-Adviser will bear all expenses in connection with the
performance of its services under this Agreement, which expenses shall not
include brokerage fees or commissions in connection with the effectuation of
securities transactions. The Company will bear certain other expenses to be
incurred in its operation, including but not limited to: organizational
expenses, taxes, interest, brokerage fees and commissions, if any; fees of
trustees of the Company who are not officers, directors or employees of the
Sub-Adviser, GW Advisors, the Fund's sub-administrator or any of their
affiliates; Securities and Exchange Commission fees and state Blue Sky
qualification fees; out-of-pocket expenses of custodians, transfer and dividend
disbursing agents and the Company's sub-administrator and transaction charges of
custodians; insurance premiums; outside auditing and legal expenses; costs of
maintenance of the Company's existence; costs attributable to investor
<PAGE> 4
services, including, without limitation, telephone and personnel expenses; costs
of preparing and printing prospectuses and statements of additional information
for regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Fund and of the
officers or Board of Trustees of the Company; and any extraordinary expenses. In
addition, the Fund pays a distribution fee pursuant to the terms of a
Distribution Plan adopted under Rule 12b-1 of the Investment Company Act of
1940.
8. Services to Other Companies or Accounts
The Company understands that the Sub-Adviser now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Company has no objection to
the Sub-Adviser so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Adviser have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Company recognizes that in some cases this procedure may adversely
affect the size of the position that may be acquired or disposed of for the
Fund. In addition, the Company understands that the persons employed by the
Sub-Adviser to assist in the performance of the Sub-Adviser's duties hereunder
will not devote their full time to such service and nothing contained herein
shall be deemed to limit or restrict the right of the Sub-Adviser or any
affiliate of the Sub-Adviser to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
9. Term of Agreement
This Agreement shall become effective as of the date the Fund commences
its investment operations and shall continue for an initial two-year term and
shall continue thereafter so long as such continuance is specifically approved
at least annually by (i) the Board of Trustees of the Company or (ii) a vote of
a "majority" (as defined in the Investment Company Act of 1940) of the Fund's
outstanding voting securities, provided that in either event the continuance is
also approved by a majority of the Board of Trustees who are not "interested
persons" (as defined in said Act) of any party to this Agreement, by vote cast
in person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable, without penalty, on 60 days' written notice, by the
Board of Trustees of the
<PAGE> 5
Company or by vote of holders of a majority of the Fund's shares, or upon 90
days' written notice, by the Sub-Adviser or GW Advisors. This Agreement will
also terminate automatically in the event of its assignment (as defined in said
Act). The Sub-Adviser agrees to notify the Company of any circumstances that
might result in this Agreement being deemed to be assigned. The Sub-Adviser
agrees to notify the Company of any changes in the membership of the general
partners of the Sub-Advisor within a reasonable time.
10. Representations of the Company and the Sub-Adviser
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of the Sub-Adviser has been duly authorized and (iii) it has acted
and will continue to act in conformity with the Investment Company Act of 1940
and other applicable laws.
The Sub-Adviser represents that it is authorized to perform the
services described herein.
11. Indemnification
GW Advisors shall indemnify and hold harmless the Sub-Adviser from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys fees and other related expenses), howsoever arising from or in
connection with this Agreement or the performance by Sub-Adviser of its duties
hereunder; provided, however that nothing contained herein shall require that
the Sub-Adviser be indemnified for Disqualifying Conduct.
12. Limitation of Liability
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Company individually.
13. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
14. Governing Law
This Agreement shall be governed in accordance with the laws of the
State of Massachusetts.
<PAGE> 6
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
GW SIERRA TRUST FUNDS
By: /s/
-------------------------------------
President
GREAT WESTERN FINANCIAL ADVISORS
CORPORATION
By: /s/
-------------------------------------
Title: President
Accepted:
Alliance Capital Management L.P.
By: Alliance Capital Management
Corporation, General Partner
By: /s/ DAVID R. BREWER
----------------------------------
Title: David R. Brewer
Assistant Secretary
<PAGE> 1
Exhibit 5(b)-5.3
INVESTMENT SUB-ADVISORY AGREEMENT
February 28, 1995
BlackRock Financial Management Inc.
345 Park Avenue, 30th Floor
New York, New York 10154
Dear Sirs:
Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, and Sierra
Investment Advisors Corporation ("Sierra Advisors"), a corporation organized
under the laws of the state of California, hereby agree with BlackRock Financial
Management Inc. (the "Sub-Advisor"), a Delaware Corporation, as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of the Company's U.S.
Government Fund (the "Fund") by investing and reinvesting in investments of the
kind and in accordance with the limitations specified in its Master Trust
Agreement, as amended, and in its Prospectus and Statement of Additional
Information relating to the Fund as in effect and which may be amended from time
to time, and in such manner and to such extent as may from time to time be
approved by the Board of Trustees of the Company. Copies of the Fund's
Prospectus and Statement of Additional Information and the Company's Master
Trust Agreement, as amended, have been or will be submitted to the Sub-Advisor.
The Company agrees to provide copies of all amendments to the Fund's Prospectus
and Statement of Additional Information and the Company's Master Trust Agreement
to the Sub-Advisor on an on-going basis. The Company desires to employ and
hereby appoints the Sub-Advisor to act as investment sub-advisor to the Fund.
The Sub-Advisor accepts the appointment and agrees to furnish the services
described herein for the compensation set forth below.
<PAGE> 2
2. Services as Investment Sub-Advisor
Subject to the supervision of the Board of Trustees of the Company and
of Sierra Advisors, the Fund's investment adviser, the Sub-Advisor will (a) act
in conformity with the Company's Master Trust Agreement, the Investment Company
Act of 1940 the Investment Advisors Act of 1940 and the Internal Revenue Code of
1986, as the same may from time to time be amended, (b) make investment
decisions for the Fund in accordance with the Fund's investment objective(s) and
policies as stated in the Fund's Prospectus and Statement of Additional
Information as in effect and, after notice to the Sub-Advisor, and which may be
amended from time to time, (c) place purchase and sale orders on behalf of the
Fund to effectuate the investment decisions made, (d) maintain books and records
with respect to the securities transactions of the Fund and will furnish the
Company's Board of Trustees such periodic, regular and special reports as the
Board may request; and (e) treat confidentially and as proprietary information
of the Company, all records and other information relative to the Company and
prior, present or potential shareholders; and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably withheld and such records
may not be withheld where the Sub-Advisor may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the
Company. In providing those services, the Sub-Advisor will supervise the Fund's
investments and conduct a continual program of investment, evaluation and, if
appropriate, sale and reinvestment of the Fund's assets. In addition, the
Sub-Advisor will furnish the Fund or Sierra Advisors with whatever statistical
information the Fund or Sierra Advisors may reasonably request with respect to
the instruments that the Fund may hold or contemplate purchasing.
3. Brokerage
In executing transactions for the Fund and selecting brokers or
dealers, the Sub-Advisor will use its best efforts to seek the best overall
terms available and shall execute or direct the execution of all such
transactions in a manner permitted by law and in a manner that is in the best
interest of the Fund and its shareholders. In assessing the best overall terms
available for any Fund transaction, the Sub-Advisor will consider all factors it
deems relevant including, but not limited to, breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of any commission for
the specific transaction
2
<PAGE> 3
and on a continuing basis. Pursuant to its investment determinations for the
Fund, in placing orders with brokers and dealers, the Sub-Advisor will attempt
to obtain the best net price and the most favorable execution of its orders.
Consistent with this obligation, when the execution and price offered by two or
more brokers or dealers are comparable, the Sub-Advisor may, in its discretion,
purchase and sell portfolio securities to and from brokers and dealers who
provide the Company with research advice and other services.
4. Information Provided to the Company
The Sub-Advisor will keep the Company and Sierra Advisors informed of
developments materially affecting the Fund, and will on its own initiative,
furnish the Company and Sierra Advisors on at least a quarterly basis with
whatever information the Sub- Advisor believes is appropriate for this purpose.
5. Standard of Care
The Sub-Advisor shall exercise its best judgment in rendering the
services described in paragraphs 2 and 3 above. The Sub-Advisor shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates, except
(a) a loss resulting from a breach of fiduciary duty with respect to the receipt
of compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of the
Investment Company Act of 1940, as amended) or (b) a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement (each such breach, act or omission described in (a) or (b) shall be
referred to as "Disqualifying Conduct").
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
Sierra Advisors will pay the Sub-Advisor on the first business day of each month
a fee for the previous month at the annual rate of: (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 "Combined
Assets") are equal to or less than $650,000,000; (ii) .15% of the Fund's average
daily net assets if the 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
3
<PAGE> 4
Combined Assets are more than $1,000,000,000. The Sub-Advisor shall have no
right to obtain compensation directly from the Fund or the Company for services
provided hereunder and agrees to look solely to Sierra Advisors for payment of
fees due. Upon any termination of this Agreement before the end of a month, the
fee for such month shall be prorated according to the proportion that the period
prior to such termination bears to the full monthly period and shall be payable
upon the date of termination of this Agreement. For the purposes of determining
fees payable to the Sub-Advisor, the value of the net assets of each of such
funds shall be computed at the times and in the manner specified in the
Prospectus or Statement of Additional Information relating to such fund as from
time to time in effect.
Notwithstanding the foregoing, in the event that any reduction in the
fees paid to Sierra Advisors under the Advisory Agreement shall be required as a
result of any statutory or regulatory limitation on investment company expenses,
there shall be a proportionate reduction in the fee payable to the Sub- Advisor
hereunder; PROVIDED THAT the Sub-Advisor will never be required to pay more than
the amount of fees it receives.
7. Expenses
The Sub-Advisor will bear all expenses in connection with the
performance of its services under this Agreement, which expenses shall not
include brokerage fees or commissions in connection with the effectuation of
securities transactions. The Company will bear certain other expenses to be
incurred in its operation, including but not limited to: organizational
expenses, taxes, interest, brokerage fees and commissions, if any; fees of
trustees of the Company who are not officers, directors or employees of the
Sub-Advisor, Sierra Advisors, the Fund's sub-administrator or any of their
affiliates; Securities and Exchange Commission fees and state Blue Sky
qualification fees; out-of-pocket expenses of custodians, transfer and dividend
disbursing agents and the Company's sub-administrator and transaction charges of
custodians; insurance premiums; outside auditing and legal expenses; costs of
maintenance of the Company's existence; costs attributable to investor services,
including without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Fund and of the
officers or Board of Trustees of the Company; and any extraordinary expenses. In
addition, the Fund pays a distribution fee pursuant to the terms of a
Distribution Plan adopted under Rule 12b-1 of the Investment Company Act of
1940, as amended.
4
<PAGE> 5
8. Services to Other Companies or Accounts
The Company understands that the Sub-Advisor now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Company has no objection to
the Sub-Advisor so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Advisor have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Company recognizes that in some cases this procedure may limit the
size of the position that may be acquired or disposed of for the Fund. In
addition, the Company understands that the persons employed by the Sub-Advisor
to assist in the performance of the Sub-Advisor's duties hereunder will not
devote their full time to such service and nothing contained herein shall be
deemed to limit or restrict the right of the Sub-Advisor or any affiliate of the
Sub-Advisor to engage in and devote time and attention to other business or to
render services of whatever kind or nature.
9. Term of Agreement
This Agreement shall become effective as of the date first written
above and shall continue for a one year term and shall continue thereafter so
long as such continuance is specifically approved at least annually by (i) the
Board of Trustees of the Company or (ii) a vote of a "majority" (as defined in
the Investment Company Act of 1940, as amended) of the Fund's outstanding voting
securities, provided that in either event the continuance is also approved by a
majority of the Board of Trustees who are not "interested persons" (as defined
in said Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval. This Agreement is terminable,
without penalty, on 30 days' written notice, by Sierra Advisors, the Board of
Trustees of the Company or by vote of holders of a majority of the Fund's
shares, or upon 90 days' written notice, by the Sub-Advisor and, will terminate
automatically upon any termination of the advisory agreement between the Company
and Sierra Advisors. In addition, this Agreement will also terminate
automatically in the event of its assignment (as defined in said Act). The
Sub-Advisor agrees to notify the Company of any circumstances that might result
in this Agreement being deemed to be assigned.
5
<PAGE> 6
10. Representations of the Company and the Sub-Advisor
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of the Sub-Advisor has been duly authorized, and (iii) it has acted
and will continue to act in conformity with the Investment Company Act of 1940,
as amended, and other applicable laws.
Sierra Advisors represents that (i) it is authorized to perform the
services herein, (ii) the appointment of the Sub-Advisor has been duly
authorized, and (iii) it will act in conformity with the Investment Company Act
of 1940, as amended, and other applicable laws.
The Sub-Advisor represents that it is authorized to perform the
services described herein.
11. Indemnification
Sierra Advisors shall indemnify and hold harmless the Sub-Advisor from
and against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses), howsoever arising from
or in connection with this Agreement or the performance by the Sub-Advisor of
its duties hereunder; provided, however, that nothing contained herein shall
require that the Sub-Advisor be indemnified for Disqualifying Conduct.
12. Amendment of this Agreement
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No amendment of this Agreement shall be effective with respect to any
Fund until approved by vote of a majority of the outstanding voting securities
of such Fund.
13. Limitation of Liability
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund
6
<PAGE> 7
of the Company and shall not be binding upon any Trustee, officer or shareholder
of the Fund and/or the Company individually.
14. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
15. Governing Law
This Agreement shall be governed in accordance with the laws of the
Commonwealth of Massachusetts.
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
SIERRA TRUST FUNDS
By /s/ KEITH B. PIPES
--------------------------------------
Name: Keith B. Pipes
Title: Executive Vice President
SIERRA INVESTMENT ADVISORS
CORPORATION
By /s/ MICHAEL D. GOTH
--------------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
Accepted:
BLACKROCK FINANCIAL MANAGEMENT, INC.
By /s/ LAWRENCE FINK
-----------------------------------
Name: Lawrence Fink
Title: President
-7-
<PAGE> 1
Exhibit 5(b)-6.1
INVESTMENT SUB-ADVISORY AGREEMENT
Growth and Income Fund
September 20, 1993
J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Dear Sirs:
Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, and Sierra
Investment Advisors Corporation ("Sierra Advisors"), a corporation organized
under the laws of the state of California, hereby agree with J.P. Morgan
Investment Management Inc. (the "Sub-Adviser"), a corporation organized under
the laws of the state of Delaware, as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of the Company's Growth and
Income Fund (the "Fund") by investing and reinvesting in investments of the kind
and in accordance with the limitations specified in its Master Trust Agreement,
as amended, and in its Prospectus and Statement of Additional Information
relating to the Fund as in effect and which may be amended from time to time,
and in such manner and to such extent as may from time to time be approved by
the Board of Trustees of the Company. Copies of the Fund's Prospectus and
Statement of Additional Information and the Company's Master Trust Agreement, as
amended, have been or will be submitted to the Sub-Adviser. The Company agrees
to provide copies of all amendments to the Fund's Prospectus and Statement of
Additional Information and the Company's Master Trust Agreement to the
Sub-Adviser on an on-going basis. The Company desires to employ and hereby
appoints the Sub-Adviser to act as investment sub-adviser to the Fund. The
Sub-Adviser accepts the appointment and agrees to furnish the services described
herein for the compensation set forth below.
2. Services as Investment Sub-Adviser
Subject to the supervision of the Board of Trustees of the Company and
of Sierra Advisors, the Fund's investment adviser, the Sub-Adviser will (a) act
in conformity with the Company's Master Trust Agreement, the Investment Company
Act of 1940 the Investment Advisors Act of 1940 and the Internal Revenue Code of
1986, as the same may from time to time be amended, (b) make investment
decisions for the Fund in accordance with the Fund's investment objective(s) and
policies as stated in the Fund's Prospectus and
<PAGE> 2
Statement of Additional Information as in effect and, after notice to the
Sub-Adviser, and which may be amended from time to time, (c) place purchase and
sale orders on behalf of the Fund to effectuate the investment decisions made,
(d) maintain books and records with respect to the securities transactions of
the Fund and will furnish the Company's Board of Trustees such periodic, regular
and special reports as the Board may reasonably request; and (e) treat
confidentially and as proprietary information of the Company, all records and
other information relative to the Company and prior, present or potential
shareholders; and will not use such records and information for any purpose
other than performance of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by the Company, which
approval shall not be unreasonably withheld and such records may not be withheld
where the Sub-Adviser may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company. In providing those
services, the Sub-Adviser will supervise the Fund's investments and conduct a
continual program of investment, evaluation and, if appropriate, sale and
reinvestment of the Fund's assets. In addition, the Sub-Adviser will furnish the
Fund or Sierra Advisors with whatever statistical information the Fund or Sierra
Advisors may reasonably request with respect to the instruments that the Fund
may hold or contemplate purchasing.
3. Brokerage
In executing transactions for the Fund and selecting brokers or
dealers, the Sub-Adviser will use its best efforts to seek the best overall
terms available and shall execute or direct the execution of all such
transactions in a manner permitted by law and in a manner that is in the best
interest of the Fund and its shareholders. In assessing the best overall terms
available for any Fund transaction, the Sub-Adviser will consider all factors it
deems relevant including, but not limited to, breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of any commission for
the specific transaction and on a continuing basis. Pursuant to its investment
determinations for the Fund, in placing orders with brokers and dealers, the
Sub-Adviser will attempt to obtain the best net price and the most favorable
execution of its orders. Consistent with this obligation, when the execution and
price offered by two or more brokers or dealers are comparable, the Sub-Adviser
may, in its discretion, purchase and sell portfolio securities to and from
brokers and dealers who provide the Company with research advice and other
services.
4. Information Provided to the Company
The Sub-Adviser will keep the Company and Sierra Advisors informed of
developments materially affecting the Fund, and will,
2
<PAGE> 3
on its own initiative, furnish the Company and Sierra Advisors on at least a
quarterly basis with whatever information the Sub Adviser believes is
appropriate for this purpose.
5. Standard of Care
The Sub-Adviser shall exercise its best judgment in rendering the
services described in paragraphs 2 and 3 above. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates, except
(a) a loss resulting from a breach of fiduciary duty with respect to the receipt
of compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of the
Investment Company Act of 1940, as amended) or (b) a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement (each such breach, act or omission described in (a) or (b) shall be
referred to as "Disqualifying Conduct").
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
Sierra Advisors will pay the Sub-Adviser on the first business day of each month
a fee for the previous month at the annual rate of .45% of the Fund's average
daily net assets up to $100 million, .40% of the value of the Fund's average
daily net assets between $100 million and $200 million, .35% of the value of the
Fund's average daily net assets between $200 million and $400 million, and .30%
of the value of the Fund's average daily net assets in excess of $400 million.
The Sub-Adviser shall have no right to obtain compensation directly from the
Fund or the Company for services provided hereunder and agrees to look solely to
Sierra Advisors for payment of fees due. Upon any termination of this Agreement
before the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to the Sub- Adviser, the
value of the Fund's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus or Statement of Additional Information
relating to the Fund as from time to time in effect.
7. Expenses
The Sub-Adviser will bear all expenses in connection with the
performance of its services under this Agreement, which expenses shall not
include brokerage fees or commissions in connection with the effectuation of
securities transactions. The Company will bear certain other expenses to be
incurred in its operation, including but not limited to: organizational
expenses, taxes, interest, brokerage fees and commissions, if any; fees of
trustees of the
3
<PAGE> 4
Company who are not officers, directors or employees of the Sub-Adviser, Sierra
Advisors, the Fund's sub-administrator or any of their affiliates; Securities
and Exchange Commission fees and state Blue Sky qualification fees;
out-of-pocket expenses of custodians, transfer and dividend disbursing agents
and the Company's sub-administrator and transaction charges of custodians;
insurance premiums; outside auditing and legal expenses; costs of maintenance of
the Company's existence; costs attributable to investor services, including
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the shareholders of the Fund and of the officers or
Board of Trustees of the Company; and any extraordinary expenses. In addition,
the Fund pays a distribution fee pursuant to the terms of a Distribution Plan
adopted under Rule 12b-1 of the Investment Company Act of 1940, as amended.
8. Services to other Companies or Accounts
The Company understands that the Sub-Adviser now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Company has no objection to
the Sub-Adviser so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Adviser have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Company recognizes that in some cases this procedure may limit the
size of the position that may be acquired or disposed of for the Fund. In
addition, the Company understands that the persons employed by the Sub-Adviser
to assist in the performance of the Sub-Adviser's duties hereunder will not
devote their full time to such service and nothing contained herein shall be
deemed to limit or restrict the right of the Sub-Adviser or any affiliate of the
Sub-Adviser to engage in and devote time and attention to other business or to
render services of whatever kind or nature.
9. Term of Agreement
This Agreement shall become effective as of September 20, 1993 and
shall continue for a one-year term and shall continue thereafter so long as such
continuance is specifically approved at least annually by (i) the Board of
Trustees of the Company or (ii) a vote of a "majority" (as defined in the
Investment Company Act of 1940, as amended) of the Fund's outstanding voting
securities, provided that in either event the continuance is also approved by a
majority of the Board of Trustees who are not "interested persons" (as defined
in said Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of
4
<PAGE> 5
voting on such approval. This Agreement is terminable, without penalty, on 30
days' written notice, by Sierra Advisors, the Board of Trustees of the Company
or by vote of holders of a majority of the Fund's shares, or upon 90 days'
written notice, by the Sub-Adviser and, will terminate automatically upon any
termination of the advisory agreement between the Company and Sierra Advisors.
In addition, this Agreement will also terminate automatically in the event of
its assignment (as defined in said Act). The Sub-Adviser agrees to notify the
Company of any circumstances that might result in this Agreement being deemed to
be assigned.
10. Representations of the Company and the Sub-Adviser
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of the Sub Adviser has been duly authorized, and (iii) it has acted
and will continue to act in conformity with the Investment Company Act of 1940,
as amended, and other applicable laws.
Sierra Advisors represents that (i) it is authorized to perform the
services herein, (ii) the appointment of the Sub Adviser has been duly
authorized, and (iii) it will act in conformity with the Investment Company Act
of 1940, as amended, and other applicable laws.
The Sub-Adviser represents that it is authorized to perform the
services described herein.
11. Indemnification
Sierra Advisors shall indemnify and hold harmless the Sub-Adviser from
and against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses), howsoever arising from
or in connection with this Agreement or the performance by the Sub-Adviser of
its duties hereunder; provided, however, that nothing contained herein shall
require that the Sub-Adviser be indemnified for Disqualifying Conduct.
12. Amendment of this Agreement
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No amendment of this Agreement shall be effective with respect to any
Fund until approved by vote of a majority of the outstanding voting securities
of such Fund.
5
<PAGE> 6
13. Limitation of Liability
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Company individually.
14. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
15. Governing Law
This Agreement shall be governed in accordance with the laws of the
Commonwealth of Massachusetts.
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
SIERRA TRUST FUNDS
By /s/ KEITH PIPES
--------------------------------
Name: Keith Pipes
Title: Executive Vice President,
Treasurer & Secretary
SIERRA INVESTMENT ADVISORS
CORPORATION
By /s/ MICHAEL D. GOTH
----------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
Accepted:
J.P. MORGAN INVESTMENT MANAGEMENT INC.
By /s/ THOMAS PERNICE
---------------------------------
Name: Thomas Pernice
Title: Vice President
6
<PAGE> 1
EXHIBIT 5(b)-7
INVESTMENT SUB-ADVISORY AGREEMENT
7/18, 1990
TCW Funds Management, Inc.
400 South Hope Street
Los Angeles, CA 90071
Dear Sirs:
GW Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, and Great Western
Financial Advisors Corporation ("GW Advisors"), a corporation organized under
the laws of the state of California, hereby agree with TCW Funds Management,
Inc. (the "Sub-Adviser") as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of GW Corporate Income Fund
(the "Fund") by investing and reinvesting in investments of the kind and in
accordance with the limitations specified in its Master Trust Agreement, as
amended, and in its Prospectus and Statement of Additional Information relating
to the Fund as in effect and which may be amended from time to time, and in such
manner and to such extent as may from time to time be approved by the Board of
Trustees of the Company. Copies of the Company's Prospectus and Statement of
Additional Information and the Company's Master Trust Agreement, as amended,
have been or will be submitted to the Sub-Adviser. The Company agrees to provide
copies of all amendments to the Fund's Prospectus and Statement of Additional
Information and the Company's Master Trust Agreement to the Sub-Adviser on an
on-going basis. The Company desires to employ and hereby appoints the
Sub-Adviser to act as investment sub-adviser to the Fund. The Sub-Adviser
accepts the appointment and agrees to furnish the services described herein for
the compensation set forth below.
2. Services as Investment Sub-Adviser
Subject to the supervision of the Board of Trustees of the Company and
of GW Advisors, the Fund's investment adviser, the Sub-Adviser will (a) act in
conformity with the Company's Master Trust Agreement, the Investment Company Act
of 1940, the Investment Advisers Act of 1940, the Internal Revenue Code and all
applicable banking laws and regulations, as the same may from time to time be
amended, (b) make investment decisions for the Fund in accordance with the
Fund's investment objective(s) and policies as stated in the Fund's Prospectus
and Statement of Additional Information as in effect and, after notice to the
Sub-Adviser, which may be amended from time to time, (c) place purchase and
sale orders on behalf of the Fund to effectuate the investment decisions made,
(d) maintain books
<PAGE> 2
and records with respect to the securities transactions of the Fund and will
furnish the Company's Board of Trustees such periodic, regular and special
reports as the Board may request; and (e) treat confidentially and as
proprietary information of the Company all records and other information
relative to the Company and prior, present or potential shareholders; and will
not use such records and information for any purpose other than performance of
its responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Company, which approval shall not be unreasonably
withheld and such records may not be withheld where the Sub-Adviser may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Company. In providing those services, the Sub-Adviser will
supervise the Fund's investments and conduct a continual program of investment,
evaluation and, if appropriate, sale and reinvestment of the Fund's assets. In
addition, the Sub-Adviser will furnish the Fund or GW Advisors with whatever
statistical information the Fund or GW Advisors may reasonably request with
respect to the instruments that the Fund may hold or contemplate purchasing.
3. Brokerage
In executing transactions for the Fund and selecting brokers or
dealers, the Sub-Adviser will use its best efforts to seek the best overall
terms available and shall execute or direct the execution of all such
transactions in a manner permitted by law and in a manner that is in the best
interest of the Fund and its shareholders. In assessing the best overall terms
available for any Fund transaction, the Sub-Adviser will consider all factors it
deems relevant including, but not limited to, breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of any commission for
the specific transaction and on a continuing basis. Pursuant to its investment
determinations for the Fund, in placing orders with brokers and dealers, the
Sub-Adviser will attempt to obtain the best net price and the most favorable
execution of its orders. Consistent with this obligation, when the execution and
price offered by two or more brokers or dealers are comparable, the Sub-Adviser
may, in its discretion, purchase and sell portfolio securities to and from
brokers and dealers who provide the Company with research advice and other
services.
4. Information Provided to the Company
The Sub-Adviser will keep the Company and GW Advisors informed of
developments materially affecting the Fund, and will on its own initiative,
furnish the Company and GW Advisors on at least a quarterly basis with whatever
information the Sub-Adviser believes is appropriate for this purpose.
<PAGE> 3
5. Standard of Care
The Sub-Adviser shall exercise its best judgment in rendering the
services described in paragraphs 2 and 3 above. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates, except
(a) a loss resulting from a breach of fiduciary duty with respect to the receipt
of compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of the
Investment Company Act of 1940, as amended) or (b) a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement (each such breach, act or omission described in (a) or (b) shall be
referred to as "Disqualifying Conduct").
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
GW Advisors will pay the Sub-Adviser on the first business day of each month a
fee for the previous month at the annual rate of .30% of the Fund's average
daily net assets up to $500 million, and .25% of the Fund's average daily net
assets in excess of $500 million. The Sub-Advisor shall have no right to obtain
compensation directly from the Fund or the Company for services provided
hereunder and agrees to look solely to GW Advisors for payment of fees due. Upon
any termination of this Agreement before the end of a month, the fee for such
part of that month shall be prorated according to the proportion that such
period bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Sub-Adviser, the value of the Fund's net assets shall be computed at the
times and in the manner specified in the Fund's Prospectus or Statement of
Additional Information relating to the Fund as from time to time in effect.
7. Expenses
The Sub-Adviser will bear all expenses in connection with the
performance of its services under this Agreement, which expenses shall not
include brokerage fees or commissions in connection with the effectuation of
securities transactions. The Company will bear certain other expenses to be
incurred in its operation, including but not limited to: organizational
expenses, taxes, interest, brokerage fees and
<PAGE> 4
commissions, if any; fees of trustees of the Company who are not officers,
directors or employees of the Sub-Adviser, GW Advisors, the Fund's sub-
administrator or any of their affiliates; Securities and Exchange Commission
fees and state Blue Sky qualification fees; out-of-pocket expenses of
custodians, transfer and dividend disbursing agents and the Company's
sub-administrator and transaction charges of custodians; insurance premiums;
outside auditing and legal expenses; costs of maintenance of the Company's
existence; costs attributable to investor services, including without
limitation, telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders; costs of shareholders' reports
and meetings of the shareholders of the Fund and of the officers or Board of
Trustees of the Company; and any extraordinary expenses. In addition, the Fund
pays a distribution fee pursuant to the terms of a Distribution Plan adopted
under Rule 12b-1 of the Investment Company Act of 1940, as amended.
8. Services to Other Companies or Accounts
The Company understands that the Sub-Adviser now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Company has no objection to
the Sub-Adviser so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Adviser have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. In addition, the Company understands that the persons employed by the
Sub-Adviser to assist in the performance of the Sub-Adviser's duties hereunder
will not devote their full time to such service and nothing contained herein
shall be deemed to limit or restrict the right of the Sub-Adviser or any
affiliate of the Sub-Adviser to engage in and devote time and attention to other
business or to render services of whatever kind or nature.
9. Term of Agreement
This Agreement shall become effective as of the date the Fund commences
its investment operations and shall continue for a one year term and shall
continue thereafter so long as such continuance is specifically approved at
least annually by (i) the Board of Trustees of the Company or (ii) a vote of a
"majority" (as defined in the Investment Company Act of 1940, as amended) of the
Fund's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in said Act) of any party to this Agreement, by
vote cast in person at a meeting called for the
<PAGE> 5
purpose of voting on such approval. This Agreement is terminable, without
penalty, on 30 days' written notice, by GW Advisors, the Board of Trustees of
the Company or by vote of holders of a majority of the Fund's shares, or upon 90
days' written notice, by the Sub-Adviser and, will terminate automatically upon
any termination of the advisory agreement between the Company and GW Advisors.
In addition, this Agreement will also terminate automatically in the event of
its assignment (as defined in said Act). The Sub-Adviser agrees to notify the
Company of any circumstances that might result in this Agreement being deemed to
be assigned.
10. Representations of the Company and the Sub-Adviser
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of the Sub-Adviser has been duly authorized and (iii) it has acted
and will continue to act in conformity with the Investment Company Act of 1940,
as amended, and other applicable laws.
The Sub-Adviser represents that it is authorized to perform the
services described herein.
11. Indemnification
GW Advisors shall indemnify and hold harmless the Sub-Adviser from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys fees and other related expenses), howsoever arising from or in
connection with this Agreement or the performance by the Sub-Adviser of its
duties hereunder; provided, however, that nothing contained herein shall require
that the Sub-Adviser be indemnified for Disqualifying Conduct.
12. Amendment of this Agreement.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No amendment of this Agreement shall be effective with respect to any
Fund until approved by vote of a majority of the outstanding voting securities
of such Fund.
13. Limitation of Liability
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Company individually.
<PAGE> 6
14. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
15. Governing Law
This Agreement shall be governed in accordance with the laws of the
Commonwealth of Massachusetts.
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
GW SIERRA TRUST FUNDS
By: /s/
--------------------------------------
Title:
GREAT WESTERN FINANCIAL
ADVISORS CORPORATION
By: /s/
--------------------------------------
Title:
Accepted:
TCW FUNDS MANAGEMENT, INC.
By: /s/
-------------------------------
Title: President
By: /s/ Hilary Lord
-------------------------------
Title: Vice President
<PAGE> 1
Exhibit 5(b)-9.1
INVESTMENT SUB-ADVISORY AGREEMENT
Emerging Growth Fund
This Agreement is made and entered into this 20th day of September,
1993, by and among Sierra Trust Funds (the "Company"), an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts,
Sierra Investment Advisors Corporation ("Sierra Advisors"), a corporation
organized under the laws of the state of California and Janus Capital
Corporation (the "Sub-Advisor"), a corporation organized under the laws of the
state of Colorado.
WITNESSETH:
Whereas, the Company is engaged in business as an open-end, management
investment company and is so registered under the Investment Company Act of
1940, as amended (the "Investment Company Act");
Whereas, the Company offers a number of investment portfolios, each
with its own investment objective and strategies, and of which one investment
portfolio is the Emerging Growth Fund (the "Fund");
Whereas, Sierra Advisors is engaged in the business of rendering
investment advisory and management services, is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"), and is the investment advisor of the Company;
Whereas, the Sub-Advisor is engaged in the business of rendering
investment advisory and management services and is registered as an investment
adviser under the Advisers Act; and
Whereas, the Company and Sierra Advisors desire to retain the
Sub-Advisor to furnish investment advisory and management services to the
Company and to the Fund and the Sub-Advisor is willing to furnish such services;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, it is hereby agreed by and among the parties hereto as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of the Fund by investing and
reinvesting in investments of the kind and in accordance with the limitations
specified in its Master Trust Agreement, as amended, and in its Prospectus and
Statement of Additional Information relating to the Fund as in effect and which
may be amended from time to time, and in such manner and to such extent as may
from time to time be approved by the Board of Trustees of the Company. Copies of
the Fund's Prospectus and
<PAGE> 2
Statement of Additional Information, as amended, have been or will be submitted
to the Sub-Advisor. The Company agrees to provide copies of all amendments or
supplements to the Fund's Prospectus and Statement of Additional Information and
the Company's Master Trust Agreement to the Sub-Advisor during the continuance
of this Agreement before or at the time such amendments or supplements become
effective.
The Company agrees to furnish the Sub-Advisor with minutes of meetings
of the Board of Trustees of the Fund to the extent they may affect the duties of
the Sub-Advisor, a certified copy of any financial statements or reports
prepared for the Fund, by certified or independent public accountants, and with
copies of any financial statements or reports made by the Fund to its
shareholders or to any governmental body or securities exchange, and any further
materials or information which the Sub-Advisor may reasonably request to enable
it to perform its functions under this Agreement. The Company desires to employ
and hereby appoints the Sub-Advisor to act as investment sub-adviser to the
Fund. The Sub-Advisor accepts the appointment and agrees to furnish the services
described herein for the compensation set forth below.
2. Services as Investment Sub-Advisor
Subject to the supervision of the Board of Trustees of the Company and
of Sierra Advisors, the Fund's investment adviser, the Sub-Advisor will (a)
maintain compliance procedures for the Fund that the Sub-Advisor believes are
adequate to ensure its compliance with the applicable provisions of the
Investment Company Act and the Advisers Act as the same may from time to time be
amended, (b) make investment decisions for the Fund in accordance with the
Fund's investment objective(s) and policies as stated in the Fund's Prospectus
and Statement of Additional Information as in effect and, after notice to the
Sub-Advisor, and which may be amended from time to time, (c) place purchase and
sale orders on behalf of the Fund to effectuate the investment decisions made,
(d) maintain books and records with respect to the securities transactions of
the Fund in accordance with the Investment Company Act and the Advisers Act and
the rules adopted thereunder and will furnish Sierra Advisors quarterly, annual
and special reports as Sierra Advisors may reasonably request; and (e) treat
confidentially and as proprietary information of the Company, all records and
other information relative to the Company and prior, present or potential
shareholders; and will not knowingly use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Company, which
approval shall not be unreasonably withheld and such records may not be withheld
where the Sub-Advisor may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company. In providing those
services, the
2
<PAGE> 3
Sub-Advisor will supervise the Fund's investments and conduct a continual
program of investment, evaluation and, if appropriate, sale and reinvestment of
the Fund's assets.
Subject to the supervision of Sierra Advisors and in accordance with
the investment objective and policies as stated in the Fund's Prospectus and
Statement of Additional Information, the Sub-Advisor is authorized, in its
discretion and without prior consultation with Sierra Advisors to buy, sell,
lend, and otherwise trade in any stocks, bonds, and other securities and
investment instruments on behalf of the Fund, without regard to the length of
time the securities have been held and the resulting rate of portfolio turnover
or any tax considerations, and so long as consistent with the foregoing, the
majority or the whole of the Fund may be invested in such proportions of stocks,
bonds, other securities or investment instruments, or cash as the Sub-Advisor
shall determine. In addition, the Sub-Advisor will furnish the Fund or Sierra
Advisors with whatever statistical information the Fund or Sierra Advisors may
reasonably request with respect to the instruments that the Fund may hold or
contemplate purchasing.
3. Brokerage
Subject to (i) the over-riding objective of obtaining the best possible
execution of orders; and (ii) review and approval of the Board of Trustees of
the Company, which may be conducted as often as quarterly, the Sub-Advisor shall
place all orders for the purchase and sale of securities for the Fund with
brokers or dealers selected by the Sub-Advisor, which may include brokers or
dealers affiliated with the Sub-Advisor. All transactions with any affiliated
person of the Company, or where any such affiliated person acts as broker or
agent in connection with any such transaction, shall be accomplished in
compliance with the Investment Company Act, the Advisers Act, the Securities
Exchange Act of 1934, as amended, the rules adopted thereunder and the
procedures adopted thereunder by the Company. Purchase or sell orders for the
Fund may be aggregated with contemporaneous purchase or sell orders of other
clients of the Sub-Advisor; provided that (i) no advisory account will be
favored by the Sub-Advisor over any other account; (ii) each client of the Sub-
Advisor who participates in such an aggregated order will participate at the
average share price, with all transaction costs shared on a pro rata basis;
(iii) only advisory clients' transactions will be aggregated for such an
aggregated order; and (iv) the accounts of clients whose orders are aggregated
will be segregated on the Sub-Advisor's books and records so as to identify the
particular client who has the beneficial interest therein. The Sub-Advisor shall
use its best efforts to obtain execution of Fund transactions at prices which
are advantageous to the Fund and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Advisor may select brokers
or dealers on the basis that they provide brokerage, research, or other services
or products to the
3
<PAGE> 4
Fund and/or other accounts serviced by the Sub-Advisor. The Sub-Advisor may pay
a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission or dealer spread another
broker or dealer would have charged for effecting that transaction if the
Sub-Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research products
and/or services provided by such broker or dealer. This determination, with
respect to brokerage and research services or products, may be viewed in terms
of either that particular transaction or the overall responsibilities which the
Sub-Advisor and its affiliates have with respect to the Fund and to accounts
over which they exercise investment discretion, and not all such services or
products may be used by the Sub-Advisor in managing the Fund; provided that with
respect to such transaction and such determination the affiliates of the
Sub-Advisor shall have the same responsibilities to the Fund as the Sub-Advisor
has under this Agreement.
4. Information Provided to the Company
The Sub-Advisor will keep the Company and Sierra Advisors informed of
developments materially affecting the Fund of which the Sub-Advisor becomes
aware and will, on its own initiative, furnish the Company and Sierra Advisors
on at least a quarterly basis with whatever information the Sub-Advisor believes
is appropriate for this purpose.
5. Standard of Care
The Sub-Advisor shall exercise its best judgment in rendering the
services described in paragraphs 2 and 3 above. Except as may otherwise be
provided by federal securities laws, the Sub-Advisor shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement (the conduct excepted in this
sentence shall be referred to as "Disqualifying Conduct").
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
Sierra Advisors will pay the Sub-Advisor on the first business day of each month
a fee for the previous month at the annual rate of .55% of the Fund's average
daily net assets including cash and cash equivalents up to $100 million and .50%
of the Fund's average daily net assets in excess of $100 million. The fee for
the first month shall be prorated based upon the number of days the account was
open in that month. Upon any termination of this Agreement before the end of a
month, the fee for such part of
4
<PAGE> 5
that month shall be prorated according to the proportion that such period bears
to the full monthly period and shall be payable upon the date of termination of
this Agreement. For the purpose of determining fees payable to the Sub-Advisor,
the value of the Fund's net assets shall be computed at the times and in the
manner specified in the Fund's Prospectus or Statement of Additional Information
relating to the Fund as from time to time in effect.
7. Expenses
The Sub-Advisor will bear all of its expenses in performing its
services under this Agreement, which expenses shall not include brokerage fees
or commissions in connection with the effectuation of securities transactions.
The Sub-Advisor shall bear no expenses of the Company, the Fund or Sierra
Advisors. The Company will bear certain other expenses to be incurred in its
operation, including but not limited to: organizational expenses, taxes,
interest, brokerage fees and commissions, if any; fees of trustees of the
Company who are not officers, directors or employees of the Sub-Advisor, Sierra
Advisors, the Fund's sub-administrator or any of their affiliates; Securities
and Exchange Commission fees and state Blue Sky qualification fees; all fees,
including out-of-pocket expenses of custodians, transfer and dividend disbursing
agents and the Company's sub-administrator and transaction charges of
custodians; insurance premiums; outside auditing and legal expenses; costs of
maintenance of the Company's existence; costs attributable to investor services,
including without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Fund and of the
officers or Board of Trustees of the Company; and any extraordinary expenses. In
addition, the Fund pays a distribution fee pursuant to the terms of a
Distribution Plan adopted under Rule 12b-1 of the Investment Company Act. Any
reimbursement of advisory fees required by any expense limitation provision
shall be the sole responsibility of Sierra Advisors.
8. Services to Other Companies or Accounts
The Company understands that the Sub-Advisor now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Company has no objection to
the Sub-Advisor so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Advisor have available funds
for investment, investments suitable and appropriate for each will be allocated
in a manner reasonably equitable to each entity. Similarly, opportunities to
sell securities will be allocated in such an equitable manner. The Company
recognizes that in some cases this procedure may limit the
5
<PAGE> 6
size of the position that may be acquired or disposed of for the Fund. In
addition, the Company understands that the persons employed by the Sub-Advisor
to assist in the performance of the Sub-Advisor's duties hereunder will not
devote their full time to such service and nothing contained herein shall be
deemed to limit or restrict the right of the Sub-Advisor or any affiliate of the
Sub-Advisor to engage in and devote time and attention to other business or to
render services of whatever kind or nature. The Company recognizes and agrees
that the Sub-Advisor may provide advice to other clients which may differ from
or be identical to advice given with respect to the Fund.
9. Term of Agreement
This Agreement shall become effective as of September 20, 1993, shall
continue for a one-year term and shall continue thereafter so long as such
continuance is specifically approved at least annually by (i) the Board of
Trustees of the Company or (ii) a vote of a "majority" (as defined in the
Investment Company Act) of the Fund's outstanding voting securities, provided
that in either event the continuance is also approved by a majority of the Board
of Trustees who are not "interested persons" (as defined in the Investment
Company Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval. This Agreement is terminable,
without penalty, on 30 days' written notice by Sierra Advisors, the Board of
Trustees of the Company or by vote of holders of a majority of the Fund's
shares, or upon 60 days' written notice, by the Sub-Advisor and, will terminate
automatically upon any termination of the advisory agreement between the Company
and Sierra Advisors. In addition, this Agreement will also terminate
automatically in the event of its assignment (as defined in the Investment
Company Act). The Sub-Advisor agrees to notify the Company of any circumstances
that to its best knowledge and belief might result in this Agreement being
deemed to be assigned.
10. Representations of the Company and the Sub-Advisor
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of the Sub-Advisor has been duly authorized, and (iii) it has acted
and will continue to act in conformity with the Investment Company Act and other
applicable laws.
Sierra Advisors represents that (i) it is authorized to perform the
services herein, (ii) the appointment of the Sub-Advisor has been duly
authorized, and (iii) it will act in conformity with the Investment Company Act
and other applicable laws.
6
<PAGE> 7
The Sub-Advisor represents that it is authorized to perform the
services described herein.
11. Indemnification
Sierra Advisors shall indemnify and hold harmless the Sub-Advisor from
and against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses), howsoever arising from
or in connection with this Agreement or the performance by the Sub-Advisor of
its duties hereunder; provided, however, that nothing contained herein shall
require that the Sub-Advisor be indemnified for Disqualifying Conduct.
