<PAGE> 1
As filed with the Securities and Exchange Commission on February 28, 1997
Securities Act File No. 33-57732
Investment Company Act File No. 811-7462
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /___/
POST-EFFECTIVE AMENDMENT NO. 7 / X /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /___/
AMENDMENT NO. 8 / X /
The Sierra Variable Trust
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
9301 Corbin Avenue
Northridge, CA 91324
----------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (818) 725-0200
F. Brian Cerini
The Sierra Variable Trust
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, DC 20036
It is proposed that this filing will become effective (check
appropriate box):
____ immediately upon filing pursuant to paragraph (b), or
____ on [date] pursuant to paragraph (b), or
____ 60 days after filing pursuant to paragraph (a), or
____ 75 days after filing pursuant to paragraph (a), or
x on May 1, 1997 pursuant to paragraph (a) of Rule 485.
- ----
<PAGE> 2
DECLARATION PURSUANT TO RULE 24f-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has previously registered an indefinite number or amount of its
shares of beneficial interest under the Securities Act of 1933.
Registrant's Rule 24f-2 Notice with respect to the Global 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 for the fiscal year ended
December 31, 1996 was filed with the Securities and Exchange Commission on
February 24, 1997.
(ii)
<PAGE> 3
THE SIERRA VARIABLE TRUST
FORM N-1A
CROSS REFERENCE SHEET
____________________________________
PART A
The enclosed Prospectus relates only to the Global 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 of The Sierra Variable Trust (the "Trust"). The
prospectus for the other series of the Trust is not being amended or otherwise
affected by the information contained in this Amendment.
The Prospectus relating to the Income Portfolio, Value Portfolio, Balanced
Portfolio, Growth Portfolio, Capital Growth Portfolio and Global Money Fund of
the Trust, is incorporated by reference to Post-Effective Amendment No. 6 to
the Registrant's Registration Statement in Form N-1A (File No. 033-57732) filed
with the securities and Exchange Commission on January 10, 1997 (Accession No.
0000950150-97-000037).
<TABLE>
<CAPTION>
Item No. Prospectus Heading
- -------- ------------------
<S> <C> <C>
1. Cover Page . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . Highlights
3. Condensed Financial
Information . . . . . . . . Financial Highlights
4. General Description of
Registrant . . . . . . . . Management of the Trust; Investment Policies;
Certain Investment Guidelines; Special
Considerations; General Information and History
5. Management of the Fund . . . Management of the Trust-Investment Advisor, --
Sub-Advisors, -- Distributor and -
Administration; Investment Guidelines;
Special Considerations
5A. Management's Discussion of Not Applicable
Fund Performance. . . . .
6. Capital Stock and Other
Securities . . . . . . . . Dividends, Distributions and Taxes;
General Information and History --The Trust
7. Purchase of Securities
</TABLE>
(i)
<PAGE> 4
<TABLE>
<S> <C> <C>
Being Offered . . . . . . . General Information and History -- Purchase and Redemption,
and -- Net Asset Value; Management of the Trust -- Distributor
8. Redemption or Repurchase . . General Information and History -- Purchase and Redemption
9. Pending Legal Proceedings. . Not Applicable
</TABLE>
(ii)
<PAGE> 5
<TABLE>
<CAPTION>
PART B
Heading in Statement of
Item No. Additional Information
- -------- ----------------------
<S> <C> <C>
10. Cover Page . . . . . . . . . Cover Page
11. Table of Contents . . . . . Contents
12. General Information and
History . . . . . . . . . . General Information and History; Management of the Trust;
see Prospectus -- "General Information and History"
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; see Prospectus -- "General
Information and History"
16. Investment Advisory and
Other Services . . . . . . Management of the Trust; see Prospectus -- "Management
of the Trust-- Administration"
17. Brokerage Allocation and
Other Practices . . . . . . Investment Objectives and Policies of the Funds
18. Capital Stock and Other
Securities . . . . . . . . Management of the Trust; see Prospectus -- "Dividends,
Distributions and Taxes" and "General Information and
History"
19. Purchase, Redemption and
Pricing of Securities
Being Offered . . . . . . . Purchase and Pricing of Shares; Net Asset Value
20. Tax Status . . . . . . . . . Taxes; see Prospectus -- "Dividends, Distributions and Taxes"
21. Underwriters . . . . . . . . Purchase and Pricing of Shares; see Prospectus -- "Management
of the Trust -- Distributor"
22. Calculation of Performance
Data . . . . . . . . . . . Performance; see Prospectus -- "Performance"
23. Financial Statements . . . . Financial Statements
</TABLE>
(iii)
<PAGE> 6
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> 7
THE SIERRA VARIABLE TRUST
9301 CORBIN AVENUE, SUITE 333
NORTHRIDGE, CALIFORNIA 91324
The Sierra Variable Trust (the "Trust") is a no-load, open-end management
investment company, commonly known as a mutual fund. The Trust serves as an
investment vehicle for variable annuity contract and variable life insurance
policies offered by life insurance companies. Currently, shares of the Trust are
offered only to American General Life Insurance Company ("AGL") and its separate
accounts for its variable annuity contracts ("Contracts"). This Prospectus
describes nine Funds offered to AGL for its Sierra Advantage Annuity. The Funds
are GLOBAL MONEY, SHORT TERM HIGH QUALITY BOND, SHORT TERM GLOBAL GOVERNMENT,
U.S. GOVERNMENT, CORPORATE INCOME, GROWTH AND INCOME, GROWTH, EMERGING GROWTH
AND INTERNATIONAL GROWTH.
Please read this Prospectus before allocating premiums to the Trust and keep it
on file for future reference. It contains useful information that can help you
decide if a Fund's investment goals match your own.
A Statement of Additional Information ("SAI") about the Trust and the Funds,
dated May 1, 1997, has been filed with the Securities and Exchange Commission
("SEC") and is incorporated herein by reference. The SAI is available free upon
request by calling AGL at 800-247-6584 or by writing to American General Life
Insurance Company, Attention: Annuity Administration, P.O. Box 1401, Houston,
Texas 77251-1401.
INVESTMENTS IN THE GLOBAL MONEY FUND ARE NOT GUARANTEED OR INSURED BY THE U.S.
GOVERNMENT. THERE IS NO ASSURANCE THAT IT WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS DATED MAY 1, 1997
1
<PAGE> 8
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Highlights........................................................................ 3
Investment Policies............................................................... 14
Management of the Trust........................................................... 20
Board of Trustees...................................................... 20
Investment Management.................................................. 20
Distributor............................................................ 25
Administration......................................................... 26
General Information and History................................................... 26
The Trust.............................................................. 26
Purchase and Redemption................................................ 27
Purchase through the SAM Program....................................... 27
Net Asset Value........................................................ 28
Dividends, Distributions and Taxes................................................ 28
Performance....................................................................... 29
Appendix - Securities and Investment Practices.................................... A-1
Statement of Additional Information Table of Contents............................. A-16
</TABLE>
2
<PAGE> 9
HIGHLIGHTS
INTRODUCTION
Owners of the Sierra Advantage Annuity may allocate their account value among
nine different Funds, each of which has a different investment objective and
different investment policies. Sierra Advantage Annuity owners may also elect to
participate in the Sierra Asset Management Program ("SAM Program"), which
periodically reallocates account values in light of financial and investment
objectives and changing economic and market conditions, through Sierra
Investment Services Corporation, the Trust's Distributor.
INVESTMENT OBJECTIVES AND POLICIES
Each Fund has a distinct investment objective and policies. Except for the Short
Term Global Government Fund, each Fund is diversified.
The GLOBAL MONEY FUND seeks to maximize current income consistent with safety of
principal and maintenance of liquidity. It will pursue this objective by
investing in U.S. dollar denominated money market instruments of foreign and
U.S. issuers. It also seeks to maintain a stable net asset value of $1.00 per
share.
The SHORT TERM HIGH QUALITY BOND FUND seeks as high a level of current income as
is consistent with prudent investment management and stability of principal. It
will pursue this objective by investing primarily in high quality short-term
bonds and other debt instruments.
The SHORT TERM GLOBAL GOVERNMENT FUND seeks to provide high current income
consistent with protection of principal. It will pursue this objective by
investing primarily 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.
The U.S. GOVERNMENT FUND seeks to maximize total return while providing
investors with a high level of current income, consistent with reasonable safety
of principal. Under normal market conditions, it will pursue this objective by
investing primarily in intermediate- and long-term U.S. Government bonds.
The CORPORATE INCOME FUND seeks to provide a high level of current income,
consistent with the preservation of capital. Under normal market conditions, it
will pursue this objective by investing primarily in investment grade corporate
bonds of United States issuers.
The GROWTH AND INCOME FUND seeks long-term capital growth and current income
consistent with reasonable investment risk. Under normal market conditions, it
will pursue this objective by investing primarily in dividend-paying Common
Stock.
The GROWTH FUND seeks long-term capital appreciation. Under normal market
conditions, it will pursue this objective by investing primarily in Equity
Securities of U.S., multinational and foreign companies of all sizes that offer
potential for growth.
The EMERGING GROWTH FUND seeks long-term capital appreciation. Under normal
market conditions, it will pursue this objective by investing primarily in
Equity Securities of U.S. and foreign companies having market capitalization of
less than $1.4 billion.
The INTERNATIONAL GROWTH FUND is an equity fund that seeks long-term capital
appreciation. Under normal market conditions, it will pursue this objective by
investing primarily in equity securities of foreign issuers.
The investment objective of each Fund and the policies and restrictions
specifically cited as fundamental may not be changed without the approval of a
majority of the outstanding shares of that Fund. A complete list of fundamental
investment restrictions, which cannot be changed without the approval of a
majority of an affected Fund's outstanding shares, is contained in the SAI.
There is no assurance that a Fund will meet its stated objective.
3
<PAGE> 10
INVESTMENT RISKS
The value of a Fund's shares will fluctuate with the value of the underlying
securities in its portfolio, and in the case of debt securities, with the
general level of interest rates. When interest rates decline, the value of a
portfolio invested in Fixed-Income Securities can be expected to rise.
Conversely, when interest rates rise, the value of a portfolio invested in
Fixed-Income Securities can be expected to decline. In the case of foreign
currency denominated securities, these trends may be offset or amplified by
fluctuations in foreign currencies. Lower-Rated 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% of total assets, are subject to greater
market fluctuations and risk of loss of income and principal than investments in
lower yielding Fixed-Income Securities. The Funds intend to employ from time to
time certain investment techniques which are designed to enhance income or total
return or hedge against market or currency risks but which themselves involve
additional risks. These techniques include Options on Securities, Futures,
Options on Futures, Options on Indexes, Options on Foreign Currencies, Foreign
Currency Exchange Transactions, Lending of Securities and When-Issued Securities
and Delayed-Delivery Transactions. Because the Short Term Global Government Fund
is non-diversified, it is permitted greater flexibility to invest its assets in
the securities of any one issuer and therefore will be exposed to increased risk
of loss if such an investment underperforms expectations. The Funds may have
higher than average portfolio turnover which may result in higher than average
brokerage commissions and transaction costs.
INVESTMENT ADVISORS
Subject to the authority of the Board of Trustees, Sierra Investment Advisors
Corporation (the "Advisor" or "Sierra Advisors") serves as each Fund's
investment advisor and has responsibility for the overall management of the
investment strategies and policies of the Funds. The Trust has secured the
services of sub-advisors for each Fund to make investment decisions and place
orders.
DISTRIBUTION
Sierra Investment Services Corporation ("Distributor" or "Sierra Services")
distributes the Funds' shares to the separate accounts, which purchase and
redeem these shares at net asset value without sales or redemption charges.
ADMINISTRATION
Sierra Fund Administration Corporation ("Sierra Administration") serves as
Administrator to the Trust and has responsibility for the Trust's administrative
functions. Sierra Administration has engaged First Data Investor Services Group,
Inc. ("FDISG"), a wholly-owned subsidiary of First Data Corporation, as
sub-administrator. The Trust has engaged FDISG as the Trust's Transfer Agent and
Boston Safe Deposit & Trust Company ("Boston Safe") as the Trust's custodian.
TAXES
The tax consequences of your investment in the Trust depend upon the specific
provisions of your Contract. For more information, see the prospectus for that
Contract, which is attached to the front of this Prospectus.
PURCHASING AND SELLING SHARES
You cannot purchase shares of the Trust directly, but only through a Contract
offered through an insurance company separate account. Please refer to the
prospectus for your Contract for information on how to make investments and
redemptions.
4
<PAGE> 11
FINANCIAL HIGHLIGHTS
The following information, insofar as it relates to each of the respective
periods ended December 31, 1996 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 AGL at 800-247-6584 or
writing to them at the address shown on the first page of this Prospectus.
GLOBAL MONEY FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
12/31/96 12/31/95 12/31/94 12/31/93*
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of year....... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................... 0.049 0.053 0.037 0.016
------- ------ ------ ------
Total from investment operations......... 0.049 0.053 0.037 0.016
------- ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income..... (0.049) (0.053) (0.037) (0.016)
Distributions from net realized capital
gains.................................. (0.000) # -- -- --
------- ------ ------ ------
Total distributions...................... (0.049) (0.053) (0.037) (0.016)
------- ------ ------ ------
Net asset value, end of year............. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ====== ====== ======
TOTAL RETURN+ 4.97% 5.46% 3.69% 1.59%
======= ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of year (in 000's)....... $23,266 $20,373 $ 6,159 $1,488
Ratio of operating expenses to average
net assets............................. 0.58% 0.50% 0.49% 0.39%**
Ratio of net investment income to average
net assets............................. 4.86% 5.30% 3.84% 2.54%**
Ratio of operating expenses to average
net assets without fees reduced by
credits allowed by the custodian....... 0.58%(a) 0.51%(a) -- --
Ratio of operating expenses to average
net assets without fee waivers,
expenses absorbed and/or fees reduced
by credits allowed by the custodian.... 0.88%(a) 1.01%(a) 1.25% 6.42%**
Net investment income/(loss) per share
without fee waivers and/or expenses
absorbed and/or fees reduced by credits
allowed by the custodian............... $ 0.046 $ 0.048 $ 0.030 $ (0.022)
</TABLE>
- --------------------------------------------------------------------------------
* The Fund commenced operations on May 10, 1993.
** Annualized.
+ Total return represents aggregate total return for the periods indicated.
The total return would have been lower if certain fees had not been waived
by the investment advisor and administrator and if certain expenses had not
been absorbed by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
(a) The ratio includes custodian fees before reduction by credits allowed by the
custodian as required by amended disclosure requirements effective September
1, 1995.
# Amount represents less than $0.001 per share.
5
<PAGE> 12
SHORT TERM HIGH QUALITY BOND FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
12/31/96 12/31/95 12/31/94*
---------- ---------- ------------
<S> <C> <C> <C>
Net asset value, beginning of year............ $ 2.49 $ 2.39 $ 2.50
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income......................... 0.15 0.12 0.08
Net realized and unrealized gain/(loss) on
investments................................. (0.06) 0.10 (0.12)
------- ------- -------
Total from investment operations.............. 0.09 0.22 (0.04)
------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income.......... (0.15) (0.12) (0.07)
------- ------- -------
Total distributions........................... (0.15) (0.12) (0.07)
------- ------- -------
Net asset value, end of year.................. $ 2.43 $ 2.49 $ 2.39
======= ======= =======
TOTAL RETURN(+) 3.74% 9.30% (1.62)%
======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of year (in 000's)............ $ 12,402 $ 12,365 $ 15,547
Ratio of operating expenses to average net
assets...................................... 0.98% 0.85% 0.77%**
Ratio of net investment income to average net
assets...................................... 6.08% 6.14% 5.63%**
Portfolio turnover rate....................... 125% 188% 80%
Ratio of operating expenses to average net
assets without fees reduced by credits
allowed by the custodian.................... 0.98%(a) 0.87%(a) --
Ratio of operating expenses to average net
assets without fee waivers and/or fees
reduced by credits allowed by the
custodian................................... 1.06%(a) 1.01%(a) 1.10%**
Net investment income per share without fee
waivers and/or fees reduced by credits
allowed by the custodian.................... $ 0.15 $ 0.11 $ 0.07
</TABLE>
- --------------------------------------------------------------------------------
* The Fund commenced operations on January 12, 1994.
** Annualized.
+ Total return represents aggregate total return for the periods indicated.
The total return would have been lower if certain fees had not been waived
by the investment advisor and administrator or if fees had not been reduced
by credits allowed by the custodian.
(a) The ratio includes custodian fees before reduction by credits allowed by the
custodian as required by amended disclosure requirements effective September
1, 1995.
6
<PAGE> 13
SHORT TERM GLOBAL GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
12/31/96++ 12/31/95 12/31/94 12/31/93*
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of year...... $ 2.50 $ 2.35 $ 2.49 $ 2.50
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................... 0.14 0.07 0.05 0.01
Net realized and unrealized gain/(loss)
on investments........................ 0.07 0.12 (0.10) (0.01)
------- ------- -------
Total from investment operations........ 0.21 0.19 (0.05) 0.00
------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income.... (0.15) (0.04) (0.05) (0.01)
Distributions in excess of net
investment income..................... (0.08) -- -- --
Distributions from capital***........... -- -- (0.04) --
------- ------- -------
Total distributions..................... (0.23) (0.04) (0.09) (0.01)
------- ------- -------
Net asset value, end of year............ $ 2.48 $ 2.50 $ 2.35 $ 2.49
======= ======= =======
TOTAL RETURN+ 8.61% 8.09% (2.03)% 0.12%
======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)...... $21,910 $23,805 $29,804 $19,147
Ratio of operating expenses to average
net assets............................ 1.28% 1.25% 0.92% 0.52%**
Ratio of net investment income to
average net assets.................... 5.67% 6.22% 5.84% 4.06%**
Portfolio turnover rate................. 77% 195% 286% 164%
Ratio of operating expenses to average
net assets without fees reduced by
credits allowed by the custodian...... 1.28%(a) 1.25% (a) -- --
Ratio of operating expenses to average
net assets without fee waivers,
expenses absorbed and/or fees reduced
by credits allowed by the custodian... 1.28%(a) 1.26% (a) 1.28% 1.92%**
Net investment income per share without
fee waivers and/or expenses absorbed
and/or fees reduced by credits allowed
by the custodian...................... $ 0.14 $ 0.07 $ 0.05 $ 0.01
</TABLE>
- --------------------------------------------------------------------------------
* The Fund commenced operations on May 12, 1993.
** Annualized.
*** 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.
+ Total return represents aggregate total return for the periods indicated.
The total return would have been lower if certain fees had not been waived
by the investment advisor and administrator and if certain expenses had not
been absorbed by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method,
which more appropriately presents the per share data for the year since the
use of the undistributed income method did not accord with results of
operations.
(a) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective
September 1, 1995.
7
<PAGE> 14
U.S. GOVERNMENT FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
12/31/96 12/31/95 12/31/94 12/31/93*
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of
year............................ $ 10.00 $ 9.13 $ 10.04 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............. 0.58 0.64 0.50 0.19
Net realized and unrealized
gain/(loss) on investments...... (0.23) 0.87## (0.90)## 0.04##
------- ------- ------- -------
Total from investment
operations...................... 0.35 1.51 (0.40) 0.23
------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment
income.......................... (0.58) (0.64) (0.50) (0.19)
Distributions from net realized
gains........................... -- -- (0.01) --
------- ------- ------- -------
Total distributions............... (0.58) (0.64) (0.51) (0.19)
------- ------- ------- -------
Net asset value, end of year...... $ 9.77 $ 10.00 $ 9.13 $ 10.04
======= ======= ======= =======
TOTAL RETURN+ 3.69% 16.89% (4.04)% 2.27%
======= ======= ======= =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's).......................... $ 66,563 $ 52,303 $ 43,582 $25,069
Ratio of operating expenses to
average net assets.............. 0.94% 1.00% 0.85% 0.44%**
Ratio of net investment income to
average net assets.............. 6.18% 6.68% 5.75% 5.37%**
Portfolio turnover rate........... 282% 273% 74% 131%
Ratio of operating expenses to
average net assets without fees
reduced by credits allowed by
the custodian................... 0.94%(a) 1.02%(a) -- --
Ratio of operating expenses to
average net assets without fee
waivers, expenses absorbed
and/or fees reduced by credits
allowed by the custodian........ 0.94%(a) 1.03%(a) 1.02% 1.47%**
Ratio of operating expenses to
average net assets including
interest expense................ 1.08% 1.76% 0.86% 0.44%**
Net investment income per share
without fee waivers and/or
expenses absorbed and/or fees
reduced by credits allowed by
the custodian................... $ 0.58 $ 0.63 $ 0.49 $ 0.15
</TABLE>
- --------------------------------------------------------------------------------
* The Fund commenced operations on May 6, 1993.
** Annualized.
+ Total return represents aggregate total return for the periods indicated.
The total return would have been lower if certain fees had not been waived
by the investment advisor and administrator and if certain expenses had
not been absorbed by the investment advisor or if fees had not been
reduced by credits allowed by the custodian.
## The amount shown may not accord with the change in the aggregate gains and
losses of portfolio securities due to timing of sales and redemptions of
Fund shares.
(a) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective
September 1, 1995.
8
<PAGE> 15
CORPORATE INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
12/31/96 12/31/95 12/31/94 12/31/93*
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of year....... $ 10.48 $ 9.06 $ 10.34 $ 10.00
------- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................... 0.68 0.70 0.47 0.23
Net realized and unrealized gain/(loss)
on investments......................... (0.66) 1.50 (1.30) 0.33##
------- ------ ------
Total from investment operations......... 0.02 2.20 (0.83) 0.56
------- ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income..... (0.68) (0.78) (0.40) (0.22)
Distributions from net realized gains.... -- -- (0.05) --
------- ------ ------
Total distributions...................... (0.68) (0.78) (0.45) (0.22)
------- ------ ------
Net asset value, end of year............. $ 9.82 $ 10.48 $ 9.06 $ 10.34
======= ====== ======
TOTAL RETURN+ 0.43% 25.09% (8.13)% 5.62%
======= ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of year (in 000's)....... $59,883 $60,676 $54,705 $28,732
Ratio of operating expenses to average
net assets............................. 0.98% 0.99% 0.93% 0.54%**
Ratio of net investment income to average
net assets............................. 6.92% 7.00% 7.28% 6.37%**
Portfolio turnover rate.................. 30% 42% 23% 26%
Ratio of operating expenses to average
net assets without fees reduced by
credits allowed by the custodian....... 0.98% (a) 0.99% (a) -- --
Ratio of operating expenses to average
net assets without fee waivers,
expenses absorbed and/or fees reduced
by credits allowed by the custodian.... 0.98% (a) 0.99% (a) 1.07% 1.50%**
Ratio of operating expenses to average
net assets including interest
expense................................ -- 0.99% -- --
Net investment income per share without
fee waivers and/or expenses absorbed
and/or fees reduced by credits allowed
by the custodian....................... $ 0.68 $ 0.70 $ 0.47 $ 0.19
</TABLE>
- --------------------------------------------------------------------------------
* The Fund commenced operations on May 7, 1993.
** Annualized.
+ Total return represents aggregate total return for the periods indicated.
The total return would have been lower if certain fees had not been waived
by the investment advisor and administrator and if certain expenses had not
been absorbed by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
## The amount shown may not accord with the change in the aggregate gains and
losses of portfolio securities due to the timing of sales and redemptions of
Fund shares.
(a) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective
September 1, 1995.
9
<PAGE> 16
GROWTH AND INCOME FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
12/31/96++ 12/31/95 12/31/94*
---------- -------- ---------
<S> <C> <C> <C>
Net asset value, beginning of year................. $ 12.83 $ 9.83 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.............................. 0.12 0.12 0.07
Net realized and unrealized gain/(loss) on
investments...................................... 2.54 3.05 (0.24)
------- ------- -------
Total from investment operations................... 2.66 3.17 (0.17)
------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income............... (0.12) (0.07) --
Distributions from net realized gains.............. (1.08) (0.10) --
------- ------- -------
Total distributions................................ (1.20) (0.17) --
------- ------- -------
Net asset value, end of year....................... $ 14.29 $ 12.83 $ 9.83
======= ======= =======
TOTAL RETURN+ 21.81% 32.41% (1.70)%
======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)................. $ 62,445 $46,362 $24,905
Ratio of operating expenses to average net
assets........................................... 1.13% 1.06% 1.20%**
Ratio of net investment income to average net
assets........................................... 0.93% 1.31% 1.63%**
Portfolio turnover rate............................ 83% 70% 44%
Ratio of operating expenses to average net assets
without fees reduced by credits allowed by the
custodian........................................ 1.13%(a) 1.06% (a) --
Ratio of operating expenses to average net assets
without fee waivers and/or fees reduced by
credits allowed by the custodian................. 1.13%(a) 1.16% (a) 1.55%**
Net investment income per share without fee waivers
and/or fees reduced by credits allowed by the
custodian........................................ $ 0.12 $ 0.11 $ 0.05
Average commission rate paid(b).................... $ 0.0533 -- --
</TABLE>
- --------------------------------------------------------------------------------
* The Fund commenced operations on January 12, 1994.
** Annualized.
+ Total return represents aggregate total return for the periods indicated.
The total return would have been lower if certain fees had not been waived
by the investment advisor and administrator or if fees had not been reduced
by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method,
which more appropriately presents the per share data for the year since the
use of the undistributed income method did not accord with results of
operations.
(a) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective
September 1, 1995.
(b) 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.
10
<PAGE> 17
GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
12/31/96++ 12/31/95++ 12/31/94 12/31/93*
---------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of year............ $ 15.72 $ 11.48 $ 11.19 $ 10.00
-------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income......................... 0.00# 0.04 0.04 0.02
Net realized and unrealized gain on
investments................................. 2.42 4.24 0.26 1.17
-------- ------- ------- -------
Total from investment operations.............. 2.42 4.28 0.30 1.19
-------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income.......... -- (0.04) (0.01) --
Distributions from net realized gains......... (2.13) (0.00)# -- --
-------- ------- ------- -------
Total distributions........................... (2.13) (0.04) (0.01) --
-------- ------- ------- -------
Net asset value, end of year.................. $ 16.01 $ 15.72 $ 11.48 $ 11.19
======== ======= ======= =======
TOTAL RETURN+ 16.15% 37.34% 2.69% 11.90%
======== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of year (in 000's)............ $116,064 $ 99,699 $62,763 $22,795
Ratio of operating expenses to average net
assets...................................... 1.22% 1.24% 1.26% 0.78%**
Ratio of net investment income to average net
assets...................................... 0.01% 0.29% 0.74% 0.70%**
Portfolio turnover rate....................... 169% 187% 257% 86%
Ratio of operating expenses to average net
assets without fees reduced by credits
allowed by the custodian.................... 1.22%(a) 1.24%(a) -- --
Ratio of operating expenses to average net
assets without fee waivers, expenses
absorbed and/or fees reduced by credits
allowed by the custodian.................... 1.22%(a) 1.24%(a) 1.32% 1.92%**
Net investment income/(loss) per share without
fee waivers and/or expenses absorbed and/or
fees reduced by credits allowed by the
custodian................................... $ 0.00# $ 0.04 $ 0.04 $ (0.01)
Average commission rate paid(b)............... $ 0.0460 -- -- --
</TABLE>
- --------------------------------------------------------------------------------
* The Fund commenced operations on May 7, 1993.
** Annualized.
+ Total return represents aggregate total return for the periods indicated.
The total return would have been lower if certain fees had not been waived
by the investment advisor and administrator and if certain expenses had not
been absorbed by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method,
which more appropriately presents the per share data for the year since the
use of the undistributed income method did not accord with results of
operations.
# Amount represents less than $0.01 per share.
(a) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective
September 1, 1995.
(b) 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.
11
<PAGE> 18
EMERGING GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
12/31/96++ 12/31/95 12/31/94*
---------- ---------- ------------
<S> <C> <C> <C>
Net asset value, beginning of year..................... $ 13.74 $ 10.53 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income/(loss)........................... (0.12) (0.01) 0.06
Net realized and unrealized gain on investments........ 1.52 3.26 0.47
------- ------- -------
Total from investment operations....................... 1.40 3.25 0.53
------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income................... -- (0.04) --
Distributions from net realized gains.................. (0.44) (0.00)# --
------- ------- -------
Total distributions.................................... (0.44) (0.04) --
------- ------- -------
Net asset value, end of year........................... $ 14.70 $ 13.74 $ 10.53
======= ======= =======
TOTAL RETURN+ 10.04% 30.99% 5.30%
======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)..................... $ 55,887 $ 46,058 $ 19,885
Ratio of operating expenses to average net assets...... 1.20% 1.20% 1.23%**
Ratio of net investment income/(loss) to average net
assets............................................... (0.82)% (0.35)% 1.03%**
Portfolio turnover rate................................ 97% 135% 192%
Ratio of operating expenses to average net assets
without fees reduced by credits allowed by the
custodian............................................ 1.21%(a) 1.21%(a) --
Ratio of operating expenses to average net assets
without fee waivers and/or fees reduced by credits
allowed by the custodian............................. 1.21%(a) 1.28%(a) 1.38%**
Net investment income/(loss) per share without fee
waivers and/or fees reduced by credits allowed by the
custodian............................................ $ (0.12) $ (0.01) $ 0.05
Average commission rate paid(b)........................ $ 0.0319 -- --
</TABLE>
- --------------------------------------------------------------------------------
* The Fund commenced operations on January 12, 1994.
** Annualized.
+ Total return represents aggregate total return for the periods indicated.
The total return would have been lower if certain fees had not been waived
by the investment advisor and administrator or if fees had not been reduced
by credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the year since the use of
the undistributed income method did not accord with results of operations.
# Amount represents less than $0.01 per share.
(a) The ratio includes custodian fees before reduction by credits allowed by the
custodian as required by amended disclosure requirements effective September
1, 1995.
(b) 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.
12
<PAGE> 19
INTERNATIONAL GROWTH FUND
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
12/31/96++ 12/31/95 12/31/94 12/31/93*
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of year......... $ 12.11 $ 11.47 $ 11.31 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................... 0.07 0.18 0.01 0.02
Net realized and unrealized gain on
investments.............................. 1.01 0.58 0.19 ## 1.29
------- ------- -------
Total from investment operations........... 1.08 0.76 0.20 1.31
------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income....... (0.17) (0.00) # (0.03) --
Distributions from net realized gains...... -- (0.12) (0.01) --
------- ------- -------
Total distributions........................ (0.17) (0.12) (0.04) --
------- ------- -------
Net asset value, end of year............... $ 13.02 $ 12.11 $ 11.47 $ 11.31
======= ======= =======
TOTAL RETURN(+) 9.04% 6.61% 1.88% 13.10%
======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of year (in 000's)......... $62,355 $45,909 $46,529 $10,638
Ratio of operating expenses to average net
assets................................... 1.39% 1.47% 1.34% 0.83% **
Ratio of net investment income to average
net assets............................... 0.56% 0.91% 0.83% 0.61% **
Portfolio turnover rate.................... 98% 72% 51% 24%
Ratio of operating expenses to average net
assets without fees reduced by credits
allowed by the custodian................. 1.39%(a) 1.47% (a) -- --
Ratio of operating expenses to average net
assets without fee waivers, expenses
absorbed and/or fees reduced by credits
allowed by the custodian................. 1.39%(a) 1.48% (a) 1.50% 2.85% **
Net investment income/(loss) per share
without fee waivers and/or expenses
absorbed and/or fees reduced by credits
allowed by the custodian................. $ 0.07 $ 0.17 $ 0.01 $ (0.06)
Average commission rate paid(b)............ $0.0253 -- -- --
</TABLE>
- --------------------------------------------------------------------------------
* The Fund commenced operations on May 7, 1993.
** Annualized.
+ Total return represents aggregate total return for the periods indicated.
The total return would have been lower if certain fees had not been waived
by the investment advisor and administrator and if certain expenses had not
been absorbed by the investment advisor or if fees had not been reduced by
credits allowed by the custodian.
++ Per share numbers have been calculated using the average shares method,
which more appropriately presents the per share data for the year since the
use of the undistributed income method did not accord with results of
operations.
# Amount represents less than $0.01 per share.
## The amount shown may not accord with the change in the aggregate gains and
losses of portfolio securities due to timing of sales and redemptions of
Fund shares.
(a) The ratio includes custodian fees before reduction by credits allowed by
the custodian as required by amended disclosure requirements effective
September 1, 1995.
(b) 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.
13
<PAGE> 20
INVESTMENT POLICIES
The nine Funds follow distinct investment policies. An investment in a single
Fund is not designed to be a complete investment program. In implementing its
policies, each Fund uses a variety of instruments, strategies and techniques
that are capitalized in the text and described in more detail in the Appendix
and in the SAI. With respect to each Fund's investment policies, use of the term
"primarily" means that under normal circumstances, at least 65% of the Fund's
assets will be invested as indicated, except for the Global Money Fund, where
all of its assets will meet the quality and maturity standards described in the
SAI. A description of the rating systems used by the following nationally
recognized statistical rating organizations ("NRSROs") is also contained in the
SAI: Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P"), Duff & Phelps, Inc. ("Duff") and Fitch Investors Service, Inc.
("Fitch"). New instruments, strategies and techniques, however, are evolving
continually and each Fund reserves authority to invest in or implement them to
the extent consistent with its investment objectives and policies.
THE MONEY MARKET FUND
GLOBAL MONEY FUND. The Global Money Fund pursues its investment objective by
investing in the following U.S. dollar denominated high-quality, money market
instruments issued by U.S. and foreign financial institutions and nonfinancial
corporations and by the U.S. Government, its agencies or instrumentalities:
1. Bank Obligations;
2. Commercial paper (including variable rate demand notes);
3. Short-term corporate obligations;
4. U.S. Government Securities; and
5. Repurchase Agreements collateralized by the securities listed in 1
and 4 above.
The Global Money Fund follows industry-standard guidelines on the quality and
maturity of its investments designed to help maintain a stable $1.00 share
price. The Fund does not, however, guarantee a $1.00 share price, and a major
change in interest rates or a default on an investment could cause the share
price to change. Generally, securities with longer maturities are more
vulnerable to price changes, although they provide higher yields.
The Fund may invest in Foreign Investments that are U.S. dollar denominated. The
Fund may invest up to 50% of its assets in any foreign country but will normally
include issues having activities in at least three countries, including the
United States. In addition, the Fund may invest in U.S. Government Securities
without limit and normally will invest at least 25% of its assets in Bank
Obligations.
THE BOND FUNDS
SHORT TERM HIGH QUALITY BOND FUND. Under normal market conditions, the Fund
pursues its investment objective by investing primarily in high quality
short-term bonds and other debt securities. The Fund will seek to maintain a
dollar-weighted average portfolio maturity of three years or less. The Fund may
hold individual securities with remaining maturities of more than three years as
long as the dollar-weighted average portfolio maturity is three years or less.
For purposes of the weighted average maturity calculation, a mortgage
instrument's average life will be considered to be its maturity.
The Fund intends to invest substantially all of its assets in a portfolio of
debt securities that are rated investment grade by one or more NRSROs, or, if
unrated, are judged to be of comparable quality by the Fund's Sub-Advisor.
Securities which are "investment grade" are rated in one of the four highest
rating categories. The Fund will invest primarily in U.S. Government Securities,
corporate debt obligations or Mortgage-Backed Securities rated in one of the two
highest categories by an NRSRO, that is, at least Aa by Moody's, at least AA by
S&P, Duff or Fitch, or, if unrated, that are judged to be of comparable quality
by the Sub-Advisor. Investment-grade bonds are generally of medium to high
quality. A bond
14
<PAGE> 21
rated in the lower end of the 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 debt 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 debt 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. As discussed in the Appendix under
"Securities and Investment Practices - Foreign Investments," investment in
foreign securities is subject to special risks, such as future adverse political
and economic developments; possible seizure, nationalization, or expropriation
of foreign investments; less stringent disclosure and accounting requirements;
the possible establishment of exchange controls or taxation at the source; or
the adoption of other foreign governmental restrictions.
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, Bank Obligations and Repurchase Agreements. In
addition, the Fund may engage in certain Strategic Transactions, which include
Dollar Roll Transactions, Reverse Repurchase Agreements, Interest Rate
Transactions, Options on Securities and Indexes, Futures and Options on Futures,
Options on Foreign Currencies, Foreign Exchange Transactions and Over the
Counter Options. The Fund currently intends to invest up to 10% of its total
assets in Reverse Repurchase Agreements and up to 33 1/3% of its total assets in
Dollar Roll Transactions.
Although the Fund will invest in high quality investments and maintain a
dollar-weighted average portfolio maturity of three years or less, there will be
some variation in the extent to which the values of the Fund's investments will
vary in response to changes in generally prevailing interest rates. For example,
certain Mortgage-Backed Securities, collateralized mortgage obligations and
Asset-Backed Securities may have pre-payment features that tend to make their
values increase less in response to declining interest rates and decrease more
in response to increasing interest rates than would the values of otherwise
similar conventional debt securities. The Fund may also invest in "inverse
floater" instruments that may be more volatile than other variable rate debt
instruments.
The Fund may invest in certain Illiquid Securities.
SHORT TERM GLOBAL GOVERNMENT FUND. Under normal market conditions, the Fund
pursues its investment objective by investing primarily in at least three
different countries, one of which may be the United States. The Fund seeks to
maintain a dollar-weighted average portfolio maturity not exceeding three years
but may hold individual securities with longer maturities. This policy helps
minimize the effect of interest rate changes on the Fund's share price. The
Sub-Advisor's determination of the expected average life of a portfolio mortgage
security is used as that security's maturity with regard to determining the
above calculation of average dollar-weighted portfolio maturity. 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 is not meant to be a substitute for a money market fund, which seeks to
maintain a fixed net asset value per share. The Fund seeks to maintain greater
price stability than longer-term bond funds.
Under normal market conditions, the Fund will invest primarily 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.
15
<PAGE> 22
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 Obligations, 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 or A) or, if unrated, will be considered by the Sub-Advisor to be of
equivalent quality. The Fund may invest in 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.
The Fund may engage in certain Strategic Transactions, which include Reverse
Repurchase Agreements, Interest Rate Transactions, Options on Securities and
Indexes, Futures and Options on Futures, Options on Foreign Currencies, Foreign
Exchange Transactions and Over the Counter Options. The Fund may also invest up
to 33 1/3% of its total assets in Dollar Roll Transactions.
The Fund's net asset value per share fluctuates, depending on (i) current
worldwide market interest rates, (ii) the value of the currencies in which the
Fund's portfolio securities are denominated when compared to the U.S. dollar,
(iii) the success of the Sub-Advisor's currency hedging techniques, and (iv) the
creditworthiness of the issuers in which the Fund is invested. In pursuing the
Fund's investment objective, however, the Sub-Advisor actively manages the Fund
in an effort to minimize the effect of such factors on the Fund's net asset
value per share. The Sub-Advisor allocates the Fund's investments among those
markets, issuers and currencies that it believes offer the most attractive
combination of high income and principal stability. In evaluating investments
for the Fund, the Sub-Advisor analyzes relative yields and appreciation
potential of securities in particular markets; world interest rates and monetary
trends; economic, political and financial market conditions in different
countries; credit quality; and the relationship of individual foreign currencies
to the U.S. dollar. The Sub-Advisor relies on internally and externally
generated financial, economic, and credit research to evaluate alternative
investment opportunities. In addition, Sierra Advisors may, from time to time,
direct the Sub-Advisor with respect to investment strategies and specific Fund
investments including, but not limited to, the Fund's currency hedging strategy,
U.S. dollar currency exposure and certain investments which are unrated or rated
below investment grade.
The Short Term Global Government Fund is classified as a "non-diversified"
investment company under the Investment Company Act of 1940, as amended (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. The Fund 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. The Fund must, however, meet certain
diversification standards to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"). See "Taxes" in the SAI.
U.S. GOVERNMENT FUND. Under normal market conditions, the Fund pursues its
investment objective by investing at least 65% and up to 100% of its assets in
intermediate- and long-term U.S. Government Securities. Depending on current
market conditions, the Fund may invest in U.S. Government Securities of varying
maturities, which may range up to 40 years. Securities in the Fund's portfolio
are high quality securities that will generally yield less income than lower
quality securities; higher quality securities,
16
<PAGE> 23
however, generally have less credit and market 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. The Fund may invest up to 35% of its assets in (i)
Commercial Mortgage-Backed Securities rated in one of the two highest rating
categories by an NRSRO, that is, at least Aa by Moody's, at least AA by S&P,
Duff or Fitch, or, if unrated, that are judged to be of comparable quality by
the Sub Advisor; and (ii) the types of securities in which the Corporate Income
Fund may invest except as otherwise prohibited in this Prospectus or the SAI,
including preferred stock, Convertible Securities, U.S. Government Securities
(including Government Stripped Mortgage-Backed Securities), Asset-Backed
Securities and interests in Lease Obligations Bonds. 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 engage in Reverse Repurchase Agreements and certain Strategic
Transactions. The Fund may also invest up to 33 1/3% of its total assets in
Dollar Roll Transactions.
GUARANTEES OF THE FUND'S SECURITIES BY THE U.S. GOVERNMENT, ITS AGENCIES OR
INSTRUMENTALITIES GUARANTEE ONLY THE PAYMENT OF PRINCIPAL AND INTEREST ON THE
GUARANTEED SECURITIES, AND DO NOT GUARANTEE THE SECURITIES' YIELD OR VALUE OR
THE YIELD OR VALUE OF THE FUND'S SHARES.
CORPORATE INCOME FUND. Under normal market conditions, the Fund pursues its
investment objective by investing primarily in corporate bonds of United States
issuers that are rated investment grade by one or more NRSROs, or, if not rated,
that the Fund's Sub-Advisor believes to have credit characteristics equivalent
to such investment grade rated corporate bonds. Securities that are rated
"investment grade" are rated in one of the four highest categories. 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 Sub-Advisor
believes that investing in corporate bonds with shorter maturities would be
appropriate in light of prevailing market conditions. Corporate bonds with
longer maturities generally tend to produce higher yields and are subject to
greater market risk than debt securities with shorter maturities. The value of
the Fund's portfolio securities can be expected to vary inversely with changes
in the prevailing interest rates.
The Fund may also invest in preferred stock and Convertible Securities, which
are rated investment grade by an NRSRO, or, if not rated, that the 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; interests in Lease
Obligation Bonds for which the payment of interest and principal is
unconditionally guaranteed by companies with debt that is 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 Obligation Bonds. The Fund may invest in
"inverse floater" instruments that may be more volatile than other variable rate
debt instruments. The Fund also 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. 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 in the highest category by an
NRSRO, Bank Obligations and cash and cash equivalents. In addition, the Fund may
engage in Reverse Repurchase Agreements and certain Strategic Transactions. The
Fund may also invest up to 33 1/3% of its total assets in Dollar Roll
Transactions.
THE EQUITY FUNDS
GROWTH AND INCOME FUND. Under normal market conditions, the Fund pursues its
investment objective by investing primarily in dividend-paying Equity
Securities. The Fund may also invest in other Equity
17
<PAGE> 24
Securities, consisting of nondividend-paying Equity Securities, preferred stock
and Convertible Securities, such as convertible preferred stock, convertible
bonds rated in the highest three rating categories by Moody's or S&P, or, if
unrated, are determined to be of equal 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 Standard & Poor's 500
Stock Index ("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.
Generation of income is not an objective of the Fund, and any income received is
only an incidental consideration. 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 ordinary market conditions, the Sub-Advisor will keep the Fund
essentially fully invested in the equity securities described above. The
Sub-Advisor may, however, invest in money market instruments including U.S.
Government Securities; Bank Obligations; and commercial paper and corporate
obligations, including variable rate demand notes, that are issued by U.S. and
foreign issuers and that are rated in the highest three rating categories by
Moody's or S&P, or, if unrated, are determined to be of equal quality by the
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. In addition, the Fund may engage in
certain Strategic Transactions.
GROWTH FUND. Under normal market conditions, the Fund pursues its investment
objective by investing primarily in Equity Securities of U.S., multinational and
foreign companies of all sizes that offer potential for growth. Generation of
income is not an objective of the Fund, and any income received is only an
incidental consideration.
The Fund intends to invest primarily in Equity Securities believed by management
to have appreciation potential. However, no class of security represents at all
times the greatest promise for capital appreciation. Therefore, the Fund may
invest in debt securities, including Lower-Rated Securities, if in the opinion
of management, doing so would further the long-term capital appreciation
objective of the Fund.
The Fund may invest up to 25% of its assets in foreign securities, usually
foreign Equity Securities, 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 management, to
be a country that is in the initial stages of its industrialization cycle. The
Fund may also, for temporary defensive purposes, in an effort to protect its
assets against major adverse market declines or when investment opportunities
with desirable risk/reward characteristics are unavailable, pursue a policy of
retaining cash or investing part or all of its assets in cash equivalents or
investment-grade debt securities. In addition, the Fund may engage in certain
Strategic Transactions.
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.
EMERGING GROWTH FUND. Under normal market conditions, the Fund pursues its
investment objective by investing primarily in Equity Securities of companies
with market capitalizations of less than $1.4 billion
18
<PAGE> 25
at the time of purchase. A company's market capitalization is calculated by
multiplying the total number of shares of its Equity Securities outstanding by
the market price per share of its stock. Generation of income is not an
objective of the Fund, and any income received is only an incidental
consideration.
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,
and therefore may provide opportunities for greater investment gains as a result
of relative inefficiencies in the marketplace.
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 Sub-Advisor believes have earnings that may be expected to grow faster
than the United States economy in general. These companies typically would
possess one or more characteristics, including high quality management, a
leading or dominant position in a major product line, a sound financial position
and a relatively high rate of return on invested capital so that future growth
can be financed from internal sources. The Fund also may invest in companies
that offer the possibility of accelerating earnings growth because of management
changes, new products or structural changes in the economy.
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.
The Fund may invest in other Equity Securities, including Convertible Securities
and warrants to purchase Equity Securities, as well as cash and cash
equivalents. In addition, the Fund may invest in Lower Rated Securities and
engage in certain Strategic Transactions. 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."
INTERNATIONAL GROWTH FUND. Under normal market conditions, the Fund pursues its
investment objective by investing primarily in Equity Securities of foreign
issuers located in 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. Generation of income is not an objective of
the Fund, and any income received is only an incidental consideration.
The Fund may invest in securities of issuers located in a variety of different
foreign regions and countries which include, but are not limited to, the
following: Argentina, Australia, Austria, Belgium, Canada, Chile, Denmark,
Finland, France, Germany, Greece, Hong Kong, Hungary, Indonesia, Ireland, Italy,
Japan, Luxembourg, Malaysia, Mexico, The Netherlands, New Zealand, Norway,
Philippines, Poland, Portugal, Singapore, The Slovak Republic, Spain, Sweden,
Switzerland, Thailand and The United Kingdom. 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.
19
<PAGE> 26
The Fund invests in Equity Securities 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. 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 in one of the three highest categories by an NRSRO, or if
unrated, of comparable quality in the opinion of the Fund's Sub-Advisor; (iii)
commercial paper, including master notes; (iv) Bank Obligations; 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 in one of the three highest categories by an NRSRO, 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 or
governments of developing or emerging countries provided that no more than 5% of
the Fund's total assets are invested in any one such country. For temporary
defensive purposes, the Fund may invest a major portion of its assets in
securities of United States issuers. Furthermore, the Fund may invest up to 5%
of its total assets in corporate debt securities having maturities longer than
one year and which are rated BBB or better by S&P, including Euro-currency
instruments and securities.
In addition, the Fund may engage in certain Strategic Transactions, which
include Options on Securities and Indexes, Futures and Options on Futures,
Options on Foreign Currencies, Foreign Exchange Transactions and Over the
Counter Options.
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Board of Trustees is responsible for the management of the business and
affairs of the Trust as provided in the laws of the Commonwealth of
Massachusetts and the Trust's Declaration of Trust and By-Laws. The Trustees are
experienced business persons who meet several times during the year to oversee
the Trust's activities, review contractual arrangements with companies that
provide services to the Trust, and review performance. The majority of the
Trustees are not otherwise affiliated with Sierra Advisors or any of the
Sub-Advisors.
INVESTMENT MANAGEMENT
INVESTMENT ADVISOR. Sierra Advisors, 9301 Corbin Avenue, Northridge, California
91324, is the investment advisor to the Trust. Sierra Advisors is an indirect
wholly-owned subsidiary of Great Western Financial Corporation ("Great
Western"), a publicly owned financial services company listed on the New York,
London and Pacific stock exchanges, and has general oversight responsibility for
the investment advisory services provided to the Funds. Responsibilities of
Sierra Advisors include formulating the Funds' investment policies, analyzing
economic trends affecting the Funds, and directing and evaluating the investment
services provided by the Sub-Advisors, including their adherence to the Funds'
investment objectives and policies and the Funds' 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
20
<PAGE> 27
best interest of a Fund's shareholders. Sierra Advisors is registered as an
investment advisor under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"). Sierra Advisors, which performs similar services for Sierra
Trust Funds and Sierra Prime Income Fund, had aggregate assets under management
of approximately $3.2 billion as of December 31, 1996. For its services, Sierra
Advisors is paid a monthly fee at annual rates equal to percentages of each
Fund's average net assets, described in "Advisory Fees."
SUB-ADVISORS. In accordance with each Fund's investment objective and policies
and under the supervision of Sierra Advisors and the Trust's Board of Trustees,
each Fund's Sub-Advisor is responsible for the day-to-day investment management
of the Fund, makes investment decisions for the Fund and places orders on behalf
of the Fund to effect the investment decisions made.
The following organizations act as Sub-Advisors to the Funds as indicated below:
BLACKROCK FINANCIAL MANAGEMENT, INC. ("BlackRock"), Sub-Advisor of the U.S.
Government Fund, 345 Park Avenue, New York, New York 10154, provides
investment advice to a wide variety of institutional and investment
company-related clients. BlackRock, a Delaware corporation, is an
indirectly, wholly-owned subsidiary of PNC Bank, N.A. PNC Bank, N.A. is an
indirectly, wholly-owned subsidiary of PNC Bank Corp. ("PNC"). PNC is a
publicly-owned multi-bank 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. As of December 31, 1996, BlackRock
had aggregate assets under management or supervision of more than $43
billion.
The day-to-day management of the U.S. Government 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 1993.
JANUS CAPITAL CORPORATION ("Janus"), Sub-Advisor of the Growth Fund and
Emerging Growth Fund, 100 Fillmore Street, Denver, Colorado 80206, provides
investment advice to mutual funds and other large institutional clients.
Janus is an indirect majority owned subsidiary of Kansas City Southern
Industries, Inc., a publicly traded holding company whose primary
subsidiaries are engaged in transportation, financial services and real
estate. As of December 31, 1996, Janus' assets under management were in
excess of $46 billion.
Warren B. Lammert, Senior Analyst and Portfolio Manager of Janus, has been
the portfolio manager for the Growth Fund since its inception. Mr. Lammert
is a graduate of Yale University and is a Chartered Financial Analyst. He
served as a securities analyst at Janus from 1987-1988, before leaving to
receive his Masters in Economic History with Distinction from the London
School of Economics. He rejoined Janus as Senior Analyst in January, 1990,
and is Portfolio Manager to a number of equity funds, including the Growth
Fund.
James P. Goff, Portfolio Manager and Senior Analyst at Janus, has been the
portfolio manager of the Emerging Growth Fund since inception. Mr. Goff
joined Janus in 1988, and also manages the Janus Enterprise Fund. He holds
a Bachelor of Arts in Economics from Yale University and is a Chartered
Financial Analyst. His duties at Janus also include the management of
separate equity accounts.
J.P. MORGAN INVESTMENT MANAGEMENT INC. ("J.P. Morgan"), Sub-Advisor of the
Global Money Fund and Growth and Income Fund, 522 Fifth Avenue, New York,
New York 10036, provides investment services to employee benefit plans of
corporations, labor unions and state and local governments and the accounts
of other institutional investors. As of December 31, 1996, J.P. Morgan had
investment management authority with respect to approximately $ billion.
Henry D. Cavanna, Managing Director of J.P. Morgan, and William M. Riegel,
Vice President of J.P. Morgan, have been the portfolio managers for the
Growth and Income Fund since inception.
21
<PAGE> 28
Mr. Cavanna is a senior portfolio manager in the Equity and Balanced
Accounts Group. Mr. Cavanna was with the Wall Street firm, Harris Upham &
Co., prior to joining J.P. Morgan in 1971. He received his B.A. degree from
Boston College and LL.B. degree from the University of Pennsylvania. Mr.
Riegel is also a senior portfolio manager in the Equity and Balanced
Accounts Group. He joined J.P. Morgan in 1979 as an investment research
analyst in energy and machinery companies after completing the firm's
commercial bank management training program. Mr. Riegel joined the Equity
group in 1984, assisting with the management of the Convertible Fund and
separately managed accounts. Mr. Riegel graduated from Williams College in
1978 and is a Chartered Financial Analyst.
SCUDDER, STEVENS & CLARK, INC. ("Scudder"), Sub-Advisor of the Short Term
High Quality Bond Fund and Short Term Global Government Fund, Two
International Place, Boston, Massachusetts 02110, provides investment
management services for institutions, individuals and mutual funds. As of
December 31, 1996, Scudder's assets under management were in excess of $115
billion. Scudder is a privately held corporation, owned and operated by
active firm employees, concentrating primarily on investment management.
Adam M. Greshin is the lead portfolio manager for the Short Term Global
Government Fund. Mr. Greshin joined Scudder in 1986 as an international
bond analyst. Currently, he is Product Leader for Scudder's global and
international fixed-income investing. He was involved in the original
design of the Fund and has served as a member of the Fund's portfolio
management team since 1991. Mr. Greshin assumed responsibility for the
Fund's day-to-day management and investment strategies effective November
1995.
Thomas M. Poor, Managing Director of Scudder, has been the portfolio
manager of the Short Term High Quality Bond Fund since inception. Mr. Poor
graduated from Amherst College in 1965 and taught mathematics before
joining Scudder in 1970. He has worked entirely in fixed income research
and institutional bond portfolio management and is currently director of
the firm's Limited Volatility Bond Product, where he is responsible for the
policy, coordination and promotion of this style. In addition, he manages
institutional portfolios, Scudder Short Term Bond Fund and Scudder Managed
GIC Trust. He became a Chartered Financial Analyst in 1975 and has received
that organization's Certificate of Achievement in 1987-1992.
TCW FUNDS MANAGEMENT, INC. ("TCW"), Sub-Advisor of the Corporate Income
Fund, 865 S. Figueroa Street, Suite 1800, Los Angeles, California 90017,
along with the other wholly-owned subsidiaries of The TCW Group, Inc., is a
privately held company, and provides a variety of investment management and
investment advisory services for institutional investors, including
investment companies. As of December 31, 1996, these companies had
aggregate assets under management of over $50 billion.
James M. Goldberg, Managing Director of TCW and Chairman of its
Fixed-Income Policy Committee, has been the portfolio manager for the
Corporate Income Fund since its inception. Mr. Goldberg joined TCW in 1984
after serving as Senior Vice President and Director of Portfolio Management
at Crocker National Corporation. He received his B.S. and M.B.A. in Finance
from the University of California at Berkeley. He is a guest lecturer at
Berkeley and Stanford and is a Chartered Financial Analyst and a Chartered
Investment Counselor.
WARBURG, PINCUS COUNSELLORS, INC. ("Warburg"), Sub-Advisor of the
International Growth Fund, 466 Lexington Avenue, New York, New York
10017-3147, was incorporated in 1970 and is a wholly-owned subsidiary of
Warburg, Pincus Counsellors G.P. ("Warburg G.P."), a New York general
partnership which itself is controlled by Warburg, Pincus & Co. ("WP&Co."),
also a New York general partnership. Lionel I. Pincus, the managing partner
of WP&Co., may be deemed to control both WP&Co. and Warburg. Warburg G.P.
has no business other than being a holding company of Warburg and its
subsidiaries. Warburg is a professional investment counselling firm
22
<PAGE> 29
which provides investment services to investment endowment funds,
foundations and other institutions and individuals. As of January 31, 1997,
Warburg managed approximately $17.9 billion of assets, including
approximately $10.7 billion of investment company assets.
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 28 years of
investment experience. Prior to joining Warburg, Mr. King was chief
investment officer and a director of Fiduciary Trust Company International
S.A. in London 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 13 years of investment experience. Prior to joining Warburg,
Mr. Ehrlich was a senior vice president, portfolio manager and analyst at
Templeton Investment Counsel Inc. from 1987 to 1995. Nicholas P.W. Horsley,
Senior Vice President, has 15 years of investment experience. Prior to
joining Warburg, Mr. Horsley was a director, portfolio manager and analyst
at Barclays de Zoete Wedd in New York from 1986 to 1993. Vincent J.
McBride, Senior Vice President, has 9 years of investment experience. Prior
to joining Warburg, Mr. McBride was an international equity analyst at
Smith Barney Inc. from 1993 to 1994. He was an international equity analyst
at General Electric Investments from 1992 to 1993 and a portfolio
manager/analyst at United Jersey Bank from 1989 to 1992.
ADVISORY FEES. For investment advisory services, monthly fees are paid to
Sierra Advisors by each Fund based upon a percentage of the average net assets
of such Fund. Absent fee waivers, the Advisor is paid the following effective
annual rates:
MONEY MARKET AND BOND FUNDS ADVISORY FEES
<TABLE>
<S> <C> <C> <C> <C> <C>
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Short Term
Global Short Term Global U.S. Corporate
Money High Quality Government Government Income
Assets Fund Bond Fund Bond Fund Fund Fund
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First $200 million .50% .50% .75% .60% .65%
- -------------------------------------------------------------------------------------------------------
From $200 million
to $500 million .50% .45% .75% .60% .65%
- -------------------------------------------------------------------------------------------------------
More than $500 million .40% .40% .65% .50% .50%
=======================================================================================================
</TABLE>
EQUITY FUNDS ADVISORY FEES
<TABLE>
<S> <C> <C> <C> <C>
======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Growth and Emerging International
Assets Income Fund Growth Fund Growth Fund Growth Fund
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First $25 million .80% .95% .90% .95%
- ------------------------------------------------------------------------------------------------------
From $25 million to $50 million .80% .875% .85% .95%
- ------------------------------------------------------------------------------------------------------
From $50 million to $100 million .80% .875% .85% .85%
- ------------------------------------------------------------------------------------------------------
From $100 million to $125 million .75% .875% .85% .85%
- ------------------------------------------------------------------------------------------------------
From $125 million to $200 million .75% .875% .85% .75%
- ------------------------------------------------------------------------------------------------------
From $200 million to $400 million .70% .875% .85% .75%
- ------------------------------------------------------------------------------------------------------
From $400 to $500 million .65% .875% .85% .75%
- ------------------------------------------------------------------------------------------------------
More than $500 million .575% .875% .75% .75%
======================================================================================================
</TABLE>
23
<PAGE> 30
Out of the investment advisory fee received by the Advisor for each Fund, the
Advisor would pay monthly to the Sub-Advisor, absent fee waivers by the
Sub-Advisor, the following percentages of average net assets for each Fund:
MONEY MARKET AND BOND FUNDS SUB-ADVISORY FEES
<TABLE>
<S> <C> <C> <C> <C> <C>
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Short Term
Global Short Term Global U.S. Corporate
Money High Quality Government Government Income
Assets Fund Bond Fund Bond Fund Fund* Fund
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First $200 million .15% .15% .28% .185% .30%
- -------------------------------------------------------------------------------------------------------
From $200 million
to $500 million .15% .10% .10% .185% .30%
- -------------------------------------------------------------------------------------------------------
From $500 million
to $650 million .15% .10% .10% .185% .25%
- -------------------------------------------------------------------------------------------------------
From $650 million
to $1 billion .15% .10% .10% .15% .25%
- -------------------------------------------------------------------------------------------------------
More than $1 billion .15% .10% .10% .10% .25%
=======================================================================================================
</TABLE>
* For purposes of calculating the annual rate of compensation for the U.S.
Government Fund's Sub-Advisor, (i) the assets reflected in the table above
include the combined assets of the Trust's U.S. Government Fund and the Sierra
Trust Fund's U.S. Government Fund, and (ii) the percentages indicated at a
given asset level apply to the entire amount of assets in the Fund if the
Fund's assets exceed the asset level indicated.
EQUITY FUNDS SUB-ADVISORY FEES
<TABLE>
<S> <C> <C> <C> <C>
======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Growth and Emerging International
Assets Income Fund Growth Fund Growth Fund Growth Fund
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First $25 million .45% .55% .55% .50%
- ------------------------------------------------------------------------------------------------------
From $25 million to $50 million .45% .50% .50% .50%
- ------------------------------------------------------------------------------------------------------
From $50 million to $100 million .45% .50% .50% .50%
- ------------------------------------------------------------------------------------------------------
From $100 million to $200 million .40% .50% .50% .50%
- ------------------------------------------------------------------------------------------------------
From $200 million to $400 million .35% .50% .50% .50%
- ------------------------------------------------------------------------------------------------------
More than $400 million .30% .50% .50% .50%
======================================================================================================
</TABLE>
The management fees for the Short Term Global Government, Growth and Income,
Growth, Emerging Growth and International Growth Funds are higher than those
paid by most mutual funds, but comparable to other mutual funds with like
investment objectives and policies.
Sierra Advisors and certain Fund Sub-Advisors may voluntarily waive fees payable
to them from time to time. Any fee waivers by a Sub-Advisor may be retained by
Sierra Advisors, or it may pass part or all of such fee waivers through to the
Funds. The Advisor and the Administrator of the Funds have each voluntarily
undertaken to waive its fees and/or bear certain expenses, if necessary, from
time to time so that average annual total expenses will not exceed: for the
Global Money Fund 1.00%; Growth Fund 1.45%; Growth and Income Fund 1.30%;
Emerging Growth Fund 1.40%; International Growth Fund 1.55%; U.S. Government
Fund 1.10%; Short Term High Quality Bond Fund 1.00%; Corporate Income Fund 1.15%
and Short Term Global Government Fund 1.35%. In addition, the Advisor and
Administrator have each agreed to further limit the average annual total
expenses of the Global Money Fund so that they will not exceed 0.85%. Absent
these voluntary waivers, reimbursements and credits allowed by the custodian,
the annual management fees, other expenses and total expenses for the Global
24
<PAGE> 31
Money Fund would have been 0.50%, 0.38% and 0.88%, respectively for the year
ended December 31, 1996. Expenses for a Fund may be accrued at a rate in excess
of such limits for short periods of time so long as the limit is met on an
annual basis. Actual expenses for a Fund may vary from day to day. The Advisor
and the Administrator retain the ability to be repaid by a Fund if expenses fall
below the specified limit prior to the end of the fiscal year, but will not
recover these amounts in later years. The Advisor and the Administrator may
each, at its sole discretion, vary the level of or eliminate its voluntary fee
waivers and expense reimbursements at any time. 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. During
the fiscal year ended December 31, 1996, the following fees based upon the
average net assets of each Fund were paid by the Trust to Sierra Advisors:
Global Money Fund: 0.20%; Short Term High Quality Bond Fund: 0.42%; Short Term
Global Government Fund: 0.75%; U.S. Government Fund: 0.60%; Corporate Income
Fund: 0.65%; Growth and Income Fund: 0.80%; Growth Fund: 0.89%; Emerging Growth
Fund: 0.87% and International Growth Fund: 0.94%.
TRUST EXPENSES. In addition to investment advisory and certain administrative
expenses incurred by Sierra Administration, each Fund pays all expenses not
assumed by Sierra Advisors. Such expenses include or could include
investment-related expenses, such as brokers' commissions, transfer taxes and
fees related to the purchase, sale, or loan of securities; fees and expenses for
Trustees not affiliated with Sierra Advisors or the Sub-Advisors; fees and
expenses of its independent auditors and legal counsel; costs of Trustee and
shareholder meetings; SEC fees; expenses of preparing and filing registration
statements; the cost of the printing and mailing to existing Contract owners of
proxy statements, prospectuses and statements of additional information; proxy
solicitors' fees; expenses of preparation, printing and mailing to Contract
owners of semi-annual shareholder reports; bank transaction charges and certain
custodians' fees and expenses; federal, state or local income or other taxes;
costs of maintaining the Trust's corporate existence; membership fees for the
Investment Company Institute and similar organizations; fidelity bond and
Trustees' liability insurance premiums; and any extraordinary expenses such as
indemnification payments or damages awarded in litigation or settlements made.
All these expenses will be passed on to the shareholders through a daily charge
made to the assets held in the Funds, which will be reflected in share prices.
PORTFOLIO TRANSACTIONS AND TURNOVER. All orders for the purchase or sale of
securities on behalf of a Fund are placed by its Sub-Advisor with broker-dealers
that it selects. A Fund may, at the discretion of its Sub-Advisor, utilize
broker-dealers affiliated with the Advisor or a Sub-Advisor in connection with a
purchase or sale of securities, in accordance with procedures adopted by
Trustees and in accordance with the 1940 Act which require periodic review of
these transactions.
Under certain market conditions, a Fund may experience high portfolio turnover
as a result of its investment strategies. For example, the purchase or sale of
securities by a Fund in anticipation of a rise or decline in interest rates or
to take advantage of yield disparities among different issues of U.S. Government
Securities could result in high portfolio turnover. As a result of their
investment strategies, the Short Term High Quality Bond, Short Term Global
Government, U.S. Government and Growth Funds' annual portfolio turnover rates
are expected to be as high as 200%. Higher portfolio turnover rates for the
Funds can result in corresponding increases in expenses such as brokerage
commissions and transaction costs. The Funds will not consider portfolio
turnover rate a limiting factor in making investment decisions consistent with
their respective objectives and policies.
DISTRIBUTOR
Sierra Services is the distributor of the Trust's shares on a best efforts
basis. Sierra Services is located at 9301 Corbin Avenue, Northridge, California
91324 and is an indirect wholly-owned subsidiary of Great Western. Sierra
Services, as principal underwriter, or insurance companies whose variable
products are funded by the Trust, will bear all of the Trust's marketing
expenses. This includes the cost of reproducing prospectuses, statements of
additional information or any other Trust documents (such as semi-annual
reports) used as sales materials.
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ADMINISTRATION
Subject to the authority of the Board of Trustees, Sierra Administration is
responsible for all administrative and some recordkeeping functions of the
Trust. It provides office facilities and supplies; provides clerical, executive,
accounting and administrative services; prepares reports to shareholders and
filings with regulatory authorities; prepares materials for the Board of
Trustees' meetings; and provides securities accounting and calculates net
assets. As permitted by the terms of the Administration Agreement, Sierra
Administration has delegated certain of these functions to FDISG and Boston
Safe. Pursuant to arrangements effective July 1, 1996, FDISG acts as the Trust's
transfer and dividend paying agent, and in that capacity pays dividends to
shareholders. Sierra Administration is an indirect wholly-owned subsidiary of
Great Western. Boston Safe, One Boston Place, Boston, Massachusetts 02108, acts
as custodian of the Funds' assets.
For its services, Sierra Administration is paid a monthly fee at an effective
annual rate of 0.18% of each Fund's average net assets. Sierra Administration
pays FDISG a fee based on the average daily assets of the Trust and its expenses
for its services as sub-administrator. In addition, Sierra Administration pays
the basic fees and charges of Boston Safe. Sierra Administration may voluntarily
waive fees payable to it and reimburse expenses from time to time. During the
fiscal year ended December 31, 1996, each Fund paid fees to Sierra
Administration equal to 0.18% of the average net assets of each Fund. In
addition, the Trust pays FDISG fees for its services as Transfer Agent. FDISG is
located at One Exchange Place, 53 State Street, Boston, Massachusetts 02109-2873
and 4400 Computer Drive, Westboro, Massachusetts 01581.
GENERAL INFORMATION AND HISTORY
THE TRUST
The Trust is an open-end management investment company that offers diversified
and non-diversified series. It was organized on January 29, 1993 under the laws
of the Commonwealth of Massachusetts as a "Massachusetts business trust." The
Trust has the power to issue separate series of shares and has authorized
fourteen separate series. The Trust offers shares of beneficial interest, each
without par value. Additional series may be established.