12. Amendment of this Agreement
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No amendment of this Agreement shall be effective with respect to the
Fund until approved by vote of a majority of the outstanding voting securities
of the Fund.
13. Limitation of Liability
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Company individually.
14. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
15. Governing Law
This Agreement shall be governed in accordance with the laws of the
Commonwealth of Massachusetts.
16. Miscellaneous
(a) Unless the Company gives the Sub-Advisor written instructions to
the contrary, the Sub-Advisor shall vote all proxies solicited by or with
respect to the issuers of securities in which assets of the Fund may be
invested. The Sub-Advisor shall use its best good faith judgment to vote such
proxies in a manner which best serves the interests of the Fund's shareholders.
7
<PAGE> 8
(b) The Company shall provide the Sub-Advisor with a copy of the Fund's
agreement (the "Custody Agreement") with the Custodian (the "Custodian")
designated to hold the assets of the Fund and any modification thereto in
advance. The Fund's assets shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement. The Sub-Advisor shall have no liability for the acts or omissions of
the Custodian. Any assets added to the Fund shall be delivered directly to the
Custodian.
(c) The Company, the Fund and Sierra Advisors agree and acknowledge
that the Sub-Advisor is the sole owner of the name and mark "Janus" and that all
use of any designation comprised in whole or part of Janus (a "Janus Mark")
under this Agreement shall inure to the benefit of the Sub-Advisor. The use by
the Company on its own behalf or on behalf of the Fund of any Janus Mark in any
advertisement or sales literature or other materials promoting the Fund shall be
with the consent of the Sub-Advisor. The Company and Sierra Advisors shall not,
without the consent of the Sub-Advisor, make representations regarding the
Sub-Advisor intended to be disseminated to the investing public in any
disclosure document, advertisement or sales literature or other materials
promoting the Fund. Such consent shall not be required for any documents or
other materials intended for broker-dealer use only, for use by the Company's
trustees and for internal use by the Company and Sierra Advisors. Consent by the
Sub-Advisor to such use of any Janus Mark and any such representation shall not
be unreasonably withheld and shall be deemed to be given if no written objection
is received by the Company, the Fund or Sierra Advisors within 3 business days
after the request is made by the Company, the Fund or Sierra Advisors for such
use of any Janus Mark or any such representation. Upon termination of this
Agreement for any reason, the Company and Sierra Advisors shall cease all use of
any Janus Mark(s) as soon as reasonably practicable.
(d) The Sub-Advisor agrees and acknowledges that the Company is the
sole owner of the name and mark "Sierra Trust Funds" and Sierra Advisors is the
sole owner of the name and mark "Sierra Investment Advisors" and that any and
all use of any designation comprised in whole or in part of "Sierra Trust Funds"
or "Sierra Investment Advisors" (a "Sierra Mark") under this Agreement shall
inure to the benefit of the Company or Sierra Advisors, respectively. The use by
the Sub-Advisor on its own behalf of any Sierra Mark in any advertisement or
sales literature or other materials promoting the Sub-Advisor shall be with the
consent of the Company or Sierra Advisors, respectively. The Sub-Advisor shall
not, without the consent of the Company or Sierra Advisors, as applicable, make
representations regarding the Company, the Fund or Sierra Advisors in any
disclosure document, advertisement or sales literature or other materials
promoting the Sub-Advisor. Consent by the Company and Sierra Advisors to such
use of any Sierra Mark and any such representations shall not be unreasonably
8
<PAGE> 9
withheld and shall be deemed to be given if no written objection is received by
the Sub-Advisor within 5 business days after the request by the Sub-Advisor is
made for such use of any Sierra Mark or any such representations. Upon
termination of this Agreement for any reason, the Sub-Advisor shall cease any
and all use of any Sierra Mark as soon as reasonably practicable.
(e) The Sub-Advisor may perform its services through any employee,
officer or agent of the Sub-Advisor, and the Company and the Fund shall not be
entitled to the advice, recommendation, or judgment of any specific person.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
ATTEST: SIERRA TRUST FUNDS
/s/ RICHARD BOCANEGRA By: /s/ KEITH PIPES
- ----------------------------- -------------------------------------
Name: Richard Bocanegra Name: Keith Pipes
Title: Administrative Asst. Title: Executive Vice President,
Treasurer & Secretary
ATTEST: SIERRA INVESTMENT ADVISORS
CORPORATION
/s/ ANN MARIE DOWELL By: /s/ MICHAEL D. GOTH
- ----------------------------- -------------------------------------
Name: Ann Marie Dowell Name: Michael D. Goth
Title: Admin. Assistant Title: Chief Operating Officer
ATTEST: JANUS CAPITAL CORPORATION
/s/ DONNA J. WEAVER By: /s/ STEPHEN L. STIENEKER
- ----------------------------- -------------------------------------
Name: Donna J. Weaver Name: Stephen L. Stieneker
Title: Title: Assistant Vice President
-9-
<PAGE> 1
Exhibit 5(b)-11
INVESTMENT SUB-ADVISORY AGREEMENT
February 3, 1992
Scudder, Stevens & Clark, Inc.
175 Federal Street
Boston, MA 02110-2267
Dear Sirs:
GW Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, and Great Western
Financial Advisors Corporation ("GW Advisors"), a corporation organized under
the laws of the state of California, hereby agree with Scudder, Stevens & Clark,
Inc. (the "Sub-Advisor"), a corporation organized under the laws of the State of
Delaware, as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of GW Short Term Global
Government Income Fund (the "Fund") by investing and reinvesting in investments
of the kind and in accordance with the limitations specified in its Master Trust
Agreement, as amended (the "Master Trust Agreement"), and in its Prospectus and
Statement of Additional Information relating to the Fund as in effect and which
may be amended from time to time, and in such manner and to such extent as may
from time to time be approved by the Board of Trustees of the Company. Copies of
the Fund's Prospectus and Statement of Additional Information and the Company's
Master Trust Agreement, as amended, have been or will be submitted to the
Sub-Advisor. The Company agrees to provide copies of all amendments to the
Fund's Prospectus and Statement of Additional Information and the Company's
Master Trust Agreement to the Sub-Advisor on an on-going basis. The Company has
employed GW Advisors to invest and reinvest the Fund's assets in accordance with
the terms of an Investment Advisory Agreement between the Company and GW
Advisors dated February 3, 1992. In connection therewith, GW Advisors desires to
employ and hereby appoints the Sub-Advisor to act as investment sub-advisor to
the Fund. The Sub-Advisor accepts the appointment and agrees to furnish the
services described herein for the compensation set forth below. The Company
hereby accepts and acknowledges the appointment of the Sub-Advisor to act as
investment sub-advisor to the Fund.
2. Services as Investment Sub-Advisor
Subject to the supervision and direction of the Board of Trustees of
the Company and of GW Advisors, the Fund's
<PAGE> 2
investment adviser, the Sub-Advisor will (a) act in conformity with the
Company's Master Trust Agreement, the Investment Company Act of 1940 (the "1940
Act"), the Investment Advisers Act of 1940 and the Internal Revenue Code, as the
same may from time to time be amended, (b) make investment decisions for the
Fund in accordance with the Fund's investment objective(s) and policies as
stated in the Fund's Prospectus and Statement of Additional Information as in
effect and, after notice to the Sub-Advisor, and which may be amended from time
to time, (c) place purchase and sale orders on behalf of the Fund to effectuate
the investment decisions made, (d) maintain books and records with respect to
the securities transactions of the Fund and will furnish the Company's Board of
Trustees such periodic, regular and special reports as the Board may request;
and (e) treat confidentially and as proprietary information of the Company, all
records and other information relative to the Company and prior, present or
potential shareholders; and will not use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Company, which
approval shall not be unreasonably withheld and such records may not be withheld
where the Sub-Advisor may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company. In providing those
services, the Sub-Advisor will supervise the Fund's investments and conduct a
continual program of investment, evaluation and, if appropriate, sale and
reinvestment of the Fund's assets. The Sub-Advisor will furnish the Fund or GW
Advisors with whatever statistical information the Fund or GW Advisors may
reasonably request with respect to the instruments that the Fund may hold or
contemplate purchasing. In addition, the Sub-Advisor will follow such written
instructions pertaining to the Fund as may be provided by GW Advisors from time
to time, provided, such instructions are not in violation of the Company's
Master Trust Agreement and the Fund's Prospectus and Statement of Additional
Information.
3. Brokerage
In executing transactions for the Fund and selecting brokers or
dealers, the Sub-Advisor will use its best efforts to seek the best overall
terms available and shall execute or direct the execution of all such
transactions in a manner permitted by law and in a manner that is in the best
interest of the Fund and its shareholders. In assessing the best overall terms
available for any Fund transaction, the Sub-Advisor will consider all factors it
deems relevant including, but not limited to, breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of any commission for
the specific transaction and on a continuing basis. Pursuant to its investment
<PAGE> 3
determinations for the Fund, in placing orders with brokers and dealers, the
Sub-Advisor will attempt to obtain the best net price and the most favorable
execution of its orders. Consistent with this obligation, when the execution and
price offered by two or more brokers or dealers are comparable, the Sub-Advisor
may, in its discretion, purchase and sell portfolio securities to and from
brokers and dealers who provide the Company with research advice and other
services.
4. Information Provided to the Company
The Sub-Advisor will keep the Company and GW Advisors informed of
developments materially affecting the Fund, and will on its own initiative,
furnish the Company and GW Advisors on at least a quarterly basis with whatever
information the Sub-Advisor believes is appropriate for this purpose.
5. Standard of Care
The Sub-Advisor shall exercise its best judgment in rendering the
services described in paragraphs 2 and 3 above. The Sub-Advisor shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates, except
(a) a loss resulting from a breach of fiduciary duty with respect to the receipt
of compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of the 1940
Act) or (b) a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement (each such
breach, act or omission described in (a) or (b) shall be referred to as
"Disqualifying Conduct").
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
GW Advisors will pay the Sub-Advisor on the first business day of each month a
fee for the previous month at the annual rate of .28% of the Fund's average
daily net assets up to $200 million and .10% of the Fund's average daily net
assets exceeding $200 million, provided, however, that in no event shall the
annual fee paid to the Sub-Advisor be less than $137,500. The Sub-Advisor shall
have no right to obtain compensation directly from the Fund or the Company for
services provided hereunder and agrees to look solely to GW Advisors for payment
of fees due. Upon any termination of this Agreement before the end of a month,
the fee for such part of that month shall be prorated according to the
proportion that such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. For the purpose of
determining fees payable to the Sub-Advisor, the value of the Fund's net assets
shall be computed at the times and in the
<PAGE> 4
manner specified in the Fund's Prospectus or Statement of Additional Information
as from time to time in effect.
7. Expenses
The Sub-Advisor will bear all expenses in connection with the
performance of its services under this Agreement, which expenses shall not
include brokerage fees or commissions in connection with the effectuation of
securities transactions. The Company will bear certain other expenses to be
incurred in its operation, including but not limited to: organizational
expenses, taxes, interest, brokerage fees and commissions, if any; fees of
trustees of the Company who are not officers, directors or employees of the
Sub-Advisor, GW Advisors, the Fund's sub-administrator or any of their
affiliates; Securities and Exchange Commission fees and state Blue Sky
qualification fees; out-of-pocket expenses of custodians, transfer and dividend
disbursing agents and the Company's sub-administrator and transaction charges of
custodians; insurance premiums; outside auditing and legal expenses; costs of
maintenance of the Company's existence; costs attributable to investor services,
including without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Fund and of the
officers or Board of Trustees of the Company; and any extraordinary expenses. In
addition, the Fund pays a distribution fee pursuant to the terms of a
Distribution Plan, as amended, adopted pursuant to Rule 12b-1 of the 1940 Act.
8. Services to Other Companies or Accounts
The Company understands that the Sub-Advisor now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Company has no objection to
the Sub-Advisor so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Advisor have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Company recognizes that in some cases this procedure may limit the
size of the position that may be acquired or disposed of for the Fund. In
addition, the Company understands that the persons employed by the Sub-Advisor
to assist in the performance of the Sub-Advisor's duties hereunder will not
devote their full time to such service and nothing contained herein shall be
deemed to limit or restrict the right of the Sub-Advisor or any affiliate of the
Sub-Advisor to engage in and devote time and attention to other business or to
render services of whatever kind or nature.
<PAGE> 5
9. Term of Agreement
This Agreement shall become effective as of February 3, 1992 and shall
continue for a one year term and shall continue thereafter so long as such
continuance is specifically approved at least annually by (i) the Board of
Trustees of the Company or (ii) a vote of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting securities, provided that in either event
the continuance is also approved by a majority of the Board of Trustees who are
not "interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. This Agreement is terminable, without penalty, on 30 days'
written notice, by GW Advisors, the Board of Trustees of the Company or by vote
of holders of a majority of the Fund's shares, or upon 90 days' written notice,
by the Sub-Advisor and, will terminate automatically upon any termination of the
advisory agreement between the Company and GW Advisors. In addition, this
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act). The Sub-Advisor agrees to notify the Company of any
circumstances that might result in this Agreement being deemed to be assigned.
10. Representations of the Company and the Sub-Advisor
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of the Sub-Advisor has been duly authorized, and (iii) it has acted
and will continue to act in conformity with the 1940 Act, and other applicable
laws.
GW Advisors represents that (i) it is authorized to perform the
services herein, (ii) the appointment of the Sub-Advisor has been duly
authorized, and (iii) it will act in conformity with the 1940 Act, and other
applicable laws.
The Sub-Advisor represents that it is authorized to perform the
services described herein.
11. Indemnification
GW Advisors shall indemnify and hold harmless the Sub-Advisor from and
against any and all claims, losses, liabilities or damages (including reasonable
attorneys' fees and other related expenses), howsoever arising from or in
connection with this Agreement or the performance by the Sub-Advisor of its
duties hereunder; provided, however, that nothing contained herein shall require
that the Sub-Advisor be indemnified for Disqualifying Conduct.
<PAGE> 6
12. Amendment of this Agreement
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No amendment of this Agreement shall be effective with respect to any
Fund until approved by vote of a majority of the outstanding voting securities
of such Fund.
13. Limitation of Liability
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Company individually.
14. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
15. Governing Law
This Agreement shall be governed in accordance with the laws of the
Commonwealth of Massachusetts.
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
GW SIERRA TRUST FUNDS
By: /s/ Brian Cerini
----------------------------------
Title: President
GREAT WESTERN FINANCIAL
ADVISORS CORPORATION
By: /s/
----------------------------------
Title: President
Accepted:
SCUDDER, STEVENS & CLARK, INC.
By: /s/
----------------------------------
Title: Chairman
<PAGE> 1
Exhibit 5(b)-12.1
AMENDED AND RESTATED INVESTMENT SUB-ADVISORY AGREEMENT
This Agreement is made and entered into as of this 22nd day of November
1993, by and among Sierra Trust Funds (the "Company"), an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts,
Sierra Investment Advisors Corporation ("Sierra Advisors"), a corporation
organized under the laws of the state of California and Janus Capital
Corporation (the "Sub-Advisor"), a corporation organized under the laws of the
state of Colorado.
WITNESSETH:
Whereas, the Company is engaged in business as an open-end, management
investment company and is so registered under the Investment Company Act of
1940, as amended (the "Investment Company Act");
Whereas, the Company offers a number of investment portfolios, each
with its own investment objective and strategies, and of which one investment
portfolio is the Growth Fund (the "Fund");
Whereas, Sierra Advisors is engaged in the business of rendering
investment advisory and management services, is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"), and is the investment advisor of the Company;
Whereas, the Sub-Advisor is engaged in the business of rendering
investment advisory and management services and is registered as an investment
adviser under the Advisers Act; and
Whereas, the Company and Sierra Advisors desire to retain the
Sub-Advisor to furnish investment advisory and management services to the
Company and to the Fund and the Sub-Advisor is willing to furnish such
services;
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, it is hereby agreed by and among the parties hereto as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of the Company's Growth Fund
(the "Fund") by investing and reinvesting in investments of the kind and in
accordance with the limitations specified in its Master Trust Agreement, as
amended, and in its Prospectus and Statement of Additional Information relating
to the Fund as in effect and which may be amended from time to time, and in such
manner and to such extent as may from time to time be approved by the Board of
Trustees of the Company. Copies of the Fund's Prospectus and Statement of
Additional Information, as amended, have been or will be submitted to the
Sub-Advisor. The Company agrees to provide copies of all amendments or
supplements to the Fund's Prospectus and Statement of Additional Information and
the Company's Master Trust Agreement to the Sub-Advisor during the continuance
of this Agreement before or at the time such amendments or supplements become
effective.
The Company agrees to furnish the Sub-Advisor with minutes of meetings
of the Board of Trustees of the Fund to the extent they may affect the duties of
the Sub-Advisor, a certified copy of any financial statements or reports
prepared for the Fund, by certified or independent public accountants, and with
copies of any financial statements or reports made by the Fund to its
shareholders or to any governmental body or securities exchange, and any further
materials or information which the Sub-Advisor may reasonably request to enable
it to perform its functions under this Agreement. The Company desires to employ
and hereby appoints the Sub-Advisor to act as investment sub-adviser to the
Fund. The Sub-Advisor accepts the appointment and agrees to furnish the services
described herein for the compensation set forth below.
2. Services as Investment Sub-Advisor
Subject to the supervision of the Board of Trustees of the Company and
of Sierra Advisors, the Fund's investment adviser, the Sub-Advisor will (a)
maintain compliance procedures for the Fund that the Sub-Advisor believes are
adequate to ensure its compliance with the applicable provisions of the
Investment Company Act and the Advisers Act as the same may from time to time be
amended, (b) make investment decisions for the Fund in accordance with the
Fund's investment objective(s) and policies as stated in the Fund's Prospectus
and Statement of Additional Information as in effect and, after notice to the
Sub-Advisor, and which may be amended from time to time, (c) place purchase
-2-
<PAGE> 3
and sale orders on behalf of the Fund to effectuate the investment decisions
made, (d) maintain books and records with respect to the securities transactions
of the Fund in accordance with the Investment Company Act and the Advisers Act
and the rules adopted thereunder and will furnish Sierra Advisors quarterly,
annual and special reports as Sierra Advisors may reasonably request; and (e)
treat confidentially and as proprietary information of the Company, all records
and other information relative to the Company and prior, present or potential
shareholders; and will not knowingly use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Company, which
approval shall not be unreasonably withheld and such records may not be withheld
where the Sub-Advisor may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company. In providing those
services, the Sub-Advisor will supervise the Fund's investments and conduct a
continual program of investment, evaluation and, if appropriate, sale and
reinvestment of the Fund's assets.
Subject to the supervision of Sierra Advisors and in accordance with
the investment objective and policies as stated in the Fund's Prospectus and
Statement of Additional Information, the Sub-Advisor is authorized, in its
discretion and without prior consultation with Sierra Advisors to buy, sell,
lend, and otherwise trade in any stocks, bonds, and other securities and
investment instruments on behalf of the Fund, without regard to the length of
time the securities have been held and the resulting rate of portfolio turnover
or any tax considerations, and so long as consistent with the foregoing, the
majority or the whole of the Fund may be invested in such proportions of stocks,
bonds, other securities or investment instruments, or cash as the Sub-Advisor
shall determine. In addition, the Sub-Advisor will furnish the Fund or Sierra
Advisors with whatever statistical information the Fund or Sierra Advisors may
reasonably request with respect to the instruments that the Fund may hold or
contemplate purchasing.
3. Brokerage
Subject to (i) the over-riding objective of obtaining the best possible
execution of orders; and (ii) review and approval of the Board of Trustees of
the Company, which may be conducted as often as quarterly, the Sub-Advisor shall
place all orders for the purchase and sale of securities for the Fund with
brokers or dealers selected by the Sub-Advisor, which may include brokers or
dealers affiliated with the Sub-Advisor. All transactions with any affiliated
person of the Company, or where
-3-
<PAGE> 4
any such affiliated person acts as broker or agent in connection with any such
transaction, shall be accomplished in compliance with the Investment Company
Act, the Advisers Act, the Securities Exchange Act of 1934, as amended, the
rules adopted thereunder and the procedures adopted thereunder by the Company.
Purchase or sell orders for the Fund may be aggregated with contemporaneous
purchase or sell orders of other clients of the Sub-Advisor; provided that (i)
no advisory account will be favored by the Sub-Advisor over any other account;
(ii) each client of the Sub-Advisor who participates in such an aggregated order
will participate at the average share price, with all transaction costs shared
on a pro rata basis; (iii) only advisory clients' transactions will be
aggregated for such an aggregated order; and (iv) the accounts of clients whose
orders are aggregated will be segregated on the Sub-Advisor's books and records
so as to identify the particular client who has the beneficial interest therein.
The Sub-Advisor shall use its best efforts to obtain execution of Fund
transactions at prices which are advantageous to the Fund and at commission
rates that are reasonable in relation to the benefits received. However, the
Sub-Advisor may select brokers or dealers on the basis that they provide
brokerage, research, or other services or products to the Fund and/or other
accounts serviced by the Sub-Advisor. The Sub-Advisor may pay a broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission or dealer spread another broker or dealer would have
charged for effecting that transaction if the Sub-Advisor determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research products and/or services provided by such broker or
dealer. This determination, with respect to brokerage and research services or
products, may be viewed in terms of either that particular transaction or the
overall responsibilities which the Sub-Advisor and its affiliates have with
respect to the Fund and to accounts over which they exercise investment
discretion, and not all such services or products may be used by the Sub-Advisor
in managing the Fund; provided that with respect to such transaction and such
determination the affiliates of the Sub-Advisor shall have the same
responsibilities to the Fund as the Sub-Advisor has under this Agreement.
4. Information Provided to the Company
The Sub-Advisor will keep the Company and Sierra Advisors informed of
developments materially affecting the Fund of which the Sub-Advisor becomes
aware and will, on its own initiative, furnish the Company and Sierra Advisors
on at least a quarterly basis with whatever information the Sub-Advisor believes
is appropriate for this purpose.
-4-
<PAGE> 5
5. Standard of Care
The Sub-Advisor shall exercise its best judgment in rendering the
services described in paragraphs 2 and 3 above. Except as may otherwise be
provided by federal securities laws, the Sub-Advisor shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement (the conduct excepted in this
sentence shall be referred to as "Disqualifying Conduct").
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
Sierra Advisors will pay the Sub-Advisor on the first business day of each month
a fee for the previous month at the annual rate of .55% of the Fund's average
daily net assets including cash and cash equivalents up to $100 million and .50%
of the Fund's average daily net assets in excess of $100 million. The fee for
the first month shall be prorated based upon the number of days the account was
open in that month. Upon any termination of this Agreement before the end of a
month, the fee for such part of that month shall be prorated according to the
proportion that such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. For the purpose of
determining fees payable to the Sub-Advisor, the value of the Fund's net assets
shall be computed at the times and in the manner specified in the Fund's
Prospectus or Statement of Additional Information relating to the Fund as from
time to time in effect.
7. Expenses
The Sub-Advisor will bear all of its expenses in performing its
services under this Agreement, which expenses shall not include brokerage fees
or commissions in connection with the effectuation of securities transactions.
The Sub-Advisor shall bear no expenses of the Company, the Fund or Sierra
Advisors. The Company will bear certain other expenses to be incurred in its
operation, including but not limited to: organizational expenses, taxes,
interest, brokerage fees and commissions, if any; fees of trustees of the
Company who are not officers, directors or employees of the Sub-Advisor, Sierra
Advisors, the Fund's sub-administrator or any of their affiliates; Securities
and Exchange Commission fees and state Blue Sky qualification fees; all fees,
including out-of-pocket expenses of custodians, transfer and dividend disbursing
agents
-5-
<PAGE> 6
and the Company's sub-administrator and transaction charges of custodians;
insurance premiums; outside auditing and legal expenses; costs of maintenance of
the Company's existence; costs attributable to investor services, including
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the shareholders of the Fund and of the officers or
Board of Trustees of the Company; and any extraordinary expenses. In addition,
the Fund pays a distribution fee pursuant to the terms of a Distribution Plan
adopted under Rule 12b-1 of the Investment Company Act. Any reimbursement of
advisory fees required by any expense limitation provision shall be the sole
responsibility of Sierra Advisors.
8. Services to Other Companies or Accounts
The Company understands that the Sub-Advisor now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Company has no objection to
the Sub-Advisor so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Advisor have available
funds for investment, investments suitable and appropriate for each will be
allocated in a manner reasonably equitable to each entity. Similarly,
opportunities to sell securities will be allocated in such an equitable manner.
The Company recognizes that in some cases this procedure may limit the size of
the position that may be acquired or disposed of for the Fund. In addition, the
Company understands that the persons employed by the Sub-Advisor to assist in
the performance of the Sub-Advisor's duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict the right of the Sub-Advisor or any affiliate of the Sub-Advisor to
engage in and devote time and attention to other business or to render services
of whatever kind or nature. The Company recognizes and agrees that the
Sub-Advisor may provide advice to other clients which may differ from or be
identical to advice given with respect to the Fund.
9. Term of Agreement
This Agreement shall become effective as of the date first written
above, shall continue for a one-year term and shall continue thereafter so long
as such continuance is specifically approved at least annually by (i) the Board
of Trustees of the Company or (ii) a vote of a "majority" (as defined in the
Investment Company Act) of the Fund's outstanding voting
-6-
<PAGE> 7
securities, provided that in either event the continuance is also approved by a
majority of the Board of Trustees who are not "interested persons" (as defined
in the Investment Company Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable, without penalty, on 30 days' written notice by Sierra
Advisors, the Board of Trustees of the Company or by vote of holders of a
majority of the Fund's shares, or upon 60 days' written notice, by the
Sub-Advisor and, will terminate automatically upon any termination of the
advisory agreement between the Company and Sierra Advisors. In addition, this
Agreement will also terminate automatically in the event of its assignment (as
defined in the Investment Company Act). The Sub-Advisor agrees to notify the
Company of any circumstances that to its best knowledge and belief might result
in this Agreement being deemed to be assigned.
10. Representations of the Company and the Sub-Advisor
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of the Sub-Advisor has been duly authorized, and (iii) it has acted
and will continue to act in conformity with the Investment Company Act and other
applicable laws.
Sierra Advisors represents that (i) it is authorized to perform the
services herein, (ii) the appointment of the Sub-Advisor has been duly
authorized, and (iii) it will act in conformity with the Investment Company Act
and other applicable laws.
The Sub-Advisor represents that it is authorized to perform the
services described herein.
11. Indemnification
Sierra Advisors shall indemnify and hold harmless the Sub-Advisor from
and against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses), howsoever arising from
or in connection with this Agreement or the performance by the Sub-Advisor of
its duties hereunder; provided, however, that nothing contained herein shall
require that the Sub-Advisor be indemnified for Disqualifying Conduct.
-7-
<PAGE> 8
12. Amendment of this Agreement
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No amendment of this Agreement shall be effective with respect to the
Fund until approved by vote of a majority of the outstanding voting securities
of the Fund.
13. Limitation of Liability
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Company individually.
14. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
15. Governing Law
This Agreement shall be governed in accordance with the laws of the
Commonwealth of Massachusetts.
16. Miscellaneous
(a) Unless the Company gives the Sub-Advisor written instructions to
the contrary, the Sub-Advisor shall vote all proxies solicited by or with
respect to the issuers of securities in which assets of the Fund may be
invested. The Sub-Advisor shall use its best good faith judgment to vote such
proxies in a manner which best serves the interests of the Fund's shareholders.
(b) The Company shall provide the Sub-Advisor with a copy of the Fund's
agreement (the "Custody Agreement") with the Custodian (the "Custodian")
designated to hold the assets of the Fund and any modification thereto in
advance. The Fund's assets shall be maintained in the custody of the Custodian
identified in, and in accordance with the terms and conditions of, the Custody
Agreement. The Sub-Advisor shall have no liability for
-8-
<PAGE> 9
the acts or omissions of the Custodian. Any assets added to the
Fund shall be delivered directly to the Custodian.
(c) The Company, the Fund and Sierra Advisors agree and acknowledge
that the Sub-Advisor is the sole owner of the name and mark "Janus" and that all
use of any designation comprised in whole or part of Janus (a "Janus Mark")
under this Agreement shall inure to the benefit of the Sub-Advisor. The use by
the Company on its own behalf or on behalf of the Fund of any Janus Mark in any
advertisement or sales literature or other materials promoting the Fund shall be
with the consent of the Sub-Advisor. The Company and Sierra Advisors shall not,
without the consent of the Sub-Advisor, make representations regarding the
Sub-Advisor intended to be disseminated to the investing public in any
disclosure document, advertisement or sales literature or other materials
promoting the Fund. Such consent shall not be required for any documents or
other materials intended for broker-dealer use only, for use by the Company's
trustees and for internal use by the Company and Sierra Advisors. Consent by the
Sub-Advisor to such use of any Janus Mark and any such representation shall not
be unreasonably withheld and shall be deemed to be given if no written objection
is received by the Company, the Fund or Sierra Advisors within 3 business days
after the request is made by the Company, the Fund or Sierra Advisors for such
use of any Janus Mark or any such representation. Upon termination of this
Agreement for any reason, the Company and Sierra Advisors shall cease all use of
any Janus Mark(s) as soon as reasonably practicable.
(d) The Sub-Advisor agrees and acknowledges that the Company is the
sole owner of the name and mark "Sierra Trust Funds" and Sierra Advisors is the
sole owner of the name and mark "Sierra Investment Advisors" and that any and
all use of any designation comprised in whole or in part of "Sierra Trust Funds"
or "Sierra Investment Advisors" (a "Sierra Mark") under this Agreement shall
inure to the benefit of the Company or Sierra Advisors, respectively. The use by
the Sub-Advisor on its own behalf of any Sierra Mark in any advertisement or
sales literature or other materials promoting the Sub-Advisor shall be with the
consent of the Company or Sierra Advisors, respectively. The Sub-Advisor shall
not, without the consent of the Company or Sierra Advisors, as applicable, make
representations regarding the Company, the Fund or Sierra Advisors in any
disclosure document, advertisement or sales literature or other materials
promoting the Sub-Advisor. Consent by the Company and Sierra Advisors to such
use of any Sierra Mark and any such representations shall not be unreasonably
withheld and shall be deemed to be given if no written objection is received by
the Sub-Advisor within 5 business days after the request by the Sub-Advisor is
made for such use of any Sierra Mark or any such representations. Upon
termination of this Agreement for any
-9-
<PAGE> 10
reason, the Sub-Advisor shall cease any and all use of any Sierra
Mark as soon as reasonably practicable.
(e) The Sub-Advisor may perform its services through any employee,
officer or agent of the Sub-Advisor, and the Company and the Fund shall not be
entitled to the advice, recommendation, or judgment of any specific person.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
ATTEST: SIERRA TRUST FUNDS
/s/ Ann M. Dowell By: /s/ Keith B. Pipes
- ------------------------------------- ------------------------------
Name: Ann M. Dowell Name: Keith B. Pipes
Title: Administrative Assistant Title: Executive Vice President
ATTEST: SIERRA INVESTMENT ADVISORS
CORPORATION
/s/ Ann M. Dowell By: /s/ Michael D. Goth
- ------------------------------------- ------------------------------
Name: Ann M. Dowell Name: Michael D. Goth
Title: Administrative Assistant Title: Chief Operating Officer
ATTEST: JANUS CAPITAL CORPORATION
/s/ Darlene A. Trujillo By: /s/ Stephen L. Stieneker
- ------------------------------------- ------------------------------
Name: Darlene A. Trujillo Name: Stephen L. Stieneker
Title: Legal Assistant Title: Asst. Vice President
-10-
<PAGE> 1
Exhibit 5(b)-14
INVESTMENT SUB-ADVISORY AGREEMENT
Short Term High Quality Bond Fund
September 6, 1993
Scudder, Stevens & Clark, Inc.
175 Federal Street
Boston, Massachusetts 02110-2267
Dear Sirs:
Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, and Sierra
Investment Advisors Corporation ("Sierra Advisors"), a corporation organized
under the laws of the state of California, hereby agree with Scudder, Stevens &
Clark, Inc. (the "Sub-Advisor"), a corporation organized under the laws of the
state of Delaware, as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of the Company's Short Term
High Quality Bond Fund (the "Fund") by investing and reinvesting in investments
of the kind and in accordance with the limitations specified in its Master Trust
Agreement, as amended, and in its Prospectus and Statement of Additional
Information relating to the Fund as in effect and which may be amended from time
to time, and in such manner and to such extent as may from time to time be
approved by the Board of Trustees of the Company. Copies of the Fund's
Prospectus and Statement of Additional Information and the Company's Master
Trust Agreement, as amended, have been or will be submitted to the Sub-Advisor.
The Company agrees to provide copies of all amendments to the Fund's Prospectus
and Statement of Additional Information and the Company's Master Trust Agreement
to the Sub-Advisor on an on-going basis. The Company desires to employ and
hereby appoints the Sub-Advisor to act as investment sub-adviser to the Fund.
The Sub-Advisor accepts the appointment and agrees to furnish the services
described herein for the compensation set forth below.
2. Services as Investment Sub-Advisor
Subject to the supervision of the Board of Trustees of the Company and
of Sierra Advisors, the Fund's investment adviser, the Sub-Advisor will (a) act
in conformity with the Company's
<PAGE> 2
Master Trust Agreement, the Investment Company Act of 1940 the Investment
Advisors Act of 1940 and the Internal Revenue Code of 1986, as the same may from
time to time be amended, (b) make investment decisions for the Fund in
accordance with the Fund's investment objective(s) and policies as stated in the
Fund's Prospectus and Statement of Additional Information as in effect and,
after notice to the Sub-Advisor, and which may be amended from time to time, (c)
place purchase and sale orders on behalf of the Fund to effectuate the
investment decisions made, (d) maintain books and records with respect to the
securities transactions of the Fund and will furnish the Company's Board of
Trustees such periodic, regular and special reports as the Board may request;
and (e) treat confidentially and as proprietary information of the Company, all
records and other information relative to the Company and prior, present or
potential shareholders; and will not use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Company, which
approval shall not be unreasonably withheld and such records may not be withheld
where the Sub-Advisor may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company. In providing those
services, the Sub-Advisor will supervise the Fund's investments and conduct a
continual program of investment, evaluation and, if appropriate, sale and
reinvestment of the Fund's assets. In addition, the Sub-Advisor will furnish the
Fund or Sierra Advisors with whatever statistical information the Fund or Sierra
Advisors may reasonably request with respect to the instruments that the Fund
may hold or contemplate purchasing.
3. Brokerage
In executing transactions for the Fund and selecting brokers or
dealers, the Sub-Advisor will use its best efforts to seek the best overall
terms available and shall execute or direct the execution of all such
transactions in a manner permitted by law and in a manner that is in the best
interest of the Fund and its shareholders. In assessing the best overall terms
available for any Fund transaction, the Sub-Advisor will consider all factors it
deems relevant including, but not limited to, breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of any commission for
the specific transaction and on a continuing basis. Pursuant to its investment
determinations for the Fund, in placing orders with brokers and dealers, the
Sub-Advisor will attempt to obtain the best net price and the most favorable
execution of its orders. Consistent with this obligation, when the execution and
price offered by two or more brokers or dealers are comparable, the Sub-Advisor
may, in its discretion, purchase and sell portfolio securities to and from
brokers and dealers who provide the Company with research advice and other
services.
-2-
<PAGE> 3
4. Information Provided to the Company
The Sub-Advisor will keep the Company and Sierra Advisors informed of
developments materially affecting the Fund, and will on its own initiative,
furnish the Company and Sierra Advisors on at least a quarterly basis with
whatever information the Sub-Advisor believes is appropriate for this purpose.
5. Standard of Care
The Sub-Advisor shall exercise its best judgment in rendering the
services described in paragraphs 2 and 3 above. The Sub-Advisor shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates, except
(a) a loss resulting from a breach of fiduciary duty with respect to the receipt
of compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of the
Investment Company Act of 1940, as amended) or (b) a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement (each such breach, act or omission described in (a) or (b) shall be
referred to as "Disqualifying Conduct").
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
Sierra Advisors will pay the Sub-Advisor on the first business day of each month
a fee for the previous month at the annual rate of 0.15% of the Fund's average
daily net assets up to $200 million and 0.10% of the Fund's average daily net
assets exceeding $200 million. The Sub-Advisor shall have no right to obtain
compensation directly from the Fund or the Company for services provided
hereunder and agrees to look solely to Sierra Advisors for payment of fees due.
Upon any termination of this Agreement before the end of a month, the fee for
such part of that month shall be prorated according to the proportion that such
period bears to the full monthly period and shall be payable upon the date of
termination of this Agreement. For the purpose of determining fees payable to
the Sub-Advisor, the value of the Fund's net assets shall be computed at the
times and in the manner specified in the Fund's Prospectus or Statement of
Additional Information relating to the Fund as from time to time in effect.
7. Expenses
The Sub-Advisor will bear all expenses in connection with the
performance of its services under this Agreement, which expenses shall not
include brokerage fees or commissions in connection with the effectuation of
securities transactions. The Company will bear certain other expenses to be
incurred in its operation, including but not limited to: organizational
expenses,
-3-
<PAGE> 4
taxes, interest, brokerage fees and commissions, if any; fees of trustees of the
Company who are not officers, directors or employees of the Sub-Advisor, Sierra
Advisors, the Fund's sub-administrator or any of their affiliates; Securities
and Exchange Commission fees and state Blue Sky qualification fees; out-of-
pocket expenses of custodians, transfer and dividend disbursing agents and the
Company's sub-administrator and transaction charges of custodians; insurance
premiums; outside auditing and legal expenses; costs of maintenance of the
Company's existence; costs attributable to investor services, including without
limitation, telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders; costs of shareholders' reports
and meetings of the shareholders of the Fund and of the officers or Board of
Trustees of the Company; and any extraordinary expenses. In addition, the Fund
pays a distribution fee pursuant to the terms of a Distribution Plan adopted
under Rule 12b-1 of the Investment Company Act of 1940, as amended.
8. Services to Other Companies or Accounts
The Company understands that the Sub-Advisor now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Company has no objection to
the Sub-Advisor so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Advisor have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Company recognizes that in some cases this procedure may limit the
size of the position that may be acquired or disposed of for the Fund. In
addition, the Company understands that the persons employed by the Sub-Advisor
to assist in the performance of the Sub-Advisor's duties hereunder will not
devote their full time to such service and nothing contained herein shall be
deemed to limit or restrict the right of the Sub-Advisor or any affiliate of the
Sub-Advisor to engage in and devote time and attention to other business or to
render services of whatever kind or nature.
9. Term of Agreement
This Agreement shall become effective as of the date the Fund commences
its investment operations and shall continue for a one-year term and shall
continue thereafter so long as such continuance is specifically approved at
least annually by (i) the Board of Trustees of the Company or (ii) a vote of a
"majority" (as defined in the Investment Company Act of 1940, as amended) of the
Fund's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in said
-4-
<PAGE> 5
Act) of any party to this Agreement, by vote cast in person at a meeting called
for the purpose of voting on such approval. This Agreement is terminable,
without penalty, on 30 days' written notice, by Sierra Advisors, the Board of
Trustees of the Company or by vote of holders of a majority of the Fund's
shares, or upon 90 days' written notice, by the Sub-Advisor and, will terminate
automatically upon any termination of the advisory agreement between the Company
and Sierra Advisors. In addition, this Agreement will also terminate
automatically in the event of its assignment (as defined in said Act). The
Sub-Advisor agrees to notify the Company of any circumstances that might result
in this Agreement being deemed to be assigned.
10. Representations of the Company and the Sub-Advisor
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of the Sub-Advisor has been duly authorized, and (iii) it has acted
and will continue to act in conformity with the Investment Company Act of 1940,
as amended, and other applicable laws.
Sierra Advisors represents that (i) it is authorized to perform the
services herein, (ii) the appointment of the Sub-Advisor has been duly
authorized, and (iii) it will act in conformity with the Investment Company Act
of 1940, as amended, and other applicable laws.
The Sub-Advisor represents that it is authorized to perform the
services described herein.
11. Indemnification
Sierra Advisors shall indemnify and hold harmless the Sub-Advisor from
and against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses), howsoever arising from
or in connection with this Agreement or the performance by the Sub-Advisor of
its duties hereunder; provided, however, that nothing contained herein shall
require that the Sub-Advisor be indemnified for Disqualifying Conduct.
12. Amendment of this Agreement
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No amendment of this Agreement shall be effective with respect to any
Fund until approved by vote of a majority of the outstanding voting securities
of such Fund.
-5-
<PAGE> 6
13. Limitation of Liability
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Company individually.
14. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
15. Governing Law
This Agreement shall be governed in accordance with the laws of the
Commonwealth of Massachusetts.
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
SIERRA TRUST FUNDS
By /s/ Keith Pipes
----------------------------------
Name: Keith Pipes
Title: Executive Vice-President,
Treasurer & Secretary
SIERRA INVESTMENT ADVISORS
CORPORATION
By /s/ Michael D. Goth
----------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
Accepted:
SCUDDER, STEVENS & CLARK, INC.
By /s/ Lynn S. Birdsong
----------------------------------
Name: Lynn S. Birdsong
Title: Managing Director
-6-
<PAGE> 1
Exhibit 5(b)-16
INVESTMENT SUB-ADVISORY AGREEMENT
March 17, 1995
BlackRock Financial Management, Inc.
345 Park Avenue
New York, NY 10154
Dear Sirs:
Sierra Trust Funds (the "Company"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, and Sierra
Investment Advisors Corporation ("Sierra Advisors"), a corporation organized
under the laws of the state of California, hereby agree with BlackRock Financial
Management, Inc. (the "Sub-Advisor"), a corporation organized under the laws of
the state of Delaware as follows:
1. Investment Description; Appointment
The Company desires to employ the capital of the Company's Target
Maturity 2002 Fund (the "Fund") by investing and reinvesting in investments of
the kind and in accordance with the limitations specified in its Master Trust
Agreement, as amended, and in its Prospectus and Statement of Additional
Information relating to the Fund as in effect and which may be amended from time
to time, and in such manner and to such extent as may from time to time be
approved by the Board of Trustees of the Company. Copies of the Fund's
Prospectus and Statement of Additional Information and the Company's Master
Trust Agreement, as amended, have been or will be submitted to the Sub-Advisor.
The Company agrees to provide copies of all amendments to the Fund's Prospectus
and Statement of Additional Information and the Company's Master Trust Agreement
to the Sub-Advisor on an on-going basis. The Company desires to employ and
hereby appoints the Sub-Advisor to act as investment sub-adviser to the Fund.
The Sub-Advisor accepts the appointment and agrees to furnish the services
described herein for the compensation set forth below.
2. Services as Investment Sub-Advisor
Subject to the supervision of the Board of Trustees of the Company and
of Sierra Advisors, the Fund's investment adviser, the Sub-Advisor will (a) act
in conformity with the Company's Master Trust Agreement, the Investment Company
Act of 1940 the Investment Advisors Act of 1940 and the Internal Revenue Code of
1986, as the same may from time to time be amended, (b) make investment
decisions for the Fund in accordance with the Fund's
<PAGE> 2
investment objective(s) and policies as stated in the Fund's Prospectus and
Statement of Additional Information as in effect and, after notice to the
Sub-Advisor, and which may be amended from time to time, (c) place purchase and
sale orders on behalf of the Fund to effectuate the investment decisions made,
(d) maintain books and records with respect to the securities transactions of
the Fund and will furnish the Company's Board of Trustees such periodic, regular
and special reports as the Board may request; and (e) treat confidentially and
as proprietary information of the Company, all records and other information
relative to the Company and prior, present or potential shareholders; and will
not use such records and information for any purpose other than performance of
its responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Company, which approval shall not be unreasonably
withheld and such records may not be withheld where the Sub-Advisor may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Company. In providing those services, the Sub-Advisor will
supervise the Fund's investments and conduct a continual program of investment,
evaluation and, if appropriate, sale and reinvestment of the Fund's assets. In
addition, the Sub-Advisor will furnish the Fund or Sierra Advisors with whatever
statistical information the Fund or Sierra Advisors may reasonably request with
respect to the instruments that the Fund may hold or contemplate purchasing.
3. Brokerage
In executing transactions for the Fund and selecting brokers or
dealers, the Sub-Advisor will use its best efforts to seek the best overall
terms available and shall execute or direct the execution of all such
transactions in a manner permitted by law and in a manner that is in the best
interest of the Fund and its shareholders. In assessing the best overall terms
available for any Fund transaction, the Sub-Advisor will consider all factors it
deems relevant including, but not limited to, breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer and the reasonableness of any commission for
the specific transaction and on a continuing basis. Pursuant to its investment
determinations for the Fund, in placing orders with brokers and dealers, the
Sub-Advisor will attempt to obtain the best net price and the most favorable
execution of its orders. Consistent with this obligation, when the execution and
price offered by two or more brokers or dealers are comparable, the Sub-Advisor
may, in its discretion, purchase and sell portfolio securities to and from
brokers and dealers who provide the Company with research advice and other
services.
-2-
<PAGE> 3
4. Information Provided to the Company
The Sub-Advisor will keep the Company and Sierra Advisors informed of
developments materially affecting the Fund, and will on its own initiative,
furnish the Company and Sierra Advisors on at least a quarterly basis with
whatever information the Sub-Advisor believes is appropriate for this purpose.
5. Standard of Care
The Sub-Advisor shall exercise its best judgment in rendering the
services described in paragraphs 2 and 3 above. The Sub-Advisor shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates, except
(a) a loss resulting from a breach of fiduciary duty with respect to the receipt
of compensation for services (in which case any award of damages shall be
limited to the period and the amount set forth in Section 36(b)(3) of the
Investment Company Act of 1940, as amended) or (b) a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement (each such breach, act or omission described in (a) or (b) shall be
referred to as "Disqualifying Conduct").
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
Sierra Advisors will pay the Sub-Advisor on the first business day of each month
a fee for the previous month at the annual rate of 0.05% of the Fund's average
daily net assets; provided that Sierra Advisors pay the Sub-Advisor a minimum of
$25,000 per year. The Sub-Advisor shall have no right to obtain compensation
directly from the Fund or the Company for services provided hereunder and agrees
to look solely to Sierra Advisors for payment of fees due. Upon any termination
of this Agreement before the end of a month, the fee for such part of that month
shall be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Sub-Advisor, the
value of the Fund's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus or Statement of Additional Information
relating to the Fund as from time to time in effect.
-3-
<PAGE> 4
7. Expenses
The Sub-Advisor will bear all expenses in connection with the
performance of its services under this Agreement, which expenses shall not
include brokerage fees or commissions in connection with the effectuation of
securities transactions. The Company will bear certain other expenses to be
incurred in its operation, including but not limited to: organizational
expenses, taxes, interest, brokerage fees and commissions, if any; fees of
trustees of the Company who are not officers, directors or employees of the
Sub-Advisor, Sierra Advisors, the Fund's sub-administrator or any of their
affiliates; Securities and Exchange Commission fees and state Blue Sky
qualification fees; out-of-pocket expenses of custodians, transfer and dividend
disbursing agents and the Company's sub-administrator and transaction charges of
custodians; insurance premiums; outside auditing and legal expenses; costs of
maintenance of the Company's existence; costs attributable to investor services,
including without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Fund and of the
officers or Board of Trustees of the Company; and any extraordinary expenses. In
addition, the Fund pays a distribution fee pursuant to the terms of a
Distribution Plan adopted under Rule 12b-1 of the Investment Company Act of
1940, as amended.
8. Services to Other Companies or Accounts
The Company understands that the Sub-Advisor now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Company has no objection to
the Sub-Advisor so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Advisor have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Company recognizes that in some cases this procedure may limit the
size of the position that may be acquired or disposed of for the Fund. In
addition, the Company understands that the persons employed by the Sub-Advisor
to assist in the performance of the Sub-Advisor's duties hereunder will not
devote their full time to such service and nothing contained herein shall be
deemed to limit or restrict the right of the Sub-Advisor or any affiliate of the
Sub-Advisor to engage
-4-
<PAGE> 5
in and devote time and attention to other business or to render services of
whatever kind or nature.
9. Term of Agreement
This Agreement shall become effective as of the date first written
above and shall continue for a one year term and shall continue thereafter so
long as such continuance is specifically approved at least annually by (i) the
Board of Trustees of the Company or (ii) a vote of a "majority" (as defined in
the Investment Company Act of 1940, as amended) of the Fund's outstanding voting
securities, provided that in either event the continuance is also approved by a
majority of the Board of Trustees who are not "interested persons" (as defined
in said Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval. This Agreement is terminable,
without penalty, on 30 days' written notice, by Sierra Advisors, the Board of
Trustees of the Company or by vote of holders of a majority of the Fund's
shares, or upon 90 days' written notice, by the Sub-Advisor and, will terminate
automatically upon any termination of the advisory agreement between the Company
and Sierra Advisors. In addition, this Agreement will also terminate
automatically in the event of its assignment (as defined in said Act). The
Sub-Advisor agrees to notify the Company of any circumstances that might result
in this Agreement being deemed to be assigned.
10. Representations of the Company and the Sub-Advisor
The Company represents that (i) a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
office of the Secretary of the Commonwealth of Massachusetts, (ii) the
appointment of the Sub-Advisor has been duly authorized, and (iii) it has acted
and will continue to act in conformity with the Investment Company Act of 1940,
as amended, and other applicable laws.
Sierra Advisors represents that (i) it is authorized to perform the
services herein, (ii) the appointment of the Sub-Advisor has been duly
authorized, and (iii) it will act in conformity with the Investment Company Act
of 1940, as amended, and other applicable laws.
The Sub-Advisor represents that it is authorized to perform the
services described herein.
-5-
<PAGE> 6
11. Indemnification
Sierra Advisors shall indemnify and hold harmless the Sub-Advisor from
and against any and all claims, losses, liabilities or damages (including
reasonable attorneys' fees and other related expenses), howsoever arising from
or in connection with this Agreement or the performance by the Sub-Advisor of
its duties hereunder; provided, however, that nothing contained herein shall
require that the Sub-Advisor be indemnified for Disqualifying Conduct.
12. Amendment of this Agreement
No provision of this Agreement may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No amendment of this Agreement shall be effective with respect to any
Fund until approved by vote of a majority of the outstanding voting securities
of such Fund.
13. Limitation of Liability
This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Company individually.
14. Entire Agreement
This Agreement constitutes the entire agreement between the
parties hereto.
15. Governing Law
This Agreement shall be governed in accordance with the laws of
the Commonwealth of Massachusetts.
-6-
<PAGE> 7
If the foregoing accurately sets forth our agreement, kindly indicate
your acceptance hereof by signing and returning the enclosed copy hereof.
Very truly yours,
SIERRA TRUST FUNDS
By /s/ Keith B. Pipes
----------------------------------
Name: Keith B. Pipes
Title: Executive Vice President
SIERRA INVESTMENT ADVISORS
CORPORATION
By /s/ Michael D. Goth
----------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
Accepted:
BLACKROCK FINANCIAL MANAGEMENT, INC.
By /s/ Laurence Fink
----------------------------------
Name: Laurence Fink
Title: Chairman & CEO
-7-
<PAGE> 1
Exhibit 8(a)-1
CUSTODY AGREEMENT
AGREEMENT dated as of July 7, 1989, between GW SIERRA TRUST FUNDS, (the
"Trust"), a Massachusetts business trust, having its principal office and place
of business at 888 South Figueroa Street, Suite 1100, Los Angeles, California
90017 and BOSTON SAFE DEPOSIT AND TRUST COMPANY (the "Custodian"), a
Massachusetts trust company with its principal place of business at One Boston
Place, Boston, Massachusetts 02108.
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set
forth, the Trust and the Custodian agree as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this
Agreement, the following words and phrases, unless the context
otherwise requires, shall have the following meanings:
(a) "Authorized Person" shall be deemed to include the President, and
any Vice President, the Secretary, the Treasurer, or any other person,
whether or not any such person is an officer or employee of the Trust,
duly authorized by the Board of Trustees of the Trust to give Oral
Instructions and Written Instructions on behalf of the Trust and listed
in the certification annexed hereto as Appendix A or such other
certification as may be received by the Custodian from time to time;
(b) "Book-Entry System" shall mean the Federal Reserve/ Treasury
book-entry system for United States and federal agency Securities, its
successor or successors and its nominee or nominees;
(c) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this Agreement to be
given to the Custodian, which is actually received by the Custodian and
signed on behalf of the Trust by such Authorized Person as the Trust
shall designate;
(d) "Declaration of Trust" shall mean the Declaration of Trust of the
Trust dated February 22, 1989 as the same may be amended from time to
time;
-1-
<PAGE> 2
(e) "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission
under Section 17(A) of the Securities Exchange Act of 1934, as amended,
its successor or successors and its nominee or nominees, in which the
Custodian is hereby specifically authorized to make deposits. The term
"Depository" shall further mean and include any other person to be
named in a Certificate authorized to act as a depository under the 1940
Act, its successor or successors and its nominee or nominees;
(f) "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest and
principal by the Government of the United States or agencies or
instrumentalities thereof, commercial paper, bank certificates of
deposit, bankers' acceptances and short-term corporate obligations,
where the purchase or sale of such securities normally requires
settlement in federal funds on the same day as such purchase or sale,
and repurchase and reverse repurchase agreements with respect to any of
the foregoing types of securities;
(g) "Oral Instructions" shall mean verbal instructions
actually received by the Custodian from a person reasonably
believed by the Custodian to be an Authorized Person;
(h) "Portfolio" refers to GW Global Income Money Market Fund, GW U.S.
Government Money Market Fund, GW California Municipal Money Market
Fund, GW U.S. Government Securities Fund, GW California Municipal
Income Fund and GW Growth and Income Fund or any such other separate
and distinct portfolio as may from time to time be created and
designated by the Trust in accordance with the provisions of the
Declaration of Trust;
(i) "Prospectus" shall mean the Trust's current prospectus and
statement of additional information relating to the registration of the
Trust's Shares under the Securities Act of 1933, as amended;
(j) "Shares" refers to the shares of beneficial interest of
each Portfolio of the Trust;
(k) "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and other
securities and investments from time to time owned by each Portfolio;
(l) "Transfer Agent" shall mean the person which performs the transfer
agent, dividend disbursing agent and shareholder servicing agent
functions for the Trust;
-2-
<PAGE> 3
(m) "Written Instructions" shall mean a written communication actually
received by the Custodian from a person reasonably believed by the
Custodian to be an Authorized Person by any system whereby the receiver
of such communication is able to verify through codes or otherwise with
a reasonable degree of certainty the authenticity of the sender of such
communication; and
(n) The "1940 Act" refers to the Investment Company Act of 1940, and
the Rules and Regulations thereunder, all as amended from time to time.
2. Appointment of Custodian.
(a) The Trust hereby constitutes and appoints the Custodian as
custodian of all the Securities and moneys at the time owned by or in
the possession of the Trust and specifically allocated to a Portfolio
during the period of this Agreement.
(b) The Custodian hereby accepts appointment as such custodian for each
Portfolio and agrees to perform the duties thereof as hereinafter set
forth.
3. Compensation.
(a) The Trust will compensate the Custodian for its services rendered
under this Agreement in accordance with the fees set forth in the Fee
Letter Agreement dated July 7, 1989, between the Trust, the Custodian,
the Shareholder Services Group, Inc. as Transfer Agent, The Boston
Company Advisors, Inc. as Sub-Administrator and Great Western Fund
Administration Corporation as Administrator (the "Fee Letter
Agreement"). Out-of-pocket disbursements shall include, but shall not
be limited to, the items specified in the Out-of-Pocket Expenses
charges delineated in the Fee Letter Agreement and incorporated herein,
which schedule may be modified by the Custodian upon not less than
thirty days prior written notice to the Trust.
(b) The parties hereto will agree upon the compensation for acting as
custodian for any Portfolio hereafter established and designated, and
at the time that the Custodian commences serving as such for said
Portfolio, such agreement shall be reflected in a Fee Letter Agreement
for that Portfolio, dated and signed by an officer of each party
hereto.
-3-
<PAGE> 4
(c) Any compensation agreed to hereunder may be adjusted from time to
time by attaching to the Fee Letter Agreement a revised Fee Schedule,
dated and signed by an Authorized Person of the Trust and a duly
authorized officer of the Custodian.
(d) The Custodian will bill the Trust for each Portfolio as soon as
practicable after the end of each calendar month, and said billings
will be detailed in accordance with the Fee Schedule for each
Portfolio. The Trust will promptly pay to the Custodian the amount of
such billing.
4. Custody of Cash and Securities.
(a) Receipt and Holding of Assets. The Trust will deliver or cause to
be delivered to the Custodian all Securities and moneys owned by it at
any time during the period of this Agreement and shall specify the
Portfolio to which the Securities and moneys are to be specifically
allocated. The Custodian will not be responsible for such Securities
and moneys until actually received by it. The Trust shall instruct the
Custodian from time to time in its sole discretion, by means of Written
Instructions, or, in connection with the purchase or sale of Money
Market Securities, by means of Oral Instructions or Written
Instructions, as to the manner in which and in what amounts Securities
and moneys of a Portfolio are to be deposited on behalf of such
Portfolio in the Book-Entry System or the Depository and specifically
allocated on the books of the Custodian to such Portfolio; provided,
however, that prior to the deposit of Securities of a Portfolio in the
Book-Entry System or the Depository, including a deposit in connection
with the settlement of a purchase or sale, the Custodian shall have
received a Certificate specifically approving such deposits by the
Custodian in the Book-Entry System or the Depository.
(b) Accounts and Disbursements. The Custodian shall establish and
maintain a separate account for each Portfolio and shall credit to the
separate account of each Portfolio all moneys received by it for the
account of such Portfolio and shall disburse the same only:
1. In payment for Securities purchased for such Portfolio, as
provided in Section 5 hereof;
2. In payment of dividends or distributions with respect to the
Shares of such Portfolio, as provided in Section 7 hereof;
3. In payment of original issue or other taxes with respect to the
Shares of such Portfolio, as provided in Section 8 hereof;
-4-
<PAGE> 5
4. In payment for Shares which have been redeemed by such
Portfolio, as provided in Section 8 hereof;
5. Pursuant to Written Instructions, or with respect to Money
Market Securities, Oral Instructions or Written Instructions,
setting forth the name of such Portfolio, the name and address of
the person to whom the payment is to be made, the amount to be paid
and the purpose for which payment is to be made; or
6. In payment of fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Portfolio, as
provided in Section 11(h) hereof.
(c) Confirmation and Statements. Promptly after the close of business
on each day, the Custodian shall furnish the Trust with confirmations
and a summary of all transfers to or from the account of each Portfolio
during said day. Where securities purchased by a Portfolio are in a
fungible bulk of securities registered in the name of the Custodian (or
its nominee) or shown on the Custodian's account on the books of the
Depository or the Book-Entry System, the Custodian shall by book entry
or otherwise identify the quantity of those securities belonging to
such Portfolio. At least monthly, the Custodian shall furnish the Trust
with a detailed statement of the Securities and moneys held for each
Portfolio under this Agreement.
(d) Registration of Securities and Physical Separation. All Securities
held for a Portfolio which are issued or issuable only in bearer form,
except such Securities as are held in the Book-Entry System, shall be
held by the Custodian in that form; all other Securities held for a
Portfolio may be registered in the name of that Portfolio, in the name
of any duly appointed registered nominee of the Custodian as the
Custodian may from time to time determine, or in the name of the
Book-Entry System or the Depository or their successor or successors,
or their nominee or nominees. The Trust reserves the right to instruct
the Custodian as to the method of registration and safekeeping of the
Securities of each Portfolio. The Trust agrees to furnish to the
Custodian appropriate instruments to enable the Custodian to hold or
deliver in proper form for transfer, or to register in the name of its
registered nominee or in the name of the Book-Entry System or the
Depository, any Securities which it may hold for the account of a
Portfolio and which may from time to time be registered in the name of
a Portfolio. The Custodian shall hold all such Securities specifically
allocated to a Portfolio which are not held in the Book-Entry System
or the Depository in a separate account for such Portfolio in the name
of such Portfolio physically segregated at all times from those of any
other person or persons.
-5-
<PAGE> 6
(e) Collection of Income and Other Matters Affecting Securities. Unless
otherwise instructed to the contrary by a Certificate, the Custodian by
itself, or through the use of the Book-Entry System or the Depository
with respect to Securities therein deposited, shall with respect to all
Securities held for a Portfolio in accordance with this Agreement:
1. Collect all income due or payable;
2. Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed or retired, or
otherwise become payable. Notwithstanding the foregoing, the
Custodian shall have no responsibility to the Trust or the
Portfolio for monitoring or ascertaining any call, redemption or
retirement dates with respect to put bonds which are owned by the
Trust or the Portfolio and held by the Custodian or its nominees.
Nor shall the Custodian have any responsibility or liability to the
Fund or the Portfolio for any loss by the Fund or the Portfolio for
any missed payments or other defaults resulting therefrom; unless
the Custodian received timely notification from the Trust
specifying the time, place and manner for the presentment of any
such put bond owned by the Trust or the Portfolio and held by the
Custodian or its nominee. The Custodian shall not be responsible
and assumes no liability to the Trust or the Portfolio for the
accuracy or completeness of any notification the Custodian may
furnish to the Trust with respect to put bonds;
3. Surrender Securities in temporary form for definitive
Securities;
4. Execute any necessary declarations or certificates of ownership
under the Federal income tax laws or the laws or regulations of any
other taxing authority now or hereafter in effect; and
5. Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the
account of each Portfolio all rights and similar Securities issued
with respect to any Securities held by the Custodian hereunder for
each Portfolio.
(f) Delivery of Securities and Evidence of Authority. Upon receipt of
Written Instructions and not otherwise, except for subparagraphs 5, 6,
7, and 8 which may be effected by Oral Instructions and confirmed by
Written Instructions or Written Instructions, the Custodian, directly
or through the use of the Book-Entry System or the Depository, shall:
1. Execute and deliver or cause to be executed and delivered to
such persons as may be designated in such Written Instruction
proxies, consents, authorizations, and any other instruments
whereby the authority of the Trust as owner of any Securities may
be exercised;
-6-
<PAGE> 7
2. Deliver or cause to be delivered any Securities held for a
Portfolio in exchange for other Securities or cash issued or paid
in connection with the liquidation, reorganization, refinancing,
merger, consolidation or recapitalization of any corporation, or
the exercise of any conversion privilege;
3. Deliver or cause to be delivered any Securities held for a
Portfolio to any protective committee, reorganization committee or
other person in connection with the reorganization, refinancing,
merger, consolidation or recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this Agreement
in the separate account for each Portfolio such certificates of
deposit, interim receipts or other instruments or documents as may
be issued to it to evidence such delivery;
4. Make or cause to be made such transfers or exchanges of the
assets specifically allocated to the separate account of a
Portfolio and take such other steps as shall be stated in said
Written Instruction to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Trust;
5. Deliver Securities owned by any Portfolio upon sale of such
Securities for the account of such Portfolio pursuant to Section 5;
6. Deliver Securities owned by any Portfolio upon the receipt of
payment in connection with any repurchase agreement related to such
Securities entered into by such Portfolio;
7. Deliver Securities owned by any Portfolio to the issuer thereof
or its agent when such securities are called, redeemed, retired or
otherwise become payable; provided, however, that in any such case
the cash or other consideration is to be delivered to the
Custodian. Notwithstanding the foregoing, the Custodian shall have
no responsibility to the Trust or the Portfolio for monitoring or
ascertaining any call, redemption or retirement dates with respect
to the put bonds which are owned by the Trust or the Portfolio and
held by the Custodian or its nominee. Nor shall the Custodian have
any responsibility or liability to the Trust or the Portfolio for
any loss by the Trust or the Portfolio for any missed payment or
other default resulting therefrom; unless the Custodian received
timely notification from the Trust specifying the time, place and
manner for the presentment of any such put bond owned by the Trust
or the Portfolio and held by the Custodian or its nominee. The
Custodian shall not be responsible and assumes no liability to the
Trust or the Portfolio for the accuracy or completeness of any
notification the Custodian may furnish to the Trust with respect to
put bonds;
-7-
<PAGE> 8
8. Deliver Securities owned by any Portfolio for delivery in
connection with any loans of securities made by such Portfolio but
only against receipt of adequate collateral as agreed upon from
time to time by the Custodian and the Trust which may be in the
form of cash or obligations issued by the United States government,
its agencies or instrumentalities;
9. Deliver Securities owned by any Portfolio for delivery as
security in connection with any borrowings by such Portfolio
requiring a pledge of Portfolio assets, but only against receipt of
amounts borrowed;
10. Deliver Securities owned by any Portfolio upon receipt of
instructions from such Portfolio for delivery to the Transfer Agent
or to the holders of Shares in connection with distributions in
kind, as may be described from time to time in the Trust's
Prospectus, in satisfaction of requests by holders of Shares for
repurchase or redemption; and
11. Deliver Securities owned by any Portfolio for any other proper
business purpose, but only upon receipt of, in addition to Written
Instructions, a certified copy of a resolution of the Board of
Trustees signed by an Authorized Person and certified by the
Secretary of the Trust, specifying the Securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper business purpose, and naming
the person or persons to whom delivery of such Securities shall be
made.
(g) Endorsement and Collection of Checks, Etc. The Custodian is hereby
authorized to endorse and collect all checks, drafts or other orders
for the payment of money received by the Custodian for the account of a
Portfolio.
5. Purchase and Sale of Investments of the Portfolios.
(a) Promptly after each purchase of Securities for a Portfolio, the Trust shall
deliver to the Custodian (i) with respect to each purchase of Securities which
are not Money Market Securities, Written Instruction, and (ii) with respect to
each purchase of Money Market Securities, either a Written or Oral Instruction,
in either case specifying with respect to each purchase: (1) the name of the
Portfolio to which such Securities are to be specifically allocated; (2) the
name of the issuer and the title of the Securities; (3) the number of shares or
the principal amount purchased and accrued interest, if any; (4) the date of
purchase and settlement; (5) the purchase price per unit; (6) the total amount
payable upon such purchase; (7) the name of the person from whom or the broker
-8-
<PAGE> 9
through whom the purchase was made, if any; (8) whether or not such purchase is
to be settled through the Book-Entry System or the Depository; and (9) whether
the Securities purchased are to be deposited in the Book-Entry System or the
Depository. The Custodian shall receive all Securities purchased by or for a
Portfolio and upon receipt of such Securities shall pay out of the moneys held
for the account of such Portfolio the total amount payable upon such purchase,
provided that the same conforms to the total amount payable as set forth in such
Written or Oral Instruction.
(b) Promptly after each sale of Securities of a Portfolio, the Trust shall
deliver to the Custodian (i) with respect to each sale of Securities which are
not Money Market Securities, Written Instruction, and (ii) with respect to each
sale of Money Market Securities, either Written or Oral Instruction, in either
case specifying with respect to such sale: (1) the name of the Portfolio to
which the Securities sold were specifically allocated; (2) the name of the
issuer and the title of the Securities; (3) the number of shares or principal
amount sold, and accrued interest, if any; (4) the date of sale; (5) the sale
price per unit; (6) the total amount payable to the Portfolio upon such sale;
(7) the name of the broker through whom or the person to whom the sale was made;
and (8) whether or not such sale is to be settled through the Book-Entry System
or the Depository. The Custodian shall deliver or cause to be delivered the
Securities to the broker or other person designated by the Trust upon receipt of
the total amount payable to such Portfolio upon such sale, provided that the
same conforms to the total amount payable to such Portfolio as set forth in such
Written or Oral Instruction. Subject to the foregoing, the Custodian may accept
payment in such form as shall be satisfactory to it, and may deliver Securities
and arrange for payment in accordance with the customs prevailing among dealers
in Securities.
6. Lending of Securities.
If any Portfolio is permitted by the terms of the Declaration of Trust
and as disclosed in its Prospectus to lend Securities specifically allocated to
that Portfolio, within 24 hours after each loan of Securities, the Trust shall
deliver to the Custodian Written Instruction specifying with respect to each
such loan: (1) the Portfolio to which the loaned securities are specifically
allocated; (2) the name of the issuer and the title of the Securities; (3) the
number of shares or the principal amount loaned; (4) the date of loan and
delivery; (5) the total amount to be delivered to the Custodian, and
specifically allocated to such Portfolio against the loan of the Securities,
including the amount of cash collateral and the premium, if any, separately
identified; (6) the name of the broker, dealer or financial institution to which
the loan was made; and (7) whether the Securities loaned are to be delivered
through the Book-Entry System or the Depository.
-9-
<PAGE> 10
Promptly after each termination of a loan of securities specifically
allocated to a Portfolio, the Trust shall deliver to the Custodian Written
Instruction specifying with respect to each such loan termination and return of
Securities: (1) the name of the Portfolio to which such loaned Securities are
specifically allocated; (2) the name of the issuer and the title of the
Securities to be returned; (3) the number of shares or the principal amount to
be returned; (4) the date of termination; (5) the total amount to be delivered
by the Custodian (including the cash collateral for such securities minus any
offsetting credits as described in said Written Instructions); (6) the name of
the broker, dealer or financial institution from which the Securities will be
returned; and (7) whether such return is to be effected through the Book-Entry
System or the Depository. The Custodian shall receive all Securities returned
from the broker, dealer or financial institution to which such Securities were
loaned and upon receipt thereof shall pay, out of the moneys specifically
allocated to such Portfolio, the total amount payable upon such return of
Securities as set forth in such Written Instruction. Securities returned to the
Custodian shall be held as they were prior to such loan.
7. Payment of Dividends or Distributions.
(a) The Trust shall furnish to the Custodian the resolution of the Board of
Trustees of the Trust certified by the Secretary (i) authorizing the declaration
of dividends with respect to a Portfolio on a specified periodic basis and
authorizing the Custodian to rely on Oral or Written Instructions specifying the
date of the declaration of such dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per share to the shareholders of record as of the
record date and the total amount payable to the Transfer Agent on the payment
date, or (ii) setting forth the date of declaration of any dividend or
distribution by a Portfolio, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per share to the shareholders of record as of the record date and the total
amount payable to the Transfer Agent on the payment date.
(b) Upon the payment date specified in such resolution, Oral Instructions, or
Written Instructions, as the case may be, the Custodian shall pay out the moneys
specifically allocated to and held for the account of the appropriate Portfolio
the total amount payable to the Transfer Agent of the Trust.
8. Sale and Redemption of Shares of the Portfolios.
(a) Whenever the Trust shall sell any Shares of a Portfolio, the Trust shall
deliver or cause to be delivered to the Custodian Written Instruction duly
specifying:
-10-
<PAGE> 11
1. The name of the Portfolio whose Shares were sold;
2. The number of Shares sold, trade date, and price; and
3. The amount of money to be received by the Custodian for the sale of such
Shares and specifically allocated to such Portfolio.
(b) Upon receipt of such money from the Transfer Agent, the Custodian shall
credit such money to the separate account of the Portfolio specified in
subparagraph (1) of paragraph (a) of this Section 8.
(c) Upon issuance of any Shares of a Portfolio in accordance with the foregoing
provisions of this Section 8, the Custodian shall pay, out of the moneys
specifically allocated and held for the account of such Portfolio, all original
issue or other taxes required to be paid in connection with such issuance upon
the receipt of a Certificate specifying the amount to be paid.
(d) Except as provided hereafter, whenever any Shares of a Portfolio are
redeemed, the Trust shall cause the Transfer Agent to promptly furnish to the
Custodian Written Instruction, specifying:
1. The name of the Portfolio whose Shares were redeemed;
2. The number of Shares redeemed; and
3. The amount to be paid for the Shares redeemed.
(e) Upon receipt from the Transfer Agent of advice setting forth the number of
Shares of a Portfolio received by the Transfer Agent for redemption and that
such Shares are valid and in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the moneys specifically allocated to and
held for the account of the Portfolio specified in subparagraph (1) of paragraph
(d) of this Section 8 of the total amount specified in the Written Instruction
issued pursuant to paragraph (d) of this Section 8.
(f) Notwithstanding the above provisions regarding the redemption of Shares,
whenever such Shares are redeemed pursuant to any check redemption privilege
which may from time to time be offered by the Trust, the Custodian, unless
otherwise instructed by a Written Instruction shall, upon receipt of advice from
the Trust or its agent stating that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the moneys
specifically allocated to the Trust in such advice for such purpose.
-11-
<PAGE> 12
9. Indebtedness.
(a) The Trust will cause to be delivered to the Custodian by any bank (excluding
the Custodian) from which the Trust borrows money for temporary administrative
or emergency purposes using Securities as collateral for such borrowings, a
notice or undertaking in the form currently employed by any such bank setting
forth the amount which such bank will loan to the Trust against delivery of a
stated amount of collateral. The Trust shall promptly deliver to the Custodian
Written Instruction stating with respect to each such borrowing: (1) the name of
the Portfolio for which the borrowing is to be made; (2) the name of the bank;
(3) the amount and terms of the borrowing, which may be set forth by
incorporating by reference an attached promissory note, duly endorsed by the
Trust, or other loan agreement; (4) the time and date, if known, on which the
loan is to be entered into (the "borrowing date"); (5) the date on which the
loan becomes due and payable; (6) the total amount payable to the Trust for the
separate account of the Portfolio on the borrowing date; (7) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities; (8) whether the Custodian is to deliver such collateral
through the Book-Entry System or the Depository; and (9) a statement that such
loan is in conformance with the 1940 Act and the Trust's Prospectus.
(b) Upon receipt of the Written Instruction referred to in subparagraph (a)
above, the Custodian shall deliver on the borrowing date the specified
collateral and the executed promissory note, if any, against delivery by the
lending bank of the total amount of the loan payable, provided that the same
conforms to the total amount payable as set forth in the Written or Oral
Instructions. The Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver as additional collateral in the manner
directed by the Trust from time to time such Securities specifically allocated
to such Portfolio as may be specified in Written or Oral Instructions to
collateralize further any transaction described in this Section 9. The Trust
shall cause all Securities released from collateral status to be returned
directly to the Custodian, and the Custodian shall receive from time to time
such return of collateral as may be tendered to it. In the event that the Trust
fails to specify in Written Instruction all of the information required by this
Section 9, the Custodian shall not be under any obligation to deliver any
Securities. Collateral returned to the Custodian shall be held hereunder as it
was prior to being used as collateral.
-12-
<PAGE> 13
10. Persons Having Access to Assets of the Portfolios.
(a) No Trustee, officer, employee or agent of the Trust, and no officer,
director, employee or agent of the investment adviser, shall have physical
access to the assets of the Trust held by the Custodian or be authorized or
permitted to withdraw any investments of the Trust, nor shall the Custodian
deliver any assets of the Trust to any such person. No officer, director,
employee or agent of the Custodian who holds any similar position with the Trust
or the investment adviser shall have access to the assets of the Trust.
(b) The individual employees of the Custodian duly authorized by the Board of
Directors of the Custodian to have access to the assets of the Trust are listed
in the certification annexed hereto as Appendix C. The Custodian shall advise
the Trust of any change in the individuals authorized to have access to the
assets of the Trust by written notice to the Trust accompanied by a certified
copy of the authorizing resolution of the Custodian's Board of Directors
approving such change.
(c) Nothing in this Section 10 shall prohibit any officer, employee or agent of
the Trust, or any officer, director, employee or agent of the investment
adviser, from giving Oral Instructions or Written Instructions to the Custodian
or executing a Certificate so long as it does not result in delivery of or
access to assets of the Trust prohibited by paragraph (a) of this Section 10.
11. Concerning the Custodian.
(a) Standard of Conduct. Except as otherwise provided herein, neither the
Custodian nor its nominee shall be liable for any loss or damage, including
counsel fees, resulting from its action or omission to act or otherwise, except
for any such loss or damage arising out of its own negligence or willful
misconduct. The Custodian may, with respect to questions of law, apply for and
obtain the advice and opinion of counsel to the Trust or of its own counsel, at
the expense of the Trust, and shall be fully protected with respect to anything
done or omitted by it in good faith in conformity with such advice or opinion.
The Custodian shall be liable to the Trust for any loss or damage resulting from
the use of the Book-Entry System or the Depository arising by reason of any
negligence, misfeasance or misconduct on the part of the Custodian or any of its
employees or agents.
(b) Limit of Duties. Without limiting the generality of the foregoing, the
Custodian shall be under no duty or obligation to inquire into, and shall not be
liable for:
-13-
<PAGE> 14
1. The validity of the issue of any Securities purchased by any Portfolio,
the legality of the purchase thereof, or the propriety of the amount paid
therefor;
2. The legality of the sale of any Securities by any Portfolio, or the
propriety of the amount for which the same are sold;
3. The legality of the issue or sale of any Shares, or the sufficiency of
the amount to be received therefor;
4. The legality of the redemption of any Shares, or the propriety of the
amount to be paid therefor;
5. The legality of the declaration or payment of any dividend or other
distribution of any Portfolio;
6. The legality of any borrowing for temporary or emergency administrative
purposes.
(c) No Liability Until Receipt. The Custodian shall not be liable for, or
considered to be the Custodian of, any money, whether or not represented by any
check, draft, or other instrument for the payment of money, received by it on
behalf of any Portfolio until the Custodian actually receives and collects such
money directly or by the final crediting of the account representing the Trust's
interest in the Book-Entry System or the Depository. The Custodian shall
exercise diligence appropriate to first class mutual fund custodians in pursuing
payment on any such instrument, or any dividend, interest or other receivable of
the Trust.
(d) Amounts Due from Transfer Agent. The Custodian shall not be under any duty
or obligation to take action to effect collection of any amount due to any
Portfolio from the Transfer Agent nor to take any action to effect payment or
distribution by the Transfer Agent of any amount paid by the Custodian to the
Transfer Agent in accordance with this Agreement.
(e) Collection Where Payment Refused. The Custodian shall not be under any duty
or obligation to take action to effect collection of any amount, if the
Securities upon which such amount is payable are in default, or if payment is
refused after due demand or presentation, unless and until (a) it shall be
directed to take such action by a Certificate and (b) it shall be assured to its
satisfaction of reimbursement of its costs and expenses in connection with any
such action.
-14-
<PAGE> 15
(f) Appointment of Agents and Sub-Custodians. The Custodian may appoint one or
more banking institutions, including but not limited to banking or other
qualified institutions located in foreign countries, to act as Depository or
Depositories or as Sub-Custodian or as Sub-Custodians of Securities and moneys
at any time owned by any Portfolio, upon terms and conditions specified in a
Certificate. The Custodian shall use reasonable care in selecting a Depository
and/or Sub-Custodian located in a country other than the United States ("Foreign
Sub-Custodian"), and shall oversee the maintenance of any Securities or moneys
of the Trust by any Foreign Sub-Custodian. Any selection of and form of
contract with a Foreign Custodian shall be subject to approval by the Trust that
such selection and contract are consistent with the requirements of Rule 17f-5
(and Rule 17f-4, if applicable) under the 1940 Act, and the Custodian shall
provide the Trust with such information and recommendations as may be reasonably
necessary as a basis for such approval.
(g) No Duty to Ascertain Authority. The Custodian shall not be under any duty or
obligation to ascertain whether any Securities at any time delivered to or held
by it for the Trust and specifically allocated to a Portfolio are such as may
properly be held by the Trust and specifically allocated to such Portfolio under
the provisions of the Declaration of Trust and the Prospectus.
(h) Compensation of the Custodians. The Custodian shall be entitled to receive,
and the Trust agrees to pay to the Custodian, such compensation as may be agreed
upon from time to time between the Custodian and the Trust. The Custodian may
charge against any moneys specifically allocated to a Portfolio such
compensation and any expenses incurred by the Custodian in the performance of
its duties pursuant to such agreement with respect to such Portfolio. The
Custodian shall also be entitled to charge against any money held by it and
specifically allocated to a Portfolio the amount of any loss, damage, liability
or expense incurred with respect to such Portfolio, including counsel fees, for
which it shall be entitled to reimbursement under the provisions of this
Agreement.
The expenses which the Custodian may charge against such account
include, but are not limited to, the expenses of Sub-Custodians and foreign
branches of the Custodian incurred in settling transactions outside of Boston,
Massachusetts or New York City, New York involving the purchase and sale of
Securities of any Portfolio.
(i) Reliance on Certificates and Instructions. The Custodian shall be entitled
to rely upon any Certificate, notice or other instrument in writing received by
the Custodian and reasonably believed by the Custodian to be genuine and to be
signed by the required number of officers of the Trust. The Custodian shall
-15-
<PAGE> 16
be entitled to rely upon any Written Instructions or Oral Instructions actually
received by the Custodian pursuant to the applicable Sections of this Agreement
and reasonably believed by the Custodian to be genuine and to be given by an
Authorized Person. The Trust agrees to forward to the Custodian Written
Instructions from an Authorized Person confirming such Oral Instructions in such
manner so that such Written Instructions are received by the Custodian, whether
by hand delivery, telex or otherwise, by the close of business on the same day
that such Oral Instructions are given to the Custodian. The Trust agrees that
the fact that such confirming instructions are not received by the Custodian
shall in no way affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Trust. The Trust agrees that the Custodian
shall incur no liability to the Trust in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions provided such instructions
reasonably appear to have been received from a duly Authorized Person.
(j) Inspection of Books and Records. The books and records of the Custodian
shall be open to inspection and audit at reasonable times by officers and
auditors employed by the Trust and by employees of the Securities and Exchange
Commission.
The Custodian shall provide the Trust with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry System
or the Depository and with such reports on its own systems of internal
accounting control as the Trust may reasonably request from time to time.
12. Term and Termination.
(a) This Agreement shall become effective on the date first set forth above and
shall continue for a one year term and thereafter so long as such continuance is
specifically approved at least annually by (i) the Board of Trustees of the
Company or (ii) a vote of a "majority" (as defined in the Investment Company Act
of 1940, as amended) of the Fund's outstanding voting securities, provided that
in either event the continuance is also approved by a majority of the Board of
Trustees who are not "interested persons" (as defined in said Act) of any party
to this Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval.
(b) Either of the parties hereto may terminate this Agreement with respect to
any Portfolio by giving to the other party a notice in writing specifying the
date of such termination, which shall be not less than 60 days after the date of
receipt of such notice. In the event such notice is given by the Trust, it shall
be accompanied by a certified resolution of the Board of Trustees of the Trust,
electing to terminate this Agreement with respect to any Portfolio and
designating a successor custodian or custodians, which shall be a person
qualified to so act under the 1940 Act or undertaking to make such designation
at least 30 days prior to the termination date. In the event such notice is
given by the Custodian, the
-16-
<PAGE> 17
Trust shall, on or before the termination date, deliver to the Custodian a
certified resolution of the Board of Trustees of the Trust, designating a
successor custodian or custodians. In the absence of such designation by the
Trust, the Custodian may designate a successor custodian, which shall be a
person qualified to so act under the 1940 Act. If the Trust fails to designate a
successor custodian for any Portfolio, the Trust shall upon the date specified
in the notice of termination of this Agreement and upon the delivery by the
Custodian of all Securities (other than Securities held in the Book-Entry
Systems which cannot be delivered to the Trust) and moneys then owned by such
Portfolio, be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book-Entry System which
cannot be delivered to the Trust.
(c) Upon the date set forth in such notice under paragraph (b) of this Section
12, this Agreement shall terminate to the extent specified in such notice, and
the Custodian shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor custodian all
Securities and moneys then held by the Custodian and specifically allocated to
the Portfolio or Portfolios specified, after deducting all fees, expenses and
other amounts for the payment or reimbursement of which it shall then be
entitled with respect to such Portfolio or Portfolios and otherwise cooperate in
the transfer of its duties and responsibilities hereunder.
13. Miscellaneous.
(a) Annexed hereto as Appendix A is a certification signed by the Secretary of
the Trust setting forth the names and the signatures of the present Authorized
Persons. The Trust agrees to furnish to the Custodian a new certification in
similar form in the event that any such present Authorized Person ceases to be
such an Authorized Person or in the event that other or additional Authorized
Persons are elected or appointed. Until such new certification shall be
received, the Custodian shall be fully protected in acting under the provisions
of this Agreement upon Oral Instructions or signatures of the present Authorized
Persons as set forth in the last delivered certification.
(b) Annexed hereto as Appendix B is a certification signed by the Secretary of
the Trust setting forth the names and the signatures of the present officers of
the Trust. The Trust agrees to furnish to the Custodian a new certification in
similar form in the event any such present officer ceases to be an officer of
the Trust or in the event that other or additional officers are elected or
appointed. Until such new certification shall be received, the Custodian shall
be fully protected in acting under the provisions of this Agreement upon the
signature of the officers as set forth in the last delivered certification.
-17-
<PAGE> 18
(c) The Custodian shall provide the Trust and/or its investment manager such
reports on securities and cash positions, transaction fails, aging of
receivables and other relevant data as the Trust or investment manager may
reasonably require and shall reconcile any differences with the records of such
pricing and bookkeeping agent. The Custodian will also timely provide the
Trust's pricing and bookkeeping agent with such information in the Custodian's
possession as the pricing and bookkeeping agent may reasonably require.
(d) Any notice or other instrument in writing, authorized or required by this
Agreement to be given to the Custodian, shall be sufficiently given if addressed
to the Custodian and mailed or delivered to it at its offices at One Boston
Place, Boston, Massachusetts 02108 Attn: Mert Thompson, or at such other place
as the Custodian may from time to time designate in writing.
(e) Any notice or other instrument in writing, authorized or required by this
Agreement to be given to the Trust, shall be sufficiently given if addressed to
the Trust and mailed or delivered to it at its offices at 888 South Figueroa
Street, Suite 1100, Los Angeles, California 90017 Attn: Secretary or at such
other place as the Trust may from time to time designate in writing.
(f) This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement, and as may be permitted or required by the 1940 Act.
(g) This Agreement shall extend to and shall be binding upon the parties hereto,
and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Trust without the written consent of
the Custodian, or by the Custodian without the written consent of the Trust
authorized or approved by a resolution of the Board of Trustees of the Trust,
and any attempted assignment without such written consent shall be null and
void.
(h) This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
(i) It is expressly agreed to that the obligations of the Trust hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents, or employees of the Trust, personally, but bind only the trust property
of the Trust, as provided in the Declaration of Trust of the Trust. The
execution and delivery of this Agreement have been authorized by the Trustees of
the Trust and signed by an authorized officer of the Trust, acting as such, and
neither such authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Trust as provided in its Declaration of Trust.
-18-
<PAGE> 19
(j) The captions of the Agreement are included for convenience of reference only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect.
(k) This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunder duly authorized as of the day and year
first above written.
GW SIERRA TRUST FUNDS
BY: /s/
----------------------------------
BOSTON SAFE DEPOSIT AND TRUST COMPANY
BY: /s/ Merton E. Thompson
----------------------------------
Merton E. Thompson
Senior Vice President
-19-
<PAGE> 20
APPENDIX A
I, Keith Pipes, Secretary of GW Sierra Trust Funds, a Massachusetts
business trust (the "Trust"), do hereby certify that:
The following individuals have been duly authorized as Authorized
Persons to give Oral Instructions and Written Instructions on behalf of the
Trust.