Currently, the shares of the Funds are sold only to AGL and its separate
accounts to fund Contracts. In the future, the Trust may offer its shares to
separate accounts funding variable annuities of insurance companies affiliated
or unaffiliated with AGL and to separate accounts which fund variable life
insurance or other variable funding arrangements. The Trust's Board of Trustees
will monitor potential conflicts between variable life insurance policies and
variable annuity contracts or among insurance company shareholders and will
determine what, if any, action should be taken to resolve any conflicts. Until
other insurance companies have made investments in the Funds, AGL will be the
sole shareholder of the Trust.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholders' meetings. On occasion, however, special meetings may be called to
elect or remove trustees, change fundamental policies, approve management
contracts, or for other purposes. Generally, shares of the Trust vote by
individual Fund on all matters except when the 1940 Act permits shares of the
Funds to be voted in the aggregate. The shareholders of the Trust are the
insurance companies whose separate accounts invest in it. The Trust expects that
its shareholders will offer their Contract owners the opportunity to instruct
them as to how shares allocable to their Contracts will be voted with respect to
certain matters, such as approval of investment advisory agreements. AGL has
advised the Trust that, whenever a shareholder vote is taken, AGL will give
Contract owners and annuitants the opportunity to instruct them how to vote the
number of shares attributable to such Contracts. AGL also stated that it will
vote any shares that it is entitled to vote directly, because of their
attributable interests in the Trust, and any shares
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attributable to Contracts for which instructions are not received, in the same
proportion that Contract owners vote.
Under Massachusetts law, in certain circumstances, shareholders may be held
personally liable as partners for the obligations of a business trust such as
the Trust. The Trust's Declaration of Trust contains provisions designed to
protect shareholders from such liability to the extent of the Trust's assets. As
a result, the risk of personal liability for the insurance company shareholders
is remote.
PURCHASE AND REDEMPTION
The shares of the Funds are sold in a continuous offering to separate accounts
of insurance companies to fund Contracts. Net purchase payments under the
Contracts are placed in one or more of the divisions of the relevant separate
accounts and the assets of each division of each separate account are invested
in the shares of the Funds corresponding to such divisions. Each of the separate
accounts purchases and redeems shares of these Funds for its divisions at net
asset value without sales or redemption charges.
For each day on which a Fund's net asset value is calculated, each separate
account transmits to the Trust any orders to purchase or redeem shares of the
Fund(s) based on the purchase payments, redemption (surrender) requests and
transfer requests from Contract owners, annuitants or beneficiaries which are
priced as of that day. The separate accounts purchase and redeem shares of each
Fund at the Fund's net asset value per share calculated as of that same day.
Orders which are not based on actions by Contract owners, annuitants or
beneficiaries or routine deductions of charges by AGL will be effected at the
Fund's net asset value per share next computed after the order is placed.
All redemption requests will be processed and payment with respect thereto will
be made according to applicable regulations. The Trust may also suspend
redemption, if permitted by the 1940 Act, for any period during which the New
York Stock Exchange ("NYSE") is closed or during which trading is restricted by
the SEC or the SEC declares that an emergency exists. Redemption may also be
suspended during other periods permitted by the SEC for the protection of the
Trust's shareholders.
PURCHASE THROUGH THE SAM PROGRAM
Owners of the Sierra Advantage Annuity may elect to participate in the Sierra
Asset Management Program ("SAM Program"). The SAM Program is an active
investment management service offered through Sierra Services, the SAM Program
investment advisor, that allocates separate account values across a number of
investment divisions selected to meet different long-term investment objectives.
Depending on market conditions, Sierra Services from time to time changes or
reallocates the combination of separate account divisions, or the amount
invested in each, to implement the various SAM strategies. In addition, account
balances of Contract owners participating in the SAM Program will be
periodically rebalanced to maintain the chosen strategy's current asset
allocation mix, if and when Fund performance unbalances the strategy's mix.
Normally, Sierra Services will reallocate once a quarter.
From time to time, one or more of the separate account investment divisions may
experience relatively large investments or redemptions due to SAM Program
allocations or rebalancings recommended by Sierra Services. These transactions
will affect the Funds that are available through the SAM Program, since Funds
that experience redemptions as a result of reallocations or rebalancings in the
separate account 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 increase transaction costs. The Advisor, representing
the interests of the Trust, is committed to minimizing the impact of SAM Program
transactions on the Funds; Sierra Services, representing the interests of SAM
Program participants, is also committed to minimizing such impact on the Funds
to the extent it is consistent with
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pursuing the investment objective of the SAM Program. 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 Trust's Distributor and has
contracted with American General Securities Incorporated, the principal
underwriter of the contracts, for Sierra Services to distribute the Contracts.
Although Sierra Services is not compensated for sales of Trust shares, it is
compensated for sales of the Contracts. Sierra Services is registered as an
investment advisor under the Advisers Act. The SAM Program is currently being
offered at no additional cost to Contract owners, although Sierra Services has
reserved the right to impose a charge for this service in the future. All of the
Funds are available through the SAM Program.
Sierra Services may restrict or terminate the participation of Sierra Advantage
Contract owners in the SAM Program at any time. In addition, AGL has reserved
the right to place restrictions on transactions permitted by the Sierra
Advantage Annuity that could result in restrictions or terminations of the SAM
Program.
NET ASSET VALUE
The net asset value (the current market value of a Fund share) of each Fund's
shares is determined at the close of regular trading on the NYSE (currently 1:00
p.m., Pacific Time), each business day the NYSE is open, except as noted. The
NYSE is currently scheduled to be closed on New Year's Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day, and on the preceding Friday or subsequent Monday when one of
these holidays falls on a Saturday or Sunday, respectively. In addition, net
asset values will not be calculated on the Friday following Thanksgiving. Net
asset value per share is calculated for purchases and redemptions of shares of
each Fund by dividing the value of total Fund assets, less liabilities
(including Trust expenses, which are accrued daily), by the total number of
shares of that Fund outstanding. The net asset value per share of each Fund is
determined each business day at the close of business. Values of assets in each
Fund's portfolio (except the Global Money Fund and certain short-term debt
securities) are determined on the basis of their market values or valuations
determined as described in the SAI. The Global Money Fund values its assets by
the amortized cost method, which approximates market value.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The tax consequences of your investment in the Trust depend upon the specific
provisions of your Contract. For more information, see the attached prospectus
for that Contract. The following discussion is only a brief summary of the
federal income tax consequences to the Funds and their insurance company
shareholders based on current tax laws and regulations, which may be changed by
subsequent legislative, judicial, or administrative action.
Each Fund intends to qualify separately each year as a "regulated investment
company" ("RIC") as defined under Subchapter M of 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 a RIC, each Fund will not be subject to federal income tax on its net
investment income and net realized capital gains which are timely distributed to
its insurance company shareholders. Accordingly, each Fund intends to distribute
all or substantially all of its net investment income and net realized capital
gains to its shareholders. Very generally, an insurance company which is a
shareholder of a Fund will determine its federal income tax liability with
respect to distributions from that Fund pursuant to the special rules of
Subchapter L of the Code.
Although the Trust intends that it and the Funds will be operated so that they
will have no federal income tax liability, if any such liability is nevertheless
incurred, the investment performance of the Fund or Funds incurring such
liability will be adversely affected. In addition, Funds investing in foreign
securities and currencies may be subject to foreign taxes. These taxes would
reduce the investment performance of such Funds.
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Because the Trust funds certain types of variable annuities, each Fund is also
subject to the investment diversification requirements of Subchapter L of the
Code. Were any Fund to fail to comply with those requirements, owners of annuity
contracts (other than certain tax-qualified retirement Contracts) funded through
the Trust would be taxed on investment earnings under their Contracts and would
thereby lose any benefit of tax deferral. Accordingly, the Trust will carefully
monitor compliance with the diversification requirements.
The amounts of dividends of net investment income (i.e., all income other than
long-term 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 and distributions paid by a Fund will be
automatically reinvested (at current net asset value) in additional full and
fractional shares of that Fund. The Global Money Fund intends to distribute its
net income as dividends for each day that net asset value is determined. Such
dividends will be declared daily and paid monthly. The Short Term High Quality
Bond, Short Term Global Government, U.S. Government and Corporate Income Funds
will declare and pay quarterly dividends from net investment income, and the
Growth and Income, Growth, Emerging Growth and International Growth Funds will
declare and pay such dividends annually. All Funds will distribute any net
long-term capital gains 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.
Certain additional tax information appears in the SAI.
PERFORMANCE
The Trust may, from time to time, calculate the yield and effective yield of the
Global Money Fund, the yield of other Funds or total return of all Funds, and
may include such information in reports to shareholders. Performance information
should be considered in light of the Fund's investment objectives and policies,
characteristics and quality of the portfolios, and the market conditions during
the given time period, and should not be considered as a representation of what
may be achieved in the future.
Current yield for the Global Money Fund will be based on income received by a
hypothetical investment over a given 7-day period (less expenses accrued during
the period), and then annualized (i.e., assuming that the 7-day yield would be
received for 52 weeks, stated in terms of an annual percentage return on the
investment). Effective yield for the Global Money Fund is calculated in a manner
similar to that used to calculate yield, but reflects the compounding effect of
earnings on reinvested dividends. For the remaining Funds, any quotations of
yield will be based on all investment income per share earned during a given
30-day period (including dividends and interest), less expenses accrued during
the period (net investment income), and will be computed by dividing net
investment income by the maximum public offering price per share on the last day
of the period. Quotations of average annual total return for a Fund will be
expressed in terms of the average annual compounded rate of return on a
hypothetical investment in the Fund over certain periods that will include
periods of 1, 5, and 10 years (up to the life of the Fund), will reflect the
deduction of a proportional share of Trust's expenses (on an annual basis), and
will assume that all dividends and distributions are reinvested when paid.
Total returns and yields quoted for the Funds include each Fund's expenses, but
may not include charges and expenses attributable to any particular insurance
product. Since shares of the Funds may only be purchased through variable
annuity and variable life insurance contracts, you should carefully review the
prospectus of the insurance product you have chosen for information on relevant
charges and expenses. Excluding these charges from quotations of each Fund's
performance has the effect of increasing the performance quoted. You should bear
in mind the effect of these charges when comparing a performance to that of
other mutual funds.
For a description of the methods used to determine yield and total return for
the Funds, see the SAI.
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APPENDIX
SECURITIES AND INVESTMENT PRACTICES
In attempting to achieve its investment objective or policies each Fund employs
a variety of instruments, strategies and techniques, which are described in
greater detail below. Risks and restrictions associated with these practices are
also described. Policies and limitations are considered at the time a security
or instrument is purchased or a practice initiated. Generally, securities need
not be sold if subsequent changes in market value would prevent applicable
limitations to be met.
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 without shareholder consent by vote of the
Board of Trustees of the Trust. A complete list of investment restrictions,
including fundamental 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, EUROPEAN DEPOSITARY RECEIPTS, CONTINENTAL
DEPOSITARY RECEIPTS AND GLOBAL DEPOSITARY RECEIPTS
All Funds except the U.S. Government Fund may invest in securities of foreign
issuers directly or in the form of American Depositary Receipts ("ADRs"),
European Depositary Receipts ("EDRs"), Continental Depositary Receipts ("CDRs")
and 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 CDRs, are securities, typically issued by a non-U.S. financial
institution, that evidence ownership interests in a security or a pool of
securities issued by either a U.S. or foreign issuer. GDRs are issued globally
and evidence a similar ownership 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 Short Term High Quality Bond, Short Term Global Government, U.S. Government,
Corporate Income and Growth and Income 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. The Short Term High Quality Bond Fund will not invest more than
25%, and the Short Term Global Government, U.S. Government, Corporate Income and
Growth and Income Funds will not invest more than 10%, of their respective total
assets in Asset-Backed 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. All of the Funds, except the Global Money and
U.S. Government Funds, may invest in foreign-currency denominated Bank
Obligations, including Euro-currency instruments and securities of U.S. and
foreign banks and thrifts. The Global Money Fund may invest in U.S. dollar
denominated Bank Obligations of foreign banks and thrifts.
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BORROWING
The 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 Short Term High Quality Bond, Short Term Global Government, U.S.
Government, Corporate Income, Growth and Income and Emerging Growth 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 Short Term High Quality Bond, Short Term Global Government, U.S.
Government, Corporate Income, Growth and Income and Emerging Growth Funds are
prohibited from borrowing money or entering Reverse Repurchase Agreements or
Dollar Roll Transactions in the aggregate in excess of 33 1/3% of the Fund's
total assets (after giving effect to such borrowings). This investment guideline
may be changed only with shareholder consent.
Borrowing, including reverse repurchase agreements and, in certain
circumstances, dollar rolls, creates leverage which increases a Fund's
investment risk. If the income and gains on the securities purchased with the
proceeds of borrowings exceed the cost of the arrangements, the Fund's earnings
or net asset value will increase faster than would be the case otherwise.
Conversely, if the income and gains fail to exceed the costs, earnings or net
asset value will decline faster than would otherwise be the case.
CONVERTIBLE SECURITIES
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 Equity Securities. By investing in Convertible Securities, the Fund
seeks the opportunity, through the conversion feature, to participate in the
capital appreciation of the Equity Securities into which the securities are
convertible, while obtaining a higher fixed rate of return than generally is
payable on the underlying Equity Securities.
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. When 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
net asset value 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 net asset value of the Fund. The Fund's Sub-Advisor may
attempt to minimize exchange rate risk through active portfolio management,
including hedging currency exposure through the use of futures, options and
forward currency transactions and may attempt to identify bond markets with
strong or stable currencies.
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.
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DOLLAR ROLL TRANSACTIONS
Any Bond Fund may enter into dollar rolls or "covered rolls" in which the Fund
sells securities (usually Mortgage-Backed Securities) and simultaneously
contracts to purchase, typically in 30 or 60 days, substantially similar, but
not identical, 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, but may earn interest on the
reinvested cash proceeds of the initial sale. The Fund is compensated either by
the difference between the current sales price and the forward price for the
future purchase (often referred to as the "drop"), or by a fee paid by the
dealer at the time 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. The risks of engaging in Dollar Roll Transactions include the
following: If the dealer to whom the Fund sells the security becomes insolvent,
the Fund's right to purchase or repurchase the security may be restricted; the
value of the security may change adversely over the term of the dollar roll; the
security that the Fund is required to repurchase may be worth less than the
security that the Fund originally held; and the return earned by the Fund with
the proceeds of a dollar roll may not exceed transaction costs.
The Fund will establish a segregated account with its custodian in which it will
maintain cash, U.S. Government Securities 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.
Dollar Roll Transactions may be considered borrowings and are, therefore,
subject to the borrowing limitations applicable to the Funds. See "Borrowing."
Each of the Short Term High Quality Bond, Short Term Global Government, U.S.
Government and Corporate Income Funds may invest up to 33 1/3% of its total
assets in such transactions.
EQUITY SECURITIES
The Equity, U.S. Government and Corporate Income Funds may invest in Equity
Securities or rights to acquire Equity Securities. Equity Securities represent
an equity (ownership) interest in a corporation, which generally gives a Fund
the right to vote on measures affecting the company's organization and
operations.
Equity Securities include common stock, preferred stock and securities
exchangeable for shares of common stock, such as convertible debt, convertible
preferred stock and warrants.
EXCHANGE RATE-RELATED SECURITIES
A Fund may invest in securities that 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 Fund 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
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and to maintain in such account cash not available for investment or U.S.
Government Securities or other liquid high quality debt securities having a
value equal to the aggregate principal amount of outstanding securities of this
type.
Investments in Exchange Rate-Related Securities entail certain risks. There is
the possibility of significant changes in rates of exchange between the U.S.
dollar and any foreign currency to which an Exchange Rate-Related Security is
linked. In addition, there is no assurance that sufficient trading interest to
create a liquid secondary market will exist for a particular Exchange
Rate-Related Security due to conditions in the debt and foreign currency
markets. Illiquidity in the forward foreign exchange market and the high
volatility of the foreign exchange market may from time to time combine to make
it difficult to sell an Exchange Rate-Related Security prior to maturity without
incurring a significant price loss.
FIXED-INCOME SECURITIES
The market value of fixed-income obligations held by the Funds and,
consequently, the net asset value per share of the Funds can be expected to vary
inversely to changes in prevailing interest rates. Investors should also
recognize that, in periods of declining interest rates, the yields of the Bond
Funds will tend to be somewhat higher than prevailing market rates and, in
periods of rising interest rates, the Bond Funds' yields will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net new
money to the Bond Funds from the continuous sale of their shares will likely be
invested in instruments producing lower yields than the balance of their assets,
thereby reducing current yields. In periods of rising interest rates, the
opposite can be expected to occur. In addition, obligations purchased by certain
of the Bond Funds that are rated in the lowest of the top four ratings (Baa by
Moody's or BBB by S&P, Duff or Fitch) 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 Corporate Income and Short Term High Quality Bond Funds may purchase
floating rate, inverse floating rate and variable rate obligations, including
Mortgage-Backed Securities. 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 Fund may purchase
floating rate, inverse floating rate and variable rate obligations that carry a
demand feature which would permit the Fund 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.
An inverse floater may be considered to be leveraged to the extent that its
interest rate varies by a magnitude that exceeds the magnitude of the change in
the index rate of interest. The higher degree of leverage inherent in inverse
floaters is associated with greater volatility in their market values.
Accordingly, the duration of an inverse floater may exceed its stated final
maturity.
The Global Money Fund may purchase 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
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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.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
All Funds except the Global Money and U.S. Government 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. Except in circumstances where segregated accounts are
not required by the 1940 Act and the rules adopted thereunder, each Fund
maintains with its custodian a segregated account of cash, U.S. Government
Securities or other liquid assets in an amount at least equal to its obligations
under each forward foreign currency exchange contract. 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 transactions in an attempt to protect
against changes in foreign currency exchange rates between the trade and
settlement dates of specific securities transactions or changes in foreign
currency exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of the hedged currency increase. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible because the future value of these securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and the date it matures.
The projection of currency market movements is extremely difficult, and the
successful execution of a hedging strategy is highly uncertain. In addition,
when the Sub-Advisor believes that the currency of a specific country may
deteriorate against another currency, it may enter into a forward contract to
sell the less attractive currency and buy the more attractive one. The amount in
question could be less than or equal to the value of the Fund's securities
denominated in the less attractive currency. The Fund may also enter into a
forward contract to sell a currency which is linked to a currency or currencies
in which some or all of the Fund's portfolio securities are or could be
denominated, and to buy U.S. dollars. These practices are referred to as "cross
hedging" and "proxy hedging."
Forward currency exchange contracts are agreements to exchange one currency for
another -- for example, to exchange a certain amount of U.S. dollars for a
certain amount of Japanese Yen -- at a future date and specified price.
Typically, the other party to a currency exchange contract will be a commercial
bank or other financial institution. Because there is a risk of loss to the Fund
if the other party does not complete the transaction, the Fund's Sub-Advisor
will enter into foreign currency exchange contracts only with parties approved
by the Fund's Board of Trustees.
A Fund may maintain "short" positions in forward currency exchange transactions
in which the Fund agrees to exchange currency that it currently does not own for
another currency -- for example, to
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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.
To the extent that 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 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 currency strategies is highly uncertain.
FOREIGN INVESTMENTS
All of the Funds except the U.S. Government Fund may invest in securities of
foreign issuers. There are certain risks involved in investing in foreign
securities, including those resulting from fluctuations in currency exchange
rates, devaluation of currencies, future political or economic developments and
the possible imposition of currency exchange blockages or other foreign
governmental laws or restrictions, reduced availability of public information
concerning issuers, and the fact that foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements comparable to those applicable to
domestic companies. Moreover, securities of many foreign companies may be less
liquid and the prices more volatile than those of securities of comparable
domestic companies. Although the Funds' Sub-Advisors do not intend to expose the
Funds to such risks, with respect to certain foreign countries, there is the
possibility of expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Funds,
including the withholding of dividends. When the Fund's Sub-Advisor believes
that currency in which a portfolio security or securities is denominated or
exposed may suffer a decline against the U.S. dollar, it may hedge such risk by
entering into a forward contract to sell an amount of foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in or exposed to such foreign currency.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and the Funds hold various foreign currencies
from time to time, the value of the net assets of the Funds as measured in U.S.
dollars will be affected favorably or unfavorably by changes in exchange rates.
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 Short Term Global Government and International Growth 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 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.
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FUTURES AND OPTIONS ON FUTURES
When deemed advisable by its Sub-Advisor, all Funds except the Global Money Fund
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 may 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 transactions are economically appropriate to the reduction of risks
inherent in the management of the Funds and for other purposes described under
"Strategic Transactions." A Fund may not enter into futures and options
contracts for which aggregate initial margin deposits and premiums paid for
unexpired futures options entered into for purposes other than "bona fide
hedging" positioning as defined in regulations adopted by the Commodities Future
Trading Commission exceed 5% of the fair market value of the Fund's assets,
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 either enhance
return or 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 involves several risks. There can be no assurance
that there will be a correlation between price movements in the underlying
securities, currencies or index, and price movements in the securities which are
the subject of the futures contract or option on futures contract. Positions in
futures contracts and options on futures contracts may be closed out only on the
exchange or board of trade on which they were entered into, and there can be no
assurance that an active market will exist for a particular contract or option
at any particular time. If a Fund has hedged against the possibility of an
increase in interest rates or bond prices adversely affecting the value of
securities held in its portfolio and rates or prices decreased instead, a Fund
will lose part or all of the benefit of the increased value of securities that
it has hedged because it will have offsetting losses in its futures positions.
In addition, in such situations, if a Fund has insufficient cash, it may have to
sell securities to meet daily variation margin requirements at a time when it
may be disadvantageous to do so. These sales of securities may, but will not
necessarily, be at increased prices that reflect the decline in interest rates
or bond prices, as the case may be. In addition, the Fund would pay commissions
and other costs in connection with such investments, which may increase the
Fund's expenses and reduce its return. While utilization of options, futures
contracts and similar instruments may be advantageous to the Fund, if the Fund's
Sub-Advisor is not successful in employing such instruments in managing the
Fund's investments, the Fund's performance will be worse than if the Fund did
not make such investments.
Losses incurred in futures contracts and options on futures contracts and the
costs of these transactions will adversely affect a Fund's performance.
GEOGRAPHICAL AND INDUSTRY CONCENTRATION
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
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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
All of the 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" in this 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 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.
ILLIQUID SECURITIES
Up to 15% (10% for the Global Money Fund) of the net assets of a Fund may be
invested in securities that are not readily marketable, including, where
applicable: (1) Repurchase Agreements with maturities greater than seven
calendar days; (2) time deposits maturing in more than seven calendar days; (3)
to the extent a liquid secondary market does not exist for the instruments,
futures contracts and options thereon; (4) certain over-the-counter options, as
described in the SAI; (5) certain variable rate demand notes having a demand
period of more than seven days; and (6) 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
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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.
INTEREST RATE TRANSACTIONS
All of the Funds except the Global Money Fund may engage in certain Interest
Rate Transactions, such as swaps, caps, floors and collars. Interest rate swaps
involve the exchange with another party of commitments to pay or receive
interest (e.g., an exchange of floating rate payments for fixed rate payments).
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. An interest rate collar combines the elements
of purchasing a cap and selling a floor. The collar protects against an interest
rate rise above the maximum amount but gives up the benefits of an interest rate
decline below the minimum amount. The net amount of the excess, if any, of a
Fund's obligations over its entitlements with respect to each interest rate swap
will be accrued on a daily basis and an amount of cash or liquid securities
having an aggregate net asset value at least equal to the accrued excess will be
maintained in a segregated account by the Trust's custodian. If there is a
default by the other party to the transaction, the Fund will have contractual
remedies pursuant to the agreements related to the transactions.
INVESTMENT COMPANIES
When a Fund's Sub-Advisor 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.
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% (10%
for the Global Money Fund) limit on Illiquid Securities.
LENDING OF SECURITIES
All of the Funds except the U.S. Government Fund 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 taken at value. Loans
of portfolio securities by a Fund will be collateralized by cash, letters of
credit or U.S. Government Securities that are maintained at all times in an
amount at least equal to the current market value of the loaned securities. Any
gain or loss in the market price of the securities loaned that might occur
during the term of the loan would be for the account of the Fund involved. Each
Fund's Sub-Advisor will monitor on an ongoing basis the creditworthiness of the
institutions to which the Fund lends securities.
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LOWER-RATED SECURITIES
The Growth and Emerging Growth Funds may each invest up to 35%, and the Short
Term Global Government Fund up to 10%, of its total assets in debt securities
rated below the fourth highest rating by an NRSRO or of equivalent quality as
determined by the 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 are often
considered to be speculative and usually entail greater risk (including the
possibility of default or bankruptcy of the issuers). Such securities 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 -- Strategy Available to
Short Term Global Government, Growth and Emerging Growth Funds" in the SAI and
the Appendix.
MORTGAGE-BACKED SECURITIES
All of the Funds may invest in Mortgage-Backed Securities, which represent an
interest in a pool of mortgage loans. 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-Backed 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 U.S. Government. 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 enhancements, 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, prepayments 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.
NEW ISSUERS
A Fund may invest up to 5% of its assets in the securities of issuers which have
been in continuous operation for less than three years.
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OPTIONS ON SECURITIES
OPTION PURCHASE. Each Fund, except the Global Money Fund, 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, the Funds limit their
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 the 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. The Funds
may also purchase call options to increase their 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. All Funds except the Global Money Fund may write put
and call options on securities for hedging purposes. The Funds realize 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.
The U.S. Government and Corporate Income Funds may also 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 written, the
Fund will either (1) deposit with Boston Safe 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 Boston Safe
in a segregated account).
The principal reason for writing covered call and put options on portfolio
securities 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
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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.
The Funds 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, the Funds 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 National Association of
Securities Dealers, Inc. 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
A Fund 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. Generally, transactions relating
to Options on Foreign Currencies occur in the over-the-counter market. 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 and Over
the Counter Options.
OPTIONS ON INDEXES
A Fund may, subject to applicable securities regulations, purchase and write put
and call options on stock and fixed income indexes listed on foreign and
domestic stock exchanges. A stock index fluctuates with
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changes in the market values of the stocks included in the index. An example of
a domestic stock index is the S&P 500 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). Examples of fixed-income
indexes include the Lehman Government/Corporate Bond Index and the Lehman
Treasury Bond Index.
Options on Indexes are generally similar to options on securities except for
delivery requirements. Instead of giving the right to take or make delivery of a
security at a specified price, an option on an 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 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 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 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 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 Indexes by the Fund will be subject to its
Sub-Advisor's ability to predict correctly movements in the direction of the
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 an index, it will establish a segregated
account with Boston Safe 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
All Funds except the Global Money Fund may write or purchase options in
privately negotiated domestic or foreign transactions ("OTC Options"), as well
as exchange-traded or "listed" options. 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.
A-13
<PAGE> 49
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
Repurchase Agreements 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. The 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 is 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.
REVERSE REPURCHASE AGREEMENTS
All Funds except the Global Money Fund 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 Repurchase 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 on-going basis the creditworthiness of the partners with which it enters into
Reverse Repurchase Agreements. Under the 1940 Act, Reverse Repurchase Agreements
may be considered borrowings by the seller. 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. See "Borrowing."
STRATEGIC TRANSACTIONS
Subject to the investment limitations and restrictions for each of the Funds as
stated elsewhere in the Prospectus and SAI of the Funds, each of the Funds
except the Global Money Fund may, but is not required to, utilize various
investment strategies as described in this Appendix 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 indexes 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").
A-14
<PAGE> 50
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 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. 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.
U.S. GOVERNMENT SECURITIES
U.S. Government Securities 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 Funds
except the Global Money Fund 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.
A-15
<PAGE> 51
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
General Information and History.................................................. B-3
Management of the Trust.......................................................... B-3
Investment Objectives and Policies of the Funds and Portfolios................... B-15
(See the Prospectus "Highlights" and "Investment
Policies")
Purchase and Pricing of Shares................................................... B-40
(See the Prospectus "Highlights" and
"Purchase and Redemption")
Net Asset Value.................................................................. B-41
Performance...................................................................... B-43
Taxes............................................................................ B-47
(See the Prospectus "Dividends, Distributions
and Taxes")
Appendix - Description of Ratings................................................ B-50
Financial Statements............................................................. FS-1
</TABLE>
A-16
<PAGE> 52
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1997
THE SIERRA VARIABLE TRUST
9301 Corbin Avenue, Suite 333
Northridge, California 91324
o Global Money Fund o Emerging Growth Fund
o Short Term High Quality Bond o International Growth Fund
Fund
o Short Term Global Government o Income Portfolio
Fund
o U.S. Government Fund o Value Portfolio
o Corporate Income Fund o Balanced Portfolio
o Growth and Income Fund o Growth Portfolio
o Growth Fund o Capital Growth Portfolio
This Statement of Additional Information ("SAI") is not a prospectus
but supplements the information contained in the current Prospectuses of The
Sierra Variable Trust (the "Trust") dated March __, 1997 and May 1, 1997. The
SAI should be read in conjunction with the appropriate Prospectus, as amended or
supplemented from time to time. The Trust's Prospectuses may be obtained without
charge by writing to American General Life Insurance Company ("AGL"), Attention:
Annuity Administration, P.O. Box 1401, Houston, Texas 77251-1401 or by calling
AGL at 800-247-6584. This Statement of Additional Information is incorporated by
reference into and, therefore, legally considered a part of, the Prospectuses in
its entirety.
B-1
<PAGE> 53
CONTENTS
For ease of reference, the same section headings are used in the
Prospectuses and in this Statement of Additional Information, except as
indicated below.
<TABLE>
<CAPTION>
Page
----
<S> <C>
General Information and History.......................................... B-3
Management of the Trust.................................................. B-3
Investment Objectives and Policies of the Funds
and Portfolios......................................................... B-15
(See the Prospectus "Highlights" and "Investment
Policies")
Purchase and Pricing of Shares........................................... B-40
(See the Prospectus "Highlights" and
"Purchase and Redemption")
Net Asset Value.......................................................... B-41
Performance.............................................................. B-43
Taxes.................................................................... B-47
(See the Prospectus "Dividends, Distributions
and Taxes")
Appendix - Description of Ratings........................................ B-50
Financial Statements..................................................... FS-1
</TABLE>
B-2
<PAGE> 54
GENERAL INFORMATION AND HISTORY
The Sierra Variable Trust (the "Trust") is an open-end management
investment company. Under the rules and regulations of the Securities and
Exchange Commission (the "SEC"), all mutual funds are required to furnish
prospective investors with certain information concerning the activities of the
investment company being considered for investment. Some of the information
required to be in this SAI is also included in the Trust's current
Prospectuses. To avoid unnecessary repetition, references are made to related
sections of the Prospectuses. In addition, the Prospectuses and this SAI omit
certain information about the Trust and its business that is contained in "Part
C" of the Trust's Registration Statement respecting the Trust and its Shares
filed with the SEC. Copies of the Registration Statement as filed, including
Part C, may be obtained from the SEC by paying the charges prescribed under its
rules and regulations.
The Trust was organized under the laws of the Commonwealth of
Massachusetts on January 29, 1993. The Trust filed a registration statement
with the SEC registering itself as an open-end management investment company
offering diversified and nondiversified series under the Investment Company Act
of 1940, as amended (the "1940 Act"), and its shares under the Securities Act
of 1933, as amended. The Trust consists of the following 14 series: Global
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 (the "Funds");
and Income Portfolio, Value Portfolio, Balanced Portfolio, Growth Portfolio and
Capital Growth Portfolio (the "Portfolios"). Each of the Funds and Portfolios
has its own investment objective and policies. The Funds seek to achieve
their investment objectives by investing directly in investment securities,
while the Portfolios seek to meet their investment objectives by investing
primarily in the Funds of the Trust.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS OF THE TRUST
The names of the Trustees and executive officers of the Trust, together
with information as to their dates of birth and principal business occupations
during the past five years, are set forth below. Each Trustee who is an
"interested person" of the Trust, as defined in the 1940 Act, is indicated by
an asterisk.
B-3
<PAGE> 55
TRUSTEES:
*F. BRIAN CERINI (1/23/51)
President
Sierra Capital Management Corporation
9301 Corbin Avenue
Northridge, California 91324
President and CEO of Sierra Capital Management Corporation ("SCMC").
Formed Great Western Financial Securities Corporation ("GW Securities") in 1985
and served as its President and Chairman. Prior to joining GW Securities, he
served as First Vice President, Financial Services for Bateman Eichler, Hill
Richards, Inc., a regional brokerage firm where he directed the firm's off
exchange product responsibilities and marketing. Previously, he worked for
Pacific Southwest Airlines for seven years as Assistant to the President. He
holds a BA degree in Economics from the University of Southern California and
an MBA from the USC Graduate School of Business.
ARTHUR H. BERNSTEIN, ESQ. (6/8/25)
President
Bancorp Capital Group, Inc.
11661 San Vicente Blvd., #405
Los Angeles, California 90049
President of Bancorp Capital Group, Inc. and President of Bancorp
Venture Capital, Inc. since 1988. He has been a Trustee of Sierra Trust Funds
since 1989. Previously served on the Board of Directors of Great Western
Leasing Corporation, a subsidiary of Great Western Financial Corporation
("GWFC"), until the subsidiary was sold in 1987. Director of Ryder System,
Inc.; Chairman of the Board of Trustees of the California Family Studies Center
and Phillips Graduate Institute since 1984. Educated at Cornell University and
a graduate of Cornell Law School.
DAVID E. ANDERSON (11/17/26)
Retired, Former President & CEO
GTE California, Inc.
17960 Seabreeze Drive
Pacific Palisades, California 90272
Retired in 1988 from GTE California, Inc. after 40 years of service.
Held the position of President and CEO from 1979 to 1988. Director of Barclay's
Bank of California until 1988. Currently involved in the following charitable
organizations as a director on the following boards: Board Chairman, Children's
Bureau Foundation; Board member, Upward Bound House
B-4
<PAGE> 56
of Santa Monica; Past Campaign Chairman of United Way; Past Chairman, Los
Angeles Area Chamber of Commerce. Holds BSEE degree from Iowa State.
EDMOND R. DAVIS, ESQ. (9/24/28)
Partner
Brobeck, Phleger & Harrison
550 South Hope Street, 21st Floor
Los Angeles, California 90071-2604
Joined the firm as a Partner in 1987 and is responsible for estate
planning, and trusts and estate matters in the Los Angeles office. Prior to
joining the firm, had a similar position for 20 years with the law firm of
Overton, Lyman & Prince in Los Angeles. His expertise has been recognized in
Who's Who in California, The Best Lawyers of America, and Who's Who in American
Law. Member of the Board of Directors of the following non-profit, charitable
organizations: Fifield Manors, Children's Bureau of Los Angeles, Children's
Bureau Foundation, and Braille Institute of America, Inc. Educated at
Pepperdine University and is an Order of the Coif graduate of Hastings College
of the Law.
JOHN W. ENGLISH (3/27/33)
Retired, former Vice President & Chief Investment Officer
Ford Foundation
50 H New England Ave.
P.O. Box 640
Summit, New Jersey 07902-0640
Retired Vice President and Chief Investment Officer, the Ford
Foundation (a non-profit charitable organization). Chairman of the Board and
Director, The China Fund, Inc. (a closed-end mutual fund). Director, Paribas
Trust for Institutions (an open-end mutual fund). Trustee, Retail Property
Trust (a company providing management services for a shopping center).
ALFRED E. OSBORNE, JR. PH.D. (12/7/44)
Professor
The Harold Price Center for Entrepreneurial Studies at UCLA
110 Westwood Plaza, Suite C305
Los Angeles, California 90095-1481
University professor, researcher and administrator at UCLA since 1972.
Director, Times Mirror Company, ReadiCare, Inc., United States Filter
Corporation, Nordstrom, Inc., Seda Specialty Packing Corporation and Greyhound
Lines, Inc. Independent general partner, Technology Funding Venture Partners V,
Governor of the National Association of Securities Dealers, Inc.
B-5
<PAGE> 57
OFFICERS:
F. BRIAN CERINI (1/23/51), CHAIRMAN AND PRESIDENT
Acts as a Trustee of the Trust as well as President. Information
regarding Mr. Cerini's background is listed previously under "Management of the
Trust--Trustees."
KEITH B. PIPES (12/20/55), EXECUTIVE VICE PRESIDENT, TREASURER AND SECRETARY
As Senior Vice President, Chief Financial Officer and Secretary of
SCMC, he is responsible for its general accounting, financial planning,
compliance administration, systems development and advisory operations.
[Joined Great Western Bank in 1983 as Manager of Strategic Planning for the
Bank and later served as product manager for the Bank's savings products before
joining GW Securities in 1986. Prior to joining the firm, served as Senior
Planning Analyst in the Mergers and Acquisitions Department of Mattel
Corporation.] Holds a B.A. degree in Economics and an MBA in Finance from UCLA.
MICHAEL D. GOTH (8/13/45), SENIOR VICE PRESIDENT
Since January 1991, serves as Chief Operating Officer and Portfolio
Manager of Sierra Investment Advisors Corporation ("Sierra Advisors"). [Prior
to joining Sierra Advisors, Mr. Goth worked for 2 1/2 years as a senior manager
of Transfer Agent operations at First Data Investor Services Group, Inc.
("First Data", formerly, The Shareholder Services Group, Inc.) and The Boston
Company. In addition, Mr. Goth has 10 years' experience as executive vice
president of the GIT mutual fund group, responsible for most aspects of that
fund group, including investments. Other experience includes 4 years as a
corporate banking officer at Citibank and 1 1/2 years in investment banking
with Drexel Firestone.] He holds B.S. and M.S. degrees from Rensselaer
Polytechnic Institute and an MBA in finance from Harvard Business School.
STEPHEN C. SCOTT (1/18/45), SENIOR VICE PRESIDENT
In August 1988 joined the company to form Sierra Advisors and currently
serves as the President and Chief Investment Officer. [Prior to joining Sierra
Advisors, served as President and Chairman of SDS Investment Advisors, a firm
he founded in which he developed asset allocation technology. Previously,
President and Chairman of Smathers and Co., an investment advisory firm. For
nine years, served as the Senior Pension Investment Consultant for the Group
Pension Investment Division of Equitable Life Insurance responsible for their
major corporate clients. Has served as member on Board of Directors of several
corporations and private organizations.] For 17 years, has served as a Trustee
on the Long Beach State University Foundation and currently chairs the
Investment Committee. He holds a B.A. degree in Economics and Finance as well
as an MBA in Finance from Long Beach State University.
B-6
<PAGE> 58
RICHARD W. GRANT (10/25/45), ASSISTANT SECRETARY
Has been a Partner in the firm of Morgan, Lewis & Bockius LLP since
1989. He received his A.B. in 1968 from Brown University and his J.D. in 1971
from the Boston University School of Law.
RICHARD H. ROSE (7/8/55), ASSISTANT TREASURER
Currently acts as Senior Vice President of First Data Investor Services
Group, Inc., a subsidiary of First Data Corp. (prior to May 6, 1994, a
subsidiary of The Boston Company Advisors, Inc. ("Boston Advisors")). He joined
Boston Advisors in 1988 as Vice President and Fund Manager in the Fund
Accounting Department. [Prior to 1988, he acted as Senior Audit Manager for
Peat Marwick Main (KPMG Peat Marwick) & Co.] He holds a Master's degree in
Accounting from Northeastern University, and a B.A. in Economics from Dartmouth.
CRAIG M. MILLER (10/7/59), ASSISTANT TREASURER
Joined SCMC in 1993 as Vice President and Controller, he also serves as
Assistant Treasurer for the Sierra Family of Mutual Funds. Prior to joining
Sierra Capital, he acted as Audit Manager in the Boston office of Coopers &
Lybrand, L.L.P. Prior to joining Coopers & Lybrand, L.L.P., he worked for two
other Certified Public Accounting firms for a total of four and one half years
providing both audit and tax services to financial institutions, small
manufacturing and service industry clients. He holds a Master's degree in
Taxation from Bentley College, where he also received his B.S. in Accountancy.
Each of the Trustees and officers of the Trust is also a trustee or
officer of Sierra Trust Funds ("STF"). 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"). STF, SPIF and SAMP is each an investment company advised
by Sierra Advisors or Sierra Investment Services Corporation ("Sierra
Services").
The address of each trustee and officer of the Trust affiliated with
Sierra Advisors or SISC is 9301 Corbin Avenue, Suite 333, Northridge,
California 91324.
REMUNERATION. No director, officer or employee of Sierra Advisors, the
sub-advisors of the Funds (the "Sub-Advisors"), or of any affiliate of Sierra
Advisors or the Sub-Advisors 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 or the Sub-Advisors,
or any of their affiliates, a fee of $5,000 per annum plus $1,250 per Board
meeting attended and $1,000 per Audit and Nominating Committee meeting attended
(except that the Audit Committee chairman receives $1,500 per committee meeting
attended), and reimburses them for travel and out-of-pocket expenses.
B-7
<PAGE> 59
The aggregate remuneration paid to Trustees by the Trust for attendance
at Board and committee meetings for the period ended December 31, 1996 was
$68,138 (including reimbursement for travel and out-of-pocket expenses). As of
December 31, 1996, the Trustees and officers of the Trust owned, in the
aggregate, less than 1% of the outstanding shares of any of the Funds.
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 December 31, 1996.
COMPENSATION TABLE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(1) Name of Person, (2) Aggregated (3) Pension or (4) Estimated Annual (5) Total Compensation
Position Compensation From Retirement Benefits Benefits Upon From Registrant and Fund
Registrant for the Accrued as Part of Retirement Complex* Paid to Trustees
Fiscal Year ended Fund Expenses for the Fiscal Year ended
December 31, 1996 December 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
**F. Brian Cerini $0 $0 $0 $0
Chairman of the Board,
President and Trustee
++Arthur H. $13,959 $0 $0 $52,125
Bernstein, Esq. for service on 4 boards
Trustee
David E. Anderson $14,459+ $0 $0 $50,250+
Trustee for service on 4 boards
Edmond R. Davis, Esq. $13,959 $0 $0 $50,250
Trustee for service on 4 boards
John W. English $13,959 $0 $0 $51,250
Trustee for service on 4 boards
+++Alfred E. $6,709 $0 $0 $28,750
Osborne, Jr. for service on 4 boards
Trustee
- ---------------------------------------------------------------------------------------------------------------------------
* The Fund Complex consisted of the Trust, STF, Sierra Prime Income Fund ("SPIF") and
Sierra Asset Management Portfolios ("SAMP") as of December 31, 1996.
** A Trustee who is an "interested person" as defined in the 1940 Act.
+ Mr. Anderson was paid $1,500 for Audit Committee Meetings held by the Trust.
++ Mr. Bernstein was paid $1,500 and $1,125 for Audit Committee Meetings held by
STF and SPIF, respectively.
+++ Dr. Osborne was appointed a Trustee of the Trust, STF, SPIF and SAMP on July 1, 1996.
</TABLE>
INVESTMENT ADVISORS AND SUB-ADVISORS, 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. Certain of the services provided by, and the
fees paid to, Sierra Advisors and the Sub-Advisors, are described in the
Prospectuses under "Management - Investment Advisor and - Sub-Advisors." Sierra
Advisors and the Sub-Advisors each (i) compensates its respective Directors and
pays the salaries of its respective officers and employees employed by such
companies, (ii) compensates
B-8
<PAGE> 60
its respective officers and employees that are employed by the Trust, and (iii)
maintains office facilities for the Trust.
Sierra Services serves as Investment Advisor to each of the Portfolios
pursuant to a written Advisory Agreement. Certain of the services provided by,
and fees paid to, Sierra Services, are described in the Prospectus relating to
the Portfolios under "Investment Management."
The assets of the Trust are held under bank custodianship in accordance
with the 1940 Act. Boston Safe Deposit and Trust Company ("Boston Safe") serves
as Custodian for the Funds and the Portfolios. Sierra Fund Administration
Corporation ("Sierra Administration") serves as the Trust's Administrator and
served as the Trust's Transfer Agent until July 1, 1996, when First Data, a
wholly-owned subsidiary of First Data Corporation, began serving as Transfer
Agent. First Data also serves as the Trust's sub-administrator, and prior to
July 1, 1996, provided sub-transfer agency services to the Trust. 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.
For the fiscal years ended December 31, 1994, 1995, and 1996, the Funds
paid to Sierra Advisors the following advisory fees*:
<TABLE>
<CAPTION>
1996
------------------------------------------
EXPENSES
FEES PAID FEES WAIVED REIMBURSED
--------- ----------- ----------
<S> <C> <C> <C>
Global Money Fund $ 40,314 $61,700 $0
Short Term High Quality Bond Fund $ 56,022 $10,732 $0
Short Term Global Government Fund $166,447 $0 $0
U.S. Government Fund $363,268 $0 $0
Corporate Income Fund $381,643 $0 $0
Growth and Income Fund $436,358 $0 $0
Growth Fund $961,131 $0 $0
Emerging Growth Fund $461,791 $0 $0
International Growth Fund $524,048 $0 $0
</TABLE>
B-9
<PAGE> 61
<TABLE>
<CAPTION>
1995
--------------------------------------
Expenses
Fees Paid Fees Waived Reimbursed
--------- ----------- ----------
<S> <C> <C> <C>
Global Money Fund $ 6,779 $50,091 $0
Short Term High Quality Bond Fund $ 50,278 $19,478 $0
Short Term Global Government Fund $201,327 $ 2,945 $0
U.S. Government Fund $280,013 $ 2,943 $0
Corporate Income Fund $367,022 $ 0 $0
Growth and Income Fund $234,524 $34,257 $0
Growth Fund $718,734 $ 0 $0
Emerging Growth Fund $250,932 $19,826 $0
International Growth Fund $407,005 $ 4,326 $0
</TABLE>
<TABLE>
<CAPTION>
1994
--------------------------------------
Expenses
Fees Paid Fees Waived Reimbursed
--------- ----------- ----------
<S> <C> <C> <C>
Global Money Fund $ 0 $19,714 $2,983
Short Term High Quality Bond Fund $ 19,651 $23,014 $0
Short Term Global Government Fund $142,816 $63,650 $0
U.S. Government Fund $211,737 $23,870 $0
Corporate Income Fund $284,782 $22,786 $0
Growth and Income Fund $ 55,204 $30,881 $0
Growth Fund $423,638 $ 0 $0
Emerging Growth Fund $ 85,541 $ 8,613 $0
International Growth Fund $270,165 $23,985 $0
</TABLE>
- -------------------
* The Global Money, the Short Term High Quality Bond, the Short Term Global
Government, the U.S. Government, the Corporate Income, the Growth and
Income, the Growth, the Emerging Growth and the International Growth Funds
commenced operations on May 10, 1993, January 12, 1994, May 12, 1993,
May 6, 1993, May 7, 1993, January 12, 1994, May 7, 1993, January 12, 1994
and May 7, 1993, respectively.
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<PAGE> 62
For the fiscal years ended December 31, 1994, 1995, and 1996, Sierra
Advisors paid to the Sub-Advisors the following sub-advisory fees*:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------------------------------------
FEES FEES FEES FEES FEES FEES
PAID WAIVED PAID WAIVED PAID WAIVED
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Global Money Fund $ 30,604 $0 $ 17,061 $0 $ 5,914 $0
Short Term High Quality $ 20,026 $0 $ 21,114 $0 $ 12,800 $0
Bond Fund
Short Term Global $ 62,140 $0 $ 76,262 $0 $ 77,081 $0
Government Fund
U.S. Government Fund
BlackRock** $112,008 $0 $ 88,293 $0 $ 5,754 $0
Van Kampen $ 72,782 $0
Corporate Income Fund $176,143 $0 $169,395 $0 $141,954 $0
Growth and Income Fund $245,451 $0 $151,189 $0 $ 48,423 $0
Growth Fund $551,003 $0 $412,538 $0 $243,892 $0
Emerging Growth Fund $276,789 $0 $164,136 $0 $ 57,538 $0
International Growth Fund
J.P. Morgan $ 81,007 $0 $259,788 $0 $185,779 $0
Warburg, Pincus*** $211,192 $0
</TABLE>
- ------------------
* The Global Money, the Short Term High Quality Bond, the Short Term
Global Government, the U.S. Government, the Corporate Income, the Growth
and Income, the Growth, the Emerging Growth and the International Growth
Funds commenced operations on May 10, 1993, January 12, 1994, May 12, 1993,
May 6, 1993, May 7, 1993, January 12, 1994, May 7, 1993, January 12, 1994
and May 7, 1993, respectively.
** On December 8, 1994 BlackRock Financial Management L.P. replaced Van Kampen
Merrit Management Inc. as the investment Sub-advisor for the U.S.
Government Fund.
*** On April 8, 1996 Warburg, Pincus Counselors Inc. replaced J.P. Morgan
Investment Management Inc. as the Sub-Advisor for the International Growth
Fund.
For the fiscal years ended December 31, 1994, 1995, and 1996 the Funds
paid to Sierra Administration the following administration fees*:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------------------------------------
FEES FEES FEES FEES FEES FEES
PAID WAIVED PAID WAIVED PAID WAIVED
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Global Money Fund $ 36,725 $0 $13,156 $7,317 $0 $7,097
</TABLE>
B-11
<PAGE> 63
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Short Term High Quality
Bond Fund $ 24,031 $0 $ 25,337 $0 $ 9,777 $ 5,583
Short Term Global
Government Fund $ 39,947 $0 $ 49,025 $0 $14,152 $35,400
U.S. Government Fund $108,980 $0 $ 84,887 $0 $33,462 $37,220
Corporate Income Fund $105,686 $0 $101,657 $0 $41,687 $43,486
Growth and Income Fund $ 98,181 $0 $ 60,476 $0 $12,587 $ 6,782
Growth Fund $193,861 $0 $143,997 $0 $54,385 $28,906
Emerging Growth Fund $ 95,144 $0 $ 54,833 $0 $11,510 $ 7,321
International Growth Fund $100,408 $0 $ 77,936 $0 $32,169 $23,565
</TABLE>
- ---------------
* The Global Money, the Short Term High Quality Bond, the Short Term
Global Government, the U.S. Government, the Corporate Income, the Growth
and Income, the Growth, the Emerging Growth and the International Growth
Funds commenced operations on May 10, 1993, January 12, 1994, May 12,
1993, May 6, 1993, May 7, 1993, January 12, 1994, May 7, 1993, January
12, 1994 and May 7, 1993, respectively.
The Portfolios had not yet commenced operations as of December 31, 1996.
COUNSEL AND AUDITOR
Morgan, Lewis & Bockius LLP serves as counsel to the Trust and also
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 an Agreement and
Declaration of Trust dated January 27, 1993, as amended from time to time (the
"Declaration of Trust"). Certificates representing shares in the Trust are not
physically issued. The Trust's Custodian and 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, 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
B-12
<PAGE> 64
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
Declaration of Trust, 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.
The record owner of all the Trust's shares is Separate Account D of
AGL. However, Contract owners may be deemed to have beneficial ownership of
shares allocable to their Contracts. As of January 31, 1997, to the Trust's
knowledge, no Contract owner had shares allocable to Contracts equal to more
than five percent of any Fund.
Massachusetts law provides that the shareholders, under certain
circumstances, could be held personally liable for the obligations of the
Trust. However, the Declaration of Trust 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 Declaration of Trust provides for indemnification
from the Trust's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust would be unable to meet its
obligations, a possibility that the Trust's management believes is remote. Upon
payment of any liability incurred by the Trust, the shareholder paying the
liability will be entitled to reimbursement from the general assets of the
Trust. The Trustees intend to conduct the operations of the Trust in such a way
so as to avoid, to the extent possible, ultimate liability of the shareholders
for liabilities of the Trust.
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 and Growth and Income Funds, 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
Corporate Finance 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 SEC and a
member of the National Association of
B-13
<PAGE> 65
Securities Dealers, Inc. ("NASD"). J.P. Securities is active as a dealer in the
securities of the 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, certain mortgage-related securities, and consumer receivable
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 or Growth and Income
Funds 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 or Growth and Income Funds 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 or Growth and
Income Funds. 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 or Growth and Income Funds or securities being considered for
purchase. Also, since the Global Money and Growth and Income Funds 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.
In addition, the Global Money and Growth and Income Funds will not
purchase securities of U.S. Government agencies 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 the Commission and subject to
the rules and regulations of the Comptroller of the Currency.
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 and Growth and Income Funds 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 and Growth and Income Funds 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.
B-14
<PAGE> 66
The Treasurer's Division of Morgan Guaranty manages Morgan Guaranty's
own investment portfolio, composed primarily of securities of the United States
Government and United States Government agencies. Such activities may affect
the portfolios of the Global Money and Growth and Income Funds or the markets
for the securities in which such portfolios invest. 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 and Growth and Income Funds,
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.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS AND PORTFOLIOS
The Prospectuses discuss the investment objective or objectives of each
of the Funds and Portfolios and the policies to be employed to achieve such
objectives. This section contains supplemental information concerning the types
of securities and other instruments in which the Funds and Portfolios may
invest, the investment policies and portfolio strategies that the Funds may
utilize and certain risks attendant to such investments, policies and
strategies.
MONEY MARKET QUALITY AND MATURITY REQUIREMENTS
The Global Money Fund will purchase only those instruments which meet
the applicable quality requirements described below. The Fund 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"), Moody's Investors Service, Inc.
("Moody's"), Duff & Phelps ("Duff") or Fitch Investors Service, Inc. ("Fitch"),
in one of the two highest rating categories for short-term debt securities,
(ii) is rated by the only NRSRO that has issued a rating in one of such NRSRO's
two highest categories for short-term debt, or (iii) if not so rated, the
security is determined to be of comparable quality. In addition, no more than
5% of the Fund's total assets will be invested in securities rated in the
second highest rating category by the
B-15
<PAGE> 67
requisite NRSROs and, no more than 1% of the Fund's total assets will be
invested in the securities of any one such issuer. A description of the rating
systems of S&P, Moody's, Duff and Fitch is contained in the Appendix to this
SAI.
At the time of investment, no security purchased by the Fund (except
securities subject to repurchase agreements and variable rate demand notes)
can have a maturity exceeding 397 days, and the Fund's average portfolio
maturity cannot exceed 90 days. The short average maturity of the portfolio
enhances the 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 the Fund will be able to maintain net asset values
at $1.00 per share.
STRATEGIES AVAILABLE TO ALL FUNDS AND PORTFOLIOS
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 or Portfolio, depending upon the principal amount of
certificates of deposit ("CDs") of each state bank held by a Fund or Portfolio)
and are subject to federal examination and to a substantial body of federal law
and regulation. As a result of federal and state laws and regulations,
domestic branches of domestic banks are, among other things, generally
required to maintain specific levels of reserves, and are subject to other
supervision and regulation designed to promote financial soundness.
Obligations of foreign branches of U.S. banks and of foreign branches
of foreign banks, such as CDs and time deposits ("TDs"), may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and governmental regulation.
Obligations of foreign branches of U.S. banks and foreign banks are subject to
the risks associated with investing in foreign securities generally. Foreign
branches of U.S. banks and foreign branches of foreign banks are not necessarily
subject to the same or similar regulatory requirements that apply to U.S.
banks, such as mandatory reserve requirements, loan limitations, and
accounting, auditing and financial recordkeeping requirements. In addition,
less information may be publicly available about a foreign branch of a U.S.
bank or about a foreign bank than about a U.S. bank.
Obligations of U.S. branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation as well as governmental action in the country in which the foreign
bank has its head office. A U.S. branch of a foreign bank may or may not be
subject to reserve 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
B-16
<PAGE> 68
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, a Fund's
Sub-Advisor or Portfolio's Advisor will carefully evaluate such investments on
a case-by-case basis.
A Fund or Portfolio 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 and Portfolios 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
all 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 Bank. Participation certificates representing interests
in mortgages from FHLMC's national portfolio are guaranteed as to the timely
payment of interest and ultimate collection of principal by FHLMC. In addition,
the U.S. Government Fund may invest in commercial mortgage-backed securities.
While these securities generally are structured with one or more types of
credit enhancement, they are issued by non-governmental entities and are not
guaranteed by 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
B-17
<PAGE> 69
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 and Portfolios 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.
RATINGS AS INVESTMENT CRITERIA. In general, the ratings of NRSROs, such
as Moody's, S&P, 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 SAI contains further information concerning
the ratings of these services and their significance.
To the extent that the rating given by a rating service for securities
may change as a result of changes in such organizations or their rating
systems, the Funds and Portfolios will attempt to use comparable ratings as
standards for its investments in accordance with the investment policies
contained in the Prospectuses and in this SAI.
REPURCHASE AGREEMENTS. The Funds and the Portfolios may invest in
repurchase agreements without limitation as to amount.
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 Untied 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
B-18
<PAGE> 70
or Portfolio will invest in obligations issued by such an instrumentality only
if the Fund's Sub-Advisor or Portfolio's Advisors determines that the credit
risk with respect to the instrumentality does not make its securities
unsuitable for investment by the Fund or Portfolio.
STRATEGIES AVAILABLE TO THE PORTFOLIOS AND ALL FUNDS EXCEPT THE GLOBAL MONEY
FUND
FUTURES ACTIVITIES. The Portfolios and 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. 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. Of course, since the value of portfolio securities will
far exceed the value of the futures contracts entered into by a Fund, an
increase in the value of the futures contract would only mitigate - but not
totally offset - the decline in the value of the portfolio.
No consideration is paid or received by a Fund upon entering into a
futures contract. Initially, a Fund would be required to deposit with the
broker an amount of cash or cash equivalents equal to approximately 1% to 10%
of the contract amount (this amount is subject to change by the board of trade
on which the contract is traded and members of such board of trade may charge a
higher amount). This amount is known as "initial margin" and is in its nature
the equivalent of a performance bond or good faith deposit on the contract,
which is returned to a Fund upon termination of the futures contract, assuming
all contractual obligations have been satisfied. Subsequent payments, known as
"variation margin," to and from the broker, will be made daily as the price of
the index or securities underlying the futures contract fluctuates, making the
long and short positions in the futures contract more or less valuable, a
process known as "marking-to-market." At any time prior to the expiration of a
futures contract, a Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in the
contract.
B-19
<PAGE> 71
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 for 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 or a futures contract, the Funds will be required
to either (i) segregate sufficient cash or other 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 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
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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."
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.
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
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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 (see "Over the Counter Options," below). In light of
this fact and current trading conditions, the Fund expects to purchase or write
call or put options issued by the OCC, as well at the following national
securities exchanges on which options are traded: The Chicago Board Options
Exchange (CBOE), The Board of Trade of the City of Chicago (CBT), American
Stock Exchange (AMEX), Philadelphia Exchange (PHLX), Pacific Stock Exchange
(PSE) and the New York Stock Exchange (NYSE).
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
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writer the Fund is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise.
Securities exchanges have established limitations governing the maximum
number of calls and puts of each class which may be held or written, or
exercised within certain time periods, by an investor or group of investors
acting in concert (regardless of whether the options are written on the same or
different securities exchanges or are held, written or exercised in one or more
accounts or through one or more brokers). It is possible that the particular
Fund and other clients of Sierra Advisors and its Sub-Advisors and certain of
their affiliates may be considered to be such a group. A securities exchange
may order the liquidation of positions found to be in violation of these limits
and it may impose certain other sanctions.
In the case of options written by a Fund that are deemed covered by
virtue of the Fund's holding convertible or exchangeable preferred stock or
debt securities, the time required to convert or exchange and obtain physical
delivery of the underlying security with respect to which the Fund has written
options may exceed the time within which the Fund must make delivery in
accordance with an exercise notice. In these instances, the Fund may purchase or
temporarily borrow the underlying securities for purposes of physical delivery.
By so doing, the Fund will not bear any market risk, since the Fund will have
the absolute right to receive from the issuer of the underlying security an
equal number of shares to replace the borrowed stock. The Fund may however,
incur additional transaction costs or interest expenses in connection with any
such purchase or borrowing.
Additional risks exist with respect to mortgage-backed U.S. Government
Securities for which the Fund may write covered call options. If a Fund writes
covered call options on a mortgage-backed security, the security that it holds
as cover may, because of scheduled amortization of unscheduled prepayments,
cease to be sufficient cover. The Fund will compensate by purchasing an
appropriate additional amount of mortgage-backed securities. 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."
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
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not purchase or write 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. 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 ALL FUNDS EXCEPT THE GLOBAL MONEY FUND
OVER THE COUNTER OPTIONS. Over the Counter Options ("OTC Options") can
be closed out only by agreement with the primary dealer in the transaction, and
thus any OTC Options and their underlying securities or currencies are
considered illiquid. With OTC Options, terms such as expiration date, exercise
price and premium are agreed upon between the Fund and the transacting dealer,
without the intermediation of a third party such as the OCC. Any OTC Options
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 OTC Option it has sold. OTC
Options will be considered illiquid in an amount equal to the formula price,
less the amount by which the option is "in-the-money."
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.
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
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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
currency position at a disadvantageous time.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. A segregated
account in the name of the Funds consisting of cash or liquid debt securities
equal to the amount of when-issued or delayed-delivery commitments will be
established at Boston Safe, the Trust's custodian. For the purpose of
determining the adequacy of the securities in the accounts, the deposited
securities will be valued at market or fair value. If the market or fair value
of the securities declines, additional cash or securities will be placed in the
account daily so that the value of the account will equal the amount of such
commitments by the Fund. On the settlement date, the Fund will meet its
obligations from then-available cash flow, the sale of securities held in the
segregated account, the sale of other securities or, although it would not
normally expect to do so, from the sale of securities purchased on a
when-issued or delayed-delivery basis themselves (which may have a greater or
lesser value than the Fund's payment obligations).
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STRATEGIES AVAILABLE TO ALL FUNDS EXCEPT THE U.S. GOVERNMENT FUND
AMERICAN DEPOSITARY RECEIPTS ("ADRs"), EUROPEAN DEPOSITARY RECEIPTS
("EDRs"), CONTINENTAL DEPOSITARY RECEIPTS ("CDRs") AND GLOBAL DEPOSITARY
RECEIPTS ("GDRs") ADRs are securities, typically issued by a U.S. financial
institution (a "depositary"), that evidence ownership interests in a security
or a pool of securities issued by a foreign issuer and deposited with the
depositary. ADRs include American Depositary Shares and New York Shares.
EDRs, which are sometimes referred to as CDRs, are securities, typically issued
by a non-U.S. financial institution, that evidence ownership interests in a
security or a pool of securities issued by either a U.S. or foreign issuer.
GDRs are issued globally and evidence a similar ownership arrangement.
Generally, ADRs are designed for trading in the U.S. securities market, EDRs
are designed for trading in European securities market and GDRs are designed
for trading in non-U.S. securities markets. ADRs, EDRs, CDRs and GDRs may be
available for investment through "sponsored" or "unsponsored" facilities. A
sponsored facility is established jointly by the issuer of the security
underlying the receipt and a depositary, whereas an unsponsored facility may be
established by a depositary without participation by the issuer of the
receipt's underlying security. Holders of an unsponsored depositary receipt
generally bear all the costs of the unsponsored facility. The depositary of an
unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited security
or to pass through to the holders of the receipts voting rights with respect to
the deposited securities.
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% 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."
STRATEGIES AVAILABLE TO ALL FUNDS EXCEPT GLOBAL MONEY AND U.S. GOVERNMENT 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 forward
foreign currency with respect to specific receivables or payables of the Fund
generally
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arising in connection with the purchase or sale of its portfolio securities.
Position hedging is the sale of forward foreign currency with respect to
portfolio security positions denominated or quoted in such foreign currency. A
Fund may not position hedge with respect to a particular currency to an extent
greater than the aggregate market value (at the time of making such sale) of
the securities held in its portfolio denominated or quoted in or currently
convertible into that particular currency.
If a Fund enters into a position hedging transaction, the Trust's
custodian or sub-custodian will, except in circumstances where segregated
accounts are not required by the 1940 Act and the rules adopted thereunder,
place cash, U.S. Government Securities or high-grade debt obligations in a
segregated account for the Fund in an amount at least equal to the value of the
Fund's total assets committed to the consummation of the forward contract. For
each forward foreign currency exchange contract that is used to hedge a
securities position denominated in a foreign currency, but for which the
hedging position no longer provides, in the opinion of the Sub-Advisor or the
Advisor, sufficient protection to consider the contract to be a hedge, the
Fund maintains with its custodian a segregated account of cash, U.S.
Government Securities or 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 varies 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.
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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.
In addition to the uses of foreign currency exchange transactions
described above, all Funds except the Global Money and the U.S. Government
Funds may use foreign currency exchange transactions for certain other
purposes. See "Strategic Transactions."
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
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currency for a fixed amount in U.S. dollars and will thereby offset, in whole
or in part, the adverse effect on its portfolio that otherwise would have
resulted. When an increase in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of the securities, the Fund conversely may purchase call options on the
currency. The purchase of such options could offset, at least partially, the
effects of the adverse movements in exchange rates. As in the case of other
types of options, however, the benefit to the Fund deriving from purchases of
foreign currency options will be reduced by the amount of the premium and
related transaction costs. In addition, if currency exchange rates do not move
in the direction, or to the extent anticipated, the Fund could sustain losses
on transactions in foreign currency options that would require it to forego a
portion or all of the benefits of advantageous changes in the rates.
The Fund 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 liquid
assets 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 protections 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 OCC, thereby reducing the
risk of counterparty default. Further, a liquid secondary market in options
traded on a national securities exchange may exist, potentially permitting the
Fund to liquidate open positions at a profit prior to their exercise or
expiration, or to limit losses in the event of adverse market movements.
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The purchase and sale of exchange-traded foreign currency options are
subject to the risks of the availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and
economic events. In addition, exercise and settlement of exchange-traded foreign
currency options must be made exclusively through the OCC, which has established
banking relationships in applicable foreign countries for this purpose. As a
result, the OCC may, if it determines that foreign governmental restrictions or
taxes would prevent the orderly settlement of foreign currency option exercises,
or would result in undue burdens on the OCC or its clearing member, impose
special procedures on exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise. For a discussion of the risks involved in OTC Options
in foreign currency, see "Over the Counter Options" above.
In addition to the uses of options on foreign currencies described
above, all Funds except the Global Money and U.S. Government Funds may use
options on foreign currencies for certain other purposes. See "Strategic
Transactions."
STRATEGY AVAILABLE TO SHORT TERM GLOBAL GOVERNMENT, GROWTH AND EMERGING GROWTH
FUNDS
LOWER-RATED SECURITIES. The Short Term Global Government Fund may
invest up to 10% and the Growth and Emerging Growth Funds up to 35% of its
total assets in non-investment grade securities (rated Ba and lower by Moody's
or 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 SAI for a more complete description of the ratings assigned by
ratings organizations and their respective characteristics.
The recent 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.
B-30
<PAGE> 82
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 each of these Fund's Sub-Advisors not to rely exclusively
on ratings issued by established credit rating agencies, but to supplement such
ratings with its own independent and ongoing review of credit quality. The
achievement of the Fund's investment objectives by investment in such
securities may be more dependent on its Sub-Advisor's credit analysis than is
the case for higher quality bonds. Should the rating of a portfolio security be
downgraded, the Fund's Sub-Advisor will determine whether it is in the best
interest of the Fund to retain the security.
Prices for below investment grade securities may be affected by
legislative and regulatory developments. For example, new federal rules require
savings and loan institutions to gradually reduce their holdings of this type
of security. Also, Congress from time to time has considered legislation which
would restrict or eliminate the corporate tax deduction for interest payments
on these securities and would regulate corporate restructurings. Such
legislation may significantly depress the prices of outstanding securities of
this type.
STRATEGY AVAILABLE TO GROWTH, EMERGING GROWTH AND INTERNATIONAL GROWTH FUNDS
SECURITIES IN DEVELOPING COUNTRIES. Although most of the investments of
the Growth Fund, Emerging Growth Fund and International Growth Fund are made in
securities of companies in (or governments of) developed countries, up to 5% of
the total assets of the Growth Fund and Emerging Growth Fund and up to 30% of
the total assets of the International 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 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.