Name
----
Martin T. Conroy
- ---------------------------------------
Susan Foster
- ---------------------------------------
Ellen Furlong
- ---------------------------------------
Ann Hoefel
- ---------------------------------------
Vincent Molloy
- ---------------------------------------
Tai-Chin Tung
- ---------------------------------------
Keith Pipes /s/ Keith Pipes
- --------------------------------------- ---------------------------------
Keith Pipes, Secretary
-20-
<PAGE> 21
APPENDIX B - OFFICERS
I, Keith Pipes, Secretary of GW SIERRA TRUST FUNDS, a Massachusetts
business trust (the "Trust"), do hereby certify that:
The following individuals serve in the following positions with the
Trust and each individual has been duly elected or appointed to each such
position and qualified therefor in conformity with the Trust's Declaration of
Trust and the signatures set forth opposite their respective names are their
true and correct signatures:
<TABLE>
<CAPTION>
Name Position Signature
---- -------- ---------
<S> <C> <C>
F. Brian Cerini Chairman /s/ Brian Cerini
-------------------------
David G. Lee President /s/ David G. Lee
-------------------------
Keith Pipes Senior Vice President
Secretary and Treasurer /s/ Keith Pipes
-------------------------
Stephen C. Scott Senior Vice President /s/ Stephen C. Scott
-------------------------
John Taylor Senior Vice President /s/ John Taylor
-------------------------
Tai-Chin Tung Assistant Treasurer /s/ Tai-Chin Tung
-------------------------
Patricia L. Bickimer Assistant Secretary /s/ Patricia L. Bickimer
-------------------------
</TABLE>
/s/ Keith Pipes
----------------------------
Keith Pipes, Secretary
-21-
<PAGE> 1
Exhibit 8(a)-1.1
GW SIERRA TRUST FUNDS
Amendment No. 1 to Custody Agreement
February 5, 1991
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108
Dear Sirs:
This letter is to confirm that the undersigned, GW Sierra Trust Funds
(the "Trust"), a Massachusetts business trust, has agreed that the Custody
Agreement between the Trust and Boston Safe Deposit and Trust Company (the
"Custodian") dated July 7, 1989, is herewith amended so that the definition of
"Written Instructions" included in Section 1(m) is revised as follows:
"Written Instructions" shall mean a communication actually received by
the Custodian from a person reasonably believed by the Custodian to be
an Authorized Person by any system whereby the receiver of such
communication is able to verify through codes or otherwise with a
reasonable degree of certainty the authenticity of the sender of such
communication; however, "Written Instructions" from the Trust's
Sub-Administrator, The Boston Company Advisors, Inc., to the Custodian
shall mean an electronic communication transmitted by Fund accountants
and their managers (who have been provided an access code by the Sub-
Administrator) and actually received by the Custodian.
If the foregoing is in accordance with your understanding, will you so
indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
GW SIERRA TRUST FUNDS
By: /s/ F. BRIAN CERINI
---------------------------------
Accepted and agreed to:
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By: /s/ [SIG]
---------------------------------
<PAGE> 1
Exhibit 8(a)-1.8
July 18, 1990
GW Sierra Trust Funds
888 South Figueroa Street
Suite 1100
Los Angeles, California 90017
RE: Revised Custodian, Transfer Agency and Registrar and
Sub-Administration Fees
Gentlemen:
This letter constitutes our agreement with respect to compensation to
be paid to (i) Boston Safe Deposit and Trust Company ("Boston Safe") under the
terms of the Custodian Agreement dated July 7, 1989 and as supplemented on July
18, 1990 between GW Sierra Trust Funds (the "Company") and Boston Safe; (ii) The
Shareholder Services Group, Inc. ("TSSG") under the terms of a Transfer Agency
and Registrar Agreement dated as of June 1, 1989 and as supplemented on July 18,
1990 between the Company and TSSG; and (iii) The Boston Company Advisors, Inc.
("Boston Advisors") under the terms of a Sub-Administration Agreement dated July
7, 1989 and as supplemented July 18, 1990 between Great Western Fund
Administration Corporation ("GW Administration") and Boston Advisors. For the
services to be provided under the aforementioned agreements, GW Administration
will pay Boston Advisors for its services and, as agent for TSSG and Boston
Safe, for the services that each will provide to the Company, the following:
1. With regard to each Fund except the GW Strategic International
Equity Fund, an asset based fee at the annual rate of .25% of the first $500
million of the Company's aggregate average daily net assets, .23% of the next
$500 million of the Company's aggregate average daily net assets and .20% in
excess of $1 billion, applied to each Fund's average daily net assets, and
exclusive of certain out-of-pocket expenses. The fee shall be calculated daily
and paid monthly.
2. With regard to the GW Strategic International Fund, an asset based
fee at the annual rate of .35% of the first $500 million of the Company's
aggregate average daily net assets, .30% of the next $500 million of the
Company's aggregate average daily net assets and .25% in excess of $1 billion,
applied to the average daily net assets of the GW Strategic International Fund
and exclusive of certain out-of-pocket expenses. The fee shall be calculated
daily and paid monthly.
3. A minimum annual fee will be paid to Boston Advisors by GW
Administration in the amount of $20,000 for services provided to the GW National
Municipal Income, GW Corporate Income and GW Equity Opportunity Funds and a
minimum annual fee will be paid to Boston Advisors in the amount of $30,000 for
services provided to the GW Strategic International Fund.
<PAGE> 2
The fee for the period from the day of the year this agreement is entered into
until the end of that year shall be pro-rated according to the proportion which
such period bears to the full annual period. The Company shall pay the following
portfolio transaction charges and out-of-pocket expenses directly to Boston
Advisors, as payment agent under aforementioned agreements:
Portfolio transaction charges for all Funds except GW Strategic
International Fund:
<TABLE>
<S> <C>
Fee per non-depository eligible $30.00
Fee per depository eligible $10.00
Repo/depository $10.00
Repo/non-depository $17.00
Physical/Government $30.00
Physical/Corp. and Muni $30.00
Commercial Paper $30.00
Global $35.00
Euro CD's $30.00
Time Deposits $30.00
Mortgage-Backed Securities Paydowns $12.00
Options: Open/Closed $25.00
Options: Exer./Expired $10.00
Futures $25.00
Cash Transactions $10.00
Foreign exchange transactions when done away from
BSD&T $20.00
Portfolio transaction charges for GW Strategic International Fund:
Global/physical delivery $50.00
Global/depository eligible $35.00
Foreign exchange transactions when done away from
BSD&T $20.00
Monthly charges for each security held $5.00
</TABLE>
<PAGE> 3
4. Out-of-pocket expenses, including, but not limited to, postage,
telephone, telex, courier service, copying, toll-free lines (if required by
you), forms, envelopes, hardware/phone lines for remote terminals (if required
by you), microfiche/microfilm, wire fees for receipt and disbursement, mailing
fee and cost of proxy solicitation, mailing and tabulation, cost of independent
pricing services, subcustodian out-of-pocket expenses and any items listed on
Schedule B to the Custody and Transfer Agency and Registrar Agreements.
5. Boston Safe allows a credit against its fees for cash balances
arising out of the custody relationship. The credit for cash balances is
calculated as follows: Average monthly cash balances times 75% of the 90 day
T-bill rate.
Boston Safe, TSSG and Boston Advisors each accepts the payment to
Boston Advisors, hereunder as full payment from GW Administration and/or the
Company (in the case of portfolio transaction charges and certain out-of-pocket
expenses) under the terms of their respective agreements with the Company.
This fee letter supersedes all fee letters dated prior to July 18,
1990.
If the forgoing accurately sets forth our agreement and you intend to
be legally bound thereby, please execute a copy of this letter and return it to
us.
Very truly yours,
THE BOSTON COMPANY ADVISORS, INC.
BY: /s/ Peter Meenan
----------------------------------
BOSTON SAFE DEPOSIT AND TRUST COMPANY
BY: /s/
----------------------------------
THE SHAREHOLDER SERVICES GROUP, INC.
BY: /s/
----------------------------------
Accepted: GW SIERRA TRUST FUNDS
BY: /s/ Brian Cerini
----------------------------
Accepted: GREAT WESTERN FUND ADMINISTRATION CORPORATION
BY: /s/ Tai-Chin Tung
----------------------------
<PAGE> 1
Exhibit 8(a)-1.9
SUPPLEMENT TO CUSTODY, TRANSFER AGENCY AND REGISTRAR
AND SUB-ADMINISTRATION AGREEMENTS
March 17, 1995
Sierra Trust Funds, a Massachusetts business trust organized under the
laws of the Commonwealth of Massachusetts (the "Company"), hereby supplements
its Custody Agreement, dated July 7, 1989, as amended, with Boston Safe Deposit
and Trust Company ("Custodian") and its Transfer Agency and Registrar Agreement
dated as of January 1, 1992, as amended, with Sierra Fund Administration
Corporation and Sierra Fund Administration Corporation, hereby supplements its
Sub-Administration Agreement, dated July 7, 1989, as amended, with The
Shareholder Services Group, Inc., a subsidiary of First Data Corp., as assignee
of The Boston Company Advisors, Inc., each to provide those services described
in the above-mentioned agreements to the Target Maturity 2002 Fund (the "New
Portfolio"). Fees to be paid to the Custodian, Transfer Agent and
Sub-Administrators will be assessed and paid out in accordance with the
effective fee letter among all such parties.
Limitation of Liability. This Supplement has been executed on behalf of
the Company by the undersigned officer of the Company in his capacity as an
officer of the Company. The obligations of this Supplement shall be binding only
upon the assets and property of the New Portfolio affected and not upon the
assets and property of any other portfolio of the Company and shall not be
binding upon any Trustee of the Company, officer of the Company or shareholder
of the New Portfolio and/or the Company individually.
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to
be executed by their officers designated below as of the 17 day of March, 1995.
SIERRA TRUST FUNDS SIERRA FUND ADMINISTRATION
CORPORATION
By: /s/ F. BRIAN CERINI By: /s/ KEITH B. PIPES
------------------------------ ---------------------------------
Authorized Signature Authorized Signature
BOSTON SAFE DEPOSIT AND TRUST THE SHAREHOLDER SERVICES
COMPANY GROUP, INC., A SUBSIDIARY OF
FIRST DATA CORP.
By: /s/ ELLEN M. FURLONG By: /s/ [SIG]
------------------------------ ---------------------------------
Authorized Signature Authorized Signature
<PAGE> 1
Exhibit 8(b)
SUBCUSTODIAN AGREEMENT
AGREEMENT made this 11th day of March, 1994, between BOSTON SAFE
DEPOSIT AND TRUST COMPANY (hereinafter referred to as "Boston Safe"), a trust
company having its principal office at One Boston Place, Boston, Massachusetts,
U.S.A., and Credit Commercial De France (hereinafter referred to as the "Bank"),
a bank organized under the laws of France and having an office at 103, Avenue de
Champ-Elysees, 75008 Paris, France.
WHEREAS, Boston Safe has been appointed to act as Trustee, Custodian or
Subcustodian of securities and monies on behalf of certain of its customers
including, without limitation, investment companies subject to the U.S.
Investment Company Act of 1940, as amended, and employee benefit plans subject
to the U.S. Employee Retirement Income Security Act of 1974, as amended; and
WHEREAS, Boston Safe wishes to establish an Account with the Bank to
hold and maintain certain property which Boston Safe holds as custodian,
subcustodian or trustee; and
WHEREAS, Bank agrees to establish such Account and to hold and maintain
all property in the Account in accordance with the terms and conditions herein
set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, Boston Safe and Bank agree as follows:
I. THE ACCOUNT
A. Establishment of the Account
Boston Safe hereby establishes with the Bank an Account which
shall be composed of
(1) a Custody Account (including such sub-accounts as Boston
Safe may request from time to time), for any and all Securities (as hereinafter
defined) from time to time received by Bank therefor, and
(2) a Deposit Account (including such sub-accounts as
Boston Safe may request from time to time) for any and all Cash (as hereinafter
defined) from time to time received by Bank therefor.
Sub-accounts shall be established for each customer of Boston
Safe as requested by Boston Safe.
1
<PAGE> 2
B. Use of the Account
The Account shall be used exclusively to hold, acquire,
transfer or otherwise care for, on behalf of Boston Safe as Trustee, Custodian
or Subcustodian and the customers of Boston Safe and not for Boston Safe's own
interest, Securities and such cash or cash equivalents as are transferred to
Bank or as are received in payment of any transfer of, or as payment on, or
interest on, or dividend from, any such Securities (herein collectively called
"Cash").
C. Transfer of Property in the Account
Beneficial ownership of the Securities and Cash in the Account
shall be freely transferable without payment of money or value other than for
custody and administration.
D. Ownership and Segregation of Property in the Account
The ownership of the property in the Account, whether
Securities, Cash or both, and whether any such property is held by Bank or in an
Eligible Depository, shall be clearly recorded on Bank's books as belonging to
Boston Safe on behalf of Boston Safe's customers, and not for Boston Safe's own
interest and, to the extent that Securities are physically held in the Account,
such Securities shall also be physically segregated from the general assets of
Bank, the assets of Boston Safe in its individual capacity and the assets of
Bank's other customers. In addition, Bank shall maintain such other records as
may be necessary to identify the property hereunder as belonging to each
sub-account of the Account.
E. Registration of Securities in the Account
Securities which are eligible for deposit in a depository as
provided for in Paragraph III may be maintained with the depository in an
account for Bank's customers. Securities which are not held in a depository and
that are ordinarily held in registered form will be registered under "Boston
Safe client's" name, unless alternate Instructions are furnished by Boston Safe.
II. SERVICES TO BE PROVIDED BY THE BANK
The services Bank will provide to Boston Safe and the manner in which
such services will be performed will be as set forth below in this Agreement and
the attached Service Standard Agreement (Attachment A). In the event of any
conflict between the Subcustodian Agreement and the Service Standard Agreement,
the Subcustodian Agreement shall prevail.
2
<PAGE> 3
A. Services Performed Pursuant to Instructions
All transactions involving the Securities and Cash in the
Account shall be executed solely in accordance with Boston Safe's Instructions
as that term is defined in Paragraph VI hereof, except those described in
paragraph B below.
B. Services to Be Performed Without Instructions
Bank will, unless it receives Instructions from Boston Safe to
the contrary:
(1) Collect Cash
Promptly collect and receive all dividends, income, principal,
proceeds from transfer and other payments with respect to
property held in the Account, and present for payment all
Securities held in the Account which are called, redeemed or
retired or otherwise become payable and all coupons and other
income items which call for payment upon presentation, and
credit Cash receipts therefrom to the Deposit Account;
(2) Exchange Securities
Promptly exchange Securities where the exchange is purely
ministerial (including, without limitation, the exchange of
temporary Securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
Securities, for the Securities themselves);
(3) Sale of Rights and Fractional Interests
Whenever notification of a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend or
stock split is received for the Account and such rights
entitlement or fractional interest bears an expiration date,
Bank will promptly endeavor to obtain Boston Safe's
Instructions, but should these not be received in time for
Bank to take timely action, Bank is authorized to sell such
rights entitlement or fractional interest and to credit the
Account;
3
<PAGE> 4
(4) Execute Certificates
Execute in Boston Safe's name for the Account, whenever Bank
deems it appropriate, such ownership and other certificates as
may be required to obtain the payment of income from the
securities held in the Account;
(5) Pay Taxes and Receive Refunds
To pay or cause to be paid from the Account any and all taxes
and levies in the nature of taxes imposed on the property in
the Account by any governmental authority, and to take all
steps necessary to obtain all tax exemptions, privileges or
other benefits, including reclaiming and recovering any
foreign withholding tax, relating to the Account and to
execute any declarations, affidavits, or certificates of
ownership which may be necessary in connection therewith; and
(6) Prevent Losses
Take such steps as may be reasonably necessary to secure or
otherwise prevent the loss of rights attached to or otherwise
relating to property held in the Account.
C. Additional Services
1. Transmission of Notices of Corporate Action
By such means as will permit Boston Safe to take
timely action with respect thereto, Bank will promptly notify Boston Safe upon
receiving notices or reports, or otherwise becoming aware, of corporate action
affecting Securities held in the Account (including, but not limited to, calls
for redemption, mergers, consolidations, reorganizations, recapitalizations,
tender offers, rights offerings, exchanges, subscriptions and other offerings)
and dividend, interest and other income payments relating to such Securities.
2. Communications Regarding the Exercise of Rights
Upon request by Boston Safe, Bank will promptly
deliver, or cause any Eligible Depository authorized and acting hereunder to
deliver, to Boston Safe all notices, proxies, proxy soliciting materials and
other communications that call for voting or the exercise of rights or other
specific action (including material relative to legal proceedings intended to be
transmitted to security holders) relating to Securities held in the Account to
the extent received by Bank or said Eligible Depository, such proxies or any
voting instruments to be executed by the registered holder of the Securities,
but without indicating the manner in which such Securities are to be voted.
4
<PAGE> 5
3. Monitor Financial Service
In furtherance of its obligations under this
Agreement, Bank will monitor French financial publications with respect to
announcements and other information respecting property held in the Account,
including announcements and other information with respect to corporate actions
and dividend, interest and other income payments.
III. USE OF SECURITIES DEPOSITORY
Bank may, with the prior written approval of Boston Safe, maintain all
or any part of the Securities in the Account with a securities depository or
clearing agency which is incorporated or organized under the laws of a country
other than the United States of America and is supervised or regulated by a
government agency or regulatory authority in the foreign jurisdiction having
authority over such depositories or agencies, and which operates (a) the central
system for handling of securities or equivalent book entries in France, (b) a
transnational system for the central handling of securities or equivalent book
entries, or (c) is the subject of an exemptive order issued by the U.S.
Securities and Exchange Commission with respect to the requirements for a
securities depository under Rule 17f-5 of the U.S. Investment Company Act of
1940 (herein called "Eligible Depository"), provided, however, that while so
maintained such Securities shall be subject only to the directions of Bank, and
that Bank's duties, obligations and responsibilities with regard to such
Securities shall be the same as if such Securities were held by Bank. In seeking
Boston Safe's approval with respect to an Eligible Depository, Bank shall submit
a copy of its agreement with such Eligible Depository to Boston Safe.
IV. CLAIMS AGAINST PROPERTY IN THE ACCOUNT
The property in the Account shall not be subject to any right, charge,
security interest, lien or claim of any kind (collectively "Charges") in favor
of Bank or any Eligible Depository or any creditor of Bank or of any Eligible
Depository, except a claim for payment for such property's safe custody or
administration in accordance with the terms of this Agreement. Bank will
immediately notify Boston Safe of any attempt by any party to assert any Charge
against the property held in the Account and shall take all lawful actions to
protect such property from such Charges until Boston Safe has had a reasonable
time to respond to such notice.
5
<PAGE> 6
V. QUALIFICATION OF BANK AS SUBCUSTODIAN
Bank represents and warrants that:
(A) it is a branch of a "qualified U.S. bank" or an "eligible foreign
custodian" as those terms are defined in Rule 17f-5 of the U.S. Investment
Company Act of 1940, a copy of which is attached hereto as Attachment A (the
"Rule"), and Bank shall immediately notify Boston Safe, in writing or by other
authorized means, in the event that there appears to be a substantial likelihood
that Bank will cease to qualify under the Rule as currently in effect or as
hereafter amended, or if in fact it does cease to qualify for any reason, or
(B) it is the subject of an exemptive order issued by the U.S.
Securities and Exchange Commission, which order permits Boston Safe to employ
Bank notwithstanding the fact that Bank fails to qualify under the terms of the
Rule, and Bank shall immediately notify Boston Safe, in writing or by other
authorized means, if for any reason it is no longer covered by such exemptive
order.
Upon receipt of any such notification required under (A) or
(B) of this Paragraph, Boston Safe may terminate this Agreement immediately
without prior notice to Bank.
VI. DEFINITIONS
A. Instructions
The term "Instructions" means (1) instructions in writing
signed by authorized individuals designated as such by Boston Safe, (2) SWIFT or
tested telex instructions of Boston Safe, (3) other forms of instructions in
computer readable form as shall customarily be used for the transmission of like
information, and (4) such other forms of communication as from time to time may
be agreed upon by Boston Safe and Bank; which Bank believes in good faith to
have been given by Boston Safe or which are transmitted with proper testing or
authentication pursuant to terms and conditions which Boston Safe may specify.
Unless otherwise expressly provided, all Instructions shall
continue in full force and effect until cancelled or superseded. Bank shall act
in accordance with Instructions and shall not be liable for any act or omission
in respect of any Instruction except in the case of willful default, negligence,
fraud, bad faith, willful misconduct, or reckless disregard of duties on the
part of Bank. Bank in executing all Instructions will take relevant action in
accordance with accepted industry practice.
6
<PAGE> 7
B. Account
The term "Account" means collectively the Custody Account and
its sub-accounts, and the Deposit Account and its sub-accounts.
C. Securities
The term "Securities" includes, without limitation, stocks,
shares, bonds, debentures, debt securities (convertible or non-convertible),
bullion, notes, or other obligations or securities and any certificates,
receipts, futures contracts, foreign exchange contracts, options, warrants,
script or other instruments representing rights to receive, purchase, or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
VII. MISCELLANEOUS PROVISIONS
A. Statements Regarding the Account
Bank will supply Boston Safe with such statements regarding
the Account as Boston Safe may request, including the identity and location of
any Eligible Depository authorized and acting hereunder. In addition, Bank will
supply to Boston Safe an advice or notification of any transfers of Securities
to or from the Account indicating, as to Securities acquired for the Account, if
applicable, the Eligible Depository having physical possession of such
Securities.
B. Examination of Books and Records
Bank agrees that its books and records relating to the Account
and Bank's actions under this Agreement shall be open to the physical,
on-premises inspection and audit at reasonable times by officers of, auditors
employed by, or other representatives of Boston Safe (including to the extent
permitted under French law the independent public accountants for any customer
of Boston Safe whose property is being held hereunder) and such books and
records shall be retained for such period as shall be agreed upon by Boston Safe
and Bank.
As Boston Safe may reasonably request from time to time, Bank
will furnish its auditor's reports on its system of internal controls, and Bank
will use its best efforts to obtain and furnish similar reports of any Eligible
Depository authorized and acting hereunder.
7
<PAGE> 8
C. Standard of Care
Bank shall exercise reasonable care in holding, maintaining,
servicing and disposing of property under this Agreement, and in fulfilling any
other obligations hereunder, provided that Bank shall exercise at least the same
standard of care as it exercises over its own assets and the degree of care
expected of a prudent professional subcustodian for hire and shall assume the
burden of proving that it has exercised such care in its maintenance of property
held by Bank in the Account and Securities held in an Eligible Depository shall
not affect Bank's standard of care, and Bank will remain as fully responsible
for any loss or damage to such Securities as if it itself had retained physical
possession of them. Bank shall indemnify and hold harmless Boston Safe, the
Account and each of Boston Safe's customer to the extent of each such customer's
interest in the Account from and against any loss, damage, cost, expense,
liability or claim (including reasonable attorneys' fees) arising out of or in
connection with the improper or negligent performance or the nonperformance of
the duties of the Bank. Bank shall maintain adequate policies of insurance with
recognized insurance carriers in support of Bank's indemnification and otherwise
covering any loss of the property held under this Agreement.
Subject to the foregoing, Bank shall be responsible for
complying with all provisions of the law of France, or any other law, applicable
to Bank in connection with its duties hereunder, including (but not limited to)
the payment of all transfer or similar taxes and compliance with any currency
restrictions and securities laws.
D. Loss of Cash or Securities
Bank agrees that, in the event of any loss of Securities or
Cash in the Account, Bank will use its best efforts to ascertain the
circumstances relating to such loss and will promptly report the same to Boston
Safe.
E. Compensation of Bank
Boston Safe agrees to pay to Bank from time to time such
compensation for its services and such out-of-pocket or incidental expenses of
Bank pursuant to this Agreement as may be mutually agreed upon in writing from
time to time.
8
<PAGE> 9
F. Termination
Except as otherwise provided herein, this Agreement may be
terminated by Bank or Boston Safe on 60 days' written notice to the other party,
sent by registered mail, provided that any such notice, whether given by Bank or
Boston Safe, shall be followed within 60 days by Instructions specifying the
names of the persons to whom Bank shall deliver the Securities in the Account
and to whom the Cash in the Account shall be paid. If within 60 days following
the giving of such notice of termination, Bank does not receive such
instructions, Bank shall continue to hold such Securities and Cash subject to
this Agreement until such Instructions are given. The obligations of the parties
under Paragraphs VIIC and VIIE of this Agreement shall survive the termination
of this Agreement.
G. Notices
Unless otherwise specified in this Agreement, all notices and
communications with respect to matters contemplated by this Agreement shall be
in writing, and delivered by mail, postage prepaid, or confirmed telex, to the
following addresses (or to such other address as either party hereto may from
time to time designate by notice duly given in accordance with this Paragraph):
To Bank:
CCF
51, Avenue Robert Schuman
5110 Reims, FRANCE
SWIFT: CCFRFRPP
Telex: 645300F
Tel: 331 4070 2307
To Boston Safe:
Boston Safe Deposit and Trust Company
20 Cabot Road, 027-003A
Medford, MA 02155
SWIFT: BSDTUS33GBL
Telex: 618 7612 BOSTONCO
Tel: (617) 382 4313
9
<PAGE> 10
H. Confidentiality
Bank and Boston Safe shall each use its best efforts to
maintain the confidentiality of the property in the Account and the beneficial
owners thereof, subject, however, to the provisions of any laws requiring
disclosure. In addition, Bank shall safeguard any testkeys, identification codes
or other security devices which Boston Safe shall make available to it.
I. Assignment
This Agreement shall not be assignable by either party but
shall bind any successor in interest of Boston Safe and Bank, respectively.
J. Governing Law
This Agreement shall be governed by and construed in
accordance with the laws of Massachusetts except to the extent that such laws
are preempted by the laws of the United States of America. To the extent
inconsistent with this Agreement, Bank's rules and conditions regarding accounts
generally or custody accounts specifically shall not apply.
IN WITNESS WHEREOF, the parties have hereto caused this Agreement to be
executed by their respective officers thereunto duly authorized.
BOSTON SAFE DEPOSIT AND TRUST COMPANY
/s/ CAROLYN F. KIESS
--------------------------------------
By: Carolyn F. Kiess
Title: Senior Vice President
CREDIT COMMERCIAL DE FRANCE
/s/ EDOUARD F. DE LENCQUESAING
--------------------------------------
By: Edouard F. de Lencquesaing
Title: Executive Vice President
10
<PAGE> 11
ATTACHMENT A
SERVICE STANDARD AGREEMENT
This agreement entered into on this 11th day of March, 1994, by and between
Boston Safe Deposit and Trust Co., a trust company organized under the laws of
the United States of America (the "Custodian"), and Credit Commercial de France,
a bank organized under the laws of France (the "Subcustodian"), will serve as
Attachment A to the Global Subcustodian Agreement entered into by the parties on
March 11, 1994.
This agreement may be amended at any time by mutual agreement of the parties and
will supersede any previous service agreement.
Now, therefore, the Custodian and the Subcustodian hereby agree as follows:
1. COMMUNICATIONS
The primary means of communication for transactional information will be the
Society for Worldwide Interbank Financial Telecommunications (SWIFT) system.
Identifications of specific message types are detailed in each of the respective
sections of this agreement.
Tested telex, facsimile, telephone and other electronic communication devices
may be used based on mutual agreement of the Custodian and the Subcustodian. In
the event instructions and/or advices are communicated via telex or facsimile
the format of such instructions will follow that of the appropriate SWIFT
message.
The following communication addresses are to be used for all correspondence
concerning the relationship:
Boston Safe Deposit and Trust Company
SWIFT Address: BSDTUS33GBL
Telex: 174-219 BOSTONCO
Fax: (617) 382-4100
Mailing Address: 20 Cabot Road
Medford, MA 02150-9113
U.S.A.
Attn: Global Custody Division, 027-003A
Credit Commercial de France
SWIFT Address: CCFRFRPP
Telex: 645300F
Fax: 331 2648 3683
Mailing Address: 51, avenue Robert Schuman
51100 Reims, FRANCE
-1-
<PAGE> 12
2. TELEPHONE COVERAGE/INQUIRIES
(a) The subcustodian will maintain telephone coverage during their
local business hours except holidays; Monday - Friday, 8:30
a.m. to 6:30 p.m.
(b) Inquiries from the custodian will be responded to by the
subcustodian within 24 hours from receipt of the inquiry. If
additional time is required to respond to an inquiry, the
timetable for completion will be given.
3. SECURITIES PROCESSING
3.1. NOTIFICATION TO THE SUBCUSTODIAN:
(a) The Custodian will communicate purchase and sale transaction
instructions via the following SWIFT messages:
MT520 - Receive Free
MT521 - Receive Against Payment
MT522 - Deliver Free
MT523 - Deliver Against Payment
Exhibit A shows the minimum information required for each
message type.
(b) All transactions will be settled according to the French
market procedures. (Under RELIT procedures, as soon as a
transaction is matched, the settlement is irrevocable. The
only situation where an entry would be reversed are the
bankruptcy of the counterparty or the unavailability of the
security on the market for a period of 10 days after the
settlement date).
(c) The Subcustodian will not settle any trade without specific
instructions from the Custodian.
(d) The deadline for receipt of instructions by the Subcustodian
in order for the transaction to settle on the contracted
settlement date is 11:00 am for same day transactions, 5:00 pm
for next day transactions, Paris time. All instructions
received after this stated deadline will be handled on a best
effort basis.
(e) Upon receipt of transaction instructions the Subcustodian will
match the trade details with the counterparty.
Note: The applicable security transactions are automatically
matched in the RELIT system.
(f) If the trade details do not match, or the counterparty's
instruction is missing, the Subcustodian will promptly notify
the Custodian via a SWIFT 573. In case of mismatching, the
details of the counterparty's instruction will be given via
SWIFT 599. If problems are encountered near or on settlement
date, the Subcustodian will inform the Custodian via
telephone. If the Custodian changes the trade details the
corrected instructions will be communicated via authenticated
message.
-2-
<PAGE> 13
3.2. NOTIFICATION TO THE CUSTODIAN
(a) The Subcustodian will confirm each security transaction to the
Custodian via the relevant SWIFT MT53X message:
MT530 - Confirmation of Receive Free
MT531 - Confirmation of Receive Against Payment
MT532 - Confirmation of Deliver Free
MT533 - Confirmation of Deliver Against Payment
NOTE: The transaction reference number supplied in field 20 of
the 52X message must be contained in field 21 of the MT53X.
Exhibit B shows the minimum information required for each
message type.
(b) The confirmation messages will be transmitted to the Custodian
before 9:30 a.m. Boston time on the day the trade has settled.
(c) The confirmation messages for free delivery and free receipt
instructions identified as stock loan transactions in field 72
of the SWIFT MT520 and SWIFT MT521 will be transmitted to the
Custodian before 9:30 a.m. Boston time on the day the trade
has settled.
(d) Transactions will be settled as long as the net amount of the
transactions is within FF 10 plus or minus of the trade.
Transactions should not be settled if there is a difference in
the number of shares between the broker and the Custodian's
instructions. Differences will be communicated to the
custodian for resolution.
(e) Unless instructed otherwise, all securities will be
re-registered upon settlement of the transaction. Due to
market practice, registration will not impede the Custodian's
ability to settle delivery transactions immediately following
receipt transactions.
4. INCOME COLLECTION
(a) Income will be credited to the operating account on payable
date.
(b) A SWIFT MT551 preadvice of income will be transmitted to the
Custodian by the Subcustodian within 24 hours of the dividend
announcement. A further SWIFT MT551 preadvice will be sent 2
days before pay date.
(c) The Subcustodian will notify the Custodian of income collected
via SWIFT MT554 message. Each message must contain the
following information:
Security Name Rate per share
Ex date Gross amount
Pay date Tax withheld
Number of shares Net amount
(d) Confirmation of credit of funds to the account will be via the
SWIFT MT554 on payable date by 9:30 a.m. Boston time.
(e) Claims for collection of past due income will be initiated by
the Subcustodian on payable date.
-3-
<PAGE> 14
(f) The past due income will be collected from the counterparty
upon settlement of the relevant security transaction. All
collected income will be credited with good value of the
original payable date.
5. TAX RECLAIMS
(a) The Subcustodian will be responsible for preparing all reclaim
forms for applicable clients and securities.
(b) The Custodian will provide the Subcustodian with a listing of
income upon which tax is to be reclaimed each time income is
paid.
(c) The Subcustodian will prepare a reclaim form for each
beneficial owner upon receipt of the custodian's information
and will forward these to the subcustodian for signature.
(d) The Custodian will send back the forms, duly signed, to the
Subcustodian. The Subcustodian will them forward the package
to the local tax authorities. The reclaim forms fully
completed and related dividends paid from January to August
are filed with the tax authorities during the first week of
October of the same year. Additional filings will be made
monthly for late collection.
(e) The reclaim forms will indicate that the reclaimed funds
should be sent to the Subcustodian and credited to the
operating account of the Custodian.
6. CORPORATE ACTIONS
(a) The Subcustodian will immediately notify the Custodian by
authenticated message of any action effecting securities held
by the Subcustodian for the Custodian. Entitlement of holders
will be included in this information.
(b) Corporate action notifications will be communicated to the
Custodian via SWIFT MT551 message format.
(c) Each notification will include the latest date on which the
Custodian must provide instructions to the Subcustodian.
(d) The Subcustodian is to act only upon the specific instruction
of the Custodian. The Custodian will, on all actions, supply
the Subcustodian with instructions.
(e) On those actions that require a decision to be returned to the
Subcustodian, the Custodian will transmit the instructions via
SWIFT.
(f) The Subcustodian assumes responsibility for the results of any
action taken by the Subcustodian without or contrary to
instructions received from the Custodian.
(g) Maturities, redemptions and any other action that results in
the Subcustodian collecting cash from tendered or redeemed
securities will be credited to the operating account on the
stated payable or maturity date.
-4-
<PAGE> 15
7. PROXY PROCESSING
(a) The Subcustodian will advise the Custodian of all meetings,
Annual, Extraordinary or other as soon as such information
becomes available.
(b) The information supplied by the Subcustodian will consist of
the following:
1) A SWIFT MT560 which included the following
information:
- Name of the corporation
- Date of the venue of the meeting
- Location
- Nature of the Meeting
2) A Summary translated into English of the meeting
agenda published on the B.A.L.O. (Bulletin des
Annonces Legales Obligatoires) will be sent by
facsimile.
(c) The Custodian will notify the Subcustodian of how many voting
forms will be needed. The Subcustodian will then collect the
necessary number of voting forms from the corporation and mail
them to the Custodian together with the original meeting
announcement from the corporation (in English when available).
(d) The Custodian will return the forms to the Subcustodian after
they have been completed and signed.
(e) Upon receipt of the forms, the Subcustodian will present the
voting forms to the operation agent at the shareholders
meeting.
(f) The Subcustodian will confirm to the Custodian, the votes that
are lodged and the securities that are frozen for
participation in the general meeting via SWIFT MT 599.
8. CASH PROCESSING
(a) An account will be established in the name of the Custodian to
facilitate trade settlement, income collection, corporate
action processing, tax reclamations, clean payments and other
cash movements as directed by the Custodian.
(b) The Custodian will pre-advise the Subcustodian of all incoming
funds and outgoing payments.
(c) Instructions to pay funds will be communicated via SWIFT
MT202. No payments may be made from the account without
instructions from the Custodian.
(d) Pre-advice of credit funds will be communicated via SWIFT
MT210.
(e) Payment and receipt of funds confirmation will be communicated
to the Custodian the same day activity by 10:00 p.m. Paris
time in the following way:
Incoming funds: SWIFT MT910's.
-5-
<PAGE> 16
Outgoing funds: SWIFT MT950's. Cash debit and/or credit
confirmations must indicate the transactions number indicated
on the original MT202 and MT5XX.
(f) The deadline for receipt of instructions by the Subcustodian
to complete an external payment on the same day the
instruction is received is 11:00 a.m. Paris time.
(g) The deadline for receipt of instructions, by the Subcustodian,
to complete internal payments on the same day the instruction
is received is any time prior to 5 p.m. Paris time.
Instructions received after these times will be executed on a
best effort basis.
(i) Failure to pay funds or properly credit funds will be the
responsibility of the Subcustodian.
9. CASH MANAGEMENT
(a) An omnibus account and a series of accounts will be
established in the name of the Custodian for the benefit of
its clients. These accounts will be used to facilitate the
investment of client owned cash.
(b) All funds received or paid on any given day will be in
immediately available funds and incorporated into balances for
that day.
(c) The account will earn credit interest at an annual rate of the
Money Market rate minus .25%.
(d) The account will incur interest on debit balances at the Money
Market Rate plus 1.00%.
(e) The Subcustodian will notify the Custodian each quarter the
average debit interest rate applying to the previous month.
(f) The Subcustodian will pass credit and debit interest, by the
10th business day of the first of each quarter.
(g) The credit and debit amounts will be netted but the interest
statement will give a clear detail of these two amounts.
(h) The Subcustodian will provide quarterly interest statement
detailing the cash activity and interest for the quarter.
(i) If the Custodian chooses to direct investment balances, the
Custodian will contact the Treasury Department of the
Subcustodian to negotiate the investment.
(j) The deadline to place funds is 10 a.m. Paris time. A minimum
investment of FF 500,000 is required.
-6-
<PAGE> 17
10. REPORTING
(a) The Subcustodian will transmit the SWIFT MT571 messages to the
Custodian on the last business day of each month.
(b) The pending transactions will be advised to the Custodian
daily via MT573 and will include if a trade is
matched/unmatched in RELIT. Mismatched trades will also be
advised by SWIFT MT599 five days before settlement date.
(c) The Custodian, may also request MT572 messages from the
Subcustodian for security transactions.
11. FEE PROCESSING
(a) The Subcustodian will be compensated by the Custodian based on
the schedules detailed in Exhibit C. The schedules may be
altered upon mutual agreement of the parties.
(b) Fees will not be charged from individual transactions.
(c) Transaction and out of pocket fees will be charged monthly and
the custody fee will be charged quarterly in arrears.
(d) The Subcustodian will provide the Custodian with an invoice by
the tenth business day of the following month detailing the
charges levied against the Custodian for the period.
(e) The Custodian will review the invoice and advise the
Subcustodian via SWIFT of acceptance of the invoice or of a
discrepancy by the 25th business day.
(f) In the event of a discrepancy, the Custodian will authorize
payment of the invoice that is not in question and work with
the Subcustodian to resolve the fees in question.
BOSTON SAFE DEPOSIT AND TRUST COMPANY
BY: /s/ CAROLYN F. KIESS
----------------------------------------------------
Carolyn F. Kiess, Senior Vice President
ATTEST: /s/ JAMES F. KEEGAN
------------------------------------------------
James F. Keegan, Vice President
CREDIT COMMERCIAL DE FRANCE
BY: /s/ EDOUARD F. DE LENCQUESAING
----------------------------------------------------
Edouard F. de Lencquesaing, Executive Vice President
ATTEST: /s/ JACQUES BLANCARD
------------------------------------------------
Jacques Blancard, Vice President
-7-
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in each of the Prospectuses
and the Statement of Additional Information constituting parts of this
Post-Effective Amendment No. 27 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated August 12, 1997, relating to the
financial statements and financial highlights appearing in the June 30, 1997
Annual Report to Shareholders of Sierra Trust Funds, which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the heading "Financial Highlights" in the
Prospectuses and under the headings "Counsel and Auditor" and "Financial
Statements" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
- -------------------------------
PRICE WATERHOUSE LLP
Boston, Massachusetts
October 27, 1997
<PAGE> 1
Exhibit 13(a)
PURCHASE AGREEMENT
GW Sierra Trust Funds (the "Company"), a Massachusetts Business Trust,
and Shearson Lehman Hutton, Inc. ("Shearson") a Delaware Corporation, hereby
agree as follows:
1. The Company hereby offers Shearson and Shearson hereby purchases
20,000 shares in the Company's GW Global Income Money Market Fund, 10,000 shares
in the Company's GW U.S. Government Money Market Fund, 10,000 shares in the
Company's GW California Municipal Money Market Fund, all at $1.00 per share, and
2,000 shares (at $10.00 per share) in each of the Company's GW U.S. Government
Securities Fund, GW California Municipal Income Fund and GW Growth and Income
Fund. Shearson hereby acknowledges receipt of a purchase confirmation reflecting
the purchase of 46,000 shares, and the Company hereby acknowledges receipt from
Shearson of funds in the amount of $100,000 in full payment for the shares.
2. Shearson represents and warrants to the Company that the shares are
being acquired for investment purposes and not with a view to the distribution
thereof.
3. Shearson agrees that if it or any direct or indirect transferee of
any of the shares redeems any of the shares prior to the fifth anniversary of
the date the Company begins its investment activities, Shearson will pay to the
Company an amount equal to the number resulting from multiplying the Company's
total unamortized organizational expenses by a fraction, the numerator of which
is equal to the number of shares redeemed by Shearson or such transferee and the
denominator of which is equal to the number of shares outstanding as of the date
of such redemption, as long as the administrative position of the staff of the
Securities and Exchange Commission requires such reimbursement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 10th day of July, 1989.
GW SIERRA TRUST FUNDS
Attest:
/s/ FRANCES SIU By: /s/ DAVID LEE
- ---------------------------------- ---------------------------------
(SEAL) SHEARSON LEHMAN HUTTON, INC.
Attest:
/s/ [SIG] By: /s/ [SIG]
- ---------------------------------- ---------------------------------
<PAGE> 1
Exhibit 13(b)
PURCHASE AGREEMENT
GW Sierra Trust Funds (the "Company"), a Massachusetts Business Trust,
and Shearson Lehman Hutton, Inc. ("Shearson") a Delaware Corporation, hereby
agree as follows:
1. The Company hereby offers Shearson and Shearson hereby purchases one
(1) share, without par value, at $10.00 per share in each of the Company's GW
Corporate Income Fund, GW National Municipal Income Fund, GW Equity Opportunity
Fund and GW Strategic International Fund (individually, a "Portfolio" and
collectively, the "Portfolios"). Each share is the "initial share" of the
Portfolio. Shearson hereby acknowledges receipt of a purchase confirmation
reflecting the purchase of four (4) shares, and the Company hereby acknowledges
receipt from Shearson of funds in the amount of $40.00 in full payment for the
shares.
2. Shearson represents and warrants to the Company that the shares are
being acquired for investment purposes and not for the purpose of distribution.
3. Shearson agrees that if it or any direct or indirect transferee of
any of the shares redeems any of the shares prior to the fifth anniversary of
the date the Company begins its investment activities, Shearson will pay to the
Company an amount equal to the number resulting from multiplying the Company's
total unamortized organizational expenses by a fraction, the numerator of which
is equal to the number of shares redeemed by Shearson or such transferee and the
denominator of which is equal to the number of shares outstanding as of the date
of such redemption, as long as the administrative position of the staff of the
Securities and Exchange Commission requires such reimbursement.
4. The Company represents that a copy of its Master Trust Agreement,
dated February 22, 1989, together with all amendments thereto, is on file in the
Office of the Secretary of the Commonwealth of Massachusetts.
5. This Agreement has been executed on behalf of the Company by the
undersigned officer of the Company in his capacity as an officer of the Company.
The obligations of this Agreement shall be binding only upon the assets and
property of the Portfolios and not upon the assets and property of any other
portfolio of the Company and shall not be binding upon any Trustee, officer or
shareholder of the Portfolio and/or the Company individually.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 6th day of July, 1990.
GW SIERRA TRUST FUNDS
Attest:
/s/ [SIG] By: /s/ PATRICIA BICKIMER
- ---------------------------------- ---------------------------------
(SEAL) SHEARSON LEHMAN HUTTON, INC.
Attest:
/s/ [SIG] By: /s/ [SIG]
- ---------------------------------- ---------------------------------
<PAGE> 1
Exhibit 14
DISCLOSURE STATEMENT
This Disclosure Statement is a general review of the terms and
conditions and the federal income tax law applicable to your Account IRA so that
you can fully understand your rights and privileges under it. You should
carefully study the following information.
You will be permitted to revoke your IRA within seven (7) days after
the date on which your IRA is established by giving written notice to _________,
P.O. Box 2537, Boston, Massachusetts 02208. Upon such revocation, you will be
entitled to a return of the entire amount of the consideration paid to the IRA,
including any fees paid, without adjustment for expenses or fluctuation in the
market value of the IRA.
I. General
- --------------------------------------------------------------------------------
1. An IRA is a trust or custodial account created or organized in the
United States for the purpose of accumulating retirement funds. If you are under
age 70 1/2, the Internal Revenue Code (the "Code") permits you to establish an
IRA to which you may make contributions each year of up to $2,000 or if less,
100% of your gross annual compensation. Compensation includes wages, salary,
commissions, bonuses, tips, etc. but does not include income from interest,
dividends or other earnings or profits from property, or amounts not included in
your gross income. It also includes your earned income if you are self-employed
(reduced by deductible Keogh plan contributions) and taxable alimony. No part of
your IRA contributions or the earnings thereon is subject to any forfeiture
provisions. Further, your IRA is tax exempt which means that you are not taxed
on earnings from your IRA contributions until distribution. However, no
deduction for IRA contributions will be allowed for the year in which you reach
age 70 1/2 or any year thereafter.
2. If neither you nor your spouse is covered by a retirement plan (as
defined below) you may deduct the entire amount of your contribution of up to
the lesser of $2,000 (or $2,250 in the case of a spousal IRA - see paragraph
(4)) or 100% of compensation. Your contributions may be deducted on your federal
income tax return even if you do not itemize your deductions.
Furthermore, even if you are or your spouse is covered by a retirement
plan, but you have adjusted gross income ("AGI") below a certain level, called
the "threshold level," you may deduct your full IRA contribution. (Your tax
return will show you how to calculate your AGI for this purpose.) If you are
single, your threshold level is $25,000. If you are married and file a joint tax
return, your threshold level is $40,000. If you are married but file a separate
tax return, your threshold level is $0 if you are covered by a retirement plan.
If, however, you are or your spouse is covered by a retirement plan and
your adjusted gross income is above the threshold level, the amount of the
deductible contribution you may make to an IRA is phased out and eventually
eliminated when your AGI is $10,000 or more above the threshold level.
Special rules apply in determining when you are considered to be covered by
a plan. These rules differ depending on whether the plan is a defined
contribution or defined benefit plan.
A defined contribution plan is a plan that provides for a separate account
for each person covered by the plan. Benefits are based only on amounts
contributed to or allocated to each account. Types of defined contribution plans
include profit sharing plans, 401(k) plans, stock bonus plans, and money
purchase pension plans. You are considered covered by a defined contribution
plan if employer or employee contributions, or forfeitures, are allocated to
your account for the plan year that ends with or within your tax year.
A defined benefit plan is any plan that is not a defined contribution plan.
Contributions to a defined benefit plan are based on a computation of what
contributions are necessary to provide definitely determinable benefits to plan
participants. Defined benefit plans include pension plans and annuity plans. If
you are not specifically excluded from the eligibility provisions of an
employer's defined benefit plan for the plan year that ends with or within your
tax year, you are considered covered by the plan. This rule applies even if you
declined to be covered by the plan, you did not make a required contribution, or
you did not perform the minimum service required to accrue a benefit.
Under either a defined benefit or defined contribution plan, you are
considered "covered" by the plan even though you may not yet be "vested" under
the plan. (Starting with the 1987 tax year, your Form W-2 should indicate
whether you are covered under a retirement plan. If you have any questions, you
should check with your employer.)
If you are married but file a separate tax return, and you are not covered
by a retirement plan, you are entitled to the full IRA deduction even if your
spouse is covered by a plan.
3. Even if you are above the threshold level described in paragraph (2) and
thus may not make a deductible contribution of $2,000 ($2,250 for a spousal
IRA), you may still make a nondeductible contribution of up to the lesser of
100% of compensation or $2,000 to your IRA ($2,250 for a spousal IRA). You may
therefore make a $2,000 contribution at any time during the year, if your
compensation for the year will be at least $2,000, without having to know how
much will be deductible. When you fill out your tax return you can then figure
out how much is deductible. The amount of your contribution which is not
deductible will be a nondeductible contribution to the IRA. You may also choose
to make a contribution nondeductible even if you could have deducted part or all
of the contribution.
Deductible and nondeductible contributions to your IRA must be reported to
the IRS on your tax return for the year (nondeductible contributions are
reported on Form 8606). Interest or other earnings on your IRA contributions,
whether from deductible or nondeductible contributions, normally will not be
taxed until taken out of your IRA and distributed to you.
You may withdraw a nondeductible IRA contribution made for a year any time
before April 15 of the following year (or a later date if you have an extension
to file your return). If you do so, you must also withdraw the earnings
attributable to that portion and report the earnings as income for the year for
which the contribution was made. The income may be subject to a tax on early
withdrawals (See paragraph (10)).
4. If you have a non working spouse or a spouse who does not make a
contribution to an IRA, you may establish a separate IRA for your spouse (called
a spousal IRA). If you maintain IRAs for yourself and your spouse, you may make
combined contributions each year in an amount up to the lesser of $2,250 or 100%
of your total compensation. You may divide contributions between your IRA and
the spousal IRA in any way you want, so long as neither IRA receives more than
$2,000 in a year. If you establish a spousal IRA, the rules concerning IRAs
which are described in the following paragraphs apply equally to your spouse.
<PAGE> 2
5. Contributions to your IRA must be made in cash. In no case will the
Custodian, ______________________, accept contributions on your behalf in excess
of $2,000 ($2,250 if you maintain an IRA and a spousal IRA) for any taxable
year, unless the contribution is designated as a rollover.
6. Any contributions to your IRA over and above the permissible limits set
forth above are considered "excess contributions" subject to an annual excise
tax of 6% of the amount of the excess contributions for each year. The 6% tax
will not apply if the excess contributions are withdrawn by April 15 (or any
later date for filing your income tax return) following the year for which the
contributions are made. If the excess contributions are not withdrawn by April
15 (or such later date for filing your return), the 6% tax will apply in the
year for which the excess contributions were made and each later year that the
excess contributions remain in your IRA at the end of the year. If the excess
contributions are not withdrawn, they may be corrected for future years by
foregoing IRA contributions in those year until the excess contributions are
charged off against permissible contributions for those later years. IRS
Publication 590 contains additional information on special rules applicable to
withdrawals of excess contributions. You may obtain Publication 590 from your
local IRS office.
7. An IRA is intended to provide income for you when you retire. For this
reason, there are certain restrictions on IRA withdrawals. You may withdraw the
funds in your IRA without penalty after the date you attain age 59 1/2 or become
permanently disabled. (See paragraph (10))
You must begin to receive distributions no later than April 1 following the
year in which you attain age 70 1/2. The distribution of funds in your account
at that time can be (i) in a single lump sum payment, or (ii) in the form of
periodic payments for a specified number of years extending up to your life
expectancy or the joint life expectancy of you and your beneficiary.
If you die after distribution to you has begun, the remaining funds in your
IRA must continue to be distributed at least at rapidly as before your death. If
you die before distribution has begun, the funds in your IRA must be distributed
in accordance with one of the following options. First, they can all be
distributed to your beneficiary within five years of your death. Second, they
can be paid as equal periodic payments to your beneficiary, beginning no later
than one year after your death, for a period not exceeding the beneficiary's
life expectancy. If the beneficiary is your spouse then two additional options
are also available. Your spouse may elect that the funds be paid as equal
periodic payments over a period not exceeding his or her life expectancy, with
distribution to begin no later than the time you would have attained age 70 1/2.
Alternatively, your spouse may elect to treat the IRA as his or her own IRA
subject to the regular IRA distribution requirements. Such election is automatic
if your spouse makes a regular IRA contribution to the account, makes a rollover
to or from the account or fails to elect any of the other three options.
If, after you attain age 70 1/2, the amount distributed to you in any year
is less than the minimum amount required by law to be distributed, the Internal
Revenue Code imposes a tax equal to 50% of the amount that should have been
distributed but wasn't.
8. Except to the extent attributable to nondeductible IRA contributions,
distributions from an IRA normally are taxed as ordinary income to the
individual participant receiving such distributions in the year received and are
not eligible for capital gains treatment. The special five year forward income
averaging treatment accorded lump sum distributions from tax-qualified pension
and profit sharing plans does not apply to lump sum distributions from an IRA.
Any excess contributions that are withdrawn before the due date for filing
your income tax will not be included in your gross income for the year in which
withdrawn, but they will be included in income in the year for which
contributions were made. Any earnings attributable to the excess contributions
in such a case will be included in your gross income for the year for which the
excess contribution is made. If excess contributions are withdrawn after the due
date for filing your income tax return they will normally be includible in your
income in the year withdrawn (as well as being includible in the year for which
made). Special rules may apply, however, if your total IRA contribution was no
more than $2,250 and no employer contributions were made to your IRA. See IRS
Publication 590, available from your local IRS office, for a discussion of these
rules.
If you make non deductible IRA contributions, a portion of your
distributions from the IRA will be non taxable (as a return of your non
deductible contributions) and a portion will be taxable (as a return of
deductible contributions, if any, and account earnings). The following formula
is used to determine the non taxable portion of your distribution for a taxable
year.
<TABLE>
<S> <C> <C>
Remaining
nondeductible Total Nontaxable
contributions distributions = distributions
---------------x for the year for the year
Year-end total
IRA account
balances
</TABLE>
To figure the year-end total IRA account balance you treat all of
your IRAs as a single IRA. This includes all regular IRAs, as well
as Simplified Employer Pension (SEP), IRAs and Rollover IRAs. You
also add back any distributions taken during the year.
9. Any distributions from an IRA to you or your beneficiary is subject to
withholding of federal income tax unless you or your beneficiary elects to have
no withholding apply to the distribution. The Custodian will furnish you with
information and an election form as to withholding when any IRA distribution is
requested.
10. In general, a taxable distribution from an IRA before an individual
attains age 59 1/2 is considered a premature distribution subject to an
additional penalty tax equal to 10% of the taxable portion of the distribution.
The 10% penalty tax, however, does not apply to (a) distributions made to your
beneficiary (or your estate) after your death, (b) distributions attributable to
your being disabled, (c) distributions that are part of a series of
substantially equal periodic payments that are made at least annually for your
life or the joint lives of you and your beneficiary and (d) certain
distributions pursuant to a divorce decree or separation order.
11. Generally, for federal estate tax purposes, amounts held in your IRA at
your death are included in your gross estate. However, if your spouse is your
beneficiary, the IRA will qualify for the marital deduction. See item 14 for a
discussion of certain excise taxes that may be payable by your estate in the
event of "excess distributions" from your IRA.
12. The Code provides that the transfer of your interest in an IRA to a
former spouse under a divorce decree or a written instrument incident to such
divorce will not be considered a taxable transfer. After the transfer the IRA
will be treated as maintained for the benefit of your former spouse.
13. If you receive in one taxable year a lump sum distribution of your
entire interest in all qualified plans maintained by your employer after you
reach age 59 1/2, become disabled (if self-employed) or separate from service
(if not self-employed), or on account of the termination of your employer's
plan, you may transfer or "rollover" part or all of the distribu-
<PAGE> 3
tion _______________your own non deductible contributions) tax free into an IRA
or individual retirement annuity even if you have already made the maximum
$2,000 contribution to an IRA during the year. You must complete the transfer
within 60 days after you receive the distribution. If property other than cash
is distributed, the same property or its proceeds may be rolled over.
If you received a "partial distribution" (which means a distribution of at
least 1/2 of your interest in all plans maintained by your employer, other than
any voluntary deductible contributions you may have made) because of termination
of employment or disability, you may roll over part or all of that distribution
into an IRA.
In addition, if your spouse received a total or partial distribution (as
defined above) on account of your death your spouse may roll over part or all of
the distribution into an IRA.
If that amount is properly rolled over into another qualified plan it will
again be eligible for special five-year forward averaging when paid out in a
lump sum from that qualified plan. Because of this, it is generally advisable
not to commingle a rollover IRA with a regular IRA.
Similarly, part or all of the amount distributed from an IRA may be rolled
over tax free into another IRA or an individual retirement annuity. Furthermore,
if the entire balance in an IRA is distributed and none of the distribution is
attributable to sources other than a lump sum distribution from a qualified
plan, part or all of the amount distributed may be rolled over tax free to
another qualified plan, if the plan so permits. However, you may make a rollover
contribution from one IRA to another IRA only once a year. Money or property
which is distributed from an IRA must be rolled over within sixty days from the
date the distribution is received.
Rollover amounts are not tax deductible by the individual participant and
are not subject to the excise tax on excess contributions described in paragraph
(6).
14. Excess distributions made from IRAs, qualified retirement plans and
tax-sheltered annuities are subject to a 15% excise tax. Generally, excess
distributions are distributions in excess of $150,000 in a year. The following
distributions, however, are excluded for purposes of calculating this excise
tax: (A) distributions made because of your death, (B) distributions payable to
an alternate payee (such as a former spouse) under a qualified domestic
relations order (as defined in the Code) if the distribution is includible in
the income of the alternate payee, (C) distributions attributable to your
after-tax contributions, and (D) distributions not includible in income because
they are rolled over to another IRA or a qualified plan. All distributions made
to you during a calendar year are aggregated for purposes of determining the
amount of the excess distributions for such year. The tax is reduced by any
payment of the 10% penalty tax on early withdrawals. (See paragraph (10))
If your accrued benefit as of August 1, 1986 exceeds $562,500, you may
elect to be covered by a special grandfather rule which exempts your benefits
accrued as of August 1, 1986 from the excise tax.
Instead of making distributions payable on account of your death subject to
the tax on excess distributions, the Code adds an additional estate tax equal to
15% of your "excess retirement accumulation." The excess retirement accumulation
is the value of your interests in all qualified retirement plans, tax-sheltered
annuities and IRAs reduced by the present value of annual payments equal to
$150,000 over your life expectancy immediately before your death. The excess
distributions tax may not be offset by any credits against the estate tax.
15. IRA funds are subject to certain investment restrictions. No part of
your IRA may be invested in life insurance contracts or "collectibles," which
are tangible personal property such as in art works, rugs, antiques, metals,
gems, coins (other than gold or silver coins issued by the United States),
stamps, and alcoholic beverages.
Your IRA funds will be clearly identified as your property and will not be
commingled with other property.
16. You may not engage in a so-called "prohibited transaction" with your
IRA. Generally, a prohibited transaction is any improper use of your IRA account
or annuity.
Some examples of prohibited transactions with an IRA are:
(A) Borrowing money from it,
(B) Selling property to it, or
(C) Receiving unreasonable
compensation for managing it.
If you engage in a prohibited transaction in connection with your IRA at
any time during the year, it will not be treated as an IRA account as of the
first day of the year.
Once this happens, you must include the fair market value of the IRA assets
in your gross income for that year. The fair market value is the price at which
the IRA assets would change hands between a willing buyer and a willing seller,
when neither has any need to buy or sell, and both have reasonable knowledge of
the relevant facts.
You must use the market value of the assets as of the first day of the year
you engaged in the prohibited transaction. If you are under age 59 1/2, you may
also have to pay the 10% tax on premature distributions, discussed earlier.
If you use a part of your IRA account as security for a loan, that part is
treated as a distribution and is included in your gross income. If you are under
age 59 1/2, you may have to pay the 10% tax on premature distributions.
17. The annual fee for your American Express Investment Management Account
IRA will be $25 if you already have an American Express Investment Management
Account. If this is your first American Express Investment Management Account,
the annual fee is $50. The fee will be charged to your American Express card
account at the time you open your IRA and each year thereafter as long as you
have an American Express Investment Management Account IRA.
In addition, there is a $10 fee if you take a premature withdrawal from
your IRA (i.e., a withdrawal before you reach age 59 1/2, other than for the
reasons set forth in paragraph (10)).
The fees may be changed at any time upon 30 days written notice to you. Any
income or other taxes (including transfer taxes) that may be levied or assessed
upon your IRA will be deducted from the assets held in your IRA. Brokerage
commissions attributable to the acquisition or disposition of assets in your IRA
will be charged to your Account. Any such taxes or commissions will be charged
against the Fund to which the charge relates. Dividends, interest or other
income, including net realized capital gains, if any, from your IRA assets will
be credited to your IRA and invested in the Fund from which paid.
18. Your IRA will be invested in one or more of The American Express Funds
in accordance with your written instructions. If you select an Investment Plan
under the American Express Investment Management Account, all future
contributions will be invested in accordance with that Investment Plan unless
you provide a new Investment Plan or other written instructions. If you do not
have an Investment Plan on file and do not provide written instructions as to
the allocation of a contribution, any funds received will be invested in the
American Express Money Market Fund until proper direction is received.
The Custodian will send you quarterly statements specifying the current
value of your IRA assets. Growth in the value of your IRA is neither guaranteed
nor projected. The value of your IRA will be computed by totalling the fair
market value of the assets credited to your Account.
19. You are required to file Form 5029 (Return for Individual Retirement
Arrangement Taxes) with the IRS with your federal
<PAGE> 4
income tax return for each taxable year during which you are subject to (i) a 6%
penalty for excess contributions (see paragraph (b), (ii) a 50% excise tax for
failure to make a required distribution (see paragraph (7)), or (iii) a 10%
excise tax for premature distributions (see paragraph (10), or (iv) for a 15%
excise tax on excess distributions (see paragraph (14)).
20. The form of your IRA has been approved by the Internal Revenue Service,
but such approval applies only to the form of the IRA and does not represent a
determination of the IRAs merits as an investment.
21. Further information concerning IRAs may be obtained from any district
office of the IRS. You should ask for Publication 590.
II. SPECIAL RULES APPLICABLE ONLY TO AN IRA ESTABLISHED AS PART OF AN EMPLOYER'S
SEP (SIMPLIFIED EMPLOYEE PENSION PLAN) PROGRAM
If your IRA has been established as part of a SEP program maintained by
your employer, it differs in a number of important respects from an ordinary
IRA. These differences are as follows:
1. The Internal Revenue Code permits an employer to contribute annually to
your SEP IRA up to $30,000 or 15% of your compensation (not to exceed $200,000),
whichever is less. For purposes of determining the 15% limitation, the amount of
the employer's contribution to the SEP IRA is excluded from compensation.
2. The employer contributions must be made under a written allocation
formula, which cannot discriminate in favor of employees who are highly
compensated. Employer contributions are considered discriminatory unless they
bear a uniform relationship to the first $200,000 of each participating
employee's total compensation.
3. Your employer must cover in a SEP each employee who has attained age 21
and has performed service for it during at least 3 of the immediately preceding
5 years. However, employees who earn less than $300 a year, employees covered by
a collective bargaining agreement, and nonresident aliens may be excluded from
consideration. Any excess contributions made by you or your employer to your SEP
IRA should be withdrawn prior to the due date of your tax return in order to
avoid imposition of the 6% penalty tax on the excess amount and its earnings.
4. Contributions made by your employer to your SEP IRA for a year up to the
$30,000/15% of compensation limit are deductible by the employer and are
excludable from your gross income. In addition, you may contribute on your own
behalf to your SEP IRA (or another IRA) an amount up to the lesser of 100% of
your compensation or $2,000 subject to the rules on deductibility applicable to
active participants discussed in the General IRA rules, paragraph (2) above.
5.Your employer may contribute to your SEP IRA in and after the taxable
year in which you attain age 70 1/2 and you may exclude your employer's
contribution from income in those taxable years.
6. There is no provision in the law for maintaining a spousal IRA under an
SEP.
7. If you are covered under certain other plans in addition to a SEP, the
Internal Revenue Code imposes additional restrictions on the contributions and
benefits which may be allocable to you. You should check with your employer if
you think that these rules may affect you.
8. Your right to withdraw amounts held in a SEP IRA cannot be restricted by
your employer. Except as provided above, your SEP IRA is subject to the rules
governing an "Individual Participant" IRA.
CUSTODIAL AGREEMENT
ARTICLE I.
1. The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in Section 402(a)(5), 402(a)(7), 403(a)(4), 403(b)(8) or
408(d)(3) of the Code or an employer contribution to a simplified employee
pension as described in Section 408(k).
ARTICLE II.
The Depositor's interest in the balance in the Custodial Account is
nonforfeitable.
ARTICLE III.
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the Custodial Account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of Section (408)(a)(5) of the Code).
2. No part of the custodial funds may be invested in collectibles (within
the meaning of Section 408(m) of the Code).
ARTICLE IV.
1. The Depositor's entire interest in the Custodial Account must be, or
begin to be, distributed by the Depositor's required beginning date, the April 1
following the calendar year end in which the Depositor reaches age 70 1/2. By
that date, the Depositor may elect, in a manner acceptable to the Custodian, to
have the balance in the Custodial Account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly or annual payments over the life of the
Depositor. The payments must begin by the April 1 following the
calendar year in which the Depositor reaches age 70 1/2.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly or annual payments over the joint and last
survivor lives of the Depositor and his or her designated
beneficiary. The payments must begin by the April 1 following the
calendar year in which the Depositor reaches age 70 1/2.
(d) Equal or substantially equal annual payments over a specified
period that may not be longer than the Depositor's life
expectancy.
(e) Equal or substantially equal annual payments over a specified
period that may not be longer than the joint life and last
survivor expectancy of the Depositor and his or her designated
beneficiary.
Even if distributions have begun to be made under option (d) or (e), the
Depositor may receive a distribution of the balance in the Custodial Account at
any time by giving written notice to the Custodian. If the Depositor does not
choose any of the methods of distribution described above by the April 1
following the calendar year in which he or she reaches age 70 1/2, distribution
to the Depositor will be made on that date by a single sum payment. If the
Depositor elects as a means of distribution (b) or (c) above, the annuity
contract must satisfy the requirements of Section 408(b)(1), (3), and (4) of the
Code. If the Depositor elects as a means of distribution (d) or (e) above, the
annual payment required to be made by the Depositor's required beginning date is
for the calendar year the Depositor reached age 70 1/2. Annual payments for
subsequent years, including the year the Depositor's required beginning date
occurs, must be made by December 31 of that year.
2. If the Depositor dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
<PAGE> 5
(a) If the Depositor dies on or after the Depositor's required
beginning date distribution must continue to be made in
accordance with Article IV Section 1;
(b) If the Depositor dies before the Depositor's required beginning
date the entire remaining interest will at the election of the
beneficiary or beneficiaries either:
(i) Be distributed by the December 31 of the year containing
the fifth anniversary of the Depositor's death or
(ii) Be distributed in equal or substantially equal payments
over the life or life expectancy of the designated beneficiary or
beneficiaries
The election of either (i) or (ii) must be made by December 31 of the year
following the year of the Depositor's death. If the beneficiary or beneficiaries
do not elect either of the distribution options described in (i) or (ii),
distribution will be made in accordance with (ii) if the beneficiary is the
Depositor's surviving spouse and in accordance with (i) if the beneficiary or
beneficiaries are or include anyone other than the surviving spouse. In the case
of distributions under (ii), distributions must commence by December 31 of the
year following the year of the Depositor's death. If the Depositor's spouse is
the beneficiary, distributions need not commence until December 31 of the year
the Depositor would have attained age 70 1/2, if later.
(c) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving
spouse, no additional cash contributions or rollover
contributions may be accepted in the account.
3. In the case of distributions over life expectancy in equal or
substantially equal payments, to determine the minimum annual payment for each
year, divide the Depositor's entire interest in the Custodial Account as of the
close of business on December 31 of the preceding year by the life expectancy of
the Depositor (or the joint life and last survivor expectancy of the Depositor
and the Depositor's designated beneficiary or the life expectancy of the
designated beneficiary, whichever applies). In the case of distributions under
paragraph (1), determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and the designated
beneficiary as of their birthdays in the year the Depositor reaches age 70 1/2.
In the case of distribution in accordance with paragraph (2)(b)(ii), determine
life expectancy using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence.
Unless the Depositor (or spouse) elects not to have life expectancy
recalculated, the Depositor's life expectancy (and the life expectancy of the
Depositor's spouse, if applicable) will be recalculated annually using their
attained ages as of their birthdays in the year for which the minimum annual
payment is being determined. The life expectancy of the designated beneficiary
(other than the spouse) will not be recalculated. The minimum annual payment may
be made in a series of installments (e.g. monthly, quarterly, etc.) as long as
the total payments for the year made by the date required are not less than the
minimum amounts required.
ARTICLE V.
Unless the Depositor dies, is disabled (as defined in Section 72(m) of the
Code) or reaches age 59 1/2 before any amount is distributed from the Custodial
Account, the Custodian must receive from the Depositor a statement explaining
how he or she intends to dispose of the amount distributed.
ARTICLE VI.
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under Section 408(i) of the
Code and related regulations.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VII.
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with Section 408(a) of the Code and
related regulations will be invalid.
ARTICLE VIII.
This Agreement may be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the Depositor and Custodian.
ARTICLE IX.
1. All funds in the Custodial Account (including earnings) shall be
invested in shares of beneficial interest of any one or more of the regulated
investment companies managed by American Express Service Corporation or any of
its subsidiaries or affiliates, and which have been designated by American
Express Service Corporation as eligible for investment under this Custodial
Account, which shares shall be collectively referred to as "Fund Shares." Fund
Shares shall be purchased at the net asset value for Fund Shares next to be
determined after receipt of the contribution by the Custodian or its agent.
2. The shareholder of record of all Fund Shares shall be the Custodian or
its nominee.
3. The Depositor shall provide the Custodian with a written Investment Plan
or other written instructions regarding allocation
of contributions among The American Express Funds. If an investment plan is
selected it shall remain in effect as to any future contributions until
superseded by a new written Investment Plan or the Depositor provides other
written instructions. If the Depositor does not provide the Custodian with a
written Investment Plan, or other written instructions, any funds received will
be invested in The American Express Money Market Fund until proper investment
direction is received. The Depositor shall be the beneficial owner of all Fund
Shares held in the Custodial Account, and the Custodian shall not vote any of
such shares except upon written direction of the Depositor.
4. The Custodian agrees to forward or to cause to be forwarded, to every
Depositor a then current Prospectus of The American Express Funds and, if
applicable, the then current prospectus of any other regulated investment
companies managed by American Express Service Corporation or any of its
subsidiaries or affiliates, and which have been designated by American Express
Service Corporation as eligible for investment under this Custodial Account, and
all notices, proxies and related proxy soliciting materials applicable to said
Fund Shares received by it.
5. Each Depositor shall have the right by written notice to the Custodian
to designate or to change a beneficiary to receive any benefit to which such
Depositor may be entitled in the event of his/her death prior to the complete
distribution of such benefit. If no such designation is in effect on a
Depositor's death, or if the designated beneficiary has predeceased the
Depositor, his/her beneficiary shall be his/her surviving spouse, or if there is
no surviving spouse, his/her estate.
6. (a) The Custodian shall have the right to receive rollover
contributions as described in Article I of this Agreement, and if
any property is so transferred to it as a rollover contributions,
such property shall be sold by
<PAGE> 6
the Custodian and reinvested as provided in Section 1 of
this Article IX. The Custodian reserves the right to refuse
to accept any property which is not in the form of cash.
(b) The Custodian, upon written direction of the Depositor and
after submission to the Custodian of such documents as it
may reasonably require shall transfer the assets held under
this Agreement (reduced by any amounts referred to in
Section 8 of this Article IX) to a successor individual
retirement account or individual retirement annuity for the
Depositor's benefit. Any amounts received or transferred by
the Custodian under this Section 6 shall be accompanied by
such records and other documents as the Custodian deems
necessary to establish the nature, value and extent of the
assets and of the various interests therein.
7. Without in any way limiting the foregoing, the Depositor hereby
delegates to The ________ Funds the power to amend at any time and from time to
time the terms and provisions of this Agreement and hereby consents to such
amendments, provided they shall comply with all applicable provisions of the
Internal Revenue Code, the regulations thereunder and with any other
governmental law, regulation or ruling. Any such amendments shall be effective
when the notice of such amendments is mailed to the address of the Depositor
indicated by the Custodian's records.
8. Any income taxes or other taxes of any kind whatsoever levied or
assessed upon or in respect of the assets of the Custodial Account, or the
income arising therefrom, any transfer taxes incurred, all other administrative
expenses incurred by the Custodian in the performance of its duties including
fees for legal services rendered to the Custodian and the Custodian's
compensation may be paid by the Depositor and, unless so paid within said time
period as the Custodian may establish, shall be paid from the Depositor's
Custodial Account. The Custodian reserves the right to change or adjust its
compensation upon 30 days' advance notice to the Depositor.
9. The benefits provided hereunder shall not be subject to alienation,
assignment, garnishment, attachment, execution or levy of any kind, and any
attempt to cause such benefits to be so subjected shall not be recognized,
except to such extent as may be required by law.
10. In taking any action or determining any fact or question which may
arise under this Custodial Account, The ___________ Funds and the Custodian may
rely upon any statement by the Depositor with respect thereto. The Depositor
hereby agrees that The ___________ Funds and the Custodian will not be liable
for any loss or expense resulting from any action taken or determination made in
reliance on such statement. The Depositor assumes sole responsibility for
assuring that conditions to the Custodial Account satisfy the limits specified
in the appropriate provisions of the Code.
11. The Custodian may resign at any time upon 30 days' written notice to
the Depositor and to The ___________ Funds and may be removed by The ___________
Funds at any time upon 30 days' written notice to the Custodian. Upon the
resignation or removal of the Custodian, a successor custodian shall be
appointed within 30 days of such resignation and in the absence of such
appointment, the Custodian shall appoint a successor unless the Agreement be
sooner terminated. Any successor custodian shall be a bank (as defined in
Section 408(n) of the Code) or such other person found qualified to act as a
custodian under an individual account plan by the Secretary of the Treasury, or
his delegate. The appointment of a successor custodian shall be effective upon
receipt by the Custodian of such successor's written acceptance which shall be
submitted to The ___________ Funds, the Custodian, and the Depositor. Within 30
days of the effective date of a successor custodian's appointment, the Custodian
shall transfer and deliver to the successor custodian applicable account records
and assets of the Custodial Account (reduced by any unpaid amounts referred to
in Section 8 of this Article IX). The successor custodian shall be subject to
the provisions of this Agreement (or any successor thereto) on the effective
date of its appointment.
12. Notwithstanding any provisions hereof to the contrary, for taxable
years in which contributions to the Custodial Account are to qualify as
contributions to a Spousal Individual Retirement Account, the following
provisions shall apply. A separate Custodial Account shall be established under
this Agreement in the name of the spouse, who shall thereafter be deemed to be
the Depositor with respect to such separate Custodial Account. The sum of the
amount contributed to the Custodial Accounts of the Depositor and the
Depositor's spouse shall not exceed the lesser of:
(i) An amount equal to 100% of
the compensation (including
earned income in the case of a
self-employed individual)
includible in the employed
spouse's gross income for the
taxable year; or
(ii) $2,250, provided, however, that no more than $2,000 may
be contributed to either of such Custodial Accounts.
13. In the event any amounts remain in the Custodial Account after the
death of the Depositor, the rights of the Depositor hereunder shall thereafter
be exercised by his or her beneficiary.
14. Notwithstanding anything to the contrary herein, no distribution from a
Custodial Account shall be in the form of an annuity contract.
15. No deduction by the Depositor pursuant to Section 219 of the Code shall
be allowed with respect to contributions to the Custodial Account if such
contributions are made with respect to the taxable year in which the Depositor
attains age 70 1/2 or any subsequent taxable year.
16. The Custodian is authorized to hire agents (including any transfer
agent for Fund Shares) to perform certain duties hereunder.
17. This Agreement shall terminate coincident with the complete
distribution of the assets of the Depositor's Account.
18. All notices to be given by the Custodian to the Depositor shall be
deemed to have been given when mailed to the address of the Depositor indicated
by the Custodian's records.
19. The Custodian and The ___________ Funds shall not be responsible for
any losses, penalties or other consequences to the Depositor or any other person
arising out of the making of any contribution or withdrawal.
20. In addition to the reports required by Section 2 of Article VI, the
Custodian shall cause to be mailed to the Depositor in respect of each calendar
quarter an account of all transactions affecting the Custodial Account during
such quarter and a statement showing the balance in the Custodial Account as of
the end of such quarter. If, within 60 days after such mailing the Depositor has
not given the Custodian written notice of any exception or objection thereto,
the quarterly accounting shall be deemed to have been approved, and in such
case, or upon the written approval of the Depositor, the Custodian shall be
released, relieved and discharged with respect to all matters and statements set
forth in such accounting as though the account had been settled by judgment or
decree of a court of competent jurisdiction.
21. In performing the duties conferred upon the Custodian or The
___________ Funds by the Depositor hereunder, the Custodian and The ___________
Funds shall act as the agent of the Depositor. The parties do not intend to
confer any fiduciary duties on the Custodian and The ___________ Funds and none
shall be implied. The Custodian and
<PAGE> 7
The ___________ Funds shall not be liable (and do not assume any responsibility)
for the collection of contributions, the deductibility or the propriety of any
contribution under this Agreement, the selection of any Fund Shares for this
Custodial Account, or the purpose or propriety of any distribution made in
accordance with Section 13, 14 or 15 of Article IX, which matters are the sole
responsibility of the Depositor or the Depositor's beneficiary as the case may
be.
22. The Custodian and The ___________ Funds shall be responsible solely for
the performance of those duties expressly assigned to them in this Agreement and
do not assume any responsibility as to duties assigned to anyone else hereunder
or by operation of law. The Custodian shall have no duty to account for
deductible contributions separately form nondeductible contributions, unless
required to do so by applicable law. In determining the taxable amount of a
distribution, the Depositor shall rely only on his or her Federal tax records,
and the Custodian shall withhold Federal income tax from any distribution from
the Custodial Account as if the total amount of the distribution is includible
in the Depositor's income.
23. This Agreement shall be governed by and construed, administered and
enforced according to the laws of the State of New York.
INSTRUCTIONS. This model Custodial Account may be used by an individual who
wishes to adopt an individual retirement account under Section 408(a). When
fully executed by the Depositor and the Custodian not later than the time
prescribed by law for filing the Federal income tax return for the Depositor's
tax year (not including any extensions thereof) an individual will have an
individual retirement account (IRA) Custodial Account which meets the
requirements of Section 408(a). This Custodial Account must be created in the
United States for the exclusive benefit of the Depositor or his or her
beneficiaries.
DEFINITIONS. "Custodian" The Custodian must be a bank or savings and loan
association, as defined in Section 408(n), or other person who has the approval
of the Internal Revenue Service to act as Custodian. The Custodian in this plan
is Boston Safe Deposit and Trust Company.
"Depositor" The Depositor is the person who establishes the Custodial
Account.
IRA FOR NON-EMPLOYED SPOUSE. Contributions to an IRA Custodial Account for
a non-employed spouse must be made to a separate IRA Custodial Account
established by the non-employed spouse. This form may be used to establish the
IRA Custodial Account for the non-employed spouse.
An employee's Social Security Number will serve as the identification
number of his or her individual retirement account. An employer identification
number is not required for each participant directed individual retirement
account. An employer identification number is required for a common fund created
for individual retirement accounts.
For more information, get a copy of the required disclosure statement from
the Custodian or get Publication 590, Individual Retirement Arrangements (IRAs).
SPECIFIC INSTRUCTIONS
Article IV. Distributions made under this Article may be made in a single
sum, periodic payment, or a combination of both. The distribution option should
be reviewed in the year the Depositor reaches age 70 1/2 to make sure the
requirements of Section 408(a)(6) have been met.
Article IX. Article IX and any that follow it may incorporate additional
provisions that are agreed upon by the Depositor and Custodian to complete the
Agreement. These may include, for example, definitions, investment powers,
voting rights, exculpatory provisions, amendment and termination, removal of
Custodian, Custodian's fees, State law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the Depositor, etc.
<PAGE> 8
If you need assistance with this application, please call us toll free at 1 800
872-1166. Please print or type all items except signature and mail in the
enclosed postage-paid envelope.
1. INFORMATION
- -----------------------------------------
Name
- -----------------------------------------
Street Address
- -----------------------------------------
City State Zip Code
- -------------- -------------------------
Birth Date Social Security No.
- ----------------------------------------
Telephone Numbers: Home ( )______________
Business ( ) ___________
Are you a current American Express(R) Investment
Management Account Holder? ____Yes ___ No
- ----------------------------------------
2. TYPE OF ACCOUNT
Please check the box indicating the account you wish to open.
o Regular IRA.
Maximum contribution $2,000 per year.
o Spousal IRA.
You may contribute to a spousal IRA for your spouse if he/she has earned income
under $250. If you are opening a regular and a spousal IRA, you and your spouse
must complete separate applications. Total contribution to your IRA and the
spousal IRA cannot exceed $2,250.
o Rollover IRA.
If you have received a distribution from an employer's qualified retirement plan
or from another IRA, you may roll part or all of the amount distributed into an
______________ IRA within 60 days of the date you received the distribution.
o Direct Transfer.
You may request a direct transfer from an existing IRA with another financial
institution to an ______________________ IRA. Please complete an IRA Transfer
form.
3. INITIAL INVESTMENT
Please write the amount of your IRA investment below. A minimum contribution of
$1,000 applies to each type of IRA. Your IRA may contain both deductible and
nondeductible contributions in one account. Distribution for 19__ tax year
$___________ Contribution for 19__ tax year $___________ Rollover Contribution
$___________ Transferred IRA $___________ To mail, please enclose a check
payable to To wire, please call 1 800 872-1167 for instructions.
4. INVESTMENT PLAN SELECTION
Please fill in the grid below to indicate the percentages of your investment
which you want to invest in specific funds.
<PAGE> 9
5. BENEFICIARY DESIGNATION
If you do not designate a beneficiary for your IRA, your surviving spouse will
be your beneficiary. If you have no surviving spouse, your IRA will go to your
estate.
I hereby designate the following person(s) to receive any amounts held in my IRA
at my death:
PRIMARY BENEFICIARY(S)
- --------------------------------------------
Name Birthdate
- --------------------------------------------
Address
- --------------------------------------------
Relationship Percentage
- --------------------------------------------
Name Birthdate
- --------------------------------------------
Address
- --------------------------------------------
Relationship Percentage
CONTINGENT BENEFICIARY(S)
- --------------------------------------------
Name Birthdate
- --------------------------------------------
Address
- --------------------------------------------
Relationship Percentage
- --------------------------------------------
Name Birthdate
- --------------------------------------------
Address
- --------------------------------------------
Relationship Percentage
6. TELEPHONE EXCHANGE PRIVILEGE
I hereby authorize The Shareholder Services Group (TSSG) to act upon exchanges
among all ______________ Funds that I request by telephone and I agree that
________ BSDI will not be liable for any loss, liability, cost or expense
incurred while responding to telephone inquiries from persons reasonably
believed by TSSG to be genuine, in accordance with the procedures set forth in
the Prospectus for The _____________ Funds.
7. APPOINTMENT OF CUSTODIAN FEES.
The Shareholder Services Group (P.O. Box 9081, Boston, MA 02205-9081) is hereby
appointed as custodian of my ______________ Account IRA.
If this is your first _____________ Account, the current annual fee is $50. If
the IRA is an additional _____________ Account the current annual fee is $25 per
year.
8. SIGNATURE AND CERTIFICATIONS
By signing this application, I hereby certify under the penalties of perjury
that the information on this application is complete and correct and that:
(1) I am of legal age. I have received, read and understand the Prospectus for
The _____________ Funds, the IRA Custodial Agreement and Disclosure Statement
and this application and agree to their terms and I am asking that _____________
(the "Company") open an ___________ Account Individual Retirement Account (under
Section 408(a) of the Internal Revenue Code and as described in Section
383452(c)-(d) of the Income Tax Regulations to provide for my retirement and for
the support of my beneficiaries after my death.
(2) the number shown on this application is my correct social security number or
taxpayer identification number.
The undersigned _____________ authorizes the Company to charge my _____________
account for the applicable _____________ Account IRA annual fee for so long as
my _____________ Account IRA remains in effect. I understand that if for any
reason my American Express Card Account is no longer valid and the Company
cannot contact me, my IRA will be assessed the annual fee according to the
procedures outlined in the Prospectus.
- --------------------------------------------
Applicant Signature Date
- --------------------------------------------
Signature Date
<PAGE> 10
IRA TRANSFER FORMS.
If you transfer your IRA to an ________Account IRA, complete this form and
return in the postage-paid envelope provided with your application.
Print Registration Information Here.
- -----------------------------------------
Your Name:
- -----------------------------------------
Address
- -----------------------------------------
City State Zip
Social Security Number _____________________
Home Phone ( ) Work Phone ( )
------------------ -------------
Please Tell Us where To Invest Your IRA(s) Transfer To (List one of the
following)
[ ] I am opening a new ________Account IRA and have attached an
Application which includes selected investment plan.
[ ] I already have an ________Account IRA. Please invest the proceeds from this
IRA transfer according to my existing investment plan, or according to the new
investment plan I've specified below.
Existing Account No. _________________________ above and want to specify a new
investment plan.
FUND NAME % INVESTMENT
- ---------- ------------
%
----------------------------
%
----------------------------
%
----------------------------
%
----------------------------
%
----------------------------
%
----------------------------
Total 100%
III. Please Tell Us About Your Present IRA(s)
Type of account to be transferred:
[ ] Regular IRA [ ] Spousal IRA [ ] Rollover IRA
Transfer from (Please complete correctly)
- --------------------------------------------
Account Number
- -------------------------------------------
Name of Company Where IRA is Currently Held
- --------------------------------------------
Address of Company
- --------------------------------------------
City State Zip
IV. Please Authorize Your Current Trustee(s) or Custodian(s) To Transfer Your
IRA(s) To The Shareholder Services Group as Custodian to Your New IRA.
To Resigning Trustee(s) or Custodian(s):
Please liquidate [ ] all or [ ] part ($____________)
[ ] all or [ ] part ($____________)
of the account(s) listed in Section III and transfer the proceeds of liquidation
to my new IRA Plan
[ ] immediately [ ] at maturity date _____________
[ ] immediately [ ] at maturity date _____________
- ----------------------------------/--------
Your Signature Date
Important: Some custodians or companies require that you obtain a signature
guarantee in order to transfer your funds. Please check with the institution
that currently holds your IRA account to see if this is necessary in order to
transfer your account to The Shareholder Services Group, as Custodian for the
____________ Account IRA. If so, fill in the information below:
Signature guaranteed by:
------------------------
- ------------------------------------------------
Name of Bank or Firm
The Shareholder Services Group Will Complete the Letters of Acceptance.
- ---------------------/------------------
Date: Re:
This is to advise you that The Shareholder Services Group, as IRA Custodian for
The ___________ Funds accepts the above-captioned account for:
- --------------------------------------------
Customer's Name
Account Number: ___________________________
Please indicate ___________ Account IRA Account Numbers and Names on all
documents sent to us. Make checks payable to _______________, P.O. Box ____,
Boston, MA 02205-_____.
- -------------------------------------------
Authorized Signature/Title
- -------------------------------------------
Telephone Number
<PAGE> 1
Exhibit 16(d)
CERTAIN PERFORMANCE DATA RELATING TO THE
GW U.S. GOVERNMENT SECURITIES FUND,
GW CALIFORNIA MUNICIPAL INCOME FUND,
GW GROWTH AND INCOME FUND,
GW EQUITY OPPORTUNITY FUND,
GW STRATEGIC INTERNATIONAL FUND,
GW NATIONAL MUNICIPAL INCOME FUND AND
GW CORPORATE INCOME FUND
<PAGE> 2
30 DAY SEC YIELD COMPUTATION
FUND: GW Government Securities Fund (with 4.50% load)
PERIOD: June 1 - June 30, 1990
FORMULA: A-B 6
YIELD = 2 [ (---------------- + 1 ) - l ]
C*D
WHERE: A = Income for the period as defined by SEC rules
B = Expenses accrued for the period
C = The average daily number of shares
outstanding during the period that were
entitled to receive dividends
D = The maximum offering price per share on the
last day of the period.