INVESTMENT RESTRICTIONS OF THE PORTFOLIOS
The following investment restrictions have been adopted by the Trust
with respect to the Portfolios as fundamental policies. A fundamental policy
affecting a particular Portfolio may not be changed without the vote of a
majority of the outstanding shares of the affected Portfolio. Majority is
defined in the 1940 Act as the lesser of (a) 67% or more of the shares present
at a shareholder meeting, if the holders of more than 50% of the outstanding
shares of the Trust are present or represented by proxy, or (b) more than 50%
of the outstanding shares. Each Portfolio will not;
1. Purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (except this shall not
prevent the Fund from purchasing or
B-31
<PAGE> 83
selling options or futures contracts or from investing in securities or
other instruments backed by physical commodities);
2. Purchase or sell real estate including limited partnership interests,
although it may purchase and sell securities of companies that deal in
real estate and may purchase and sell securities that are secured by
interests in real estate;
3. Make loans to any person, except loans of portfolio securities to the
extent that no more than 33 1/3% of its total assets would be lent to
other parties, but this limitation does not apply to purchases of debt
securities or repurchase agreements;
4. (i) Purchase more than 10% of any class of the outstanding voting
securities of any issuer (except other investment companies as defined
in the 1940 Act) and (ii) purchase securities of an issuer (except
obligations of the U.S. Government and its agencies and
instrumentalities and securities of other investment companies as
defined in the 1940 Act) if as a result, with respect to 75% of its
total assets, more than 5% of the Portfolio's total assets, at market
value, would be invested in the securities of such issuer;
5. Issue senior securities (as defined in the 1940 Act) except as permitted
by rule, regulation or order of the SEC;
6. Will not borrow, except from banks for temporary or emergency (not
leveraging) purposes including the meeting of redemption requests that
might otherwise require the untimely disposition of securities in an
aggregate amount not exceeding 30% of the value of the Portfolio's total
assets (including the amount borrowed) valued at market less liabilities
(not including the amount borrowed) at the time the borrowing is made;
and whenever borrowings by a Portfolio, including reverse repurchase
agreements, exceed 5% of the value of a Portfolio's total assets, the
Portfolio will not purchase any securities;
7. Underwrite securities issued by others, except to the extent that the
Portfolio may be considered an underwriter within the meaning of the
1933 Act in the disposition of restricted securities; and
8. Write or acquire options or interests in oil, gas or other mineral
exploration or development programs.
In addition, each Portfolio has adopted non-fundamental investment
limitations as stated below and in its prospectus. Such limitations may be
changed without shareholder approval. Each Portfolio will not:
1. Purchase or retain securities of an issuer if those officers and
trustees of the Portfolio or its investment advisor owning more than 1/2
of 1% of such securities together own more than 5% of such securities;
B-32
<PAGE> 84
2. Pledge, mortgage, or hypothecate any of its assets except to secure
borrowings permitted by the Portfolio's fundamental limitation on
borrowing;
3. Invest for the purpose of exercising control over management of any
company;
4. Invest its assets in securities of any investment company, except (i) by
purchase in the open market involving only customary brokers'
commissions; (ii) in connection with mergers, acquisitions of assets or
consolidations; (iii) as permitted by SEC exemptive order; or (iv) as
otherwise permitted by the 1940 Act;
5. Invest more than 5% of its total assets in securities of companies,
other than investment companies, which have (with predecessors) a record
of less than three years' continuous operation;
6. Purchase warrants if, by reason of such purchase, more than 5% of the
value of the Portfolio's net assets (taken at market value) would be
invested in warrants, valued at the lower of cost or market; included
within this amount, but not to exceed 2% of the value of the Fund's net
assets, may be warrants that are not listed on a recognized stock
exchange;
7. Purchase or hold illiquid securities, which are securities that cannot
be disposed of for their approximate market value in seven days or less
(which terms include repurchase agreements and time deposits maturing in
more than seven days) if, in the aggregate, more than 15% of its net
assets would be invested in illiquid securities;
8. Invest in oil, gas or other mineral leases.
9. Purchase securities on margin, except that a Portfolio may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of
initial or variation margin in connection with futures contracts or
related options will not be deemed to be a purchase of securities on
margin.
10. Purchase or hold lower rated bonds ("junk bonds"), directly or
indirectly, if, in the aggregate, 35% or more of its net assets would be
invested, directly or indirectly, in junk bonds.
INVESTMENT RESTRICTIONS OF THE FUNDS
The investment restrictions number 1 through 15 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. Investment
restrictions 16 through 23 may be changed by vote of a majority of the Trust's
Board of Trustees at any time.
B-33
<PAGE> 85
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 Short Term Global
Government Fund; and provided further that 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.
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 Short Term Global Government and Growth Funds; and
provided further that the Growth Fund shall 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.
4. Making short sales of securities or maintaining a short position;
provided that this restriction shall not apply to the Short Term Global
Government, Growth and International Growth Funds.
5. Borrowing money, except that (a) the Fund may (i) enter into Reverse
Repurchase Agreements or (ii) borrow from banks for temporary (not
leveraging) purposes, including the meeting of redemption requests that
might otherwise require the untimely disposition of securities or
pending settlement of securities transactions or for emergency or
extraordinary purposes 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) all of the Funds except the Global Money
Fund may enter into (i) futures contracts, and (ii) dollar roll
transactions. Whenever borrowings pursuant to (a) above (except that
with respect to the Short Term High Quality Bond, Short Term Global
Government, U.S. Government, Corporate Income, Growth and Income and
Emerging Growth Funds, pursuant to (a)(ii) above) exceed 5% of the value
of a Fund's total assets, (w) continuous asset coverage of at least 300%
is required; (x) in the event such asset coverage falls below 300% due
to market fluctuations or otherwise, the Fund must within 3 days reduce
the amount of its borrowings so that asset coverage will again be at
least 300%, even if disadvantageous from an investment standpoint; (y)
borrowing pursuant to (a) over 5% must be repaid
B-34
<PAGE> 86
before making additional investments; and (z) any interest paid on such
borrowings will reduce income. The Short Term High Quality Bond, Short
Term Global Government, U.S. Government, Corporate Income, Growth and
Income and Emerging Growth Funds may not borrow money or enter 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 transaction).
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 all of the Funds except the Global
Money Fund may invest in futures contracts and options on futures
contracts. The entry into forward foreign currency exchange contracts is
not and shall not be deemed to involve investing in commodities.
10. Investing in oil, gas or other mineral exploration or development
programs.
11. Making loans to others, except through the purchase of qualified debt
obligations, loans of portfolio securities (except in the case of the
U.S. Government Fund) and the entry into repurchase agreements.
12. 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, or (b) with
respect to the Short Term Global Government Fund, Bank Obligations.
13. Purchasing, writing or selling puts, calls, straddles, spreads or
combinations thereof; provided that this restriction shall not apply to
any of the Funds except the Global Money Fund; and provided further that
(a) all of the Funds except the Global Money and Short
B-35
<PAGE> 87
Term Global Government Funds may purchase, write and sell covered put
and call options on securities, (b) all of the funds except the Global
Money Fund may purchase, write and sell futures contracts and options
on futures contracts, (c) all of the Funds except the Global Money Fund
may purchase and write put and call options on stock indexes, and (d)
the International Growth Fund may purchase put and call options and
write cover call options on foreign currency contracts.
14. With respect to the Growth Fund, investing more than 35% of the Fund's
assets in non-investment grade debt securities.
15. With respect to the Short Term High Quality Bond Fund, having a
dollar-weighted average portfolio maturity in excess of five years.
16. With respect to the Growth and Emerging Growth Funds, investing more
than 25% of the Fund's assets in foreign securities.
17. Purchasing securities that are not readily marketable if more than 10%
of the total assets of the Global Money Fund, or more than 15% of the
total assets of the Short Term High Quality Bond, Short Term Global
Government, U.S. Government, Corporate Income, Growth and Income,
Growth, Emerging Growth and International Growth Funds, would be
invested in such securities, including, but not limited to: (1)
repurchase agreements with maturities greater than seven calendar days;
(2) time deposits maturing in more than seven calendar days; (3) to the
extent a liquid secondary market does not exist for the instruments,
futures contracts and options thereon; (4) certain over-the-counter
options, as described in this SAI; (5) certain variable rate demand
notes having a demand period of more than seven days; and (6) certain
Rule 144A restricted securities that are deemed to be illiquid.
18. Making investments for the purpose of exercising control or management.
19. Purchasing or selling interests in real estate limited partnerships.
The percentage limitations contained in the restrictions listed above
apply at the time of purchases of securities.
PORTFOLIO TURNOVER
The Global Money Fund, a money market fund, attempts to increase yields
by trading to take advantage of short-term market variations, which results in
high portfolio turnover. Because purchases and sales of money market instruments
are usually effected as principal transactions, this policy does not result in
high brokerage commissions to the Fund. The Growth and Income, Growth,
Emerging Growth and International Growth Funds (together, the "Equity Funds")
and the Short Term High Quality Bond, the Short Term Global Government, the
U.S. Government and the Corporate Income Funds (collectively, the "Bond Funds")
do not intend to seek profits
B-36
<PAGE> 88
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 Equity Funds and the Bond Funds
may experience increased portfolio turnover as a result of such Fund's options
activities. 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
Purchases and sales of Fund shares by a Portfolio are effected directly
through the Trust's distributor, Sierra Services. In addition, all decisions
to buy and sell securities, including Fund shares, are made by Sierra Services,
subject to the overall review of the Trustees.
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 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, those other
accounts may make investments of the same type as the Fund. 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 the coordination and
the ability to participate in volume transactions will be to the benefit of the
Fund.
B-37
<PAGE> 89
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 between the Trust
and Sierra Advisors and each sub-advisory agreement between Sierra Advisors and
a Sub-Advisor authorizes the Advisor or Sub-Advisor, in selecting brokers or
dealers to execute a particular transaction and in evaluating the best overall
terms available, to consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as
amended) provided to the Trust, the other Funds and/or other accounts over
which the Sub-Advisors or its affiliates exercise investment discretion. The
fees under the advisory agreements between the Trust and the Advisor are not
reduced by reason of the receipt by the Advisor or Sub-Advisors of 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.
To the extent consistent with applicable provisions of the 1940 Act and
the rules and exemptions adopted by the Commission thereunder, the Trust's
Board of Trustees has determined that portfolio transactions for a Fund may be
executed through GW Securities or any other affiliated broker, including J.P.
Securities or J.P. Limited (which are affiliates of J.P. Management, the
Sub-Advisor of the Global Money and Growth and Income Funds), if, 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 accounts of the
broker's most favored unaffiliated clients. Over-the-counter purchases and
sales are transacted directly with principal market makers except in those
cases in which better prices and executions may be obtained elsewhere. Under
rules adopted by the SEC, an affiliated broker may not execute transactions for
a Fund on the floor of any national securities exchange, but may effect
transactions by transmitting orders for execution, providing for clearance and
settlement, and arranging for the performance of those functions by members of
the exchange not associated with the affiliated broker. GW Securities or an
affiliated broker will be required to pay fees charged by those persons
performing the floor brokerage elements out of the brokerage compensation it
receives from the Fund. The Trust has been advised that on most transactions,
the floor brokerage may constitute 20% or more of the total commissions paid.
B-38
<PAGE> 90
For the fiscal years ended December 31, 1994, 1995 and 1996, the Funds
paid the following brokerage commissions*:
<TABLE>
<CAPTION>
1996
-------------------------------------------------
Amount Paid for Aggregate
Brokerage Brokerage and Transaction
Fund Commissions Research Amount
- ---- ----------- --------------- -----------
<S> <C> <C> <C>
Global Money Fund $0 $0 $0
Short Term High Quality Bond Fund $3,514 $0 $20,845,613
Short Term Global Government Fund $1,000 $0 $49,500
U.S. Government Fund $9,844 $0 $206,916,397
Corporate Income Fund $0 $0 $0
Growth and Income Fund $106,187 $0 $78,909,538
Growth Fund $215,458 $0 $226,603,698
Emerging Growth Fund $79,295 $0 $48,481,530
International Growth Fund $345,365 $0 $99,133,129
Total for Trust $760,663 $0 $680,939,405
Amount Paid to
Affiliated
Broker-Dealers $6,031 $0 $3,405,755
</TABLE>
<TABLE>
<CAPTION>
1995
-------------------------------------------------
Amount Paid for Aggregate
Brokerage Brokerage and Transaction
Fund Commissions Research Amount
- ---- ----------- --------------- -----------
<S> <C> <C> <C>
Global Money Fund $0 $0 $0
Short Term High Quality Bond Fund $2,332 $0 $164,272
Short Term Global Government Fund $0 $0 $0
U.S. Government Fund $2,430 $0 $75,222,018
Corporate Income Fund $0 $0 $0
Growth and Income Fund $108,464 $0 $61,223,495
Growth Fund $283,404 $0 $1,281,740,556
Emerging Growth Fund $114,232 $0 $372,208,173
International Growth Fund $164,195 $0 $535,107,481
Total for Trust $675,057
</TABLE>
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<PAGE> 91
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Amount Paid to $0
Affiliated
Broker-Dealers
</TABLE>
<TABLE>
<CAPTION>
1994
-------------------------------------------------
Amount Paid for Aggregate
Brokerage Brokerage and Transaction
Fund Commissions Research Amount
- ---- ----------- --------------- -----------
<S> <C> <C> <C>
Global Money Fund $0 $0 $0
Short Term High Quality Bond Fund $0 $0 $0
Short Term Global Government Fund $0 $0 $0
U.S. Government Fund $0 $0 $0
Corporate Income Fund $0 $0 $0
Growth and Income Fund $38,101 $0 $29,470,747
Growth Fund $183,469 $0 $791,695,782
Emerging Growth Fund $58,799 $0 $120,185,937
International Growth Fund $195,231 $0 $50,945,896
Total for Trust $475,600
Amount Paid to
Affiliated $126
Broker-Dealers
</TABLE>
- --------------
* The Global Money Fund, the Short Term High Quality Bond Fund, the Short
Term Global Government Fund, the U.S. Government Fund, the Corporate
Income Fund, the Growth and Income Fund, the Growth Fund, the Emerging
Growth Fund and the International Growth Fund commenced operations on
May 10, 1993, January 12, 1994, May 12, 1993, May 6, 1993, May 7, 1993,
January 12, 1994, May 7, 1993, January 12, 1994 and May 7, 1993,
respectively.
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 December 31, 1996, the
Growth and Income Fund held common stock of Dean Witter, Discover & Company
valued at $669,125.
PURCHASE AND PRICING OF SHARES
Shares in the Portfolios and Funds are purchased and redeemed and net
asset value is calculated in the manner described in the Prospectuses.
B-40
<PAGE> 92
REDEMPTIONS
The right of redemption of shares of a Portfolio or Fund may be
suspended or the date of payment postponed (1) for any periods during which the
NYSE is closed (other than for customary weekend and holiday closings), (2)
when trading in the markets the Fund (or underlying Fund of a Portfolio)
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 asset value not reasonably practicable or (3) for such
other periods as the SEC by order may permit for protection of the Fund's
shareholders.
DISTRIBUTIONS IN KIND. If the Board of Trustees determines that it
would be detrimental to the best interests of the shareholders of a Portfolio
or Fund to make a redemption payment wholly in cash, the Trust may pay any
portion of a redemption by distribution in kind of portfolio securities in lieu
of cash. Securities issued in a distribution in kind will be readily
marketable, although shareholders receiving distributions in kind may incur
brokerage commissions when subsequently redeeming shares of those securities.
NET ASSET VALUE
The Trust will not calculate the net asset value of the Funds and
Portfolios 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.
The assets of each Fund and Portfolio are valued according to generally
accepted accounting principles and applicable law. Generally, a Fund's or
Portfolio's investments are valued at market value or, in the absence of a
market value with respect to any portfolio securities, at fair value as
determined by or under the direction of the Trust's Board of Trustees:
o A security that is primarily traded on a U.S. or foreign
exchange (including securities traded through the National
Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ")) 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.
o Securities that are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such
securities on their respective exchanges, except when an
occurrence subsequent to the time a value was so established is
likely to have changed the value, then the fair value of those
securities will be determined by consideration of other factors
by or under the direction of the Trust's Board of Trustees or
its delegates.
o Over-the-counter securities that are not reported on the NASDAQ
System and securities listed or traded on certain foreign
exchanges whose operations are similar
B-41
<PAGE> 93
to the U.S. over-the-counter market are valued on the basis of
the bid price at the close of business on each day.
o An option is generally valued at the last sale price or, in the
absence of a last sale price, the last offer price.
o 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.
o 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 Global Money Fund are
also valued at amortized cost.
o 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 price to be determined by or under
the direction of the Trust's Board of Trustees.
o Shares of open-end investment companies are valued at the net
asset value per share last or, contemporaneously calculated.
In carrying out the Board's valuation policies, First Data Investor
Services Group, Inc. ("FDISG"), a wholly-owned subsidiary of First Data
Corporation, as sub-administrator, may consult with one or more independent
pricing services ("Pricing Services") retained by the Trust. Debt securities
of U.S. issuers (other than U.S. Government Securities and short-term
investments) are valued by FDISG, as sub-administrator, after consultation with
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 GLOBAL MONEY FUND. The valuation of the portfolio
securities of the Global Money Fund is based upon its 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 the Fund would receive if it sold the instrument.
The use by the Global Money Fund of the amortized cost method of
valuing its respective portfolio securities is permitted by a rule adopted by
the SEC. Under this rule, the Global Money Fund must maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase
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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 under
"Investment Objectives and Policies of the Funds -- Money Market Quality and
Maturity Requirements" above. Pursuant to the rule, the Board of Trustees also
has established procedures designed to stabilize, to the extent reasonably
possible, the Fund's price per share as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the Fund's portfolio
holdings by the Board of Trustees, at such intervals as it may deem
appropriate, to determine whether the Fund's 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
Fund's 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 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.
PERFORMANCE
From time to time, the Trust may quote the performance of a Portfolio or
Fund in terms of yield, effective yield, actual distributions, total return or
capital appreciation in reports or other communications to shareholders or in
advertising material. Fund or Portfolio performance will be advertised only if
accompanied by the comparable performance for the corresponding separate
account.
ANNUITY CONTRACT OWNER VALUES WILL DEPEND NOT ONLY ON THE PERFORMANCE
OF THE FUNDS OR PORTFOLIOS, BUT ALSO ON THE MORTALITY AND EXPENSE RISK CHARGES,
THE ADMINISTRATIVE CHARGES, AND ANY APPLICABLE SALES CHARGES UNDER THE ANNUITY
CONTRACTS. THE TOTAL RETURNS OF THE FUNDS REFLECT THE AGREEMENT OF SIERRA
ADVISORS TO VOLUNTARILY WAIVE FEES AND BEAR CERTAIN EXPENSES. TOTAL RETURNS
WOULD HAVE BEEN LOWER IF THESE FEES AND EXPENSES HAD NOT BEEN WAIVED.
GLOBAL MONEY FUND YIELD INFORMATION
The "yield" of the Global Money Fund refers to the income generated by
an investment in the Fund over a 7-day period (which period will be stated 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.
The "effective yield" is calculated similarly but, when annualized, the income
earned
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by an investment in a Fund is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment.
The yield for the Global Money Fund is computed by: (1) determining the
net change, exclusive of capital changes, in the value of a hypothetical
pre-existing account in the 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 charge 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 share purchased with dividends
declared on the original share and any such additional shares and income
received or accrued but not declared as a dividend, but does not include
realized gains and losses or unrealized appreciation or depreciation. In
addition, the Global Money Fund 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.
Based upon the foregoing calculation, for the 7-day period ended
December 31, 1996, the yield for the Global Money Fund was 4.85%, and the
effective yield for the Global Money Fund for the same period was 4.97%.
The Global Money Fund yield may be compared with the yields of other
investments. It should not, however, be compared to the return on fixed rate
investments which guarantee rates of interest for specified periods, such as the
interest guarantees in an annuity contract or bank deposits.
YIELD INFORMATION
From time to time, the Bond Funds and the Income, Value and Balance
Portfolios may advertise the 30-day "yield." Yield refers to the income
generated by an investment in such Fund or Portfolio over the 30-day period
identified in the advertisement, and is computed by dividing the net investment
income per share earned by the Fund or Portfolio during the period by the net
asset value per share on the last day of the previous 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 net asset value.
The yield formula prescribed by the SEC can be expressed as follows:
6
YIELD = 2[((a-b) + 1) - 1]
---
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
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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 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, for the 30-day period ended
December 31, 1996, the yields for the Short Term High Quality Bond, the Short
Term Global Government, the U.S. Government and the Corporate Income Funds were
5.85%, 4.03%, 5.74% and 6.55%, respectively.
TOTAL RETURN INFORMATION
From time to time, a Fund or Portfolio, other than the Global Money
Fund, may advertise its "average annual total return" or "aggregate total
return" over various periods of time. Such average annual total return figures
show the average percentage change in value of an investment in the Fund or
Portfolio from the beginning date of the measuring period to the end of the
measuring period. These figures reflect changes in the price of the Fund's or
Portfolio's shares and assume that any income dividends and/or capital gains
distributions made by the Fund or Portfolio during the period were reinvested
in shares of that Fund or Portfolio. Figures will be given for recent one-,
five- and ten-year periods (if applicable), and may be given for other periods
as well (such as from commencement of the Fund's or Portfolio's operations, or
on a year-by-year basis).
When considering "average" total return figures for periods longer than
one year, it is important to note that the relevant Fund's or Portfolio's annual
total return for any one year in the period might have been greater or less than
the average for the entire period. A Fund or Portfolio may also use "aggregate"
total return figures for various periods representing the cumulative change in
value of an investment in the Fund or Portfolio for a specific period (again
reflecting changes in the Fund's or Portfolio's share prices and assuming
reinvestment of dividends and distributions). Aggregate total returns may be
shown by means of schedules, charts or graphs and may indicate subtotals of the
various components of total return (i.e., change in value of initial investment,
income dividends and capital gains distributions).
Average annual total return is 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
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payment of $1,000; T = average annual total return; n = number of years; and
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the designated time period as of the end of such period or the
life of the fund. The formula for calculating aggregate total return can be
expressed as (ERV/P)-1.
Based on the foregoing, the average annual total returns for the fiscal
year ended December 31, 1996 and from inception through December 31, 1996 and
the aggregate total returns for the Funds from inception through December 31,
1996, were as follows*:
<TABLE>
<CAPTION>
Average Annual
Total Return Average Aggregate
for Fiscal Annual Total Total Return
Year Ended Return Since Since
Fund* 12/31/96 Inception Inception
- ----- ------------ ------------ ------------
<S> <C> <C> <C>
Global Money Fund 4.97% 4.32% 16.64%(1)
Short Term High Quality Bond 3.74% 3.75% 11.55%(2)
Short Term Global Government Fund 8.61% 3.96% 15.15%(3)
U.S. Government Fund 3.69% 4.87% 18.94%(4)
Corporate Income Fund 0.43% 5.58% 21.90%(5)
Growth and Income Fund 21.81% 16.80% 58.55%(2)
Growth Fund 16.15% 18.07% 83.30%(5)
Emerging Growth Fund 10.04% 15.09% 51.77%(2)
International Growth Fund 9.04% 8.34% 33.94%(5)
</TABLE>
- ---------------
* As of December 31, 1996, the Portfolios had not yet commenced
operations.
(1) Commenced operations on May 10, 1993
(2) Commenced operations on January 12, 1994
(3) Commenced operations on May 12, 1993
(4) Commenced operations on May 6, 1993
(5) Commenced operations on May 7, 1993
The total returns shown for the Funds are not an estimate or guarantee
of future performance and do not take into account charges at the annuity and
separate account level.
The performance of any or all of the Funds or Portfolios may be
compared in advertisements and sales literature to the performance of other
variable annuity issuers in general and to the performance of particular types
of variable annuities investing in mutual funds, or series of mutual funds,
with investment objectives similar to each of the Funds. Lipper Analytical
Services, Inc. ("Lipper") and the Variable Annuity Research and Data Service
("VARDS(R)") are independent services which monitor and rank the performance of
variable annuity issuers in each of the major categories of investment
objectives on an industry-wide basis. Lipper's rankings include variable life
issuers as well as variable annuity issuers. VARDS(R) rankings compare only
variable annuity issuers. The performance analyses prepared
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by Lipper and VARDS(R) rank such issuers on the basis of total return, assuming
reinvestment of dividends and distributions, but do not take sales charges,
redemption fees or certain expense deductions at the separate account level
into consideration. In addition, VARDS(R) prepares risk adjusted rankings,
which consider the effects of market risk on total return performance.
In addition, performance of each Fund or Portfolio may be compared in
advertisements and sales literature to the following benchmarks: (1) the
Standard & Poor's 500 Index, which represents an unmanaged weighted index of 500
industrial, transportation, utility and financial companies that represent
approximately 80% of the market capitalization of the United States equity
markets, widely regarded by investors as representative of the stock market; (2)
the Consumer Price Index, published by the U.S. Bureau of Labor Statistics, a
statistical measure of change, over time, in the prices of goods and services in
major expenditure groups and generally considered to be a measure of inflation;
(3) the Lehman Brothers Mutual Fund Short World Multi-Market Index, which
includes all debt instruments of the United States and 12 Lehman Major Countries
denominated in dollars with maturities of one to five years; (4) the Lehman
Brothers Mutual Fund U.S. Mortgage Index, which includes all agency
Mortgage-Backed Securities; (5) the Lehman Brothers Mutual Fund Debt BBB-Rated
Index, which represents all investment-grade corporate debt securities; (6) the
Morgan Stanley Capital International EAFE (Europe, Australia, Far East) Index,
which includes 1050 companies representing the stock markets of Europe,
Australia, New Zealand and the Far East; and (7) the U.S. Government 90 Day
Treasury Bill rate. Generally, an index represents the market value of an
unmanaged group of securities, regarded by investors as representative of a
particular market. An index does not reflect any asset-based charges for
investment management or other expenses. 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, Institutional Investor, Money and The Wall Street
Journal.
TAXES
The following discussion of federal income tax consequences is based on
the Code and the regulations issued thereunder as in effect on the date of
this SAI. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein and may
have a retroactive effect with respect to the transactions contemplated herein.
Each of the Funds and Portfolios intends to qualify as a "regulated
investment company" ("RIC") under Subchapter M of the Code. A Fund or
Portfolio that is a RIC and distributes to its shareholders at least 90% of its
taxable net investment income (including, for this purpose, its net realized
short-term capital gains) and 90% of its tax-exempt interest income (reduced by
certain expenses), 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.
A number of technical rules are prescribed for computing net investment
income and net capital gains. For example, the Fund or Portfolio is generally
treated as receiving dividends on
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the ex-dividend date. Also, certain foreign currency losses and capital losses
arising after October 31 of a given year may be treated as if they arise on the
first day of the next taxable year.
In order to qualify as a RIC under the Code, in addition to satisfying
the distribution requirement described above, each Fund or Portfolio must (a)
derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities, or foreign currencies, and certain
other related income, including, generally, certain gains from options,
futures, and forward contracts; (b) derive less than 30% of its gross income
each taxable year from the sale or other disposition of the following items if
held for less than three months: (i) stock or securities, (ii) options, futures
or forward contracts (other than options futures, or forward contracts on
foreign currencies), and (iii) foreign currencies (or options, futures, or
forward contracts on foreign currencies) that are not directly related to the
company's business of investing in stock or securities; and (c) diversify its
holdings so that, at the end of each fiscal quarter of the Fund's or
Portfolio'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 Registered Investment Companies ("RICs"), and other
securities, with such other securities limited, in respect of any one issuer,
to an amount that does not exceed 10% of the voting securities of such issuer
or 5% of the value of the Fund's or Portfolio's total assets; and (ii) not more
than 25% of the value of its assets is invested in the securities (other than
U.S. Government Securities and securities of other RICs) of any one issuer or
two or more issuers which the Fund or Portfolio controls and which are engaged
in the same, similar or related trades or businesses.
If a Fund or Portfolio fails to qualify as a RIC for any year, all of
its income will be subject to tax at corporate rates, and its distributions
(including capital gain distributions) will be taxable as ordinary income
dividends to its shareholders to the extent of the Fund's or Portfolio's
current and accumulated earnings and profits.
In addition to qualifying under subchapter M by meeting the requirements
described above, each Fund and Portfolio intends to qualify as diversified under
Subchapter L so that non-qualified variable annuity contracts funded by the
Trust will not fail to qualify as annuities for tax purposes. In general, for a
Fund or Portfolio to meet the investment diversification requirements of
Subchapter L of the Code, Treasury regulations require that no more than 55% of
the total value of the assets of the Fund or Portfolio be represented by any one
investment, no more than 70% by any two investments, no more than 80% by three
investments and no more than 90% by four investments. Generally, for purposes of
the regulations, all securities of the same issuer are treated as one
investment. In the context of U.S. Government Securities (including any
security that is issued, guaranteed or insured by the United States or an
instrumentality of the United States), each U.S. Government agency or
instrumentality is treated as a separate issuer. In the context of shares of
registered investment companies (including shares of the Trust), each series,
fund or portfolio is treated as a separate issuer. Compliance with the
Subchapter L regulations is tested on the last day of each calendar year
quarter.
Notwithstanding the distribution requirement described above, which
only requires a Fund or Portfolio to distribute at least 90% of its annual
investment company taxable income and
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does not require any minimum distribution of net capital gain, a regulated
investment company is generally subject to a nondeductible 4% 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 98% of its capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
The excise tax is inapplicable to any RIC all of the shareholders of
which are either tax-exempt pension trusts or separate accounts of life
insurance companies funding variable contracts. Although each Fund and
Portfolio believes that it is not subject to the excise tax, each Fund and
Portfolio intends to make the distributions required to avoid the imposition of
the tax, provided such payments and distributions are determined to be in the
best interest of such Fund's or Portfolio's shareholders.
Dividends declared by a Fund or Portfolio in October, November, or
December of any year and payable to shareholders of record on a date in such
month will be deemed to have been paid by the Fund or Portfolio and received by
the shareholders on December 31 of that year if paid by the Fund or Portfolio
at any time during the following January.
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APPENDIX
DESCRIPTION OF S&P, MOODY'S, DUFF AND FITCH RATINGS
DESCRIPTION OF S&P CORPORATE BOND RATINGS
AAA-Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA-Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated debt only in small degree.
A-Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits 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
debt in this category than in higher-rated categories.
BB, B, CCC, CC or C-Debt rated BB, B, CCC, CC or C is regarded as
having predominantly speculative characteristics with respect to capacity to
pay interest and repay principal. BB indicates the least degree of speculation
and C the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB Debt rated 'BB' has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions that
could lead to inadequate capacity to meet timely interest and principal
payments. The 'BB' rating category is also used for debt subordinated
to senior debt that is assigned an actual or implied 'BBB-' rating.
B Debt rate 'B' has greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions would likely impair capacity
or willingness to pay interest and repay principal. The 'B' rating
category also is used for debt subordinated to senior debt that is
assigned an actual or implied 'BB' or 'BB-' rating.
CCC Debt rated 'CCC' has a current identifiable vulnerability to default,
and is dependent on favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The 'CCC' rating category also is used for debt
subordinated to senior debt that is assigned an actual or implied 'B' or
'B-' rating.
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CC The rating 'CC' is typically applied to debt subordinated to senior
debt which is assigned an actual or implied 'CCC' rating.
C The rating 'C' is typically applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC-' debt rating. The 'C'
rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued.
C1-Debt rated C1 is reserved for income bonds on which no interest is
being paid.
D-Debt is rated D when the issue is in payment default, or the obligor
has filed for bankruptcy. The D rating is used 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.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
DESCRIPTION OF MOODY'S CORPORATE 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-edge." 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 risk appear somewhat larger than the 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 some time 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
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very moderate and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in this class.
B-Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca-Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C-Bonds which are rated C are the lowest class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. 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 security ranks in the lower end of its generic rating
category.
DESCRIPTION OF DUFF CORPORATE BOND RATINGS
AAA-Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA-High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A-Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.
BBB-Below average protection factors but still considered sufficient
for prudent investment. Considerable variability in risk during economic cycles.
BB+ Below investment grade but deemed likely to meet obligations when due.
BB Present or prospective financial protection factors fluctuate according
to industry conditions or company fortunes.
BB- Overall quality may move up or down frequently within this category.
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B+ Below investment grade and possessing risk that obligations will not be
met when due.
B Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes.
B- Potential exists for frequent changes in the rating within this category
or into a higher or lower rating grade.
CCC Well below investment grade securities. Considerable uncertainty exists
as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with
unfavorable economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP Preferred stock with dividend arrearages.
DESCRIPTION OF FITCH CORPORATE BOND RATINGS
AAA-Bonds 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.
AA-Bonds considered to be investment grade and of 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. Because bonds rated in the
AAA and AA categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated F-1+.
A-Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and to 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.
BBB-Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and to repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an 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.
BB Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified
which could assist the obligor in satisfying its debt service
requirements.
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B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable business
and economic activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D
Bonds are in default on interest and/or principal payments. Such bonds
are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor.
'DDD' represents the highest potential for recovery on these bonds, and
'D' represents the lowest potential for recovery.
PLUS (+) MINUS (-)
Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the DDD, DD, or D categories.
DESCRIPTION OF S&P COMMERCIAL PAPER RATINGS
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Debt determined to possess extremely strong
safety characteristics is denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated 'A-1'.
A-3 Debt carrying this designation has an adequate capacity for timely
payment. It is, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designations.
B Debt rated 'B' is regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D This rating indicates that the obligation is in payment default.
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DESCRIPTION OF MOODY'S COMMERCIAL PAPER RATINGS
PRIME-1 Issuers rated Prime-1 (or supporting institutions) have superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
- -- Leading market positions in well established industries.
- -- High rates of return on fund employed.
- -- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- -- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- -- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3 Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
liquidity is maintained.
NOT PRIME Issuers rate Not Prime do not fall within any of the Prime rating
categories.
DESCRIPTION OF DUFF'S COMMERCIAL PAPER RATINGS
Duff 1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just
below risk-free U.S. Treasury short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection factors.
Risk factors are minor.
Duff 1- High certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk
factors are very small.
GOOD GRADE
Duff 2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs
may enlarge total financing requirements, access to capital
markets is good. Risk factors are small.
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SATISFACTORY GRADE
Duff 3 Satisfactory liquidity and other protection factors qualify
issue as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
NON-INVESTMENT GRADE
Duff 4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service. Operating
factors and market access may be subject to a high degree of variation.
DEFAULT
Duff 5 Issuer failed to meet scheduled principal and/or interest
payments.
DESCRIPTION OF FITCH'S COMMERCIAL PAPER RATINGS
F-1+ Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated 'F-1+'.
F-2 Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not
as great as for issues assigned 'F-1+' and 'F-1' ratings.
F-3 Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
however, near-term adverse changes could cause these securities to be
rated below investment grade.
F-S Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and economic
conditions.
D Default. Issues assigned this rating are in actual or imminent payment
default.
LOC The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
B-56
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FINANCIAL STATEMENTS
The Trust's financial statements for the fiscal year ended December 31,
1996, including notes thereto and the Report of Price Waterhouse LLP,
Independent Accountants, dated February 14, 1997, are herein incorporated by
reference from the Trust's Annual Report. A copy of the Annual Report to
Shareholders must accompany the delivery of this Statement of Additional
Information.
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THE SIERRA VARIABLE TRUST
PART C
Item 24. Financial Statements and Exhibits
(a) Financial Statements (included in Part A)
Audited Financial Highlights for the fiscal year ended
December 31, 1996.
*Financial Statements (incorporated by reference in Part B)
The following audited financial statements as of December 31,
1996 and the report of Price Waterhouse, LLP dated February
___, 1997 are hereby incorporated by reference to the
Statement of Additional Information from form N-30D, the
Annual Report of Shareholders, as filed with the Securities
and Exchange Commission on February ___, 1997 with Accession
Number ____________.
Statement of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Financial Highlights
Portfolio of Investments
Notes to Financial Statements
Report of Independent Accountants
* To be filed by amendment
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(b) Exhibits:
1(a) Agreement and Declaration of Trust, dated January 29, 1993.
(1) (**)
1(b)-1 Amendment No. 1 to the Trust's Agreement and Declaration of
Trust, dated April 27, 1993. (3) (**)
1(b)-2 Amendment No. 2 to the Trust's Agreement and Declaration of
Trust, dated September 22, 1993. (3) (**)
1(c)-1 Establishment and Designation of Series of Shares of
Beneficial Interest, dated April 27, 1993, with respect to the
Global Money, Short Term Global Government, U.S. Government,
Corporate Income Growth and International Growth Funds.(3)
(**)
1(c)-2 Establishment and Designation of Series of Shares of
Beneficial Interest, dated February 3, 1995, with respect to
the Short Term High Quality Bond, Growth and Income and
Emerging Growth Funds. (5) (**)
1(c)-3 Establishment and Designation of Series of Shares of
Beneficial Interest, dated January 23, 1997 with respect to
the Capital Growth, Growth, Balanced, Value and Income
Portfolios. (*)
2 By-Laws of the Trust.(1) (**)
3 Not Applicable.
4 Not Applicable.
5(a)-1 Management Agreement, dated as of April 8, 1993, between the
Trust and Sierra Investment Advisors Corporation ("Sierra
Advisors") with respect to the Global Money Fund.(3) (**)
5(a)-2 Management Agreement, dated as of April 8, 1993, between the
Trust and Sierra Advisors with respect to the International
Growth Fund. (3) (**)
5(a)-3 Management Agreement, dated as of April 8, 1993, between the
Trust and Sierra Advisors with respect to the U.S. Government
Fund. (3) (**)
5(a)-4 Management Agreement, dated as of April 8, 1993, between the
Trust and Sierra Advisors with respect to the Corporate Income
Fund. (3) (**)
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5(a)-5 Management Agreement, dated as of April 8, 1993, between the
Trust and Sierra Advisors with respect to the Short Term
Global Government Fund. (3) (**)
5(a)-6 Management Agreement, dated as of April 8, 1993, between the
Trust and Sierra Advisors with respect to the Growth Fund. (3)
(**)
5(a)-7 Form of Management Agreement between the Trust and
Sierra Advisors with respect to the Short Term High Quality
Bond, Growth and Income and Emerging Growth Funds. (3)
(Replaced by Exhibits 5(a)-9, 5(a)-10, 5(a)-11)
5(a)-8 Form of Investment Advisory Agreement between the Trust and
Sierra Services (7)
5(a)-9 Management Agreement, dated January 1, 1994, between the Trust
and Sierra Advisors, with respect to the Short Term High
Quality Bond Fund. (Replaces Exhibit 5(a)-7)(*)
5(a)-10 Management Agreement, dated January 1, 1994, between the Trust
and Sierra Advisors, with respect to the Growth and Income
Fund. (Replaces Exhibit 5(a)-7)(*)
5(a)-11 Management Agreement, dated January 1, 1994, between the Trust
and Sierra Advisors, with respect to the Emerging Growth Fund.
(Replaces Exhibit 5(a)-7)(*)
5(b)-1 Sub-Adviser Agreement, dated as of April 8, 1993, between
Sierra Advisors and J.P. Morgan Investment Management Inc.
("J.P. Morgan") with respect to the Global Money Fund. (3)
(**)
5(b)-2 Sub-Adviser Agreement, dated as of April 8, 1996, between
Sierra Advisors and Warburg, Pincus Counsellors, Inc.
("Warburg") with respect to the International Growth Fund.(6)
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(Replaces Sub-Adviser Agreement, dated as of April 8, 1993,
between Sierra Advisors and J.P. Morgan with respect to the
International Growth Fund. (3))
5(b)-3 Sub-Adviser Agreement, dated as of April 8, 1993 between
Sierra Advisors and Van Kampen Merritt Management Inc. with
respect to the U.S. Government Fund.(3) (**)
5(b)-4 Sub-Adviser Agreement, dated as of April 8, 1993, between
Sierra Advisors and TCW Funds Management, Inc. with respect to
the Corporate Income Fund. (3) (**)
5(b)-5 Sub-Adviser Agreement, dated as of April 8, 1993, between
Sierra Advisors and Scudder, Stevens & Clark, Inc. ("Scudder")
with respect to the Short Term Global Government Fund. (3)
(**)
5(b)-6 Sub-Adviser Agreement, dated as of April 8, 1993, between
Sierra Advisors and Janus Capital Corporation ("Janus") with
respect to the Growth Fund. (3)
5(b)-6A Withdrawn.
5(b)-6B Amended and Restated Sub-Adviser Agreement between Sierra
Advisors and Janus with respect to the Growth Fund. (4) (**)
5(b)-7 Sub-Adviser Agreement, dated as of January 1, 1994, between
Sierra Advisors and J.P. Morgan with respect to the Growth and
Income Fund. (*)
(Replaces Form of Sub-Adviser Agreement between Sierra
Advisors and J.P. Morgan with respect to the Growth and Income
Fund. (3))
5(b)-8 Sub-Adviser Agreement, dated as of January 1, 1994, between
Sierra Advisors and Scudder with respect to the Short Term
High Quality Bond Fund. (*)
(Replaces Form of Sub-Adviser Agreement between Sierra
Advisors and Scudder with respect to the Short Term High
Quality Bond Fund. (3))
5(b)-9 Sub-Adviser Agreement, dated as of January 1, 1994, between
Sierra Advisors and Janus with respect to the Emerging Growth
Fund. (*)
(Replaces Form of Sub-Adviser Agreement between Sierra
Advisors and Janus with respect to the Emerging Growth
Fund. (3))
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6(a) Distribution Agreement, dated April 19, 1993, between
the Trust and Sierra Investment Services Corporation ("Sierra
Services"). (3) (**)
6(b) Participation Agreement, regarding Sierra Advantage
among the Trust, Sierra Advisors, Sierra Services, American
General Life Insurance Company ("American General") and
American General Securities Incorporated ("American General
Securities"), dated as of may 3, 1993. (4) (**)
7 Not Applicable.
8(a) Custody Agreement, dated as of January 1, 1996, between
the Trust and Boston Safe Deposit & Trust Company. (*)
(Replaces Form of Custody Agreement between the Trust and
Boston Safe Deposit & Trust Company. (2))
8(b) Transfer Agency and Services Agreement, dated as of
July 1, 1996, between the Trust and First Data Investor
Services Group. (*)
9(a) Administration Agreement, dated as of July 1, 1996,
between the Trust and Sierra Fund Administration Corporation
("Sierra Administration"). (*)
(Replaces Administration Agreement, dated April 19, 1993,
between the Trust and Sierra Administration. (3))
9(b) Sub-Administration Agreement, dated April 19, 1993,
between Sierra Administration and The Boston Company Advisors,
Inc. (3)
10 Consent and Opinion of Counsel with Rule 24f-2 Notice
filed with the Securities and Exchange Commission on February
24, 1997.
11(a)-1 Powers of Attorney with respect to Registration
Statements and Amendments thereto signed by the following
persons in their capacities as Trustees and, where applicable,
officers of the Trust: David E. Anderson, Arthur H. Bernstein,
F. Brian Cerini, Edmond R. Davis, Alfred E. Osborne, Jr., and
Keith B. Pipes. (2) (**)
11(a)-2 Power of Attorney with respect to Registration
Statements and Amendments thereto signed by the following
person in his capacity as Trustee: John W. English. (5) (**)
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11(b) Amended and Restated Agreement Concerning Allocation of
Fidelity Bond Premiums and Recovery, dated February 14, 1996,
among the Trust, the Sierra Trust Funds and the Sierra Prime
Income Fund. (6)
11(c) Amended and Restated Agreement Concerning Allocation of Joint
Liability (Errors and Omissions) Insurance Policy Premiums,
dated February 14, 1996, among the Trust, the Sierra Trust
Funds and the Sierra Prime Income Fund.(6)
11(d) Indemnification Agreement, dated as of May 3, 1993, among
Sierra Advisors, Sierra Services, American General, and
American General Securities. (3)
11(e) Consent of Independent Accountants. (6)
12 Not Applicable.
13 Not Applicable.
14 Not Applicable.
15 Not Applicable.
16(a) Certain Performance Data relating to the Funds. (4) (**)
Ex-27 Financial Data Schedules (*)
______________
* Filed herewith.
** Filed herewith. Document previously filed on paper only.
(1) Incorporated by reference to Registration Statement filed with the SEC
on February 2, 1993.
(2) Incorporated by reference to Pre-Effective Amendment No. 1 filed with
the SEC on March 29, 1993.
(3) Incorporated by reference to Post-Effective Amendment No. 1 filed with
the SEC on October 13, 1993.
(4) Incorporated by reference to Post-Effective Amendment No. 2 filed with
the SEC on April 22, 1994.
(5) Incorporated by reference to Post-Effective Amendment No. 3 filed with
the SEC on February 10, 1995.
(6) Incorporated by reference to Post-Effective Amendment NO. 5 filed with
the SEC on April 26, 1996.
(7) Incorporated by reference to Post-Effective Amendment No. 6 filed with
the SEC on January 10, 1997.
Item 25. Persons Controlled by or Under Common Control with Registrant
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The Trust is a business trust organized under the laws of the
Commonwealth of Massachusetts. Separate Account D of American General Life
Insurance Company is the sole shareholder of, and may be deemed to control, the
Trust. American General Life Insurance Company is a subsidiary of American
General Corporation.
The list of American General Corporation's active subsidiaries is
hereby incorporated by reference to Item 26 of the Form N-4 registration
statement of American General Life Insurance Company and its Separate Account
D, File No. 33-57730 and File No. 811-2441.
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Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
(2)
(1) No. of Record Holders at
Title of Class December 31, 1996
--------------
<S> <C>
Shares of the Global Money Fund, without par value 1
Shares of the Short Term High Quality Bond Fund, 1
without par value
Shares of the Short Term Global Government Fund, 1
without par value
Shares of the U.S. Government Fund, without par value 1
Shares of the Corporate Income Fund, without par value 1
Shares of the Growth and Income Fund, without par 1
value
Shares of the Growth Fund, without par value 1
Shares of the Emerging Growth Fund, without par value 1
Shares of the International Growth Fund, without par 1
value
Shares of the Income 0*
Portfolio, without par value
Shares of the Value 0*
Portfolio, without par value
Shares of the Balanced Portfolio, without par value 0*
Shares of the Growth Portfolio, 0*
without par value
Shares of the Capital Growth Portfolio, without par 0*
value
</TABLE>
* The Portfolios have not yet commenced operations.
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Item 27. Indemnification
Article VIII of the Registrant's Agreement and Declaration of Trust
provides in relevant part:
The Trust shall indemnify each of its Trustees and officers (including
persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest
as a shareholder, creditor or otherwise) (hereinafter referred to as a
"Covered Person") against all liabilities and expenses, including but
not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees reasonably
incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or legislative body, in
which such Covered Person may be or may have been involved as a party
or otherwise or with which such Covered Person may be or may have been
threatened, while in office or thereafter, by reason of being or
having been such a Covered Person except with respect to any matter as
to which such Covered Person shall have been finally adjudicated in
any such action, suit or other proceeding to be liable to the Trust or
its Shareholders by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of such Covered Person's office. Expenses, including counsel fees so
incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties),
shall be paid from time to time by the Trust in advance of the final
disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so
paid to the Trust if it is ultimately determined that indemnification
of such expenses is not authorized under this Article; provided,
however, that either (a) such Covered Person shall have provided
appropriate security for such undertaking, (b) the Trust shall be
insured against losses arising from any such advance payments or (c)
either a majority of the disinterested Trustees acting on the matter
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(provided that a majority of the disinterested Trustees then in office
act on the matter), or independent legal counsel in a written opinion,
shall have determined, based upon a review of readily available facts
(as opposed to a full trial type inquiry) that there is reason to
believe that such Covered Person will be found entitled to
indemnification under this Article.
As to any matter disposed of (whether by a compromise payment,
pursuant to a consent decree or otherwise) without an adjudication by a
court, or by any other body before which the proceeding was brought,
that such Covered Person is liable to the Trust or its Shareholders by
reason of wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office,
indemnification shall be provided if (a) approved, after notice that it
involves such indemnification, by at least a majority of the
disinterested Trustees acting on the matter (provided that a majority
of the disinterested Trustees then in office act on the matter) upon a
determination, based upon a review of readily available facts (as
opposed to a full trial type inquiry) that such Covered Person is not
liable to the Trust or its Shareholders by reasons of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office, or (b) there has
been obtained an opinion in writing of independent legal counsel, based
upon a review of readily available facts (as opposed to a full trial
type inquiry) to the effect that such indemnification would not protect
such Person against any liability to the Trust to which he or she would
otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office. Any approval pursuant to this Section shall not prevent
the recovery from any Covered Person of any amount paid to such Covered
Person in accordance with this Section as indemnification if such
Covered Person is subsequently adjudicated by a court of competent
jurisdiction to have been liable to the Trust or its Shareholders by
reason of wilful misfeasance, bad faith, gross negligence or reckless
disregard of
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the duties involved in the conduct of such Covered Person's office.
Section 9 of the Sub-Adviser Agreements that are filed as Exhibits
5(b)-2 and 5(b)-7 to this Registration Statement are hereby incorporated by
reference in response to this item. They provide that, in the absence of
willful misfeasance, bad faith or gross negligence on the part of J.P. Morgan,
or reckless disregard of its obligations and duties thereunder ("Disqualifying
Conduct"), J.P. Morgan shall not be subject to any liability to the Trust or the
Fund, or to any shareholder of the Fund, for any act or omission in the course
of, or connected with, rendering services hereunder. This Section further
provides that Sierra Advisors shall indemnify and hold harmless J.P. Morgan from
and against all claims, losses, liabilities or damages (including reasonable
attorneys' fees and other related expenses) (collectively, "Losses"), howsoever
arising under this Agreement or the performance by J.P. Morgan of its duties
thereunder; provided, however, that nothing contained therein shall require that
J.P. Morgan be indemnified for Losses resulting from Disqualifying Conduct.
Section 11 of the Sub-Adviser Agreements that are filed as Exhibits
5(b)-6 and 5(b)-9 to this Registration Statement are hereby incorporated by
reference in response to this item. They provide that Sierra Advisors will
indemnify and hold harmless Janus 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 these Sub-Adviser
Agreements or the performance by Janus of its duties thereunder; provided,
however, that nothing contained therein shall require that Janus be indemnified
for Disqualifying Conduct.
Section 12 of the Participation Agreement that is filed as Exhibit
6(b) to this Registration Statement is hereby incorporated by reference in
response to this item. Section 12.1 thereof provides that American General
will indemnify the Trust and Sierra Services and their directors, trustees,
officers and controlling persons from losses and costs due to misstatements or
omissions of material facts for which American General is responsible in its
registration statement relating to annuities funded through the Trust or
otherwise or due to American General's failure to meet its obligations under
the Participation Agreement. Section 12.2 thereof
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provides that Sierra Services will indemnify the Trust, American General,
American General Securities and their directors, trustees, officers and
controlling persons from losses and costs due to any misstatements or omissions
of material facts for which Sierra Services or its affiliates are responsible
in American General registration statements relating to annuities funded
through the Trust or otherwise or as a result of any failure by the Trust or
Sierra Services to meet its obligations under the Participation Agreement.
The Agreement filed as Exhibit 11(d) to this Registration Statement is
hereby incorporated by reference in response to this item. Pursuant to that
Agreement, Sierra Advisors and Sierra Services agree to indemnify American
General and American General Securities with respect to liabilities arising out
of the negligence or bad faith of Sierra Services, Sierra Advisors or any
sub-advisor to the Trust in performing their obligations to the Trust,
including the obligations of Sierra Advisors and the sub-advisors to operate
the Trust in compliance with Sub-Chapter M and Section 817(h) of the Internal
Revenue Code of 1986, as amended. Sierra Advisors and Sierra Services also
agree to indemnify American General and American General Securities for 50% of
any other liabilities or costs that they may incur as a result of any failure
of the Trust to comply with Sub-Chapter M or Section 817(h) that does not
result from such negligence or bad faith.
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
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against public policy as expressed in the 1933 Act and will be 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).
Sierra Investment Services Corporation ("Sierra Services") is the
investment advisor of the Portfolios.
Sierra Services does not currently act as depositor or investment
advisor for any other investment company.
The information required by this Item 28 with respect to each director
and officer of Sierra Services is incorporated by reference to Schedule A of
Form BD filed by Sierra Services pursuant to the Securities Exchange Act of
1934 (SEC File No. 8-45144).
Item 28(b). 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.
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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(c). 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(d). 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 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).
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Item 28(e). 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. Janus provides a variety of investment
management and investment advisory services.
The list required by this Item 28 of officers and directors of Janus,
together with any 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(f). 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(g). 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
investment companies, employee benefit plans, 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,
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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
(a) Sierra Investment Services Corporation ("Sierra Services"),
the Distributor of the Trust, currently acts as distributor for the Sierra
Trust Funds.
(b) 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).
(c) Not Applicable.
Item 30. Location of Accounts and Records
(1) The Sierra Variable Trust
9301 Corbin Avenue
Northridge, California 91324
(declaration and agreement of trust and by-laws)
(2) Sierra Investment Advisors Corporation
9301 Corbin Avenue
Northridge, California 91324
(with respect to their services as investment advisor)
(3) Sierra Investment Services Corporation
9301 Corbin Avenue
Northridge, California 91324
(with respect to their services as distributor)
(4) Sierra Fund Administration Corporation
9301 Corbin Avenue
Northridge, California 91324
(with respect to their services as administrator,
shareholder servicing agent and transfer agent)
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<PAGE> 125
(5) First Data Investor Services Group, Inc.
One Exchange Place
53 State Street
Boston, MA 02109-2873
(with respect to their services as investment
sub-administrator)
(6) Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
(with respect to their services as custodian)
(7) J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
(with respect to their services as investment
sub-advisor)
(8) TCW Funds Management, Inc.
865 S. Figueroa Street, Suite 1800
Los Angeles, California 90017
(with respect to their services as investment
sub-advisor)
(9) Scudder, Stevens & Clark, Inc.
Two International Place
Boston, Massachusetts 02110
(with respect to their services as investment
sub-advisor)
(10) Janus Capital Corporation
100 Fillmore Street, Suite 300
Denver, Colorado 80206
(with respect to their services as investment
sub-advisor)
(11) BlackRock Financial Management, Inc.
345 Park Avenue
New York, New York 10154
(with respect to their services as investment
sub-advisor)
(12) Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(with respect to their services as investment
sub-advisor)
C-17
<PAGE> 126
(13) Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103
(with respect to their services as counsel)
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) 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-18
<PAGE> 127
**********
NOTICE
**********
A copy of the Agreement and Declaration of Trust of The Sierra
Variable Trust (the "Trust") is on file with the Secretary of State of the
Commonwealth of Massachusetts and notice is hereby given that this Registration
Statement has been executed on behalf of the Trust by an officer of the Trust
as an officer and by its Trustees as trustees and not individually and the
obligations of or arising out of this Registration Statement are not binding
upon any of the Trustees, officers or shareholders individually but are binding
only upon the assets and property of the Trust.
C-19
<PAGE> 128
EXHIBIT INDEX
<TABLE>
<CAPTION>
EDGAR
Exhibit No. Exhibit No. Description
<S> <C> <C>
Ex.-99B 1(a) Agreement and Declaration of Trust, dated January 27, 1993. (1)(**)
Ex.-99B 1(b)-1 Amendment No. 1 to the Trust's Agreement and Declaration of Trust, dated
April 27, 1993. (3)(**)
Ex.-99B 1(b)-2 Amendment No. 2 to the Trust's Agreement and Declaration of Trust, dated
September 22, 1993. (3)(**)
Ex.-99B 1(c)-1 Establishment and Designation of Series of Shares of Beneficial Interest, dated
April 27, 1993, with respect to the Global Money, Short Term Global Government,
U.S. Government, Corporate Income, Growth and International Growth Funds. (3)(**)
Ex.-99B 1(c)-2 Establishment and Designation of Series of Shares of Beneficial Interest, dated
February 3, 1995, with respect to the Short Term High Quality Bond, Growth and
Income and Emerging Growth Funds. (5)(**)
Ex.-99B 1(c)-3 Establishment and Designation of Series of Shares of Beneficial Interest, dated
January 23, 1997, with respect to the Capital Growth, Growth, Balanced, Value
and Income Portfolios. (*)
Ex.-99B 2 By-Laws of the Trust. (1)(**)
3 Not Applicable.
4 Not Applicable.
Ex.-99B 5(a)-1 Management Agreement, dated as of April 8, 1993, between the Trust and Sierra
</TABLE>
C-20
<PAGE> 129
<TABLE>
<S> <C> <C>
Investment Advisors Corporation ("Sierra Advisors") with respect to the Global Money
Fund.(3)(**)
Ex.-99B 5(a)-2 Management Agreement, dated as of April 8, 1993, between the Trust and Sierra Advisors
with respect to the International Growth Fund. (3)(**)
Ex.-99B 5(a)-3 Management Agreement, dated as of April 8, 1993, between the Trust and Sierra Advisors
with respect to the U.S. Government Fund. (3)(**)
Ex.-99B 5(a)-4 Management Agreement, dated as of April 8, 1993, between the Trust and Sierra
Advisors with respect to the Corporate Income Fund. (3)(**)
Ex.-99B 5(a)-5 Management Agreement, dated as of April 8, 1993, between the Trust and Sierra Advisors
with respect to the Short Term Global Government Fund. (3)(**)
Ex.-99B 5(a)-6 Management Agreement, dated as of April 8, 1993, between the Trust and Sierra Advisors
with respect to the Growth Fund.(3)(**)
5(a)-7 Form of Management Agreement between the Trust and Sierra Advisors with respect
to the Short Term High Quality Bond, Growth and Income and Emerging Growth
Funds. (3)
(Replaced by Exhibits 5(a)-9, 5(a)-10, 5(a)-11)
5(a)-8 Form of Investment Advisory Agreement between the Trust and Sierra Services (7)
Ex.-99B 5(a)-9 Management Agreement, dated January 1, 1994, between the Trust and Sierra Advisors,
with respect to the Short Term High Quality Bond Fund. (Replaces Exhibit 5(a)-7)(*)
</TABLE>
C-21
<PAGE> 130
<TABLE>
<S> <C> <C>
Ex.-99B 5(a)-10 Management Agreement, dated January 1, 1994, between the Trust and Sierra Advisors,
with respect to the Growth and Income Fund. (Replaces Exhibit 5(a)-7)(*)
Ex.-99B 5(a)-11 Management Agreement, dated January 1, 1994, between the Trust and Sierra Advisors,
with respect to the Emerging Growth Fund. (Replaces Exhibit 5(a)-7)(*)
Ex.-99B 5(b)-1 Sub-Adviser Agreement, dated as of April 8, 1993, between Sierra Advisors and J.P.
Morgan Investment Management Inc. ("J.P. Morgan") with respect to the Global Money
Fund. (3)(**)
Ex.-99B 5(b)-2 Sub-Adviser Agreement, dated as of April 8, 1996, between Sierra Advisors and Warburg,
Pincus Counsellors, Inc. ("Warburg") with respect to the International Growth
Fund. (6)
(Replaces Sub-Adviser Agreement, dated as of April 8, 1993, between Sierra Advisors
and J.P. Morgan with respect to the International Growth Fund. (3))
Ex.-99B 5(b)-3 Sub-Adviser Agreement, dated as of April 8, 1993 between Sierra Advisors and Van
Kampen Merritt Management Inc. with respect to the U.S. Government Fund. (3)(**)
</TABLE>
C-22
<PAGE> 131
<TABLE>
<S> <C> <C>
Ex.-99B 5(b)-4 Sub-Adviser Agreement, dated as of April 8, 1993, between Sierra Advisors and TCW
Funds Management, Inc. with respect to the Corporate Income Fund. (3)(**)
Ex.-99B 5(b)-5 Sub-Adviser Agreement, dated as of April 8, 1993, between Sierra Advisors and Scudder,
Stevens & Clark, Inc. ("Scudder") with respect to the Short Term Global Government
Fund. (3)(**)
5(b)-6 Sub-Adviser Agreement, dated as of April 8, 1993, between Sierra Advisors and
Janus Capital Corporation ("Janus") with respect to the Growth Fund. (3)
5(b)-6A Withdrawn
Ex.-99B 5(b)-6B Amended restated Sub-Adviser Agreement between Sierra Advisors and Janus with respect
to the Growth Fund. (4)(**)
Ex.-99B 5(b)-7 Sub-Adviser Agreement, dated as of January 1, 1994, between Sierra Advisors and J.P.
Morgan with respect to the Growth and Income Fund. (*)
(Replaces Form of Sub-Adviser Agreement between Sierra Advisors and J.P. Morgan with
respect to the Growth and Income Fund. (3))
Ex.-99B 5(b)-8 Sub-Adviser Agreement, dated as of January 1, 1994, between Sierra Advisors and
Scudder with respect to the Short Term High Quality Bond Fund. (*)
(Replaces Form of Sub-Adviser Agreement between Sierra Advisors and Scudder with
respect to the Short Term High Quality Bond Fund. (3))
Ex.-99B 5(b)-9 Sub-Adviser Agreement, dated as of January 1, 1994, between Sierra Advisors and Janus
with respect to the Emerging Growth Fund. (*)
</TABLE>
C-23
<PAGE> 132
<TABLE>
<S> <C> <C>
(Replaces Form of Sub-Adviser Agreement between Sierra Advisors and Janus with
respect to the Emerging Growth Fund. (3))
Ex.-99B 6(a) Distribution Agreement, dated April 19, 1993, between the Trust and Sierra
Investment Services Corporation ("Sierra Services"). (3)(**)
Ex.-99B 6(b) Participation Agreement regarding Sierra Advantage among the Trust, Sierra Advisors,
Sierra Services, American General Life Insurance Company ("American General") and
American General Securities Incorporated ("American General Securities"), dated as
of May 3, 1993. (4)(**)
7 Not Applicable.
Ex.-99B 8(a) Custody Agreement, dated as of January 1, 1996, between the Trust and Boston Safe
Deposit & Trust Company. (*)
(Replaces Form of Custody Agreement between the Trust and Boston Safe Deposit & Trust
Company. (2))
Ex.-99B. 8(b) Transfer Agency and Services Agreement, dated as of July 1, 1996, between the Trust
and First Data Investor Services Group. (*)
Ex.-99B 9(a) Administration Agreement, dated as of July 1, 1996, between the Trust and Sierra
Fund Administration Corporation ("Sierra Administration"). (*)
(Replaces Administration Agreement, dated April 19, 1993, between the Trust and
Sierra Administration. (3))
9(b) Sub-Administration Agreement, dated April 19, 1993, between Sierra Administration
and The Boston Company Advisors, Inc. (3)
</TABLE>
C-24
<PAGE> 133
<TABLE>
<S> <C> <C>
10 Consent and Opinion of Counsel with Rule 24f-2 Notice filed with the Securities and
Exchange Commission on February 24, 1997.
Ex.-99B 11(a)-1 Powers of Attorney with respect to Registration Statements and Amendments thereto
signed by the following persons in their capacities as Trustees and, where
applicable, officers of the Trust: David E. Anderson, Arthur H. Bernstein, F. Brian
Cerini, Edmond R. Davis, Alfred E. Osborne, Jr., and Keith B. Pipes. (2)(**)
Ex.-99B 11(a)-2 Power of Attorney with respect to Registration Statements and Amendments thereto
signed by the following person in his capacity as Trustee: John W. English. (5)(**)
11(b) Amended and Restated Agreement Concerning Allocation of Fidelity Bond Premiums and
Recovery, dated February 14, 1996, among the Trust, the Sierra Trust Funds and the
Sierra Prime Income Fund.(6)
11(c) Amended and Restated Agreement Concerning Allocation of Joint Liability (Errors
and Omissions) Insurance Policy Premiums, dated February 14, 1996, among the
Trust, the Sierra Trust Funds and the Sierra Prime Income Fund.(6)
11(d) Indemnification Agreement, dated as of May 3, 1993, among Sierra Advisors, Sierra
Services, American General, and American General Securities.(3)
11(e) Consent of Independent Accountants.(6)
12 Not Applicable.
13 Not Applicable.
14 Not Applicable.
</TABLE>
C-25
<PAGE> 134
<TABLE>
<S> <C> <C> <C>
15 Not Applicable.
Ex.-99B 16(a) Certain Performance Data relating to the Funds. (4)(**)
Ex-27 Financial Data Schedules (*)
- -------------------
</TABLE>
* Filed herewith.
** Filed herewith. Document previously filed on paper only.
(1) Incorporated by reference to Registration Statement filed with the SEC on
February 2, 1993.
(2) Incorporated by reference to Pre-Effective Amendment No. 1 filed with the
SEC on March 29, 1993.
(3) Incorporated by reference to Post-Effective Amendment No. 1 filed with the
SEC on October 13, 1993.
(4) Incorporated by reference to Post-Effective Amendment No. 2 filed with the
SEC on April 22, 1994.
(5) Incorporated by reference to Post-Effective Amendment No. 3 filed with the
SEC on February 10, 1995.
(6) Incorporated by reference to Post-Effective Amendment NO. 5 filed with the
SEC on April 26, 1996.
(7) Incorporated by reference to Post-Effective Amendment No. 6 filed with the
SEC on January 10, 1997.
C-26
<PAGE> 135
Securities Act File No. 33-57732
Investment Company Act File No. 811-7462
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /___/
PRE-EFFECTIVE AMENDMENT NO. ___ /___/
POST-EFFECTIVE AMENDMENT NO. 7 / X /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /___/
AMENDMENT NO. 8 / X /
The Sierra Variable Trust
(Exact Name of Registrant as Specified in Charter)
___________________________________
EXHIBITS
___________________________________
<PAGE> 136
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended ("1933
Act"), and the Investment Company Act of 1940, as amended, the Registrant has
duly caused this Post-Effective Amendment No. 7 to the Registrant's
Registration Statement File No. 33-57732 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Northridge and State of
California on the 27th day of February, 1997.
THE SIERRA VARIABLE TRUST
By: /s/ F. Brian Cerini
----------------------------------
F. Brian Cerini
President
Pursuant to the requirements of the 1933 Act, as amended, this
Post-Effective Amendment No. 7 Registration Statement 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>
/s/ F. Brian Cerini President and Trustee February 27, 1997
--------------------------------
F. Brian Cerini
(Principal Executive Officer)
/s/ Keith B. Pipes Executive Vice President, February 27, 1997
--------------------------------
Keith B. Pipes Treasurer and Secretary
(Principal Financial and Accounting Officer)
* Trustee February 27, 1997
--------------------------------
David E. Anderson
* Trustee February 27, 1997
--------------------------------
Arthur H. Bernstein
* Trustee February 27, 1997
---------------------------------
Edmond R. Davis
</TABLE>
<PAGE> 137
<TABLE>
<S> <C> <C>
* Trustee February 27, 1997
- ----------------------------------
John W. English
* Trustee February 27, 1997
- ----------------------------------
Alfred E. Osborne, Jr. Ph.D.
</TABLE>
*By: /s/ F. Brian Cerini
------------------------------
F. Brian Cerini
Attorney-In-Fact
<PAGE> 1
EXHIBIT 1(a)
THE SIERRA VARIABLE TRUST
CROSS-REFERENCE SHEET
Pursuant to CMR 116.00:
116.03 (a) Name of organization or trust:
The Sierra Variable Trust
(b) Date of organization:
January 29, 1993
(c) Names and address of the trustees:
F. Brian Cerini
888 South Figueroa Street, Suite 1100
P.O. Box 17967
Los Angeles, CA 90017
(d) Original signatures of all trustees:
See page 18.
(e) Principal place of business:
888 South Figueroa Street, Suite 1100
P.O. Box 17967
Los Angeles, CA 90017
(f) Statement that beneficial interest is divided into
transferrable certificates of participation
or shares; See Section 3.1, page 3.
(g) Ability to merge:
See Section 9.5, page 17.
<PAGE> 2
THE SIERRA VARIABLE TRUST
MASTER TRUST AGREEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I. NAME AND DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
- ---------- --------------------
Section 1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
a) "Trust" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
b) "Trustees" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
c) "Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
d) "Shareholder" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
e) "1940 Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
f) "Affiliated Person", "Assignment", "Commission", "Interested Person", "Principal
Underwriter", and "Majority Shareholder Vote" . . . . . . . . . . . . . . . . . . 2
g) "Declaration of Trust" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
h) "By-laws" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II. PURPOSE OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
- ----------- --------------------
ARTICLE III. SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
- ------------ ------
Section 3.1 Division of Beneficial Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.2 Ownership of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.3 Investment in the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.4 No Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.5 Status of Shares and Limitation of
Personal Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV. THE TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
- ----------- ------------
Section 4.1 Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.2 Effect of Death, Resignation, etc.
of a Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.3 No Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.4 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
a) Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
b) Disposition of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
c) Act as Distributor, Underwriter,
Broker, Dealer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
d) Ownership Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
e) Subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
f) Form of Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
g) Allocation of Assets and
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
h) Reorganization, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
i) Voting Trusts, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
j) Compromise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
k) Partnerships, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
l) Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
m) Guarantees, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
n) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
o) Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
p) Any Other Lawful Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.5 Payment of Expenses by Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.6 Ownership of Assets of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.7 Advisory, Management and Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
- ---------- ----------------------------------------
ARTICLE VI. DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
- ----------- -------------------------------------------
Section 6.1 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6.2 Redemptions and Repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.3 Redemptions at the Option of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.4 Dividends, Distributions, Redemptions and Repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.5 Redemptions in Kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VII. COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
- ------------ ----------------------------------------------------
Section 7.1 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.2 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VIII. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
- ------------- ---------------
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 8.1 Trustees, Officers, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.2 Compromise Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8.3 Indemnification Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 8.4 Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
- ----------- -------------
Section 9.1 Trustees, Shareholders, etc. Not Personally
Liable; Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 9.2 Trustee's Good Faith Action, Expert Advice,
No Bond or Surety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 9.3 Liability of Third Persons Dealing with
Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 9.4 Duration and Termination of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 9.5 Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9.6 Filings of Copies, References, Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9.7 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 9.8 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
<PAGE> 5
THE SIERRA VARIABLE TRUST
----------
AGREEMENT AND DECLARATION OF TRUST
----------
AGREEMENT AND DECLARATION OF TRUST, made this 29th day of
January 1993, by the Trustees hereunder, and by the holders of shares of
beneficial interest to be issued hereunder as hereinafter provided.