FOR THE PERIOD INDICATED ABOVE, THESE FACTORS WERE:
A = $235,672.02
B = $30,612.52
C = $2,978,884.65
D = $10.38
YIELD = 8.09%
<PAGE> 3
GW U.S. GOVERNMENT SECURITIES FUND
TOTAL RETURN COMPUTATION FROM INCEPTION
DATE FUND ORGANIZED:
DATE OF FUND INCEPTI 07/25/89
FUND'S FISCAL YEAR-END:
<TABLE>
<CAPTION>
N.A.V. BEGINNING
INITIAL FRONT $ AMOUNT AT FUND NUMBER OF
INVESTMENT LOAD INVESTED INCEPTION SHARES HELD
- ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
$10,000 4.50% $ 9,550 $ 10.01 954.0460
</TABLE>
<TABLE>
<CAPTION>
PER SHARE PER SHARE TOTAL VALUE TOTAL RETURN
RECORD EX PAY DATE O INCOME CAP GAIN REINVESTMENT MONTH-END OF SHARES FROM FUND
DATE DATE MONTH END DIVIDEND DISTRIBUTION PRICE N.A.V. HELD INCEPTION
- ------------------ ------------- ------------ ------------ --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCEPTION OF FUND 07/25/89 $ 0.0000 $ 0.0000 $ 10.01 $ 10.01 $ 9,550.00 -4.50%
N/A N/A 07/31/89 $ 0.0000 $ 0.0000 10.02 10.02 9,559.54 -4.40%
N/A N/A 08/31/89 $ 0.0496 $ 0.0000 9.87 9.87 9,463.75 -5.36%
09/30/89 $ 0.0701 $ 0.0000 9.94 9.86 9,520.84 -4.79%
10/31/89 $ 0.0701 $ 0.0000 9.96 9.99 9,714.26 -2.86%
11/30/89 $ 0.0701 $ 0.0000 10.06 10.03 9,821.12 -1.79%
12/31/89 $ 0.0678 $ 0.0000 10.06 10.01 9,867.59 -1.32%
12/31/89 $ 0.0437 $ 0.0000 10.04 10.01 9,910.54 -0.89%
01/14/90 01/15/90 01/16/90 $ 0.0339 $ 0.0000 10.02 9.90 9,834.80 -1.65%
02/14/90 02/14/90 02/15/90 $ 0.0680 $ 0.0000 9.91 9.87 9,872.27 -1.28%
03/15/90 03/15/90 03/15/90 $ 0.0680 $ 0.0000 9.82 9.83 9,900.35 -1.00%
04/12/90 04/12/90 04/12/90 $ 0.0680 $ 0.0000 9.84 9.71 9,847.07 -1.53%
05/15/90 05/15/90 05/15/90 $ 0.0680 $ 0.0000 9.84 9.87 10,078.50 0.79%
06/14/90 06/15/90 06/15/90 $ 0.0680 $ 0.0000 9.93 9.93 10,209.21 2.09%
</TABLE>
FORMULA: TOTAL ENDING VALUE OF SHARES HELD - INITIAL INVESTMENT
RETURN = --------------------------------------------------
INITIAL INVESTMENT
<PAGE> 4
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
WITH 4.50% LOAD
FUND: GW U.S. GOVERNMENT SECURITIES FUND
n
FORMULA: P(1+T) = ERV
WHERE: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical
$1,000 payment made at the beginning of the 1,
5, or 10 year (or other) periods at the end of
the 1, 5, or 10 year (or other) periods (or
fractional portion thereof).
<TABLE>
<CAPTION>
AVERAGE
DATES ENDING ANNUAL RATE
PERIOD COVERED REDEEMABLE VALUE OF RETURN * FORMULA
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM FUND 07/25/89 $1,020.92 2.25% @RATE (1,020.92, 1,000, 0.93)
INCEPTION** to 06/30/90
</TABLE>
** Period = 0.93 Years
* LOTUS 123 @RATE function:
@RATE (fv, pv, term) The periodic interest rate necessary
for present value "pv", to grow to future value
"fv", over the number of compounding periods in
"term".
1/n
fv
-- - 1
pv
<PAGE> 5
30 DAY SEC YIELD COMPUTATION
FUND: GW California Municipal Income Fund (with 4.50% load)
PERIOD: June 1 - June 30, 1990
FORMULA: A-B 6
YIELD = 2 [ (---------------- + 1 ) - l ]
C*D
WHERE: A = Income for the period as defined by SEC rules
B = Expenses accrued for the period
C = The average daily number of shares
outstanding during the period that were
entitled to receive dividends
D = The maximum offering price per share on the
last day of the period.
FOR THE PERIOD INDICATED ABOVE, THESE FACTORS WERE:
A = $549,658.99
B = $55,658.364
C = $8,942,263.63
D = $10.46
YIELD = 6.42%
TAX EQUIVALENT YIELD WITH 4.50% LOAD
30 DAY SEC YIELD
- ----------------------
(1 - FEDERAL TAX RATE)
6.42%
- ------- = 8.92%
(1-28%)
<PAGE> 6
GW CALIFORNIA MUNICIPAL BOND FUND
TOTAL RETURN COMPUTATION FROM INCEPTION
DATE FUND ORGANIZED:
DATE OF FUND INCEPTI 07/25/89
FUND'S FISCAL YEAR-END:
<TABLE>
<CAPTION>
N.A.V. BEGINNING
INITIAL FRONT $ AMOUNT AT FUND NUMBER OF
INVESTMENT LOAD INVESTED INCEPTION SHARES HELD
- ---------- ------------ ---------- --------------- -----------
<S> <C> <C> <C> <C>
$10,000 4.50% $ 9,550 $ 10.00 955.0000
</TABLE>
<TABLE>
<CAPTION>
PER SHARE PER SHARE TOTAL VALUE TOTAL RETURN
RECORD EX PAY DATE O INCOME CAP GAIN REINVESTMENT MONTH-END OF SHARES FROM FUND
DATE DATE MONTH END DIVIDEND DISTRIBUTION PRICE N.A.V. HELD INCEPTION
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCEPTION OF FUND 07/25/89 $0.0000 $0.0000 $10.00 $10.00 $9,550.00 -4.50%
N/A N/A 07/31/89 $0.0000 $0.0000 10.08 10.08 9,626.40 -3.74%
N/A N/A 08/31/89 $0.0388 $0.0000 10.03 9.94 9,529.42 -4.71%
09/30/89 $0.0540 $0.0000 9.94 9.86 9,504.08 -4.96%
10/31/89 $0.0540 $0.0000 10.01 9.97 9,661.95 -3.38%
11/30/89 $0.0522 $0.0000 10.00 10.05 9,790.32 -2.10%
12/18/89 $0.0542 $0.0000 10.06 10.04 9,833.27 -1.67%
12/31/89 $0.0277 $0.0000 10.04 10.04 9,860.40 -1.40%
01/14/90 01/15/90 01/16/90 $0.0261 $0.0000 9.97 9.90 9,748.39 -2.52%
02/14/90 02/14/90 02/15/90 $0.0530 $0.0000 9.96 9.94 9,839.86 -1.60%
03/15/90 03/15/90 03/15/90 $0.0530 $0.0000 9.95 9.96 9,912.18 -0.88%
04/12/90 04/12/90 04/12/90 $0.0530 $0.0000 9.97 9.76 9,764.77 -2.35%
05/15/90 05/15/90 05/15/90 $0.0530 $0.0000 9.95 9.93 9,987.77 -0.12%
06/14/90 06/15/90 06/15/90 $0.0530 $0.0000 9.98 10.01 10,121.71 1.22%
</TABLE>
FORMULA: TOTAL ENDING VALUE OF SHARES HELD - INITIAL INVESTMENT
RETURN = --------------------------------------------------
INITIAL INVESTMENT
<PAGE> 7
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
WITH 4.50% LOAD
FUND: GW CALIFORNIA MUNICIPAL INCOME FUND
n
FORMULA: P(1+T) = ERV
WHERE: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical
$1,000 payment made at the beginning of the 1,
5, or 10 year (or other) periods at the end of
the 1, 5, or 10 year (or other) periods (or
fractional portion thereof).
<TABLE>
<CAPTION>
AVERAGE
DATES ENDING ANNUAL RATE
PERIOD COVERED REDEEMABLE VALUE OF RETURN * FORMULA
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM FUND 07/25/89 $1,012.17 1.31% @RATE (1,012.17, 1,000, 0.93)
INCEPTION** to 06/30/90
</TABLE>
** Period = 0.93 Years
* LOTUS 123 @RATE function:
@RATE (fv, pv, term) The periodic interest rate necessary
for present value "pv", to grow to future value "fv", over
the number of compounding periods in "term".
1/n
fv
-- - 1
pv
<PAGE> 8
GW GROWTH AND INCOME FUND
TOTAL RETURN COMPUTATION FROM INCEPTION
DATE FUND ORGANIZED:
DATE OF FUND INCEPTI 07/25/89
FUND'S FISCAL YEAR-END:
<TABLE>
<CAPTION>
N.A.V. BEGINNING
INITIAL FRONT $ AMOUNT AT FUND NUMBER OF
INVESTMENT LOAD INVESTED INCEPTION SHARES HELD
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
$10,000 4.50% $9,550 $10.00 955.0000
</TABLE>
<TABLE>
<CAPTION>
PER SHARE PER SHARE TOTAL VALUE TOTAL RETURN
RECORD PAY DATE O INCOME CAP GAIN REINVESTMENT MONTH-END OF SHARES FROM FUND
DATE EX DATE MONTH END DIVIDEND DISTRIBUTION PRICE N.A.V. HELD INCEPTION
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCEPTION OF FUND 07/25/89 $0.0000 $0.0000 $10.00 $10.00 $9,550.00 -4.50%
N/A N/A 07/31/89 $0.0000 $0.0000 10.03 10.03 9,578.65 -4.21%
N/A N/A 08/31/89 $0.0000 $0.0000 10.21 10.21 9,750.55 -2.49%
09/30/89 $0.0000 $0.0000 10.17 10.17 9,712.35 -2.88%
10/31/89 $0.0000 $0.0000 9.93 9.93 9,483.15 -5.17%
11/30/89 $0.0000 $0.0000 10.11 10.11 9,655.05 -3.45%
12/31/89 $0.0500 $0.0000 9.88 10.05 9,646.32 -3.54%
12/31/89 $0.0440 $0.0000 10.03 10.05 9,688.64 -3.11%
01/31/90 $0.0000 $0.0000 9.54 9.54 9,196.98 -8.03%
02/28/90 $0.0000 $0.0000 9.67 9.67 9,322.30 -6.78%
03/15/90 03/15/90 03/15/90 $0.0500 $0.0000 9.79 9.83 9,524.95 -4.75%
04/30/90 $0.0000 $0.0000 9.54 9.54 9,243.95 -7.56%
05/31/90 $0.0000 $0.0000 9.30 10.30 9,980.36 -0.20%
06/14/90 06/15/90 06/15/90 $0.0500 $0.0000 10.31 10.12 9,853.50 -1.46%
</TABLE>
FORMULA: TOTAL ENDING VALUE OF SHARES HELD - INITIAL INVESTMENT
RETURN = --------------------------------------------------
INITIAL INVESTMENT
<PAGE> 9
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
WITH 4.50% LOAD
FUND: GW GROWTH AND INCOME FUND
n
FORMULA: P(1+T) = ERV
WHERE: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical
$1,000 payment made at the beginning of the 1,
5, or 10 year (or other) periods at the end of
the 1, 5, or 10 year (or other) periods (or
fractional portion thereof).
<TABLE>
<CAPTION>
ENDING AVERAGE
DATES REDEEMABLE ANNUAL RATE
PERIOD COVERED VALUE OF RETURN * FORMULA
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM FUND 07/25/89 $985.35 -1.57% @RATE (985.35, 1,000, 0.93)
INCEPTION** to 06/30/90
</TABLE>
** Period = 0.93 Years
* LOTUS 123 @RATE function:
@RATE (fv, pv, term) The periodic interest rate necessary
for present value "pv", to grow to
future value "fv", over the number of
compounding periods in "term".
1/n
fv
-- - 1
pv
<PAGE> 10
GW EQUITY OPPORTUNITY FUND
TOTAL RETURN COMPUTATION FROM INCEPTION
DATE FUND ORGANIZED:
DATE OF FUND INCEPTI 07/18/90
FUND'S FISCAL YEAR-END:
<TABLE>
<CAPTION>
N.A.V. BEGINNING
INITIAL FRONT $ AMOUNT AT FUND NUMBER OF
INVESTMENT LOAD INVESTED INCEPTION SHARES HELD
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
$10,000 4.50% $9,550 $10.00 955.0000
</TABLE>
<TABLE>
<CAPTION>
PER SHARE PER SHARE TOTAL VALUE TOTAL RETURN
RECORD PAY DATE O INCOME CAP GAIN REINVESTMENT MONTH-END OF SHARES FROM FUND
DATE EX DATE MONTH END DIVIDEND DISTRIBUTION PRICE N.A.V. HELD INCEPTION
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCEPTION OF FUND 07/18/90 $0.0000 $0.0000 $10.00 $10.00 $9,550.00 -4.50%
N/A N/A 07/31/90 $0.0000 $0.0000 9.60 9.60 9,168.00 -8.32%
N/A N/A 08/31/90 $0.0000 $0.0000 8.52 8.52 8,136.60 -18.63%
09/30/90 $0.0000 $0.0000 7.81 7.81 7,458.55 -25.41%
10/31/90 $0.0000 $0.0000 7.62 7.62 7,277.10 -27.23%
</TABLE>
FORMULA: TOTAL ENDING VALUE OF SHARES HELD - INITIAL INVESTMENT
RETURN = --------------------------------------------------
INITIAL INVESTMENT
<PAGE> 11
GW EQUITY OPPORTUNITY FUND
TOTAL RETURN COMPUTATION FROM INCEPTION
DATE FUND ORGANIZED:
DATE OF FUND INCEPTI 07/18/90
FUND'S FISCAL YEAR-END:
<TABLE>
<CAPTION>
N.A.V. BEGINNING
INITIAL FRONT $ AMOUNT AT FUND NUMBER OF
INVESTMENT LOAD INVESTED INCEPTION SHARES HELD
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
$10,000 0.00% $10,000 $10.00 1000.0000
</TABLE>
<TABLE>
<CAPTION>
PER SHARE PER SHARE TOTAL VALUE TOTAL RETURN
RECORD PAY DATE O INCOME CAP GAIN REINVESTMENT MONTH-END OF SHARES FROM FUND
DATE EX DATE MONTH END DIVIDEND DISTRIBUTION PRICE N.A.V. HELD INCEPTION
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCEPTION OF FUND 07/18/90 $0.0000 $0.0000 $10.00 $10.00 $10,000.00 0.00%
N/A N/A 07/31/90 $0.0000 $0.0000 9.60 9.60 9,600.00 -4.00%
N/A N/A 08/31/90 $0.0000 $0.0000 8.52 8.52 8,520.00 -14.80%
09/30/90 $0.0000 $0.0000 7.81 7.81 7,810.00 -21.90%
10/31/90 $0.0000 $0.0000 7.62 7.62 7,620.00 -23.80%
</TABLE>
FORMULA: TOTAL ENDING VALUE OF SHARES HELD - INITIAL INVESTMENT
RETURN = --------------------------------------------------
INITIAL INVESTMENT
<PAGE> 12
GW STRATEGIC INTERNATIONAL FUND
TOTAL RETURN COMPUTATION FROM INCEPTION
DATE FUND ORGANIZED:
DATE OF FUND INCEPTI 07/18/90
FUND'S FISCAL YEAR-END:
<TABLE>
<CAPTION>
N.A.V. BEGINNING
INITIAL FRONT $ AMOUNT AT FUND NUMBER OF
INVESTMENT LOAD INVESTED INCEPTION SHARES HELD
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
$10,000 4.50% $9,550 $10.00 955.0000
</TABLE>
<TABLE>
<CAPTION>
PER SHARE PER SHARE TOTAL VALUE TOTAL RETURN
RECORD PAY DATE O INCOME CAP GAIN REINVESTMENT MONTH-END OF SHARES FROM FUND
DATE EX DATE MONTH END DIVIDEND DISTRIBUTION PRICE N.A.V. HELD INCEPTION
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCEPTION OF FUND 07/18/90 $0.0000 $0.0000 $10.00 $10.00 $9,550.00 -4.50%
N/A N/A 07/31/90 $0.0000 $0.0000 9.78 9.78 9,339.90 -6.60%
N/A N/A 08/31/90 $0.0000 $0.0000 8.69 8.69 8,298.95 -17.01%
09/30/90 $0.0000 $0.0000 7.76 7.76 7,410.80 -25.89%
10/31/90 $0.0000 $0.0000 8.73 8.73 8,337.15 -16.63%
</TABLE>
FORMULA: TOTAL ENDING VALUE OF SHARES HELD - INITIAL INVESTMENT
RETURN = --------------------------------------------------
INITIAL INVESTMENT
<PAGE> 13
GW STRATEGIC INTERNATIONAL FUND
TOTAL RETURN COMPUTATION FROM INCEPTION
DATE FUND ORGANIZED:
DATE OF FUND INCEPTI 07/18/90
FUND'S FISCAL YEAR-END:
<TABLE>
<CAPTION>
N.A.V. BEGINNING
INITIAL FRONT $ AMOUNT AT FUND NUMBER OF
INVESTMENT LOAD INVESTED INCEPTION SHARES HELD
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$10,000 0.00% $10,000 $ 10.00 1000.0000
</TABLE>
<TABLE>
<CAPTION>
PER SHARE PER SHARE TOTAL VALUE TOTAL RETURN
RECORD PAY DATE O INCOME CAP GAIN REINVESTMENT MONTH-END OF SHARES FROM FUND
DATE EX DATE MONTH END DIVIDEND DISTRIBUTION PRICE N.A.V. HELD INCEPTION
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCEPTION OF FUND 07/18/90 $0.0000 $0.0000 $10.00 $10.00 $10,000.00 0.00%
N/A N/A 07/31/90 $0.0000 $0.0000 9.78 9.78 9,780.00 -2.20%
N/A N/A 08/31/90 $0.0000 $0.0000 8.69 8.69 8,690.00 -13.10%
09/30/90 $0.0000 $0.0000 7.76 7.76 7,760.00 -22.40%
10/31/90 $0.0000 $0.0000 8.73 8.73 8,730.00 -12.70%
</TABLE>
FORMULA: TOTAL ENDING VALUE OF SHARES HELD - INITIAL INVESTMENT
RETURN = --------------------------------------------------
INITIAL INVESTMENT
<PAGE> 14
30 DAY SEC YIELD COMPUTATION
FUND: GW National Municipal Income Fund (with 4.50% load)
PERIOD: October 1 - October 31, 1990
FORMULA: A-B 6
YIELD = 2 [ (----------- + 1 ) - l ]
C*D
WHERE: A = Income for the period as defined by SEC rules
B = Expenses accrued for the period
C = The average daily number of shares
outstanding during the period that were
entitled to receive dividends
D = The maximum offering price per share on the
last day of the period.
FOR THE PERIOD INDICATED ABOVE, THESE FACTORS WERE:
A = $84,755.02
B = $8,902.55
C = $1,372,421.67
D = $10.21
YIELD = 6.58%
TAX EQUIVALENT YIELD WITH 4.50% LOAD
30 DAY SEC YIELD
- ----------------------
(1 - FEDERAL TAX RATE)
6.58%
---------- = 9.15%
(1-28%)
<PAGE> 15
GW NATIONAL MUNICIPAL INCOME FUND
TOTAL RETURN COMPUTATION FROM INCEPTION
DATE FUND ORGANIZED:
DATE OF FUND INCEPTI 07/18/90
FUND'S FISCAL YEAR-END:
<TABLE>
<CAPTION>
N.A.V. BEGINNING
INITIAL FRONT $ AMOUNT AT FUND NUMBER OF
INVESTMENT LOAD INVESTED INCEPTION SHARES HELD
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$10,000 4.50% $ 9,550 $ 10.00 955.0000
</TABLE>
<TABLE>
<CAPTION>
PER SHARE PER SHARE TOTAL VALUE TOTAL RETURN
RECORD PAY DATE O INCOME CAP GAIN REINVESTMENT MONTH-END OF SHARES FROM FUND
DATE EX DATE MONTH END DIVIDEND DISTRIBUTION PRICE N.A.V. HELD INCEPTION
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCEPTION OF FUND 07/18/90 $0.0000 $0.0000 $10.00 $10.00 $9,550.00 -4.50%
N/A N/A 07/31/90 $0.0000 $0.0000 10.06 10.05 9,597.75 -4.02%
N/A N/A 08/31/90 $0.0560 $0.0000 9.97 9.78 9,392.36 -6.08%
09/30/90 $0.0570 $0.0000 9.82 9.76 9,427.56 -5.72%
10/31/90 $0.0570 $0.0000 9.68 9.77 9,492.79 -5.07%
</TABLE>
FORMULA: TOTAL ENDING VALUE OF SHARES HELD - INITIAL INVESTMENT
RETURN = --------------------------------------------------
INITIAL INVESTMENT
<PAGE> 16
GW NATIONAL MUNICIPAL INCOME FUND
TOTAL RETURN COMPUTATION FROM INCEPTION
DATE FUND ORGANIZED:
DATE OF FUND INCEPTI 07/18/90
FUND'S FISCAL YEAR-END:
<TABLE>
<CAPTION>
N.A.V. BEGINNING
INITIAL FRONT $ AMOUNT AT FUND NUMBER OF
INVESTMENT LOAD INVESTED INCEPTION SHARES HELD
- ---------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
$10,000 0.00% $10,000 $10.00 1000.0000
</TABLE>
<TABLE>
<CAPTION>
PER SHARE PER SHARE TOTAL VALUE TOTAL RETURN
RECORD PAY DATE O INCOME CAP GAIN REINVESTMENT MONTH-END OF SHARES FROM FUND
DATE EX DATE MONTH END DIVIDEND DISTRIBUTION PRICE N.A.V. HELD INCEPTION
- ----------------- ------- --------- -------- ------------ ------------ --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCEPTION OF FUND 07/18/90 $0.0000 $0.0000 $10.00 $10.00 $10,000.00 0.00%
N/A N/A 07/31/90 $0.0000 $0.0000 10.06 10.05 10,050.00 0.50%
N/A N/A 08/31/90 $0.0560 $0.0000 9.97 9.78 9,834.93 -1.65%
09/30/90 $0.0570 $0.0000 9.82 9.76 9,871.79 -1.28%
10/31/90 $0.0570 $0.0000 9.68 9.77 9,940.00 -0.60%
</TABLE>
FORMULA: TOTAL = ENDING VALUE OF SHARES HELD - INITIAL INVESTMENT
RETURN ------------------------------------------------
INITIAL INVESTMENT
<PAGE> 17
30 DAY SEC YIELD COMPUTATION
FUND: GW Corporate Income Fund (with 4.50% load)
PERIOD: October 1 - October 31, 1990
FORMULA: A-B 6
YIELD = 2 [ (---------------- + 1 ) - l ]
C*D
WHERE: A = Income for the period as defined by SEC rules
B = Expenses accrued for the period
C = The average daily number of shares
outstanding during the period that were
entitled to receive dividends
D = The maximum offering price per share on the
last day of the period.
FOR THE PERIOD INDICATED ABOVE, THESE FACTORS WERE:
A = $116,505.87
B = $14,415.97
C = $1,314,627.21
D = $9.73
YIELD = 9.77%
<PAGE> 18
GW CORPORATE INCOME FUND
TOTAL RETURN COMPUTATION FROM INCEPTION
DATE FUND ORGANIZED:
DATE OF FUND INCEPTI 07/18/90
FUND'S FISCAL YEAR-END:
<TABLE>
<CAPTION>
N.A.V. BEGINNING
INITIAL FRONT $ AMOUNT AT FUND NUMBER OF
INVESTMENT LOAD INVESTED INCEPTION SHARES HELD
- ---------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
$10,000 4.50% $9,550 $10.00 955.0000
</TABLE>
<TABLE>
<CAPTION>
PER SHARE PER SHARE TOTAL VALUE TOTAL RETURN
RECORD PAY DATE O INCOME CAP GAIN REINVESTMENT MONTH-END OF SHARES FROM FUND
DATE EX DATE MONTH END DIVIDEND DISTRIBUTION PRICE N.A.V. HELD INCEPTION
- ----------------- ------- --------- -------- ------------ ------------ --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCEPTION OF FUND 07/18/90 $0.0000 $0.0000 $10.00 $10.00 $9,550.00 -4.50%
N/A N/A 07/31/90 $0.0000 $0.0000 10.06 10.05 9,597.75 -4.02%
N/A N/A 08/31/90 $0.0720 $0.0000 9.84 9.69 9,321.66 -6.78%
09/30/90 $0.0740 $0.0000 9.67 9.45 9,160.35 -8.40%
10/31/90 $0.0740 $0.0000 9.41 9.31 9,095.61 -9.04%
</TABLE>
FORMULA: TOTAL = ENDING VALUE OF SHARES HELD - INITIAL INVESTMENT
RETURN --------------------------------------------------
INITIAL INVESTMENT
<PAGE> 19
GW CORPORATE INCOME FUND
TOTAL RETURN COMPUTATION FROM INCEPTION
DATE FUND ORGANIZED:
DATE OF FUND INCEPTI 07/18/90
FUND'S FISCAL YEAR-END:
<TABLE>
<CAPTION>
N.A.V. BEGINNING
INITIAL FRONT $ AMOUNT AT FUND NUMBER OF
INVESTMENT LOAD INVESTED INCEPTION SHARES HELD
- ---------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
$10,000 0.00% $10,000 $10.00 1000.0000
</TABLE>
<TABLE>
<CAPTION>
PER SHARE PER SHARE TOTAL VALUE TOTAL RETURN
RECORD PAY DATE O INCOME CAP GAIN REINVESTMENT MONTH-END OF SHARES FROM FUND
DATE EX DATE MONTH END DIVIDEND DISTRIBUTION PRICE N.A.V. HELD INCEPTION
- ----------------- ------- --------- -------- ------------ ------------ --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCEPTION OF FUND 07/18/90 $0.0000 $0.0000 $10.00 $10.00 $10,000.00 0.00%
N/A N/A 07/31/90 $0.0000 $0.0000 10.06 10.05 10,050.00 0.50%
N/A N/A 08/31/90 $0.0720 $0.0000 9.84 9.69 9,760.90 -2.39%
09/30/90 $0.0740 $0.0000 9.67 9.45 9,591.99 -4.08%
10/31/90 $0.0740 $0.0000 9.41 9.31 9,524.20 -4.76%
</TABLE>
FORMULA: TOTAL = ENDING VALUE OF SHARES HELD - INITIAL INVESTMENT
RETURN --------------------------------------------------
INITIAL INVESTMENT
<PAGE> 1
Exhibit 16(e)
CERTAIN PERFORMANCE DATA RELATING TO THE
GW NATIONAL MUNICIPAL INCOME FUND,
GW CORPORATE INCOME FUND,
GW EQUITY OPPORTUNITY FUND AND
GW STRATEGIC INTERNATIONAL FUND
<PAGE> 2
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
WITH 4.50% LOAD
FUND: GW CORPORATE INCOME
n
FORMULA: P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10 year
(or other) periods at the end of the 1, 5, or 10 year
(or other) periods (or fractional portion thereof).
<TABLE>
<CAPTION>
ENDING AVERAGE
DATES REDEEMABLE ANNUAL RATE
PERIOD COVERED VALUE OF RETURN * FORMULA
- -------------- --------- ---------- ----------- ------------------------------
<S> <C> <C> <C> <C>
FROM FUND 07/18/90 $1,028.85 3.04% @RATE (1,028.85 , 1,000 , 0.95)
INCEPTION** to 06/30/91
</TABLE>
** Period = 0.95 Years
* LOTUS 123 @RATE function:
@RATE(fv, pv, term) The periodic interest rate necessary for
present value "pv", to grow to future
value "fv", over the number of
compounding periods in "term".
1/n
fv
-- - 1
pv
<PAGE> 3
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
WITHOUT LOAD
FUND: GW CORPORATE INCOME
n
FORMULA: P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10 year
(or other) periods at the end of the 1, 5, or 10 year
(or other) periods (or fractional portion thereof).
<TABLE>
<CAPTION>
ENDING AVERAGE
DATES REDEEMABLE ANNUAL RATE
PERIOD COVERED VALUE OF RETURN * FORMULA
- -------------- --------- ---------- ----------- ------------------------------
<S> <C> <C> <C> <C>
FROM FUND 07/18/90 $1,077.33 8.16% @RATE (1,077.33 , 1,000 , 0.95)
INCEPTION** to 06/30/91
</TABLE>
**Period = 0.95 Years
* LOTUS 123 @RATE function:
@RATE (fv, pv, term) The periodic interest rate
necessary for present value
"pv", to grow to future value
"fv", over the number of
compounding periods in "term".
1/n
fv
-- -1
pv
<PAGE> 4
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
WITH 4.50% LOAD
FUND: GW NATIONAL MUNI
n
FORMULA: P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10 year
(or other) periods at the end of the 1, 5, or 10 year
(or other) periods (or fractional portion thereof).
<TABLE>
<CAPTION>
ENDING AVERAGE
DATES REDEEMABLE ANNUAL RATE
PERIOD COVERED VALUE OF RETURN * FORMULA
- -------------- --------- ---------- ----------- ------------------------------
<S> <C> <C> <C> <C>
FROM FUND 07/18/90 $1,036.98 3.90% @RATE (1,036.98 , 1,000 , 0.95)
INCEPTION** to 06/30/91
</TABLE>
**Period = 0.95 Years
* LOTUS 123 @RATE function:
@RATE (fv, pv, term) The periodic interest rate
necessary for present value
"pv", to grow to future value
"fv", over the number of
compounding periods in "term".
1/n
fv
-- -1
pv
<PAGE> 5
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
WITHOUT LOAD
FUND: GW NATIONAL MUNI
n
FORMULA: P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10 year
(or other) periods at the end of the 1, 5, or 10 year
(or other) periods (or fractional portion thereof).
<TABLE>
<CAPTION>
ENDING AVERAGE
DATES REDEEMABLE ANNUAL RATE
PERIOD COVERED VALUE OF RETURN * FORMULA
- -------------- --------- ---------- ----------- ------------------------------
<S> <C> <C> <C> <C>
FROM FUND 07/18/90 $1,085.84 9.06% @RATE (1,085.84 , 1,000 , 0.95)
INCEPTION** to 06/30/91
</TABLE>
**Period = 0.95 Years
* LOTUS 123 @RATE function:
@RATE (fv, pv, term) The periodic interest rate
necessary for present value
"pv", to grow to future value
"fv", over the number of
compounding periods in "term".
1/n
fv
-- -1
pv
<PAGE> 6
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
WITH 4.50% LOAD
FUND: GW EQUITY OPPORTUNITY
n
FORMULA: P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10 year
(or other) periods at the end of the 1, 5, or 10 year
(or other) periods (or fractional portion thereof).
<TABLE>
<CAPTION>
ENDING AVERAGE
DATES REDEEMABLE ANNUAL RATE
PERIOD COVERED VALUE OF RETURN * FORMULA
- -------------- --------- ---------- ----------- ------------------------------
<S> <C> <C> <C> <C>
FROM FUND 07/18/90 $922.08 -8.18% @RATE (922.08 , 1,000 , 0.95)
INCEPTION** to 06/30/91
</TABLE>
**Period = 0.95 Years
* LOTUS 123 @RATE function:
@RATE (fv, pv, term) The periodic interest rate
necessary for present value
"pv", to grow to future value
"fv", over the number of
compounding periods in "term".
1/n
fv
-- -1
pv
<PAGE> 7
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
WITHOUT LOAD
FUND: GW EQUITY OPPORTUNITY
n
FORMULA: P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10 year
(or other) periods at the end of the 1, 5, or 10 year
(or other) periods (or fractional portion thereof).
<TABLE>
<CAPTION>
ENDING AVERAGE
DATES REDEEMABLE ANNUAL RATE
PERIOD COVERED VALUE OF RETURN * FORMULA
- -------------- --------- ---------- ----------- ------------------------------
<S> <C> <C> <C> <C>
FROM FUND 07/18/90 $965.53 -3.62% @RATE (965.53 , 1,000 , 0.95)
INCEPTION** to 06/30/91
</TABLE>
**Period = 0.95 Years
* LOTUS 123 @RATE function:
@RATE (fv, pv, term) The periodic interest rate
necessary for present value
"pv", to grow to future value
"fv", over the number of
compounding periods in "term".
1/n
fv
-- -1
pv
<PAGE> 8
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
WITH 4.50% LOAD
FUND: GW STRATEGIC INTERNATIONAL
FORMULA: P(1+T) n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10 year
(or other) periods at the end of the 1, 5, or 10 year
(or other) periods (or fractional portion thereof).
<TABLE>
<CAPTION>
ENDING AVERAGE
DATES REDEEMABLE ANNUAL RATE
PERIOD COVERED VALUE OF RETURN * FORMULA
- -------------- --------- ---------- ----------- ------------------------------
<S> <C> <C> <C> <C>
FROM FUND 07/18/90 $789.79 -22.00% @RATE (789.79 , 1,000 , 0.95)
INCEPTION** to 06/30/91
</TABLE>
** Period = 0.95 Years
* LOTUS 123 @RATE function:
@RATE (fv, pv, term) The periodic interest rate
necessary for present value
"pv", to grow to future value
"fv", over the number of
compounding periods in "term".
1/n
fv
-- - 1
pv
<PAGE> 9
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
WITHOUT LOAD
FUND: GW STRATEGIC INTERNATIONAL
FORMULA: P(1+T) n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the 1, 5, or 10 year
(or other) periods at the end of the 1, 5, or 10 year
(or other) periods (or fractional portion thereof).
<TABLE>
<CAPTION>
ENDING AVERAGE
DATES REDEEMABLE ANNUAL RATE
PERIOD COVERED VALUE OF RETURN * FORMULA
- -------------- --------- ---------- ----------- ------------------------------
<S> <C> <C> <C> <C>
FROM FUND 07/18/90 $827.00 -18.12% @RATE (827.00 , 1,000 , 0.95)
INCEPTION** to 06/30/91
</TABLE>
** Period = 0.95 Years
* LOTUS 123 @RATE function:
@RATE (fv, pv, term) The periodic interest rate
necessary for present value
"pv", to grow to future value
"fv", over the number of
compounding periods in "term".
1/n
fv
-- - 1
pv
<PAGE> 1
Exhibit 18
SIERRA TRUST FUNDS
RULE 18F-3
MULTIPLE CLASS PLAN
JUNE 13, 1995
INTRODUCTION
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,
International Growth Fund and Target Maturity 2002 Fund and any other series
investment fund offered by Sierra Trust Funds (the "Company") from time to time,
(each, a "Fund," and collectively, the "Funds"), have elected to rely on Rule
18f-3 under the Investment Company Act of 1940, as amended (the "1940 Act") in
offering multiple classes of units of beneficial interest ("shares") in each
Fund with differing distribution and/or servicing arrangements and voting
rights. This Multiple Class Plan (the "Plan") sets forth the differences among
classes, including shareholder services, distribution arrangements, expense
allocations, and conversion or exchange options.
A. ATTRIBUTES OF SHARE CLASSES
The rights of each existing class of the Funds are not being changed
hereby, and shall be as set forth in the resolutions and related materials of
the Company's Board of Trustees adopted pursuant to the order dated March 22,
1994, obtained by Sierra Trust Funds et al., and applicable to the Funds (Inv.
Co. Act Release No. IC-20153), as set forth in Exhibit A hereto.
With respect to any class of shares of a Fund, the following
requirements shall apply. Each share of a Fund must represent an equal pro rata
interest in the Fund and must have identical voting, dividend, liquidation and
other rights, preferences, powers, restrictions, limitations, qualifications,
designations and terms and conditions, except that: (i) each new class must have
a different class name or other designation that identifies the class as
separate from any other class of the same Fund; (ii) each class must separately
bear any distribution expenses ("distribution fees") in connection with a plan
adopted pursuant to Rule 12b-1 under the 1940 Act (a "Rule 12b-1 Plan") and must
separately bear any expenses associated with any non-Rule l2b-1 Plan service
payments ("service fees") that are made under any servicing agreement entered
into with respect to that class; (iii) each new class of shares may bear,
consistent with rulings and other
<PAGE> 2
published statements of position by the Internal Revenue Service, the expenses
of the Fund's operations which are directly attributable to such class ("Class
Expenses")1/; and (iv) holders of the shares of the class shall have exclusive
voting rights regarding the Rule 12b-1 Plan and the servicing agreements
relating to such class, and shall have separate voting rights on any matter
submitted to shareholders in which the interests of that class differ from the
interests of any other class.
B. EXPENSE ALLOCATIONS
Expenses of each class created after the date hereof must be allocated
as follows: (i) distribution and shareholder servicing payments associated with
any Rule 12b-1 Plan or non-Rule 12b-1 servicing agreement relating to each class
of shares will be borne exclusively by that class; (ii) any incremental transfer
agency fees relating to a particular class will be borne exclusively by that
class; and (iii) Class Expenses relating to a particular class will be borne
exclusively by that class.
The methodology and procedures for calculating the net asset value of
the various classes of shares and the proper allocation of income and expenses
among the various classes of shares shall be as set forth in Exhibit D
"Methodology To Be Used For Net Asset Value ("NAV") And Dividend And
Distribution Determinations" (the "Methodology") and the accompanying report of
Price Waterhouse LLP (the "Report") as set forth in Exhibit E of the Second
Amended and Restated Application for Exemption filed with the Securities and
Exchange Commission on March 14, 1994. The Report states that the policies and
procedures are suitably designed to provide reasonable assurance that the
specified control objectives would be achieved if the described policies and
procedures were
- ----------
1/ Class Expenses are limited to any or all of the following: (i) transfer
agent fees identified as being attributable to a specific class of
shares, (ii) stationery, printing, postage, and delivery expenses
related to preparing and distributing materials such as shareholder
reports, prospectuses, and proxy statements to current shareholders of
a specific class, (iii) Blue Sky registration fees incurred by a class
of shares, (iv) SEC registration fees incurred by a class of shares,
(v) expenses of administrative personnel and services as required to
support the shareholders of a specific class, (vi) directors, fees or
expenses incurred as a result of issues relating to one class of
shares, (vii) account expenses relating solely to one class of shares,
(viii) auditors' fees, litigation expenses, and legal fees and expenses
relating to a class of shares, and (ix) expenses incurred in connection
with shareholder meetings as a result of issues relating to one class
of shares.
<PAGE> 3
complied with satisfactorily. The Methodology and Report are attached hereto as
Exhibits B and C, respectively.
C. AMENDMENT OF PLAN; PERIODIC REVIEW
This Plan must be amended to properly describe (through additional
exhibits hereto or otherwise) each additional class of shares approved by the
Company's Board of Trustees after the date hereof.