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the business
of an investment company; and
WHEREAS, the Trustees have agreed to manage all property
coming into their hands as trustees of a Massachusetts voluntary association
with transferable shares in accordance with the provisions hereinafter set
forth.
NOW, THEREFORE, the Trustees hereby declare that they will
hold all cash, securities and other assets, which they may from time to time
acquire in any manner as Trustees hereunder IN TRUST to manage and dispose of
the same upon the following terms and conditions for the pro rata benefit of
the holders from time to time of Shares in this Trust as hereinafter set forth.
<PAGE> 6
ARTICLE I
Name and Definitions
Name
Section 1. This Trust shall be known as "The Sierra Variable Trust",
and the Trustees shall conduct the business of the Trust under that name or any
other name as they may from time to time determine.
Definitions
Section 2. Whenever used herein, unless otherwise required by the
context or specifically provided:
(a) The "Trust" refers to the Massachusetts business
trust established by this Agreement and Declaration of Trust, as
amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust named
herein or elected in accordance with Article IV;
(c) "Shares" means the equal proportionate transferable
units of interest into which the beneficial interest in the Trust
shall be divided from time to time or, if more than one series or
class of Shares is authorized by the Trustees, the equal proportionate
transferable units into which each series or class of Shares shall be
divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act
of 1940 and the Rules and Regulations thereunder, all as amended from
time to time;
(f) The terms "Affiliated Person", "Assignment",
"Commission", "Interested Person", "Principal Underwriter" and
"Majority Shareholder Vote" (the 67% or 50% requirement of the third
sentence of Section 2(a)(42) of the 1940 Act, whichever may be
applicable) shall have the meanings given them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to time; and
(h) "By-laws" shall mean the By-laws of the Trust as
amended from time to time.
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ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a managed investment
primarily in securities, commodities and debt instruments and to carry on such
other business as the Trustees may from time to time determine pursuant to
their authority under this Declaration of Trust.
ARTICLE III
Shares
Division of Beneficial Interest
Section 1. The Shares of the Trust shall have no par value and shall
be issued in one or more series as the Trustees may, without shareholder
approval, authorize. Each series shall be preferred over all other series in
respect of the assets allocated to that series. The Shares of any series may
be issued in two or more classes, as the Trustees may, without Shareholder
approval, authorize. Unless the Trustees have authorized the issuance of
Shares of a series in two or more classes, each Share of a series shall
represent an equal proportionate interest in the assets and liabilities of the
series with each other Share of the same series, none having priority or
preference over another. If the Trustees have authorized the issuance of
Shares of a series in two or more classes, then the classes may have such
variations as to dividend, redemption, and voting rights, net asset values,
expenses borne by the classes, and other matters as the Trustees have
authorized. The number of Shares authorized shall be unlimited. The Trustees
may from time to time divide or combine the Shares of any series or of any
class of a series into a greater or lesser number without thereby changing the
proportionate beneficial interests in the series or class.
Ownership of Shares
Section 2. The ownership of Shares shall be recorded on the books of
the Trust or a transfer or similar agent. No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the transfer of Shares and
similar matters. The record books of the Trust as kept by the Trust or any
transfer or similar agent, as the case may be, shall be conclusive as to who
are the Shareholders of each series or class and as to the number of Shares of
each series or class held from time to time by each Shareholder.
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Investment in the Trust
Section 3. The Trustees shall accept investments in the Trust from
such persons and on such terms and for such consideration, which may consist of
cash or tangible or intangible property or a combination thereof, as they from
time to time authorize.
All consideration received by the Trust for the issue or sale of
Shares of each series, together with all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may be, shall irrevocably belong to the
series of Shares with respect to which the same were received by the Trust for
all purposes, subject only to the rights of creditors, and shall be so handled
upon the books of account of the Trust and are herein referred to as "assets
of" such series.
No Preemptive Rights
Section 4. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust.
Status of Shares and Limitation of Personal Liability
Section 5. Shares shall be deemed to be personal property giving only
the rights provided in this instrument. Every Shareholder by virtue of having
become a Shareholder shall be held to have expressly assented and agreed to the
terms hereof and to have become a party hereto. The death of a Shareholder
during the continuance of the Trust shall not operate to terminate the same nor
entitle the representative of any deceased Shareholder to an accounting or to
take any action in court or elsewhere against the Trust or the Trustees, but
only to the rights of said decedent under this Trust. Ownership of Shares
shall not entitle the Shareholder to any title in or to the whole or any part
of the Trust property or right to call for a partition or division of the same
or for an accounting, nor shall the ownership of Shares constitute the
Shareholders partners. Neither the Trust nor the Trustees, nor any officer,
employee or agent of the Trust shall have any power to bind personally any
Shareholder, nor except as specifically provided herein to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever other
than such as the Shareholder may at any time personally agree to pay.
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ARTICLE IV
The Trustees
Election
Section 1. There shall initially be one Trustee who shall be F. Brian
Cerini. The number of Trustees shall be as provided in the By- laws or as
fixed from time to time by the Trustees. The Shareholders may elect Trustees
at any meeting of Shareholders called by the Trustees for that purpose. Each
Trustee shall serve during the continued lifetime of the Trust until he or she
dies, resigns or is removed, or, if sooner, until the next meeting of
Shareholders called for the purpose of electing Trustees and the election and
qualification of his or her successor. Any Trustee may resign at any time by
written instrument signed by him or her and delivered to any officer of the
Trust, to each other Trustee or to a meeting of the Trustees. Such resignation
shall be effective upon receipt unless specified to be effective at some other
time. Except to the extent expressly provided in a written agreement with the
Trust, no Trustee resigning and no Trustee removed shall have any right to any
compensation for any period following his resignation or removal, or any right
to damages on account of such removal.
Effect of Death, Resignation, etc. of a Trustee
Section 2. The death, declination, resignation, retirement, removal
or incapacity of the Trustees, or any one of them, shall not operate to annul
the Trust or to revoke any existing agency created pursuant to the terms of
this Declaration of Trust.
No Accounting
Section 3. Except to the extent required by the 1940 Act or under
circumstances which would justify his or her removal for cause, no person
ceasing to be a Trustee as a result of his or her death, resignation,
retirement, removal or incapacity (nor the estate of any such person) shall be
required to make an accounting to the Shareholders or remaining Trustees upon
such cessation.
Powers
Section 4. Subject to the provisions of this Declaration of Trust,
the business of the Trust shall be managed by the Trustees, and they shall have
all powers necessary or convenient to carry out that responsibility. Without
limiting the foregoing, the Trustees may adopt By-laws not inconsistent with
this Declaration of Trust providing for the conduct of the business of the
Trust and may amend and repeal them to the extent that such By-laws do not
reserve that right to the Shareholders; they may enlarge or reduce their
number, may fill vacancies in
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their number, including vacancies caused by enlargement of their number, and
may remove Trustees with or without cause; they may elect and remove, with or
without cause, such officers and appoint and terminate such agents as they
consider appropriate; they may appoint from their own number, and terminate,
any one or more committees consisting of two or more Trustees, including an
executive committee which may, when the Trustees are not in session, exercise
some or all of the power and authority of the Trustees as the Trustees may
determine; they may employ one or more custodians of the assets of the Trust
and may authorize such custodians to employ subcustodians and to deposit all or
any part of such assets in a system or systems for the central handling of
securities, retain a transfer agent or a Shareholder servicing agent, or both,
provide for the distribution of Shares by the Trust, through one or more
principal underwriters or otherwise, set record dates for the determination of
Shareholders with respect to various matters, and in general delegate such
authority as they consider desirable to any officer of the Trust, to any
committee of the Trustees and to any agent or employee of the Trust or to any
such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have power and authority:
(a) To invest and reinvest cash, and to hold cash
uninvested;
(b) To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of
the Trust;
(c) To act as a distributor of shares and as underwriter
of, or broker or dealer in, securities or other property;
(d) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and
to execute and deliver proxies or powers of attorney to such person or
persons as the Trustees shall deem proper, granting to such person or
persons such power and discretion with relation to securities or
property as the Trustees shall deem proper;
(e) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities;
(f) To hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust or in
the name of a custodian, subcustodian or other depository or a nominee
or nominees or otherwise;
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(g) To allocate assets, liabilities and expenses of the
Trust to a particular series or class of Shares or to apportion the
same among two or more series or classes of Shares, provided that any
liabilities or expenses incurred by a particular series or class of
Shares shall be payable solely out of the assets of that series or
class.
(h) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer,
any security of which is or was held in the Trust; to consent to any
contract, lease, mortgage, purchase or sale of property by such
corporation or issuer, and to pay calls or subscriptions with respect
to any security held in the Trust;
(i) To join with other security holders in acting
through a committee depositary, voting trustee or otherwise, and in
that connection to deposit any security with, or transfer any security
to, any such committee, depositary or trustee, and to delegate to them
such power and authority with relation to any security (whether or not
so deposited or transferred) as the Trustees shall deem proper, and to
agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees
shall deem proper;
(j) To compromise, arbitrate or otherwise adjust claims
in favor of or against the Trust or any matter in controversy,
including but not limited to claims for taxes;
(k) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(l) To borrow funds;
(m) To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof; and to
mortgage and pledge the Trust property or any part thereof to secure
any of or all such obligations;
(n) To purchase and pay for entirely out of Trust
property such insurance as they may deem necessary or appropriate for
the conduct of the business, including without limitation, insurance
policies insuring the assets of the Trust and payment of distributions
and principal on its portfolio investments, and insurance policies
insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers or managers, principal underwriters, or
independent contractors of the Trust individually against all claims
and liabilities of every nature arising by reason
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of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such
person as Shareholder, Trustee, officer, employee, agent, investment
adviser or manager, principal underwriter, or independent contractor,
including any action taken or omitted that may be determined to
constitute negligence, whether or not the Trust would have the power
to indemnify such person against such liability;
(o) To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out
pension, profit-sharing, share bonus, share purchase, savings, thrift
and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits,
for any or all of the Trustees, officers, employees and agents of the
Trust; and
(p) To engage in any other lawful act or activity in
which corporations organized under the Massachusetts Business
Corporation Law may engage.
The Trustees shall not in any way be bound or limited by any present
or future law or custom in regard to investments by trustees. Except as
otherwise provided herein or from time to time in the By-laws, any action to be
taken by the Trustees may be taken by a majority of the Trustees present at a
meeting of Trustees (a quorum being present), within or without Massachusetts,
including any meeting held by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting, or by written consents of a
majority of the Trustees then in office.
Payment of Expenses by Trust
Section 5. The Trustees are authorized to pay or to cause to be paid
out of the principal or income of the Trust, or partly out of principal and
partly out of income, as they deem fair, all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with the Trust, in connection
with the management thereof, or in connection with the financing of the sale of
Shares, including, but not limited to, the Trustees' compensation and such
expenses and charges for the services of the Trust's officers, employees, any
investment adviser, manager, or sub-adviser, principal underwriter, auditor,
counsel, custodian, transfer agent, shareholder servicing agent, and such other
agents or independent contractors and such other expenses and charges as the
Trustees may deem necessary or proper to incur; provided, however, that all
expenses, fees, charges, taxes
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and liabilities incurred or arising in connection with a particular series or
class of Shares as determined by the Trustees, shall be payable solely out of
the assets of that series or class. Any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as
belonging to any particular series shall be allocated and charged by the
Trustees between or among any one or more of the series in such manner as the
Trustees in their sole discretion deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all series
for all purposes. Any creditor of any series may look only to the assets of
that series to satisfy such creditor's debt.
The Trustees shall have the power, as frequently as they may
determine, to cause each Shareholder to pay directly, in advance or arrears,
for any and all expenses of the Trust, an amount fixed from time to time by the
Trustees, by setting off such charges due from such Shareholder from declared
but unpaid dividends owed such Shareholder and/or by reducing the number of
Shares in the account of such Shareholder by that number of full and/or
fractional Shares which represents the outstanding amount of such charges due
from such Shareholder.
Ownership of Assets of the Trust
Section 6. Title to all of the assets of each series of Shares and of
the Trust shall at all times be considered as vested in the Trustees.
Advisory, Management and Distribution
Section 7. The Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive advisory and/or management services with
any corporation, trust, association or other organization (the "Manager"),
every such contract to comply with such requirements and restrictions as may be
set forth in the By-laws; and any such contract may provide for one or more
Sub-advisers who shall perform all or part of the obligations of the Manager
under such contract and may contain such other terms interpretive of or in
addition to said requirements and restrictions as the Trustees may determine,
including, without limitation, authority to determine from time to time what
investments shall be purchased, held, sold or exchanged and what portion, if
any, of the assets of the Trust shall be held uninvested and to make changes in
the Trust's investments. The Trustees may also, at any time and from time to
time, contract with the Manager or any other corporation, trust, association or
other organization, appointing it exclusive or nonexclusive distributor or
principal underwriter for the Shares, every such contract to comply with such
requirements and restrictions as may be set forth in the By-laws; and any such
contract may contain
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such other terms interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of or
for any corporation, trust, association, or other organization, or of
or for any parent or affiliate of any organization, with which an
advisory or management contract, or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or other
agency contract may have been or may hereafter be made, or that any
such organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other
organization with which an advisory or management contract or
principal underwriter's or distributor's contract, or transfer,
shareholder servicing or other agency contract may have been or may
hereafter be made also has an advisory or management contract, or
principal underwriter's or distributor's contract, or transfer,
Shareholder servicing or other agency contract with one or more other
corporations, trusts, associations, or other organizations, or has
other business or interests
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its
Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Shareholders shall have such power to vote as is provided for in, and
may hold meetings and take actions pursuant to the provisions of the By-laws.
ARTICLE VI
Distributions, Redemptions and Repurchases
Distributions
Section 1. The Trustees may each year, or more frequently if they so
determine, distribute to the Shareholders of each series or class of Shares
such income and capital gains, accrued or realized, as the Trustees may
determine, after providing for actual and accrued expenses and liabilities
(including such reserves as the Trustees may establish) determined in
accordance
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with good accounting practices. The Trustees shall have full discretion to
determine which items shall be treated as income and which items as capital and
their determination shall be binding upon the Shareholders. Distributions of
each year's income of each series or class of Shares shall be distributed pro
rata to Shareholders in proportion to the number of Shares of each series or
class held by each of them. Such distributions shall be made in cash or Shares
or a combination thereof as determined by the Trustees. Any such distribution
paid in Shares will be paid at the net asset value thereof as determined in
accordance with the By-laws.
Redemptions and Repurchases
Section 2. The Trust shall purchase such Shares as are offered by any
Shareholder for redemption, upon the presentation of any certificate for the
Shares to be purchased, a proper instrument of transfer and a request directed
to the Trust or a person designated by the Trust or a person designated by the
Trust that the Trust purchase such Shares, or in accordance with such other
procedures for redemption as the Trustees may from time to time authorize; and
the Trust will pay therefor the net asset value thereof, as next determined in
accordance with the By-laws, less such redemption charge or fee as the Trustees
may determine from time to time. Payment for said Shares shall be made by the
Trust to the Shareholder within seven days after the date on which the request
is made. The obligation set forth in this Section 2 is subject to the
provision that in the event that any time the New York Stock Exchange is closed
for other than customary weekends or holidays, or, if permitted by rules of the
Commission, during periods when trading on the Exchange is restricted or during
any emergency which makes it impractical for the Trust to dispose of its
investments or to determine fairly the value of its net assets, or during any
other period permitted by order of the Commission for the protection of
investors, such obligation may be suspended or postponed by the Trustees. The
Trust may also purchase or repurchase Shares at a price not exceeding the net
asset value of such Shares in effect when the purchase or repurchase or any
contract to purchase or repurchase is made.
Redemptions at the Option of the Trust
Section 3. The Trust shall have the right at its option at any time
to redeem Shares of any Shareholder at the net asset value thereof as
determined in accordance with the By-laws: (i) if at such time such Shareholder
owns fewer Shares than, or Shares having an aggregate net asset value of less
than, an amount determined from time to time by the Trustees; or (ii) to the
extent that such Shareholder owns Shares of a particular series or class of
Shares equal to or in excess of a percentage of the outstanding Shares of that
series or class determined from
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time to time by the Trustees; or (iii) to the extent that such Shareholder owns
Shares of the Trust representing a percentage equal to or in excess of such
percentage of the aggregate number of outstanding Shares of the Trust or the
aggregate net asset value of the Trust determined from time to time by the
Trustees.
Dividends, Distributions, Redemptions and Repurchases
Section 4. No dividend or distribution (including, without
limitation, any distribution paid upon termination of the Trust or of any
series) with respect to, nor any redemption or repurchase of, the Shares of any
series shall be effected by the Trust other than from the assets of such
series.
Redemptions in Kind
Section 5. Subject to any generally applicable limitation imposed by
the Trustees, any payment on redemption, purchase or repurchase by the Trust of
Shares may, if authorized by the Trustees, be made wholly or partly in kind,
instead of in cash. Such payment in kind shall be made by distributing
securities or other property, constituting, in the opinion of the Trustees, a
fair representation of the various types of securities and other property then
held by the series of Shares being redeemed, purchased or repurchased (but not
necessarily involving a portion of each of the series' holdings) and taken at
their value used in determining the net asset value of the Shares in respect of
which payment is made.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Compensation
Section 1. The Trustees as such shall be entitled to reasonable
compensation from the Trust; they may fix the amount of their compensation.
Nothing herein shall in any way prevent the employment of any Trustee for
advisory, management, legal, accounting, investment banking, underwriting,
brokerage, or investment dealer or other services and payment for the same by
the Trust.
Limitation of Liability
Section 2. The Trustees shall not be responsible or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, manager or
principal underwriter of the Trust, nor shall any Trustee be responsible for
the act or omission of any other Trustee, but nothing herein contained shall
protect any Trustee against any liability to which he or she would otherwise be
subject by reason of wilful misfeasance, bad faith, gross
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negligence or reckless disregard of the duties involved in the conduct of his
or her office.
Every note, bond, contract, instrument, certificate, Share or
undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with the Trust
shall be conclusively deemed to have been executed or done only in or with
respect to their or his or her capacity as Trustees or Trustee, and such
Trustees or Trustee shall not be personally liable thereon.
ARTICLE VIII
Indemnification
Trustees, Officers, etc.
Section 1. The Trust shall indemnify each of its Trustees and
officers (including persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust has any
interest as a shareholder, creditor or otherwise) (hereinafter referred to as a
"Covered Person") against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a Covered Person except with respect to any matter as to which such
Covered Person shall have been finally adjudicated in any such action, suit or
other proceeding to be liable to the Trust or its Shareholders by reason of
wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office. Expenses,
including counsel fees so incurred by any such Covered Person (but excluding
amounts paid in satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by the Trust in advance of the
final disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so paid to
the Trust if it is ultimately determined that indemnification of such expenses
is not authorized under this Article; provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust shall be insured against losses arising from any such advance
payments or (c) either a majority of the disinterested Trustees acting on the
matter (provided that a majority of the disinterested Trustees then in office
act on the matter), or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts
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(as opposed to a full trial type inquiry) that there is reason to believe that
such Covered Person will be found entitled to indemnification under this
Article.
Compromise Payment
Section 2. As to any matter disposed of (whether by a compromise
payment, pursuant to a consent decree or otherwise) without an adjudication by
a court, or by any other body before which the proceeding was brought, that
such Covered Person is liable to the Trust or its Shareholders by reason of
wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office, indemnification shall be
provided if (a) approved, after notice that it involves such indemnification,
by at least a majority of the disinterested Trustees acting on the matter
(provided that a majority of the disinterested Trustees then in office act on
the matter) upon a determination, based upon a review of readily available
facts (as opposed to a full trial type inquiry) that such Covered Person is not
liable to the Trust or its Shareholders by reasons of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office, or (b) there has been obtained an opinion in
writing of independent legal counsel, based upon a review of readily available
facts (as opposed to a full trial type inquiry) to the effect that such
indemnification would not protect such Person against any liability to the
Trust to which he or she would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. Any approval pursuant to this Section
shall not prevent the recovery from any Covered Person of any amount paid to
such Covered Person in accordance with this Section as indemnification if such
Covered Person is subsequently adjudicated by a court of competent jurisdiction
to have been liable to the Trust or its Shareholders by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office.
Indemnification Not Exclusive
Section 3. The right of indemnification hereby provided shall not be
exclusive of or affect any other rights to which such Covered Person may be
entitled. As used in this Article VIII, the term "Covered Person" shall
include such person's heirs, executors and administrators and a "disinterested
Trustee" is a Trustee who is not an "interested person" of the Trust as defined
in Section 2 (a)(19) of the Investment Company Act of 1940, as amended, (or who
has been exempted from being an "interested person" by any rule, regulation or
order of the Commission) and against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the
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same or similar grounds is then or has been pending. Nothing contained in this
Article shall affect any rights to indemnification to which personnel of the
Trust, other than Trustees or officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of any such person.
Shareholders
Section 4. In case any Shareholder or former Shareholder shall be
held to be personally liable solely by reason of his or her being or having
been a Shareholder and not because of his or her acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his or her heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified against all loss and expense
arising from such liability, but only out of the assets of the particular
series of Shares of which he or she is or was a Shareholder.
ARTICLE IX
Miscellaneous
Trustees, Shareholders, etc. Not Personally Liable; Notice
Section 1. All persons extending credit to, contracting with or
having any claim against the Trust or a particular series of Shares shall look
only to the assets of the Trust or the assets of that particular series of
Shares for payment under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of the Trust's officers, employees or
agents, whether past, present or future, shall be personally liable therefor.
Nothing in this Declaration of Trust shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking
made or issued by the Trustees or by any officer or officers shall give notice
that this Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust or by them as Trustee or Trustees or as
officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually
but are binding only upon the assets and property of the Trust, and may contain
such further recital as he or she or they may deem appropriate, but the
omission thereof shall not
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operate to bind any Trustee or Trustees or officer or officers or Shareholder
or Shareholders individually.
Trustee's Good Faith Action, Expert Advice, No Bond or Surety
Section 2. The exercise by the Trustees of their powers and
discretions hereunder shall be binding upon everyone interested. A Trustee
shall be liable for his or her own wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee, and for nothing else, and shall not be liable for errors of
judgment or mistakes of fact or law. The Trustees may take advice of counsel
or other experts with respect to the meaning and operation of this Declaration
of Trust, and shall be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice. The Trustees shall not
be required to give any bond as such, nor any surety if a bond is required.
Liability of Third Persons Dealing with Trustees
Section 3. No person dealing with the Trustees shall be bound to make
any inquiry concerning the validity of any transaction made or to be made by
the Trustees or to see to the application of any payments made or property
transferred to the Trust or upon its order.
Duration and Termination of Trust
Section 4. Unless terminated as provided herein, the Trust shall
continue without limitation of time. The Trust may be terminated at any time
by the vote of Shareholders holding at least a majority of the Shares of each
series entitled to vote or by the Trustees by written notice to the
Shareholders. Any series of Shares may be terminated at any time by vote of
Shareholders holding at least a majority of the Shares of such series entitled
to vote or by the Trustees by written notice to the Shareholders of such
series.
Upon termination of the Trust or of any one or more series of Shares,
after paying or otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated, of the Trust or of the
particular series as may be determined by the Trustees, the Trust shall, in
accordance with such procedures as the Trustees shall consider appropriate,
reduce the remaining assets to distributable form in cash or shares or other
securities, or any combination thereof, and -distribute the proceeds to the
Shareholders of the series involved, ratably according to the aggregate net
asset value of Shares of such series or class of Shares held by the several
Shareholders of such series or class of Shares on the date of termination.
-16-
<PAGE> 21
Reorganization
Section 5. The Trust may merge or consolidate with any other
corporation, partnership, association, trust or other organization and the
Trustees may sell, convey, and transfer the assets of the Trust, or the assets
belonging to any one or more series or class of Shares, to another trust,
partnership, association or corporation organized under the laws of any state
of the United States, or to the Trust to be held as assets belonging to another
series or class of Shares, in exchange for cash, shares or other securities
(including, in the case of a transfer to another series or class of Shares of
the Trust, Shares of such other series or class of Shares) with such transfer
being made subject to, or with the assumption by the transferee of, the
liabilities belonging to each series or class of Shares the assets of which are
so transferred; provided, however, that no assets belonging to any particular
series or class of Shares shall be so transferred unless the terms of such
transfer shall have first been approved at a meeting called for the purpose by
the affirmative vote of the holders of a majority of the outstanding voting
Shares, as defined in the 1940 Act, of that series or class of Shares. Any
such consolidation or merger shall require approval by the affirmative vote of
the holders of a majority of the outstanding voting Shares, as defined in the
1940 Act, of the Trust (or each series or class of Shares affected thereby, as
the case may be), except that such affirmative vote of the holders of Shares
shall not be required if the Trust (or series or class of Shares affected
thereby, as the case may be) shall be the survivor of such consolidation or
merger.
Filing of Copies, References, Headings
Section 6. The original or a copy of this instrument and of each
amendment hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. A copy of this instrument and of each amendment
hereto shall be filed by the Trust with the Secretary of the Commonwealth of
Massachusetts and with the Boston City Clerk, as well as any other governmental
office where such filing may from time to time be required. Anyone dealing
with the Trust may rely on a certificate by an officer of the Trust as to
whether or not any such amendments have been made and as to any matters in
connection with the Trust hereunder, and, with the same effect as if it were
the original, may rely on a copy certified by an officer of the Trust to be a
copy of this instrument or of any such amendments. In this instrument and in
any such amendment, references to this instrument, and all expressions like
"herein",, "hereof" and "hereunder" shall be deemed to refer to this instrument
as amended or affected by any such amendments. Headings are placed herein for
convenience of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction
-17-
<PAGE> 22
or effect of this instrument. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
Applicable Law
Section 7. This Declaration of Trust is made in the Commonwealth of
Massachusetts, and it is created under and is to be governed by and construed
and administered according to the laws of said Commonwealth. The Trust shall
be of the type commonly called a Massachusetts business trust, and without
limiting the provisions hereof, the Trust may exercise all powers which are
ordinarily exercised by such a trust.
Amendments
Section 8. This Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then Trustees when authorized
to do so by vote of Shareholders holding a majority of the Shares of each
series entitled to vote, except that an amendment which shall affect the
holders of one or more series of Shares but not the holders of all outstanding
series shall be authorized by vote of the Shareholders holding a majority of
the Shares entitled to vote of each series affected and no vote of Shareholders
of a series not affected shall be required. Any amendment which shall affect
the holders of Shares of one or more classes of a series but not the holders of
all Shares of a series shall be authorized by vote of the Shareholders holding
a majority of the Shares of such classes affected by the amendment voting
together as a single class, and no vote of Shareholders of the classes not
affected shall be required. Amendments having the purpose of changing the name
of the Trust, of establishing, changing, or eliminating the par value of the
shares or of supplying any omission, curing any ambiguity or curing, correcting
or supplementing any defective or inconsistent provision contained herein shall
not require authorization by Shareholder vote.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
for himself and his assigns, as of the 27th day of January, 1993.
/s/ F. Brian Cerini
--------------------------
F. Brian Cerini
-18-
<PAGE> 23
THE STATE OF CALIFORNIA
County of Los Angeles January 27th, 1993
Then personally appeared the above-named F. Brian Cerini and
acknowledged the foregoing instrument to be his free act and deed, before me.
/s/ Lisbeth Lopez
--------------------------
Notary Public
My commission expires: 6/10/94
[Notary's seal]
(Notary's seal)
-19-
<PAGE> 1
EXHIBIT 1(b)-1
THE SIERRA VARIABLE TRUST
AMENDMENT NO. 1
TO
AGREEMENT AND DECLARATION OF TRUST
The undersigned, being a majority of the trustees of The
Sierra Variable Trust, created and existing under an Agreement and Declaration
of Trust dated January 29, 1993 (the "Original Declaration of Trust"), a copy
of which is on file in the office of the Secretary of the Commonwealth of
Massachusetts, and having been duly authorized to execute this Amendment No. 1
by vote of the Shareholders holding a majority of the Shares of the Trust do
hereby consent to and adopt the following amendments to the Original
Declaration of Trust:
1. Article VIII, Section 2 of the Original Declaration
of Trust shall be and is hereby amended and restated in its entirety as
follows:
"Compromise Payment
Section 2. As to any matter disposed of (whether by
a compromise payment, pursuant to a consent decree or
otherwise) without an adjudication by a court, or by any other
body before which the proceeding was brought, that such
Covered Person is liable to the Trust or its Shareholders by
reason of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
his or her office, indemnification shall be provided if (a)
approved, after notice that it involves such indemnification,
by at least a majority of the disinterested Trustees acting on
the matter (provided that a majority of the disinterested
Trustees then in office act on the matter) upon a
determination, based upon a review of readily available facts
(as opposed to a full trial type inquiry) that such Covered
Person is not liable to the Trust or its Shareholders by
reasons of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
his or her office, or (b) there has been obtained an opinion
in writing of independent legal counsel, based upon a review
of readily available facts (as opposed to a full trial type
inquiry) to the effect that such indemnification would not
protect such Person against any liability to the Trust or to
its shareholders to which he or she would otherwise be subject
by reason of wilful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of
his office. Any approval pursuant to this Section shall not
prevent the recovery from any Covered
<PAGE> 2
Person of any amount paid to such Covered Person in accordance
with this Section as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction
to have been liable to the Trust or its Shareholders by reason
of wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office."
The foregoing Amendment shall become effective upon the filing
of an original executed copy of this instrument with the Secretary of the
Commonwealth of Massachusetts.
<PAGE> 3
IN WITNESS WHEREOF, we have hereunto set our hands and common
seal for ourselves and for our successors and assigns on the 27th day of April,
1993.
/s/ F. Brian Cerini /s/ Arthur H. Bernstein
- ------------------------------ -----------------------------
F. Brian Cerini Arthur H. Bernstein, Esq.
/s/ David E. Anderson /s/ Edmond R. Davis
- ------------------------------ ------------------------------
David E. Anderson Edmond R. Davis, Esq.
/s/ Alfred E. Osborne, Jr.
- ------------------------------
Alfred E. Osborne, Jr., Ph.D.
<PAGE> 1
EXHIBIT 1(b)-2
THE SIERRA VARIABLE TRUST
AMENDMENT NO. 2
TO
AGREEMENT AND DECLARATION OF TRUST
The undersigned, being a Trustee of The Sierra Variable Trust
(the "Trust"), created and existing under an Agreement and Declaration of Trust
dated January 29, 1993 (the "Original Declaration of Trust"), a copy of which
is on file in the office of the Secretary of the Commonwealth of Massachusetts
and the Boston City Clerk, and having been duly authorized to execute this
Amendment No. 2 by vote of the Trustees of the Trust does hereby consent to and
adopt the following amendment to the Original Declaration of Trust:
1. The principal address of the Trust, formerly:
888 South Figueroa Street, Suite 1100
Los Angeles, California 90017
is hereby changed to:
9301 Corbin Avenue, Suite 333
Northridge, California 91324
The main phone number is (800) 222-5852.
The foregoing Amendment shall become effective upon the filing
of an original executed copy of this instrument with the Secretary of the
Commonwealth of Massachusetts.
Subscribed this 22nd day of September, 1993, under penalties
of perjury.
Signature: /s/ F. Brian Cerini
-----------------------
F. Brian Cerini, Trustee
<PAGE> 1
EXHIBIT 1(c)-1
THE SIERRA VARIABLE TRUST
ESTABLISHMENT AND
DESIGNATION OF SERIES OF SHARES OF
BENEFICIAL INTEREST (NO PAR VALUE)
Pursuant to Section 3.1 of the Declaration of Trust
(the "Declaration of Trust") of The Sierra Variable Trust (the "Trust"), the
Trustees of the Trust hereby establish and designate the following series of
Shares (as defined in the Declaration of Trust) (each, a "Fund") to have the
following special and relative rights:
1. Each Fund shall be designated as follows:
Global Money Fund
Growth Fund
International Growth Fund
U.S. Government Fund
Corporate Income Fund
Short Term Global Government Fund
2. Each Fund shall be authorized to hold cash,
invest in securities, instruments and other property and use investment
techniques as from time to time described in the Trust's then currently
effective registration statement under the Securities Act of 1933 to the extent
pertaining to the offering of Shares of such Fund. Each share of each Fund
shall be redeemable, shall be entitled to one vote (or a fraction thereof in
respect of a fractional share) on matters on which Shares of each Fund shall be
entitled to vote, shall represent a pro rata beneficial interest in the assets
allocated or belonging to each Fund, and shall be entitled to receive its pro
rata share of the net assets of each Fund upon liquidation of each Fund, all as
provided in Section 3.1 of the Declaration of Trust. The proceeds of sales of
Shares of each Fund, together with any income and gain thereon, less any
diminution or expenses thereof, shall irrevocably belong to each Fund, unless
otherwise required by law.
3. Shareholders of each Fund shall vote
separately as a class on any matter to the extent required by, and any matter
shall have been deemed effectively acted upon with respect to such Fund as
provided in, Rule 18f-2, as from time to time in effect, under the Investment
Company Act of 1940, as amended, or any successor rule, and the Declaration of
Trust.
<PAGE> 2
4. The assets and liabilities of the Trust
shall be allocated between the Funds as set forth in Section 3.1 of the
Declaration of Trust.
5. Subject to the provisions of Section 3.1 and
Article IX of the Declaration of Trust, the Trustees (including any successor
Trustees) shall have the right at any time and from time to time to change the
designation of any Fund now or hereafter created, or to otherwise change the
special and relative rights of any Fund.
IN WITNESS WHEREOF, the undersigned have executed
this instrument as of the 27th day of April, 1993.
/s/ David E. Anderson /s/ Arthur H. Bernstein
- ------------------------------ ------------------------------
David E. Anderson Arthur H. Bernstein, Esq.
/s/ F. Brian Cerini /s/ Edmond R. Davis
- ------------------------------ ------------------------------
F. Brian Cerini Edmond R. Davis, Esq.
/s/ Alfred E. Osborne, Jr.
- -------------------------------
Alfred E. Osborne, Jr., Ph.D.
<PAGE> 1
EXHIBIT 1(c)-2
THE SIERRA VARIABLE TRUST
ESTABLISHMENT AND
DESIGNATION OF SERIES OF SHARES OF
BENEFICIAL INTEREST (NO PAR VALUE)
Pursuant to Section 3.1 of the Declaration of Trust
(the "Declaration of Trust") of The Sierra Variable Trust (the "Trust"), the
Trustees of the Trust hereby establish and designate the following series of
Shares (as defined in the Declaration of Trust) (each, a "Fund") to have the
following special and relative rights:
1. Each Fund shall be designated as follows:
Emerging Growth Fund
Growth and Income Fund
Short Term High Quality Bond Fund
2. Each Fund shall be authorized to hold cash,
invest in securities, instruments and other property and use investment
techniques as from time to time described in the Trust's then currently
effective registration statement under the Securities Act of 1933 to the extent
pertaining to the offering of Shares of such Fund. Each share of each Fund
shall be redeemable, shall be entitled to one vote (or a fraction thereof in
respect of a fractional share) on matters on which Shares of each Fund shall be
entitled to vote, shall represent a pro rata beneficial interest in the assets
allocated or belonging to each Fund, and shall be entitled to receive its pro
rata share of the net assets of each Fund upon liquidation of each Fund, all as
provided in Section 3.1 of the Declaration of Trust. The proceeds of sales of
Shares of each Fund, together with any income and gain thereon, less any
diminution or expenses thereof, shall irrevocably belong to each Fund, unless
otherwise required by law.
3. Shareholders of each Fund shall vote
separately as a class on any matter to the extent required by, and any matter
shall have been deemed effectively acted upon with respect to such Fund as
provided in, Rule 18f-2, as from time to time in effect, under the Investment
Company Act of 1940, as amended, or any successor rule, and the Declaration of
Trust.
4. The assets and liabilities of the Trust shall
be allocated between the Funds as set forth in Section 3.1 of the Declaration
of Trust.
<PAGE> 2
5. Subject to the provisions of Section 3.1 and
Article IX of the Declaration of Trust, the Trustees (including any successor
Trustees) shall have the right at any time and from time to time to change the
designation of any Fund now or hereafter created, or to otherwise change the
special and relative rights of any Fund.
IN WITNESS WHEREOF, the undersigned have executed
this instrument as of the 3rd day of February, 1995.
/s/ David E. Anderson /s/ Arthur H. Bernstein
- ------------------------------ ------------------------------
David E. Anderson Arthur H. Bernstein, Esq.
/s/ F. Brian Cerini /s/ Edmond R. Davis
- ------------------------------ ------------------------------
F. Brian Cerini Edmond R. Davis, Esq.
/s/ John W. English
- ------------------------------
John W. English
<PAGE> 1
EXHIBIT 1(c)-3
THE SIERRA VARIABLE TRUST
Establishment and
Designation of Series of Shares of
Beneficial Interest (no par value)
Pursuant to Section 3.1 of the Declaration of Trust (the
"Declaration of Trust") of The Sierra Variable Trust (the "Trust"), the
Trustees of the Trust hereby establish and designate five additional series of
Shares (as defined in the Declaration of Trust) (each series, a "Fund") to have
the following special and relative rights:
1. The Funds shall be designated as follows:
Capital Growth Portfolio
Growth Portfolio
Balanced Portfolio
Value Portfolio
Income Portfolio
2. Each of the Funds shall be authorized to hold cash,
invest in securities, instruments and other property and use investment
techniques as from time to time described in the Trust's then currently
effective registration statement under the Securities Act of 1933, as amended,
to the extent pertaining to the offering of Shares of each of the Funds,
respectively. Each Share of a Fund shall be redeemable, shall be entitled to
one vote (or a fraction thereof in respect of a fractional share) on matters on
which Shares of such Fund shall be entitled to vote, shall represent a pro rata
beneficial interest in the assets allocated or belonging to such Fund, and
shall be entitled to receive its pro rata share of the net assets of such Fund
upon liquidation of such Fund, all as provided in Section 3.1 of the
Declaration of Trust. The proceeds of sales of Shares of a Fund, together with
any income and gain thereon, less any diminution or expenses thereof, shall
irrevocably belong to such Fund, unless otherwise required by law.
3. Shareholders of a Fund shall vote separately as a
class on any matter to the extent required by, and any matter shall have been
deemed effectively acted upon with respect to such Fund as provided in, Rule
18f-2, as from time to time in effect, under the Investment Company Act of
1940, as amended, or any successor rule, and the Declaration of Trust.
4. The assets and liabilities of the Trust shall be
allocated among the Funds as set forth in Section 3.1 of the Declaration of
Trust.
5. Subject to the provisions of Section 3.1 and Article
IX of the Declaration of Trust, the Trustees (including any successor Trustees)
shall have the right at any time and from
<PAGE> 2
time to time to change the designation of any one or more of the Funds now or
hereafter created, or to otherwise change the special and relative rights of
any one or more of the Funds.
IN WITNESS WHEREOF, the undersigned have executed this
instrument as of the 23rd day of January, 1997.
/s/ David E. Anderson /s/ Arthur H. Bernstein
- ----------------------------- -----------------------------
David E. Anderson Arthur H. Bernstein, Esq.
/s/ F. Brian Cerini /s/ Edmond R. Davis
- ----------------------------- -----------------------------
F. Brian Cerini Edmond R. Davis, Esq.
/s/ John W. English /s/ Alfred E. Osborne
- ----------------------------- -----------------------------
John W. English Alfred E. Osborne, Jr., Ph.D.
<PAGE> 1
EXHIBIT 2
BY-LAWS
OF
THE SIERRA VARIABLE TRUST
ARTICLE 1
Agreement and Declaration of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These By-laws shall be
subject to the Agreement and Declaration of Trust, as from time to time in
effect (the "Declaration of Trust"), of The Sierra Variable Trust, the
Massachusetts business trust established by the Declaration of Trust (the
"Trust").
1.2 Principal Office of the Trust. A principal office of the
Trust shall be located in Boston, Massachusetts. The Trust may have such other
offices within or without Massachusetts as the Trustees may determine or as
they may authorize.
ARTICLE 2
Meetings of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may be
held without call or notice at such places and at such times as the Trustees
may from time to time determine, provided that notice of the first regular
meeting following any such determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may be
held at any time and at any place designated in the call of the meeting when
called by the Chairman of the Trustees, the President or the Treasurer or by
two or more Trustees, sufficient notice thereof being given to each Trustee by
the Secretary or an Assistant Secretary or by the officer or the Trustees
calling the meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of a
special meeting to send notice by mail at least forty-eight hours or by
telegram, telex or telecopy or other electronic facsimile transmission method
at least twenty-four hours before the meeting addressed to the Trustee at his
or her usual or last known business or residence address or to give notice to
him or her in person or by telephone at least twenty-four hours before the
meeting. Notice of a meeting need not be given to any Trustee if a written
waiver of notice, executed by him or her before the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him or
her. Neither notice of a meeting nor a waiver of a notice need specify the
purposes of the meeting.
<PAGE> 2
2.4 Quorum. At any meeting of the Trustee a majority of the
Trustees then in office shall constitute a quorum. Any meeting may be
adjourned from time to time by a majority of the votes cast upon the question,
whether or not a quorum is present, and the meeting may be held as adjourned
without further notice.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall
be a President, a Treasurer, a Secretary, and such other officers, including a
Chairman of the Trustees and a Controller, if any, as the Trustees from time to
time may in their discretion elect. The Trust may also have such agents as the
Trustees from time to time may in their discretion appoint. The Chairman of
the Trustees, if one is elected, shall be a Trustee and may but need not be a
shareholder; and any other officer may but not need be a Trustee or a
shareholder. Any two or more offices may be held by the same person.
3.2 Election. The President, the Treasurer, and the Secretary
shall be elected annually by the Trustees. Other officers, if any, may be
elected or appointed by the Trustees at such or any other time. Vacancies in
any office may be filled at any time.
3.3 Tenure. The Chairman of the Trustees, if one is elected, the
President, the Treasurer and the Secretary shall hold office until their
respective successors are chosen and qualified, or in each case until he or she
sooner dies, resigns, is removed or becomes disqualified. Each other officer
shall hold office and each agent shall retain authority at the pleasure of the
Trustees.
3.4 Powers. Subject to the other provisions of these By-laws,
each officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him or her as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.5 Chairman; President. Unless the Trustees otherwise provide,
the Chairman of the Trustees or, if there is none or in the absence of the
Chairman, the President shall preside at all meetings of the shareholders and
of the Trustees. The President shall be the chief executive officer.
3.6 Treasurer and Controller. The Treasurer shall be the chief
financial officer and, if no Controller is elected, chief accounting officer of
the Trust, and shall, subject to the
- 2 -
<PAGE> 3
provisions of the Declaration of Trust and to any arrangement made by the
Trustees with a custodian, investment adviser or manager, or transfer,
shareholder servicing or similar agent, be in charge of the valuable papers
and, if no Controller is elected, the books of account and accounting records
of the Trust, and shall have such other duties and powers as may be designated
from time to time by the Trustees or by the President.
The Controller, if any, shall be the chief accounting officer of the
Trust and shall be in charge of its books of account and accounting records.
The Controller shall be responsible for preparation of financial statements of
the Trust and shall have such other duties and powers as may be designated from
time to time by the Trustees or the President.
3.7 Secretary. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust or at the
office of the Trust's counsel. In the absence of the Secretary from any
meeting of the shareholders or Trustees, an assistant Secretary, or if there be
none or if he or she is absent, a temporary Secretary chosen at such meeting
shall record the proceedings thereof in the aforesaid books.
3.8 Resignations. Any Trustee or officer may resign at any time
by written instrument signed by him or her and delivered to the Chairman, the
President or the Secretary or to a meeting of the Trustees. Such resignation
shall be effective upon receipt unless specified to be effective at some other
time. Except to the extent expressly provided in a written agreement with the
Trust, no officer resigning and no officer removed shall have any right to any
compensation for any period following his or her resignation or removal, or any
right to damages on account of such removal.
ARTICLE 4
Committees
4.1 Quorum; Voting. A majority of the members of any Committee of
the Trustees shall constitute a quorum for the transaction of business, and any
action of such a Committee may be taken at a meeting by a vote of a majority of
the members present (a quorum being present) or evidenced by one or more
writings signed by such a majority. Members of a Committee may participate in
a meeting of such Committee by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.
- 3 -
<PAGE> 4
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render reports at
the time and in the manner required by the Declaration of Trust or any
applicable law. Officers and Committees shall render such additional reports
as they may deem desirable or as may from time to time be required by the
Trustees.
ARTICLE 6
Fiscal Year
6.1 General. Except as from time to time otherwise provided by
the Trustees, the initial fiscal year of the Trust shall end on such date as is
determined in advance or in arrears by the Treasurer, and subsequent fiscal
years shall end on such date in subsequent years.
ARTICLE 7
Seal
7.1 General. The seal of the Trust shall consist of a flat-faced
die with the word "Massachusetts", together with the name of the Trust and the
year of its organization cut or engraved thereon but, unless otherwise required
by the Trustees, the seal shall not be necessary to be placed on, and its
absence shall not impair the validity of, any document, instrument or other
paper executed and delivered by or on behalf of the Trust.
ARTICLE 8
Execution of Papers
8.1 General. Except as the Trustees may generally or in
particular cases authorize the execution thereof in some other manner, all
deeds, leases, contracts, notes and other obligations made by the Trustees
shall be signed by the President or by the Treasurer and need not bear the seal
of the Trust.
ARTICLE 9
Share Certificates
9.1 Share Certificates. No certificates certifying the ownership
of shares shall be issued except as the Trustees may otherwise authorize. In
the event that the Trustees authorize the issuance of share certificates,
subject to the provisions of Section 9.3, each shareholder shall be entitled to
a certificate stating the number of shares and the series or class owned by him
- 4 -
<PAGE> 5
or her, in such form as shall be prescribed from time to time by the Trustees.
Such certificates shall be signed by the President or any Vice-President and
by the Treasurer or any Assistant Treasurer. Such signatures may be facsimiles
if the certificate is signed by a transfer agent, or by a registrar, other than
a Trustee, officer or employee of the Trust. In case any officer who has
signed or whose facsimile signature has been placed on such certificate shall
cease to be such officer before such certificate is issued, it may be issued by
the Trust with the same effect as if he or she were such officer at the time of
its issue.
In lieu of issuing certificates for shares, the Trustees or the
transfer agent may either issue receipts therefor or may keep accounts upon the
books of the Trust for the record holders of such shares, who shall in either
case be deemed, for all purposes hereunder, to be the holders of certificates
for such shares as if they had accepted such certificates and shall be held to
have expressly assented and agreed to the terms hereof.
9.2 Loss of Certificates. In case of the alleged loss or
destruction or the mutilation of a share certificate, a duplicate certificate
may be issued in place thereof, upon such terms as the Trustees may prescribe.
9.3 Discontinuance of Issuance of Certificates. The Trustees may
at any time discontinue the issuance of share certificates and may, by written
notice to each shareholder, require the surrender of share certificates to the
Trust for cancellation. Such surrender and cancellation shall not effect the
ownership of shares in the Trust.
ARTICLE 10
Provisions Relating to the Conduct of the Trust's Business
10.1 Certain Definitions. When used herein the following words
shall have the following meanings: "Distributor" shall mean any one or more
corporations, firms, or associations which have distributor's or principal
underwriter's contracts in effect with the Trust providing that redeemable
shares issued by the Trust shall be offered and sold by such Distributor.
"Manager" shall mean any corporation, firm or association which may at the time
have an advisory or management contract with the Trust and any corporation,
firm or association which may at any time have a sub-advisory contract relating
to the Trust with any such Manager.
10.2 Limitation on Holdings by the Trust of Certain Securities and
on Dealings with Officers or Trustees. The Trust may not purchase or retain
shares or securities issued by an issuer if one or more of the holders of the
shares or securities
- 5 -
<PAGE> 6
issued by an issuer or one or more of the officers or directors of such issuer
is an officer or Trustee of the Trust or officer or director of the Manager and
if one or more of such officers, Trustees or directors owns beneficially more
than 1/2 of 1% of the shares or securities, or both, of such issuer and such
officers, Trustees and directors owning more than 1/2 of 1% of such shares or
securities together own beneficially more than 5% of such shares or securities.
Each officer and Trustee of the Trust shall keep the Treasurer of the Trust
informed of the names of all issuers shares or securities of which are held in
the portfolio of the Trust and in which such officer or Trustee owns as much as
1/2 of 1% of the outstanding shares or securities.
The Trust will not lend any of its assets to the Distributor or
Manager or to any officer or director of the Distributor or Manager or any
officer or Trustee of the Trust, and shall not permit any officer or Trustee or
any officer or director of the Distributor or Manager to deal for or on behalf
of the Trust with himself or herself as principal or agent, or with any
partnership, association or corporation in which he or she has a financial
interest; provided that the foregoing provisions shall not prevent (a) officers
and Trustees of the Trust or officers and directors of the Distributor or
Manager from buying, holding or selling shares in the Trust or from being
partners, offices or directors of or otherwise financially interested in the
Distributor or the Manager; (b) purchases or sales of securities or other
property if such transaction is permitted by or is exempt or exempted from the
provisions of the Investment Company Act of 1940 or any Rule or Regulation
thereunder (together, the "1940 Act"); (c) employment of legal counsel,
registrar, transfer agent, shareholder servicing agent, dividend disbursing
agent or custodian who is, or has a partner, shareholder, officer or director
who is, an officer or Trustee of the Trust or an officer or director of the
Distributor or Manager; (d) sharing statistical, research, legal and management
expenses and office hire and expenses with any other investment company in
which an officer or Trustee of the Trust or an officer or director of the
Distributor or Manager is an officer or director or otherwise financially
interested.
10.3 Limitation on Dealing in Securities of the Trust by Certain
Officers, Trustees, Distributor or Manager. Neither the Distributor nor
Manager, nor any officer or Trustee of the Trust or officer or director of the
Distributor or Manager shall take long or short positions in securities issued
by the Trust; provided, however, that:
(a) the Distributor may purchase from the Trust and otherwise
deal in shares issued by the Trust pursuant to the terms of
its contract with the Trust;
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(b) any officer or Trustee of the Trust or officer or director of
the Distributor or Manager or any trustee or fiduciary for the
benefit of any of them may at any time, or from time to time,
purchase from the Trust or from the Distributor shares issued
by the Trust at the price available to the public or to such
officer, Trustee, director, trustee or fiduciary, no such
purchase to be in contravention of any applicable state or
federal requirement; and
(c) the Distributor or the Manager may at any time, or from time
to time, purchase for investment shares issued by the Trust.
10.4 Securities and Cash of the Trust to be held by Custodian subject
to certain Terms and Conditions.
(a) All securities and cash owned by this Trust shall be held by
or deposited with one or more banks or trust companies having
(according to its last published report) not less than
$5,000,000 aggregate capital, surplus and undivided profits
(any such bank or trust company being hereby designated as
"Custodian"), provided such a Custodian can be found ready and
willing to act; subject to such rules, regulations and orders,
if any, as the Securities and Exchange Commission may adopt,
this Trust may, or may permit any Custodian to, deposit all or
any part of the securities owned by this Trust in a system for
the central handling of securities pursuant to which all
securities of any particular class or series of any issue
deposited within the system may be transferred or pledged by
bookkeeping entry, without physical delivery. The Custodian
may appoint, subject to the approval of the Trustees, one or
more subcustodians.
(b) The Trust shall enter into a written contract with each
Custodian regarding the powers, duties and compensation of
such Custodian with respect to the cash and securities of the
Trust held by such Custodian. Said contract and all
amendments thereto shall be approved by the Trustees.
(c) The Trust shall upon the resignation or inability to serve of
any Custodian or upon change of any Custodian:
(i) in cash of such resignation or inability to serve,
use its best efforts to obtain a successor Custodian;
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(ii) require that the cash and securities owned by the
Trust be delivered directly to the successor
Custodian; and
(iii) in the event that no successor Custodian can be
found, submit to the shareholders, before permitting
delivery of the cash and securities owned by the
Trust otherwise than to a successor Custodian, the
question whether the Trust shall be liquidated or
shall function without a Custodian.
10.5 Requirements and Restrictions Regarding the Management Contract.
Every advisory or management contract entered into by the Trust shall provide
that in the event that the total expenses of any series of shares of the Trust
for any fiscal year should exceed the limits imposed on investment company
expenses imposed by any statute or regulatory authority of any jurisdiction in
which shares of the Trust are offered for sale, the compensation due the
Manager for such fiscal year shall be reduced by the amount of such excess by a
reduction or refund thereof.
10.6 Reports to Shareholders: Distributions from Realized Gains.
The Trust shall send to each shareholder of record at least semi- annually a
statement of the condition of the Trust and of the results of its operations,
containing all information required by applicable laws or regulations.
10.7 Determination of Net Asset Value Per Share. Net asset value per
share of each series or class of shares of the Trust shall mean: (i) the value
of all the assets of such series or class of shares; (ii) less total
liabilities of such series or class of shares; (iii) divided by the number of
shares of such series or class of shares outstanding, in each case at the time
of each determination. The net asset value per share of each series or class
of shares shall be determined as of the normal close of trading on the New York
Stock Exchange on each day on which such Exchange is open. As of any time
other than the normal close of trading on such Exchange, the Trustees may cause
the net asset value per share last determined to be determined again in a
similar manner or adjusted to reflect changes in market values of securities in
the portfolio, such adjustment to be made on the basis of changes in selected
security prices determined by the Trustees to be relevant to the portfolio of
such series or class of shares or in averages or in other standard and readily
ascertainable market data, and the Trustees may fix the time when such
redetermined or adjusted net asset value per share of each series or class of
shares shall become effective.
In valuing the portfolio investments of any series or class of shares
for determination of net asset value per share of such
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series, securities for which market quotations are readily available shall be
valued at prices which, in the opinion of the Trustees or the person designated
by the Trustees to make the determination, most nearly represent the market
value of such securities, and other securities and assets shall be valued at
their fair value as determined by or pursuant to the direction of the Trustees,
which in the case of short-term debt obligations, commercial paper and
repurchase agreements may, but need not, be on the basis of quoted yields for
securities of comparable maturity, quality and type, or on the basis of
amortized cost. Expenses and liabilities of the Trust shall be accrued each
day. Liabilities may include such reserves for taxes, estimated accrued
expenses and contingencies as the Trustees or their designates may in their
sole discretion deem fair and reasonable under the circumstances. No accruals
shall be made in respect of taxes on unrealized appreciation of securities
owned unless the Trustees shall otherwise determine. Dividends payable by the
Trust shall be deducted as at the time of but immediately prior to the
determination of net asset value per share on the record date therefor.
10.8. Derivative Claims. No Shareholder shall have the right to
bring or maintain any court action, proceeding or claim on behalf of the Trust
or any series or class thereof without first making demand on the Trustees
requesting the Trustees to bring or maintain such action, proceeding or claim.
Such demand shall be excused only when the plaintiff makes a specific showing
that irreparable injury to the Trust or series or class would otherwise result.
Such demand shall be made to the Secretary or the Trust at the Trust's
principal office and shall set forth in reasonable detail the nature of the
proposed court action, proceeding or claim and the essential facts relied upon
by the Shareholder to support the allegations made in the demand. The Trustees
shall consider such demand within 45 days of its receipt by the Trust. In
their sole discretion, the Trustees may submit the matter to a vote of
Shareholders of the Trust or series or class, as appropriate. Any decision by
the Trustees to bring, maintain or settle (or not to bring, maintain or settle)
such court action, proceeding or claim, or to submit the matter to a vote of
Shareholders shall be made by the Trustees in their business judgment and shall
be binding upon the Shareholders. Any decision by the Trustees to bring or
maintain a court action, proceeding or suit on behalf of the Trust or a series
or class shall be subject to the right of the Shareholders under Section 1 of
Article 11 of these By-laws to vote on whether or not such court action,
proceeding or suit should or should not be brought or maintained.
ARTICLE 11
Shareholders' Voting Powers and Meetings
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11.1 Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Article IV, Section 1 of the
Declaration of Trust, provided, however, that no meeting of Shareholders is
required to be called for the purpose of electing Trustees unless and until
such time as less than a majority of the Trustees have been elected by the
Shareholders, (ii) with respect to any Manager or Sub-Adviser as provided in
Article IV, Section 6 of the Declaration of Trust to the extent required by the
1940 Act, (iii) with respect to any termination of this Trust to the extent and
as provided in Article IX, Section 4 of the Declaration of Trust, (iv) with
respect to any amendment of the Declaration of Trust to the extent and as
provided in Article IX, Section 7 of the Declaration of Trust, (v) to the same
extent as the stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (vi) with respect to such additional matters relating
to the Trust as may be required by law, the Declaration of Trust, these By-laws
or any registration of the Trust with the Commission (or any successor agency)
or any state, or as the Trustees may consider necessary or desirable. Each
whole Share shall be entitled to one vote as to any matter on which it is
entitled to vote and each fractional Share shall be entitled to a proportionate
fractional vote. The Shareholders of any particular series or class shall not
be entitled to vote on any matters as to which such series or class is not
affected. Except with respect to matters as to which the Trustees have
determined that only the interests of one or more particular series or classes
are affected or as required by law, all of the Shares of each series or class
shall, on matters as to which such series or class is entitled to vote, vote
with other series or classes so entitled as a single class. Notwithstanding
the foregoing, with respect to matters which would otherwise be voted on by two
or more series or classes as a single class, the Trustees may, in their sole
discretion, submit such matters to the Shareholders of any or all such series
or classes, separately. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy. The placing of a
Shareholder's name on a proxy pursuant to telephonic or electronically
transmitted instructions obtained pursuant to procedures reasonably designed to
verify that such instructions have been authorized by such Shareholder shall
constitute election of such proxy by or on behalf of such Shareholder. A proxy
with respect to Shares held in the name of two or more persons shall be valid
if executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them.
A proxy purporting to be executed by or on behalf of a Shareholder shall be
deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. Until Shares are issued, the
Trustees may exercise all rights of
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Shareholders and may take any action required by law, the Declaration of Trust
or these By-laws to be taken by shareholders.
11.2 Voting Power and Meetings. Meetings of the Shareholders of the
Trust or of one or more series or classes of shares may be called by the
Trustees for the purpose of electing Trustees as provided in Article IV,
Section 1 of the Declaration of Trust and for such other purposes as may be
prescribed by law, by the Declaration of Trust or by these By-laws. Meetings
of the Shareholders of the Trust or of one or more series or classes of shares
may also be called by the Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Trustees to be necessary or
desirable. A meeting of Shareholders may be held at any place designated by
the Trustees. Written notice of any meeting of Shareholders shall be given or
caused to be given by the Trustees by mailing such notice at least seven days
before such meeting, postage prepaid, stating the time and place of the
meeting, to each Shareholder at the Shareholder's address as it appears on the
records of the Trust. Whenever notice of a meeting is required to be given to
a Shareholder under the Declaration of Trust or these By-laws, a written waiver
thereof, executed before or after the meeting by such Shareholder or his
attorney thereunto authorized and filed with the records of the meeting, shall
be deemed equivalent to such notice.
11.3 Quorum and Required Vote. Thirty percent (30%) of Shares
entitled to vote shall be a quorum for the transaction of business at a
Shareholders' meeting, except that where any provision of law or of the
Declaration of Trust or these By-laws permits or requires that holders of any
series or class of shares shall vote as a series or class, as the case may be,
then thirty percent (30%) of the aggregate number of Shares of that series or
that class entitled to vote shall be necessary to constitute a quorum for the
transaction of business by that series or class. Any lesser number shall be
sufficient for adjournments. Any adjourned session or sessions may be held,
within a reasonable time after the date set for the original meeting, without
the necessity of further notice. Except when a larger vote is required by any
provision of law or the Declaration of Trust or these By-laws, a majority of
the Shares voted shall decide any questions and a plurality shall elect a
Trustee, provided that where any provision of law or of the Declaration of
Trust or these By-laws permits or requires that the holders of any series or
class shall vote as a series or class, as the case may be, then a majority of
the Shares of that series or that class voted on the matter (or a plurality
with respect to the election of a Trustee) shall decide that matter insofar as
that series or class is concerned.
11.4 Action by Written Consent. Any action taken by Shareholders may
be taken without a meeting if a majority of
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Shareholders entitled to vote on the matter (or such larger proportion thereof
as shall be required by any express provision of law or the Declaration of
Trust or these By-laws) consent to the action in writing and such written
consents are filed with the records of the meetings of Shareholders. Such
consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
11.5 Record Dates. For the purpose of determining the shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to receive payment of any dividend or of any other
distribution, or for the purpose of any other action, etc., the Trustees may
from time to time fix a time, which shall be not more than 60 days before the
date of any meeting of shareholders or the date for the payment of any dividend
or of any other distribution, as the record date for determining the
shareholders having the right to notice of and to vote at such meeting and any
adjournment thereof or the right to receive such dividend or distribution, and
in such case only shareholders of record on such record date shall have such
right notwithstanding any transfer of shares on the books of the Trust after
the record date; or without fixing such record date the Trustees may for any of
such purposes close the register or transfer books for all or any part of such
period.
11.6 Removal of Trustees. No natural person shall serve as Trustee
after the holders of record of not less than two-thirds of the outstanding
Shares (as defined in the Declaration of Trust) have declared that such Trustee
be removed from that office either by declaration in writing filed with the
Trust's custodian or by votes cast in person or by proxy at a meeting called
for the purpose. The Trustees shall promptly call a meeting of shareholders
for the purpose of voting upon the question of removal of any Trustee when
requested in writing so to do by the record holders of not less than 10 per
centum of the outstanding Shares.
Whenever ten or more shareholders of record who have been such for at
least six months preceding the date of application, and who hold in the
aggregate Shares having a net asset value of at least 21 per centum of the
outstanding Shares shall apply to the Trustees in writing, stating that they
wish to communicate with other shareholders with a view to obtaining signatures
to a request for a meeting pursuant to this Section and accompanied by a form
of communication and request which they wish to transmit, the Trustees shall
within five business days after receipt of such application either (a) afford
to such applicants access to a list of the names and addresses of all
shareholders as recorded on the books of the Trust; or (b) inform such
applicants as to the approximate number of shareholders of record, and the
approximate cost of mailing to them the proposed communication and form of
request. If the Trustees elect to follow the course
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specified in clause (b) above, the Trustees, upon the written request of such
applicants, accompanied by a tender of the material to be mailed and of the
reasonable expenses of mailing, shall, with reasonable promptness, mail such
material to all shareholders of record at their addressees as recorded on the
books of the Trust, unless within five business days after such tender the
Trustees shall mail to such applicants and file with the Securities and
Exchange Commission, together with a copy of the material proposed to be
mailed, a written statement signed by at least a majority of the Trustees to
the effect that in their opinion either such material contains untrue
statements of fact or omits to state facts necessary to make the statements
contained therein not misleading, or would be in violation of applicable law,
and specifying the basis of such opinion. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of the objections
specified in the written statement so filed, or if, after the entry of an order
sustaining one or more of such objections, the Securities and Exchange
Commission shall find, after notice and opportunity for hearing, that all
objections so sustained have been met, and shall enter an order so declaring,
the Trustees shall mail copies of such material to all shareholders with
reasonable promptness after the entry of such order and the renewal of such
tender.
ARTICLE 12
Amendments to the By-laws
12.1 General. These By-laws may be amended or repealed, in whole or
in part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
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EXHIBIT 5(a)-1
MANAGEMENT CONTRACT
Management Contract executed as of April 8, 1993, between THE SIERRA
VARIABLE TRUST, a Massachusetts business trust (the "Trust") on behalf of THE
GLOBAL MONEY FUND (the "Fund"), and SIERRA INVESTMENT ADVISORS CORPORATION, a
California corporation (the "Manager").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO THE TRUST.
(a) Subject always to the control of the Trustees of the Trust,
the Manager will, at its expense, furnish continuously an investment program
for the Fund, will make investment decisions on behalf of the Fund and will,
subject to the provisions of paragraph (c), place all orders for the purchase
and sale of its portfolio securities. Subject always to the control of the
Trustees of the Fund, the Manager will also manage, supervise and conduct the
other affairs and business of the Fund and matters incidental thereto. In the
performance of its duties, the Manager will comply with the provisions of the
Agreement and Declaration of Trust, the By-laws of the Trust and the Fund's
stated investment objectives, policies and restrictions as set forth in its
Registration Statement on Form N-1A, File No. 33-57732 and will use its best
efforts to safeguard and promote the welfare of the Fund and to comply with
other policies which the Trustees may from time to time determine.
(b) The Manager, at its expense, will furnish all necessary office
space and equipment, bookkeeping and clerical services (excluding securities
accounting and transfer agency services) required for it to perform its duties
hereunder and will pay all salaries, fees and expenses of officers and Trustees
of the Trust who are affiliated with the Manager.
<PAGE> 2
(c) In the selection of brokers, dealers, futures commissions
merchants or any other sources of portfolio investments for the Fund (hereafter,
"brokers or dealers") and the placing of orders for the purchaser and sale of
portfolio investments for the Fund, the Manager shall seek to obtain the most
favorable price and execution available, except to the extent it may be
permitted to pay higher brokerage commissions for brokerage and research
services as described below. In using its best efforts to obtain for the Fund
the most favorable price and execution available, the Manager, bearing in mind
the Fund's best interests at all times, shall consider all factors it deems
relevant, including, by way of illustration, price, the size of the transaction,
the nature of the market for the security, relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the transaction taking
into account market prices and trends, the reputation, experience and financial
stability of the broker or dealer involved and the quality of service rendered
by the broker or dealer in other transactions. Subject to such policies as the
Trustees may determine, the Manager shall not be deemed to have acted unlawfully
or to have breached any duty created by this Contract or otherwise solely by
reason of its having caused the Trust to pay, on behalf of the Fund, a broker or
dealer that provides brokerage and research services to the Manager an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Manager determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Manager's overall responsibilities with respect to
the Fund and to other clients of the Manager as to which the Manager exercised
investment discretion. The Trust hereby agrees with the Manager and with any
Sub-Adviser selected by the Manager as provided in Section 1(d) that any entity
or person associated with the Manager or such Sub-Adviser which is a member of a
national securities exchange is authorized to effect any transaction on such
exchange for the account of the Fund which is permitted by Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Trust
hereby consents to the retention of compensation for such transactions in
accordance with Rule 11a2-2(T)(2)(iv).
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(d) Subject to the provisions of the Agreement and Declaration of
Trust of the Trust and the Investment Company Act of 1940, the Manager, at its
expense, may select and contract with one or more investment advisers (the
"Sub-Adviser") for the Fund to perform some or all of the services for which it
is responsible pursuant to paragraph (a) of this Section 1 (and any related
facilities or services for which it is responsible under paragraph (b) of this
Section 1). The Manager will compensate any Sub-Adviser of the Fund for its
services to the Fund. The Manager may terminate the services of any
Sub-Adviser at any time in its sole discretion, and shall at such time assume
the responsibilities of such Sub-Advisor unless and until a successor
Sub-Adviser is selected.
(e) The Manager shall not be obligated to pay any expenses of or
for the Trust or of or for the Fund not expressly assumed by the Manager
pursuant to this Section other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees officers and
employees of the Trust may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust.
The Trust also understands that the Manager now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Trust has no objection to
the Manager so acting, PROVIDED THAT whenever the Fund and one or more other
accounts or investment companies advised by the Manager have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Trust recognizes that in some cases this procedure may adversely
affect the size of the position that may be acquired or disposed of for the
Fund. In addition, the Trust
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understands that the persons employed by the Manager to assist the performance
of the Manager's duties hereunder will not devote their full time to such
services and nothing contained herein shall be deemed to limit or restrict the
right of the Manager or any affiliate of the Manager to engage in and devote
time and attention to other businesses or to render services of whatever kind
or nature.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
The Trust, on behalf of the Fund, will pay to the Manager as
compensation for the Manager's services rendered, for the facilities furnished
and for the expenses borne by the Manager pursuant to Section 1, a fee,
computed and paid monthly at the annual rate of 0.50% of the value of the
Fund's average daily net assets up to $500 million and 0.40% of value of the
Fund's average daily net assets over $500 million. Such average daily net
asset value of the Fund shall be determined by taking an average of all of the
determinations of such net asset value during such month at the close of
business on each business day during such month while this Contract is in
effect. Such fee shall be payable for each month within five (5) business days
after the end of such month.
In the event that expenses of the Fund for any fiscal year (not
including any interest, taxes, brokerage, extraordinary expenses or
distribution expenses paid by the Fund pursuant to any distribution plan)
should exceed the expense limitation on investment company expenses enforced by
any statute or regulatory authority of any jurisdiction in which shares of the
Trust are qualified for offer and sale, the compensation due the Manager for
such fiscal year shall be reduced by the amount of such excess by a reduction
or refund thereof. In the event that the expenses of the Fund exceed any
expense limitation which the Manager may, by written notice to the Trust,
voluntarily declare to be effective with respect to the Fund, subject to such
terms and conditions as the Manager may prescribe in such notice, the
compensation due the Manager shall be reduced, and, if necessary, the Manager
shall bear the Fund's expenses to the extent required by such expense
limitation.
The Manager shall not be required to reimburse any amount in excess of
the compensation paid to it pursuant to Section 3.
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If the Manager shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Contract shall not be
amended unless such amendment is approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Fund, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager or of any Sub-Adviser of the Fund.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this
Contract by not more than sixty days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders
by the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager, by vote cast in
person at a meeting called for the purpose of voting on such approval,
do not specifically approve at least annually the continuance of this
Contract, then this Contract shall automatically terminate at the
close of business on the second anniversary of its execution, or upon
the expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the
continuance of this Contract is submitted to the shareholders of the
Fund for their approval and such shareholders fail to approve such
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<PAGE> 6
continuance of this Contract as provided herein, the Manager may
continue to serve hereunder in a manner consistent with the Investment
Company Act of 1940 and the rules and regulations thereunder.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of
the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Manager shall promptly notify the Trust in writing of the
occurrence of any of the following events: (a) the Manager shall fail to be
registered as an investment adviser under the Investment Company Act of 1940,
as amended from time to time, and under the laws of any jurisdiction in which
the Manager is required to be registered as an investment adviser in order to
perform its obligations under this Agreement, (b) the Manager shall have been
served or otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or
body, involving the affairs of the Trust and (c) there shall be any change in
the control of the Manager.
7. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of the Fund means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting are present in person or by proxy, or (b)
of the holders of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company
- 6 -
<PAGE> 7
Act of 1940 and the rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act; the term "specifically approve at least annually" shall be construed
in a manner consistent with the Investment Company Act of 1940 and the rules
and regulations thereunder; and the term "brokerage and research services"
shall have the meaning given in the Securities Exchange Act of 1934 and the
rules and regulations thereunder.
8. NONLIABILITY OF MANAGER.
The Manager shall exercise its best judgement in rendering its
services under this Agreement. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager shall not be subject to any
liability to the Trust, or to any shareholder of the Trust, for any act or
omission in the course of, or connected with, rendering services hereunder.
9. USE OF NAME.
The Manager owns the name "Sierra", which may be used by the Trust
only with the consent of the Manager. The Manager consents to the use by the
Trust of the name "The Sierra Variable Trust" or any other name embodying the
name "Sierra", but only on condition and so long as (i) this Agreement shall
remain in full force, (ii) the Trust shall fully perform, fulfill and comply
with all provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it, and (iii) Sierra Investment Advisors
Corporation is the Manager of the Trust. No such name shall be used by the
Trust at any time or in any place or for any purposes or under any conditions
except as in this section provided. The foregoing authorization by the Manager
to the Trust to use the name "Sierra" as part of a business or name is not
exclusive of the right of the Manager itself to use, or to authorize others to
use, the same; the Trust acknowledges and agrees that as between the Manager
and the Trust, the Manager has the exclusive right so to use, or authorize
others to use, said name, and the Trust agrees to take such action as may
reasonably be requested by the Manager to give full effect to the provisions of
this section (including, without limitation, consenting to such use of said
name). Without limiting the generality of the
- 7 -
<PAGE> 8
foregoing, the Trust agrees that, upon (i) any termination of this Agreement by
either party, (ii) the violation of any of its provisions by the Trust or (iii)
termination of this Management Contract between Sierra and the Trust, the Trust
will, at the request of the Manager made within six months after such
termination or violation, use its best efforts to change the name of the Trust
so as to eliminate all reference, if any, to the name "Sierra" and will not
thereafter transact any business in a name containing the name "Sierra" in any
form or combination whatsoever, or designate itself as the same entity as or
successor to an entity of such name, or otherwise use the name "Sierra" or any
other reference to the Manager. Such covenants on the part of the Trust shall
be binding upon it, its trustees, offices, stockholders, creditors and all
other persons claiming under or through it.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, THE SIERRA VARIABLE TRUST and SIERRA INVESTMENT
ADVISORS CORPORATION have each caused this instrument to be signed in duplicate
on its behalf by its duly authorized representative, all as of the day and year
first above written.
THE SIERRA VARIABLE TRUST
By /s/ KEITH PIPES
--------------------------------
Name: Keith Pipes
Title: Director, Executive Vice
President & Secretary
SIERRA INVESTMENT ADVISORS CORPORATION
By /s/ MICHAEL D. GOTH
--------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
- 8 -
<PAGE> 1
EXHIBIT 5(a)-2
MANAGEMENT CONTRACT
Management Contract executed as of April 8, 1993, between THE SIERRA
VARIABLE TRUST, a Massachusetts business trust (the "Trust") on behalf of THE
INTERNATIONAL GROWTH FUND (the "Fund"), and SIERRA INVESTMENT ADVISORS
CORPORATION, a California corporation (the "Manager").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is agreed as
follows:
1. SERVICES TO BE RENDERED BY MANAGER TO THE TRUST.
(a) Subject always to the control of the Trustees of the Trust,
the Manager will, at its expense, furnish continuously an investment program
for the Fund, will make investment decisions on behalf of the Fund and will,
subject to the provisions of paragraph (c), place all orders for the purchase
and sale of its portfolio securities. Subject always to the control of the
Trustees of the Fund, the Manager will also manage, supervise and conduct the
other affairs and business of the Fund and matters incidental thereto. In the
performance of its duties, the Manager will comply with the provisions of the
Agreement and Declaration of Trust, the By-laws of the Trust and the Fund's
stated investment objectives, policies and restrictions as set forth in its
Registration Statement on Form N-1A, File No. 33-57732 and will use its best
efforts to safeguard and promote the welfare of the Fund and to comply with
other policies which the Trustees may from time to time determine.
(b) The Manager, at its expense, will furnish all necessary office
space and equipment, bookkeeping and clerical services (excluding securities
accounting and transfer agency services) required for it to perform its duties
hereunder and will pay all salaries, fees and expenses of officers and Trustees
of the Trust who are affiliated with the Manager.
(c) In the selection of brokers, dealers, futures commissions
merchants or any other sources of portfolio
<PAGE> 2
investments for the Fund (hereafter, "brokers or dealers") and the placing of
orders for the purchaser and sale of portfolio investments for the Fund, the
Manager shall seek to obtain the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage commissions
for brokerage and research services as described below. In using its best
efforts to obtain for the Fund the most favorable price and execution
available, the Manager, bearing in mind the Fund's best interests at all times,
shall consider all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the transaction
taking into account market prices and trends, the reputation, experience and
financial stability of the broker or dealer involved and the quality of service
rendered by the broker or dealer in other transactions. Subject to such
policies as the Trustees may determine, the Manager shall not be deemed to have
acted unlawfully or to have breached any duty created by this Contract or
otherwise solely by reason of its having caused the Trust to pay, on behalf of
the Fund, a broker or dealer that provides brokerage and research services to
the Manager an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction, if the Manager determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Manager's overall
responsibilities with respect to the Fund and to other clients of the Manager
as to which the Manager exercised investment discretion. The Trust hereby
agrees with the Manager and with any Sub-Adviser selected by the Manager as
provided in Section 1(d) that any entity or person associated with the Manager
or such Sub-Adviser which is a member of a national securities exchange is
authorized to effect any transaction on such exchange for the account of the
Fund which is permitted by Section 11(a) of the Securities Exchange Act of 1934
and Rule 11a2-2(T) thereunder, and the Trust hereby consents to the retention
of compensation for such transactions in accordance with Rule 11a2-2(T)(2)(iv).
(d) Subject to the provisions of the Agreement and Declaration of
Trust of the Trust and the Investment Company Act
- 2 -
<PAGE> 3
of 1940, the Manager, at its expense, may select and contract with one or more
investment advisers (the "Sub-Adviser") for the Fund to perform some or all of
the services for which it is responsible pursuant to paragraph (a) of this
Section 1 (and any related facilities or services for which it is responsible
under paragraph (b) of this Section 1). The Manager will compensate any
Sub-Adviser of the Fund for its services to the Fund. The Manager may
terminate the services of any Sub-Adviser at any time in its sole discretion,
and shall at such time assume the responsibilities of such Sub-Advisor unless
and until a successor Sub-Adviser is selected.
(e) The Manager shall not be obligated to pay any expenses of or
for the Trust or of or for the Fund not expressly assumed by the Manager
pursuant to this Section other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees officers and
employees of the Trust may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust.
The Trust also understands that the Manager now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Trust has no objection to
the Manager so acting, PROVIDED THAT whenever the Fund and one or more other
accounts or investment companies advised by the Manager have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Trust recognizes that in some cases this procedure may adversely
affect the size of the position that may be acquired or disposed of for the
Fund. In addition, the Trust understands that the persons employed by the
Manager to assist the performance of the Manager's duties hereunder will not
devote
- 3 -
<PAGE> 4
their full time to such services and nothing contained herein shall be deemed
to limit or restrict the right of the Manager or any affiliate of the Manager
to engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
The Trust, on behalf of the Fund, will pay to the Manager as
compensation for the Manager's services rendered, for the facilities furnished
and for the expenses borne by the Manager pursuant to Section 1, a fee,
computed and paid monthly at the annual rate of 0.95% of the value of the
Fund's average daily net assets up to $50 million, 0.85% of the value of the
Fund's average daily net assets between $50 million and $125 million and 0.75%
of the value of the Fund's average daily net assets over $125 million. Such
average daily net asset value of the Fund shall be determined by taking an
average of all of the determinations of such net asset value during such month
at the close of business on each business day during such month while this
Contract is in effect. Such fee shall be payable for each month within five
(5) business days after the end of such month.
In the event that expenses of the Fund for any fiscal year (not
including any interest, taxes, brokerage, extraordinary expenses or
distribution expenses paid by the Fund pursuant to any distribution plan)
should exceed the expense limitation on investment company expenses enforced by
any statute or regulatory authority of any jurisdiction in which shares of the
Trust are qualified for offer and sale, the compensation due the Manager for
such fiscal year shall be reduced by the amount of such excess by a reduction
or refund thereof. In the event that the expenses of the Fund exceed any
expense limitation which the Manager may, by written notice to the Trust,
voluntarily declare to be effective with respect to the Fund, subject to such
terms and conditions as the Manager may prescribe in such notice, the
compensation due the Manager shall be reduced, and, if necessary, the Manager
shall bear the Fund's expenses to the extent required by such expense
limitation.
The Manager shall not be required to reimburse any amount in excess of
the compensation paid to it pursuant to Section 3.
- 4 -
<PAGE> 5
If the Manager shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Contract shall not be
amended unless such amendment is approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Fund, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager or of any Sub-Adviser of the Fund.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this
Contract by not more than sixty days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders
by the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager, by vote cast in
person at a meeting called for the purpose of voting on such approval,
do not specifically approve at least annually the continuance of this
Contract, then this Contract shall automatically terminate at the
close of business on the second anniversary of its execution, or upon
the expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the
continuance of this Contract is submitted to the shareholders of the
Fund for their approval and such shareholders fail to approve such
continuance of this Contract as provided herein, the Manager
- 5 -
<PAGE> 6
may continue to serve hereunder in a manner consistent with the
Investment Company Act of 1940 and the rules and regulations
thereunder.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of
the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Manager shall promptly notify the Trust in writing of the
occurrence of any of the following events: (a) the Manager shall fail to be
registered as an investment adviser under the Investment Company Act of 1940,
as amended from time to time, and under the laws of any jurisdiction in which
the Manager is required to be registered as an investment adviser in order to
perform its obligations under this Agreement, (b) the Manager shall have been
served or otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or
body, involving the affairs of the Trust and (c) there shall be any change in
the control of the Manager.
7. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of the Fund means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting are present in person or by proxy, or (b)
of the holders of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the rules and
regulations thereunder, subject,
- 6 -
<PAGE> 7
however, to such exemptions as may be granted by the Securities and Exchange
Commission under said Act; the term "specifically approve at least annually"
shall be construed in a manner consistent with the Investment Company Act of
1940 and the rules and regulations thereunder; and the term "brokerage and
research services" shall have the meaning given in the Securities Exchange Act
of 1934 and the rules and regulations thereunder.
8. NONLIABILITY OF MANAGER.
The Manager shall exercise its best judgement in rendering its
services under this Agreement. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager shall not be subject to any
liability to the Trust, or to any shareholder of the Trust, for any act or
omission in the course of, or connected with, rendering services hereunder.
9. USE OF NAME.
The Manager owns the name "Sierra", which may be used by the Trust
only with the consent of the Manager. The Manager consents to the use by the
Trust of the name "The Sierra Variable Trust" or any other name embodying the
name "Sierra", but only on condition and so long as (i) this Agreement shall
remain in full force, (ii) the Trust shall fully perform, fulfill and comply
with all provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it, and (iii) Sierra Investment Advisors
Corporation is the Manager of the Trust. No such name shall be used by the
Trust at any time or in any place or for any purposes or under any conditions
except as in this section provided. The foregoing authorization by the Manager
to the Trust to use the name "Sierra" as part of a business or name is not
exclusive of the right of the Manager itself to use, or to authorize others to
use, the same; the Trust acknowledges and agrees that as between the Manager
and the Trust, the Manager has the exclusive right so to use, or authorize
others to use, said name, and the Trust agrees to take such action as may
reasonably be requested by the Manager to give full effect to the provisions of
this section (including, without limitation, consenting to such use of said
name). Without limiting the generality of the foregoing, the Trust agrees
that, upon (i) any termination of
- 7 -
<PAGE> 8
this Agreement by either party, (ii) the violation of any of its provisions by
the Trust or (iii) termination of this Management Contract between Sierra and
the Trust, the Trust will, at the request of the Manager made within six months
after such termination or violation, use its best efforts to change the name of
the Trust so as to eliminate all reference, if any, to the name "Sierra" and
will not thereafter transact any business in a name containing the name
"Sierra" in any form or combination whatsoever, or designate itself as the same
entity as or successor to an entity of such name, or otherwise use the name
"Sierra" or any other reference to the Manager. Such covenants on the part of
the Trust shall be binding upon it, its trustees, offices, stockholders,
creditors and all other persons claiming under or through it.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, THE SIERRA VARIABLE TRUST and SIERRA INVESTMENT
ADVISORS CORPORATION have each caused this instrument to be signed in duplicate
on its behalf by its duly authorized representative, all as of the day and year
first above written.
THE SIERRA VARIABLE TRUST
By /s/ KEITH PIPES
-----------------------------
Name: Keith Pipes
Title: Director, Executive Vice
President & Secretary
SIERRA INVESTMENT ADVISORS CORPORATION
By /s/ MICHAEL D. GOTH
-----------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
- 8 -
<PAGE> 1
EXHIBIT 5(a)-3
MANAGEMENT CONTRACT
Management Contract executed as of April 8, 1993, between THE SIERRA
VARIABLE TRUST, a Massachusetts business trust (the "Trust") on behalf of THE
U.S. GOVERNMENT FUND (the "Fund"), and SIERRA INVESTMENT ADVISORS CORPORATION,
a California corporation (the "Manager").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO THE TRUST.
(a) Subject always to the control of the Trustees of the Trust,
the Manager will, at its expense, furnish continuously an investment program
for the Fund, will make investment decisions on behalf of the Fund and will,
subject to the provisions of paragraph (c), place all orders for the purchase
and sale of its portfolio securities. Subject always to the control of the
Trustees of the Fund, the Manager will also manage, supervise and conduct the
other affairs and business of the Fund and matters incidental thereto. In the
performance of its duties, the Manager will comply with the provisions of the
Agreement and Declaration of Trust, the By-laws of the Trust and the Fund's
stated investment objectives, policies and restrictions as set forth in its
Registration Statement on Form N-1A, File No. 33-57732 and will use its best
efforts to safeguard and promote the welfare of the Fund and to comply with
other policies which the Trustees may from time to time determine.
(b) The Manager, at its expense, will furnish all necessary office
space and equipment, bookkeeping and clerical services (excluding securities
accounting and transfer agency services) required for it to perform its duties
hereunder and will pay all salaries, fees and expenses of officers and Trustees
of the Trust who are affiliated with the Manager.
(c) In the selection of brokers, dealers, futures commissions
merchants or any other sources of portfolio
<PAGE> 2
investments for the Fund (hereafter, "brokers or dealers") and the placing of
orders for the purchaser and sale of portfolio investments for the Fund, the
Manager shall seek to obtain the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage commissions
for brokerage and research services as described below. In using its best
efforts to obtain for the Fund the most favorable price and execution
available, the Manager, bearing in mind the Fund's best interests at all times,
shall consider all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market for
the security, relevant, including, by way of illustration, price, the size of
the transaction, the nature of the market for the security, the amount of the
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker or dealer in
other transactions. Subject to such policies as the Trustees may determine, the
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Contract or otherwise solely by reason of its having caused
the Trust to pay, on behalf of the Fund, a broker or dealer that provides
brokerage and research services to the Manager an amount of commission for
effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Manager determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Manager's overall responsibilities with respect to
the Fund and to other clients of the Manager as to which the Manager exercised
investment discretion. The Trust hereby agrees with the Manager and with any
Sub-Adviser selected by the Manager as provided in Section 1(d) that any entity
or person associated with the Manager or such Sub-Adviser which is a member of a
national securities exchange is authorized to effect any transaction on such
exchange for the account of the Fund which is permitted by Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Trust
hereby consents to the retention of compensation for such transactions in
accordance with Rule 11a2-2(T)(2)(iv).
(d) Subject to the provisions of the Agreement and Declaration of
Trust of the Trust and the Investment Company Act
- 2 -
<PAGE> 3
of 1940, the Manager, at its expense, may select and contract with one or more
investment advisers (the "Sub-Adviser") for the Fund to perform some or all of
the services for which it is responsible pursuant to paragraph (a) of this
Section 1 (and any related facilities or services for which it is responsible
under paragraph (b) of this Section 1). The Manager will compensate any
Sub-Adviser of the Fund for its services to the Fund. The Manager may
terminate the services of any Sub-Adviser at any time in its sole discretion,
and shall at such time assume the responsibilities of such Sub-Advisor unless
and until a successor Sub-Adviser is selected.
(e) The Manager shall not be obligated to pay any expenses of or
for the Trust or of or for the Fund not expressly assumed by the Manager
pursuant to this Section other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees officers and
employees of the Trust may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust.
The Trust also understands that the Manager now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Trust has no objection to
the Manager so acting, PROVIDED THAT whenever the Fund and one or more other
accounts or investment companies advised by the Manager have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Trust recognizes that in some cases this procedure may adversely
affect the size of the position that may be acquired or disposed of for the
Fund. In addition, the Trust understands that the persons employed by the
Manager to assist the performance of the Manager's duties hereunder will not
devote
- 3 -
<PAGE> 4
their full time to such services and nothing contained herein shall be deemed
to limit or restrict the right of the Manager or any affiliate of the Manager
to engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
The Trust, on behalf of the Fund, will pay to the Manager as
compensation for the Manager's services rendered, for the facilities furnished
and for the expenses borne by the Manager pursuant to Section 1, a fee,
computed and paid monthly at the annual rate of 0.60% of the value of the
Fund's average daily net assets up to $500 million and 0.50% of the value of
the Fund's average daily net assets over $500 million. Such average daily net
asset value of the Fund shall be determined by taking an average of all of the
determinations of such net asset value during such month at the close of
business on each business day during such month while this Contract is in
effect. Such fee shall be payable for each month within five (5) business days
after the end of such month.
In the event that expenses of the Fund for any fiscal year (not
including any interest, taxes, brokerage, extraordinary expenses or
distribution expenses paid by the Fund pursuant to any distribution plan)
should exceed the expense limitation on investment company expenses enforced by
any statute or regulatory authority of any jurisdiction in which shares of the
Trust are qualified for offer and sale, the compensation due the Manager for
such fiscal year shall be reduced by the amount of such excess by a reduction
or refund thereof. In the event that the expenses of the Fund exceed any
expense limitation which the Manager may, by written notice to the Trust,
voluntarily declare to be effective with respect to the Fund, subject to such
terms and conditions as the Manager may prescribe in such notice, the
compensation due the Manager shall be reduced, and, if necessary, the Manager
shall bear the Fund's expenses to the extent required by such expense
limitation.
The Manager shall not be required to reimburse any amount in excess of
the compensation paid to it pursuant to Section 3.
If the Manager shall serve for less than the whole of a
- 4 -
<PAGE> 5
month, the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Contract shall not be
amended unless such amendment is approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Fund, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager or of any Sub-Adviser of the Fund.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this
Contract by not more than sixty days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders
by the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager, by vote cast in
person at a meeting called for the purpose of voting on such approval,
do not specifically approve at least annually the continuance of this
Contract, then this Contract shall automatically terminate at the
close of business on the second anniversary of its execution, or upon
the expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the
continuance of this Contract is submitted to the shareholders of the
Fund for their approval and such shareholders fail to approve such
continuance of this Contract as provided herein, the Manager may
continue to serve hereunder in a manner consistent with
- 5 -
<PAGE> 6
the Investment Company Act of 1940 and the rules and regulations
thereunder.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of
the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Manager shall promptly notify the Trust in writing of the
occurrence of any of the following events: (a) the Manager shall fail to be
registered as an investment adviser under the Investment Company Act of 1940,
as amended from time to time, and under the laws of any jurisdiction in which
the Manager is required to be registered as an investment adviser in order to
perform its obligations under this Agreement, (b) the Manager shall have been
served or otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or
body, involving the affairs of the Trust and (c) there shall be any change in
the control of the Manager.
7. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of the Fund means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting are present in person or by proxy, or (b)
of the holders of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the rules and
regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities
- 6 -
<PAGE> 7
and Exchange Commission under said Act; the term "specifically approve at least
annually" shall be construed in a manner consistent with the Investment Company
Act of 1940 and the rules and regulations thereunder; and the term "brokerage
and research services" shall have the meaning given in the Securities Exchange
Act of 1934 and the rules and regulations thereunder.
8. NONLIABILITY OF MANAGER.
The Manager shall exercise its best judgement in rendering its
services under this Agreement. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager shall not be subject to any
liability to the Trust, or to any shareholder of the Trust, for any act or
omission in the course of, or connected with, rendering services hereunder.
9. USE OF NAME.
The Manager owns the name "Sierra", which may be used by the Trust
only with the consent of the Manager. The Manager consents to the use by the
Trust of the name "The Sierra Variable Trust" or any other name embodying the
name "Sierra", but only on condition and so long as (i) this Agreement shall
remain in full force, (ii) the Trust shall fully perform, fulfill and comply
with all provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it, and (iii) Sierra Investment Advisors
Corporation is the Manager of the Trust. No such name shall be used by the
Trust at any time or in any place or for any purposes or under any conditions
except as in this section provided. The foregoing authorization by the Manager
to the Trust to use the name "Sierra" as part of a business or name is not
exclusive of the right of the Manager itself to use, or to authorize others to
use, the same; the Trust acknowledges and agrees that as between the Manager
and the Trust, the Manager has the exclusive right so to use, or authorize
others to use, said name, and the Trust agrees to take such action as may
reasonably be requested by the Manager to give full effect to the provisions of
this section (including, without limitation, consenting to such use of said
name). Without limiting the generality of the foregoing, the Trust agrees
that, upon (i) any termination of this Agreement by either party, (ii) the
violation of any of its
- 7 -
<PAGE> 8
provisions by the Trust or (iii) termination of this Management Contract
between Sierra and the Trust, the Trust will, at the request of the Manager
made within six months after such termination or violation, use its best
efforts to change the name of the Trust so as to eliminate all reference, if
any, to the name "Sierra" and will not thereafter transact any business in a
name containing the name "Sierra" in any form or combination whatsoever, or
designate itself as the same entity as or successor to an entity of such name,
or otherwise use the name "Sierra" or any other reference to the Manager. Such
covenants on the part of the Trust shall be binding upon it, its trustees,
offices, stockholders, creditors and all other persons claiming under or
through it.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, THE SIERRA VARIABLE TRUST and SIERRA INVESTMENT
ADVISORS CORPORATION have each caused this instrument to be signed in duplicate
on its behalf by its duly authorized representative, all as of the day and year
first above written.
THE SIERRA VARIABLE TRUST
By /s/ KEITH PIPES
-----------------------------
Name: Keith Pipes
Title:
SIERRA INVESTMENT ADVISORS CORPORATION
By /s/ MICHAEL D. GOTH
-----------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
- 8 -
<PAGE> 1
EXHIBIT 5(a)-4
MANAGEMENT CONTRACT
Management Contract executed as of April 8, 1993, between THE SIERRA
VARIABLE TRUST, a Massachusetts business trust (the "Trust") on behalf of THE
CORPORATE INCOME FUND (the "Fund"), and SIERRA INVESTMENT ADVISORS CORPORATION,
a California corporation (the "Manager").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO THE TRUST.
(a) Subject always to the control of the Trustees of the Trust,
the Manager will, at its expense, furnish continuously an investment program
for the Fund, will make investment decisions on behalf of the Fund and will,
subject to the provisions of paragraph (c), place all orders for the purchase
and sale of its portfolio securities. Subject always to the control of the
Trustees of the Fund, the Manager will also manage, supervise and conduct the
other affairs and business of the Fund and matters incidental thereto. In the
performance of its duties, the Manager will comply with the provisions of the
Agreement and Declaration of Trust, the By-laws of the Trust and the Fund's
stated investment objectives, policies and restrictions as set forth in its
Registration Statement on Form N-1A, File No. 33-57732 and will use its best
efforts to safeguard and promote the welfare of the Fund and to comply with
other policies which the Trustees may from time to time determine.
(b) The Manager, at its expense, will furnish all necessary office
space and equipment, bookkeeping and clerical services (excluding securities
accounting and transfer agency services) required for it to perform its duties
hereunder and will pay all salaries, fees and expenses of officers and Trustees
of the Trust who are affiliated with the Manager.
(c) In the selection of brokers, dealers, futures commissions
merchants or any other sources of portfolio
<PAGE> 2
investments for the Fund (hereafter, "brokers or dealers") and the placing of
orders for the purchaser and sale of portfolio investments for the Fund, the
Manager shall seek to obtain the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage commissions
for brokerage and research services as described below. In using its best
efforts to obtain for the Fund the most favorable price and execution
available, the Manager, bearing in mind the Fund's best interests at all times,
shall consider all factors it deems [relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market for
the security,] the amount of the commission, the timing of the transaction
taking into account market prices and trends, the reputation, experience and
financial stability of the broker or dealer involved and the quality of service
rendered by the broker or dealer in other transactions. Subject to such
policies as the Trustees may determine, the Manager shall not be deemed to have
acted unlawfully or to have breached any duty created by this Contract or
otherwise solely by reason of its having caused the Trust to pay, on behalf of
the Fund, a broker or dealer that provides brokerage and research services to
the Manager an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction, if the Manager determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Manager's overall
responsibilities with respect to the Fund and to other clients of the Manager
as to which the Manager exercised investment discretion. The Trust hereby
agrees with the Manager and with any Sub-Adviser selected by the Manager as
provided in Section 1(d) that any entity or person associated with the Manager
or such Sub-Adviser which is a member of a national securities exchange is
authorized to effect any transaction on such exchange for the account of the
Fund which is permitted by Section 11(a) of the Securities Exchange Act of 1934
and Rule 11a2-2(T) thereunder, and the Trust hereby consents to the retention
of compensation for such transactions in accordance with Rule 11a2-2(T)(2)(iv).
(d) Subject to the provisions of the Agreement and Declaration of
Trust of the Trust and the Investment Company Act
- 2 -
<PAGE> 3
of 1940, the Manager, at its expense, may select and contract with one or more
investment advisers (the "Sub-Adviser") for the Fund to perform some or all of
the services for which it is responsible pursuant to paragraph (a) of this
Section 1 (and any related facilities or services for which it is responsible
under paragraph (b) of this Section 1). The Manager will compensate any
Sub-Adviser of the Fund for its services to the Fund. The Manager may
terminate the services of any Sub-Adviser at any time in its sole discretion,
and shall at such time assume the responsibilities of such Sub-Advisor unless
and until a successor Sub-Adviser is selected.
(e) The Manager shall not be obligated to pay any expenses of or
for the Trust or of or for the Fund not expressly assumed by the Manager
pursuant to this Section other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees officers and
employees of the Trust may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust.
The Trust also understands that the Manager now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Trust has no objection to
the Manager so acting, PROVIDED THAT whenever the Fund and one or more other
accounts or investment companies advised by the Manager have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Trust recognizes that in some cases this procedure may adversely
affect the size of the position that may be acquired or disposed of for the
Fund. In addition, the Trust understands that the persons employed by the
Manager to assist the performance of the Manager's duties hereunder will not
devote
- 3 -
<PAGE> 4
their full time to such services and nothing contained herein shall be deemed
to limit or restrict the right of the Manager or any affiliate of the Manager
to engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
The Trust, on behalf of the Fund, will pay to the Manager as
compensation for the Manager's services rendered, for the facilities furnished
and for the expenses borne by the Manager pursuant to Section 1, a fee,
computed and paid monthly at the annual rate of 0.65% of the value of the
Fund's average daily net assets up to $500 million and 0.50% of the value of
the Fund's average daily net assets over $500 million. Such average daily net
asset value of the Fund shall be determined by taking an average of all of the
determinations of such net asset value during such month at the close of
business on each business day during such month while this Contract is in
effect. Such fee shall be payable for each month within five (5) business days
after the end of such month.
In the event that expenses of the Fund for any fiscal year (not
including any interest, taxes, brokerage, extraordinary expenses or
distribution expenses paid by the Fund pursuant to any distribution plan)
should exceed the expense limitation on investment company expenses enforced by
any statute or regulatory authority of any jurisdiction in which shares of the
Trust are qualified for offer and sale, the compensation due the Manager for
such fiscal year shall be reduced by the amount of such excess by a reduction
or refund thereof. In the event that the expenses of the Fund exceed any
expense limitation which the Manager may, by written notice to the Trust,
voluntarily declare to be effective with respect to the Fund, subject to such
terms and conditions as the Manager may prescribe in such notice, the
compensation due the Manager shall be reduced, and, if necessary, the Manager
shall bear the Fund's expenses to the extent required by such expense
limitation.
The Manager shall not be required to reimburse any amount in excess of
the compensation paid to it pursuant to Section 3.
If the Manager shall serve for less than the whole of a
- 4 -
<PAGE> 5
month, the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Contract shall not be
amended unless such amendment is approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Fund, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager or of any Sub-Adviser of the Fund.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this
Contract by not more than sixty days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders
by the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager, by vote cast in
person at a meeting called for the purpose of voting on such approval,
do not specifically approve at least annually the continuance of this
Contract, then this Contract shall automatically terminate at the
close of business on the second anniversary of its execution, or upon
the expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the
continuance of this Contract is submitted to the shareholders of the
Fund for their approval and such shareholders fail to approve such
continuance of this Contract as provided herein, the Manager may
continue to serve hereunder in a manner consistent with
- 5 -
<PAGE> 6
the Investment Company Act of 1940 and the rules and regulations
thereunder.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of
the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Manager shall promptly notify the Trust in writing of the
occurrence of any of the following events: (a) the Manager shall fail to be
registered as an investment adviser under the Investment Company Act of 1940,
as amended from time to time, and under the laws of any jurisdiction in which
the Manager is required to be registered as an investment adviser in order to
perform its obligations under this Agreement, (b) the Manager shall have been
served or otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or
body, involving the affairs of the Trust and (c) there shall be any change in
the control of the Manager.
7. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of the Fund means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting are present in person or by proxy, or (b)
of the holders of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the rules and
regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities
- 6 -
<PAGE> 7
and Exchange Commission under said Act; the term "specifically approve at least
annually" shall be construed in a manner consistent with the Investment Company
Act of 1940 and the rules and regulations thereunder; and the term "brokerage
and research services" shall have the meaning given in the Securities Exchange
Act of 1934 and the rules and regulations thereunder.
8. NONLIABILITY OF MANAGER.
The Manager shall exercise its best judgement in rendering its
services under this Agreement. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager shall not be subject to any
liability to the Trust, or to any shareholder of the Trust, for any act or
omission in the course of, or connected with, rendering services hereunder.
9. USE OF NAME.
The Manager owns the name "Sierra", which may be used by the Trust
only with the consent of the Manager. The Manager consents to the use by the
Trust of the name "The Sierra Variable Trust" or any other name embodying the
name "Sierra", but only on condition and so long as (i) this Agreement shall
remain in full force, (ii) the Trust shall fully perform, fulfill and comply
with all provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it, and (iii) Sierra Investment Advisors
Corporation is the Manager of the Trust. No such name shall be used by the
Trust at any time or in any place or for any purposes or under any conditions
except as in this section provided. The foregoing authorization by the Manager
to the Trust to use the name "Sierra" as part of a business or name is not
exclusive of the right of the Manager itself to use, or to authorize others to
use, the same; the Trust acknowledges and agrees that as between the Manager
and the Trust, the Manager has the exclusive right so to use, or authorize
others to use, said name, and the Trust agrees to take such action as may
reasonably be requested by the Manager to give full effect to the provisions of
this section (including, without limitation, consenting to such use of said
name). Without limiting the generality of the foregoing, the Trust agrees
that, upon (i) any termination of this Agreement by either party, (ii) the
violation of any of its
- 7 -
<PAGE> 8
provisions by the Trust or (iii) termination of this Management Contract
between Sierra and the Trust, the Trust will, at the request of the Manager
made within six months after such termination or violation, use its best
efforts to change the name of the Trust so as to eliminate all reference, if
any, to the name "Sierra" and will not thereafter transact any business in a
name containing the name "Sierra" in any form or combination whatsoever, or
designate itself as the same entity as or successor to an entity of such name,
or otherwise use the name "Sierra" or any other reference to the Manager. Such
covenants on the part of the Trust shall be binding upon it, its trustees,
offices, stockholders, creditors and all other persons claiming under or
through it.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, THE SIERRA VARIABLE TRUST and SIERRA INVESTMENT
ADVISORS CORPORATION have each caused this instrument to be signed in duplicate
on its behalf by its duly authorized representative, all as of the day and year
first above written.
THE SIERRA VARIABLE TRUST
By \s\ Keith Pipes
------------------------------
Name: Keith Pipes
Title:
SIERRA INVESTMENT ADVISORS CORPORATION
By \s\ Michael D. Goth
------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
- 8 -
<PAGE> 1
EXHIBIT 5(a)-5
MANAGEMENT CONTRACT
Management Contract executed as of April 8, 1993, between THE SIERRA
VARIABLE TRUST, a Massachusetts business trust (the "Trust") on behalf of THE
SHORT-TERM GLOBAL GOVERNMENT FUND (the "Fund"), and SIERRA INVESTMENT ADVISORS
CORPORATION, a California corporation (the "Manager").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO THE TRUST.
(a) Subject always to the control of the Trustees of the Trust,
the Manager will, at its expense, furnish continuously an investment program
for the Fund, will make investment decisions on behalf of the Fund and will,
subject to the provisions of paragraph (c), place all orders for the purchase
and sale of its portfolio securities. Subject always to the control of the
Trustees of the Fund, the Manager will also manage, supervise and conduct the
other affairs and business of the Fund and matters incidental thereto. In the
performance of its duties, the Manager will comply with the provisions of the
Agreement and Declaration of Trust, the By-laws of the Trust and the Fund's
stated investment objectives, policies and restrictions as set forth in its
Registration Statement on Form N-1A, File No. 33-57732 and will use its best
efforts to safeguard and promote the welfare of the Fund and to comply with
other policies which the Trustees may from time to time determine.
(b) The Manager, at its expense, will furnish all necessary office
space and equipment, bookkeeping and clerical services (excluding securities
accounting and transfer agency services) required for it to perform its duties
hereunder and will pay all salaries, fees and expenses of officers and Trustees
of the Trust who are affiliated with the Manager.
(c) In the selection of brokers, dealers, futures commissions
merchants or any other sources of portfolio investments for the Fund
(hereafter, "brokers or dealers") and
<PAGE> 2
the placing of orders for the purchaser and sale of portfolio investments for
the Fund, the Manager shall seek to obtain the most favorable price and
execution available, except to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research services as described below.
In using its best efforts to obtain for the Fund the most favorable price and
execution available, the Manager, bearing in mind the Fund's best interests at
all times, shall consider all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the transaction
taking into account market prices and trends, the reputation, experience and
financial stability of the broker or dealer involved and the quality of service
rendered by the broker or dealer in other transactions. Subject to such
policies as the Trustees may determine, the Manager shall not be deemed to have
acted unlawfully or to have breached any duty created by this Contract or
otherwise solely by reason of its having caused the Trust to pay, on behalf of
the Fund, a broker or dealer that provides brokerage and research services to
the Manager an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction, if the Manager determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Manager's overall
responsibilities with respect to the Fund and to other clients of the Manager
as to which the Manager exercised investment discretion. The Trust hereby
agrees with the Manager and with any Sub-Adviser selected by the Manager as
provided in Section 1(d) that any entity or person associated with the Manager
or such Sub-Adviser which is a member of a national securities exchange is
authorized to effect any transaction on such exchange for the account of the
Fund which is permitted by Section 11(a) of the Securities Exchange Act of 1934
and Rule 11a2-2(T) thereunder, and the Trust hereby consents to the retention
of compensation for such transactions in accordance with Rule 11a2-2(T)(2)(iv).
(d) Subject to the provisions of the Agreement and Declaration of
Trust of the Trust and the Investment Company Act of 1940, the Manager, at its
expense, may select and contract
- 2 -
<PAGE> 3
with one or more investment advisers (the "Sub-Adviser") for the Fund to
perform some or all of the services for which it is responsible pursuant to
paragraph (a) of this Section 1 (and any related facilities or services for
which it is responsible under paragraph (b) of this Section 1). The Manager
will compensate any Sub-Adviser of the Fund for its services to the Fund. The
Manager may terminate the services of any Sub-Adviser at any time in its sole
discretion, and shall at such time assume the responsibilities of such
Sub-Advisor unless and until a successor Sub-Adviser is selected.
(e) The Manager shall not be obligated to pay any expenses of or
for the Trust or of or for the Fund not expressly assumed by the Manager
pursuant to this Section other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees officers and
employees of the Trust may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust.
The Trust also understands that the Manager now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Trust has no objection to
the Manager so acting, PROVIDED THAT whenever the Fund and one or more other
accounts or investment companies advised by the Manager have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Trust recognizes that in some cases this procedure may adversely
affect the size of the position that may be acquired or disposed of for the
Fund. In addition, the Trust understands that the persons employed by the
Manager to assist the performance of the Manager's duties hereunder will not
devote their full time to such services and nothing contained herein
- 3 -
<PAGE> 4
shall be deemed to limit or restrict the right of the Manager or any affiliate
of the Manager to engage in and devote time and attention to other businesses
or to render services of whatever kind or nature.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
The Trust, on behalf of the Fund, will pay to the Manager as
compensation for the Manager's services rendered, for the facilities furnished
and for the expenses borne by the Manager pursuant to Section 1, a fee,
computed and paid monthly at the annual rate of 0.75% of the value of the
Fund's average daily net assets up to $500 million and 0.65% of the value of
the Fund's average daily net assets over $500 million. Such average daily net
asset value of the Fund shall be determined by taking an average of all of the
determinations of such net asset value during such month at the close of
business on each business day during such month while this Contract is in
effect. Such fee shall be payable for each month within five (5) business days
after the end of such month.
In the event that expenses of the Fund for any fiscal year (not
including any interest, taxes, brokerage, extraordinary expenses or
distribution expenses paid by the Fund pursuant to any distribution plan)
should exceed the expense limitation on investment company expenses enforced by
any statute or regulatory authority of any jurisdiction in which shares of the
Trust are qualified for offer and sale, the compensation due the Manager for
such fiscal year shall be reduced by the amount of such excess by a reduction
or refund thereof. In the event that the expenses of the Fund exceed any
expense limitation which the Manager may, by written notice to the Trust,
voluntarily declare to be effective with respect to the Fund, subject to such
terms and conditions as the Manager may prescribe in such notice, the
compensation due the Manager shall be reduced, and, if necessary, the Manager
shall bear the Fund's expenses to the extent required by such expense
limitation.
The Manager shall not be required to reimburse any amount in excess of
the compensation paid to it pursuant to Section 3.
If the Manager shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
- 4 -
<PAGE> 5
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Contract shall not be
amended unless such amendment is approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Fund, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager or of any Sub-Adviser of the Fund.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this
Contract by not more than sixty days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders
by the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager, by vote cast in
person at a meeting called for the purpose of voting on such approval,
do not specifically approve at least annually the continuance of this
Contract, then this Contract shall automatically terminate at the
close of business on the second anniversary of its execution, or upon
the expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the
continuance of this Contract is submitted to the shareholders of the
Fund for their approval and such shareholders fail to approve such
continuance of this Contract as provided herein, the Manager may
continue to serve hereunder in a manner consistent with the Investment
Company Act of 1940 and the rules and regulations thereunder.
- 5 -
<PAGE> 6
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of
the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Manager shall promptly notify the Trust in writing of the
occurrence of any of the following events: (a) the Manager shall fail to be
registered as an investment adviser under the Investment Company Act of 1940,
as amended from time to time, and under the laws of any jurisdiction in which
the Manager is required to be registered as an investment adviser in order to
perform its obligations under this Agreement, (b) the Manager shall have been
served or otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or
body, involving the affairs of the Trust and (c) there shall be any change in
the control of the Manager.
7. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of the Fund means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting are present in person or by proxy, or (b)
of the holders of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the rules and
regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the rules
- 6 -
<PAGE> 7
and regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934 and the rules and
regulations thereunder.
8. NONLIABILITY OF MANAGER.
The Manager shall exercise its best judgement in rendering its
services under this Agreement. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager shall not be subject to any
liability to the Trust, or to any shareholder of the Trust, for any act or
omission in the course of, or connected with, rendering services hereunder.
9. USE OF NAME.
The Manager owns the name "Sierra", which may be used by the Trust
only with the consent of the Manager. The Manager consents to the use by the
Trust of the name "The Sierra Variable Trust" or any other name embodying the
name "Sierra", but only on condition and so long as (i) this Agreement shall
remain in full force, (ii) the Trust shall fully perform, fulfill and comply
with all provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it, and (iii) Sierra Investment Advisors
Corporation is the Manager of the Trust. No such name shall be used by the
Trust at any time or in any place or for any purposes or under any conditions
except as in this section provided. The foregoing authorization by the Manager
to the Trust to use the name "Sierra" as part of a business or name is not
exclusive of the right of the Manager itself to use, or to authorize others to
use, the same; the Trust acknowledges and agrees that as between the Manager
and the Trust, the Manager has the exclusive right so to use, or authorize
others to use, said name, and the Trust agrees to take such action as may
reasonably be requested by the Manager to give full effect to the provisions of
this section (including, without limitation, consenting to such use of said
name). Without limiting the generality of the foregoing, the Trust agrees
that, upon (i) any termination of this Agreement by either party, (ii) the
violation of any of its provisions by the Trust or (iii) termination of this
Management Contract between Sierra and the Trust, the Trust will, at the
request of the Manager made within six months after such
- 7 -
<PAGE> 8
termination or violation, use its best efforts to change the name of the Trust
so as to eliminate all reference, if any, to the name "Sierra" and will not
thereafter transact any business in a name containing the name "Sierra" in any
form or combination whatsoever, or designate itself as the same entity as or
successor to an entity of such name, or otherwise use the name "Sierra" or any
other reference to the Manager. Such covenants on the part of the Trust shall
be binding upon it, its trustees, offices, stockholders, creditors and all other
persons claiming under or through it.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, THE SIERRA VARIABLE TRUST and SIERRA INVESTMENT
ADVISORS CORPORATION have each caused this instrument to be signed in duplicate
on its behalf by its duly authorized representative, all as of the day and year
first above written.
THE SIERRA VARIABLE TRUST
By /s/ KEITH PIPES
-----------------------------
Name: Keith Pipes
Title:
SIERRA INVESTMENT ADVISORS CORPORATION
By /s/ MICHAEL D. GOTH
------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
- 8 -
<PAGE> 1
EXHIBIT 5(a)-6
MANAGEMENT CONTRACT
Management Contract executed as of April 8, 1993, between THE SIERRA
VARIABLE TRUST, a Massachusetts business trust (the "Trust") on behalf of THE
GROWTH FUND (the "Fund"), and SIERRA INVESTMENT ADVISORS CORPORATION, a
California corporation (the "Manager").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO THE TRUST.
(a) Subject always to the control of the Trustees of the Trust, the
Manager will, at its expense, furnish continuously an investment program for the
Fund, will make investment decisions on behalf of the Fund and will, subject to
the provisions of paragraph (c), place all orders for the purchase and sale of
its portfolio securities. Subject always to the control of the Trustees of the
Fund, the Manager will also manage, supervise and conduct the other affairs and
business of the Fund and matters incidental thereto. In the performance of its
duties, the Manager will comply with the provisions of the Agreement and
Declaration of Trust, the By-laws of the Trust and the Fund's stated investment
objectives, policies and restrictions as set forth in its Registration Statement
on Form N-1A, File No. 33-57732 and will use its best efforts to safeguard and
promote the welfare of the Fund and to comply with other policies which the
Trustees may from time to time determine.
(b) The Manager, at its expense, will furnish all necessary office
space and equipment, bookkeeping and clerical services (excluding securities
accounting and transfer agency services) required for it to perform its duties
hereunder and will pay all salaries, fees and expenses of officers and Trustees
of the Trust who are affiliated with the Manager.
(c) In the selection of brokers, dealers, futures commissions
merchants or any other sources of portfolio investments for the Fund (hereafter,
"brokers or dealers") and the placing of orders for the purchaser and sale of
portfolio
<PAGE> 2
investments for the Fund, the Manager shall seek to obtain the most favorable
price and execution available, except to the extent it may be permitted to pay
higher brokerage commissions for brokerage and research services as described
below. In using its best efforts to obtain for the Fund the most favorable price
and execution available, the Manager, bearing in mind the Fund's best interests
at all times, shall consider all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the transaction taking
into account market prices and trends, the reputation, experience and financial
stability of the broker or dealer involved and the quality of service rendered
by the broker or dealer in other transactions. Subject to such policies as the
Trustees may determine, the Manager shall not be deemed to have acted unlawfully
or to have breached any duty created by this Contract or otherwise solely by
reason of its having caused the Trust to pay, on behalf of the Fund, a broker or
dealer that provides brokerage and research services to the Manager an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Manager determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Manager's overall responsibilities with respect to
the Fund and to other clients of the Manager as to which the Manager exercised
investment discretion. The Trust hereby agrees with the Manager and with any
Sub-Adviser selected by the Manager as provided in Section 1(d) that any entity
or person associated with the Manager or such Sub-Adviser which is a member of a
national securities exchange is authorized to effect any transaction on such
exchange for the account of the Fund which is permitted by Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Trust
hereby consents to the retention of compensation for such transactions in
accordance with Rule 11a2-2(T)(2)(iv).
(d) Subject to the provisions of the Agreement and Declaration of
Trust of the Trust and the Investment Company Act
-2-
<PAGE> 3
of 1940, the Manager, at its expense, may select and contract with one or more
investment advisers (the "Sub-Adviser") for the Fund to perform some or all of
the services for which it is responsible pursuant to paragraph (a) of this
Section 1 (and any related facilities or services for which it is responsible
under paragraph (b) of this Section 1). The Manager will compensate any
Sub-Adviser of the Fund for its services to the Fund. The Manager may terminate
the services of any Sub-Adviser at any time in its sole discretion, and shall at
such time assume the responsibilities of such Sub-Advisor unless and until a
successor Sub-Adviser is selected.
(e) The Manager shall not be obligated to pay any expenses of or for
the Trust or of or for the Fund not expressly assumed by the Manager pursuant to
this Section other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees officers and
employees of the Trust may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust.
The Trust also understands that the Manager now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Trust has no objection to
the Manager so acting, PROVIDED THAT whenever the Fund and one or more other
accounts or investment companies advised by the Manager have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with procedures believed to be equitable to each entity. Similarly,
opportunities to sell securities will be allocated in an equitable manner. The
Trust recognizes that in some cases this procedure may adversely affect the size
of the position that may be acquired or disposed of for the Fund. In addition,
the Trust understands that the persons employed by the Manager to assist the
performance of the Manager's duties hereunder will not devote
- 3 -
<PAGE> 4
their full time to such services and nothing contained herein shall be deemed to
limit or restrict the right of the Manager or any affiliate of the Manager to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
The Trust, on behalf of the Fund, will pay to the Manager as
compensation for the Manager's services rendered, for the facilities furnished
and for the expenses borne by the Manager pursuant to Section 1, a fee, computed
and paid monthly at the annual rate of 0.95% of value of the Fund's average
daily net assets up to $200 million and 0.875% of the value of the Fund's
average daily net assets over $200 million. Such average daily net asset value
of the Fund shall be determined by taking an average of all of the
determinations of such net asset value during such month at the close of
business on each business day during such month while this Contract is in
effect. Such fee shall be payable for each month within five (5) business days
after the end of such month.
In the event that expenses of the Fund for any fiscal year (not
including any interest, taxes, brokerage, extraordinary expenses or distribution
expenses paid by the Fund pursuant to any distribution plan) should exceed the
expense limitation on investment company expenses enforced by any statute or
regulatory authority of any jurisdiction in which shares of the Trust are
qualified for offer and sale, the compensation due the Manager for such fiscal
year shall be reduced by the amount of such excess by a reduction or refund
thereof. In the event that the expenses of the Fund exceed any expense
limitation which the Manager may, by written notice to the Trust, voluntarily
declare to be effective with respect to the Fund, subject to such terms and
conditions as the Manager may prescribe in such notice, the compensation due the
Manager shall be reduced, and, if necessary, the Manager shall bear the Fund's
expenses to the extent required by such expense limitation.
The Manager shall not be required to reimburse any amount in excess of
the compensation paid to it pursuant to Section 3.
If the Manager shall serve for less than the whole of a
- 4 -
<PAGE> 5
month, the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment; and this Contract shall not be amended
unless such amendment is approved at a meeting by the affirmative vote of a
majority of the outstanding shares of the Fund, and by the vote, cast in person
at a meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Trust who are not interested persons of the Trust or of the
Manager or of any Sub-Adviser of the Fund.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this
Contract by not more than sixty days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders by
the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager, by vote cast in
person at a meeting called for the purpose of voting on such approval,
do not specifically approve at least annually the continuance of this
Contract, then this Contract shall automatically terminate at the close
of business on the second anniversary of its execution, or upon the
expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the
continuance of this Contract is submitted to the shareholders of the
Fund for their approval and such shareholders fail to approve such
continuance of this Contract as provided herein, the Manager may
continue to serve hereunder in a manner consistent with
- 5 -
<PAGE> 6
the Investment Company Act of 1940 and the rules and regulations
thereunder.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Manager shall promptly notify the Trust in writing of the
occurrence of any of the following events: (a) the Manager shall fail to be
registered as an investment adviser under the Investment Company Act of 1940, as
amended from time to time, and under the laws of any jurisdiction in which the
Manager is required to be registered as an investment adviser in order to
perform its obligations under this Agreement, (b) the Manager shall have been
served or otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or
body, involving the affairs of the Trust and (c) there shall be any change in
the control of the Manager.
7. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of the Fund means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting are present in person or by proxy, or (b)
of the holders of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the rules and
regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities
- 6 -
<PAGE> 7
and Exchange Commission under said Act; the term "specifically approve at least
annually" shall be construed in a manner consistent with the Investment Company
Act of 1940 and the rules and regulations thereunder; and the term "brokerage
and research services" shall have the meaning given in the Securities Exchange
Act of 1934 and the rules and regulations thereunder.
8. NONLIABILITY OF MANAGER.
The Manager shall exercise its best judgement in rendering its services
under this Agreement. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or reckless disregard of its obligations
and duties hereunder, the Manager shall not be subject to any liability to the
Trust, or to any shareholder of the Trust, for any act or omission in the course
of, or connected with, rendering services hereunder.
9. USE OF NAME.
The Manager owns the name "Sierra", which may be used by the Trust only
with the consent of the Manager. The Manager consents to the use by the Trust of
the name "The Sierra Variable Trust" or any other name embodying the name
"Sierra", but only on condition and so long as (i) this Agreement shall remain
in full force, (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed, fulfilled or
complied with by it, and (iii) Sierra Investment Advisors Corporation is the
Manager of the Trust. No such name shall be used by the Trust at any time or in
any place or for any purposes or under any conditions except as in this section
provided. The foregoing authorization by the Manager to the Trust to use the
name "Sierra" as part of a business or name is not exclusive of the right of the
Manager itself to use, or to authorize others to use, the same; the Trust
acknowledges and agrees that as between the Manager and the Trust, the Manager
has the exclusive right so to use, or authorize others to use, said name, and
the Trust agrees to take such action as may reasonably be requested by the
Manager to give full effect to the provisions of this section (including,
without limitation, consenting to such use of said name). Without limiting the
generality of the foregoing, the Trust agrees that, upon (i) any termination of
this Agreement by either party, (ii) the violation of any of its
- 7 -
<PAGE> 8
provisions by the Trust or (iii) termination of this Management Contract between
Sierra and the Trust, the Trust will, at the request of the Manager made within
six months after such termination or violation, use its best efforts to change
the name of the Trust so as to eliminate all reference, if any, to the name
"Sierra" and will not thereafter transact any business in a name containing the
name "Sierra" in any form or combination whatsoever, or designate itself as the
same entity as or successor to an entity of such name, or otherwise use the name
"Sierra" or any other reference to the Manager. Such covenants on the part of
the Trust shall be binding upon it, its trustees, offices, stockholders,
creditors and all other persons claiming under or through it.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders individually
but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, THE SIERRA VARIABLE TRUST and SIERRA INVESTMENT
ADVISORS CORPORATION have each caused this instrument to be signed in duplicate
on its behalf by its duly authorized representative, all as of the day and year
first above written.
THE SIERRA VARIABLE TRUST
By \s\ Keith Pipes
----------------------------
Name: Keith Pipes
Title:
SIERRA INVESTMENT ADVISORS CORPORATION
By \s\ Michael D. Goth
----------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
- 8 -
<PAGE> 1
EXHIBIT 5(a)-9
MANAGEMENT CONTRACT
Management Contract executed as of January 1, 1994, between THE
SIERRA VARIABLE TRUST, a Massachusetts business trust (the "Trust") on behalf of
the SHORT TERM HIGH QUALITY FUND (the "Fund"), and SIERRA INVESTMENT ADVISORS
CORPORATION, a California corporation (the "Manager").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO THE TRUST.
(a) Subject always to the control of the Trustees of the Trust, the
Manager will, at its expense, furnish continuously an investment program for the
Fund, will make investment decisions on behalf of the Fund and will, subject to
the provisions of paragraph (c), place all orders for the purchase and sale of
its portfolio securities. Subject always to the control of the Trustees of the
Fund, the Manager will also manage, supervise and conduct the other affairs and
business of the Fund and matters incidental thereto. In the performance of its
duties, the Manager will comply with the provisions of the Agreement and
Declaration of Trust, the By-laws of the Trust and the Fund's stated investment
objectives, policies and restrictions as set forth in its Registration Statement
on Form N-1A, File No. 33-57732 and will use its best efforts to safeguard and
promote the welfare of the Fund and to comply with other policies which the
Trustees may from time to time determine.
(b) The Manager, at its expense, will furnish all necessary office
space and equipment, bookkeeping and clerical services (excluding securities
accounting and transfer agency services) required for it to perform its duties
hereunder and will pay all salaries, fees and expenses of officers and Trustees
of the Trust who are affiliated with the Manager.
(c) In the selection of brokers, dealers, futures commissions merchants
or any other sources of portfolio investments for the Fund (hereafter, "brokers
or dealers") and
<PAGE> 2
the placing of orders for the purchaser and sale of portfolio investments for
the Fund, the Manager shall seek to obtain the most favorable price and
execution available, except to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research services as described below. In
using its best efforts to obtain for the Fund the most favorable price and
execution available, the Manager, bearing in mind the Fund's best interests at
all times, shall consider all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the transaction taking
into account market prices and trends, the reputation, experience and financial
stability of the broker or dealer involved and the quality of service rendered
by the broker or dealer in other transactions. Subject to such policies as the
Trustees may determine, the Manager shall not be deemed to have acted unlawfully
or to have breached any duty created by this Contract or otherwise solely by
reason of its having caused the Trust to pay, on behalf of the Fund, a broker or
dealer that provides brokerage and research services to the Manager an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Manager determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Manager's overall responsibilities with respect to
the Fund and to other clients of the Manager as to which the Manager exercised
investment discretion. The Trust hereby agrees with the Manager and with any
Sub-Adviser selected by the Manager as provided in Section 1(d) that any entity
or person associated with the Manager or such Sub-Adviser which is a member of a
national securities exchange is authorized to effect any transaction on such
exchange for the account of the Fund which is permitted by Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Trust
hereby consents to the retention of compensation for such transactions in
accordance with Rule 11a2-2(T)(2)(iv).
(d) Subject to the provisions of the Agreement and Declaration of Trust of the
Trust and the Investment Company Act of 1940, the Manager, at its expense, may
select and contract
-2-
<PAGE> 3
with one or more investment advisers (the "Sub-Adviser") for the Fund to
perform some or all of the services for which it is responsible pursuant to
paragraph (a) of this Section 1 (and any related facilities or services for
which it is responsible under paragraph (b) of this Section 1). The Manager
will compensate any Sub-Adviser of the Fund for its services to the Fund. The
Manager may terminate the services of any Sub-Adviser at any time in its sole
discretion, and shall at such time assume the responsibilities of such
Sub-Advisor unless and until a successor Sub-Adviser is selected.
(e) The Manager shall not be obligated to pay any expenses of or
for the Trust or of or for the Fund not expressly assumed by the Manager
pursuant to this Section other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees officers and
employees of the Trust may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust.
The Trust also understands that the Manager now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Trust has no objection to
the Manager so acting, PROVIDED THAT whenever the Fund and one or more other
accounts or investment companies advised by the Manager have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Trust recognizes that in some cases this procedure may adversely
affect the size of the position that may be acquired or disposed of for the
Fund. In addition, the Trust understands that the persons employed by the
Manager to assist the performance of the Manager's duties hereunder will not
devote their full time to such services and nothing contained herein
- 3 -
<PAGE> 4
shall be deemed to limit or restrict the right of the Manager or any affiliate
of the Manager to engage in and devote time and attention to other businesses
or to render services of whatever kind or nature.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
The Trust, on behalf of the Fund, will pay to the Manager as
compensation for the Manager's services rendered, for the facilities furnished
and for the expenses borne by the Manager pursuant to Section 1, a fee,
computed and paid monthly at the annual rate of 0.80% of the value of the
Fund's average daily net assets up to $100 million, 0.75% of the value of the
Fund's average daily net assets between $100 million and $200 million, 0.70% of
the value of the Fund's average daily net assets between $200 million and $400
million, 0.65% of the value of the Fund's average daily net assets between $400
million and $500 million and 0.575% of the value of the Fund's average daily
net assets over $500 million. Such average daily net asset value of the Fund
shall be determined by taking an average of all of the determinations of such
net asset value during such month at the close of business on each business day
during such month while this Contract is in effect. Such fee shall be payable
for each month within five (5) business days after the end of such month.
In the event that expenses of the Fund for any fiscal year (not
including any interest, taxes, brokerage, extraordinary expenses or
distribution expenses paid by the Fund pursuant to any distribution plan)
should exceed the expense limitation on investment company expenses enforced by
any statute or regulatory authority of any jurisdiction in which shares of the
Trust are qualified for offer and sale, the compensation due the Manager for
such fiscal year shall be reduced by the amount of such excess by a reduction
or refund thereof. In the event that the expenses of the Fund exceed any
expense limitation which the Manager may, by written notice to the Trust,
voluntarily declare to be effective with respect to the Fund, subject to such
terms and conditions as the Manager may prescribe in such notice, the
compensation due the Manager shall be reduced, and, if necessary, the Manager
shall bear the Fund's expenses to the extent required by such expense
limitation.
The Manager shall not be required to reimburse any amount in excess of
the compensation paid to it pursuant to Section 3.
If the Manager shall serve for less than the whole of a
- 4 -
<PAGE> 5
month, the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Contract shall not be
amended unless such amendment is approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Fund, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager or of any Sub-Adviser of the Fund.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this
Contract by not more than sixty days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders
by the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager, by vote cast in
person at a meeting called for the purpose of voting on such approval,
do not specifically approve at least annually the continuance of this
Contract, then this Contract shall automatically terminate at the
close of business on the second anniversary of its execution, or upon
the expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the
continuance of this Contract is submitted to the shareholders of the
Fund for their approval and such shareholders fail to approve such
continuance of this Contract as provided herein, the Manager may
continue to serve hereunder in a manner consistent with
- 5 -
<PAGE> 6
the Investment Company Act of 1940 and the rules and regulations
thereunder.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of
the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Manager shall promptly notify the Trust in writing of the
occurrence of any of the following events: (a) the Manager shall fail to be
registered as an investment adviser under the Investment Company Act of 1940,
as amended from time to time, and under the laws of any jurisdiction in which
the Manager is required to be registered as an investment adviser in order to
perform its obligations under this Agreement, (b) the Manager shall have been
served or otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or
body, involving the affairs of the Trust and (c) there shall be any change in
the control of the Manager.
7. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of the Fund means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting are present in person or by proxy, or (b)
of the holders of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the rules and
regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities
- 6 -
<PAGE> 7
and Exchange Commission under said Act; the term "specifically approve at least
annually" shall be construed in a manner consistent with the Investment Company
Act of 1940 and the rules and regulations thereunder; and the term "brokerage
and research services" shall have the meaning given in the Securities Exchange
Act of 1934 and the rules and regulations thereunder.
8. NONLIABILITY OF MANAGER.
The Manager shall exercise its best judgement in rendering its
services under this Agreement. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager shall not be subject to any
liability to the Trust, or to any shareholder of the Trust, for any act or
omission in the course of, or connected with, rendering services hereunder.
9. USE OF NAME.
The Manager owns the name "Sierra", which may be used by the Trust
only with the consent of the Manager. The Manager consents to the use by the
Trust of the name "The Sierra Variable Trust" or any other name embodying the
name "Sierra", but only on condition and so long as (i) this Agreement shall
remain in full force, (ii) the Trust shall fully perform, fulfill and comply
with all provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it, and (iii) Sierra Investment Advisors
Corporation is the Manager of the Trust. No such name shall be used by the
Trust at any time or in any place or for any purposes or under any conditions
except as in this section provided. The foregoing authorization by the Manager
to the Trust to use the name "Sierra" as part of a business or name is not
exclusive of the right of the Manager itself to use, or to authorize others to
use, the same; the Trust acknowledges and agrees that as between the Manager
and the Trust, the Manager has the exclusive right so to use, or authorize
others to use, said name, and the Trust agrees to take such action as may
reasonably be requested by the Manager to give full effect to the provisions of
this section (including, without limitation, consenting to such use of said
name). Without limiting the generality of the foregoing, the Trust agrees
that, upon (i) any termination of this Agreement by either party, (ii) the
violation of any of its
- 7 -
<PAGE> 8
provisions by the Trust or (iii) termination of this Management Contract
between Sierra and the Trust, the Trust will, at the request of the Manager
made within six months after such termination or violation, use its best
efforts to change the name of the Trust so as to eliminate all reference, if
any, to the name "Sierra" and will not thereafter transact any business in a
name containing the name "Sierra" in any form or combination whatsoever, or
designate itself as the same entity as or successor to an entity of such name,
or otherwise use the name "Sierra" or any other reference to the Manager. Such
covenants on the part of the Trust shall be binding upon it, its trustees,
offices, stockholders, creditors and all other persons claiming under or
through it.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, THE SIERRA VARIABLE TRUST and SIERRA INVESTMENT
ADVISORS CORPORATION have each caused this instrument to be signed in duplicate
on its behalf by its duly authorized representative, all as of the day and year
first above written.
THE SIERRA VARIABLE TRUST
By /s/ KEITH PIPES
-----------------------------
Name: Keith Pipes
Title:
SIERRA INVESTMENT ADVISORS CORPORATION
By /s/ MICHAEL D. GOTH
------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
- 8 -
<PAGE> 1
EXHIBIT 5(a)-10
MANAGEMENT CONTRACT
Management Contract executed as of January 1, 1994, between THE
SIERRA VARIABLE TRUST, a Massachusetts business trust (the "Trust") on behalf of
the GROWTH AND INCOME FUND (the "Fund"), and SIERRA INVESTMENT ADVISORS
CORPORATION, a California corporation (the "Manager").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO THE TRUST.
(a) Subject always to the control of the Trustees of the Trust, the
Manager will, at its expense, furnish continuously an investment program for the
Fund, will make investment decisions on behalf of the Fund and will, subject to
the provisions of paragraph (c), place all orders for the purchase and sale of
its portfolio securities. Subject always to the control of the Trustees of the
Fund, the Manager will also manage, supervise and conduct the other affairs and
business of the Fund and matters incidental thereto. In the performance of its
duties, the Manager will comply with the provisions of the Agreement and
Declaration of Trust, the By-laws of the Trust and the Fund's stated investment
objectives, policies and restrictions as set forth in its Registration Statement
on Form N-1A, File No. 33-57732 and will use its best efforts to safeguard and
promote the welfare of the Fund and to comply with other policies which the
Trustees may from time to time determine.
(b) The Manager, at its expense, will furnish all necessary office
space and equipment, bookkeeping and clerical services (excluding securities
accounting and transfer agency services) required for it to perform its duties
hereunder and will pay all salaries, fees and expenses of officers and Trustees
of the Trust who are affiliated with the Manager.
(c) In the selection of brokers, dealers, futures commissions
merchants or any other sources of portfolio investments for the Fund (hereafter,
"brokers or dealers") and
<PAGE> 2
the placing of orders for the purchaser and sale of portfolio investments for
the Fund, the Manager shall seek to obtain the most favorable price and
execution available, except to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research services as described below. In
using its best efforts to obtain for the Fund the most favorable price and
execution available, the Manager, bearing in mind the Fund's best interests at
all times, shall consider all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the transaction taking
into account market prices and trends, the reputation, experience and financial
stability of the broker or dealer involved and the quality of service rendered
by the broker or dealer in other transactions. Subject to such policies as the
Trustees may determine, the Manager shall not be deemed to have acted unlawfully
or to have breached any duty created by this Contract or otherwise solely by
reason of its having caused the Trust to pay, on behalf of the Fund, a broker or
dealer that provides brokerage and research services to the Manager an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Manager determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Manager's overall responsibilities with respect to
the Fund and to other clients of the Manager as to which the Manager exercised
investment discretion. The Trust hereby agrees with the Manager and with any
Sub-Adviser selected by the Manager as provided in Section 1(d) that any entity
or person associated with the Manager or such Sub-Adviser which is a member of a
national securities exchange is authorized to effect any transaction on such
exchange for the account of the Fund which is permitted by Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Trust
hereby consents to the retention of compensation for such transactions in
accordance with Rule 11a2-2(T)(2)(iv).