The Company's Board of Trustees, including a majority of the
independent Trustees, must periodically review this Plan for its continued
appropriateness, and must approve any material amendment of the Plan as it
relates to any class of any Fund covered by the Plan.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> SIERRA TRUST GLOBAL MONEY CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 190,219,001
<INVESTMENTS-AT-VALUE> 190,219,001
<RECEIVABLES> 2,694,405
<ASSETS-OTHER> 6,013
<OTHER-ITEMS-ASSETS> 109,268
<TOTAL-ASSETS> 193,028,687
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,501,118
<TOTAL-LIABILITIES> 1,501,118
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 104,650,207
<SHARES-COMMON-STOCK> 104,654,469
<SHARES-COMMON-PRIOR> 153,677,036
<ACCUMULATED-NII-CURRENT> 368
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20,439
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 104,301,904
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,691,001
<OTHER-INCOME> 0
<EXPENSES-NET> 1,332,276
<NET-INVESTMENT-INCOME> 8,358,725
<REALIZED-GAINS-CURRENT> 28,755
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 8,387,480
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,014,055)
<DISTRIBUTIONS-OF-GAINS> (6,663)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 432,669,575
<NUMBER-OF-SHARES-REDEEMED> (487,335,380)
<SHARES-REINVESTED> 5,643,238
<NET-CHANGE-IN-ASSETS> 16,471,185
<ACCUMULATED-NII-PRIOR> 8,033
<ACCUMULATED-GAINS-PRIOR> 969
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 701,336
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,033,516
<AVERAGE-NET-ASSETS> 125,822,670
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> (0.00)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> SIERRA TRUST GLOBAL MONEY CL-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 190,219,001
<INVESTMENTS-AT-VALUE> 190,219,001
<RECEIVABLES> 2,694,405
<ASSETS-OTHER> 6,013
<OTHER-ITEMS-ASSETS> 109,268
<TOTAL-ASSETS> 193,028,687
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,501,118
<TOTAL-LIABILITIES> 1,501,118
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,308,787
<SHARES-COMMON-STOCK> 1,308,787
<SHARES-COMMON-PRIOR> 421,783
<ACCUMULATED-NII-CURRENT> 368
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20,439
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,314,349
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,691,001
<OTHER-INCOME> 0
<EXPENSES-NET> 1,332,276
<NET-INVESTMENT-INCOME> 8,358,725
<REALIZED-GAINS-CURRENT> 28,755
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 8,387,480
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (35,704)
<DISTRIBUTIONS-OF-GAINS> (47)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,657,885
<NUMBER-OF-SHARES-REDEEMED> (1,800,407)
<SHARES-REINVESTED> 29,526
<NET-CHANGE-IN-ASSETS> 16,471,185
<ACCUMULATED-NII-PRIOR> 8,033
<ACCUMULATED-GAINS-PRIOR> 969
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 701,336
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,033,516
<AVERAGE-NET-ASSETS> 882,194
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> (0.00)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 013
<NAME> SIERRA TRUST GLOBAL MONEY CL-S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 190,219,001
<INVESTMENTS-AT-VALUE> 190,219,001
<RECEIVABLES> 2,694,405
<ASSETS-OTHER> 6,013
<OTHER-ITEMS-ASSETS> 109,268
<TOTAL-ASSETS> 193,028,687
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,501,118
<TOTAL-LIABILITIES> 1,501,118
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,879,685
<SHARES-COMMON-STOCK> 6,879,685
<SHARES-COMMON-PRIOR> 20,952,825
<ACCUMULATED-NII-CURRENT> 368
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20,439
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,908,921
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,691,001
<OTHER-INCOME> 0
<EXPENSES-NET> 1,332,276
<NET-INVESTMENT-INCOME> 8,358,725
<REALIZED-GAINS-CURRENT> 28,755
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 8,387,480
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (524,764)
<DISTRIBUTIONS-OF-GAINS> (689)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,644,275
<NUMBER-OF-SHARES-REDEEMED> (22,223,883)
<SHARES-REINVESTED> 506,468
<NET-CHANGE-IN-ASSETS> 16,471,185
<ACCUMULATED-NII-PRIOR> 8,033
<ACCUMULATED-GAINS-PRIOR> 969
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 701,336
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,033,516
<AVERAGE-NET-ASSETS> 13,011,325
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> (0.00)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 014
<NAME> SIERRA TRUST GLOBAL MONEY CL-I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 190,219,001
<INVESTMENTS-AT-VALUE> 190,219,001
<RECEIVABLES> 2,694,405
<ASSETS-OTHER> 6,013
<OTHER-ITEMS-ASSETS> 109,268
<TOTAL-ASSETS> 193,028,687
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,501,118
<TOTAL-LIABILITIES> 1,501,118
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 78,668,083
<SHARES-COMMON-STOCK> 78,668,083
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 368
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20,439
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 79,002,395
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,691,001
<OTHER-INCOME> 0
<EXPENSES-NET> 1,332,276
<NET-INVESTMENT-INCOME> 8,358,725
<REALIZED-GAINS-CURRENT> 28,755
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 8,387,480
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,791,867)
<DISTRIBUTIONS-OF-GAINS> (1,886)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 81,006,393
<NUMBER-OF-SHARES-REDEEMED> (2,338,310)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 16,471,185
<ACCUMULATED-NII-PRIOR> 8,033
<ACCUMULATED-GAINS-PRIOR> 969
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 701,336
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,033,516
<AVERAGE-NET-ASSETS> 38,124,231
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> (0.00)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 021
<NAME> SIERRA TRUST US GOVT MONEY CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 33,653,549
<INVESTMENTS-AT-VALUE> 33,653,549
<RECEIVABLES> 675,827
<ASSETS-OTHER> 1,664
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34,331,040
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,664,297
<TOTAL-LIABILITIES> 1,664,297
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30,524,873
<SHARES-COMMON-STOCK> 30,529,135
<SHARES-COMMON-PRIOR> 39,043,239
<ACCUMULATED-NII-CURRENT> 7,444
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (14,487)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 30,518,573
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,835,588
<OTHER-INCOME> 0
<EXPENSES-NET> 296,911
<NET-INVESTMENT-INCOME> 1,538,677
<REALIZED-GAINS-CURRENT> 1,221
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,539,898
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,489,830)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 195,434,265
<NUMBER-OF-SHARES-REDEEMED> (205,320,545)
<SHARES-REINVESTED> 1,372,176
<NET-CHANGE-IN-ASSETS> (6,914,582)
<ACCUMULATED-NII-PRIOR> 7,444
<ACCUMULATED-GAINS-PRIOR> (15,708)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 135,916
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 415,149
<AVERAGE-NET-ASSETS> 32,719,491
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 022
<NAME> SIERRA TRUST US GOVT MONEY CL-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 33,653,549
<INVESTMENTS-AT-VALUE> 33,653,549
<RECEIVABLES> 675,827
<ASSETS-OTHER> 1,664
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34,331,040
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,664,297
<TOTAL-LIABILITIES> 1,664,297
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,802,096
<SHARES-COMMON-STOCK> 1,802,096
<SHARES-COMMON-PRIOR> 111,719
<ACCUMULATED-NII-CURRENT> 7,444
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (14,487)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,801,472
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,835,588
<OTHER-INCOME> 0
<EXPENSES-NET> 296,911
<NET-INVESTMENT-INCOME> 1,538,677
<REALIZED-GAINS-CURRENT> 1,221
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,539,898
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (34,499)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 28,086,537
<NUMBER-OF-SHARES-REDEEMED> (26,421,345)
<SHARES-REINVESTED> 25,185
<NET-CHANGE-IN-ASSETS> (6,914,582)
<ACCUMULATED-NII-PRIOR> 7,444
<ACCUMULATED-GAINS-PRIOR> (15,708)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 135,916
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 415,149
<AVERAGE-NET-ASSETS> 889,066
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 023
<NAME> SIERRA TRUST US GOVT MONEY CL-S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 33,653,549
<INVESTMENTS-AT-VALUE> 33,653,549
<RECEIVABLES> 675,827
<ASSETS-OTHER> 1,664
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34,331,040
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,664,297
<TOTAL-LIABILITIES> 1,664,297
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 345,772
<SHARES-COMMON-STOCK> 345,772
<SHARES-COMMON-PRIOR> 438,893
<ACCUMULATED-NII-CURRENT> 7,444
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (14,487)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 345,652
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,835,588
<OTHER-INCOME> 0
<EXPENSES-NET> 296,911
<NET-INVESTMENT-INCOME> 1,538,677
<REALIZED-GAINS-CURRENT> 1,221
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,539,898
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14,303
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,927,941
<NUMBER-OF-SHARES-REDEEMED> (5,034,843)
<SHARES-REINVESTED> 13,781
<NET-CHANGE-IN-ASSETS> (6,914,582)
<ACCUMULATED-NII-PRIOR> 7,444
<ACCUMULATED-GAINS-PRIOR> 15,708
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 135,916
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 415,149
<AVERAGE-NET-ASSETS> 369,340
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 024
<NAME> SIERRA TRUST US GOVT MONEY CL-I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 33,653,549
<INVESTMENTS-AT-VALUE> 33,653,549
<RECEIVABLES> 675,827
<ASSETS-OTHER> 1,664
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34,331,040
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,664,297
<TOTAL-LIABILITIES> 1,664,297
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,045
<SHARES-COMMON-STOCK> 1,045
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 7,444
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (14,487)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,046
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,835,588
<OTHER-INCOME> 0
<EXPENSES-NET> 296,911
<NET-INVESTMENT-INCOME> 1,538,677
<REALIZED-GAINS-CURRENT> 1,221
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,539,898
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (45)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 45
<NET-CHANGE-IN-ASSETS> (6,914,582)
<ACCUMULATED-NII-PRIOR> 7,444
<ACCUMULATED-GAINS-PRIOR> (15,708)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 135,916
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 415,149
<AVERAGE-NET-ASSETS> 1,020
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 031
<NAME> SIERRA TRUST CALIFORNIA MONEY CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 40,085,484
<INVESTMENTS-AT-VALUE> 40,085,484
<RECEIVABLES> 1,503,214
<ASSETS-OTHER> 5,411
<OTHER-ITEMS-ASSETS> 3,539,772
<TOTAL-ASSETS> 45,133,881
<PAYABLE-FOR-SECURITIES> 2,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 140,866
<TOTAL-LIABILITIES> 2,140,866
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,961,770
<SHARES-COMMON-STOCK> 42,964,966
<SHARES-COMMON-PRIOR> 51,252,924
<ACCUMULATED-NII-CURRENT> 2,363
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (40,974)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 42,923,227
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,683,921
<OTHER-INCOME> 0
<EXPENSES-NET> 398,281
<NET-INVESTMENT-INCOME> 1,285,640
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,285,640
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,284,111)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 33,810,325
<NUMBER-OF-SHARES-REDEEMED> (43,341,830)
<SHARES-REINVESTED> 1,243,547
<NET-CHANGE-IN-ASSETS> (8,375,797)
<ACCUMULATED-NII-PRIOR> 2,363
<ACCUMULATED-GAINS-PRIOR> (40,974)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 187,084
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 533,776
<AVERAGE-NET-ASSETS> 46,694,607
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 032
<NAME> SIERRA TRUST CALIFORNIA MONEY CL-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 40,085,484
<INVESTMENTS-AT-VALUE> 40,085,484
<RECEIVABLES> 1,503,214
<ASSETS-OTHER> 5,411
<OTHER-ITEMS-ASSETS> 3,539,772
<TOTAL-ASSETS> 45,133,881
<PAYABLE-FOR-SECURITIES> 2,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 140,866
<TOTAL-LIABILITIES> 2,140,866
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 67,673
<SHARES-COMMON-STOCK> 67,673
<SHARES-COMMON-PRIOR> 147,265
<ACCUMULATED-NII-CURRENT> 2,363
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (40,974)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 67,607
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,683,921
<OTHER-INCOME> 0
<EXPENSES-NET> 398,281
<NET-INVESTMENT-INCOME> 1,285,640
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,285,640
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,373)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,200
<NUMBER-OF-SHARES-REDEEMED> (83,133)
<SHARES-REINVESTED> 1,341
<NET-CHANGE-IN-ASSETS> (8,375,797)
<ACCUMULATED-NII-PRIOR> 2,363
<ACCUMULATED-GAINS-PRIOR> (40,974)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 187,084
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 553,776
<AVERAGE-NET-ASSETS> 68,888
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 033
<NAME> SIERRA TRUST CALIFORNIA MONEY CL-S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 40,085,484
<INVESTMENTS-AT-VALUE> 40,085,484
<RECEIVABLES> 1,503,214
<ASSETS-OTHER> 5,411
<OTHER-ITEMS-ASSETS> 3,539,772
<TOTAL-ASSETS> 45,133,881
<PAYABLE-FOR-SECURITIES> 2,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 140,866
<TOTAL-LIABILITIES> 2,140,866
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,154
<SHARES-COMMON-STOCK> 1,154
<SHARES-COMMON-PRIOR> 10,430
<ACCUMULATED-NII-CURRENT> 2,363
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (40,974)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,153
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,683,921
<OTHER-INCOME> 0
<EXPENSES-NET> 398,281
<NET-INVESTMENT-INCOME> 1,285,640
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,285,640
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (125)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (9,400)
<SHARES-REINVESTED> 124
<NET-CHANGE-IN-ASSETS> (8,375,797)
<ACCUMULATED-NII-PRIOR> 2,363
<ACCUMULATED-GAINS-PRIOR> (40,974)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 187,084
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 533,776
<AVERAGE-NET-ASSETS> 6,407
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 034
<NAME> SIERRA TRUST CALIFORNIA MONEY CL-I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 40,085,484
<INVESTMENTS-AT-VALUE> 40,085,484
<RECEIVABLES> 1,503,214
<ASSETS-OTHER> 5,411
<OTHER-ITEMS-ASSETS> 3,539,772
<TOTAL-ASSETS> 45,133,881
<PAYABLE-FOR-SECURITIES> 2,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 140,866
<TOTAL-LIABILITIES> 2,140,866
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,029
<SHARES-COMMON-STOCK> 1,029
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,363
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (40,974)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,028
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,683,921
<OTHER-INCOME> 0
<EXPENSES-NET> 398,281
<NET-INVESTMENT-INCOME> 1,285,640
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,285,640
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (31)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,000
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 29
<NET-CHANGE-IN-ASSETS> (8,375,797)
<ACCUMULATED-NII-PRIOR> 2,363
<ACCUMULATED-GAINS-PRIOR> (40,974)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 187,084
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 533,776
<AVERAGE-NET-ASSETS> 1,012
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 141
<NAME> SIERRA TRUST ST HIGH QUALITY BD CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 20,055,099
<INVESTMENTS-AT-VALUE> 20,156,215
<RECEIVABLES> 188,237
<ASSETS-OTHER> 1,527
<OTHER-ITEMS-ASSETS> 26,277
<TOTAL-ASSETS> 20,372,256
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 142,282
<TOTAL-LIABILITIES> 142,282
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,011,969
<SHARES-COMMON-STOCK> 5,898,076
<SHARES-COMMON-PRIOR> 13,985,174
<ACCUMULATED-NII-CURRENT> 16,879
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,637,456)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 86,124
<NET-ASSETS> 13,685,006
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,245,073
<OTHER-INCOME> 0
<EXPENSES-NET> 279,327
<NET-INVESTMENT-INCOME> 1,965,746
<REALIZED-GAINS-CURRENT> (460,363)
<APPREC-INCREASE-CURRENT> 308,395
<NET-CHANGE-FROM-OPS> 1,813,778
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,327,651)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,042,539
<NUMBER-OF-SHARES-REDEEMED> (9,497,646)
<SHARES-REINVESTED> 368,009
<NET-CHANGE-IN-ASSETS> (19,177,752)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,303,060)
<OVERDISTRIB-NII-PRIOR> (60,622)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 153,348
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 474,697
<AVERAGE-NET-ASSETS> 21,844,963
<PER-SHARE-NAV-BEGIN> 2.32
<PER-SHARE-NII> 0.14
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.14)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 2.32
<EXPENSE-RATIO> 0.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 142
<NAME> SIERRA TRUST ST HIGH QUALITY BD CL-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 20,055,099
<INVESTMENTS-AT-VALUE> 20,156,215
<RECEIVABLES> 188,237
<ASSETS-OTHER> 1,527
<OTHER-ITEMS-ASSETS> 26,277
<TOTAL-ASSETS> 20,372,256
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 142,282
<TOTAL-LIABILITIES> 142,282
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,993,720
<SHARES-COMMON-STOCK> 1,290,338
<SHARES-COMMON-PRIOR> 1,482,673
<ACCUMULATED-NII-CURRENT> 16,879
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,637,456)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 86,124
<NET-ASSETS> 2,993,682
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,245,073
<OTHER-INCOME> 0
<EXPENSES-NET> 279,327
<NET-INVESTMENT-INCOME> 1,965,746
<REALIZED-GAINS-CURRENT> (460,363)
<APPREC-INCREASE-CURRENT> 308,395
<NET-CHANGE-FROM-OPS> 1,813,778
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (173,000)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 254,315
<NUMBER-OF-SHARES-REDEEMED> (502,572)
<SHARES-REINVESTED> 55,922
<NET-CHANGE-IN-ASSETS> (19,177,752)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,303,060)
<OVERDISTRIB-NII-PRIOR> (60,622)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 153,348
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 474,697
<AVERAGE-NET-ASSETS> 3,297,641
<PER-SHARE-NAV-BEGIN> 2.32
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 2.32
<EXPENSE-RATIO> 1.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 143
<NAME> SIERRA TRUST ST HIGH QUALITY BD CL-S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 20,055,099
<INVESTMENTS-AT-VALUE> 20,156,215
<RECEIVABLES> 188,237
<ASSETS-OTHER> 1,527
<OTHER-ITEMS-ASSETS> 26,277
<TOTAL-ASSETS> 20,372,256
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 142,282
<TOTAL-LIABILITIES> 142,282
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 958,441
<SHARES-COMMON-STOCK> 344,729
<SHARES-COMMON-PRIOR> 1,522,546
<ACCUMULATED-NII-CURRENT> 16,879
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,637,456)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 86,124
<NET-ASSETS> 799,784
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,245,073
<OTHER-INCOME> 0
<EXPENSES-NET> 279,327
<NET-INVESTMENT-INCOME> 1,965,746
<REALIZED-GAINS-CURRENT> (460,363)
<APPREC-INCREASE-CURRENT> 308,395
<NET-CHANGE-FROM-OPS> 1,813,778
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (97,246)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 108,858
<NUMBER-OF-SHARES-REDEEMED> (1,316,825)
<SHARES-REINVESTED> 30,150
<NET-CHANGE-IN-ASSETS> (19,177,752)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,303,060)
<OVERDISTRIB-NII-PRIOR> (60,622)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 153,348
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 474,697
<AVERAGE-NET-ASSETS> 1,817,127
<PER-SHARE-NAV-BEGIN> 2.32
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 2.32
<EXPENSE-RATIO> 1.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 144
<NAME> SIERRA TRUST ST HIGH QUALITY BD CL-I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 20,055,099
<INVESTMENTS-AT-VALUE> 20,156,215
<RECEIVABLES> 188,237
<ASSETS-OTHER> 1,527
<OTHER-ITEMS-ASSETS> 26,277
<TOTAL-ASSETS> 20,372,256
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 142,282
<TOTAL-LIABILITIES> 142,282
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,800,297
<SHARES-COMMON-STOCK> 1,185,878
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 16,879
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,637,456)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 86,124
<NET-ASSETS> 2,751,502
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,245,073
<OTHER-INCOME> 0
<EXPENSES-NET> 279,327
<NET-INVESTMENT-INCOME> 1,965,746
<REALIZED-GAINS-CURRENT> (460,363)
<APPREC-INCREASE-CURRENT> 308,395
<NET-CHANGE-FROM-OPS> 1,813,778
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (227,346)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,412,404
<NUMBER-OF-SHARES-REDEEMED> (2,226,526)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (19,177,752)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1,303,060)
<OVERDISTRIB-NII-PRIOR> (60,622)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 153,348
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 474,697
<AVERAGE-NET-ASSETS> 3,970,455
<PER-SHARE-NAV-BEGIN> 2.32
<PER-SHARE-NII> 0.14
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.14)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 2.32
<EXPENSE-RATIO> 0.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 111
<NAME> SIERRA TRUST SHORT TERM GLOB GOVT CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 50,819,677
<INVESTMENTS-AT-VALUE> 49,424,551
<RECEIVABLES> 1,589,720
<ASSETS-OTHER> 5,086
<OTHER-ITEMS-ASSETS> 165,642
<TOTAL-ASSETS> 51,184,999
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 390,829
<TOTAL-LIABILITIES> 390,829
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44,047,615
<SHARES-COMMON-STOCK> 19,252,637
<SHARES-COMMON-PRIOR> 28,740,543
<ACCUMULATED-NII-CURRENT> 3,232,202
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2,059,526)
<ACCUM-APPREC-OR-DEPREC> (861,022)
<NET-ASSETS> 44,255,652
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,471,922
<OTHER-INCOME> 0
<EXPENSES-NET> 564,253
<NET-INVESTMENT-INCOME> 3,907,669
<REALIZED-GAINS-CURRENT> 4,777,708
<APPREC-INCREASE-CURRENT> (3,374,878)
<NET-CHANGE-FROM-OPS> 5,310,499
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,433,267)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,126,127
<NUMBER-OF-SHARES-REDEEMED> (11,829,475)
<SHARES-REINVESTED> 1,215,442
<NET-CHANGE-IN-ASSETS> (18,737,218)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (209,594)
<OVERDIST-NET-GAINS-PRIOR> (2,677,835)
<GROSS-ADVISORY-FEES> 394,684
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 935,929
<AVERAGE-NET-ASSETS> 54,988,292
<PER-SHARE-NAV-BEGIN> 2.29
<PER-SHARE-NII> 0.15
<PER-SHARE-GAIN-APPREC> 0.05
<PER-SHARE-DIVIDEND> (0.19)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 2.30
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 112
<NAME> SIERRA TRUST SHORT TERM GLOB GOVT CL-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 50,819,677
<INVESTMENTS-AT-VALUE> 49,424,551
<RECEIVABLES> 1,589,720
<ASSETS-OTHER> 5,086
<OTHER-ITEMS-ASSETS> 165,642
<TOTAL-ASSETS> 51,184,999
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 390,829
<TOTAL-LIABILITIES> 390,829
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,287,333
<SHARES-COMMON-STOCK> 1,014,294
<SHARES-COMMON-PRIOR> 697,118
<ACCUMULATED-NII-CURRENT> 3,232,202
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2,059,526)
<ACCUM-APPREC-OR-DEPREC> (861,022)
<NET-ASSETS> 2,331,382
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,471,922
<OTHER-INCOME> 0
<EXPENSES-NET> 564,253
<NET-INVESTMENT-INCOME> 3,907,669
<REALIZED-GAINS-CURRENT> 4,777,708
<APPREC-INCREASE-CURRENT> (3,374,878)
<NET-CHANGE-FROM-OPS> 5,310,499
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (150,137)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 571,754
<NUMBER-OF-SHARES-REDEEMED> (304,570)
<SHARES-REINVESTED> 49,992
<NET-CHANGE-IN-ASSETS> (18,737,218)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (209,594)
<OVERDIST-NET-GAINS-PRIOR> (2,677,835)
<GROSS-ADVISORY-FEES> 394,684
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 935,929
<AVERAGE-NET-ASSETS> 2,086,173
<PER-SHARE-NAV-BEGIN> 2.29
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 0.05
<PER-SHARE-DIVIDEND> (0.17)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 2.30
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 113
<NAME> SIERRA TRUST SHORT TERM GLOB GOVT CL-S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 50,819,677
<INVESTMENTS-AT-VALUE> 49,424,551
<RECEIVABLES> 1,589,720
<ASSETS-OTHER> 5,086
<OTHER-ITEMS-ASSETS> 165,642
<TOTAL-ASSETS> 51,184,999
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 390,829
<TOTAL-LIABILITIES> 390,829
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 362,119
<SHARES-COMMON-STOCK> 206,038
<SHARES-COMMON-PRIOR> 966,831
<ACCUMULATED-NII-CURRENT> 3,232,202
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2,059,526)
<ACCUM-APPREC-OR-DEPREC> (861,022)
<NET-ASSETS> 473,579
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,471,922
<OTHER-INCOME> 0
<EXPENSES-NET> 564,253
<NET-INVESTMENT-INCOME> 3,907,669
<REALIZED-GAINS-CURRENT> 4,777,708
<APPREC-INCREASE-CURRENT> (3,374,878)
<NET-CHANGE-FROM-OPS> 5,310,499
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (65,366)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 127,421
<NUMBER-OF-SHARES-REDEEMED> (909,052)
<SHARES-REINVESTED> 20,838
<NET-CHANGE-IN-ASSETS> (18,737,218)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (209,594)
<OVERDIST-NET-GAINS-PRIOR> (2,677,835)
<GROSS-ADVISORY-FEES> 394,684
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 935,929
<AVERAGE-NET-ASSETS> 1,002,236
<PER-SHARE-NAV-BEGIN> 2.29
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 0.05
<PER-SHARE-DIVIDEND> (0.17)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 2.30
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 114
<NAME> SIERRA TRUST SHORT TERM GLOB CL-I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 50,819,677
<INVESTMENTS-AT-VALUE> 49,424,551
<RECEIVABLES> 1,589,720
<ASSETS-OTHER> 5,086
<OTHER-ITEMS-ASSETS> 165,642
<TOTAL-ASSETS> 51,184,999
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 390,829
<TOTAL-LIABILITIES> 390,829
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,785,449
<SHARES-COMMON-STOCK> 1,624,325
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3,232,202
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2,059,526)
<ACCUM-APPREC-OR-DEPREC> (861,022)
<NET-ASSETS> 3,733,557
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,471,922
<OTHER-INCOME> 0
<EXPENSES-NET> 564,253
<NET-INVESTMENT-INCOME> 3,907,669
<REALIZED-GAINS-CURRENT> 4,777,708
<APPREC-INCREASE-CURRENT> (3,374,878)
<NET-CHANGE-FROM-OPS> 5,310,499
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (239,874)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,307,924
<NUMBER-OF-SHARES-REDEEMED> (683,599)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (18,737,218)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (209,594)
<OVERDIST-NET-GAINS-PRIOR> (2,677,835)
<GROSS-ADVISORY-FEES> 394,684
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 935,929
<AVERAGE-NET-ASSETS> 2,829,829
<PER-SHARE-NAV-BEGIN> 2.29
<PER-SHARE-NII> 0.14
<PER-SHARE-GAIN-APPREC> 0.05
<PER-SHARE-DIVIDEND> (0.18)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 2.30
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 041
<NAME> SIERRA TRUST US GOVT CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 474,836,318
<INVESTMENTS-AT-VALUE> 478,326,512
<RECEIVABLES> 33,851,915
<ASSETS-OTHER> 81,353
<OTHER-ITEMS-ASSETS> 160,709
<TOTAL-ASSETS> 512,420,489
<PAYABLE-FOR-SECURITIES> 48,661,707
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93,826,767
<TOTAL-LIABILITIES> 142,488,474
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 328,868,117
<SHARES-COMMON-STOCK> 27,040,300
<SHARES-COMMON-PRIOR> 44,993,650
<ACCUMULATED-NII-CURRENT> 26,210
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (73,160,966)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,874,070
<NET-ASSETS> 258,553,449
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 33,188,270
<OTHER-INCOME> 2,724,218
<EXPENSES-NET> 5,295,444
<NET-INVESTMENT-INCOME> 30,617,044
<REALIZED-GAINS-CURRENT> 1,459,508
<APPREC-INCREASE-CURRENT> 4,763,805
<NET-CHANGE-FROM-OPS> 36,840,357
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (23,090,174)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,386,050
<NUMBER-OF-SHARES-REDEEMED> (21,821,064)
<SHARES-REINVESTED> 1,481,664
<NET-CHANGE-IN-ASSETS> (112,685,306)
<ACCUMULATED-NII-PRIOR> 5,733
<ACCUMULATED-GAINS-PRIOR> (75,544,583)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,407,855
<INTEREST-EXPENSE> 807,494
<GROSS-EXPENSE> 6,686,494
<AVERAGE-NET-ASSETS> 338,632,090
<PER-SHARE-NAV-BEGIN> 9.41
<PER-SHARE-NII> 0.65
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> (0.65)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.56
<EXPENSE-RATIO> 0.98
<AVG-DEBT-OUTSTANDING> 152,113,152
<AVG-DEBT-PER-SHARE> 3.280
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 042
<NAME> SIERRA TRUST US GOVT CL-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 474,836,318
<INVESTMENTS-AT-VALUE> 478,326,512
<RECEIVABLES> 33,851,915
<ASSETS-OTHER> 81,353
<OTHER-ITEMS-ASSETS> 160,709
<TOTAL-ASSETS> 512,420,489
<PAYABLE-FOR-SECURITIES> 48,661,707
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93,826,767
<TOTAL-LIABILITIES> 142,488,474
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,416,498
<SHARES-COMMON-STOCK> 2,130,374
<SHARES-COMMON-PRIOR> 2,515,458
<ACCUMULATED-NII-CURRENT> 26,210
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (73,160,966)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,874,070
<NET-ASSETS> 20,370,022
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 33,188,270
<OTHER-INCOME> 2,724,218
<EXPENSES-NET> 5,295,444
<NET-INVESTMENT-INCOME> 30,617,044
<REALIZED-GAINS-CURRENT> 1,459,508
<APPREC-INCREASE-CURRENT> 4,763,805
<NET-CHANGE-FROM-OPS> 36,840,357
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,358,038)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 359,307
<NUMBER-OF-SHARES-REDEEMED> (832,090)
<SHARES-REINVESTED> 87,699
<NET-CHANGE-IN-ASSETS> (112,685,306)
<ACCUMULATED-NII-PRIOR> 5,733
<ACCUMULATED-GAINS-PRIOR> (75,544,583)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,407,855
<INTEREST-EXPENSE> 807,494
<GROSS-EXPENSE> 6,686,373
<AVERAGE-NET-ASSETS> 22,369,788
<PER-SHARE-NAV-BEGIN> 9.41
<PER-SHARE-NII> 0.58
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> (0.58)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.56
<EXPENSE-RATIO> 1.73
<AVG-DEBT-OUTSTANDING> 152,113,152
<AVG-DEBT-PER-SHARE> 3.280
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 043
<NAME> SIERRA TRUST US GOVT CL-S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 474,836,318
<INVESTMENTS-AT-VALUE> 478,326,512
<RECEIVABLES> 33,851,915
<ASSETS-OTHER> 81,353
<OTHER-ITEMS-ASSETS> 160,709
<TOTAL-ASSETS> 512,420,489
<PAYABLE-FOR-SECURITIES> 48,661,707
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93,826,767
<TOTAL-LIABILITIES> 142,488,474
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,646,641
<SHARES-COMMON-STOCK> 950,480
<SHARES-COMMON-PRIOR> 3,792,380
<ACCUMULATED-NII-CURRENT> 26,210
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (73,160,966)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,874,070
<NET-ASSETS> 9,088,294
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 33,188,270
<OTHER-INCOME> 2,724,218
<EXPENSES-NET> 5,295,444
<NET-INVESTMENT-INCOME> 30,617,044
<REALIZED-GAINS-CURRENT> 1,459,508
<APPREC-INCREASE-CURRENT> 4,763,805
<NET-CHANGE-FROM-OPS> 36,840,357
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,289,588)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 897,373
<NUMBER-OF-SHARES-REDEEMED> (3,856,138)
<SHARES-REINVESTED> 116,865
<NET-CHANGE-IN-ASSETS> (112,685,306)
<ACCUMULATED-NII-PRIOR> 5,733
<ACCUMULATED-GAINS-PRIOR> (75,544,583)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,407,855
<INTEREST-EXPENSE> 807,494
<GROSS-EXPENSE> 6,686,373
<AVERAGE-NET-ASSETS> 21,285,271
<PER-SHARE-NAV-BEGIN> 9.41
<PER-SHARE-NII> 0.58
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> (0.58)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.56
<EXPENSE-RATIO> 1.73
<AVG-DEBT-OUTSTANDING> 152,113,152
<AVG-DEBT-PER-SHARE> 3.280
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 044
<NAME> SIERRA TRUST US GOVT CL-I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 474,836,318
<INVESTMENTS-AT-VALUE> 478,326,512
<RECEIVABLES> 33,851,915
<ASSETS-OTHER> 81,353
<OTHER-ITEMS-ASSETS> 160,709
<TOTAL-ASSETS> 512,420,489
<PAYABLE-FOR-SECURITIES> 48,661,707
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93,826,767
<TOTAL-LIABILITIES> 142,488,474
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 82,261,445
<SHARES-COMMON-STOCK> 8,567,415
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 26,210
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (73,160,966)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,874,070
<NET-ASSETS> 81,920,250
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 33,188,270
<OTHER-INCOME> 2,724,218
<EXPENSES-NET> 5,295,444
<NET-INVESTMENT-INCOME> 30,617,044
<REALIZED-GAINS-CURRENT> 1,459,508
<APPREC-INCREASE-CURRENT> 4,763,805
<NET-CHANGE-FROM-OPS> 36,840,357
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,934,658)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,933,369
<NUMBER-OF-SHARES-REDEEMED> (1,365,954)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (112,685,306)
<ACCUMULATED-NII-PRIOR> 5,733
<ACCUMULATED-GAINS-PRIOR> (75,544,583)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,407,855
<INTEREST-EXPENSE> 807,494
<GROSS-EXPENSE> 6,686,373
<AVERAGE-NET-ASSETS> 59,409,697
<PER-SHARE-NAV-BEGIN> 9.35
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> 0.21
<PER-SHARE-DIVIDEND> (0.63)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.56
<EXPENSE-RATIO> 0.73
<AVG-DEBT-OUTSTANDING> 152,113,152
<AVG-DEBT-PER-SHARE> 3.280
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 071
<NAME> SIERRA TRUST CORPORATE INCOME CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 240,671,845
<INVESTMENTS-AT-VALUE> 250,239,423
<RECEIVABLES> 5,672,065
<ASSETS-OTHER> 11,990
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 255,923,478
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,011,548
<TOTAL-LIABILITIES> 30,011,548
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 219,376,313
<SHARES-COMMON-STOCK> 18,966,729
<SHARES-COMMON-PRIOR> 29,386,338
<ACCUMULATED-NII-CURRENT> 694
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (33,296,439)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,567,578
<NET-ASSETS> 195,530,521
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23,923,775
<OTHER-INCOME> 1,144,852
<EXPENSES-NET> 3,658,675
<NET-INVESTMENT-INCOME> 21,409,952
<REALIZED-GAINS-CURRENT> 1,712,345
<APPREC-INCREASE-CURRENT> 1,997,323
<NET-CHANGE-FROM-OPS> 25,119,620
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (18,329,881)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,552,541
<NUMBER-OF-SHARES-REDEEMED> (12,913,788)
<SHARES-REINVESTED> 941,638
<NET-CHANGE-IN-ASSETS> (109,222,389)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (35,032,631)
<OVERDISTRIB-NII-PRIOR> (1,086,967)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,901,382
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,262,939
<AVERAGE-NET-ASSETS> 248,591,188
<PER-SHARE-NAV-BEGIN> 10.16
<PER-SHARE-NII> 0.76
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> (0.76)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.31
<EXPENSE-RATIO> 1.18
<AVG-DEBT-OUTSTANDING> 43,749,345
<AVG-DEBT-PER-SHARE> 1.530
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 072
<NAME> SIERRA TRUST CORPORATE INCOME CL-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 240,671,845
<INVESTMENTS-AT-VALUE> 250,239,423
<RECEIVABLES> 5,672,065
<ASSETS-OTHER> 11,990
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 255,923,478
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,011,548
<TOTAL-LIABILITIES> 30,011,548
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,441,858
<SHARES-COMMON-STOCK> 2,035,268
<SHARES-COMMON-PRIOR> 2,422,109
<ACCUMULATED-NII-CURRENT> 694
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (33,296,439)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,567,578
<NET-ASSETS> 20,981,782
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23,923,775
<OTHER-INCOME> 1,144,852
<EXPENSES-NET> 3,658,675
<NET-INVESTMENT-INCOME> 21,409,952
<REALIZED-GAINS-CURRENT> 1,712,345
<APPREC-INCREASE-CURRENT> 1,997,323
<NET-CHANGE-FROM-OPS> 25,119,620
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,539,683)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 269,118
<NUMBER-OF-SHARES-REDEEMED> (730,698)
<SHARES-REINVESTED> 74,739
<NET-CHANGE-IN-ASSETS> (109,222,389)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (35,032,631)
<OVERDISTRIB-NII-PRIOR> (1,086,967)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,901,382
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,262,939
<AVERAGE-NET-ASSETS> 23,246,350
<PER-SHARE-NAV-BEGIN> 10.16
<PER-SHARE-NII> 0.68
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> (0.68)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.31
<EXPENSE-RATIO> 1.93
<AVG-DEBT-OUTSTANDING> 43,749,345
<AVG-DEBT-PER-SHARE> 1.530
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 073
<NAME> SIERRA TRUST CORPORATE INCOME CL-S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 240,671,845
<INVESTMENTS-AT-VALUE> 250,239,423
<RECEIVABLES> 5,672,065
<ASSETS-OTHER> 11,990
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 255,923,478
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,011,548
<TOTAL-LIABILITIES> 30,011,548
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,708,813
<SHARES-COMMON-STOCK> 205,775
<SHARES-COMMON-PRIOR> 1,182,150
<ACCUMULATED-NII-CURRENT> 694
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (33,296,439)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,567,578
<NET-ASSETS> 2,121,394
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23,923,775
<OTHER-INCOME> 1,144,852
<EXPENSES-NET> 3,658,675
<NET-INVESTMENT-INCOME> 21,409,952
<REALIZED-GAINS-CURRENT> 1,712,345
<APPREC-INCREASE-CURRENT> 1,997,323
<NET-CHANGE-FROM-OPS> 25,119,620
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (414,635)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 208,078
<NUMBER-OF-SHARES-REDEEMED> (1,219,937)
<SHARES-REINVESTED> 35,484
<NET-CHANGE-IN-ASSETS> (109,222,389)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (35,032,631)
<OVERDISTRIB-NII-PRIOR> (1,086,967)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,901,382
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,262,939
<AVERAGE-NET-ASSETS> 6,279,340
<PER-SHARE-NAV-BEGIN> 10.16
<PER-SHARE-NII> 0.68
<PER-SHARE-GAIN-APPREC> 0.15
<PER-SHARE-DIVIDEND> (0.68)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.31
<EXPENSE-RATIO> 1.93
<AVG-DEBT-OUTSTANDING> 43,749,345
<AVG-DEBT-PER-SHARE> 1.530
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 074
<NAME> SIERRA TRUST CORPORATE INCOME CL-I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 240,671,845
<INVESTMENTS-AT-VALUE> 250,239,423
<RECEIVABLES> 5,672,065
<ASSETS-OTHER> 11,990
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 255,923,478
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,011,548
<TOTAL-LIABILITIES> 30,011,548
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,113,113
<SHARES-COMMON-STOCK> 705,975
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 694
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (33,296,439)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,567,578
<NET-ASSETS> 7,278,233
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23,923,775
<OTHER-INCOME> 1,144,852
<EXPENSES-NET> 3,658,675
<NET-INVESTMENT-INCOME> 21,409,952
<REALIZED-GAINS-CURRENT> 1,712,345
<APPREC-INCREASE-CURRENT> 1,997,323
<NET-CHANGE-FROM-OPS> 25,119,620
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,101,212)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,833,815
<NUMBER-OF-SHARES-REDEEMED> (2,127,840)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (109,222,389)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (35,032,631)
<OVERDISTRIB-NII-PRIOR> (1,086,967)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,901,382
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,262,939
<AVERAGE-NET-ASSETS> 15,416,372
<PER-SHARE-NAV-BEGIN> 10.03
<PER-SHARE-NII> 0.73
<PER-SHARE-GAIN-APPREC> 0.28
<PER-SHARE-DIVIDEND> (0.73)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.31
<EXPENSE-RATIO> 0.93
<AVG-DEBT-OUTSTANDING> 43,749,345
<AVG-DEBT-PER-SHARE> 1.530
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 051
<NAME> SIERRA TRUST CALIFORNIA MUNI CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 317,972,658
<INVESTMENTS-AT-VALUE> 338,604,972
<RECEIVABLES> 5,927,530
<ASSETS-OTHER> 14,119
<OTHER-ITEMS-ASSETS> 41,769
<TOTAL-ASSETS> 344,588,390
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,109,660
<TOTAL-LIABILITIES> 1,109,660
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 306,455,471
<SHARES-COMMON-STOCK> 29,146,582
<SHARES-COMMON-PRIOR> 35,110,379
<ACCUMULATED-NII-CURRENT> 33,691
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,226,227)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,632,314
<NET-ASSETS> 318,251,461
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 24,303,666
<OTHER-INCOME> 0
<EXPENSES-NET> 3,817,055
<NET-INVESTMENT-INCOME> 20,486,611
<REALIZED-GAINS-CURRENT> 5,995,910
<APPREC-INCREASE-CURRENT> 5,182,081
<NET-CHANGE-FROM-OPS> 31,664,602
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (19,363,780)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,233,283
<NUMBER-OF-SHARES-REDEEMED> (9,335,254)
<SHARES-REINVESTED> 1,138,174
<NET-CHANGE-IN-ASSETS> (49,252,085)
<ACCUMULATED-NII-PRIOR> 11,641
<ACCUMULATED-GAINS-PRIOR> (14,200,087)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,063,242
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,908,749
<AVERAGE-NET-ASSETS> 351,508,142
<PER-SHARE-NAV-BEGIN> 10.60
<PER-SHARE-NII> 0.59
<PER-SHARE-GAIN-APPREC> 0.32
<PER-SHARE-DIVIDEND> (0.59)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.92
<EXPENSE-RATIO> 0.97
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 052
<NAME> SIERRA TRUST CALIFORNIA MUNI CL-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 317,972,658
<INVESTMENTS-AT-VALUE> 338,604,972
<RECEIVABLES> 5,927,530
<ASSETS-OTHER> 14,119
<OTHER-ITEMS-ASSETS> 41,769
<TOTAL-ASSETS> 344,588,390
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,109,660
<TOTAL-LIABILITIES> 1,109,660
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,576,183
<SHARES-COMMON-STOCK> 2,309,607
<SHARES-COMMON-PRIOR> 1,937,826
<ACCUMULATED-NII-CURRENT> 33,691
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,226,227)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,632,314
<NET-ASSETS> 25,219,136
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 24,303,666
<OTHER-INCOME> 0
<EXPENSES-NET> 3,817,055
<NET-INVESTMENT-INCOME> 20,486,611
<REALIZED-GAINS-CURRENT> 5,995,910
<APPREC-INCREASE-CURRENT> 5,182,081
<NET-CHANGE-FROM-OPS> 31,664,602
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,122,377)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 742,146
<NUMBER-OF-SHARES-REDEEMED> (443,547)
<SHARES-REINVESTED> 73,182
<NET-CHANGE-IN-ASSETS> (49,252,085)
<ACCUMULATED-NII-PRIOR> 11,641
<ACCUMULATED-GAINS-PRIOR> (14,200,087)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,063,242
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,908,749
<AVERAGE-NET-ASSETS> 23,617,260
<PER-SHARE-NAV-BEGIN> 10.60
<PER-SHARE-NII> 0.51
<PER-SHARE-GAIN-APPREC> 0.32
<PER-SHARE-DIVIDEND> (0.51)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.92
<EXPENSE-RATIO> 1.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 053
<NAME> SIERRA TRUST CALIFORNIA MUNI CL-S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 317,972,658
<INVESTMENTS-AT-VALUE> 338,604,972
<RECEIVABLES> 5,927,530
<ASSETS-OTHER> 14,119
<OTHER-ITEMS-ASSETS> 41,769
<TOTAL-ASSETS> 344,588,390
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,109,660
<TOTAL-LIABILITIES> 1,109,660
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,242
<SHARES-COMMON-STOCK> 646
<SHARES-COMMON-PRIOR> 1,065
<ACCUMULATED-NII-CURRENT> 33,691
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,226,227)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,632,314
<NET-ASSETS> 7,052
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 24,303,666
<OTHER-INCOME> 0
<EXPENSES-NET> 3,817,055
<NET-INVESTMENT-INCOME> 20,486,611
<REALIZED-GAINS-CURRENT> 5,995,910
<APPREC-INCREASE-CURRENT> 5,182,081
<NET-CHANGE-FROM-OPS> 31,664,602
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (398)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 629
<NUMBER-OF-SHARES-REDEEMED> (1,085)
<SHARES-REINVESTED> 37
<NET-CHANGE-IN-ASSETS> (49,252,085)
<ACCUMULATED-NII-PRIOR> 11,641
<ACCUMULATED-GAINS-PRIOR> (14,200,087)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,063,242
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,908,749
<AVERAGE-NET-ASSETS> 8,408
<PER-SHARE-NAV-BEGIN> 10.60
<PER-SHARE-NII> 0.51
<PER-SHARE-GAIN-APPREC> 0.32
<PER-SHARE-DIVIDEND> (0.51)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.92
<EXPENSE-RATIO> 1.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 054
<NAME> SIERRA TRUST CALIFORNIA MUNI CL-I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 317,972,658
<INVESTMENTS-AT-VALUE> 338,604,972
<RECEIVABLES> 5,927,530
<ASSETS-OTHER> 14,119
<OTHER-ITEMS-ASSETS> 41,769
<TOTAL-ASSETS> 344,588,390
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,109,660
<TOTAL-LIABILITIES> 1,109,660