(d) Subject to the provisions of the Agreement and Declaration of
Trust of the Trust and the Investment Company Act of 1940, the Manager, at its
expense, may select and contract
- 2 -
<PAGE> 3
with one or more investment advisers (the "Sub-Adviser") for the Fund to perform
some or all of the services for which it is responsible pursuant to paragraph
(a) of this Section 1 (and any related facilities or services for which it is
responsible under paragraph (b) of this Section 1). The Manager will compensate
any Sub-Adviser of the Fund for its services to the Fund. The Manager may
terminate the services of any Sub-Adviser at any time in its sole discretion,
and shall at such time assume the responsibilities of such Sub-Advisor unless
and until a successor Sub-Adviser is selected.
(e) The Manager shall not be obligated to pay any expenses of or for
the Trust or of or for the Fund not expressly assumed by the Manager pursuant to
this Section other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees officers and
employees of the Trust may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust.
The Trust also understands that the Manager now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Trust has no objection to
the Manager so acting, PROVIDED THAT whenever the Fund and one or more other
accounts or investment companies advised by the Manager have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with procedures believed to be equitable to each entity. Similarly,
opportunities to sell securities will be allocated in an equitable manner. The
Trust recognizes that in some cases this procedure may adversely affect the size
of the position that may be acquired or disposed of for the Fund. In addition,
the Trust understands that the persons employed by the Manager to assist the
performance of the Manager's duties hereunder will not devote their full time to
such services and nothing contained herein
- 3 -
<PAGE> 4
shall be deemed to limit or restrict the right of the Manager or any affiliate
of the Manager to engage in and devote time and attention to other businesses or
to render services of whatever kind or nature.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
The Trust, on behalf of the Fund, will pay to the Manager as
compensation for the Manager's services rendered, for the facilities furnished
and for the expenses borne by the Manager pursuant to Section 1, a fee, computed
and paid monthly at the annual rate of 0.80% of the value of the Fund's average
daily net assets up to $100 million, 0.75% of the value of the Fund's average
daily net assets between $100 million and $200 million, 0.70% of the value of
the Fund's average daily net assets between $200 million and $400 million, 0.65%
of the value of the Fund's average daily net assets between $400 million and
$500 million and 0.575% of the value of the Fund's average daily net assets over
$500 million. Such average daily net asset value of the Fund shall be determined
by taking an average of all of the determinations of such net asset value during
such month at the close of business on each business day during such month while
this Contract is in effect. Such fee shall be payable for each month within five
(5) business days after the end of such month.
In the event that expenses of the Fund for any fiscal year (not
including any interest, taxes, brokerage, extraordinary expenses or distribution
expenses paid by the Fund pursuant to any distribution plan) should exceed the
expense limitation on investment company expenses enforced by any statute or
regulatory authority of any jurisdiction in which shares of the Trust are
qualified for offer and sale, the compensation due the Manager for such fiscal
year shall be reduced by the amount of such excess by a reduction or refund
thereof. In the event that the expenses of the Fund exceed any expense
limitation which the Manager may, by written notice to the Trust, voluntarily
declare to be effective with respect to the Fund, subject to such terms and
conditions as the Manager may prescribe in such notice, the compensation due the
Manager shall be reduced, and, if necessary, the Manager shall bear the Fund's
expenses to the extent required by such expense limitation.
The Manager shall not be required to reimburse any amount in
- 4 -
<PAGE> 5
excess of the compensation paid to it pursuant to Section 3.
If the Manager shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of any
penalty, in the event of its assignment; and this Contract shall not be amended
unless such amendment is approved at a meeting by the affirmative vote of a
majority of the outstanding shares of the Fund, and by the vote, cast in person
at a meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Trust who are not interested persons of the Trust or of the
Manager or of any Sub-Adviser of the Fund.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this
Contract by not more than sixty days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders by
the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager, by vote cast in
person at a meeting called for the purpose of voting on such approval,
do not specifically approve at least annually the continuance of this
Contract, then this Contract shall automatically terminate at the close
of business on the second anniversary of its execution, or upon the
expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the
continuance of this Contract is submitted to the shareholders of the
Fund for
- 5 -
<PAGE> 6
their approval and such shareholders fail to approve such continuance
of this Contract as provided herein, the Manager may continue to serve
hereunder in a manner consistent with the Investment Company Act of
1940 and the rules and regulations thereunder.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Manager shall promptly notify the Trust in writing of the
occurrence of any of the following events: (a) the Manager shall fail to be
registered as an investment adviser under the Investment Company Act of 1940, as
amended from time to time, and under the laws of any jurisdiction in which the
Manager is required to be registered as an investment adviser in order to
perform its obligations under this Agreement, (b) the Manager shall have been
served or otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or
body, involving the affairs of the Trust and (c) there shall be any change in
the control of the Manager.
7. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of the Fund means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting are present in person or by proxy, or (b)
of the holders of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person" and "assignment" shall
- 6 -
<PAGE> 7
have their respective meanings defined in the Investment Company Act of 1940 and
the rules and regulations thereunder, subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission under said Act; the
term "specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the rules and regulations
thereunder; and the term "brokerage and research services" shall have the
meaning given in the Securities Exchange Act of 1934 and the rules and
regulations thereunder.
8. NONLIABILITY OF MANAGER.
The Manager shall exercise its best judgement in rendering its services
under this Agreement. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or reckless disregard of its obligations
and duties hereunder, the Manager shall not be subject to any liability to the
Trust, or to any shareholder of the Trust, for any act or omission in the course
of, or connected with, rendering services hereunder.
9. USE OF NAME.
The Manager owns the name "Sierra", which may be used by the Trust only
with the consent of the Manager. The Manager consents to the use by the Trust of
the name "The Sierra Variable Trust" or any other name embodying the name
"Sierra", but only on condition and so long as (i) this Agreement shall remain
in full force, (ii) the Trust shall fully perform, fulfill and comply with all
provisions of this Agreement expressed herein to be performed, fulfilled or
complied with by it, and (iii) Sierra Investment Advisors Corporation is the
Manager of the Trust. No such name shall be used by the Trust at any time or in
any place or for any purposes or under any conditions except as in this section
provided. The foregoing authorization by the Manager to the Trust to use the
name "Sierra" as part of a business or name is not exclusive of the right of the
Manager itself to use, or to authorize others to use, the same; the Trust
acknowledges and agrees that as between the Manager and the Trust, the Manager
has the exclusive right so to use, or authorize others to use, said name, and
the Trust agrees to take such action as may reasonably be requested by the
Manager to give full effect to the provisions of this section (including,
without limitation, consenting to
- 7 -
<PAGE> 8
such use of said name). Without limiting the generality of the foregoing, the
Trust agrees that, upon (i) any termination of this Agreement by either party,
(ii) the violation of any of its provisions by the Trust or (iii) termination of
this Management Contract between Sierra and the Trust, the Trust will, at the
request of the Manager made within six months after such termination or
violation, use its best efforts to change the name of the Trust so as to
eliminate all reference, if any, to the name "Sierra" and will not thereafter
transact any business in a name containing the name "Sierra" in any form or
combination whatsoever, or designate itself as the same entity as or successor
to an entity of such name, or otherwise use the name "Sierra" or any other
reference to the Manager. Such covenants on the part of the Trust shall be
binding upon it, its trustees, offices, stockholders, creditors and all other
persons claiming under or through it.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders individually
but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, THE SIERRA VARIABLE TRUST and SIERRA INVESTMENT
ADVISORS CORPORATION have each caused this instrument to be signed in duplicate
on its behalf by its duly authorized representative, all as of the day and year
first above written.
THE SIERRA VARIABLE TRUST
By \s\ Keith Pipes
-----------------------------
Name: Keith Pipes
Title: Director, Executive Vice President
& Secretary
SIERRA INVESTMENT ADVISORS CORPORATION
By \s\ Michael D. Goth
------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
- 8 -
<PAGE> 1
EXHIBIT 5(a)-11
MANAGEMENT CONTRACT
Management Contract executed as of January 1, 1994, between
THE SIERRA VARIABLE TRUST, a Massachusetts business trust (the "Trust") on
behalf of the Emerging Growth Fund (the "Fund"), and SIERRA INVESTMENT ADVISORS
CORPORATION, a California corporation (the "Manager").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO THE TRUST.
(a) Subject always to the control of the Trustees of the Trust,
the Manager will, at its expense, furnish continuously an investment program
for the Fund, will make investment decisions on behalf of the Fund and will,
subject to the provisions of paragraph (c), place all orders for the purchase
and sale of its portfolio securities. Subject always to the control of the
Trustees of the Fund, the Manager will also manage, supervise and conduct the
other affairs and business of the Fund and matters incidental thereto. In the
performance of its duties, the Manager will comply with the provisions of the
Agreement and Declaration of Trust, the By-laws of the Trust and the Fund's
stated investment objectives, policies and restrictions as set forth in its
Registration Statement on Form N-1A, File No. 33-57732 and will use its best
efforts to safeguard and promote the welfare of the Fund and to comply with
other policies which the Trustees may from time to time determine.
(b) The Manager, at its expense, will furnish all necessary office
space and equipment, bookkeeping and clerical services (excluding securities
accounting and transfer agency services) required for it to perform its duties
hereunder and will pay all salaries, fees and expenses of officers and Trustees
of the Trust who are affiliated with the Manager.
(c) In the selection of brokers, dealers, futures commissions
merchants or any other sources of portfolio investments for the Fund
(hereafter, "brokers or dealers") and
<PAGE> 2
the placing of orders for the purchaser and sale of portfolio investments for
the Fund, the Manager shall seek to obtain the most favorable price and
execution available, except to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research services as described below.
In using its best efforts to obtain for the Fund the most favorable price and
execution available, the Manager, bearing in mind the Fund's best interests at
all times, shall consider all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the transaction
taking into account market prices and trends, the reputation, experience and
financial stability of the broker or dealer involved and the quality of service
rendered by the broker or dealer in other transactions. Subject to such
policies as the Trustees may determine, the Manager shall not be deemed to have
acted unlawfully or to have breached any duty created by this Contract or
otherwise solely by reason of its having caused the Trust to pay, on behalf of
the Fund, a broker or dealer that provides brokerage and research services to
the Manager an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction, if the Manager determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Manager's overall
responsibilities with respect to the Fund and to other clients of the Manager
as to which the Manager exercised investment discretion. The Trust hereby
agrees with the Manager and with any Sub-Adviser selected by the Manager as
provided in Section 1(d) that any entity or person associated with the Manager
or such Sub-Adviser which is a member of a national securities exchange is
authorized to effect any transaction on such exchange for the account of the
Fund which is permitted by Section 11(a) of the Securities Exchange Act of 1934
and Rule 11a2-2(T) thereunder, and the Trust hereby consents to the retention
of compensation for such transactions in accordance with Rule 11a2-2(T)(2)(iv).
(d) Subject to the provisions of the Agreement and Declaration of
Trust of the Trust and the Investment Company Act of 1940, the Manager, at its
expense, may select and contract
- 2 -
<PAGE> 3
with one or more investment advisers (the "Sub-Adviser") for the Fund to
perform some or all of the services for which it is responsible pursuant to
paragraph (a) of this Section 1 (and any related facilities or services for
which it is responsible under paragraph (b) of this Section 1). The Manager
will compensate any Sub-Adviser of the Fund for its services to the Fund. The
Manager may terminate the services of any Sub-Adviser at any time in its sole
discretion, and shall at such time assume the responsibilities of such
Sub-Advisor unless and until a successor Sub-Adviser is selected.
(e) The Manager shall not be obligated to pay any expenses of or
for the Trust or of or for the Fund not expressly assumed by the Manager
pursuant to this Section other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees officers and
employees of the Trust may be a shareholder, director, officer or employee of,
or be otherwise interested in, the Manager, and in any person controlled by or
under common control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have an interest in
the Trust.
The Trust also understands that the Manager now acts, will continue to
act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment adviser to one or more other investment
companies or series of investment companies, and the Trust has no objection to
the Manager so acting, PROVIDED THAT whenever the Fund and one or more other
accounts or investment companies advised by the Manager have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with procedures believed to be equitable to each entity.
Similarly, opportunities to sell securities will be allocated in an equitable
manner. The Trust recognizes that in some cases this procedure may adversely
affect the size of the position that may be acquired or disposed of for the
Fund. In addition, the Trust understands that the persons employed by the
Manager to assist the performance of the Manager's duties hereunder will not
devote their full time to such services and nothing contained herein
- 3 -
<PAGE> 4
shall be deemed to limit or restrict the right of the Manager or any affiliate
of the Manager to engage in and devote time and attention to other businesses
or to render services of whatever kind or nature.
3. COMPENSATION TO BE PAID BY THE TRUST TO THE MANAGER.
The Trust, on behalf of the Fund, will pay to the Manager as
compensation for the Manager's services rendered, for the facilities furnished
and for the expenses borne by the Manager pursuant to Section 1, a fee,
computed and paid monthly at the annual rate of 0.90% of the value of the
Fund's average daily net assets up to $25 million, 0.85% of the value of the
Fund's average daily net assets between $25 million and $500 million and 0.75%
of the value of the Fund's average daily net assets over $500 million. Such
average daily net asset value of the Fund shall be determined by taking an
average of all of the determinations of such net asset value during such month
at the close of business on each business day during such month while this
Contract is in effect. Such fee shall be payable for each month within five
(5) business days after the end of such month.
In the event that expenses of the Fund for any fiscal year (not
including any interest, taxes, brokerage, extraordinary expenses or
distribution expenses paid by the Fund pursuant to any distribution plan)
should exceed the expense limitation on investment company expenses enforced by
any statute or regulatory authority of any jurisdiction in which shares of the
Trust are qualified for offer and sale, the compensation due the Manager for
such fiscal year shall be reduced by the amount of such excess by a reduction
or refund thereof. In the event that the expenses of the Fund exceed any
expense limitation which the Manager may, by written notice to the Trust,
voluntarily declare to be effective with respect to the Fund, subject to such
terms and conditions as the Manager may prescribe in such notice, the
compensation due the Manager shall be reduced, and, if necessary, the Manager
shall bear the Fund's expenses to the extent required by such expense
limitation.
The Manager shall not be required to reimburse any amount in
excess of the compensation paid to it pursuant to Section 3.
If the Manager shall serve for less than the whole of a
- 4 -
<PAGE> 5
month, the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.
This Contract shall automatically terminate, without the payment of
any penalty, in the event of its assignment; and this Contract shall not be
amended unless such amendment is approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Fund, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager or of any Sub-Adviser of the Fund.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) Either party hereto may at any time terminate this
Contract by not more than sixty days' written notice delivered or
mailed by registered mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders
by the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager, by vote cast in
person at a meeting called for the purpose of voting on such approval,
do not specifically approve at least annually the continuance of this
Contract, then this Contract shall automatically terminate at the
close of business on the second anniversary of its execution, or upon
the expiration of one year from the effective date of the last such
continuance, whichever is later; provided, however, that if the
continuance of this Contract is submitted to the shareholders of the
Fund for their approval and such shareholders fail to approve such
continuance of this Contract as provided herein, the Manager may
continue to serve hereunder in a manner consistent with
- 5 -
<PAGE> 6
the Investment Company Act of 1940 and the rules and regulations
thereunder.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of
the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Manager shall promptly notify the Trust in writing of the
occurrence of any of the following events: (a) the Manager shall fail to be
registered as an investment adviser under the Investment Company Act of 1940,
as amended from time to time, and under the laws of any jurisdiction in which
the Manager is required to be registered as an investment adviser in order to
perform its obligations under this Agreement, (b) the Manager shall have been
served or otherwise have notice of any action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or
body, involving the affairs of the Trust and (c) there shall be any change in
the control of the Manager.
7. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of a majority
of the outstanding shares" of the Fund means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting are present in person or by proxy, or (b)
of the holders of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the rules and
regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities
- 6 -
<PAGE> 7
and Exchange Commission under said Act; the term "specifically approve at least
annually" shall be construed in a manner consistent with the Investment Company
Act of 1940 and the rules and regulations thereunder; and the term "brokerage
and research services" shall have the meaning given in the Securities Exchange
Act of 1934 and the rules and regulations thereunder.
8. NONLIABILITY OF MANAGER.
The Manager shall exercise its best judgement in rendering its
services under this Agreement. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager shall not be subject to any
liability to the Trust, or to any shareholder of the Trust, for any act or
omission in the course of, or connected with, rendering services hereunder.
9. USE OF NAME.
The Manager owns the name "Sierra", which may be used by the Trust
only with the consent of the Manager. The Manager consents to the use by the
Trust of the name "The Sierra Variable Trust" or any other name embodying the
name "Sierra", but only on condition and so long as (i) this Agreement shall
remain in full force, (ii) the Trust shall fully perform, fulfill and comply
with all provisions of this Agreement expressed herein to be performed,
fulfilled or complied with by it, and (iii) Sierra Investment Advisors
Corporation is the Manager of the Trust. No such name shall be used by the
Trust at any time or in any place or for any purposes or under any conditions
except as in this section provided. The foregoing authorization by the Manager
to the Trust to use the name "Sierra" as part of a business or name is not
exclusive of the right of the Manager itself to use, or to authorize others to
use, the same; the Trust acknowledges and agrees that as between the Manager
and the Trust, the Manager has the exclusive right so to use, or authorize
others to use, said name, and the Trust agrees to take such action as may
reasonably be requested by the Manager to give full effect to the provisions of
this section (including, without limitation, consenting to such use of said
name). Without limiting the generality of the foregoing, the Trust agrees that,
upon (i) any termination of this Agreement by either party, (ii) the violation
of any of its
- 7 -
<PAGE> 8
provisions by the Trust or (iii) termination of this Management Contract between
Sierra and the Trust, the Trust will, at the request of the Manager made within
six months after such termination or violation, use its best efforts to change
the name of the Trust so as to eliminate all reference, if any, to the name
"Sierra" and will not thereafter transact any business in a name containing the
name "Sierra" in any form or combination whatsoever, or designate itself as the
same entity as or successor to an entity of such name, or otherwise use the name
"Sierra" or any other reference to the Manager. Such covenants on the part of
the Trust shall be binding upon it, its trustees, offices, stockholders,
creditors and all other persons claiming under or through it.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Trust.
IN WITNESS WHEREOF, THE SIERRA VARIABLE TRUST and SIERRA INVESTMENT
ADVISORS CORPORATION have each caused this instrument to be signed in duplicate
on its behalf by its duly authorized representative, all as of the day and year
first above written.
THE SIERRA VARIABLE TRUST
By \s\ KEITH PIPES
--------------------------------
Name: Keith Pipes
Title: Director, Executive Vice
President and Secretary
SIERRA INVESTMENT ADVISORS CORPORATION
By \s\ MICHAEL D. GOTH
--------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
- 8 -
<PAGE> 1
EXHIBIT 5(b)-1
SUB-ADVISER AGREEMENT
Sub-Adviser Agreement executed as of April 8, 1993 between SIERRA
INVESTMENT ADVISORS CORPORATION, a California corporation (the "Manager"), and
J.P. MORGAN INVESTMENT MANAGEMENT, INC., a Delaware corporation (the
"Sub-Adviser").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST.
(a) Subject always to the control of the Trustees of The Sierra
Variable Trust, a Massachusetts business trust (the "Trust") and to the overall
supervision of the Manager, the Sub-Adviser, at its expense, will furnish
continuously an investment program for the portfolio represented by shares of
The Global Money Fund series (the "Fund"). The Sub-Adviser will make
investment decisions on behalf of the Fund and place all orders for the
purchase and sale of portfolio securities. In the performance of its duties,
the Sub-Adviser will comply with the provisions of the Agreement and
Declaration of Trust, the By-laws of the Trust and the stated investment
objectives, policies and restrictions of the Fund as set forth in its
registration statement on Form N-1A, File No. 33-57732, and will use its best
efforts to safeguard and promote the welfare of the Fund, and to comply with
other policies which the Trustees or the Manager, as the case may be, may from
time to time determine and provide to the Sub-Adviser in writing (including any
additional requirements with respect to applicable insurance laws or
regulations). The Manager represents that all such copies of the Trust's
Registration Statement, including exhibits, have been or will be provided to
the Sub-Adviser, and the Manager agrees promptly to provide the Sub-Adviser
with all amendments or supplements to the Registration Statement. The
Sub-Adviser shall make its officers and employees available to the Manager at
reasonable times to review investment policies of the Fund and to consult with
the Manager regarding the investment affairs of the Fund.
<PAGE> 2
(b) The Sub-Adviser, at its expense, will furnish all necessary
office space and equipment, bookkeeping and clerical services (excluding
shareholder accounting and transfer agency services) required for it to perform
its duties hereunder and will pay all salaries, fees and expenses of officers
and Trustees of the Trust who are affiliated with the Sub-Adviser and not
otherwise affiliated with the Manager.
(c) In the selection of brokers, dealers, futures commissions
merchants or any other sources of portfolio investments for the Fund
(hereafter, "brokers or dealers") and the placing of orders for the purchase
and sale of portfolio investments for the Fund, the Sub-Adviser shall use its
best efforts to obtain the most favorable price and execution available, except
to the extent it may be permitted to pay higher brokerage commissions for
brokerage and research services as described below. In using its best efforts
to obtain the most favorable price and execution available, the Sub-Adviser,
bearing in mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration, price, the size of
the transaction, the nature of the market for the security, the amount of the
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker or dealer in
other transactions. Subject to such policies as the Trustees of the Trust may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused the Trust to pay, on behalf of the Fund, a broker or
dealer that provides brokerage and research services to the Sub-Adviser an
amount of commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Sub-Adviser determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Trust and to other clients of the
Sub-Adviser as to which the Sub-Adviser exercises investment discretion. As
provided in the Management Contract between the Trust and the Manager with
respect to the Fund, dated as of April 8, 1993 (the "Management Contract"), the
Trust agrees that any entity or person associated with the Manager or
Sub-Adviser which is a member of a national
- 2 -
<PAGE> 3
securities exchange is authorized to effect any transaction on such exchange
for the account of the Fund which is permitted by Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Trust
has consented to the retention of compensation for such transactions in
accordance with Rule 11a2-2(T)(2)(iv).
(d) The Sub-Adviser shall not be obligated to pay any expenses of
or for the Fund not expressly assumed by the Sub-Adviser pursuant to this
Section 1.
(e) The Sub-Adviser shall maintain all books and records with respect
to the Fund's portfolio transactions required by subparagraphs (b)(5) - (b)(11)
and paragraph (f) of Rule 31a-1 under the Investment Company Act of 1940, as
amended, and shall render to the Board of Trustees of the Trust such periodic
and special reports as the Board may reasonably request.
- 3 -
<PAGE> 4
2. OTHER AGREEMENTS, ETC.
The Trust 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 Trust 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 Trust recognizes that in some cases this procedure
may adversely affect the size of the position that may be acquired or disposed
of for the Fund. In addition, the Trust understands that the persons employed
by the Sub-Adviser to assist 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.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER.
The Manager will pay to the Sub-Adviser as compensation for the
Sub-Adviser's services rendered and for the expenses borne by the Sub- Adviser
pursuant to Section 1, a fee, computed and paid monthly at the annual rate of
0.15% of the value of the Fund's average daily net assets. Such average daily
net asset value of the Fund shall be determined by taking an average of all of
the determinations of such net asset value during such month at the close of
business on each business day during such month while this contract is in
effect. Such fee shall be payable for each month within 10 business days after
the end of such month.
If the Sub-Adviser shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS CONTRACT.
- 4 -
<PAGE> 5
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment or in the event that the Management
Contract shall have terminated for any reason and the Manager shall have
provided prior notice of any such termination of the Management Contract; and
this Agreement shall not be amended unless such amendment be approved at a
meeting by the affirmative vote of a majority of the outstanding shares of the
Fund, and by the vote, cast in person at a meeting called for the purpose of
voting on such approval, of a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) The Trust may at any time terminate this Agreement by
not more than sixty days' written notice delivered or mailed by
registered mail, postage prepaid, to the Manager and the Sub-Adviser,
or
(b) If (i) the Trustees of the Trust or the shareholders
by the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager or of the
Sub-Adviser, by vote cast in person at a meeting called for the
purpose of voting on such approval, do not specifically approve at
least annually the continuance of this Agreement, then this Agreement
shall automatically terminate as at the close of business on the
second anniversary of its execution, or upon the expiration of one
year from the effective date of the last such continuance, whichever
is later; provided, however, that if the continuance of this Agreement
is submitted to the shareholders of the Fund for their approval and
such shareholders fail to approve such continuance of this Agreement
as provided herein, the Sub-Adviser may continue to serve hereunder in
a manner consistent with the Investment Company Act of 1940 and the
Rules and Regulations thereunder, or
- 5 -
<PAGE> 6
(c) The Manager may at any time terminate this Agreement
by not less than sixty days' written notice delivered or mailed by
registered mail, postage prepaid, to the Sub-Adviser, and the
Sub-Adviser may at any time terminate this Agreement by not less than
90 days' written notice delivered or mailed by registered mail,
postage prepaid, to the Manager.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of
the outstanding shares of the Fund.
Termination of this Agreement pursuant to this Section 5 shall be
without the payment of any penalty.
- 6 -
<PAGE> 7
6. CERTAIN INFORMATION.
The Sub-Adviser shall promptly notify the Manager in writing of the
occurrence of any of the following events: (a) the Sub-Adviser shall fail to
be registered as an investment adviser under the Investment Advisers Act of
1940, as amended from time to time, and under the laws of any jurisdiction in
which the Sub-Adviser is required to be registered as an investment adviser in
order to perform its obligations under this Agreement, (b) the Sub-Adviser
shall have been served or otherwise have notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Trust and (c) there
shall be any change in the control of the Sub-Adviser.
7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a
majority of the outstanding shares" of the Fund means the affirmative vote, at
a duly called and held meeting of shareholders, (a) of the holders of 67% or
more of the shares of the Fund present (in person or by proxy) and entitled to
vote at such meeting, if the holders of more than 50% of the outstanding shares
of or the Fund entitled to vote at such meeting are present in person or by
proxy, or (b) of the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the Rules and
Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934 and the Rules and
Regulations thereunder.
8. STATEMENTS AND REPRESENTATIONS OF THE MANAGER
- 7 -
<PAGE> 8
The Manager believes, to the best of its knowledge after reasonable
inquiry, that the Trust's investment objectives, policies and guidelines will
be in conformity in all material respects with applicable insurance laws and
regulations.
The Manager represents that (i) the appointment of the Sub-Adviser has
been duly authorized and (ii) it has acted and will continue to act, and that
the Trust's investment objectives, policies and guidelines will be, in
conformity in all material respects with other applicable laws in connection
with this Agreement and the transactions contemplated hereunder.
9. NONLIABILITY OF SUB-ADVISER.
The Sub-Adviser shall exercise its best judgment in rendering its
services under this agreement. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser, or reckless disregard
of its obligations and duties hereunder ("Disqualifying Conduct"), the
Sub-Adviser shall not be subject to any liability to the Trust or the Fund, or
to any shareholder of the Fund, for any act or omission in the course of, or
connected with, rendering services hereunder.
The Manager shall indemnify and hold harmless the Sub-Adviser from and
against all claims, losses, liabilities or damages (including reasonable
attorneys' fees and other related expenses) (collectively, "Losses"), howsoever
arising under 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 Losses resulting from
Disqualifying Conduct.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Fund.
- 8 -
<PAGE> 9
IN WITNESS WHEREOF, SIERRA INVESTMENT ADVISORS CORPORATION and
J.P.MORGAN INVESTMENT MANAGEMENT, INC. have each caused this instrument to be
signed in duplicate on its behalf by its duly authorized representative, all as
of the day and year first above written.
SIERRA INVESTMENT ADVISORS CORPORATION
By \s\ Michael D. Goth
--------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
J.P. MORGAN INVESTMENT MANAGEMENT, INC.
By \s\ Thomas Pernice
--------------------------------
Name: Thomas Pernice
Title: Vice President
Accepted and agreed to
as of the day and year
first above written:
THE SIERRA VARIABLE TRUST
By: \s\ Keith B. Pipes
--------------------------------
Name: Keith B. Pipes
Title: Executive Vice President
Treasurer & Secretary
- 9 -
<PAGE> 1
EXHIBIT 5(b)-3
SUB-ADVISER AGREEMENT
Sub-Adviser Agreement executed as of February 28, 1995 between SIERRA
INVESTMENT ADVISORS CORPORATION, a California corporation (the "Manager"), and
BLACKROCK FINANCIAL MANAGEMENT, INC., a Delaware corporation (the
"Sub-Adviser").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST.
(a) Subject always to the control of the Trustees of The Sierra
Variable Trust, a Massachusetts business trust (the "Trust") and to the overall
supervision of the Manager, the Sub-Adviser, at its expense, will furnish
continuously an investment program for the portfolio represented by shares of
The U.S. Government Fund series (the "Fund"). The Sub-Adviser will make
investment decisions on behalf of the Fund and place all orders for the
purchase and sale of portfolio securities. In the performance of its duties,
the Sub-Adviser will comply with the provisions of the Agreement and
Declaration of Trust, the By-laws of the Trust and the stated investment
objectives, policies and restrictions of the Fund as set forth in its
registration statement on Form N-1A, File No. 33-57732, and will use its best
efforts to safeguard and promote the welfare of the Fund, and to comply with
other policies which the Trustees or the Manager, as the case may be, may from
time to time determine. Copies of the Trust's Registration Statement,
including exhibits, have been or
<PAGE> 2
will be provided to the Sub-Adviser, and the Manager agrees promptly to provide
the Sub-Adviser with all amendments or supplements to the Registration
Statement. The Sub-Adviser shall make its officers and employees available to
the Manager at reasonable times to review investment policies of the Fund and
to consult with the Manager regarding the investment affairs of the Fund.
(b) The Sub-Adviser, at its expense, will furnish all necessary
office space and equipment, bookkeeping and clerical services (excluding
shareholder accounting and transfer agency services) required for it to perform
its duties hereunder and will pay all salaries, fees and expenses of officers
and Trustees of the Trust who are affiliated with the Sub-Adviser and not
otherwise affiliated with the Manager.
(c) In the selection of brokers, dealers, futures commissions
merchants or any other sources of portfolio investments for the Fund
(hereafter, "brokers or dealers") and the placing of orders for the purchase
and sale of portfolio investments for the Fund, the Sub-Adviser shall use its
best efforts to obtain the most favorable price and execution available, except
to the extent it may be permitted to pay higher brokerage commissions for
brokerage and research services as described below. In using its best efforts
to obtain the most favorable price and execution available, the Sub-Adviser,
bearing in mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration, price, the size of
the transaction, the nature of the market for the security, the amount of the
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker or dealer in
other transactions. Subject to such policies as the Trustees of the Trust may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused the Trust to pay, on behalf of the Fund, a broker or
dealer that provides brokerage and research services to the Sub-Adviser an
amount of commission for effecting a portfolio investment transaction in excess
of the amount of commission
- 2 -
<PAGE> 3
another broker or dealer would have charged for effecting that transaction, if
the Sub-Adviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that particular
transaction or the Sub-Adviser's overall responsibilities with respect to the
Trust and to other clients of the Sub- Adviser as to which the Sub-Adviser
exercises investment discretion. As provided in the Management Contract
referred to in Section 3 below, the Trust agrees that any entity or person
associated with the Manager or Sub-Adviser which is a member of a national
securities exchange is authorized to effect any transaction on such exchange
for the account of the Fund which is permitted by Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Trust
has consented to the retention of compensation for such transactions in
accordance with Rule 11a2-2(T)(2)(iv).
(d) The Sub-Adviser shall not be obligated to pay any expenses of
or for the Fund not expressly assumed by the Sub-Adviser pursuant to this
Section 1 other than as provided in Section 3.
(e) The Sub-Adviser shall maintain all books and records with respect
to the Fund's portfolio transactions required by subparagraphs (b)(5) - (b)(11)
and paragraph (f) of Rule 31a-1 under the Investment Company Act of 1940, as
amended, and shall render to the Board of Trustees of the Trust such periodic
and special reports as the Board may reasonably request.
2. OTHER AGREEMENTS, ETC.
The Trust 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 Trust 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
- 3 -
<PAGE> 4
procedures believed to be equitable to each entity. Similarly, opportunities
to sell securities will be allocated in an equitable manner. The Trust
recognizes that in some cases this procedure may adversely affect the size of
the position that may be acquired or disposed of for the Fund. In addition,
the Trust understands that the persons employed by the Sub-Adviser to assist
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.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER.
The Manager will pay to the Sub-Adviser as compensation for the
Sub-Adviser's services rendered and for the expenses borne by the Sub- Adviser
pursuant to Section 1, a fee, computed and paid monthly 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 Trust Funds' 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 Combined Assets are more than $1,000,000,000.
Such average daily net asset value of each of such funds shall be determined by
taking an average of all of the determinations of such net asset value during
such month at the close of business on each business day during such month
while this contract is in effect. For the purposes of determining fees payable
to the Sub-Adviser, 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
- 4 -
<PAGE> 5
such fund as from time to time in effect. Such fee shall be payable for each
month within 10 business days after the end of such month.
Notwithstanding the foregoing, in the event that any reduction in the
fees paid to the Manager under the Management Contract 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-Adviser hereunder; PROVIDED THAT the Sub-Adviser will never be required to
pay more than the amount of fees it receives.
If the Sub-Adviser shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS CONTRACT.
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment or in the event that the Management
Contract shall have terminated for any reason; and this Agreement shall not be
amended unless such amendment be approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Fund, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) The Trust may at any time terminate this Agreement by
not more than sixty days' written notice delivered or mailed by
registered mail, postage
- 5 -
<PAGE> 6
prepaid, to the Manager and the Sub-Adviser, or
(b) If (i) the Trustees of the Trust or the shareholders
by the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager or of the
Sub-Adviser, by vote cast in person at a meeting called for the
purpose of voting on such approval, do not specifically approve at
least annually the continuance of this Agreement, then this Agreement
shall automatically terminate as at the close of business on the
second anniversary of its execution, or upon the expiration of one
year from the effective date of the last such continuance, whichever
is later; provided, however, that if the continuance of this Agreement
is submitted to the shareholders of the Fund for their approval and
such shareholders fail to approve such continuance of this Agreement
as provided herein, the Sub-Adviser may continue to serve hereunder in
a manner consistent with the Investment Company Act of 1940 and the
Rules and Regulations thereunder, or
(c) The Manager may at any time terminate this Agreement
by not less than sixty days' written notice delivered or mailed by
registered mail, postage prepaid, to the Sub-Adviser, and the
Sub-Adviser may at any time terminate this Agreement by not less than
90 days' written notice delivered or mailed by registered mail,
postage prepaid, to the Manager.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of
the outstanding shares of the Fund.
Termination of this Agreement pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
- 6 -
<PAGE> 7
The Sub-Adviser shall promptly notify the Manager in writing of the
occurrence of any of the following events: (a) the Sub-Adviser shall fail to
be registered as an investment adviser under the Investment Advisers Act of
1940, as amended from time to time, and under the laws of any jurisdiction in
which the Sub-Adviser is required to be registered as an investment adviser in
order to perform its obligations under this Agreement, (b) the Sub-Adviser
shall have been served or otherwise have notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Trust and (c) there
shall be any change in the control of the Sub-Adviser.
7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a
majority of the outstanding shares" of the Fund means the affirmative vote, at
a duly called and held meeting of shareholders, (a) of the holders of 67% or
more of the shares of the Fund present (in person or by proxy) and entitled to
vote at such meeting, if the holders of more than 50% of the outstanding shares
of or the Fund entitled to vote at such meeting are present in person or by
proxy, or (b) of the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the Rules and
Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934 and the Rules and
Regulations thereunder.
- 7 -
<PAGE> 8
8. NONLIABILITY OF SUB-ADVISER.
The Sub-Adviser shall exercise its best judgment in rendering its
services under this agreement. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser, or reckless disregard
of its obligations and duties hereunder, the Sub-Adviser shall not be subject
to any liability to the Trust or the Fund, or to any shareholder of the Fund,
for any act or omission in the course of, or connected with, rendering services
hereunder.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Fund.
IN WITNESS WHEREOF, SIERRA INVESTMENT ADVISORS CORPORATION and
BLACKROCK FINANCIAL MANAGEMENT, INC. have each caused this instrument to be
signed in duplicate on its behalf by its duly authorized representative, all as
of the day and year first above written.
SIERRA INVESTMENT ADVISORS CORPORATION
By \s\ Michael D. Goth
-----------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
BLACKROCK FINANCIAL MANAGEMENT, INC.
By \s\ Lawrence Fink
-----------------------------------
Name: Lawrence Fink
Title: President
Accepted and agreed to
as of the day and year
first above written:
THE SIERRA VARIABLE TRUST
By \s\ Keith B. Pipes
-------------------------------
Name: Keith B. Pipes
Title: Executive Vice President
- 8 -
<PAGE> 1
EXHIBIT 5(b)-4
SUB-ADVISER AGREEMENT
Sub-Adviser Agreement executed as of April 8, 1993 between SIERRA
INVESTMENT ADVISORS CORPORATION, a California corporation (the "Manager"), and
TCW FUNDS MANAGEMENT INC., a California corporation (the "Sub-Adviser").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST.
(a) Subject always to the control of the Trustees of The Sierra
Variable Trust, a Massachusetts business trust (the "Trust") and to the overall
supervision of the Manager, the Sub-Adviser, at its expense, will furnish
continuously an investment program for the portfolio represented by shares of
The Corporate Income Fund series (the "Fund"). The Sub-Adviser will make
investment decisions on behalf of the Fund and place all orders for the
purchase and sale of portfolio securities. In the performance of its duties,
the Sub-Adviser will comply with the provisions of the Agreement and
Declaration of Trust, the By-laws of the Trust and the stated investment
objectives, policies and restrictions of the Fund as set forth in its
registration statement on Form N-1A, File No. 33-57732, and will use its best
efforts to safeguard and promote the welfare of the Fund, and to comply with
other policies which the Trustees or the Manager, as the case may be, may from
time to time determine. Copies of the Trust's Registration Statement,
including exhibits, have been or will be provided to the Sub-Adviser, and the
Manager agrees promptly to provide the Sub-Adviser with all amendments or
supplements to the Registration Statement. The Sub-Adviser shall make its
officers and employees available to the Manager at reasonable times to review
investment policies of the Fund and to consult with the Manager regarding the
investment affairs of the Fund.
(b) The Sub-Adviser, at its expense, will furnish all necessary
office space and equipment, bookkeeping and clerical services (excluding
shareholder accounting and transfer agency
<PAGE> 2
services) required for it to perform its duties hereunder and will pay all
salaries, fees and expenses of officers and Trustees of the Trust who are
affiliated with the Sub-Adviser and not otherwise affiliated with the Manager.
(c) In the selection of brokers, dealers, futures commissions
merchants or any other sources of portfolio investments for the Fund
(hereafter, "brokers or dealers") and the placing of orders for the purchase
and sale of portfolio investments for the Fund, the Sub-Adviser shall use its
best efforts to obtain the most favorable price and execution available, except
to the extent it may be permitted to pay higher brokerage commissions for
brokerage and research services as described below. In using its best efforts
to obtain the most favorable price and execution available, the Sub-Adviser,
bearing in mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration, price, the size of
the transaction, the nature of the market for the security, the amount of the
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker or dealer in
other transactions. Subject to such policies as the Trustees of the Trust may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused the Trust to pay, on behalf of the Fund, a broker or
dealer that provides brokerage and research services to the Sub-Adviser an
amount of commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Sub-Adviser determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Trust and to other clients of the
Sub-Adviser as to which the Sub-Adviser exercises investment discretion. As
provided in the Management Contract referred to in Section 3 below, the Trust
agrees that any entity or person associated with the Manager or Sub-Adviser
which is a member of a national securities exchange is authorized to effect any
transaction on such exchange for the account of the Fund which is permitted by
Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder, and the Trust has consented to the retention of compensation for
- 2 -
<PAGE> 3
such transactions in accordance with Rule 11a2-2(T)(2)(iv).
(d) The Sub-Adviser shall not be obligated to pay any expenses of
or for the Fund not expressly assumed by the Sub-Adviser pursuant to this
Section 1 other than as provided in Section 3.
(e) The Sub-Adviser shall maintain all books and records with respect
to the Fund's portfolio transactions required by subparagraphs (b)(5) - (b)(11)
and paragraph (f) of Rule 31a-1 under the Investment Company Act of 1940, as
amended, and shall render to the Board of Trustees of the Trust such periodic
and special reports as the Board may reasonably request.
2. OTHER AGREEMENTS, ETC.
The Trust 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 Trust 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 Trust recognizes that in some cases this procedure
may adversely affect the size of the position that may be acquired or disposed
of for the Fund. In addition, the Trust understands that the persons employed
by the Sub-Adviser to assist 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.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER.
The Manager will pay to the Sub-Adviser as compensation for the
Sub-Adviser's services rendered and for the expenses borne by the Sub-Adviser
pursuant to Section 1, a fee, computed and paid
- 3 -
<PAGE> 4
monthly at the annual rate of 0.30% of the value of the Fund's average daily
net assets up to $500 million and 0.25% of the value of the Fund's daily net
assets over $500 million. Such average daily net asset value of the Fund shall
be determined by taking an average of all of the determinations of such net
asset value during such month at the close of business on each business day
during such month while this contract is in effect. Such fee shall be payable
for each month within 10 business days after the end of such month.
Notwithstanding the foregoing, in the event that any reduction in the
fees paid to the Manager under the Management Contract 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-Adviser hereunder; PROVIDED THAT the Sub-Adviser will never be required to
pay more than the amount of fees it receives.
If the Sub-Adviser shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS CONTRACT.
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment or in the event that the Management
Contract shall have terminated for any reason; and this Agreement shall not be
amended unless such amendment be approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Fund, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) The Trust may at any time terminate this Agreement
- 4 -
<PAGE> 5
by not more than sixty days' written notice delivered or mailed by
registered mail, postage prepaid, to the Manager and the Sub- Adviser,
or
(b) If (i) the Trustees of the Trust or the shareholders
by the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager or of the
Sub-Adviser, by vote cast in person at a meeting called for the
purpose of voting on such approval, do not specifically approve at
least annually the continuance of this Agreement, then this Agreement
shall automatically terminate as at the close of business on the
second anniversary of its execution, or upon the expiration of one
year from the effective date of the last such continuance, whichever
is later; provided, however, that if the continuance of this Agreement
is submitted to the shareholders of the Fund for their approval and
such shareholders fail to approve such continuance of this Agreement
as provided herein, the Sub-Adviser may continue to serve hereunder in
a manner consistent with the Investment Company Act of 1940 and the
Rules and Regulations thereunder, or
(c) The Manager may at any time terminate this Agreement
by not less than sixty days' written notice delivered or mailed by
registered mail, postage prepaid, to the Sub-Adviser, and the
Sub-Adviser may at any time terminate this Agreement by not less than
90 days' written notice delivered or mailed by registered mail,
postage prepaid, to the Manager.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of
the outstanding shares of the Fund.
Termination of this Agreement pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Sub-Adviser shall promptly notify the Manager in writing of the
occurrence of any of the following events: (a) the Sub-
- 5 -
<PAGE> 6
Adviser shall fail to be registered as an investment adviser under the
Investment Advisers Act of 1940, as amended from time to time, and under the
laws of any jurisdiction in which the Sub-Adviser is required to be registered
as an investment adviser in order to perform its obligations under this
Agreement, (b) the Sub-Adviser shall have been served or otherwise have notice
of any action, suit, proceeding, inquiry or investigation, at law or in equity,
before or by any court, public board or body, involving the affairs of the
Trust and (c) there shall be any change in the control of the Sub-Adviser.
7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a
majority of the outstanding shares" of the Fund means the affirmative vote, at
a duly called and held meeting of shareholders, (a) of the holders of 67% or
more of the shares of the Fund present (in person or by proxy) and entitled to
vote at such meeting, if the holders of more than 50% of the outstanding shares
of or the Fund entitled to vote at such meeting are present in person or by
proxy, or (b) of the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the Rules and
Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934 and the Rules and
Regulations thereunder.
8. NONLIABILITY OF SUB-ADVISER.
The Sub-Adviser shall exercise its best judgment in rendering its
services under this agreement. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser, or reckless disregard
of its obligations and duties hereunder, the Sub-Adviser shall not be subject
to any
- 6 -
<PAGE> 7
liability to the Trust or the Fund, or to any shareholder of the Fund, for any
act or omission in the course of, or connected with, rendering services
hereunder.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Fund.
IN WITNESS WHEREOF, SIERRA INVESTMENT ADVISORS CORPORATION and TCW
FUNDS MANAGEMENT INC. have each caused this instrument to be signed in
duplicate on its behalf by its duly authorized representative, all as of the
day and year first above written.
SIERRA INVESTMENT ADVISORS CORPORATION
By \s\ Michael D. Goth
--------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
TCW FUNDS MANAGEMENT INC.
By \s\ Michael E. Cahill
--------------------------------
Name: Michael E. Cahill
Title: Managing Director
By \s\ Marie M. Bender
--------------------------------
Name: Marie M. Bender
Title: Asst. Vice President
Accepted and agreed to
as of the day and year
first above written:
THE SIERRA VARIABLE TRUST
By: \s\ Keith Pipes
--------------------------------
Name:
Title:
- 7 -
<PAGE> 1
EXHIBIT 5(b)-5
SUB-ADVISER AGREEMENT
Sub-Adviser Agreement executed as of April 8, 1993 between SIERRA
INVESTMENT ADVISORS CORPORATION, a California corporation (the "Manager"), and
SCUDDER, STEVENS & CLARK, INC., a Delaware corporation (the "Sub-Adviser").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST.
(a) Subject always to the control of the Trustees of The Sierra
Variable Trust, a Massachusetts business trust (the "Trust") and to the overall
supervision of the Manager, the Sub-Adviser, at its expense, will furnish
continuously an investment program for the portfolio represented by shares of
The Short term Global Government Fund series (the "Fund"). The Sub-Adviser
will make investment decisions on behalf of the Fund and place all orders for
the purchase and sale of portfolio securities. In the performance of its
duties, the Sub-Adviser will comply with the provisions of the Agreement and
Declaration of Trust, the By-laws of the Trust and the stated investment
objectives, policies and restrictions of the Fund as set forth in its
registration statement on Form N-1A, File No. 33-57732, and will use its best
efforts to safeguard and promote the welfare of the Fund, and to comply with
other policies which the Trustees or the Manager, as the case may be, may from
time to time determine. Copies of the Trust's Registration Statement,
including exhibits, have been or will be provided to the Sub-Adviser, and the
Manager agrees promptly to provide the Sub-Adviser with all amendments or
supplements to the Registration Statement. The Sub-Adviser shall make its
officers and employees available to the Manager at reasonable times to review
investment policies of the Fund and to consult with the Manager regarding the
investment affairs of the Fund.
(b) The Sub-Adviser, at its expense, will furnish all necessary
office space and equipment, bookkeeping and clerical services (excluding
shareholder accounting and transfer agency
<PAGE> 2
services) required for it to perform its duties hereunder and will pay all
salaries, fees and expenses of officers and Trustees of the Trust who are
affiliated with the Sub-Adviser and not otherwise affiliated with the Manager.
(c) In the selection of brokers, dealers, futures commissions
merchants or any other sources of portfolio investments for the Fund
(hereafter, "brokers or dealers") and the placing of orders for the purchase
and sale of portfolio investments for the Fund, the Sub-Adviser shall use its
best efforts to obtain the most favorable price and execution available, except
to the extent it may be permitted to pay higher brokerage commissions for
brokerage and research services as described below. In using its best efforts
to obtain the most favorable price and execution available, the Sub-Adviser,
bearing in mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration, price, the size of
the transaction, the nature of the market for the security, the amount of the
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker or dealer in
other transactions. Subject to such policies as the Trustees of the Trust may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused the Trust to pay, on behalf of the Fund, a broker or
dealer that provides brokerage and research services to the Sub-Adviser an
amount of commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Sub-Adviser determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Trust and to other clients of the
Sub-Adviser as to which the Sub-Adviser exercises investment discretion. As
provided in the Management Contract referred to in Section 3 below, the Trust
agrees that any entity or person associated with the Manager or Sub-Adviser
which is a member of a national securities exchange is authorized to effect any
transaction on such exchange for the account of the Fund which is permitted by
Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder, and the Trust has consented to the retention of compensation for
- 2 -
<PAGE> 3
such transactions in accordance with Rule 11a2-2(T)(2)(iv).
(d) The Sub-Adviser shall not be obligated to pay any expenses of
or for the Fund not expressly assumed by the Sub-Adviser pursuant to this
Section 1 other than as provided in Section 3.
(e) The Sub-Adviser shall maintain all books and records with respect
to the Fund's portfolio transactions required by subparagraphs (b)(5) - (b)(11)
and paragraph (f) of Rule 31a-1 under the Investment Company Act of 1940, as
amended, and shall render to the Board of Trustees of the Trust such periodic
and special reports as the Board may reasonably request.
2. OTHER AGREEMENTS, ETC.
The Trust 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 Trust 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 Trust recognizes that in some cases this procedure
may adversely affect the size of the position that may be acquired or disposed
of for the Fund. In addition, the Trust understands that the persons employed
by the Sub-Adviser to assist 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.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER.
The Manager will pay to the Sub-Adviser as compensation for the
Sub-Adviser's services rendered and for the expenses borne by the Sub-Adviser
pursuant to Section 1, a fee, computed and paid
- 3 -
<PAGE> 4
monthly at the annual rate of 0.28% of the value of the Fund's average daily
net assets up to $200 million and 0.10% of the value of the Fund's average
daily net assets over $200 million. Such average daily net asset value of the
Fund shall be determined by taking an average of all of the determinations of
such net asset value during such month at the close of business on each
business day during such month while this contract is in effect. Such fee
shall be payable for each month within 10 business days after the end of such
month.
Notwithstanding the foregoing, in the event that any reduction in the
fees paid to the Manager under the Management Contract 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-Adviser hereunder; PROVIDED THAT the Sub-Adviser will never be required to
pay more than the amount of fees it receives.
If the Sub-Adviser shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS CONTRACT.
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment or in the event that the Management
Contract shall have terminated for any reason; and this Agreement shall not be
amended unless such amendment be approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Fund, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) The Trust may at any time terminate this Agreement
- 4 -
<PAGE> 5
by not more than sixty days' written notice delivered or mailed by
registered mail, postage prepaid, to the Manager and the Sub-Adviser,
or
(b) If (i) the Trustees of the Trust or the shareholders
by the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager or of the
Sub-Adviser, by vote cast in person at a meeting called for the
purpose of voting on such approval, do not specifically approve at
least annually the continuance of this Agreement, then this Agreement
shall automatically terminate as at the close of business on the
second anniversary of its execution, or upon the expiration of one
year from the effective date of the last such continuance, whichever
is later; provided, however, that if the continuance of this Agreement
is submitted to the shareholders of the Fund for their approval and
such shareholders fail to approve such continuance of this Agreement
as provided herein, the Sub-Adviser may continue to serve hereunder in
a manner consistent with the Investment Company Act of 1940 and the
Rules and Regulations thereunder, or
(c) The Manager may at any time terminate this Agreement
by not less than sixty days' written notice delivered or mailed by
registered mail, postage prepaid, to the Sub-Adviser, and the
Sub-Adviser may at any time terminate this Agreement by not less than
90 days' written notice delivered or mailed by registered mail,
postage prepaid, to the Manager.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of
the outstanding shares of the Fund.
Termination of this Agreement pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Sub-Adviser shall promptly notify the Manager in writing of the
occurrence of any of the following events: (a) the Sub-
- 5 -
<PAGE> 6
Adviser shall fail to be registered as an investment adviser under the
Investment Advisers Act of 1940, as amended from time to time, and under the
laws of any jurisdiction in which the Sub-Adviser is required to be registered
as an investment adviser in order to perform its obligations under this
Agreement, (b) the Sub-Adviser shall have been served or otherwise have notice
of any action, suit, proceeding, inquiry or investigation, at law or in equity,
before or by any court, public board or body, involving the affairs of the
Trust and (c) there shall be any change in the control of the Sub-Adviser.
7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a
majority of the outstanding shares" of the Fund means the affirmative vote, at
a duly called and held meeting of shareholders, (a) of the holders of 67% or
more of the shares of the Fund present (in person or by proxy) and entitled to
vote at such meeting, if the holders of more than 50% of the outstanding shares
of or the Fund entitled to vote at such meeting are present in person or by
proxy, or (b) of the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the Rules and
Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934 and the Rules and
Regulations thereunder.
8. NONLIABILITY OF SUB-ADVISER.
The Sub-Adviser shall exercise its best judgment in rendering its
services under this agreement. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser, or reckless disregard
of its obligations and duties hereunder, the Sub-Adviser shall not be subject
to any
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<PAGE> 7
liability to the Trust or the Fund, or to any shareholder of the Fund, for any
act or omission in the course of, or connected with, rendering services
hereunder.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Fund.
IN WITNESS WHEREOF, SIERRA INVESTMENT ADVISORS CORPORATION and
SCUDDER, STEVENS & CLARK, INC. have each caused this instrument to be signed in
duplicate on its behalf by its duly authorized representative, all as of the
day and year first above written.
SIERRA INVESTMENT ADVISORS CORPORATION
By \s\ Michael D. Goth
--------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
SCUDDER, STEVENS & CLARK, INC.
By \s\ Lynn Birdsong
-------------------------------
Name: Lynn Birdsong
Title: Managing Director
Accepted and agreed to
as of the day and year
first above written:
THE SIERRA VARIABLE TRUST
By: \s\ Keith Pipes
--------------------------------
Name:
Title:
- 7 -
<PAGE> 1
EXHIBIT 5(b)-6B
AMENDED AND RESTATED SUB-ADVISER AGREEMENT
This Amended and Restated Agreement is made and entered into this 17th
day of September, 1993, by and between Sierra Investment Advisors Corporation
(the "Manager"), a corporation organized under the laws of the state of
California and Janus Capital Corporation (the "Sub-Adviser"), a corporation
organized under the laws of the state of Colorado.
WITNESSETH:
WHEREAS, the Manager 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 adviser to the Growth Fund of The Sierra Variable
Trust (the "Trust"), an unincorporated business trust organized under the laws
of the Commonwealth of Massachusetts pursuant to a Management Contract, dated
as of April 8, 1993, between the Manager and the Trust (the "Management
Contract"); and
WHEREAS, the Trust 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 "1940 Act"); and
WHEREAS, the Trust 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"); and
WHEREAS, the Sub-Adviser is engaged in the business of rendering
investment advisory and management services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act"); and
WHEREAS, the Manager is authorized to retain sub-advisers and desires
to retain the Sub-Adviser to furnish investment advisory and management
services to the Fund and the Sub-Adviser 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 Manager 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.
In performance of its duties, the Sub-Adviser will comply with the
limitations specified in its Agreement and Declaration of Trust, the By-laws of
the Trust and the stated investment objectives, policies and restrictions of the
Fund as forth in the Trust's Registration Statement on Form N-1A, File No.
33-57732, as in effect and which may be amended from time to time (the
"Registration Statement"), and in such manner and to such extent as may from
time to time be approved by the Board of Trustees of the Trust. Copies of the
Registration Statement, have been or will be submitted to the Sub-Adviser.
Copies of all amendments or supplements to the Trust's Registration Statement
and the Trust's Declaration and Agreement of Trust will be provided to the
Sub-Adviser during the continuance of this Agreement before or at the time such
amendments or supplements become effective.
The Manager agrees to furnish the Sub-Adviser with minutes of meetings
of the Board of Trustees of the Fund to the extent they may affect the duties
of the Sub-Adviser, a certified copy of any financial statements or reports
prepared for the Trust which relate to the Fund, by certified or independent
public accountants, and with copies of any financial statements or reports made
by the Trust to its shareholders or to any governmental body or securities
exchange, and any further materials or information which the Sub-Adviser may
reasonably request to enable it to perform its functions under this Agreement.
2. Services as Investment Sub-Adviser
Subject to the supervision of the Board of Trustees of the Trust and
of the Manager, the Fund's investment adviser, the
- 2 -
<PAGE> 3
Sub-Adviser will (a) maintain compliance procedures for the Fund that the
Sub-Adviser believes are adequate to ensure its compliance with the applicable
provisions of the 1940 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
Registration Statement 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 in
accordance with the 1940 Act and the Advisers Act and the rules adopted
thereunder and will furnish the Manager quarterly, annual and special reports
as the Manager may reasonably request; and (e) treat confidentially and as
proprietary information of the Trust, all records and other information
relative to the Trust 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 Trust, 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 Trust. 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.
Subject to the supervision of the Manager and in accordance with the
investment objective and policies as stated in the Trust's Registration
Statement, the Sub-Adviser is authorized, in its discretion and without prior
consultation with the Manager 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-Adviser shall
- 3 -
<PAGE> 4
determine. In addition, the Sub-Adviser will furnish the Fund or the Manager
with whatever statistical information the Fund or the Manager 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 Trust, which may be conducted as often as quarterly, the
Sub-Adviser shall place all orders for the purchase and sale of investments for
the Fund with brokers, dealers, futures commissions merchants, or other sources
(hereafter, "brokers or dealers") selected by the Sub-Adviser, which may
include brokers or dealers affiliated with the Sub-Adviser. All transactions
with any affiliated person of the Trust, or where any such affiliated person
acts as broker or agent in connection with any such transaction, shall be
accomplished in compliance with the 1940 Act, the Advisers Act, the Securities
Exchange Act of 1934, as amended, the rules adopted thereunder and the
procedures adopted thereunder by the Trust. As provided in the Management
Contract, the Trust agrees that any entity or person associated with the
Manager or Sub-Adviser which is a member of a national securities exchange is
authorized to effect any transaction on such exchange for the account of the
Fund which is permitted by Section 11(a) of the Securities Exchange Act of 1934
and Rule 11a2-2(T) thereunder, and the Trust has consented to the retention of
compensation for the transactions in accordance with Rule 11a2-2(T)(2)(iv).
Purchase or sell orders for the Fund may be aggregated with contemporaneous
purchase or sell orders of other clients of the Sub-Adviser; provided that (i)
no advisory account will be favored by the Sub-Adviser 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- Adviser's books and
records so as to identify the particular client who has the beneficial interest
therein. The Sub-Adviser shall use its best efforts to obtain execution of
Fund transactions at prices which
- 4 -
<PAGE> 5
are advantageous to the Fund and at commission rates that are reasonable in
relation to the benefits received. However, the Sub-Adviser 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-Adviser. The Sub-Adviser 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-Adviser 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-Adviser 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-Adviser in managing the Fund; provided that with respect to such
transaction and such determination the affiliates of the Sub-Adviser shall have
the same responsibilities to the Fund as the Sub-Adviser has under this
Agreement.
4. Information Provided to the Trust
The Sub-Adviser will keep the Trust and the Manager informed of
developments materially affecting the Fund of which the Sub-Adviser becomes
aware and will, on its own initiative, furnish the Trust and the Manager 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. Except as may otherwise be
provided by federal or state securities laws, 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 loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its
- 5 -
<PAGE> 6
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,
the Manager will pay the Sub-Adviser 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 up to $25 million and .50% of the Fund's average daily net
assets in excess of $25 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-Adviser, the value of the Fund's net assets shall be computed at the
times and in the manner specified in the Registration Statement.
7. Expenses
The Sub-Adviser 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-Adviser shall bear no expenses of the Trust, the Fund or the Manager.
The Trust bears the expenses described in its Registration Statement. Any
reimbursement of advisory fees required by the Management Contract between the
Trust and the Manager or any voluntary or statutory expense limitation
provision shall be the sole responsibility of the Manager.
8. Services to Other Companies or Accounts
The Trust 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 Trust has no objection to
the Sub-
- 6 -
<PAGE> 7
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 a manner reasonably equitable to each entity. Similarly,
opportunities to sell securities will be allocated in such an equitable manner.
The Trust recognizes that in some cases this procedure may limit the size of
the position that may be acquired or disposed of for the Fund. In addition,
the Trust 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. The Trust recognizes and agrees that the
Sub-Adviser 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 upon its execution, 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 Trust 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 60 days'
written notice by the Manager, the Board of Trustees of the Trust or by vote of
holders of a majority of the Fund's shares, or upon 60 days' written notice, by
the Sub-Adviser and, will terminate automatically upon any termination of the
Management Contract. In addition, this Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act). The
Sub-Adviser agrees to notify the Trust of any circumstances that to its best
knowledge and belief might result in this Agreement being deemed to be
assigned.
- 7 -
<PAGE> 8
10. Representations of the Trust and the Sub-Adviser
The Trust represents that (i) a copy of its Declaration and Agreement
of Trust, dated January 27, 1993, 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 1940 Act and other
applicable laws.
The Manager 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 1940 Act and other
applicable laws.
The Sub-Adviser represents that it is authorized to perform the
services described herein.
11. Indemnification
The Manager 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, and by the vote, cast in person at a meeting called for the
purpose of voting on such approval, of a majority of the Trustees of the Trust
who are not interested persons of the Trust or of the Manager or of the
Sub-Adviser.
- 8 -
<PAGE> 9
13. Limitation of Liability
This Agreement has been executed on behalf of the Trust by the
undersigned officer of the Trust in his capacity as an officer of the Trust.
The obligations of this Agreement shall be binding upon the assets and property
of the Fund only and not upon the assets and property of any other investment
fund of the Trust and shall not be binding upon any Trustee, officer or
shareholder of the Fund and/or the Trust individually.
14. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
15. Governing Law
This Agreement shall be governed in accordance with the laws of the
Commonwealth of Massachusetts.
16. Miscellaneous
(a) Unless the Trust gives the Sub-Adviser written instructions to
the contrary, the Sub-Adviser 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-Adviser 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 Trust shall provide the Sub-Adviser 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-Adviser 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 Trust, the Fund and the Manager agree and acknowledge that
the Sub-Adviser is the sole owner of the name
- 9 -
<PAGE> 10
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-Adviser. The use by the Trust 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-Adviser. The
Trust and the Manager shall not, without the consent of the Sub-Adviser, make
representations regarding the Sub-Adviser 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 Trust's trustees and for internal use by the Trust and the Manager.
Consent by the Sub-Adviser 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 Trust, the Fund or the Manager
within 3 business days after the request is made by the Trust, the Fund or the
Manager for such use of any Janus Mark or any such representation. Upon
termination of this Agreement for any reason, the Trust and the Manager shall
cease all use of any Janus Mark(s) as soon as reasonably practicable.
(d) The Sub-Adviser agrees and acknowledges that the Trust is the
sole owner of the name and mark "The Sierra Variable Trust" and the Manager 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 "The Sierra
Variable Trust" or "Sierra Investment Advisors" (a "Sierra Mark") under this
Agreement shall inure to the benefit of the Trust or the Manager, respectively.
The use by the Sub-Adviser on its own behalf of any Sierra Mark in any
advertisement or sales literature or other materials promoting the Sub-Adviser
shall be with the consent of the Trust or the Manager, respectively. The
Sub-Adviser shall not, without the consent of the Trust or the Manager, as
applicable, make representations regarding the Trust, the Fund or the Manager
in any disclosure document, advertisement or sales literature or other
materials promoting the Sub-Adviser. Consent by the Trust and the Manager 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-Adviser within 5 business days after the
- 10 -
<PAGE> 11
request by the Sub-Adviser is made for such use of any Sierra Mark or any such
representations. Upon termination of this Agreement for any reason, the
Sub-Adviser shall cease any and all use of any Sierra Mark as soon as
reasonably practicable.
(e) The Sub-Adviser may perform its services through any employee,
officer or agent of the Sub-Adviser, and the Trust and the Fund shall not be
entitled to the advice, recommendation, or judgment of any specific person.
- 11 -
<PAGE> 12
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
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: Assistant Vice President
Accepted and agreed to
as of the day and year
first above written:
THE SIERRA VARIABLE TRUST
By: \s\ Keith Pipes
--------------------------------
Name: Keith Pipes
Title: Director, Executive Vice President
& Secretary
ATTEST:
By: \s\ Richard Bocanegra
--------------------------------
Name: Richard Bocanegra
Title: Administrative Assistant
- 12 -
<PAGE> 1
EXHIBIT 5(b)-7
SUB-ADVISER AGREEMENT
Sub-Adviser Agreement executed as of January 1, 1994 between SIERRA
INVESTMENT ADVISORS CORPORATION, a California corporation (the "Manager"), and
J.P. MORGAN INVESTMENT MANAGEMENT, INC., a Delaware corporation (the
"Sub-Adviser").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST.
(a) Subject always to the control of the Trustees of The Sierra
Variable Trust, a Massachusetts business trust (the "Trust") and to the overall
supervision of the Manager, the Sub-Adviser, at its expense, will furnish
continuously an investment program for the portfolio represented by shares of
The Growth and Income Fund series (the "Fund"). The Sub-Adviser will make
investment decisions on behalf of the Fund and place all orders for the
purchase and sale of portfolio securities. In the performance of its duties,
the Sub-Adviser will comply with the provisions of the Agreement and
Declaration of Trust, the By-laws of the Trust and the stated investment
objectives, policies and restrictions of the Fund as set forth in its
registration statement on Form N-1A, File No. 33-57732, and will use its best
efforts to safeguard and promote the welfare of the Fund, and to comply with
other policies which the Trustees or the Manager, as the case may be, may from
time to time determine and provide to the Sub-Adviser in writing (including any
additional requirements with respect to applicable insurance laws or
regulations). The Manager represents that all such copies of the Trust's
Registration Statement, including exhibits, have been or will be provided to
the Sub-Adviser, and the Manager agrees promptly to provide the Sub-Adviser
with all amendments or supplements to the Registration Statement. The
Sub-Adviser shall make its officers and employees available to the Manager at
reasonable times to review investment policies of the Fund and to consult with
the Manager regarding the investment affairs of the Fund.
(b) The Sub-Adviser, at its expense, will furnish all
<PAGE> 2
necessary office space and equipment, bookkeeping and clerical services
(excluding shareholder accounting and transfer agency services) required for it
to perform its duties hereunder and will pay all salaries, fees and expenses of
officers and Trustees of the Trust who are affiliated with the Sub-Adviser and
not otherwise affiliated with the Manager.
(c) In the selection of brokers, dealers, futures commissions
merchants or any other sources of portfolio investments for the Fund
(hereafter, "brokers or dealers") and the placing of orders for the purchase
and sale of portfolio investments for the Fund, the Sub-Adviser shall use its
best efforts to obtain the most favorable price and execution available, except
to the extent it may be permitted to pay higher brokerage commissions for
brokerage and research services as described below. In using its best efforts
to obtain the most favorable price and execution available, the Sub-Adviser,
bearing in mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration, price, the size of
the transaction, the nature of the market for the security, the amount of the
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker or dealer in
other transactions. Subject to such policies as the Trustees of the Trust may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused the Trust to pay, on behalf of the Fund, a broker or
dealer that provides brokerage and research services to the Sub-Adviser an
amount of commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction, if the Sub-Adviser determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Sub-Adviser's overall
responsibilities with respect to the Trust and to other clients of the
Sub-Adviser as to which the Sub-Adviser exercises investment discretion. As
provided in the Management Contract between the Trust and the Manager with
respect to the Fund, dated as of April 8, 1993 (the "Management Contract"), the
Trust agrees that any entity or person associated with the Manager or
Sub-Adviser which is a member of a national securities exchange is authorized
to effect any transaction on
- 2 -
<PAGE> 3
such exchange for the account of the Fund which is permitted by Section 11(a)
of the Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the
Trust has consented to the retention of compensation for such transactions in
accordance with Rule 11a2-2(T)(2)(iv).
(d) The Sub-Adviser shall not be obligated to pay any expenses of
or for the Fund not expressly assumed by the Sub-Adviser pursuant to this
Section 1.
(e) The Sub-Adviser shall maintain all books and records with respect
to the Fund's portfolio transactions required by subparagraphs (b)(5) - (b)(11)
and paragraph (f) of Rule 31a-1 under the Investment Company Act of 1940, as
amended, and shall render to the Board of Trustees of the Trust such periodic
and special reports as the Board may reasonably request.
- 3 -
<PAGE> 4
2. OTHER AGREEMENTS, ETC.
The Trust 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 Trust 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 Trust recognizes that in some cases this procedure
may adversely affect the size of the position that may be acquired or disposed
of for the Fund. In addition, the Trust understands that the persons employed
by the Sub-Adviser to assist 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.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER.
The Manager will pay to the Sub-Adviser as compensation for the
Sub-Adviser's services rendered and for the expenses borne by the Sub-Adviser
pursuant to Section 1, a fee, computed and paid monthly at the annual rate of
0.45% of the value of the Fund's average daily net assets up to $100 million,
0.40% of the value of the Fund's average daily net assets between $100 million
and $200 million, 0.35% of the value of the Fund's average daily net assets
between $200 million and $400 million, and 0.30% of the value of the Fund's
daily net assets over $400 million. Such average daily net asset value of the
Fund shall be determined by taking an average of all of the determinations of
such net asset value during such month at the close of business on each
business day during such month while this contract is in effect. Such fee
shall be payable for each month within 10 business days after the end of such
month.
If the Sub-Adviser shall serve for less than the whole of a
- 4 -
<PAGE> 5
month, the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS CONTRACT.
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment or in the event that the Management
Contract shall have terminated for any reason and the Manager shall have
provided prior notice of any such termination of the Management Contract; and
this Agreement shall not be amended unless such amendment be approved at a
meeting by the affirmative vote of a majority of the outstanding shares of the
Fund, and by the vote, cast in person at a meeting called for the purpose of
voting on such approval, of a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) The Trust may at any time terminate this Agreement by
not more than sixty days' written notice delivered or mailed by
registered mail, postage prepaid, to the Manager and the Sub-Adviser,
or
(b) If (i) the Trustees of the Trust or the shareholders
by the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager or of the
Sub-Adviser, by vote cast in person at a meeting called for the
purpose of voting on such approval, do not specifically approve at
least annually the continuance of this Agreement, then this Agreement
shall automatically terminate as at the close of business on the
second anniversary of its execution, or upon the expiration of one
year from the effective date of the last such continuance, whichever
is later; provided, however, that if the continuance of this Agreement
is submitted to the shareholders of the Fund for their approval and
such
- 5 -
<PAGE> 6
shareholders fail to approve such continuance of this Agreement as
provided herein, the Sub-Adviser may continue to serve hereunder in a
manner consistent with the Investment Company Act of 1940 and the
Rules and Regulations thereunder, or
(c) The Manager may at any time terminate this Agreement
by not less than sixty days' written notice delivered or mailed by
registered mail, postage prepaid, to the Sub-Adviser, and the
Sub-Adviser may at any time terminate this Agreement by not less than
90 days' written notice delivered or mailed by registered mail,
postage prepaid, to the Manager.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of
the outstanding shares of the Fund.
Termination of this Agreement pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Sub-Adviser shall promptly notify the Manager in writing of the
occurrence of any of the following events: (a) the Sub-Adviser shall fail to
be registered as an investment adviser under the Investment Advisers Act of
1940, as amended from time to time, and under the laws of any jurisdiction in
which the Sub-Adviser is required to be registered as an investment adviser in
order to perform its obligations under this Agreement, (b) the Sub-Adviser
shall have been served or otherwise have notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Trust and (c) there
shall be any change in the control of the Sub-Adviser.
7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a
majority of the outstanding shares" of the Fund means the affirmative vote, at
a duly called and held meeting of shareholders, (a) of the holders of 67% or
more of the shares of the Fund present (in person or by proxy) and entitled to
vote at
- 6 -
<PAGE> 7
such meeting, if the holders of more than 50% of the outstanding shares of or
the Fund entitled to vote at such meeting are present in person or by proxy, or
(b) of the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the Rules and
Regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934 and the Rules and
Regulations thereunder.
8. STATEMENTS AND REPRESENTATIONS OF THE MANAGER
The Manager believes, to the best of its knowledge after reasonable
inquiry, that the Trust's investment objectives, policies and guidelines will
be in conformity in all material respects with applicable insurance laws and
regulations.
The Manager represents that (i) the appointment of the Sub-Adviser has
been duly authorized and (ii) it has acted and will continue to act, and that
the Trust's investment objectives, policies and guidelines will be, in
conformity in all material respects with other applicable laws in connection
with this Agreement and the transactions contemplated hereunder.
9. NONLIABILITY OF SUB-ADVISER.
The Sub-Adviser shall exercise its best judgment in rendering its
services under this agreement. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser, or reckless disregard
of its obligations and duties hereunder ("Disqualifying Conduct"), the
Sub-Adviser shall not be subject to any liability to the Trust or the Fund, or
to any shareholder of the Fund, for any act or omission in the course of, or
connected with, rendering services hereunder.
- 7 -
<PAGE> 8
The Manager shall indemnify and hold harmless the Sub-Adviser from and
against all claims, losses, liabilities or damages (including reasonable
attorneys' fees and other related expenses) (collectively, "Losses"), howsoever
arising under 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 Losses resulting from
Disqualifying Conduct.
10. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Fund.
- 8 -
<PAGE> 9
IN WITNESS WHEREOF, SIERRA INVESTMENT ADVISORS CORPORATION and J.P.
MORGAN INVESTMENT MANAGEMENT, INC. have each caused this instrument to be
signed in duplicate on its behalf by its duly authorized representative, all as
of the day and year first above written.
SIERRA INVESTMENT ADVISORS CORPORATION
By \s\ Michael D. Goth
--------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
J.P. MORGAN INVESTMENT MANAGEMENT, INC.
By \s\ Thomas Pernice
--------------------------------
Name: Thomas Pernice
Title: Vice President
Accepted and agreed to
as of the day and year
first above written:
THE SIERRA VARIABLE TRUST
By: \s\ Keith Pipes
--------------------------------
Name: Keith Pipes
Title: Director, Executive Vice President
& Secretary
- 9 -
<PAGE> 1
EXHIBIT 5(b)-8
SUB-ADVISER AGREEMENT
Sub-Adviser Agreement executed as of January 1, 1994 between SIERRA
INVESTMENT ADVISORS CORPORATION, a California corporation (the "Manager"), and
SCUDDER, STEVENS & CLARK, INC., a Delaware corporation (the "Sub-Adviser").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY SUB-ADVISER TO THE TRUST.
(a) Subject always to the control of the Trustees of The Sierra
Variable Trust, a Massachusetts business trust (the "Trust") and to the overall
supervision of the Manager, the Sub- Adviser, at its expense, will furnish
continuously an investment program for the portfolio represented by shares of
The Short Term High Quality Bond Fund series (the "Fund"). The Sub-Adviser will
make investment decisions on behalf of the Fund and place all orders for the
purchase and sale of portfolio securities. In the performance of its duties, the
Sub-Adviser will comply with the provisions of the Agreement and Declaration of
Trust, the By-laws of the Trust and the stated investment objectives, policies
and restrictions of the Fund as set forth in its registration statement on Form
N-1A, File No. 33-57732, and will use its best efforts to safeguard and promote
the welfare of the Fund, and to comply with other policies which the Trustees or
the Manager, as the case may be, may from time to time determine. Copies of the
Trust's Registration Statement, including exhibits, have been or will be
provided to the Sub-Adviser, and the Manager agrees promptly to provide the
Sub-Adviser with all amendments or supplements to the Registration Statement.
The Sub-Adviser shall make its officers and employees available to the Manager
at reasonable times to review investment policies of the Fund and to consult
with the Manager regarding the investment affairs of the Fund.
(b) The Sub-Adviser, at its expense, will furnish all necessary office
space and equipment, bookkeeping and clerical services (excluding shareholder
accounting and transfer agency services) required for it to perform its duties
hereunder and
<PAGE> 2
will pay all salaries, fees and expenses of officers and Trustees of the Trust
who are affiliated with the Sub-Adviser and not otherwise affiliated with the
Manager.
(c) In the selection of brokers, dealers, futures commissions merchants
or any other sources of portfolio investments for the Fund (hereafter, "brokers
or dealers") and the placing of orders for the purchase and sale of portfolio
investments for the Fund, the Sub-Adviser shall use its best efforts to obtain
the most favorable price and execution available, except to the extent it may be
permitted to pay higher brokerage commissions for brokerage and research
services as described below. In using its best efforts to obtain the most
favorable price and execution available, the Sub-Adviser, bearing in mind the
Fund's best interests at all times, shall consider all factors it deems
relevant, including by way of illustration, price, the size of the transaction,
the nature of the market for the security, the amount of the commission, the
timing of the transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker or dealer involved
and the quality of service rendered by the broker or dealer in other
transactions. Subject to such policies as the Trustees of the Trust may
determine, the Sub-Adviser shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused the Trust to pay, on behalf of the Fund, a broker or dealer
that provides brokerage and research services to the Sub-Adviser an amount of
commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Sub-Adviser determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Trust and to other clients of the Sub-Adviser as to which the
Sub-Adviser exercises investment discretion. As provided in the Management
Contract referred to in Section 3 below, the Trust agrees that any entity or
person associated with the Manager or Sub-Adviser which is a member of a
national securities exchange is authorized to effect any transaction on such
exchange for the account of the Fund which is permitted by Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and the Trust has
consented to the retention of compensation for such transactions in accordance
with Rule 11a2-2(T)(2)(iv).
<PAGE> 3
(d) The Sub-Adviser shall not be obligated to pay any expenses of or
for the Fund not expressly assumed by the Sub- Adviser pursuant to this Section
1 other than as provided in Section 3.
(e) The Sub-Adviser shall maintain all books and records with respect
to the Fund's portfolio transactions required by subparagraphs (b)(5) - (b)(11)
and paragraph (f) of Rule 31a-1 under the Investment Company Act of 1940, as
amended, and shall render to the Board of Trustees of the Trust such periodic
and special reports as the Board may reasonably request.
2. OTHER AGREEMENTS, ETC.
The Trust 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 Trust 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 Trust recognizes that in some cases this procedure may adversely
affect the size of the position that may be acquired or disposed of for the
Fund. In addition, the Trust understands that the persons employed by the
Sub-Adviser to assist 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.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE SUB-ADVISER.
The Manager will pay to the Sub-Adviser as compensation for the
Sub-Adviser's services rendered and for the expenses borne by the Sub-Adviser
pursuant to Section 1, a fee, computed and paid monthly at the annual rate of
0.15% of the value of the Fund's average daily net assets up to $200 million and
0.10% of the
<PAGE> 4
value of the Fund's average daily net assets over $200 million. Such average
daily net asset value of the Fund shall be determined by taking an average of
all of the determinations of such net asset value during such month at the close
of business on each business day during such month while this contract is in
effect. Such fee shall be payable for each month within 10 business days after
the end of such month.
Notwithstanding the foregoing, in the event that any reduction in the
fees paid to the Manager under the Management Contract 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- Adviser
hereunder; PROVIDED THAT the Sub-Adviser will never be required to pay more than
the amount of fees it receives.
If the Sub-Adviser shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS
CONTRACT.
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment or in the event that the Management
Contract shall have terminated for any reason; and this Agreement shall not be
amended unless such amendment be approved at a meeting by the affirmative vote
of a majority of the outstanding shares of the Fund, and by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the Trustees of the Trust who are not interested persons of the
Trust or of the Manager or of the Sub-Adviser.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective upon its execution, and shall
remain in full force and effect continuously thereafter (unless terminated
automatically as set forth in Section 4) until terminated as follows:
(a) The Trust may at any time terminate this Agreement by not
more than sixty days' written notice delivered or mailed by registered
mail, postage prepaid, to the Manager
<PAGE> 5
and the Sub-Adviser, or
(b) If (i) the Trustees of the Trust or the shareholders by
the affirmative vote of a majority of the outstanding shares of the
Fund, and (ii) a majority of the Trustees of the Trust who are not
interested persons of the Trust or of the Manager or of the
Sub-Adviser, by vote cast in person at a meeting called for the purpose
of voting on such approval, do not specifically approve at least
annually the continuance of this Agreement, then this Agreement shall
automatically terminate as at the close of business on the second
anniversary of its execution, or upon the expiration of one year from
the effective date of the last such continuance, whichever is later;
provided, however, that if the continuance of this Agreement is
submitted to the shareholders of the Fund for their approval and such
shareholders fail to approve such continuance of this Agreement as
provided herein, the Sub-Adviser may continue to serve hereunder in a
manner consistent with the Investment Company Act of 1940 and the Rules
and Regulations thereunder, or
(c) The Manager may at any time terminate this Agreement by
not less than sixty days' written notice delivered or mailed by
registered mail, postage prepaid, to the Sub-Adviser, and the
Sub-Adviser may at any time terminate this Agreement by not less than
90 days' written notice delivered or mailed by registered mail, postage
prepaid, to the Manager.
Action by the Trust under (a) above may be taken either (i) by vote of
a majority of its Trustees, or (ii) by the affirmative vote of a majority of the
outstanding shares of the Fund.
Termination of this Agreement pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN INFORMATION.
The Sub-Adviser shall promptly notify the Manager in writing of the
occurrence of any of the following events: (a) the Sub- Adviser shall fail to be
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended from time
<PAGE> 6
to time, and under the laws of any jurisdiction in which the Sub- Adviser is
required to be registered as an investment adviser in order to perform its
obligations under this Agreement, (b) the Sub-Adviser shall have been served or
otherwise have notice of any action, suit, proceeding, inquiry or investigation,
at law or in equity, before or by any court, public board or body, involving the
affairs of the Trust and (c) there shall be any change in the control of the
Sub-Adviser.
7. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the "affirmative vote of a majority
of the outstanding shares" of the Fund means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and entitled to vote at
such meeting, if the holders of more than 50% of the outstanding shares of or
the Fund entitled to vote at such meeting are present in person or by proxy, or
(b) of the holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the Rules and
Regulations thereunder, subject, however, to such exemptions as may be granted
by the Securities and Exchange Commission under said Act; the term "specifically
approve at least annually" shall be construed in a manner consistent with the
Investment Company Act of 1940 and the Rules and Regulations thereunder; and the
term "brokerage and research services" shall have the meaning given in the
Securities Exchange Act of 1934 and the Rules and Regulations thereunder.
8. NONLIABILITY OF SUB-ADVISER.
The Sub-Adviser shall exercise its best judgment in rendering its
services under this agreement. In the absence of willful misfeasance, bad faith
or gross negligence on the part of the Sub-Adviser, or reckless disregard of its
obligations and duties hereunder, the Sub-Adviser shall not be subject to any
liability to the Trust or the Fund, or to any shareholder of the Fund, for any
act or omission in the course of, or connected
<PAGE> 7
with, rendering services hereunder.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders individually
but are binding only upon the assets and property of the Fund.
IN WITNESS WHEREOF, SIERRA INVESTMENT ADVISORS CORPORATION and SCUDDER,
STEVENS & CLARK, INC. have each caused this instrument to be signed in duplicate
on its behalf by its duly authorized representative, all as of the day and year
first above written.
SIERRA INVESTMENT ADVISORS CORPORATION
By \s\ Michael D. Goth
--------------------------------------
Name: Michael D. Goth
Title: Chief Operating Officer
SCUDDER, STEVENS & CLARK, INC.
By \s\ Lynn Birdsong
--------------------------------------
Name: Lynn Birdsong
Title: Managing Director
Accepted and agreed to as of the day and year first above written:
THE SIERRA VARIABLE TRUST
By: \s\ Keith Pipes
---------------------------------------
Name: Keith Pipes
Title: Director, Executive Vice President
& Secretary
<PAGE> 1
EXHIBIT 5(b)-9
SUB-ADVISER AGREEMENT
This Agreement is made and entered into this 1st day of
January, 1994, by and between Sierra Investment Advisors Corporation (the
"Manager"), a corporation organized under the laws of the state of California
and Janus Capital Corporation (the "Sub-Adviser"), a corporation organized under
the laws of the state of Colorado.
WITNESSETH:
WHEREAS, the Manager 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 adviser to the Emerging Growth Fund of The Sierra
Variable Trust (the "Trust"), an unincorporated business trust organized under
the laws of the Commonwealth of Massachusetts pursuant to a Management Contract,
dated as of January 1, 1994, between the Manager and the Trust (the "Management
Contract"); and
WHEREAS, the Trust 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 "1940 Act"); and
WHEREAS, the Trust 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"); and
WHEREAS, the Sub-Adviser is engaged in the business of
rendering investment advisory and management services and is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"); and
WHEREAS, the Manager is authorized to retain sub-
advisers and desires to retain the Sub-Adviser to furnish
-1-
<PAGE> 2
investment advisory and management services to the Fund and the Sub-Adviser 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 Manager 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.
In performance of its duties, the Sub-Adviser will comply
with the limitations specified in its Agreement and Declaration of Trust, the
By-laws of the Trust and the stated investment objectives, policies and
restrictions of the Fund as forth in the Trust's Registration Statement on Form
N-1A, File No. 33-57732, as in effect and which may be amended from time to time
(the "Registration Statement"), and in such manner and to such extent as may
from time to time be approved by the Board of Trustees of the Trust. Copies of
the Registration Statement, have been or will be submitted to the Sub-Adviser.
Copies of all amendments or supplements to the Trust's Registration Statement
and the Trust's Declaration and Agreement of Trust will be provided to the
Sub-Adviser during the continuance of this Agreement before or at the time such
amendments or supplements become effective.
The Manager agrees to furnish the Sub-Adviser with minutes of
meetings of the Board of Trustees of the Fund to the extent they may affect the
duties of the Sub-Adviser, a certified copy of any financial statements or
reports prepared for the Trust which relate to the Fund, by certified or
independent public accountants, and with copies of any financial statements or
reports made by the Trust to its shareholders or to any governmental body or
securities exchange, and any further materials or information which the
Sub-Adviser may reasonably
-2-
<PAGE> 3
request to enable it to perform its functions under this Agreement.
2. Services as Investment Sub-Adviser
Subject to the supervision of the Board of Trustees of the
Trust and of the Manager, the Fund's investment adviser, the Sub-Adviser will
(a) maintain compliance procedures for the Fund that the Sub-Adviser believes
are adequate to ensure its compliance with the applicable provisions of the 1940
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 Registration Statement 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 in accordance with the 1940 Act and the
Advisers Act and the rules adopted thereunder and will furnish the Manager
quarterly, annual and special reports as the Manager may reasonably request; and
(e) treat confidentially and as proprietary information of the Trust, all
records and other information relative to the Trust 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
Trust, 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 Trust.
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.
Subject to the supervision of the Manager and in accordance
with the investment objective and policies as stated in the Trust's Registration
Statement, the Sub-Adviser is authorized, in its discretion and without prior
consultation with the Manager to buy, sell, lend, and otherwise trade in any
-3-
<PAGE> 4
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-Adviser shall determine. In addition, the
Sub-Adviser will furnish the Fund or the Manager with whatever statistical
information the Fund or the Manager 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 Trust, which may be conducted as often as quarterly, the
Sub-Adviser shall place all orders for the purchase and sale of investments for
the Fund with brokers, dealers, futures commissions merchants, or other sources
(hereafter, "brokers or dealers") selected by the Sub-Adviser, which may include
brokers or dealers affiliated with the Sub- Adviser. All transactions with any
affiliated person of the Trust, or where any such affiliated person acts as
broker or agent in connection with any such transaction, shall be accomplished
in compliance with the 1940 Act, the Advisers Act, the Securities Exchange Act
of 1934, as amended, the rules adopted thereunder and the procedures adopted
thereunder by the Trust. As provided in the Management Contract, the Trust
agrees that any entity or person associated with the Manager or Sub- Adviser
which is a member of a national securities exchange is authorized to effect any
transaction on such exchange for the account of the Fund which is permitted by
Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder, and the Trust has consented to the retention of compensation for the
transactions in accordance with Rule 11a2-2(T)(2)(iv). Purchase or sell orders
for the Fund may be aggregated with contemporaneous purchase or sell orders of
other clients of the Sub-Adviser; provided that (i) no advisory account will be
favored by the Sub-Adviser 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
-4-
<PAGE> 5
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-Adviser's books and records so as to identify the particular client who has
the beneficial interest therein. The Sub-Adviser 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-Adviser 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-Adviser. The Sub- Adviser 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-Adviser 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-Adviser 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-Adviser in managing the Fund; provided that with respect to such
transaction and such determination the affiliates of the Sub-Adviser shall have
the same responsibilities to the Fund as the Sub-Adviser has under this
Agreement.
4. Information Provided to the Trust
The Sub-Adviser will keep the Trust and the Manager informed
of developments materially affecting the Fund of which the Sub-Adviser becomes
aware and will, on its own initiative, furnish the Trust and the Manager on at
least a quarterly basis with whatever information the Sub-Adviser believes is
appropriate for this purpose.
5. Standard of Care
-5-
<PAGE> 6
The Sub-Adviser shall exercise its best judgment in rendering
the services described in paragraphs 2 and 3 above. Except as may otherwise be
provided by federal or state securities laws, 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 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, the Manager will pay the Sub-Adviser 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 up to $25 million and .50% of the Fund's average daily
net assets in excess of $25 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-Adviser, the value of the Fund's net assets shall be computed at the
times and in the manner specified in the Registration Statement.
7. Expenses
The Sub-Adviser 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- Adviser shall bear no expenses of the Trust, the Fund or
the Manager. The Trust bears the expenses described in its Registration
Statement. Any reimbursement of advisory fees required by the Management
Contract between the Trust and the Manager or any voluntary or statutory expense
limitation provision shall be the sole responsibility of the Manager.
-6-
<PAGE> 7
8. Services to Other Companies or Accounts
The Trust 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 Trust 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 a manner reasonably equitable to each entity. Similarly,
opportunities to sell securities will be allocated in such an equitable manner.
The Trust recognizes that in some cases this procedure may limit the size of the
position that may be acquired or disposed of for the Fund. In addition, the
Trust 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. The Trust recognizes and agrees that the Sub-Adviser
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 upon its execution,
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 Trust 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 60 days'
written notice by the Manager, the Board of Trustees of the Trust or by vote of
holders of a majority of the Fund's shares, or upon 60 days' written notice, by
the Sub-Adviser and, will terminate
-7-
<PAGE> 8
automatically upon any termination of the Management Contract. In addition, this
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act). The Sub-Adviser agrees to notify the Trust of any
circumstances that to its best knowledge and belief might result in this
Agreement being deemed to be assigned.
10. Representations of the Trust and the Sub-Adviser
The Trust represents that (i) a copy of its Declaration and
Agreement of Trust, dated January 27, 1993, 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 1940 Act
and other applicable laws.
The Manager 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 1940 Act and other
applicable laws.
The Sub-Adviser represents that it is authorized to perform
the services described herein.
11. Indemnification
The Manager 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
-8-
<PAGE> 9
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, and by the
vote, cast in person at a meeting called for the purpose of voting on such
approval, of a majority of the Trustees of the Trust who are not interested
persons of the Trust or of the Manager or of the Sub-Adviser.
13. Limitation of Liability
This Agreement has been executed on behalf of the Trust by the
undersigned officer of the Trust in his capacity as an officer of the Trust. The
obligations of this Agreement shall be binding upon the assets and property of
the Fund only and not upon the assets and property of any other investment fund
of the Trust and shall not be binding upon any Trustee, officer or shareholder
of the Fund and/or the Trust individually.
14. Entire Agreement
This Agreement constitutes the entire agreement between the
parties hereto.
15. Governing Law
This Agreement shall be governed in accordance with the laws
of the Commonwealth of Massachusetts.
16. Miscellaneous
(a) Unless the Trust gives the Sub-Adviser written
instructions to the contrary, the Sub-Adviser 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-Adviser 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 Trust shall provide the Sub-Adviser 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
-9-
<PAGE> 10
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-Adviser 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 Trust, the Fund and the Manager agree and acknowledge
that the Sub-Adviser 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-Adviser. The use by
the Trust 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-Adviser. The Trust and the Manager shall not,
without the consent of the Sub-Adviser, make representations regarding the
Sub-Adviser 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 Trust's
trustees and for internal use by the Trust and the Manager. Consent by the
Sub-Adviser 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 Trust, the Fund or the Manager within 3 business days after
the request is made by the Trust, the Fund or the Manager for such use of any
Janus Mark or any such representation. Upon termination of this Agreement for
any reason, the Trust and the Manager shall cease all use of any Janus Mark(s)
as soon as reasonably practicable.
(d) The Sub-Adviser agrees and acknowledges that the Trust is
the sole owner of the name and mark "The Sierra Variable Trust" and the Manager
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 "The Sierra
Variable Trust" or "Sierra Investment Advisors" (a "Sierra Mark") under this
Agreement shall inure to the benefit of the Trust or the Manager, respectively.
The use by the Sub-Adviser on its own behalf of any Sierra Mark in any
advertisement or sales literature or other materials promoting the Sub-Adviser
shall be with the consent of the Trust or the Manager, respectively. The
-10-
<PAGE> 11
Sub-Adviser shall not, without the consent of the Trust or the Manager, as
applicable, make representations regarding the Trust, the Fund or the Manager in
any disclosure document, advertisement or sales literature or other materials
promoting the Sub-Adviser. Consent by the Trust and the Manager 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-Adviser within 5 business days after the request by the Sub-Adviser is made
for such use of any Sierra Mark or any such representations. Upon termination of
this Agreement for any reason, the Sub-Adviser shall cease any and all use of
any Sierra Mark as soon as reasonably practicable.
(e) The Sub-Adviser may perform its services through any
employee, officer or agent of the Sub-Adviser, and the Trust and the Fund shall
not be entitled to the advice, recommendation, or judgment of any specific
person.
-11-
<PAGE> 12
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be duly executed as of the date first written above.
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
By: \s\ Stephen L. Stieneker
- ------------------------------- -------------------------------
Name: Name: Stephen L. Stieneker
Title: Title: Assistant Vice President
Accepted and agreed to
as of the day and year
first above written:
THE SIERRA VARIABLE TRUST
By: \s\ Keith Pipes
-----------------------------
Name: Keith Pipes
Title: Director, Executive Vice President
& Secretary
ATTEST:
By: \s\ Richard Bocanegra
-----------------------------
Name: Richard Bocanegra
Title: Administrative Assistant
-12-
<PAGE> 1
EXHIBIT 6(a)
DISTRIBUTION AGREEMENT
AGREEMENT, dated as of April 19, 1993, by and between THE
SIERRA VARIABLE TRUST (the "Trust") and SIERRA INVESTMENT SERVICES CORPORATION
("Sierra Services").
WITNESSETH:
WHEREAS, the Trust is a Massachusetts business trust organized
under the laws of the State of Massachusetts whose shareholders are and will be
separate accounts in unit investment trust form ("Eligible Separate Accounts")
of insurance companies;
WHEREAS, variable annuity and insurance product ("Variable
Products") net premiums and considerations will be allocated to Eligible
Separate Accounts for investment in the Trust;
WHEREAS, the Trust's shares may not be sold separately from
the Variable Products;
WHEREAS, the Trust desires Sierra Services to undertake
marketing activities with respect to Trust shares;
WHEREAS, the Trust is registered as an open-end investment
company under the Investment Company Act of 1940 ("Investment Company Act");
WHEREAS, the Investment Company Act prohibits any principal
underwriter for a registered open-end investment company from offering for
sale, selling, or delivering after sale any security of which such company is
the issuer, except pursuant to a written contract with such company, and Sierra
Services will
<PAGE> 2
be a principal underwriter for sale of securities issued by the Trust;
WHEREAS, Sierra Services is registered as a broker-dealer
under the Securities Exchange Act of 1934 ("Securities Exchange Act") and is a
member of the National Association of Securities Dealers, Inc. ("NASD");
NOW THEREFORE, the Trust and Sierra Services agree as follows:
Section 1. The Trust has approved a Memorandum of
"Procedures for Monitoring Potential Conflicts Among Insurance Company
Shareholders" (the "Procedures"). This Agreement shall be subject to the
provisions of the Procedures, the terms of which are incorporated herein by
reference, made a part hereof and controlling. The Procedures may be amended
or superseded, without prior notice, and this Agreement shall be deemed amended
to the extent the Procedures are amended or superseded. Sierra Services
represents and warrants that it will act in a manner consistent with such
Procedures as so set forth and as they may be amended or superseded, so long as
it is a principal underwriter of the Trust. This provision shall survive the
termination of this Agreement.
Section 2. Sierra Services is hereby authorized, from
time to time, to enter into separate written agreements ("Participation
Agreements" or, individually, a "Participation Agreement"), on terms and
conditions not inconsistent with this Agreement, with insurance companies which
have Eligible Separate Accounts and
-2-
<PAGE> 3
which agree to participate in the distribution of Trust shares, directly or
through affiliated broker-dealers (collectively, with the insurance companies
the "Participating Insurance Companies"), by means of distribution of Variable
Products and to use their best efforts to solicit applications for Variable
Products. Each Participation Agreement shall be entered into jointly with the
Participating Insurance Company and the Eligible Separate Account. Sierra
Services may not enter into any Participation Agreement with any Participating
Insurance Company that is more favorable than that maintained with any other
Participating Insurance Company and Eligible Separate Account.
Section 3. Such Participating Insurance Companies and
their agents or representatives soliciting applications for Variable Products
shall be duly and appropriately licensed, registered or otherwise qualified for
the sale of Variable Products under any applicable insurance laws and any
applicable securities laws of one or more states or other jurisdictions in
which Variable Products may be lawfully sold. Each such Participating
Insurance Company shall be both registered as a broker-dealer under the
Securities Exchange Act and a member of the NASD. Each such Participating
Insurance Company shall agree to comply with all laws and regulations, whether
federal or state, and whether relating to insurance, securities or other
general areas, including but not limited to the record-keeping and sales
supervision requirements of such laws and regulations.
-3-
<PAGE> 4
Section 4. Purchases and redemptions of Trust shares
shall be at the net asset value for the appropriate Fund, computed as set forth
in the most recent Prospectus and Statement of Additional Information relating
to the Trust contained in its Registration Statement on Form N-1A, File No.
33-57732, or any amendments thereto, and any supplements thereto ("Registration
Statement"). Trust shares may not be sold or transferred except to an Eligible
Separate Account with the prior approval of the Trust's Board of Trustees.
Section 5. The Trust shall not pay any compensation to
Sierra Services for services as principal underwriter herein, nor shall the
Trust reimburse Sierra Services for any expenses related to such services.
Sierra Services may, but need not, pay or charge other Participating Insurance
Companies pursuant to agreements as described in Section 2.
Section 6. The Trust represents to Sierra Services that
the Registration Statement contains all statements and information which are
required to be stated therein by the Securities Act of 1933 and in all respects
conform to the requirements thereof, and neither the Trust Prospectus nor the
SAI include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the foregoing representations
shall not apply to information contained in or omitted from the Trust
Prospectus and SAI in reliance upon, and
-4-
<PAGE> 5
in conformity with, written information furnished by Sierra Services
specifically for use in the preparation thereof.
In this connection Sierra Services acknowledges that the
day-to-day operations of the Trust, including without limitation, investment
management, securities brokerage allocation, cash control, accounting, record
keeping and other administrative, marketing and regulatory compliance
functions, are carried on and may in the future be carried on by Sierra
Services its affiliates Sierra Investment Advisors Corporation and Sierra Fund
Administration Corporation (the "Sierra Companies") and other parties
unaffiliated with Sierra Services on behalf of the Trust (collectively, the
"Preparing Parties"), under various agreements and arrangements, and that such
activities in large measure provide the basis upon which statements and
information are included or omitted from the Registration Statement. Sierra
Services further acknowledges that because of the foregoing arrangements, the
preparation of the Registration Statement is substantially in the control of
the Preparing Parties, subject to the broad supervisory authority and
responsibility of the Trust's Board of Trustees, and that, essentially, the
only Registration Statement information not independently known to, or prepared
by, the Preparing Parties is personal information as to each Trustee's full
name, age, background, business experience and other personal information that
may require disclosures under securities laws and for which
-5-
<PAGE> 6
the Preparing Parties necessarily must rely on each such Trustee to produce.
Section 7. The Trust will periodically prepare
Prospectuses (and, if applicable, SAIs) and any supplements thereto and shall
make camera ready copy available to Sierra Services for reproduction by it or
the Participating Insurance Companies. The Trust shall pay the cost of
reproducing its Prospectuses (and SAIs) for use by Sierra Services or other
Participating Insurance companies pursuant to this Agreement for existing
Contract Owners. Sierra Services shall pay the costs of reproducing any other
Trust documents (such as semi-annual reports) used as sales material.
Section 8. The Trust shall make available to Sierra
Services copies of Trust proxy materials and semi-annual reports, and any
supplements thereto in such numbers as the Participating Insurance Companies
may reasonably request for distribution to existing Contract Owners. The Trust
will use its best efforts to provide notice to Sierra Services of anticipated
filings or supplements. Sierra Services may from time to time authorize in
writing descriptions of the Trust for use in sales literature or advertising by
the Participating Insurance Companies (including brochures, letters,
illustrations and other similar materials, whether transmitted directly to
potential applicants or published in print or audio-visual media), which
authorization will not unreasonably withheld or delayed.
-6-
<PAGE> 7
Section 9. Sierra Services shall furnish to the Trust,
at least quarterly, reports as to the sales of Trust shares made pursuant to
this Agreement. These reports may be combined with any similar report prepared
by Sierra Services or any of the Preparing Parties.
Section 10. Sierra Services shall submit to all
regulatory and administrative bodies having jurisdiction over the operations of
Sierra Services, the Trust, or any Participating Insurance Company, present or
future, any information, reports or other material which any such body by
reason of this Agreement may request or require as authorized by applicable
laws or regulations.
Section 11. This Agreement shall be subject to the
provisions of the Investment Company Act, the Securities Exchange Act and the
Securities Act of 1933 and the rules, regulations, and rulings thereunder and
of the NASD, from time to time in effect, including such exemptions from the
Investment Company Act and no action positions as the Securities and Exchange
Commission or its staff may grant, and the terms hereof shall be interpreted
and construed in accordance therewith. Without limiting the generality of the
foregoing, (a) the term "assigned" shall not include any transaction exempted
from section 15(b)(2) of the Investment Company Act and (b) the vote of the
persons having voting rights in respect of the Trust referred to in Section 12
shall be the affirmative votes of the lesser of (1) the holders of more than
50% of all votes entitled to be cast in respect of the Trust
-7-
<PAGE> 8
or (ii) the holders of at least 67% of the votes which are present at a meeting
of such persons in the holders of more than 50% of all votes entitled to be
cast in respect of the Trust are present or represented by proxy at such
meeting, in either case voted in accordance with the provisions of the Policy.
Section 12. This Agreement shall continue in effect only
so long as such continuance is specifically approved at least annually by a
majority of the Trustees of the Trust who are not interested persons of the
Trust or Sierra Services and by (a) persons having voting rights in respect of
the Trust, by the vote stated in Section 11, voted in accordance with the
provisions of the Policy, or (b) the Board of Trustees of the Trust.
Section 13. This Agreement shall terminate automatically
if it shall be assigned.
Section 14. A copy of the Agreement and Declaration of Trust
of the Trust is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this instrument is executed on
behalf of the Trustees of the Trust as Trustees and not individually and that
the obligations of this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets and property of
the Trust.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
Attest: THE SIERRA VARIABLE TRUST
By: /s/ Donna J. Bray By: /s/ F. Brian Cerini
------------------------ ------------------------
Name: Donna J. Bray Name: F. Brian Cerini
----------------------- ------------------------
Title: Administrative Assistant Title: Chairman of the Board
------------------------- and President
-----------------------
Attest: SIERRA INVESTMENT SERVICES
CORPORATION
By: /s/ Donna J. Bray By: /s/ Keith Pipes
----------------------- -----------------------
Name: Donna J. Bray Name: Keith Pipes
----------------------- ---------------------
Title: Administrative Assistant Title: Executive Vice President,
------------------------- Treasurer and Secretary
--------------------------
-9-
<PAGE> 1
EXHIBIT 6(b)
PARTICIPATION AGREEMENT
AMONG
AMERICAN GENERAL LIFE INSURANCE COMPANY,
AMERICAN GENERAL SECURITIES INCORPORATED,
THE SIERRA VARIABLE TRUST
AND
SIERRA INVESTMENT SERVICES CORPORATION
DATED AS OF
May 3, 1993
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1
Introduction 2
1.1 Availability of Separate Account Divisions 2
1.2 Broker-Dealer Registration 3
SECTION 2
Processing Transactions 3
2.1 Timely Pricing and Orders 3
2.2 Timely Payments 4
2.3 Redemption in Kind 4
2.4 Applicable Price 4
SECTION 3
Costs and Expenses 5
3.1 General 5
3.2 Registration 5
3.3 Other (Non-Sales-Related) 5
3.4 Sales-Related 6
3.5 Parties to Cooperate 6
SECTION 4
Legal Compliance 7
4.1 Tax Laws 7
4.2 Insurance and Certain Other Laws 10
4.3 Securities Laws 11
4.4 Notice of Certain Proceedings and Other Circumstances 13
4.5 AGL to Provide Documents 13
4.6 Trust to Provide Documents 14
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 5
Mixed and Shared Funding 14
5.1 General 14
5.2 Disinterested Trustees 15
5.3 Monitoring for Material Irreconcilable Conflicts 15
5.4 Conflict Remedies 16
5.5 Notice to AGL 18
5.6 Information Requested by Board of Trustees 18
5.7 Compliance with SEC Rules 19
5.8 Requirements for Other Insurance Companies 19
SECTION 6
Termination 20
6.1 Events of Termination 20
6.2 Funds to Remain Available 22
6.3 Survival of Warranties and Indemnifications 22
6.4 Continuance of Agreement for Certain Purposes 22
SECTION 7
Parties to Cooperate Respecting Termination 24
SECTION 8
Assignment 24
SECTION 9
Notices 24
SECTION 10
Voting Procedures 25
SECTION 11
Foreign Tax Credits 26
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 12
Indemnification 25
12.1 Of Trust and Distributor by AGL 25
12.2 Of AGL and AGSI by Distributor 29
12.3 Effect of Notice 32
SECTION 13
Applicable Law 32
SECTION 14
Execution in Counterparts 33
SECTION 15
Severability 33
SECTION 16
Rights Cumulative 33
SECTION 17
Restrictions on Sales of Trust Shares 33
SECTION 18
Scope of Liability 34
SECTION 19
Headings 34
</TABLE>
iii
<PAGE> 5
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 3rd day of May, 1993
("Agreement"), by and among American General Life Insurance Company, a Texas
life insurance company ("AGL") (on behalf of itself and its "Separate Account,"
defined below), American General Securities Incorporated, a Texas corporation
("AGSI"), the principal underwriter with respect to the Contracts referred to
below, The Sierra Variable Trust, a Massachusetts business trust (the "Trust"),
and Sierra Investment Services Corporation, a California corporation (the
"Distributor"), the Trust's principal underwriter (collectively, the
"Parties"),
WITNESSETH THAT:
WHEREAS the Distributor and the Trust desire that shares of the
Trust's Global Money Fund, Growth Fund, International Growth Fund, U.S.
Government Fund, Corporate Income Fund, and Short Term Global Government Fund
(the "Funds"; reference herein to the "Trust" includes reference to each Fund
to the extent the context requires) be made available by the Distributor to
serve as underlying investment media for those combination fixed and variable
annuity contracts of AGL that are the subject of AGL's Form N-4 registration
statement filed with the Securities and Exchange Commission (the "SEC"), File
No. 33-57730 (the "Contracts"), to be offered through the Distributor,
<PAGE> 6
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Trust and the Distributor will make shares in the Funds
available to AGL for this purpose at net asset value and with no sales charges,
all subject to the following provisions:
Section 1. Introduction
1.1 Availability of Separate Account Divisions.
AGL represents that American General Life Insurance Company Separate
Account D (the "Separate Account") is and will continue to be available to
serve as an investment vehicle for its Contracts. The Contracts provide for
the allocation of net amounts received by AGL to separate series (the
"Divisions"; reference herein to the "Separate Account" includes reference to
each Division to the extent the context requires) of the Separate Account for
investment in the shares of corresponding Funds of the Trust that are made
available through the Separate Account to act as underlying investment media.
The Trust may from time to time add additional Funds, which will become subject
to this Agreement, if they are made available as investment media for the
Contracts. AGL will not unreasonably deny any request by the Distributor to
create new Divisions corresponding to such new Funds.
1.2 Broker-Dealer Registration.
The Distributor and AGSI each represents and warrants that it is
registered as a broker dealer with the SEC under the Securities Exchange Act of
1934, as amended, and is a member in good standing of the National Association
of Securities Dealers, Inc. (the "NASD").
2
<PAGE> 7
Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
The Trust or its designated agent will provide closing net asset
value, dividend and capital gain information for each Fund to AGL at the close
of trading on each day (a "Business Day") on which (a) the New York Stock
Exchange is open for regular trading, (b) the Trust calculates its net asset
value and (c) AGL is open for business. The Trust or its designated agent will
use its best efforts to provide this information by 5:00 p.m., Houston time.
AGL will use these data to calculate unit values, which in turn will be used to
process transactions that receive that same Business Day's Separate Account
unit value. The Separate Account processing will be done the same evening, and
corresponding orders with respect to Trust shares will be placed the morning of
the following Business Day. AGL will use its best efforts to place such orders
with the Trust by 9:00 a.m., Houston time.
2.2 Timely Payments.
AGL will transmit orders for purchases and redemptions of Trust
shares to the Distributor, and will wire payment for net purchases to a
custodial account designated by the Trust on the same day as the order for
Trust shares is placed, to the extent practicable. Payment for net redemptions
will be wired by the Trust to an account designated by AGL on the same day as
the order is placed, to the extent practicable, and in any event be made within
six calendar days after the date the order
3
<PAGE> 8
is placed in order to enable AGL to pay redemption proceeds within the time
specified in Section 22(e) of the Investment Company Act of 1940, as amended
(the "1940 Act").
2.3 Redemption in Kind.
The Trust reserves the right to pay any portion of a redemption in
kind of portfolio securities, if the Trust's board of trustees (the "Board of
Trustees") determines that it would be detrimental to the best interests of
shareholders to make a redemption wholly in cash.
2.4 Applicable Price.
The Parties agree that orders resulting from purchase payments,
surrenders, partial withdrawals, routine withdrawals of charges, or other
transactions under Contracts will be executed at the net asset values as
determined as of the close of regular trading on the New York Stock Exchange on
the Business Day that AGL processes such transactions, which will be the
Business Day prior to the Distributor's receipt of such orders. All other
purchases and redemptions will be effected at the net asset values next
computed after receipt by the Trust of the order therefor, and such orders will
be irrevocable. AGL hereby elects to reinvest all dividends and capital gains
distributions in additional shares of the corresponding Fund at the record-date
net asset values until AGL otherwise notifies the Trust in writing, it being
agreed by the Parties that the record date and the payment date with respect to
any dividend or distribution will be the same Business Day.
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<PAGE> 9
Section 3. Costs and Expenses
3.1 General.
Except as otherwise specifically provided herein, each Party
will bear all expenses incident to its performance under this Agreement.
3.2 Registration.
The Trust will pay the cost of its registering as a management
investment company under the 1940 Act and registering its shares under the
Securities Act of 1933, as amended (the "1933 Act"), and keeping such
registrations current and effective. AGL will pay the cost of registering the
Separate Account as a unit investment trust under the 1940 Act and registering
units of interest under the Contracts under the 1933 Act and keeping such
registrations current and effective.
3.3 Other (Non-Sales-Related).
As among the Parties, the Trust will bear the costs of preparing,
filing with the SEC and setting for printing the Trust's prospectus, statement
of additional information and any supplements thereto (collectively, the "Trust
Prospectus"), periodic reports to shareholders, Trust proxy material and other
shareholder communications. AGL will bear the costs of preparing, filing with
the SEC and setting for printing, the Separate Account's prospectus, statement
of additional information and any supplements thereto (collectively, the
"Separate Account Prospectus"), periodic reports to owners, annuitants or
participants under the Contracts (collectively, "Participants"), voting
instruction solicitation material, and other Participant communications. As
among the Parties, the
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<PAGE> 10
Trust and AGL each will bear the costs of printing and delivering to existing
Participants the documents as to which it bears the cost of preparation as set
forth above in this Section 3.3, it being understood that reasonable cost
allocations will be made in cases where any such Trust and AGL documents are
printed or mailed on a combined or coordinated basis.
3.4 Sales-Related.
Except as may otherwise be agreed to by the Parties relating to an
initial period of time after the Contracts are first offered for sale, the
Distributor will bear the cost of preparing, printing and distributing all
Trust and Separate Account sales literature and advertising and filing it with
the SEC and NASD, printing and delivering to offerees Trust and Separate
Account Prospectuses, Trust and Separate Account periodic reports and Trust and
AGL sales literature, and placing any advertisements. AGL will bear the cost
of filing any Trust or AGL sales materials with, and obtaining approval from,
any state insurance regulatory authorities, to the extent required.
3.5 Parties to Cooperate.
The Trust, AGL, AGSI and the Distributor each agrees to cooperate with
the others, as applicable, in arranging to print, mail and/or deliver combined
or coordinated prospectuses or other materials of the Trust and Separate
Account.
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<PAGE> 11
Section 4. Legal Compliance
4.1 Tax Laws.
(a) The Trust represents that it will make every effort to qualify
and to maintain qualification of each Fund as a regulated investment company
("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), and the Trust or the Distributor will notify AGL immediately upon
having a reasonable basis for believing that a Fund has ceased to so qualify or
that it might not so qualify in the future.
(b) AGL represents that it believes, in good faith, that the
Contracts will be treated as annuity contracts under applicable provisions of
the Code and that it will make every effort to maintain such treatment; AGL
will notify the Trust and the Distributor immediately upon having a reasonable
basis for believing that any of the Contracts have ceased to be so treated or
that they might not be so treated in the future.
(c) The Trust represents that it will make every effort to comply
and to maintain each Fund's compliance with the diversification requirements
set forth in Section 817(h) of the Code and Section 1.817- 5(b) of the
regulations under the Code, and the Trust or the Distributor will notify AGL
immediately upon having a reasonable basis for believing that a Fund has ceased
to so comply or that a Fund might not so comply in the future.
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<PAGE> 12
(d) AGL represents that it believes, in good faith, that the
Separate Account is a "segregated asset account" and that interests in the
Separate Account are offered exclusively through the purchase of or transfer
into a "variable contract," within the meaning of such terms under Section
817(h) of the Code and the regulations thereunder. AGL will make every effort
to continue to meet such definitional requirements, and it will notify the
Trust and the Distributor immediately upon having a reasonable basis for
believing that such requirements have ceased to be met or that they might not
be met in the future. Within 10 Business Days after the end of each calendar
quarter, AGL will certify in writing that such definitional requirements were
met during the preceding calendar quarter.
(e) The Trust represents that, under the terms of its investment
advisory agreements with Sierra Investment Advisors Corporation (the
"Adviser"), the Adviser is and will be responsible for managing the Trust in
compliance with the Trust's investment objectives, policies and restrictions as
set forth in the Trust Prospectus. The Trust represents that these objectives,
policies and restrictions do and will include operating as a RIC in compliance
with Subchapter M of the Code and Section 817(h) of the Code and regulations
thereunder. The Trust has adopted and will maintain procedures for ensuring
that the Trust is managed in compliance with Subchapter M and Section 817(h)
and regulations thereunder. On request, the Trust shall also provide AGL with
such materials, cooperation and assistance as may be reasonably necessary for
AGL or any person designated by AGL to review from time to time the procedures
and practices of the Adviser, each sub-investment adviser or other provider of
services to the Trust for ensuring that the Trust is managed in compliance with
Subchapter M and Section 817(h) and regulations thereunder.
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<PAGE> 13
(f) Independent public accountants (the "Auditors") will prepare a
report ("Report") for each Fund of the Trust in which the Separate Account
invests, within 15 Business Days after the end of each calendar quarter,
regarding whether any matter (the "Matter") has come to the attention of the
Auditors that has caused the Auditors to believe that the Trust was not a RIC
in compliance with Subchapter M of the Code and/or was not in compliance with
Section 817(h) of the Code and the regulations thereunder as of the last day of
such calendar quarter. A Report of no such Matter is referred to herein as a
"Non-Actionable Report," and a Report of such a Matter is referred to herein as
an "Actionable Report." Each Report will be prepared by Price Waterhouse or
other independent public accountants selected by the Trust. If such other
independent public accountants are not also the auditors approved with respect
to the Trust pursuant to Section 32(a) of the 1940 Act, such other independent
public accountants must be approved by AGL, which approval shall not be
unreasonably withheld. Each Report will be in a form and based on specified
procedures and work sheets agreed upon by the Trust and AGL, such agreement not
to be unreasonably withheld.
(g) The Trust will deliver to AGL a letter confirming any
Non-Actionable Report within 20 Business Days after the end of the quarter to
which it relates. On request, the Trust will also deliver to AGL a copy of any
Non-Actionable Report.
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<PAGE> 14
(h) Any Actionable Report shall be furnished immediately to AGL.
In the event of an Actionable Report, the Trust will take such action as is
necessary or appropriate to cure any noncompliance during a grace period of 30
calendar days after the end of the calendar quarter covered by the Report. If
the Trust so cures the noncompliance, it will furnish AGL with a Non-Actionable
Report by the last day of such grace period. If the Trust does not so cure the
noncompliance regarding its status as a RIC, the Trust will pursue those
efforts necessary to enable each affected Fund to qualify once again for
treatment as a RIC in compliance with Subchapter M, including cooperation in
good faith with AGL. If the Trust does not so cure the noncompliance regarding
its status under Section 817(h), the Trust will cooperate in good faith with
AGL's efforts to obtain a ruling and closing agreement, as provided in Revenue
Procedure 92-95 issued by the Internal Revenue Service (or any applicable
ruling or procedure subsequently issued by the Internal Revenue Service), that
the Trust satisfies Section 817(h) for the period or periods covered by the
Actionable Report.
4.2 Insurance and Certain Other Laws.
(a) The Trust will use its best efforts to comply with any
applicable state insurance laws or regulations, to the extent specifically
requested in writing by AGL.
(b) AGL represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
the State of Texas and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains the
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<PAGE> 15
Separate Account as a segregated asset account under Article 3.75 of the Texas
Insurance Code, and (iii) the Contracts comply in all material respects with
all other applicable federal and state laws and regulations.
(c) AGL and AGSI represent and warrant that AGSI is a business
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas and has full corporate power, authority and legal
right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
(d) The Distributor represents and warrants that it is a business
corporation duly organized, validly existing, and in good standing under the
laws of the State of California and has full corporate power, authority and
legal right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
(e) The Distributor and the Trust represent and warrant that the
Trust is a business trust duly organized, validly existing, and in good
standing under the laws of the Commonwealth of Massachusetts and has full
power, authority, and legal right to execute, deliver, and perform its duties
and comply with its obligations under this Agreement.
4.3 Securities Laws.
(a) AGL represents and warrants that (i) it has registered the
Separate Account as a unit investment trust in accordance with the provisions
of the 1940 Act to serve as a segregated
11
<PAGE> 16
investment account for its variable annuity contracts, including the Contracts,
(ii) the Separate Account does and will comply in all material respects with
the requirements of the 1940 Act and the rules thereunder, (iii) the Separate
Account's 1933 Act registration statement relating to the Contracts, together
with any amendments thereto, will at all times comply in all material respects
with the requirements of the 1933 Act and the rules thereunder, and (iv) the
Separate Account Prospectus will at all times comply in all material respects
with the requirements of the 1933 Act and the rules thereunder.
(b) The Trust and the Distributor represent and warrant that (i)
Trust shares sold pursuant to this Agreement will be registered under the 1933
Act to the extent required by the 1933 Act and duly authorized for issuance and
sold in compliance with Massachusetts law, (ii) the Trust is and will remain
registered under the 1940 Act to the extent required by the 1940 Act, and (iii)
the Trust will amend the registration statement for its shares under the 1933
Act and itself under the 1940 Act from time to time as required in order to
effect the continuous offering of its shares.
(c) The Trust represents and warrants that (i) the Trust does and
will comply in all material respects with the requirements of the 1940 Act and
the rules thereunder, (ii) its 1933 Act registration statement, together with
any amendments thereto, will at all times comply in all material respects with
the requirements of the 1933 Act and rules thereunder, and (iii) the Trust
Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
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<PAGE> 17
(d) The Trust will register and qualify its shares for sale in
accordance with the laws of any state or other jurisdiction only if and to the
extent reasonably deemed advisable by the Trust, AGL or any other life
insurance company utilizing the Trust.
4.4 Notice of Certain Proceedings and Other Circumstances.
The Distributor or the Trust shall immediately notify AGL of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to the Trust's registration
statement under the 1933 Act or the Trust Prospectus, (ii) any request by the
SEC for any amendment to such registration statement or Trust Prospectus, (iii)
the initiation of any proceedings for that purpose or for any other purpose
relating to the registration or offering of the Trust's shares, or (iv) any
other action or circumstances that may prevent the lawful offer or sale of
Trust shares in any state or jurisdiction, including, without limitation, any
circumstances in which (x) the Trust's shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law or (y) such law precludes the use of such shares as an underlying
investment medium of the Contracts issued or to be issued by AGL. The
Distributor and the Trust will make every reasonable effort to prevent the
issuance of any stop order, cease and desist order or similar order and, if any
such order is issued, to obtain the lifting thereof at the earliest possible
time.
4.5 AGL to Provide Documents.
AGL will provide to the Trust one complete copy of all SEC
registration statements, Separate Account Prospectuses, reports, any
preliminary and final voting instruction solicitation
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<PAGE> 18
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Separate Account or the
Contracts, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
4.6 Trust to Provide Documents.
The Trust will provide to AGL one complete copy of all SEC
registration statements, Trust Prospectuses, reports, any preliminary and final
proxy material, applications for exemptions, requests for no-action letters,
and all amendments to any of the above, that relate to the Trust or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
Section 5. Mixed and Shared Funding
5.1 General.
The Trust may apply for an order exempting it from certain provisions
of the 1940 Act and rules thereunder so that, subject to compliance with
Section 17 of this Agreement, the Trust may be available for investment by
certain other entities, including, without limitation, separate accounts
funding variable life insurance policies, separate accounts of insurance
companies unaffiliated with AGL and trustees of qualified pension and
retirement plans ("Mixed and Shared Funding"). The Parties recognize that the
SEC has imposed terms and conditions for such orders that are substantially
identical to many of the provisions of this Section 5. If the Trust implements
Mixed and Shared Funding, pursuant to such an exemptive order or otherwise,
Sections 5.2 through 5.8 below shall apply, but not otherwise.
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<PAGE> 19
5.2 Disinterested Trustees.
The Trust agrees that the Board of Trustees shall at all times consist
of trustees a majority of whom (the "Disinterested Trustees") are not
interested persons of the Adviser or the Distributor within the meaning of
Section 2(a)(19) of the 1940 Act.
5.3 Monitoring for Material Irreconcilable Conflicts.
The Trust agrees that the Board of Trustees will monitor for the
existence of any material irreconcilable conflict between the interests of the
Participants of all separate accounts of life insurance companies utilizing the
Trust, including the Separate Account. AGL agrees to inform the Board of
Trustees of the Trust of the existence of or any potential for any such
material irreconcilable conflict of which it is aware. The concept of a
"material irreconcilable conflict" is not defined by the 1940 Act or the rules
thereunder, but the Parties recognize that such a conflict may arise for a
variety of reasons, including, without limitation:
(a) an action by any state insurance or other regulatory
authority;
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<PAGE> 20
(b) a change in applicable federal or state insurance, tax or
securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any
similar action by insurance, tax or securities regulatory
authorities;
(c) an administrative or judicial decision in any relevant
proceeding;
(d) the manner in which the investments of any Fund are being
managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract participants or
by participants of different life insurance companies
utilizing the Trust; or
(f) a decision by a life insurance company utilizing the Trust to
disregard the voting instructions of participants.
Consistent with the SEC's requirements in connection with exemptive
proceedings of the type referred to in Section 5. 1 hereof, AGL will assist the
Board of Trustees in carrying out its responsibilities by providing the Board
of Trustees with all information reasonably necessary for the Board of Trustees
to consider any issue raised, including information as to a decision by AGL to
disregard voting instructions of Participants.
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<PAGE> 21
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the
members of the Board of Trustees or a majority of the Disinterested Trustees
that a material irreconcilable conflict exists, AGL and the other life
insurance companies utilizing the Trust will, at their own expense and to the
extent reasonably practicable (as determined by a majority of the Disinterested
Trustees), take whatever steps are necessary to remedy or eliminate the
material irreconcilable conflict, which steps may include, but are not limited
to:
(i) withdrawing the assets allocable to some or all of the
separate accounts from the Trust or any Fund and reinvesting
such assets in a different investment medium, including
another Fund of the Trust, or submitting the question whether
such segregation should be implemented to a vote of all
affected participants and, as appropriate, segregating the
assets of any particular group (e.g., annuity contract owners
or participants, life insurance contract owners or all
contract owners and participants of one or more life insurance
companies utilizing the Trust) that votes in favor of such
segregation, or offering to the affected contract owners or
participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "Management Company" in Section 4(3) of the 1940
Act or a new separate account that is operated as a Management
Company.
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<PAGE> 22
(b) If the material irreconcilable conflict arises because of
AGL's decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, AGL may be
required, at the Trust's election, to withdraw the Separate Account's
investment in the Trust. No charge or penalty will be imposed as a result of
such withdrawal. Any such withdrawal must take place within six months after
the Trust gives notice to AGL that this provision is being implemented, and
until such withdrawal the Distributor and Trust shall continue to accept and
implement orders by AGL for the purchase and redemption of shares of the Trust.
(c) If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to AGL conflicts
with the majority of other state regulators, then AGL will withdraw the
Separate Account's investment in the Trust within six months after the Trust's
Board of Trustees informs AGL that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal the
Distributor and Trust shall continue to accept and implement orders by AGL for
the purchase and redemption of shares of the Trust.
(d) AGL agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its expense and
with a view only to the interests of Participants.
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<PAGE> 23
(e) For purposes hereof, a majority of the Disinterested Trustees
will determine whether or not any proposed action adequately remedies any
material irreconcilable conflict. In no event, however, will the Trust or the
Distributor be required to establish a new funding medium for any Contracts.
AGL will not be required by the terms hereof to establish a new funding medium
for any Contracts if an offer to do so has been declined by vote of a majority
of Participants materially adversely affected by the material irreconcilable
conflict.
5.5 Notice to AGL.
The Trust will promptly make known in writing to AGL the Board of
Trustees' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 Information Requested by Board of Trustees.
AGL and the Trust will at least annually submit to the Board of
Trustees of the Trust such reports, materials or data as the Board of Trustees
may reasonably request so that the Board of Trustees may fully carry out the
obligations imposed upon them by the provisions hereof, and said reports,
materials and data will be submitted at any reasonable time deemed appropriate
by the Board of Trustees. All reports received by the Board of Trustees of
potential or existing conflicts, and all Board of Trustees actions with regard
to determining the existence of a conflict, notifying life insurance companies
utilizing the Trust of a conflict, and determining whether any proposed action
adequately remedies a conflict, will be properly recorded in the minutes of the
Board of Trustees or
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<PAGE> 24
other appropriate records, and such minutes or other records will be made
available to the SEC upon request.
5.7 Compliance with SEC Rules.
If, at any time during which the Trust is serving an investment medium
for variable life insurance policies, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to mixed and shared funding, the Parties agree that they will comply
with the terms and conditions thereof and that the terms of this Section 5
shall be deemed modified if and only to the extent required in order also to
comply with the terms and conditions of such exemptive relief that is afforded
by any of said rules that are applicable.
5.8 Requirements for Other Insurance Companies.
The Trust will require that each insurance company utilizing the Trust
enter into an agreement with the Trust that contains in substance the same
provisions as are set forth in Sections 2.3, 4. 1 (b), 4. 1 (d), 4.4, 4.3 (a),
4.5, 5, 10 and 18 of this Agreement. This provision is not intended to limit in
any way the obligations of the Trust and Distributor under Section 17 of this
Agreement.
Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.4 below, this Agreement will terminate as to a
Fund:
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<PAGE> 25
(a) at the option of AGL, the Distributor or the Trust upon (i) at
least six months' advance written notice to the other Parties, and (ii) the
approval by (x) a majority of the Disinterested Trustees or (y) a majority vote
of the shares of the affected Fund that are held in the corresponding Divisions
of the Separate Account (pursuant to the procedures set forth in Section 10 of
this Agreement for voting Trust shares in accordance with Participant
instructions); provided, however, that the approvals described in clauses (x)
and (y) above shall not be required if (1) the aggregate account value under
the Contracts is less than $300 million at the date the notice of termination
is delivered, (2) the aggregate month-end account value under the Contracts has
averaged less than $300 million for the 24 full calendar months immediately
preceding the date the notice of termination is delivered and (3) the notice of
termination is delivered no earlier than the end of the 60th full calendar
month following the date the first Contract is issued; or
(b) at the option of the Trust upon institution of formal
proceedings against AGL by the SEC, any state insurance regulator or any other
regulatory body regarding AGL's duties under this Agreement or related to the
sale of the Contracts, the operation of the Separate Account, or the purchase
of the Trust shares, if, in each case, the Trust reasonably determines that
such proceedings, or the facts on which such proceedings may be based, have a
material likelihood of imposing material adverse consequences on the Fund to be
terminated; or
(c) at the option of AGL upon institution of formal proceedings
against the Trust, the Adviser or any sub-investment adviser to the Trust, or
the Distributor by the NASD, the SEC, or any state securities or insurance
department or any other regulatory body, if, in each case, AGL reasonably
determines that such proceedings, or the facts on which such proceedings may be
based,
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<PAGE> 26
have a material likelihood of imposing material adverse consequences on AGL,
AGSI or the Division corresponding to the Fund to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's
shares are not registered and, in all material respects, issued and sold in
accordance with applicable state and federal law or (ii) such law precludes the
use of such shares as an underlying investment medium of the Contracts issued
or to be issued by AGL; or
(e) upon termination of the corresponding Division's investment in
the Fund pursuant to Section 5 hereof; or
(f) at the option of AGL if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions, or if
AGL reasonably believes that the Fund may fail to so qualify; or
(g) at the option of AGL if the Fund fails to comply with Section
817(h) of the Code or with successor or similar provisions, or if AGL
reasonably believes that the Fund may fail to so comply.
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<PAGE> 27
6.2 Funds to Remain Available.
Except (i) as necessary to implement Participant initiated
transactions, (ii) as required by state insurance laws or regulations, (iii) as
required pursuant to Section 5 of this Agreement, or (iv) with respect to any
Fund as to which this Agreement has terminated, AGL shall not (x) redeem Trust
shares attributable to the Contracts (as opposed to Trust shares attributable
to AGL's assets held in the Separate Account), or (y) prevent Participants from
allocating payments to or transferring amounts from a Fund that was otherwise
available under the Contracts, until, in either case, 90 calendar days after
AGL shall have notified the Trust or Distributor of its intention to do so.
6.3 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the termination of
this Agreement.
6.4 Continuance of Agreement for Certain Purposes.
If any Party terminates this Agreement with respect to any Fund
pursuant to Sections 6.1 (b), 6.1 (c), 6.1 (d), 6.1 (f), or 6.1 (g) hereof,
this Agreement shall nevertheless continue in effect as to any shares of that
Fund that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date
as of which the Separate Account owns no shares of the affected Fund or a date
(the "Final Termination Date") six months following the Initial Termination
Date, except that AGL may, by written notice to the other Parties, shorten said
six month period in the case of a termination pursuant to Sections 6.1 (d), 6.1
(f) or 6.1 (g).
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<PAGE> 28
Section 7. Parties to Cooperate Respecting Termination
The Parties agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that the Separate Account owns no shares of a Fund after the Final
Termination Date with respect thereto, or, in the case of a termination
pursuant to Section 6. 1 (a), the termination date specified in the notice of
termination.
Section 8. Assignment
This Agreement may not be assigned, except with the written consent of
each other Party.
Section 9. Notices
Notices and communications required or permitted by Section 2 hereof
will be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given
to the following persons at the following addresses and facsimile numbers, or
such other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
American General Life
Insurance Company
2727 Allen Parkway
Houston, Texas 77019
Attn: Steven A. Glover
FAX: 713-831-3071
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<PAGE> 29
American General Securities
Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attn: Steven A. Glover
FAX: 713-831-3071
The Sierra Variable Trust
888 South Figueroa Street
Suite 1100
Los Angeles, California 90017
Attn: Keith B. Pipes
FAX: 213-623-3783
Sierra Investment Services Corporation
888 South Figueroa Street
Suite 1100
Los Angeles, California 90017
Attn: Keith B. Pipes
FAX: 213-623-3783
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section 3
hereof, AGL will distribute all proxy material furnished by the Trust to
Participants and will vote Trust shares in accordance with instructions
received from Participants. AGI, will vote Trust shares that are (a) not
attributable to Participants or (b) attributable to Participants, but for which
no instructions have been received, in the same proportion as Trust shares for
which said instructions have been received from Participants. AGL agrees that
it will disregard Participant voting instructions only to the extent it would
be permitted to do so pursuant to Rule 6e-3(T)(b)(15)(iii) under the 1940 Act
if the Contracts were variable life insurance policies subject to that rule.
Other participating life insurance
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<PAGE> 30
companies utilizing the Trust will be responsible for calculating voting
privileges in a manner consistent with that of AGL, as prescribed by this
Section 10.
Section 11. Foreign Tax Credits
The Trust agrees to consult in advance with AGL concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to its shareholders.
Section 12. Indemnification
12.1 Of Trust and Distributor by AGL.
(a) Except to the extent provided in Sections 12.l(b) and 12.l(c),
below, AGL agrees to indemnify and hold harmless the Trust and the Distributor,
each of their trustees, directors and officers, and each person, if any, who
controls the Trust or the Distributor within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
12.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of AGL) or actions in
respect thereof (including, to the extent reasonable, legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or actions are related to the sale or acquisition
of the Trust's shares and:
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<PAGE> 31
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Separate Account's 1933 Act registration statement, the
Separate Account Prospectus, the Contracts or, to the extent
prepared by AGL or AGSI, sales literature or advertising for
the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading; provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to AGL or AGSI by or on behalf of the Trust, the
Distributor or the Adviser for use in the Separate Account's
1933 Act registration statement, the Separate Account
Prospectus, the Contracts, or sales literature or advertising
(or any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in the Trust's 1933 Act registration statement,
Trust Prospectus, sales literature or advertising of the
Trust, or any amendment or supplement to any of the foregoing,
not supplied for use therein by or on behalf of AGL or AGSI)
or wrongful conduct of AGL or AGSI or persons under their
control (including, without limitation, their employees and
"Associated Persons," as that term is defined in paragraph (m)
of Article I of the NASD's By-Laws), in connection with the
sale or distribution of the Contracts or Trust shares; or
27
<PAGE> 32
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Trust's
1933 Act registration statement, Trust Prospectus, sales
literature or advertising of the Trust, or any amendment or
supplement to any of the foregoing, or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in
reliance upon and in conformity with information furnished to
the Trust by or on behalf of AGL or AGSI for use in the
Trust's 1933 Act registration statement, Trust Prospectus,
sales literature or advertising of the Trust, or any amendment
or supplement to any of the foregoing; or
(iv) arise as a result of any failure by AGL or AGSI to perform the
obligations, provide the services and furnish the materials
required of them under the terms of this Agreement.
(b) AGL shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of its reckless disregard of obligations or duties
under this Agreement or to the Distributor or to the Trust.
(c) AGL shall not be liable under this indemnification provision
with respect to any action against an Indemnified Party unless the Trust or the
Distributor shall have notified AGL in
28
<PAGE> 33
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify AGL of any such
action shall not relieve AGL from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against
an Indemnified Party, AGL shall be entitled to participate, at its own expense,
in the defense of such action. AGL also shall be entitled to assume the defense
thereof, with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from AGL to
such Indemnified Party of AGL's election to assume the defense thereof, the
Indemnified Party will cooperate fully with AGL and shall bear the fees and
expenses of any additional counsel retained by it, and AGL will not be liable
to such Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection
with the defense thereof, other than reasonable costs of investigation.