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,056
<SHARES-COMMON-STOCK> 99
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 33,691
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,226,227)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20,632,314
<NET-ASSETS> 1,081
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 24,303,666
<OTHER-INCOME> 0
<EXPENSES-NET> 3,817,055
<NET-INVESTMENT-INCOME> 20,486,611
<REALIZED-GAINS-CURRENT> 5,995,910
<APPREC-INCREASE-CURRENT> 5,182,081
<NET-CHANGE-FROM-OPS> 31,664,602
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (56)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 95
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> (49,252,085)
<ACCUMULATED-NII-PRIOR> 11,641
<ACCUMULATED-GAINS-PRIOR> (14,200,087)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,063,242
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,908,749
<AVERAGE-NET-ASSETS> 1,042
<PER-SHARE-NAV-BEGIN> 10.62
<PER-SHARE-NII> 0.58
<PER-SHARE-GAIN-APPREC> 0.30
<PER-SHARE-DIVIDEND> (0.58)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.92
<EXPENSE-RATIO> 0.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 131
<NAME> SIERRA TRUST FLORIDA INSURED MUNI CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 27,084,825
<INVESTMENTS-AT-VALUE> 28,357,781
<RECEIVABLES> 557,749
<ASSETS-OTHER> 1,239
<OTHER-ITEMS-ASSETS> 78,557
<TOTAL-ASSETS> 28,995,326
<PAYABLE-FOR-SECURITIES> 1,035,727
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100,964
<TOTAL-LIABILITIES> 1,136,691
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,429,399
<SHARES-COMMON-STOCK> 2,291,279
<SHARES-COMMON-PRIOR> 3,093,335
<ACCUMULATED-NII-CURRENT> 2,892
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,719,108)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,272,956
<NET-ASSETS> 22,761,049
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,840,152
<OTHER-INCOME> 0
<EXPENSES-NET> 298,890
<NET-INVESTMENT-INCOME> 1,541,262
<REALIZED-GAINS-CURRENT> 343,304
<APPREC-INCREASE-CURRENT> 678,418
<NET-CHANGE-FROM-OPS> 2,562,984
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,356,750)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 219,446
<NUMBER-OF-SHARES-REDEEMED> (1,088,997)
<SHARES-REINVESTED> 67,495
<NET-CHANGE-IN-ASSETS> (7,401,293)
<ACCUMULATED-NII-PRIOR> 35,177
<ACCUMULATED-GAINS-PRIOR> (3,053,564)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 173,618
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 500,047
<AVERAGE-NET-ASSETS> 26,374,897
<PER-SHARE-NAV-BEGIN> 9.64
<PER-SHARE-NII> 0.49
<PER-SHARE-GAIN-APPREC> 0.30
<PER-SHARE-DIVIDEND> (0.50)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.93
<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 132
<NAME> SIERRA TRUST FLORIDA INSURED MUNI CL-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 27,084,825
<INVESTMENTS-AT-VALUE> 28,357,781
<RECEIVABLES> 557,749
<ASSETS-OTHER> 1,239
<OTHER-ITEMS-ASSETS> 78,557
<TOTAL-ASSETS> 28,995,326
<PAYABLE-FOR-SECURITIES> 1,035,727
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100,964
<TOTAL-LIABILITIES> 1,136,691
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,842,679
<SHARES-COMMON-STOCK> 510,106
<SHARES-COMMON-PRIOR> 563,020
<ACCUMULATED-NII-CURRENT> 2,892
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,719,108)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,272,956
<NET-ASSETS> 5,067,286
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,840,152
<OTHER-INCOME> 0
<EXPENSES-NET> 298,890
<NET-INVESTMENT-INCOME> 1,541,262
<REALIZED-GAINS-CURRENT> 343,304
<APPREC-INCREASE-CURRENT> 678,418
<NET-CHANGE-FROM-OPS> 2,562,984
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (227,849)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 93,965
<NUMBER-OF-SHARES-REDEEMED> (161,649)
<SHARES-REINVESTED> 14,770
<NET-CHANGE-IN-ASSETS> (7,401,293)
<ACCUMULATED-NII-PRIOR> 35,177
<ACCUMULATED-GAINS-PRIOR> (3,053,564)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 173,618
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 500,047
<AVERAGE-NET-ASSETS> 5,182,248
<PER-SHARE-NAV-BEGIN> 9.64
<PER-SHARE-NII> 0.42
<PER-SHARE-GAIN-APPREC> 0.30
<PER-SHARE-DIVIDEND> (0.43)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.93
<EXPENSE-RATIO> 1.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 133
<NAME> SIERRA TRUST FLORIDA INSURED MUNI CL-S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 27,084,825
<INVESTMENTS-AT-VALUE> 28,357,781
<RECEIVABLES> 557,749
<ASSETS-OTHER> 1,239
<OTHER-ITEMS-ASSETS> 78,557
<TOTAL-ASSETS> 28,995,326
<PAYABLE-FOR-SECURITIES> 1,035,727
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100,964
<TOTAL-LIABILITIES> 1,136,691
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 28,765
<SHARES-COMMON-STOCK> 2,941
<SHARES-COMMON-PRIOR> 1,167
<ACCUMULATED-NII-CURRENT> 2,892
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,719,108)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,272,956
<NET-ASSETS> 29,218
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,840,152
<OTHER-INCOME> 0
<EXPENSES-NET> 298,890
<NET-INVESTMENT-INCOME> 1,541,262
<REALIZED-GAINS-CURRENT> 343,304
<APPREC-INCREASE-CURRENT> 678,418
<NET-CHANGE-FROM-OPS> 2,562,984
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (389)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,774
<NUMBER-OF-SHARES-REDEEMED> (1,039)
<SHARES-REINVESTED> 39
<NET-CHANGE-IN-ASSETS> (7,401,293)
<ACCUMULATED-NII-PRIOR> 35,177
<ACCUMULATED-GAINS-PRIOR> (3,053,564)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 173,618
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 500,047
<AVERAGE-NET-ASSETS> 8,715
<PER-SHARE-NAV-BEGIN> 9.64
<PER-SHARE-NII> 0.42
<PER-SHARE-GAIN-APPREC> 0.30
<PER-SHARE-DIVIDEND> (0.43)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.93
<EXPENSE-RATIO> 1.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 134
<NAME> SIERRA TRUST FLORIDA INSURED MUNI CL-I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 27,084,825
<INVESTMENTS-AT-VALUE> 28,357,781
<RECEIVABLES> 557,749
<ASSETS-OTHER> 1,239
<OTHER-ITEMS-ASSETS> 78,557
<TOTAL-ASSETS> 28,995,326
<PAYABLE-FOR-SECURITIES> 1,035,727
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 100,964
<TOTAL-LIABILITIES> 1,136,691
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,052
<SHARES-COMMON-STOCK> 109
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,892
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,719,108)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,272,956
<NET-ASSETS> 1,082
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,840,152
<OTHER-INCOME> 0
<EXPENSES-NET> 298,890
<NET-INVESTMENT-INCOME> 1,541,262
<REALIZED-GAINS-CURRENT> 343,304
<APPREC-INCREASE-CURRENT> 678,418
<NET-CHANGE-FROM-OPS> 2,562,984
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (107)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 103
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> (7,401,293)
<ACCUMULATED-NII-PRIOR> 35,177
<ACCUMULATED-GAINS-PRIOR> (3,053,564)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 173,618
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 500,047
<AVERAGE-NET-ASSETS> 1,039
<PER-SHARE-NAV-BEGIN> 9.68
<PER-SHARE-NII> 0.49
<PER-SHARE-GAIN-APPREC> 0.26
<PER-SHARE-DIVIDEND> (0.50)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.93
<EXPENSE-RATIO> 0.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 151
<NAME> SIERRA TRUST CA INSURED INTERM MUNI CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 61,992,856
<INVESTMENTS-AT-VALUE> 65,290,463
<RECEIVABLES> 1,141,648
<ASSETS-OTHER> 2,629
<OTHER-ITEMS-ASSETS> 50,590
<TOTAL-ASSETS> 66,485,330
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 333,437
<TOTAL-LIABILITIES> 333,437
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,171,583
<SHARES-COMMON-STOCK> 4,205,143
<SHARES-COMMON-PRIOR> 5,164,136
<ACCUMULATED-NII-CURRENT> 3,196
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 414,942
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,297,607
<NET-ASSETS> 45,156,682
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,938,439
<OTHER-INCOME> 0
<EXPENSES-NET> 756,082
<NET-INVESTMENT-INCOME> 3,182,357
<REALIZED-GAINS-CURRENT> 529,710
<APPREC-INCREASE-CURRENT> 1,035,421
<NET-CHANGE-FROM-OPS> 4,747,488
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,354,600)
<DISTRIBUTIONS-OF-GAINS> (231,272)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 603,408
<NUMBER-OF-SHARES-REDEEMED> (1,743,747)
<SHARES-REINVESTED> 181,346
<NET-CHANGE-IN-ASSETS> (9,325,676)
<ACCUMULATED-NII-PRIOR> 2,768
<ACCUMULATED-GAINS-PRIOR> 213,231
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 398,681
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,113,110
<AVERAGE-NET-ASSETS> 51,058,182
<PER-SHARE-NAV-BEGIN> 10.56
<PER-SHARE-NII> 0.49
<PER-SHARE-GAIN-APPREC> 0.23
<PER-SHARE-DIVIDEND> (0.49)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.74
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 152
<NAME> SIERRA TRUST CA INSURED INTERM MUNI CL-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 61,992,856
<INVESTMENTS-AT-VALUE> 65,290,463
<RECEIVABLES> 1,141,648
<ASSETS-OTHER> 2,629
<OTHER-ITEMS-ASSETS> 50,590
<TOTAL-ASSETS> 66,485,330
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 333,437
<TOTAL-LIABILITIES> 333,437
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,262,446
<SHARES-COMMON-STOCK> 1,954,892
<SHARES-COMMON-PRIOR> 1,984,291
<ACCUMULATED-NII-CURRENT> 3,196
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 414,942
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,297,607
<NET-ASSETS> 20,992,484
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,938,439
<OTHER-INCOME> 0
<EXPENSES-NET> 756,082
<NET-INVESTMENT-INCOME> 3,182,357
<REALIZED-GAINS-CURRENT> 529,710
<APPREC-INCREASE-CURRENT> 1,035,421
<NET-CHANGE-FROM-OPS> 4,747,488
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (827,004)
<DISTRIBUTIONS-OF-GAINS> (96,670)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 289,579
<NUMBER-OF-SHARES-REDEEMED> (385,086)
<SHARES-REINVESTED> 66,108
<NET-CHANGE-IN-ASSETS> (9,325,676)
<ACCUMULATED-NII-PRIOR> 2,768
<ACCUMULATED-GAINS-PRIOR> 213,231
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 398,681
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,113,110
<AVERAGE-NET-ASSETS> 21,420,949
<PER-SHARE-NAV-BEGIN> 10.56
<PER-SHARE-NII> 0.41
<PER-SHARE-GAIN-APPREC> 0.23
<PER-SHARE-DIVIDEND> (0.41)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.74
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 153
<NAME> SIERRA TRUST CA INSURED INTERM MUNI CL-S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 61,992,856
<INVESTMENTS-AT-VALUE> 65,290,463
<RECEIVABLES> 1,141,648
<ASSETS-OTHER> 2,629
<OTHER-ITEMS-ASSETS> 50,590
<TOTAL-ASSETS> 66,485,330
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 333,437
<TOTAL-LIABILITIES> 333,437
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,067
<SHARES-COMMON-STOCK> 155
<SHARES-COMMON-PRIOR> 1,077
<ACCUMULATED-NII-CURRENT> 3,196
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 414,942
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,297,607
<NET-ASSETS> 1,664
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,938,439
<OTHER-INCOME> 0
<EXPENSES-NET> 756,082
<NET-INVESTMENT-INCOME> 3,182,357
<REALIZED-GAINS-CURRENT> 529,710
<APPREC-INCREASE-CURRENT> 1,035,421
<NET-CHANGE-FROM-OPS> 4,747,488
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (278)
<DISTRIBUTIONS-OF-GAINS> (52)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (954)
<SHARES-REINVESTED> 32
<NET-CHANGE-IN-ASSETS> (9,325,676)
<ACCUMULATED-NII-PRIOR> 2,768
<ACCUMULATED-GAINS-PRIOR> 213,231
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 398,681
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,113,110
<AVERAGE-NET-ASSETS> 7,263
<PER-SHARE-NAV-BEGIN> 10.56
<PER-SHARE-NII> 0.41
<PER-SHARE-GAIN-APPREC> 0.23
<PER-SHARE-DIVIDEND> (0.41)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.74
<EXPENSE-RATIO> 1.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 154
<NAME> SIERRA TRUST CA INSURED INTERM MUNI CL-I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 61,992,856
<INVESTMENTS-AT-VALUE> 65,290,463
<RECEIVABLES> 1,141,648
<ASSETS-OTHER> 2,629
<OTHER-ITEMS-ASSETS> 50,590
<TOTAL-ASSETS> 66,485,330
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 333,437
<TOTAL-LIABILITIES> 333,437
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,052
<SHARES-COMMON-STOCK> 99
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3,196
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 414,942
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,297,607
<NET-ASSETS> 1,063
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,938,439
<OTHER-INCOME> 0
<EXPENSES-NET> 756,082
<NET-INVESTMENT-INCOME> 3,182,357
<REALIZED-GAINS-CURRENT> 529,710
<APPREC-INCREASE-CURRENT> 1,035,421
<NET-CHANGE-FROM-OPS> 4,747,488
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (47)
<DISTRIBUTIONS-OF-GAINS> (5)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 95
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> (9,325,676)
<ACCUMULATED-NII-PRIOR> 2,768
<ACCUMULATED-GAINS-PRIOR> 213,231
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 398,681
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,113,110
<AVERAGE-NET-ASSETS> 1,032
<PER-SHARE-NAV-BEGIN> 10.58
<PER-SHARE-NII> 0.49
<PER-SHARE-GAIN-APPREC> 0.21
<PER-SHARE-DIVIDEND> (0.49)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.74
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 081
<NAME> SIERRA TRUST NATIONAL MUNICIPAL CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 166,933,787
<INVESTMENTS-AT-VALUE> 183,056,048
<RECEIVABLES> 5,848,876
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 8,497
<TOTAL-ASSETS> 188,913,421
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 647,675
<TOTAL-LIABILITIES> 647,675
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 174,112,070
<SHARES-COMMON-STOCK> 16,332,950
<SHARES-COMMON-PRIOR> 21,543,012
<ACCUMULATED-NII-CURRENT> 63,957
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (7,865,048)
<ACCUM-APPREC-OR-DEPREC> 16,122,261
<NET-ASSETS> 182,262,402
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14,153,167
<OTHER-INCOME> 0
<EXPENSES-NET> 2,290,174
<NET-INVESTMENT-INCOME> 11,862,993
<REALIZED-GAINS-CURRENT> 2,949,759
<APPREC-INCREASE-CURRENT> 3,563,565
<NET-CHANGE-FROM-OPS> 18,376,317
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11,539,149)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,958,051
<NUMBER-OF-SHARES-REDEEMED> (7,769,989)
<SHARES-REINVESTED> 601,785
<NET-CHANGE-IN-ASSETS> (51,904,263)
<ACCUMULATED-NII-PRIOR> 39,645
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (10,790,495)
<GROSS-ADVISORY-FEES> 1,179,610
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,789,176
<AVERAGE-NET-ASSETS> 207,731,719
<PER-SHARE-NAV-BEGIN> 10.83
<PER-SHARE-NII> 0.61
<PER-SHARE-GAIN-APPREC> 0.33
<PER-SHARE-DIVIDEND> (0.61)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.16
<EXPENSE-RATIO> 1.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 082
<NAME> SIERRA TRUST NATIONAL MUNICIPAL CL-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 166,933,787
<INVESTMENTS-AT-VALUE> 183,056,048
<RECEIVABLES> 5,848,876
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 8,497
<TOTAL-ASSETS> 188,913,421
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 647,675
<TOTAL-LIABILITIES> 647,675
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,830,326
<SHARES-COMMON-STOCK> 537,751
<SHARES-COMMON-PRIOR> 627,662
<ACCUMULATED-NII-CURRENT> 63,957
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (7,865,048)
<ACCUM-APPREC-OR-DEPREC> 16,122,261
<NET-ASSETS> 6,000,911
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14,153,167
<OTHER-INCOME> 0
<EXPENSES-NET> 2,2990,174
<NET-INVESTMENT-INCOME> 11,862,993
<REALIZED-GAINS-CURRENT> 2,949,759
<APPREC-INCREASE-CURRENT> 3,563,565
<NET-CHANGE-FROM-OPS> 18,376,317
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (323,451)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 100,499
<NUMBER-OF-SHARES-REDEEMED> (207,225)
<SHARES-REINVESTED> 16,815
<NET-CHANGE-IN-ASSETS> (51,904,263)
<ACCUMULATED-NII-PRIOR> 39,645
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (10,790,495)
<GROSS-ADVISORY-FEES> 1,179,610
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,789,176
<AVERAGE-NET-ASSETS> 6,734,720
<PER-SHARE-NAV-BEGIN> 10.83
<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> 0.33
<PER-SHARE-DIVIDEND> (0.53)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.16
<EXPENSE-RATIO> 1.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 083
<NAME> SIERRA TRUST NATIONAL MUNICIPAL CL-S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 166,933,787
<INVESTMENTS-AT-VALUE> 183,056,048
<RECEIVABLES> 5,848,876
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 8,497
<TOTAL-ASSETS> 188,913,421
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 647,675
<TOTAL-LIABILITIES> 647,675
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,124
<SHARES-COMMON-STOCK> 120
<SHARES-COMMON-PRIOR> 1,030
<ACCUMULATED-NII-CURRENT> 63,957
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (7,865,048)
<ACCUM-APPREC-OR-DEPREC> 16,122,261
<NET-ASSETS> 1,339
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14,153,167
<OTHER-INCOME> 0
<EXPENSES-NET> 2,290,174
<NET-INVESTMENT-INCOME> 11,862,993
<REALIZED-GAINS-CURRENT> 2,949,759
<APPREC-INCREASE-CURRENT> 3,563,565
<NET-CHANGE-FROM-OPS> 18,376,317
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (336)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> (940)
<SHARES-REINVESTED> 30
<NET-CHANGE-IN-ASSETS> (51,904,263)
<ACCUMULATED-NII-PRIOR> 39,645
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (10,790,495)
<GROSS-ADVISORY-FEES> 1,179,610
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,789,176
<AVERAGE-NET-ASSETS> 7,022
<PER-SHARE-NAV-BEGIN> 10.83
<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> 0.33
<PER-SHARE-DIVIDEND> (0.53)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.16
<EXPENSE-RATIO> 1.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 084
<NAME> SIERRA TRUST NATIONAL MUNICIPAL CL-I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 166,933,787
<INVESTMENTS-AT-VALUE> 183,056,048
<RECEIVABLES> 5,848,876
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 8,497
<TOTAL-ASSETS> 188,913,421
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 647,675
<TOTAL-LIABILITIES> 647,675
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,056
<SHARES-COMMON-STOCK> 98
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 63,957
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (7,865,048)
<ACCUM-APPREC-OR-DEPREC> 16,122,261
<NET-ASSETS> 1,094
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14,153,167
<OTHER-INCOME> 0
<EXPENSES-NET> 2,290,174
<NET-INVESTMENT-INCOME> 11,862,993
<REALIZED-GAINS-CURRENT> 2,949,759
<APPREC-INCREASE-CURRENT> 3,563,565
<NET-CHANGE-FROM-OPS> 18,376,317
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (57)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 93
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> (51,904,263)
<ACCUMULATED-NII-PRIOR> 39,645
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (10,790,495)
<GROSS-ADVISORY-FEES> 1,179,610
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,789,176
<AVERAGE-NET-ASSETS> 1,046
<PER-SHARE-NAV-BEGIN> 10.82
<PER-SHARE-NII> 0.60
<PER-SHARE-GAIN-APPREC> 0.34
<PER-SHARE-DIVIDEND> (0.60)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.16
<EXPENSE-RATIO> 0.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 061
<NAME> SIERRA TRUST GROWTH & INCOME CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 311,818,728
<INVESTMENTS-AT-VALUE> 362,914,978
<RECEIVABLES> 953,869
<ASSETS-OTHER> 9,101
<OTHER-ITEMS-ASSETS> 1,505
<TOTAL-ASSETS> 363,879,453
<PAYABLE-FOR-SECURITIES> 1,316,364
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 985,634
<TOTAL-LIABILITIES> 2,301,998
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103,150,994
<SHARES-COMMON-STOCK> 10,590,644
<SHARES-COMMON-PRIOR> 12,986,458
<ACCUMULATED-NII-CURRENT> 16,944
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 41,022,110
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 51,096,250
<NET-ASSETS> 168,687,115
<DIVIDEND-INCOME> 4,721,074
<INTEREST-INCOME> 414,173
<OTHER-INCOME> 0
<EXPENSES-NET> 4,535,318
<NET-INVESTMENT-INCOME> 599,929
<REALIZED-GAINS-CURRENT> 48,582,245
<APPREC-INCREASE-CURRENT> 30,882,635
<NET-CHANGE-FROM-OPS> 80,064,809
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (365,513)
<DISTRIBUTIONS-OF-GAINS> (21,832,444)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,215,500
<NUMBER-OF-SHARES-REDEEMED> (15,206,678)
<SHARES-REINVESTED> 1,595,364
<NET-CHANGE-IN-ASSETS> 125,088,740
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 28,424,080
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,121,809
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,538,333
<AVERAGE-NET-ASSETS> 171,125,834
<PER-SHARE-NAV-BEGIN> 14.10
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 3.88
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> (2.06)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.93
<EXPENSE-RATIO> 1.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 062
<NAME> SIERRA TRUST GROWTH & INCOME CL-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 311,818,728
<INVESTMENTS-AT-VALUE> 362,914,978
<RECEIVABLES> 953,869
<ASSETS-OTHER> 9,101
<OTHER-ITEMS-ASSETS> 1,505
<TOTAL-ASSETS> 363,879,453
<PAYABLE-FOR-SECURITIES> 1,316,364
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 985,634
<TOTAL-LIABILITIES> 2,301,998
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,273,572
<SHARES-COMMON-STOCK> 2,435,189
<SHARES-COMMON-PRIOR> 1,705,017
<ACCUMULATED-NII-CURRENT> 16,944
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 41,022,110
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 51,096,250
<NET-ASSETS> 38,356,895
<DIVIDEND-INCOME> 4,721,074
<INTEREST-INCOME> 414,173
<OTHER-INCOME> 0
<EXPENSES-NET> 4,535,318
<NET-INVESTMENT-INCOME> 599,929
<REALIZED-GAINS-CURRENT> 48,582,245
<APPREC-INCREASE-CURRENT> 30,882,635
<NET-CHANGE-FROM-OPS> 80,064,809
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (4,043,990)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,051,658
<NUMBER-OF-SHARES-REDEEMED> (615,030)
<SHARES-REINVESTED> 293,544
<NET-CHANGE-IN-ASSETS> 125,088,740
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 28,424,080
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,121,809
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,538,333
<AVERAGE-NET-ASSETS> 30,694,383
<PER-SHARE-NAV-BEGIN> 14.03
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 3.84
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.06)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.75
<EXPENSE-RATIO> 2.28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 063
<NAME> SIERRA TRUST GROWTH & INCOME CL-S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 311,818,728
<INVESTMENTS-AT-VALUE> 362,914,978
<RECEIVABLES> 953,869
<ASSETS-OTHER> 9,101
<OTHER-ITEMS-ASSETS> 1,505
<TOTAL-ASSETS> 363,879,453
<PAYABLE-FOR-SECURITIES> 1,316,364
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 985,634
<TOTAL-LIABILITIES> 2,301,998
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,963,821
<SHARES-COMMON-STOCK> 871,381
<SHARES-COMMON-PRIOR> 2,100,515
<ACCUMULATED-NII-CURRENT> 16,944
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 41,022,110
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 51,096,250
<NET-ASSETS> 13,726,113
<DIVIDEND-INCOME> 4,721,074
<INTEREST-INCOME> 414,173
<OTHER-INCOME> 0
<EXPENSES-NET> 4,535,318
<NET-INVESTMENT-INCOME> 599,929
<REALIZED-GAINS-CURRENT> 48,582,245
<APPREC-INCREASE-CURRENT> 30,882,635
<NET-CHANGE-FROM-OPS> 80,064,809
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,738,013)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 791,910
<NUMBER-OF-SHARES-REDEEMED> (2,145,414)
<SHARES-REINVESTED> 124,370
<NET-CHANGE-IN-ASSETS> 125,088,740
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 28,424,080
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,121,809
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,538,333
<AVERAGE-NET-ASSETS> 20,147,015
<PER-SHARE-NAV-BEGIN> 14.04
<PER-SHARE-NII> (0.06)
<PER-SHARE-GAIN-APPREC> 3.83
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.06)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.75
<EXPENSE-RATIO> 2.28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 064
<NAME> SIERRA TRUST GROWTH & INCOME CL-I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 311,818,728
<INVESTMENTS-AT-VALUE> 362,914,978
<RECEIVABLES> 953,869
<ASSETS-OTHER> 9,101
<OTHER-ITEMS-ASSETS> 1,505
<TOTAL-ASSETS> 363,879,453
<PAYABLE-FOR-SECURITIES> 1,316,364
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 985,634
<TOTAL-LIABILITIES> 2,301,998
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 127,053,764
<SHARES-COMMON-STOCK> 8,834,523
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 16,944
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 41,022,110
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 51,096,250
<NET-ASSETS> 140,807,332
<DIVIDEND-INCOME> 4,721,074
<INTEREST-INCOME> 414,173
<OTHER-INCOME> 0
<EXPENSES-NET> 4,533,318
<NET-INVESTMENT-INCOME> 599,929
<REALIZED-GAINS-CURRENT> 48,582,245
<APPREC-INCREASE-CURRENT> 30,882,635
<NET-CHANGE-FROM-OPS> 80,064,809
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (217,472)
<DISTRIBUTIONS-OF-GAINS> (8,369,768)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,288,164
<NUMBER-OF-SHARES-REDEEMED> (453,641)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 125,088,740
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 28,424,080
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,121,809
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,538,333
<AVERAGE-NET-ASSETS> 63,921,833
<PER-SHARE-NAV-BEGIN> 13.12
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 4.87
<PER-SHARE-DIVIDEND> (0.06)
<PER-SHARE-DISTRIBUTIONS> (2.06)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.94
<EXPENSE-RATIO> 1.28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 121
<NAME> SIERRA TRUST GROWTH CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 249,558,705
<INVESTMENTS-AT-VALUE> 282,299,244
<RECEIVABLES> 3,287,998
<ASSETS-OTHER> 10,626
<OTHER-ITEMS-ASSETS> 328,083
<TOTAL-ASSETS> 285,925,951
<PAYABLE-FOR-SECURITIES> 2,568,967
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 748,856
<TOTAL-LIABILITIES> 3,317,823
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 67,290,796
<SHARES-COMMON-STOCK> 7,462,279
<SHARES-COMMON-PRIOR> 11,451,604
<ACCUMULATED-NII-CURRENT> (114,094)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11,731,936
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,034,311
<NET-ASSETS> 111,186,791
<DIVIDEND-INCOME> 1,696,258
<INTEREST-INCOME> 2,221,092
<OTHER-INCOME> 0
<EXPENSES-NET> 4,760,018
<NET-INVESTMENT-INCOME> (842,668)
<REALIZED-GAINS-CURRENT> 23,854,848
<APPREC-INCREASE-CURRENT> 4,925,545
<NET-CHANGE-FROM-OPS> 27,937,725
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (19,083,057)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,003,738
<NUMBER-OF-SHARES-REDEEMED> (12,312,534)
<SHARES-REINVESTED> 1,319,471
<NET-CHANGE-IN-ASSETS> 32,169,091
<ACCUMULATED-NII-PRIOR> (165,570)
<ACCUMULATED-GAINS-PRIOR> 28,190,464
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,418,645
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,771,102
<AVERAGE-NET-ASSETS> 140,748,046
<PER-SHARE-NAV-BEGIN> 15.69
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> 1.58
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.34)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.90
<EXPENSE-RATIO> 1.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 122
<NAME> SIERRA TRUST GROWTH CL-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 249,558,705
<INVESTMENTS-AT-VALUE> 282,299,244
<RECEIVABLES> 3,287,998
<ASSETS-OTHER> 10,626
<OTHER-ITEMS-ASSETS> 328,083
<TOTAL-ASSETS> 285,925,951
<PAYABLE-FOR-SECURITIES> 2,568,967
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 748,856
<TOTAL-LIABILITIES> 3,317,823
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,867,956
<SHARES-COMMON-STOCK> 2,091,474
<SHARES-COMMON-PRIOR> 1,620,425
<ACCUMULATED-NII-CURRENT> (114,094)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11,731,936
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,034,311
<NET-ASSETS> 30,396,646
<DIVIDEND-INCOME> 1,696,258
<INTEREST-INCOME> 2,221,092
<OTHER-INCOME> 0
<EXPENSES-NET> 4,760,018
<NET-INVESTMENT-INCOME> (842,668)
<REALIZED-GAINS-CURRENT> 23,854,848
<APPREC-INCREASE-CURRENT> 4,925,545
<NET-CHANGE-FROM-OPS> 27,937,725
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (4,239,788)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,352,409
<NUMBER-OF-SHARES-REDEEMED> (1,187,173)
<SHARES-REINVESTED> 305,813
<NET-CHANGE-IN-ASSETS> 32,169,091
<ACCUMULATED-NII-PRIOR> (165,570)
<ACCUMULATED-GAINS-PRIOR> 28,190,464
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,418,645
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,771,102
<AVERAGE-NET-ASSETS> 28,104,954
<PER-SHARE-NAV-BEGIN> 15.47
<PER-SHARE-NII> (0.14)
<PER-SHARE-GAIN-APPREC> 1.54
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.34)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.53
<EXPENSE-RATIO> 2.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 123
<NAME> SIERRA TRUST GROWTH CL-S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 249,558,705
<INVESTMENTS-AT-VALUE> 282,299,244
<RECEIVABLES> 3,287,998
<ASSETS-OTHER> 10,626
<OTHER-ITEMS-ASSETS> 328,083
<TOTAL-ASSETS> 285,925,951
<PAYABLE-FOR-SECURITIES> 2,568,967
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 748,856
<TOTAL-LIABILITIES> 3,317,823
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,787,379
<SHARES-COMMON-STOCK> 965,677
<SHARES-COMMON-PRIOR> 2,950,379
<ACCUMULATED-NII-CURRENT> (114,094)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11,731,936
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,034,311
<NET-ASSETS> 14,038,462
<DIVIDEND-INCOME> 1,696,258
<INTEREST-INCOME> 2,221,092
<OTHER-INCOME> 0
<EXPENSES-NET> 4,760,018
<NET-INVESTMENT-INCOME> (842,668)
<REALIZED-GAINS-CURRENT> 23,854,848
<APPREC-INCREASE-CURRENT> 4,925,545
<NET-CHANGE-FROM-OPS> 27,937,725
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (2,712,699)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 735,121
<NUMBER-OF-SHARES-REDEEMED> (2,912,975)
<SHARES-REINVESTED> 193,152
<NET-CHANGE-IN-ASSETS> 32,169,091
<ACCUMULATED-NII-PRIOR> (165,570)
<ACCUMULATED-GAINS-PRIOR> 28,190,464
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,418,645
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,771,102
<AVERAGE-NET-ASSETS> 28,298,962
<PER-SHARE-NAV-BEGIN> 15.47
<PER-SHARE-NII> (0.14)
<PER-SHARE-GAIN-APPREC> 1.55
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.34)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.54
<EXPENSE-RATIO> 2.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 124
<NAME> SIERRA TRUST GROWTH CL-I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 249,558,705
<INVESTMENTS-AT-VALUE> 282,299,244
<RECEIVABLES> 3,287,998
<ASSETS-OTHER> 10,626
<OTHER-ITEMS-ASSETS> 328,083
<TOTAL-ASSETS> 285,925,951
<PAYABLE-FOR-SECURITIES> 2,568,967
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 748,856
<TOTAL-LIABILITIES> 3,317,823
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 131,009,844
<SHARES-COMMON-STOCK> 8,498,913
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (114,094)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11,731,936
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,034,311
<NET-ASSETS> 126,986,229
<DIVIDEND-INCOME> 1,696,258
<INTEREST-INCOME> 2,221,092
<OTHER-INCOME> 0
<EXPENSES-NET> 4,760,018
<NET-INVESTMENT-INCOME> (842,668)
<REALIZED-GAINS-CURRENT> 23,854,848
<APPREC-INCREASE-CURRENT> 4,925,545
<NET-CHANGE-FROM-OPS> 27,937,725
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (13,384,790)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,525,955
<NUMBER-OF-SHARES-REDEEMED> (27,042)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 32,169,091
<ACCUMULATED-NII-PRIOR> (165,570)
<ACCUMULATED-GAINS-PRIOR> 28,190,464
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,418,645
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,771,102
<AVERAGE-NET-ASSETS> 72,609,467
<PER-SHARE-NAV-BEGIN> 14.21
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 3.07
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.34)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.94
<EXPENSE-RATIO> 1.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 091
<NAME> SIERRA TRUST EMERGING GROWTH CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 178,564,684
<INVESTMENTS-AT-VALUE> 252,094,857
<RECEIVABLES> 5,750,907
<ASSETS-OTHER> 18,915
<OTHER-ITEMS-ASSETS> 76,974
<TOTAL-ASSETS> 257,941,653
<PAYABLE-FOR-SECURITIES> 862,734
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,696,310
<TOTAL-LIABILITIES> 2,559,044
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 99,052,508
<SHARES-COMMON-STOCK> 9,066,672
<SHARES-COMMON-PRIOR> 14,066,987
<ACCUMULATED-NII-CURRENT> (215,392)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (6,791,126)
<ACCUM-APPREC-OR-DEPREC> 73,121,088
<NET-ASSETS> 165,719,142
<DIVIDEND-INCOME> 728,428
<INTEREST-INCOME> 675,267
<OTHER-INCOME> 0
<EXPENSES-NET> 5,202,073
<NET-INVESTMENT-INCOME> (3,798,378)
<REALIZED-GAINS-CURRENT> (7,974,694)
<APPREC-INCREASE-CURRENT> (3,135,432)
<NET-CHANGE-FROM-OPS> (14,908,504)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (16,295,524)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,426,433
<NUMBER-OF-SHARES-REDEEMED> (15,355,631)
<SHARES-REINVESTED> 928,883
<NET-CHANGE-IN-ASSETS> (100,929,306)
<ACCUMULATED-NII-PRIOR> 322,571
<ACCUMULATED-GAINS-PRIOR> 25,655,387
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,600,399
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,209,631
<AVERAGE-NET-ASSETS> 206,008,473
<PER-SHARE-NAV-BEGIN> 20.17
<PER-SHARE-NII> (0.21)
<PER-SHARE-GAIN-APPREC> (0.18)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.50)
<RETURNS-OF-CAPITAL> (0.00)
<PER-SHARE-NAV-END> 18.28
<EXPENSE-RATIO> 1.64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 092
<NAME> SIERRA TRUST EMERGING GROWTH CL-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 178,564,684
<INVESTMENTS-AT-VALUE> 252,094,857
<RECEIVABLES> 5,750,907
<ASSETS-OTHER> 18,915
<OTHER-ITEMS-ASSETS> 76,974
<TOTAL-ASSETS> 257,941,653
<PAYABLE-FOR-SECURITIES> 862,734
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,696,310
<TOTAL-LIABILITIES> 2,559,044
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27,092,326
<SHARES-COMMON-STOCK> 1,631,562
<SHARES-COMMON-PRIOR> 1,454,916
<ACCUMULATED-NII-CURRENT> (215,392)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (6,791,126)
<ACCUM-APPREC-OR-DEPREC> 73,121,088
<NET-ASSETS> 29,123,427
<DIVIDEND-INCOME> 728,428
<INTEREST-INCOME> 675,267
<OTHER-INCOME> 0
<EXPENSES-NET> 5,202,073
<NET-INVESTMENT-INCOME> (3,798,378)
<REALIZED-GAINS-CURRENT> (7,974,694)
<APPREC-INCREASE-CURRENT> (3,135,432)
<NET-CHANGE-FROM-OPS> (14,908,504)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (2,456,114)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,294,271
<NUMBER-OF-SHARES-REDEEMED> (1,259,280)
<SHARES-REINVESTED> 141,655
<NET-CHANGE-IN-ASSETS> (100,929,306)
<ACCUMULATED-NII-PRIOR> 322,571
<ACCUMULATED-GAINS-PRIOR> 25,655,387
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,600,399
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,209,631
<AVERAGE-NET-ASSETS> 29,064,863
<PER-SHARE-NAV-BEGIN> 19.88
<PER-SHARE-NII> (0.34)
<PER-SHARE-GAIN-APPREC> (0.19)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.50)
<RETURNS-OF-CAPITAL> (0.00)
<PER-SHARE-NAV-END> 17.85
<EXPENSE-RATIO> 2.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 093
<NAME> SIERRA TRUST EMERGING GROWTH CL-S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 178,564,684
<INVESTMENTS-AT-VALUE> 252,094,857
<RECEIVABLES> 5,750,907
<ASSETS-OTHER> 18,915
<OTHER-ITEMS-ASSETS> 76,974
<TOTAL-ASSETS> 257,941,653
<PAYABLE-FOR-SECURITIES> 862,734
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,696,310
<TOTAL-LIABILITIES> 2,559,044
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,346,532
<SHARES-COMMON-STOCK> 467,222
<SHARES-COMMON-PRIOR> 2,195,022
<ACCUMULATED-NII-CURRENT> (215,392)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (6,791,126)
<ACCUM-APPREC-OR-DEPREC> 73,121,088
<NET-ASSETS> 8,340,761
<DIVIDEND-INCOME> 728,428
<INTEREST-INCOME> 675,267
<OTHER-INCOME> 0
<EXPENSES-NET> 5,202,073
<NET-INVESTMENT-INCOME> (3,798,378)
<REALIZED-GAINS-CURRENT> (7,974,694)
<APPREC-INCREASE-CURRENT> (3,135,432)
<NET-CHANGE-FROM-OPS> (14,908,504)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,158,776)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 444,186
<NUMBER-OF-SHARES-REDEEMED> (2,238,511)
<SHARES-REINVESTED> 66,525
<NET-CHANGE-IN-ASSETS> (100,929,306)
<ACCUMULATED-NII-PRIOR> 322,571
<ACCUMULATED-GAINS-PRIOR> 25,655,387
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,600,399
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,209,631
<AVERAGE-NET-ASSETS> 22,021,285
<PER-SHARE-NAV-BEGIN> 19.88
<PER-SHARE-NII> (0.34)
<PER-SHARE-GAIN-APPREC> (0.19)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.50)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 17.85
<EXPENSE-RATIO> 2.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 094
<NAME> SIERRA TRUST EMERGING GROWTH CL-I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 178,564,684
<INVESTMENTS-AT-VALUE> 252,094,857
<RECEIVABLES> 5,750,907
<ASSETS-OTHER> 18,915
<OTHER-ITEMS-ASSETS> 76,974
<TOTAL-ASSETS> 257,941,653
<PAYABLE-FOR-SECURITIES> 862,734
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,696,310
<TOTAL-LIABILITIES> 2,559,044
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58,776,673
<SHARES-COMMON-STOCK> 2,848,374
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (215,392)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (6,791,126)
<ACCUM-APPREC-OR-DEPREC> 73,121,088
<NET-ASSETS> 52,199,279
<DIVIDEND-INCOME> 728,428
<INTEREST-INCOME> 675,267
<OTHER-INCOME> 0
<EXPENSES-NET> 5,202,073
<NET-INVESTMENT-INCOME> (3,798,378)
<REALIZED-GAINS-CURRENT> (7,974,694)
<APPREC-INCREASE-CURRENT> (3,135,432)
<NET-CHANGE-FROM-OPS> (14,908,504)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (5,828,460)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,305,292
<NUMBER-OF-SHARES-REDEEMED> (2,456,918)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (100,929,306)
<ACCUMULATED-NII-PRIOR> 322,571
<ACCUMULATED-GAINS-PRIOR> 25,655,387
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,600,399
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,209,631
<AVERAGE-NET-ASSETS> 45,974,619
<PER-SHARE-NAV-BEGIN> 17.52
<PER-SHARE-NII> (0.16)
<PER-SHARE-GAIN-APPREC> 2.47
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.50)
<RETURNS-OF-CAPITAL> (0.00)
<PER-SHARE-NAV-END> 18.33
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 101
<NAME> SIERRA TRUST INT'L GROWTH CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 146,965,364
<INVESTMENTS-AT-VALUE> 166,678,163
<RECEIVABLES> 5,667,271
<ASSETS-OTHER> 5,614
<OTHER-ITEMS-ASSETS> 881,351
<TOTAL-ASSETS> 173,232,399
<PAYABLE-FOR-SECURITIES> 1,905,389
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,171,153
<TOTAL-LIABILITIES> 3,076,542
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,780,979
<SHARES-COMMON-STOCK> 4,876,565
<SHARES-COMMON-PRIOR> 11,078,231
<ACCUMULATED-NII-CURRENT> 1,856,754
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,298,422
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,454,955
<NET-ASSETS> 57,776,390
<DIVIDEND-INCOME> 3,035,375
<INTEREST-INCOME> 490,221
<OTHER-INCOME> 0
<EXPENSES-NET> 2,973,092
<NET-INVESTMENT-INCOME> 552,504
<REALIZED-GAINS-CURRENT> 8,783,992
<APPREC-INCREASE-CURRENT> 15,640,885
<NET-CHANGE-FROM-OPS> 24,977,381
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (944,934)
<DISTRIBUTIONS-OF-GAINS> (740,078)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,541,386
<NUMBER-OF-SHARES-REDEEMED> (16,902,883)
<SHARES-REINVESTED> 159,831
<NET-CHANGE-IN-ASSETS> 10,555,066
<ACCUMULATED-NII-PRIOR> 1,605,235
<ACCUMULATED-GAINS-PRIOR> 424,907
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,444,004
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,978,723
<AVERAGE-NET-ASSETS> 84,361,605
<PER-SHARE-NAV-BEGIN> 10.49
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 1.55
<PER-SHARE-DIVIDEND> (0.13)
<PER-SHARE-DISTRIBUTIONS> (0.10)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.85
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 102
<NAME> SIERRA TRUST INT'L GROWTH CL-B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 146,965,364
<INVESTMENTS-AT-VALUE> 166,678,163
<RECEIVABLES> 5,667,271
<ASSETS-OTHER> 5,614
<OTHER-ITEMS-ASSETS> 881,351
<TOTAL-ASSETS> 173,232,399
<PAYABLE-FOR-SECURITIES> 1,905,389
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,171,153
<TOTAL-LIABILITIES> 3,076,542
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,284,757
<SHARES-COMMON-STOCK> 416,612
<SHARES-COMMON-PRIOR> 428,022
<ACCUMULATED-NII-CURRENT> 1,856,754
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,298,422
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,454,955
<NET-ASSETS> 4,875,995
<DIVIDEND-INCOME> 3,035,375
<INTEREST-INCOME> 490,221
<OTHER-INCOME> 0
<EXPENSES-NET> 2,973,092
<NET-INVESTMENT-INCOME> 552,504
<REALIZED-GAINS-CURRENT> 8,783,992
<APPREC-INCREASE-CURRENT> 15,640,885
<NET-CHANGE-FROM-OPS> 24,977,381
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (33,752)
<DISTRIBUTIONS-OF-GAINS> (45,566)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 127,312
<NUMBER-OF-SHARES-REDEEMED> (146,269)
<SHARES-REINVESTED> 7,547
<NET-CHANGE-IN-ASSETS> 10,555,066
<ACCUMULATED-NII-PRIOR> 1,605,235
<ACCUMULATED-GAINS-PRIOR> 424,907
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,444,004
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,978,723
<AVERAGE-NET-ASSETS> 4,620,137
<PER-SHARE-NAV-BEGIN> 10.39
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> 1.53
<PER-SHARE-DIVIDEND> (0.08)
<PER-SHARE-DISTRIBUTIONS> (0.10)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.70
<EXPENSE-RATIO> 2.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 103
<NAME> SIERRA TRUST INT'L GROWTH CL-S
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 146,965,364
<INVESTMENTS-AT-VALUE> 166,678,163
<RECEIVABLES> 5,667,271
<ASSETS-OTHER> 5,614
<OTHER-ITEMS-ASSETS> 881,351
<TOTAL-ASSETS> 173,232,399
<PAYABLE-FOR-SECURITIES> 1,905,389
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,171,153
<TOTAL-LIABILITIES> 3,076,542
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,157,071
<SHARES-COMMON-STOCK> 1,018,498
<SHARES-COMMON-PRIOR> 3,746,621
<ACCUMULATED-NII-CURRENT> 1,856,754
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,298,422
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,454,955
<NET-ASSETS> 11,991,449
<DIVIDEND-INCOME> 3,035,375
<INTEREST-INCOME> 490,221
<OTHER-INCOME> 0
<EXPENSES-NET> 2,973,092
<NET-INVESTMENT-INCOME> 552,504
<REALIZED-GAINS-CURRENT> 8,783,992
<APPREC-INCREASE-CURRENT> 15,640,885
<NET-CHANGE-FROM-OPS> 24,977,381
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (157,954)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,237,033
<NUMBER-OF-SHARES-REDEEMED> (3,980,047)
<SHARES-REINVESTED> 14,891
<NET-CHANGE-IN-ASSETS> 10,555,066
<ACCUMULATED-NII-PRIOR> 1,605,235
<ACCUMULATED-GAINS-PRIOR> 424,907
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,444,004
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,978,723
<AVERAGE-NET-ASSETS> 24,801,328
<PER-SHARE-NAV-BEGIN> 10.38
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> 1.53
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.10)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.77
<EXPENSE-RATIO> 2.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 104
<NAME> SIERRA TRUST INT'L GROWTH CL-I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 146,965,364
<INVESTMENTS-AT-VALUE> 166,678,163
<RECEIVABLES> 5,667,271
<ASSETS-OTHER> 5,614
<OTHER-ITEMS-ASSETS> 881,351
<TOTAL-ASSETS> 173,232,399
<PAYABLE-FOR-SECURITIES> 1,905,389
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,171,153
<TOTAL-LIABILITIES> 3,076,542
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 83,322,919
<SHARES-COMMON-STOCK> 8,082,390
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,856,754
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,298,422
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,454,953
<NET-ASSETS> 95,512,023
<DIVIDEND-INCOME> 3,035,375
<INTEREST-INCOME> 490,221
<OTHER-INCOME> 0
<EXPENSES-NET> 2,973,092
<NET-INVESTMENT-INCOME> 552,504
<REALIZED-GAINS-CURRENT> 8,783,992
<APPREC-INCREASE-CURRENT> 15,640,885
<NET-CHANGE-FROM-OPS> 24,977,381
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,421,219)
<DISTRIBUTIONS-OF-GAINS> (867,959)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,883,459
<NUMBER-OF-SHARES-REDEEMED> (1,801,069)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 10,555,066
<ACCUMULATED-NII-PRIOR> 1,605,235
<ACCUMULATED-GAINS-PRIOR> 424,907
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,444,004
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,978,723
<AVERAGE-NET-ASSETS> 66,595,561
<PER-SHARE-NAV-BEGIN> 9.88
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 2.15
<PER-SHARE-DIVIDEND> (0.17)
<PER-SHARE-DISTRIBUTIONS> (0.10)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.82
<EXPENSE-RATIO> 1.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 160
<NAME> SIERRA TRUST TARGET MATURITY 2002 CL-A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 2,701,220
<INVESTMENTS-AT-VALUE> 2,715,324
<RECEIVABLES> 888
<ASSETS-OTHER> 115
<OTHER-ITEMS-ASSETS> 124,572
<TOTAL-ASSETS> 2,840,899
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,031
<TOTAL-LIABILITIES> 25,031
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,696,240
<SHARES-COMMON-STOCK> 263,366
<SHARES-COMMON-PRIOR> 291,381
<ACCUMULATED-NII-CURRENT> 93,410
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,114
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,104
<NET-ASSETS> 2,815,868
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 199,829
<OTHER-INCOME> 0
<EXPENSES-NET> 19,983
<NET-INVESTMENT-INCOME> 179,846
<REALIZED-GAINS-CURRENT> 20,427
<APPREC-INCREASE-CURRENT> 6,041
<NET-CHANGE-FROM-OPS> 206,314
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (200,615)
<DISTRIBUTIONS-OF-GAINS> (14,491)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,881
<NUMBER-OF-SHARES-REDEEMED> (67,265)
<SHARES-REINVESTED> 20,369
<NET-CHANGE-IN-ASSETS> (308,834)
<ACCUMULATED-NII-PRIOR> 102,422
<ACCUMULATED-GAINS-PRIOR> 6,178
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,756
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 89,946
<AVERAGE-NET-ASSETS> 3,102,493
<PER-SHARE-NAV-BEGIN> 10.72
<PER-SHARE-NII> 0.62
<PER-SHARE-GAIN-APPREC> 0.11
<PER-SHARE-DIVIDEND> (0.71)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.69
<EXPENSE-RATIO> 0.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