12.2 Of AGL and AGSI by Distributor.
(a) Except to the extent provided in Sections 12.2(b) and 12.2(c)
hereof, the Distributor agrees to indemnify and hold harmless AGL, AGSI, and
the Trust, each of their trustees, directors and officers, and each person, if
any, who controls AGL, AGSI or the Trust within the meaning of Section 15 of
the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 12.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Distributor) or actions in respect thereof (including, to the extent
29
<PAGE> 34
reasonable, legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or actions are related to the sale or
acquisition of the Trust's shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Trust's
1933 Act registration statement, Trust Prospectus, sales
literature or advertising of the Trust or, to the extent not
prepared by AGL or AGSI, sales literature or advertising for
the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading; provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Distributor or Trust by or on behalf of AGL
or AGSI for use in the Trust's 1933 Act registration
statement, Trust Prospectus, or in sales literature or
advertising (or any amendment or supplement to any of the
foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in the Separate Account's 1933 Act registration
statement, Separate Account Prospectus, sales literature or
advertising for the Contracts, or any amendment or supplement
to any of the foregoing, not
30
<PAGE> 35
supplied for use therein by or on behalf of the Distributor,
Trust or Adviser) or wrongful conduct of the Trust or
Distributor or persons under their control (including, without
limitation, their employees and Associated Persons), in
connection with the sale or distribution of the Contracts or
Trust shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Separate Account's 1933 Act registration statement, Separate
Account Prospectus, sales literature or advertising covering
the Contracts, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon and in
conformity with information furnished to AGL or AGSI by or on
behalf of the Trust, the Adviser or the Distributor for use in
the Separate Account's 1933 Act registration statement,
Separate Account Prospectus, sales literature or advertising
covering the Contracts, or any amendment or supplement to any
of the foregoing; or
(iv) arise as a result of any failure by the Trust or the
Distributor to perform the obligations, provide the services
and furnish the materials required of them under the terms of
this Agreement;
31
<PAGE> 36
(b) The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of its reckless disregard of
obligations and duties under this Agreement or to AGL, AGSI or the Separate
Account.
(c) The Distributor shall not be liable under this indemnification
provision with respect to any action against an Indemnified Party unless AGL or
AGSI shall have notified the Distributor in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify the Distributor of any such action shall not
relieve the Distributor from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against an
Indemnified Party, the Distributor will be entitled to participate, at its own
expense, in the defense of such action. The Distributor also shall be entitled
to assume the defense thereof, with counsel approved by the Indemnified Party
named in the action, which approval shall not be unreasonably withheld. After
notice from the Distributor to such Indemnified Party of the Distributor's
election to assume the defense thereof, the Indemnified Party will cooperate
fully with the Distributor and shall bear the fees and expenses of any
additional counsel retained by it, and the Distributor will not be liable to
such Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred
32
<PAGE> 37
by such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.
12.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Section 12.1 or 12.2 above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Massachusetts law, without regard for that state's
principles of conflict of laws.
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
33
<PAGE> 38
Section 15. Severability
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
Section 17. Restrictions on Sales of Trust Shares
The Trust and the Distributor agree that, for a period of 24 months
following the initial sale of Contracts, shares of the Trust will not be made
available to any separate account of any other insurance company without AGL's
specific written consent. AGL agrees that the Trust thereafter will be
permitted (subject to the other terms of this Agreement) to make its shares
available to separate accounts of other life insurance companies. Without AGL's
express written consent, neither the Trust nor the Distributor, nor any of
their related persons and entities, will enter into any arrangement for
utilization of the Trust by any other life insurance company under which the
terms granted to that insurance company or its related persons and entities are
more favorable than those granted to AGL and its related persons and entities
hereunder. Other than as set forth above in this Section 17, neither the Trust
nor the Distributor will offer or issue Trust shares to any person or entity,
other than the Separate Account, without AGL's specific written consent, which
shall not be unreasonably withheld.
34
<PAGE> 39
Section 18. Scope of Liability
It is understood and expressly agreed that the obligations and
liabilities of the Trust hereunder will not be binding upon any of the
trustees, shareholders, nominees, officers, agents or employees of the Trust,
as provided in the Declaration of Trust. The execution and delivery of this
Agreement have been authorized by the Board of Trustees and this Agreement has
been signed by an authorized officer of the Trust, acting as such, and neither
such authorization by the Board of Trustees nor such execution and delivery by
such officer will be deemed to have been made by any of the Trustees
individually or to impose any liability on any of them personally, but will
bind only the assets and property of the Trust, as provided in its Declaration
of Trust.
Section 19. Headings
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers signing below.
35
<PAGE> 40
AMERICAN GENERAL LIFE INSURANCE COMPANY
By:/s/ Robert S. Cauthen, Jr.
________________________________
Title: Senior Vice President &
Chief Marketing Officer
AMERICAN GENERAL SECURITIES INCORPORATED
By:/s/ Larry K. Janney
________________________________
Title: President
THE SIERRA VARIABLE TRUST
By: /s/ F. Brian Cerini
---------------------------------
Title: Chairman of the Board & President
SIERRA INVESTMENT SERVICES CORPORATION
By: /s/ Keith Pipes
------------------------------------
Title: Senior Vice President,
Chief Financial Officer
36
<PAGE> 1
EXHIBIT 8(a)
CUSTODY AGREEMENT
AGREEMENT dated as of January 1, 1996, between THE SIERRA VARIABLE
TRUST (the "Trust") on behalf of its managed investment series funds currently
existing or as may from time to time be created and designated by the Trust and
covered under this Agreement pursuant to Section 2 hereof (individually, a
"Fund" and collectively, the "Funds"), a business trust organized under the
laws of the Commonwealth of Massachusetts, and registered as an investment
company under the 1940 Act, having its principal office and place of business
at 9301 Corbin Avenue, Suite 333, Northridge, California 91324, and BOSTON
SAFE DEPOSIT AND TRUST COMPANY (the "Custodian"), a Massachusetts trust company
with its principal place of business at One Boston Place, Boston, Massachusetts
02108.
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set
forth, the Trust and the Custodian agree as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:
(a) "Authorized Person" shall be deemed to include the Chairman of
the Board of Trustees, the President, and any Vice President, the
Secretary, the Treasurer or any other person, whether or not any such
person is an officer or employee of the Trust, duly authorized by the
Board of Trustees of the Trust to give Oral Instructions and Written
Instructions on behalf of the Trust and listed in the certification
annexed hereto as Appendix A or such other certification as may be
received by the Custodian from time to time.
(b) "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency Securities, its
successor or successors and its nominee or nominees.
(c) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this
<PAGE> 2
Agreement to be given by the Trust to the Custodian, which is actually
received by the Custodian and signed on behalf of the Trust by any two
Authorized Persons or any two officers thereof.
(d) "Business Day" shall mean any day on which any Fund and the
Custodian are open for business.
(e) "Master Trust Agreement" shall mean the Agreement and
Declaration of Trust of the Trust dated January 29, 1993, as the same
may be amended from time to time.
(f) "Depository" shall mean The Depository Trust Company ("DTC"),
a clearing agency registered with the Securities and Exchange
Commission under Section 17(a) of the Securities Exchange Act of 1934,
as amended, and authorized to act as a depository under the 1940 Act,
its successor or successors and its nominee or nominees, in which the
Custodian is hereby specifically authorized to make deposits. The
term "Depository" shall further mean and include any other person to
be named in a Certificate authorized to act as a depository under the
1940 Act, its successor or successors and its nominee or nominees.
(g) "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest and
principal by the Government of the United States or agencies or
instrumentalities thereof, commercial paper, bank certificates of
deposit, bankers' acceptances and short-term corporate obligations,
where the purchase or sale of such securities normally requires
settlement in federal funds on the same day as such purchase or sale,
and repurchase and reverse repurchase agreements with respect to any
of the foregoing types of securities.
(h) "Oral Instruction" shall mean one or more verbal instructions
actually received by the Custodian from a person reasonably believed
by the Custodian to be an Authorized Person.
(i) "Prospectus" shall mean the Funds' current prospectus(es) and
statement(s) of additional information relating to the registration of
the Trust's Shares under the Securities Act of 1933, as amended.
(j) "Shares" refers to shares of beneficial interest of any of the
Funds.
(k) "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and
other securities, commodities interests
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<PAGE> 3
and investments from time to time owned by any of the Funds.
(l) "Transfer Agent" shall mean the person that performs the
transfer agent, dividend disbursing agent and shareholder servicing
agent functions for the Funds.
(m) "Written Instruction" shall mean one or more written
communications actually received by the Custodian from a person
reasonably believed by the Custodian to be an Authorized Person by any
system whereby the receiver of such communication is able to verify
through codes or otherwise with a reasonable degree of certainty the
authenticity of the sender of such communication; however, "Written
Instruction" from the Funds' Sub-Administrator, The Shareholder
Services Group, Inc., to the Custodian shall mean one or more
electronic communications transmitted by fund accountants and their
managers (who have been provided an access code by the Sub-
Administrator) and actually received by the Custodian.
(n) The "1940 Act" refers to the Investment Company Act of 1940,
and the Rules and Regulations thereunder, all as amended from time to
time.
2. Appointment of Custodian.
(a) The Trust hereby constitutes and appoints the Custodian as
custodian of all the Securities and monies at the time owned by or in
the possession of the Trust and specifically allocated to a Fund
during the period of this Agreement.
(b) In the event that the Trust establishes one or more investment
series funds other than the Funds with respect to which the Trust
decides to retain the Custodian to provide custody services, the Trust
shall so notify the Custodian in writing. If the Custodian is willing
to render such services, the Custodian shall notify the Trust in
writing, whereupon each such investment series fund shall be deemed a
Fund hereunder as provided in Section 2(c) below. Without limiting
the foregoing, it is understood that the Trust will from time to time
issue separate series or classes of shares and may classify and
reclassify shares of any such series or class. The Custodian shall
identify to each such series or class property belonging to such
series or class and in such reports, confirmations and notices to the
Trust as are called for under this Agreement shall identify the series
or class to which such report, confirmation or notice pertains.
(c) Any Fund may be added to or deleted from coverage under this
Agreement by attaching a revised Schedule C to this
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<PAGE> 4
Agreement reflecting such addition or termination, dated and signed by
an authorized officer or representative of each party hereto.
(d) The Custodian hereby accepts appointment as such custodian for
each Fund and agrees to perform the duties thereof as set forth
herein.
3. Compensation.
(a) The Trust will compensate the Custodian for its services
rendered under this Agreement in accordance with the fees set forth in
the Fee Schedule annexed hereto as Schedule A and incorporated herein.
Such Fee Schedule does not include commercially reasonable
out-of-pocket disbursements of the Custodian for which the Custodian
shall be entitled to bill separately. Commercially reasonable
out-of-pocket disbursements shall include, but shall not be limited
to, the items specified in the Schedule of Out-of-Pocket Charges
annexed hereto as Schedule B and incorporated herein, which schedule
may be modified by the Custodian (i) upon not less than thirty days
prior written notice to the Trust and (ii) agreement of the Trust. In
addition, the expenses that the Custodian may charge a Fund include,
but are not limited to, the usual and customary expenses of
Sub-Custodians and foreign branches of the Custodian incurred in
settling transactions outside of Boston, Massachusetts or New York
City, New York involving the purchase and sale of Securities of such
Fund.
(b) Any compensation agreed to hereunder may be adjusted from time
to time by attaching to Schedule A and/or Schedule B of this Agreement
a revised Fee Schedule and/or Schedule of Out-of-Pocket Charges, dated
and signed by an authorized officer or representative of each party
hereto.
(c) The Custodian will bill the Trust for each Fund as soon as
practicable after the end of each calendar month, and said billings
will be detailed in accordance with the Fee Schedule and Schedule of
Out-of-Pocket Charges for each Fund. The Trust will promptly pay to
the Custodian the amount of such billing. In the alternative, the
Custodian may charge against any monies specifically allocated to a
Fund and held on behalf of the Trust pursuant to this Agreement such
compensation and any reasonable expenses incurred by the Custodian in
the performance of its duties with respect to such Fund pursuant to
this Agreement. The Custodian shall also be entitled to place in an
escrow account with a third party escrow agent that is agreeable to
the Custodian and the Trust (provided that such approval of
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<PAGE> 5
the third party escrow agent shall not be unreasonably withheld by
either party), any monies held by the Custodian and specifically
allocated to a Fund on behalf of the Trust pursuant to this Agreement
in the amount of any loss, damage, liability or expense incurred with
respect to such Fund, including counsel fees, for which the Custodian
shall be entitled to reimbursement under the provisions of this
Agreement; provided, that the Custodian shall promptly notify such
Fund in writing of such placement of monies in escrow and shall not
withdraw for the account of the Custodian any monies from such escrow
except as mutually agreed in writing between the Custodian and the
Fund; and provided further, that in the event that the Custodian and
the Fund can not agree as to the withdrawal of any amount of monies
from such escrow, the amount of monies to be withdrawn shall be
determined by arbitration conducted as mutually agreed by the
Custodian and the Trust.
4. Custody of Monies and Securities.
(a) Receipt and Holding of Assets.
The Trust will deliver or cause to be delivered to the Custodian all
Securities and monies owned by it at any time during the period of
this Agreement and shall specify the Fund to which the Securities and
monies are to be specifically allocated. The Custodian will not be
responsible for such Securities and monies until actually received by
it. The Trust shall instruct the Custodian from time to time in its
sole discretion, by means of a Written Instruction, or, in connection
with the purchase or sale of Money Market Securities, by means of an
Oral Instruction or a Written Instruction, as to the manner in which
and in what amounts Securities and monies of a Fund are to be
deposited on behalf of such Fund in the Book-Entry System or a
Depository and specifically allocated on the books of the Custodian to
such Fund; provided, however, that prior to the deposit of Securities
of a Fund in the Book-Entry System or a Depository, including a
deposit in connection with the settlement of a purchase or sale, the
Custodian shall have received a Certificate specifically approving
such deposits by the Custodian in the Book-Entry System or a
Depository. Securities and monies of a Fund deposited in the
Book-Entry System or a Depository will be represented in accounts
which include only assets held by the Custodian for customers,
including but not limited to accounts which the Custodian acts in a
fiduciary or representative capacity.
(b) Accounts and Disbursements. The Custodian shall establish and
maintain a separate account for each Fund and
- 5 -
<PAGE> 6
shall credit to the separate account for each Fund all monies received
by it for the account of such Fund and shall disburse the same only:
1. In payment for Securities purchased for such Fund, as
provided in Section 5 hereof;
2. For the payment of any expenses or liability incurred
by such Fund, including, but not limited to, the following:
management, accounting, transfer agent and legal fees and
operating expenses of that Fund whether or not expenses are,
in whole or in part, to be capitalized or treated as deferred
expenses;
3. In payment of dividends or distributions with respect
to the Shares of such Fund, as provided in Section 7 hereof;
4. In payment of original issue or other taxes with
respect to the Shares of such Fund, as provided in Section 8
hereof;
5. In payment for Shares of such Fund which have been
redeemed by that Fund, as provided in Section 8 hereof;
6. Pursuant to a Written Instruction, or with respect to
Money Market Securities, an Oral Instruction or a Written
Instruction, setting forth the name of such Fund, the name and
address of the person to whom the payment is to be made, the
amount to be paid and the purpose for which payment is to be
made; or
7. In payment of fees and in reimbursement of the
expenses and liabilities of the Custodian attributable to such
Fund, as provided in Sections 3 and 11(j) hereof.
(c) Confirmation and Statements. Promptly after the close of
business on each day, the Custodian shall furnish the Trust with
confirmations and a summary of all transfers to or from the account of
each Fund during such day. Where securities purchased by a Fund are
in a fungible bulk of securities registered in the name of the
Custodian (or its nominee) or shown on the Custodian's account on the
books of a Depository or the Book-Entry System, the Custodian shall by
book entry or otherwise identify the quantity of those securities
belonging to such Fund. At least monthly, the Custodian shall furnish
the Trust with a detailed statement of the Securities and monies held
for each Fund under this Agreement.
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<PAGE> 7
(d) Registration of Securities and Physical Separation. All
Securities held for a Fund which are issued or issuable only in bearer
form, except such Securities as are held in the Book-Entry System,
shall be held by the Custodian in that form; all other Securities held
for a Fund may be registered in the name of that Fund, in the name of
any duly appointed registered nominee of the Custodian as the
Custodian may from time to time determine, or in the name of the
Book-Entry System or a Depository or their successor or successors, or
their nominee or nominees. The Trust reserves the right to instruct
the Custodian as to the method of registration and safekeeping of the
Securities of each Fund. The Trust agrees to furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of its registered
nominee or in the name of the Book-Entry System or a Depository, any
Securities which it may hold for the account of a Fund and which may
from time to time be registered in the name of a Fund. The Custodian
shall hold all such Securities specifically allocated to a Fund which
are not held in the Book-Entry System or a Depository in a separate
account for such Fund, in the name of such Fund, physically segregated
at all times from those of any other person or persons.
(e) Segregated Accounts. Upon receipt of a Written Instruction
the Custodian will establish segregated accounts on behalf of each
Fund to hold liquid or other assets as it shall be directed by such
Written Instruction and shall increase or decrease the assets in such
Segregated Accounts only as it shall be directed by any subsequent
Written Instructions.
(f) Collection of Income and Other Matters Affecting Securities.
Unless otherwise instructed to the contrary by a Written Instruction,
the Custodian by itself, or through the use of the Book-Entry System
or a Depository with respect to Securities therein deposited, shall
with respect to all Securities held for a Fund in accordance with this
Agreement:
1. Collect all income due or payable;
2. Present for payment and collect the amount payable
upon all Securities which may mature or be called, redeemed or
retired, or otherwise become payable. The Custodian also
shall have the responsibility to each Fund for monitoring or
ascertaining any call, redemption or retirement dates with
respect to put bonds which are owned by that Fund and held by
the Custodian or its nominees;
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<PAGE> 8
3. Surrender Securities in temporary form for definitive
Securities;
4. Execute any necessary declarations or certificates of
ownership under the Federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in
effect; and
5. Hold directly, or through the Book-Entry System or a
Depository with respect to Securities therein deposited, for
the account of a Fund all rights and similar Securities issued
with respect to any Securities held by the Custodian hereunder
for that Fund.
(g) Delivery of Securities and Evidence of Authority. Upon
receipt of a Written Instruction and not otherwise, except for
subparagraphs 5, 6, 7, and 8 of this section 4(g) which may be
effected by either an Oral or Written Instruction, the Custodian,
directly or through the use of the Book-Entry System or a Depository,
shall:
1. Execute and deliver or cause to be executed and
delivered to such persons as may be designated in such Written
Instruction, proxies, consents, authorizations, and any other
instruments whereby the authority of a Fund as owner of any
Securities may be exercised;
2. Deliver or cause to be delivered any Securities held
for a Fund in exchange for other Securities or monies issued
or paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;
3. Deliver or cause to be delivered any Securities held
for a Fund to any protective committee, reorganization
committee or other person in connection with the
reorganization, refinancing, merger, consolidation or
recapitalization or sale of assets of any corporation, and
receive and hold under the terms of this Agreement in the
separate account for a Fund such certificates of deposit,
interim receipts or other instruments or documents as may be
issued to it to evidence such delivery;
4. Make or cause to be made such transfers or exchanges
of the assets specifically allocated to the separate account
of a Fund and take such other steps as shall be stated in such
Written Instruction for the purpose of effectuating any duly
authorized plan of
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<PAGE> 9
liquidation, reorganization, merger, consolidation or
recapitalization of the Funds;
5. Deliver Securities owned by a Fund upon sale of such
Securities for the account of that Fund pursuant to Section 5;
6. Deliver Securities owned by a Fund upon the receipt
of payment in connection with any repurchase agreement related
to such Securities entered into by that Fund;
7. Deliver Securities owned by a Fund to the issuer
thereof or its agent when such Securities are called,
redeemed, retired or otherwise become payable; provided,
however, that in any such case the monies or other
consideration is to be delivered to the Custodian. The
Custodian also shall have the responsibility to each Fund for
monitoring or ascertaining any call, redemption or retirement
dates with respect to the put bonds which are owned by that
Fund and held by the Custodian or its nominee;
8. Deliver Securities owned by a Fund to the issuer
thereof, or its agent, for transfer into the name of that Fund
or into the name of any nominee or nominees of the Custodian
or into the name or nominee name of any agent or any
sub-custodian appointed pursuant to Section 11(g) hereof; or
for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units; provided, however, that in any such case, the
new Securities are to be delivered to the Custodian;
9. Deliver Securities owned by a Fund to the broker for
examination in accordance with "street delivery" custom;
10. Deliver Securities owned by a Fund in accordance with
the provisions of any agreement among a Fund, the Custodian
and any broker-dealer or any similar organization or
organizations relating to compliance with the rules of any
options clearing entity or securities or commodities exchange,
regarding escrow or other arrangements in connection with
transactions by the Fund;
11. Deliver Securities owned by a Fund in accordance with
the provisions of any agreement among that Fund, the Custodian
and an individual or organization registered under the
Commodity Exchange Act, relating
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<PAGE> 10
to compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by that Fund;
12. Deliver Securities owned by a Fund for delivery in
connection with any loans of securities made by that Fund, but
only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and that Fund, which may be
in the form of monies or obligations issued by the United
States government, its agencies or instrumentalities;
13. Deliver Securities owned by a Fund for delivery as
security in connection with any borrowings by that Fund
requiring a pledge of that Fund's assets, but only against
receipt of amounts borrowed;
14. Deliver Securities owned by a Fund upon receipt of a
Written Instruction from that Fund for delivery to the
Transfer Agent or to the holders of Shares of that Fund in
connection with distributions in kind, as may be described
from time to time in that Fund's Prospectus, in satisfaction
of requests by holders of Shares for repurchase or redemption;
15. Deliver Securities as collateral in connection with
short sales of securities by a Fund;
16. Deliver Securities for any purpose expressly
permitted by and in accordance with procedures described in a
Fund's Prospectus or resolution adopted by the Trust's Board
of Trustees signed by an Authorized Person and certified by
the Secretary of the Trust; and
17. Deliver Securities owned by a Fund for any other
proper business purpose, but only upon receipt of, in addition
to a Written Instruction, a certified copy of a resolution of
the Board of Trustees signed by an Authorized Person and
certified by the Secretary of the Trust, specifying the
Securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to
be a proper business purpose, and naming the person or persons
to whom delivery of such Securities shall be made.
(h) Endorsement and Collection of Checks, Etc. The Custodian is
hereby authorized to endorse and collect all checks, drafts or other
orders for the payment of money
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<PAGE> 11
received by the Custodian for the account of a Fund; provided,
however, that the Custodian shall not be liable for any monies,
whether or not represented by check, draft, or other instrument for
the payment of money, received by it on behalf of that Fund, until the
Custodian actually receives and collects such monies directly or by
the final crediting of the account representing that Fund's interest
in the Book-Entry System or a Depository.
5. Purchase and Sale of Investments of the Funds.
(a) Promptly after each purchase of Securities for a Fund, the
Trust shall deliver to the Custodian (i) with respect to each purchase
of Securities that are not Money Market Securities, a Written
Instruction, and (ii) with respect to each purchase of Money Market
Securities, either a Written Instruction or Oral Instruction, in
either case specifying with respect to each purchase: (1) the name of
the Fund to which such Securities are to be specifically allocated;
(2) the name of the issuer and the title of the Securities; (3) the
number of shares or the principal amount purchased, and accrued
interest, if any; (4) the date of purchase and settlement; (5) the
purchase price per unit; (6) the total amount payable upon such
purchase; (7) the name of the person from whom or the broker through
whom the purchase was made, if any; (8) whether or not such purchase
is to be settled through the Book-Entry System or a Depository; and
(9) whether the Securities purchased are to be deposited in the
Book-Entry System or a Depository. The Custodian shall receive the
Securities purchased by or for a Fund and upon receipt of such
Securities shall pay out of the monies held for the account of such
Fund the total amount payable upon such purchase, provided that the
same conforms to the total amount payable as set forth in such Written
or Oral Instruction.
(b) Promptly after each sale of Securities of a Fund, the Trust
shall deliver to the Custodian (i) with respect to each sale of
Securities which are not Money Market Securities, a Written
Instruction, and (ii) with respect to each sale of Money Market
Securities, either a Written Instruction or Oral Instruction, in
either case specifying with respect to such sale: (1) the name of the
Fund to which the Securities sold were specifically allocated; (2) the
name of the issuer and the title of the Securities; (3) the number of
shares or principal amount sold, and accrued interest, if any; (4) the
date of sale; (5) the sale price per unit; (6) the total amount
payable to such Fund upon such sale; (7) the name of the broker
through whom or the person to whom the sale was made; and (8) whether
or not
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<PAGE> 12
such sale is to be settled through the Book-Entry System or a
Depository. The Custodian shall deliver or cause to be delivered the
Securities to the broker or other person designated by the Trust upon
receipt of the total amount payable to such Fund upon such sale,
provided that the same conforms to the total amount payable to such
Fund as set forth in such Written or Oral Instruction. Subject to the
foregoing, the Custodian may accept payment in such form as shall be
satisfactory to it, and may deliver Securities and arrange for payment
in accordance with the customs prevailing among dealers in Securities.
6. Lending of Securities.
If any Fund is permitted by the terms of the Master Trust
Agreement and as disclosed in the Fund's Prospectus to lend Securities
specifically allocated to that Fund, within 24 hours after each loan
of Securities, the Trust shall deliver to the Custodian a Written
Instruction specifying with respect to each such loan: (a) the name
of the Fund to which the loaned Securities are specifically allocated;
(b) the name of the issuer and the title of the Securities; (c) the
number of shares or the principal amount loaned; (d) the date of loan
and delivery; (e) the total amount to be delivered to the Custodian,
and specifically allocated to such Fund against the loan of the
Securities, including the amount of cash collateral and the premium,
if any, separately identified; (f) the name of the broker, dealer or
financial institution to which the loan was made; and (g) whether the
Securities loaned are to be delivered through the Book-Entry System or
a Depository.
Promptly after each termination of a loan of Securities
specifically allocated to a Fund, the Trust shall deliver to the
Custodian a Written Instruction specifying with respect to each such
loan termination and return of Securities: (a) the name of the Fund
to which such loaned Securities are specifically allocated; (b) the
name of the issuer and the title of the Securities to be returned; (c)
the number of shares or the principal amount to be returned; (d) the
date of termination; (e) the total amount to be delivered by the
Custodian (including the cash collateral for such Securities minus any
offsetting credits as described in said Written Instruction); (f) the
name of the broker, dealer or financial institution from which the
Securities will be returned; and (g) whether such return is to be
effected through the Book-Entry System or a Depository. The Custodian
shall receive all Securities returned from the broker, dealer or
financial institution to which such Securities were loaned and upon
receipt thereof shall pay,
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<PAGE> 13
out of the monies specifically allocated to such Fund, the total
amount payable upon such return of Securities as set forth in the
Written Instruction. Securities returned to the Custodian shall be
held as they were prior to such loan.
7. Payment of Dividends or Distributions.
(a) The Trust shall furnish to the Custodian the vote of the Board
of Trustees of the Trust certified by the Secretary (i) authorizing
the declaration of distributions with respect to a Fund on a specified
periodic basis and authorizing the Custodian to rely on an Oral
Instruction or a Written Instruction specifying the date of the
declaration of such distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share to the shareholders of record
as of the record date and the total amount payable to the Transfer
Agent on the payment date, or (ii) setting forth the date of
declaration of any distribution by a Fund, the date of payment
thereof, the record date as of which shareholders entitled to payment
shall be determined, the amount payable per share to the shareholders
of record as of the record date and the total amount payable to the
Transfer Agent on the payment date.
(b) Upon the payment date specified in such vote, an Oral
Instruction or a Written Instruction, as the case may be, the
Custodian shall pay out the monies specifically allocated to and held
for the account of the appropriate Fund the total amount payable to
the Transfer Agent of that Fund.
8. Sale and Redemption of Shares of the Funds.
(a) Whenever the Trust shall sell any Shares of a Fund, the Trust
shall deliver or cause to be delivered to the Custodian a Written
Instruction duly specifying:
1. The name of the Fund whose Shares were sold;
2. The name and number of Shares sold, trade date, and
price; and
3. The amount of monies to be received by the Custodian
for the sale of such Shares and specifically allocated to such
Fund.
The Custodian understands and agrees that a Written
Instruction may be furnished subsequent to the purchase of
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<PAGE> 14
Shares of a Fund and that the information contained therein will be
derived from the sales of Shares specifically allocated to that Fund
as reported to the Trust by the Transfer Agent.
(b) Upon receipt of such monies from the Transfer Agent, the
Custodian shall credit such monies to the separate account of the Fund
specified in subparagraph (1) of paragraph (a) of this Section 8.
(c) Upon issuance of any Shares of a Fund in accordance with the
foregoing provisions of this Section 8, the Custodian shall pay, out
of all the monies specifically allocated and held for the account of
such Fund, all original issue or other taxes required to be paid in
connection with such issuance upon the receipt of a Written
Instruction specifying the amount to be paid.
(d) Except as provided hereafter, whenever any Shares of a Fund
are redeemed, the Trust shall cause the Transfer Agent to promptly
furnish to the Custodian a Written Instruction, specifying:
1. The name of the Fund whose Shares were redeemed;
2. The number of Shares redeemed; and
3. The amount to be paid for the Shares redeemed.
The Custodian further understands that the information
contained in any such Written Instruction will be derived from the
redemption of Shares specifically allocated to that Fund as reported
to the Trust by the Transfer Agent.
(e) Upon receipt from the Transfer Agent of advice setting forth
the number of Shares of a Fund received by the Transfer Agent for
redemption and that such Shares are valid and in good form for
redemption, the Custodian shall make payment to the Transfer Agent out
of the monies specifically allocated to and held for the account of
the Fund specified as provided in subparagraph (1) of paragraph (d) of
this Section 8.
(f) Notwithstanding the above provisions regarding the redemption
of Shares of a Fund, whenever such Shares are redeemed pursuant to any
check redemption privilege which may from time to time be offered by
the Fund, the Custodian, unless otherwise instructed by a Written
Instruction shall, upon receipt of advice from the Fund or its agent
stating that the redemption is in good form for redemption in
accordance with the check redemption procedure, honor the
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<PAGE> 15
check presented as part of such check redemption privilege out of the
monies specifically allocated to the Fund in such advice for such
purpose.
9. Indebtedness.
(a) The Trust will cause to be delivered to the Custodian by any
bank (excluding the Custodian) from which the Trust borrows money for
temporary administrative or emergency purposes using Securities as
collateral for such borrowings, a notice or undertaking in the form
currently employed by any such bank setting forth the amount which
such bank will loan to the Trust against delivery of a stated amount
of collateral. The Trust shall promptly deliver to the Custodian a
Written Instruction stating with respect to each such borrowing: (1)
the name of the Fund for which the borrowing is to be made; (2) the
name of the bank; (3) the amount and terms of the borrowing, which may
be set forth by incorporating by reference an attached promissory
note, duly endorsed by the Trust, or other loan agreement; (4) the
time and date, if known, on which the loan is to be entered into (the
"borrowing date"); (5) the date on which the loan becomes due and
payable; (6) the total amount payable to the Trust for the separate
account of the Fund on the borrowing date; (7) the market value of
Securities to be delivered as collateral for such loan, including the
name of the issuer, the title and the number of shares or the
principal amount of any particular Securities; (8) whether the
Custodian is to deliver such collateral through the Book-Entry System
or a Depository; and (9) a statement that such loan is in conformance
with the 1940 Act and the Fund's Prospectus.
(b) Upon receipt of the Written Instruction referred to in
subparagraph (a) of this Section 9, the Custodian shall deliver on the
borrowing date the specified collateral and the executed promissory
note, if any, against delivery by the lending bank of the total amount
of the loan payable, provided that the same conforms to the total
amount payable as set forth in the Written Instruction. The Custodian
may, at the option of the lending bank, keep such collateral in its
possession, but such collateral shall be subject to all rights therein
given the lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver as additional collateral in
the manner directed by the Trust from time to time such Securities
specifically allocated to such Fund as may be specified in a Written
Instruction to collateralize further any transaction described in this
Section 9. The Trust shall cause all Securities released from
collateral status to be returned directly to the Custodian, and the
Custodian shall receive
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<PAGE> 16
from time to time such return of collateral as may be tendered to it.
In the event that the Trust fails to specify in a Written Instruction
all of the information required by this Section 9, the Custodian shall
not be under any obligation to deliver any Securities and will
promptly notify the Trust of such deficient Written Instruction and
the information that is required by this Section 9 that is missing.
Collateral returned to the Custodian shall be held hereunder as it was
prior to being used as collateral.
10. Persons Having Access to Assets of the Funds.
(a) No Trustee, officer, employee or agent of the Trust, and no
officer, director, trustee, employee or agent of the Funds' investment
adviser, of any investment sub-adviser of a Fund, or of the Funds'
administrator or sub-administrator, shall have physical access to the
assets of a Fund held by the Custodian or be authorized or permitted
to withdraw any investments of a Fund, nor shall the Custodian deliver
any assets of a Fund to any such person. No officer, director,
employee or agent of the Custodian who holds any similar position with
the Funds' investment adviser with any sub-adviser of the Funds or
with the Funds' administrator or sub- administrator shall have access
to the assets of a Fund.
(b) Nothing in this Section 10 shall prohibit any trustee,
officer, employee or agent of the Trust, or any officer, director,
trustee, employee or agent of a Fund's investment adviser, of any
investment sub-adviser of a Fund or of the Funds' administrator or
sub-administrator, from giving an Oral Instruction or a Written
Instruction to the Custodian or executing a Certificate so long as it
does not result in delivery of or access to assets of the Trust
prohibited by paragraph (a) of this Section 10.
11. Concerning the Custodian.
(a) Qualification. The Custodian represents and warrants to the
Trust that the Custodian is qualified under Section 17(f) of the 1940
Act and the rules and regulations thereunder to be a custodian for the
securities and similar investments of the Trust, as a registered
investment company, and of the Funds, as series of a registered
investment company.
(b) Standard of Conduct. Except as otherwise provided herein,
neither the Custodian nor its nominee shall be liable for any loss or
damage, including counsel fees, resulting from its action or omission
to act or otherwise,
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<PAGE> 17
except for any such loss or damage arising out of its own negligence
or willful misconduct. The Custodian may, with respect to questions
of law, apply for and obtain the advice and opinion of counsel to the
Trust or of its own counsel, at the expense of the Trust, and shall be
fully protected with respect to anything done or omitted by it in good
faith in conformity with such advice or opinion. The Custodian shall
be liable to the Trust for any loss or damage resulting from the use
of the Book-Entry System or a Depository arising by reason of any
negligence, misfeasance or misconduct on the part of the Custodian or
any of its employees or agents.
(c) Limit of Duties. Without limiting the generality of the
foregoing, the Custodian shall be under no duty or obligation to
inquire into, and shall not be liable for:
1. The validity of the issue of any Securities purchased
by a Fund, the legality of the purchase thereof, or the
propriety of the amount paid therefor;
2. The legality of the sale of any Securities by a Fund
or the propriety of the amount for which the same are sold;
3. The legality of the issue or sale of any Shares, or
the sufficiency of the amount to be received therefor;
4. The legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor;
5. The legality of the declaration or payment of any
distribution of a Fund;
6. The legality of any borrowing for temporary or
emergency administrative purposes.
(d) No Liability Until Receipt. The Custodian shall not be liable
for, or considered to be the Custodian of, any monies, whether or not
represented by any check, draft, or other instrument for the payment
of money, received by it on behalf of a Fund until the Custodian
actually receives and collects such monies directly or by the final
crediting of the account representing the Trust's or such Fund's
interest in the Book-Entry System or a Depository. The Custodian
shall exercise reasonable diligence in pursuing payment on any such
instrument, or any dividend, interest or other receivable of the
Trust.
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<PAGE> 18
(e) Amounts Due from Transfer Agent. The Custodian shall not be
under any duty or obligation to take action to effect collection of
any amount due to a Fund from the Transfer Agent nor to take any
action to effect payment or distribution by the Transfer Agent of any
amount paid by the Custodian to the Transfer Agent in accordance with
this Agreement.
(f) Collection Where Payment Refused. The Custodian shall not be
under any duty or obligation to take action to effect collection of
any amount, if the Securities upon which such amount is payable are in
default, or if payment is refused after due demand or presentation,
unless and until (a) it shall be directed to take such action by a
Certificate and (b) it shall be assured to its satisfaction of
reimbursement of its costs and expenses in connection with any such
action.
(g) Appointment of Agents and Sub-Custodians. The Custodian may
appoint one or more banking institutions, including but not limited to
banking institutions located in foreign countries (provided that each
such institution shall constitute an "Eligible Foreign Custodian"
within the meaning of Rule 17f-5 under the 1940 Act), to act as
Depository or Depositories or as Sub-Custodian or as Sub- Custodians
of Securities and monies at any time owned by a Fund, upon terms and
conditions specified in a Certificate. The Custodian shall use
reasonable care in selecting a Depository and/or Sub-Custodian located
in a country other than the United States ("Foreign Sub-Custodian"),
and shall oversee the maintenance of any Securities or monies of a
Fund by any Foreign Sub-Custodian. The Custodian shall not appoint
any Foreign Sub-Custodian until the Board of Trustees of the Trust
shall have made the determinations and approved the written contract
with such Foreign Sub-Custodian as required by Rule 17f-5 and Rule
17f-4, if applicable, under the 1940 Act. In addition, the Custodian
shall hold the Trust harmless from, and indemnify the Trust against,
any loss that occurs as a result of the failure of any Foreign
Sub-Custodian to exercise reasonable care with respect to the
safekeeping of Securities and monies of any Fund. Notwithstanding the
generality of the foregoing, however, the Custodian shall not be
liable for any losses resulting from or caused by events or
circumstances beyond its reasonable control, including but not limited
to, losses resulting from nationalization, expropriation, devaluation,
revaluation, confiscation, seizure, cancellation, destruction or
similar action by any governmental authority, de facto or de jure; or
enactment, promulgation, imposition or enforcement by any such
governmental authority or currency restrictions, exchange controls,
taxes, levies or
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<PAGE> 19
other charges affecting the Trust's property; or acts of war,
terrorism, insurrection or revolution; or any other similar act or
event beyond the Custodian's control.
The Custodian shall maintain such records as shall be
necessary to identify the assets of each Fund held by each Foreign
Sub- Custodian. The Custodian shall furnish to the Trust such
periodic reports as the Trust shall reasonably request with respect to
the assets of each Fund held by each Foreign Sub-Custodian, and shall
furnish to the Trust such notices of transfers of securities, deposits
or other assets to or from each Fund's account by each Foreign
Sub-Custodian as the Trust shall request.
The Custodian shall advise the Trust promptly if it learns
that any Foreign Sub-Custodian no longer constitutes an "Eligible
Foreign Custodian" and of any failure by any Foreign Sub-Custodian to
observe any material term or condition of its appointment. If the
Board of Trustees of the Trust determines that a Fund's assets should
be withdrawn from a Foreign Sub-Custodian pursuant to Rule 17f-5 under
the 1940 Act, the Custodian shall withdraw the Fund's assets from the
care of such Foreign Sub-Custodian as soon as reasonably practicable,
and in any event within 180 days of the date of such determination by
the Board of Trustees of the Trust.
The Custodian may authorize one or more of the Foreign
Sub-Custodians to use the facilities of one or more foreign central
securities depositories or clearing agencies listed in Appendix C
hereto, or as may hereafter be approved by resolution of the Trustees
of the Trust; provided that any such organization shall constitute an
"Eligible Foreign Custodian."
In the event that any Foreign Sub-Custodian fails to perform
any of its obligations under the terms of its appointment, the
Custodian shall use its best efforts to cause such Foreign
Sub-Custodian to perform such obligations. At the written request of
the Trust, the Custodian shall use its best efforts to assert and
collect any claim for liability for any loss or damage incurred by a
Fund arising out of the failure of any such Foreign Sub-Custodian to
perform such obligations.
(h) No Duty to Ascertain Authority. The Custodian shall not be
under any duty or obligation to ascertain whether any Securities at
any time delivered to or held by it for the Trust and specifically
allocated to a Fund are such as may properly be held by the Trust and
specifically allocated to
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<PAGE> 20
such Fund under the provisions of the Master Trust Agreement and the
Prospectus.
(i) Reliance on Certificates and Instructions. The Custodian
shall be entitled to rely upon any Certificate, notice or other
instrument in writing received from the Trust by the Custodian and
reasonably believed by the Custodian to be genuine and to be signed by
two officers of the Trust. The Custodian shall be entitled to rely
upon any Written Instruction or Oral Instruction actually received by
the Custodian pursuant to the applicable Sections of this Agreement
and reasonably believed by the Custodian to be genuine and to be given
by an Authorized Person. The Trust agrees to forward to the Custodian
a Written Instruction from an Authorized Person confirming such Oral
Instruction in such manner so that such Written Instruction are
received by the Custodian, whether by hand delivery, telex or
otherwise, by the close of business on the same day that such Oral
Instruction is given to the Custodian. The Trust agrees that the fact
that such confirming instructions are not received by the Custodian
shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the Trust.
The Trust agrees that the Custodian shall incur no liability to the
Trust in acting upon an Oral Instruction given to the Custodian
hereunder concerning such transactions provided such instructions
reasonably appear to have been received from a duly Authorized Person.
(j) Overdrafts. In the event that the Custodian is directed by
Written Instruction (or Oral Instruction confirmed in writing in
accordance with Section 11(i) hereof) to make any payment or transfer
of monies on behalf of any Fund for which there would be, at the close
of business on the date of such payment or transfer, insufficient
monies held by the Custodian on behalf of the Fund, the Custodian may,
in its sole discretion and as permitted by applicable law, provide an
overdraft (an "Overdraft") to the Fund in an amount sufficient to
allow the completion of such payment or transfer. Any Overdraft
provided hereunder: (a) shall be payable on the next Business Day,
unless otherwise agreed by such Fund and the Custodian; (b) shall
accrue interest from the date of the Overdraft to the date of payment
in full by such Fund at a rate agreed upon in writing, from time to
time, by the Custodian and such Fund. The Custodian and the Fund
acknowledge that the purpose of such Overdraft is to temporarily
finance the purchase of Securities for prompt delivery in accordance
with the terms hereof, to meet unanticipated or unusual redemption, to
allow the settlement of foreign exchange contracts or to meet other
emergency
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<PAGE> 21
expenses not reasonably foreseeable by such Fund. In the event that
the Custodian becomes aware that an Overdraft may occur in time to
prevent the Overdraft, the Custodian will promptly notify the Fund, to
the extent practicable, and cooperate with the Fund, to the extent
possible, in the Fund's attempt to avoid the Overdraft. The Custodian
shall promptly notify such Fund in writing (an "Overdraft Notice") of
any Overdraft by facsimile transmission or in such other manner as
such Fund and the Custodian may agree in writing. The Fund shall be
liable to pay the charge for the Overdraft to the extent that the Fund
is responsible for causing such Overdraft and the Custodian shall be
liable to pay the charge for the Overdraft to the extent that the
Custodian is responsible for causing such Overdraft. To secure
payment of any Overdraft, the Fund hereby grants to the Custodian a
continuing security interest in and right of setoff against the
Securities and monies in such Fund's account from time to time in the
full amount of such Overdraft. Should the Fund fail to pay promptly
any amounts owed hereunder, the Custodian shall be entitled to use
available monies in such Fund's account and to liquidate Securities in
the account as is necessary to meet such Fund's obligations under the
Overdraft; provided, that the Fund shall be entitled to choose which
Securities shall be liquidated. In any such case, and without
limiting the foregoing, the Custodian shall be entitled, to the extent
permitted by applicable law, to take such other action(s) or exercise
such other options, powers and rights as the Custodian now or
hereafter has as a secured creditor under the Massachusetts Uniform
Commercial Code or any other applicable law.
(k) Inspection of Books and Records. The books and records of the
Custodian shall be open to inspection and audit at reasonable times by
officers and auditors employed by the Trust and by the appropriate
employees of the Securities and Exchange Commission.
The Custodian shall provide the Trust with any report obtained
by the Custodian on the system of internal accounting control of the
Book-Entry System or a Depository and with such reports on its own
systems of internal accounting control as the Trust may reasonably
request from time to time.
12. Term and Termination.
(a) This Agreement shall be effective as of the date first set
forth above (the "Effective Date") and shall continue in effect
thereafter as the parties may mutually agree.
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<PAGE> 22
(b) Either of the parties hereto may terminate this Agreement with
respect to any Fund by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than
60 days after the date of receipt of such notice. In the event such
notice is given by the Trust, it shall be accompanied by a certified
vote or votes of the Board of Trustees of the Trust, electing to
terminate this Agreement with respect to any Fund and designating a
successor custodian or custodians, which shall be a person qualified
to so act under the 1940 Act.
(c) In the event that the Custodian is no longer qualified as
provided in Section 11(a) hereof, the Custodian shall immediately give
notice to the Trust as provided herein and this Agreement shall
automatically terminate as to all of the Funds as soon as it is
practicable for all the Securities and monies of the Trust and the
Funds to be delivered to the Trust or to a new custodian as provided
below and upon such delivery.
In the event notice of termination is given by the Custodian
or this Agreement is automatically terminated as provided above, as
the case may be, the Trust shall, on or before the termination date,
deliver to the Custodian a certified vote or votes of the Board of
Trustees of the Trust, designating a successor custodian or
custodians. In the absence of such designation by the Trust, the
Custodian may designate a successor custodian, which shall be a person
qualified to so act under the 1940 Act. If the Trust fails to
designate a successor custodian for such Fund or Funds and the
Custodian does not designate a successor custodian for such Fund or
Funds, the Trust shall upon the date specified in the notice of
termination of this Agreement or upon the date of automatic
termination of this Agreement as provided above and upon the delivery
by the Custodian of all Securities (other than Securities held in the
Book- Entry System which cannot be delivered to the Trust) and monies
then owned by such Fund, be deemed to be its own custodian and the
Custodian shall thereby be relieved of all duties and responsibilities
pursuant to this Agreement, other than the duty with respect to
Securities held in the Book-Entry System which cannot be delivered to
the Trust.
(d) If the Trust or the Custodian designates a successor custodian
for the Fund or Funds, upon the date set forth in such notice under
paragraph (c) of this Section 12 or upon the date of automatic
termination of this Agreement, as provided above, as the case may be,
this Agreement shall terminate to the extent specified in such notice,
and the Custodian shall upon receipt of a notice of acceptance by
- 22 -
<PAGE> 23
the successor custodian on that date (i) deliver directly to the
successor custodian all Securities and monies then held by the
Custodian and specifically allocated to the Fund or Funds specified,
after deducting all fees, expenses and other amounts for the payment
or reimbursement of which it shall then be entitled with respect to
such Fund or Funds; and (ii) will otherwise cooperate in the transfer
of its duties and responsibilities to the successor custodian
hereunder.
13. Limitation of Liability.
The Trust and the Custodian agree that the obligations of the
Trust under this Agreement shall not be binding upon any of the
Trustees, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Trust, individually, but are
binding only upon the assets and property of the Trust and the Funds
covered under this Agreement, as provided in the Master Trust
Agreement. The execution and delivery of this Agreement have been
authorized by the Trustees of the Trust, and signed by an authorized
officer of the Trust, acting as such, and neither such authorization
by such Trustees nor such execution and delivery by such officer shall
be deemed to have been made by any of them or any shareholder of the
Trust individually or to impose any liability on any of them or any
shareholder of the Trust personally, but shall bind only the assets
and property of the Trust and the Funds covered under this Agreement
as provided in the Master Trust Agreement.
14. Miscellaneous.
(a) Annexed hereto as Appendix A is a certification signed by two
of the present officers of the Trust setting forth the names and the
signatures of the present Authorized Persons. The Trust agrees to
furnish to the Custodian a new certification in similar form in the
event that any such present Authorized Person ceases to be such an
Authorized Person or in the event that other or additional Authorized
Persons are elected or appointed. Until such new certification shall
be received, the Custodian shall be fully protected in acting under
the provisions of this Agreement upon Oral Instruction or signatures
of the present Authorized Persons as set forth in the last delivered
certification.
(b) Annexed hereto as Appendix B is a certification signed by two
of the present officers of the Trust setting forth the names and the
signatures of the present officers of the
- 23 -
<PAGE> 24
Trust. The Trust agrees to furnish to the Custodian a new
certification in similar form in the event any such present officer
ceases to be an officer of the Trust or in the event that other or
additional officers are elected or appointed. Until such new
certification shall be received, the Custodian shall be fully
protected in acting under the provisions of this Agreement upon the
signature of the officers as set forth in the last delivered
certification.
(c) The Custodian shall provide the Trust and/or its investment
advisers and investment sub-advisers such reports on securities and
cash positions, transaction fails, aging of receivables and other
relevant data as the Trust or its investment advisers and investment
sub-advisers may reasonably require and shall reconcile any
differences with the records of such pricing and bookkeeping agent.
The Custodian will also timely provide the Trust's pricing and
bookkeeping agent with such information in the Custodian's possession
as the pricing and bookkeeping agent may reasonably require.
(d) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at One Boston Place, Boston,
Massachusetts 02108; or at such other place or in such other manner as
the Custodian may from time to time designate in writing.
(e) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Trust, shall be
sufficiently given if addressed to the Trust and mailed or delivered
to it at its principal office and place of business first set forth
above; or at such other place or in such other manner as the Trust may
from time to time designate in writing.
(f) This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the same
formality as this Agreement, as may be permitted or required by the
1940 Act.
(g) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Trust
without the written consent of the Custodian, or by the Custodian
without the written consent of the Trust authorized or approved by a
vote of the Board of Trustees of the Trust, and any attempted
assignment without such written consent shall be null and void.
- 24 -
<PAGE> 25
(h) The Trust represents that a copy of the Master Trust Agreement
is on file with the Secretary of the Commonwealth of Massachusetts and
with the Boston City Clerk.
(i) This Agreement shall be construed in accordance with the laws
of the Commonwealth of Massachusetts.
(j) The captions of the Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
(k) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but such counterparts
shall, together, constitute only one instrument.
- 25 -
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective representatives duly authorized as
of the day and year first above written.
THE SIERRA VARIABLE TRUST
By /s/ F. Brian Cerini
------------------------------
Name: F. Brian Cerini
Title: President
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By /s/ Ellen M. Furlong
------------------------------
Name: Ellen M. Furlong
Title: Vice President
- 26 -
<PAGE> 27
APPENDIX A
We, F. Brian Cerini, President, and Keith B. Pipes, Executive
Vice President, Treasurer and Secretary, of The Sierra Variable Trust, a
business trust organized under the laws of the Commonwealth of Massachusetts
(the "Trust"), do hereby certify that:
The following individuals have been duly authorized as
Authorized Persons to give Oral Instructions and Written Instructions on behalf
of the Trust.
<TABLE>
<CAPTION>
Name Position Signature
---- -------- ---------
<S> <C> <C>
F. Brian Cerini President /s/ F. Brian Cerini
--------------------
Keith B. Pipes Executive Vice President, Treasurer /s/ Keith B. Pipes
and Secretary ---------------------
Michael D. Goth Senior Vice President /s/ Michael D. Goth
---------------------
Stephen C. Scott Senior Vice President /s/ Stephen C. Scott
--------------------
Craig M. Miller Assistant Treasurer /s/ Craig M. Miller
---------------------
</TABLE>
/s/F. Brian Cerini /s/Keith B. Pipes
------------------ -----------------
F. Brian Cerini Keith B. Pipes
President Executive Vice President, Secretary
and Treasurer
- 27 -
<PAGE> 28
APPENDIX B
We, F. Brian Cerini, President, and Keith B. Pipes, Executive
Vice President, Treasurer and Secretary, of The Sierra Variable Trust, a
business trust organized under the laws of the Commonwealth of Massachusetts
(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 Master
Trust Agreement and the signatures set forth opposite their respective names
are their true and correct signatures:
<TABLE>
<CAPTION>
Name Position Signature
---- -------- ---------
<S> <C> <C>
F. Brian Cerini President /s/ F. Brian Cerini
--------------------
Keith B. Pipes Executive Vice President, Treasurer /s/ Keith B. Pipes
and Secretary --------------------
Michael D. Goth Senior Vice President /s/ Michael D. Goth
--------------------
Stephen C. Scott Senior Vice President /s/ Stephen C. Scott
--------------------
Craig M. Miller Assistant Treasurer /s/ Craig M. Miller
---------------------
</TABLE>
/s/F. Brian Cerini /s/ Keith B. Pipes
------------------ ------------------
F. Brian Cerini Keith B. Pipes
President Executive Vice President, Treasurer
and Secretary
- 28 -
<PAGE> 29
APPENDIX C
FOREIGN CENTRAL SECURITIES DEPOSITORIES AND CLEARING AGENCIES
CEDEL
EUROCLEAR
FIRST CHICAGO CLEARING CORP.
- 29 -
<PAGE> 30
SCHEDULE A
BOSTON SAFE DEPOSIT AND TRUST COMPANY
CUSTODY FEE SCHEDULE
A. Transaction Charges:(Domestic)
<TABLE>
<S> <C>
DTC, FBE $ 8.00 per trade
PTC, Muni Book Entry $10.00 per trade
Physical $30.00 per trade
Paydowns $ 5.00 per Paydown
Time Deposit/Mutual Fund $30.00 per trade
(Other than Dreyfus)
Options: (open, close) $25.00 per trade
Options: (exercised, expired) $10.00 per trade
</TABLE>
B. Earnings credits:
Earnings credits will be provided on 90% of idle U.S. dollar balances
at an annualized rate equal to the 90 day U.S. Treasury Bill rate for
the period. If the earnings credit exceeds the total custody bill in
a given month, the excess earnings credit will be carried forward and
can be used to offset future custody bills. If the earnings credit is
less than the custody bill in a given month plus any previous excess
earnings credit, then an invoice will be due for that amount.
Earnings credits will be used exclusively to offset custody bills.
- 30 -
<PAGE> 31
SCHEDULE A
(continued)
BOSTON SAFE DEPOSIT AND TRUST COMPANY
GLOBAL CUSTODY FEE SCHEDULE
C. Global Safekeeping:
1. EUROCLEAR/CEDEL/FIRST CHICAGO CLEARING CORP.:
The Trust shall pay the Custodian the following transaction
charge for assets held through Euroclear/Cedel at the end of
each month:
$30 per transaction
2. Global Safekeeping - Group I, Group II, Group III, Group IV,
Group V and Group VI Markets:
The Trust shall pay the Custodian the following transaction
charges with respect to the Group listed below.
Group I Transactions $35.00 per transaction
Group II Transactions $40.00 per transaction
Group III Transactions $50.00 per transaction
Group IV Transactions $60.00 per transaction
Group V Transactions $70.00 per transaction
Group VI Transactions $85.00 per transaction
*Third Party F/X $20.00 per FX
_______________
* A Third Party F/X is one in which Boston Safe is not the
currency broker. This charge will be assessed only on
transactions where funds are actually transferred.
Reimbursable out-of-pocket expenses will be added to each
monthly invoice and will include, but not be limited to, such
customary items as telephone, wire charges ($5.00 per wire),
stamp duties, securities registration, postage, courier
services and duplication charges.
- 31 -
<PAGE> 32
SCHEDULE A
(continued)
COUNTRY GROUPS
<TABLE>
<CAPTION>
GROUP I GROUP II GROUP III GROUP IV
------- -------- --------- --------
<S> <C> <C> <C>
Australia Belgium Austria Argentina
Canada Denmark Finland Czech Republic
Germany France Hong Kong Philippines
Japan Ireland Israel Sri Lanka
Italy Malaysia Taiwan
Netherlands Mexico Turkey
New Zealand Norway
South Africa South Korea
Spain Singapore
Sweden Thailand
Switzerland
United Kingdom
</TABLE>
<TABLE>
<CAPTION>
GROUP V GROUP VI
- ------- --------
<S> <C>
Indonesia Bangladesh
Luxembourg Brazil
Peru China-Shanghai
Portugal China Shenzhen
Colombia
Greece
Hungary
India
Jordan
Pakistan
Poland
Venezuela
</TABLE>
THE SIERRA VARIABLE TRUST
BY: /s/ F. Brian Cerini
--------------------------
NAME: F. Brian Cerini
TITLE: President
BOSTON SAFE DEPOSIT AND TRUST
COMPANY
BY: /s/ Ellen M. Furlong
--------------------------
NAME: Ellen M. Furlong
TITLE: Vice President
Dated: January 1, 1996
- 32 -
<PAGE> 33
SCHEDULE B
OUT-OF-POCKET CHARGES
The Trust will pay to the Custodian as soon as possible after the end
of each month all out-of-pocket expenses reasonably incurred in connection with
the assets of each Fund of the Trust.
THE SIERRA VARIABLE TRUST
By /s/ F. Brian Cerini
------------------------------
Name: F. Brian Cerini
Title: President
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By /s/ Ellen M. Furlong
------------------------------
Name: Ellen M. Furlong
Title: Vice President
Dated: January 1, 1996.
- 33 -
<PAGE> 34
SCHEDULE C
FUNDS OF THE SIERRA VARIABLE TRUST
COVERED UNDER THIS CUSTODY AGREEMENT
Global 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
International Growth Fund
THE SIERRA VARIABLE TRUST
By /s/ F. Brian Cerini
------------------------------
Name: F. Brian Cerini
Title: President
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By /s/ Ellen M. Furlong
------------------------------
Name: Ellen M. Furlong
Title: Vice President
Dated: January 1, 1996.
- 34 -
<PAGE> 1
EXHIBIT 8(b)
TRANSFER AGENCY AND SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 1st day of July, 1996 between Sierra
Variable Trust (the "Fund"), a Massachusetts business trust having its
principal place of business at 9301 Corbin Avenue, Northridge, California 91324
and FIRST DATA INVESTOR SERVICES GROUP, INC. ("FDISG"), a Massachusetts
corporation with principal offices at 4400 Computer Drive, Westboro,
Massachusetts 01581.
WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets;
WHEREAS, the Fund initially intend to offer shares in those Portfolios
identified in the attached Exhibit 1, each such Portfolio, together with all
other Portfolios subsequently established by the Fund shall be subject to this
Agreement in accordance with Article 14;
WHEREAS, the Fund desires to appoint FDISG as its transfer agent, dividend
disbursing agent and agent in connection with certain other activities and
FDISG desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and FDISG agree as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles
of Incorporation, Declaration of Trust, or other similar
organizational document as the case may be, of the Fund as the same
may be amended from time to time;
(b) "Authorized Person" shall be deemed to include (i)
any authorized officer of the Fund; or (ii) any person, whether or not
such person is an officer or employee of the Fund, duly authorized to
give Oral Instructions or Written Instructions on behalf of the Fund
as indicated in writing to FDISG from time to time;
1
<PAGE> 2
(c) "Board of Directors" shall mean the Board of
Directors or Board of Trustees of the Fund, as the case may be;
(d) "Commission" shall mean the Securities and Exchange
Commission;
(e) "Custodian" refers to any custodian or subcustodian
of securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custodian Agreement;
(f) "Fund" shall mean the Sierra Variable Trust on behalf
of its Portfolios;
(g) "1934 Act" shall mean the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder, all as
amended from time to time;
(h) "1940 Act" shall mean the Investment Company Act of
1940 and the rules and regulations promulgated thereunder, all as
amended from time to time;
(i) "Oral Instructions" shall mean instructions, other
than Written Instructions, actually received by FDISG from a person
reasonably believed by FDISG to be an Authorized Person;
(j) "Portfolio" shall mean each separate series of shares offered
by the Fund representing interest in a separate portfolio of securities
and other assets;
(k) "Prospectus" shall mean the most recently dated Fund Prospectus
and Statement of Additional Information, including any supplements
thereto if any, which has become effective under the Securities Act of
1933 and the 1940 Act;
(l) "Shares" refers collectively to such shares of capital stock or
beneficial interest, as the case may be, or class thereof, of the Fund
as may be issued from time to time;
(m) "Shareholder" shall mean a record owner of Shares;
(n) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by FDISG to be an Authorized
Person and actually received by FDISG. Written Instructions shall
include manually executed originals and authorized electronic
transmissions, including telefacsimile of a manually executed original
or other process.
Article 2 Appointment of FDISG.
2
<PAGE> 3
The Fund hereby appoint and constitute FDISG as transfer agent and
dividend disbursing agent for Shares and as shareholder servicing agent for the
Fund and FDISG hereby accepts such appointments and agrees to perform the
duties hereinafter set forth.
Article 3 Duties of FDISG.
3.1 FDISG shall be responsible for:
(a) Administering and/or performing the customary
services of a transfer agent; acting as service agent in connection
with dividend and distribution functions; and for performing
shareholder account and administrative agent functions in connection
with the issuance, transfer and redemption or repurchase (including
coordination with the Custodian) of Shares, as more fully described in
the written schedule of Duties of FDISG annexed hereto as Schedule A
and incorporated herein, and in accordance with the terms of the
Prospectus of the Fund, applicable law and the procedures established
from time to time between FDISG and the Fund.
(b) Recording the issuance of Shares and maintaining
pursuant to Rule 17Ad-10(e) of the 1934 Act a record of the total
number of Shares which are authorized, based upon data provided to it
by the Funds, and issued and outstanding. FDISG shall provide the
Fund on a regular basis with the total number of Shares which are
authorized and issued and outstanding and shall have no obligation,
when recording the issuance of Shares, to monitor the issuance of such
Shares or to take cognizance of any laws relating to the issue or sale
of such Shares, which functions shall be the sole responsibility of
the Fund.
(c) Notwithstanding any of the foregoing provisions of
this Agreement, FDISG shall be under no duty or obligation to inquire
into, and shall not be liable for: (i) the legality of the issuance
or sale of any Shares or the sufficiency of the amount to be received
therefor; (ii) the legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor; (iii) the legality of the
declaration of any dividend by the Board of Directors, or the legality
of the issuance of any Shares in payment of any dividend; or (iv) the
legality of any recapitalization or readjustment of the Shares.
3.2 In addition, the Fund shall (i) identify to FDISG in writing
those transactions and assets to be treated as exempt from blue sky reporting
for each State and (ii) verify the establishment of transactions for each
State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of FDISG for the Fund's blue sky
State registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Fund and the reporting of
such transactions to the Fund as provided above.
3
<PAGE> 4
3.3 In addition to the duties set forth herein, FDISG shall
perform such other duties and functions, and shall be paid such amounts
therefor, as may from time to time be agreed upon in writing between the Fund
and FDISG.
3.4 FDISG agrees to provide the services described herein in
accordance with the Performance Standards annexed hereto as Exhibit 1 of
Schedule A and incorporated herein (the "Performance Standards"). Such
Performance Standards may be amended from time to time upon written agreement
by the parties.
Article 4 Recordkeeping and Other Information.
4.1 FDISG shall create and maintain all records required of it
pursuant to its duties hereunder and as set forth in Schedule A in accordance
with all applicable laws, rules and regulations, including records required by
Section 31(a) of the 1940 Act. Where applicable, such records shall be
maintained by FDISG for the periods and in the places required by Rule 31a-2
under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, FDISG
agrees that all such records prepared or maintained by FDISG relating to the
services to be performed by FDISG hereunder are the property of the Fund and
will be preserved, maintained and made available in accordance with such
section, and will be surrendered promptly to the Fund on and in accordance with
the Fund's request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, FDISG will endeavor to notify the Fund of such
request and secure Written Instructions as to the handling of such request.
FDISG reserves the right, however, to exhibit the Shareholder records to any
person whenever it is advised by its counsel that it may be held liable for the
failure to comply with such request.
Article 5 Fund Instructions.
5.1 FDISG will have no liability when acting upon Written or Oral
Instructions believed to have been executed or orally communicated by an
Authorized Person and will not be held to have any notice of any change of
authority of any person until receipt of a Written Instruction thereof from the
Fund.
5.2 At any time, FDISG may request Written Instructions from the
Fund and may seek advice from legal counsel for the Fund, or its own legal
counsel, with respect to any matter arising in connection with this Agreement,
and it shall not be liable for any action taken or not taken or suffered by it
in good faith in accordance with such Written Instructions or in accordance
with the opinion of counsel for the Fund or for FDISG. Written Instructions
requested by FDISG will be
4
<PAGE> 5
provided by the Fund within a reasonable period of time.
5.3 FDISG, its officers, agents or employees, shall accept Oral
Instructions or Written Instructions given to them by any person representing
or acting on behalf of the Funds only if said representative is an Authorized
Person. The Fund agrees that all Oral Instructions shall be followed within
one business day by confirming Written Instructions, and that the Fund's
failure to so confirm shall not impair in any respect FDISG's right to rely on
Oral Instructions.
Article 6 Compensation.
6.1 (a) The Fund on behalf of each of the Portfolios will
compensate FDISG for the performance of its obligations hereunder in accordance
with the fees set forth in the written Fee Schedule annexed hereto as Schedule
B and incorporated herein.
6.2 (a) In the event that FDISG has failed to meet a specific
Performance Standard category, as set forth on Exhibit 1 of Schedule A, in two
of any rolling three month periods, the Fund may reduce the total amount of
fees due to FDISG under this Agreement, excluding out-of-pocket expenses, by an
amount equal to five percent (5%) of the fees for the third month.
Notwithstanding the foregoing, the Fund's rights under this Section 6.2, shall
not become effective until August 1, 1996 with respect to the Print Mail and
Shareholder Services Performance Standards and October 1, 1996 with respect to
Transaction Processing (Financials and Non-Financials) Performance Standards.
(b) For purposes of the fee reduction set forth in Section
6.2(a) above, FDISG's obligation to meet the Performance Standards
shall be measured in the aggregate with respect to all of the mutual
funds for which FDISG has been appointed transfer agent.
6.3 In addition to those fees set forth in Section 6.1 above, the
Fund agrees to pay, and will be billed separately for, out-of-pocket expenses
incurred by FDISG in the performance of its duties hereunder. Out-of-pocket
expenses shall include, but shall not be limited to, the items specified in the
written schedule of out-of-pocket charges annexed hereto as Schedule C and
incorporated herein. Schedule C may be modified by written agreement between
the parties. Unspecified out-of-pocket expenses shall be limited to those
out-of-pocket expenses reasonably incurred by FDISG in the performance of its
obligations hereunder.
6.4 The Fund agrees that all fees and out-of-pocket expenses shall
be paid within fifteen (15) days following the receipt of the respective
invoice.
6.5 Any compensation agreed to hereunder may be adjusted from time
to time by attaching to Schedule B, a revised Fee Schedule executed and dated
by the parties hereto.
5
<PAGE> 6
6.6 The Fund acknowledges that the fees that FDISG charges the
Fund under this Agreement reflect the allocation of risk between the parties,
including the disclaimer of warranties in Section 9.3 and the limitations on
liability and exclusion of remedies in Section 11.2 and Article 12. Modifying
the allocation of risk from what is stated here would affect the fees that
FDISG charges, and in consideration of those fees, the Fund agrees to the
stated allocation of risk.
Article 7 Documents.
In connection with the appointment of FDISG, the Fund shall, on or before the
date this Agreement goes into effect, but in any case within a reasonable
period of time for FDISG to prepare to perform its duties hereunder, each
deliver or caused to be delivered to FDISG the documents set forth in the
written schedule of Fund Documents annexed hereto as Schedule D.
Article 8 Transfer Agent System.
8.1 FDISG shall retain title to and ownership of any and all data
bases, computer programs, screen formats, report formats, interactive design
techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights, trade secrets,
and other related legal rights utilized by FDISG in connection with the
services provided by FDISG to the Fund herein (the "FDISG System").
8.2 FDISG hereby grants to the Fund a limited license to the FDISG
System for the sole and limited purpose of having FDISG provide the services
contemplated hereunder and nothing contained in this Agreement shall be
construed or interpreted otherwise and such license shall immediately terminate
with the termination of this Agreement.
8.3 FDISG agrees to enhance its propriatary image system (IMPRESS)
in order to support financial transactions by December 31, 1996.
Article 9 Representations and Warranties.
9.1 FDISG represents and warrants to the Funds that:
(a) it is a corporation duly organized, existing and in
good standing under the laws of the Commonwealth of Massachusetts;
(b) it is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into and perform this
Agreement;
6
<PAGE> 7
(c) all requisite corporate proceedings have been taken
to authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory
agency as a transfer agent and such registration will remain in effect
for the duration of this Agreement; and
(e) it has and will continue to have access to the
necessary facilities, equipment and personnel to perform its duties
and obligations under this Agreement.
9.2 The Fund represents and warrants to FDISG that:
(a) it is duly organized, existing and in good standing
under the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its
Article of Incorporation and By-Laws to enter into this Agreement;
(c) all corporate proceedings required by said Articles
of Incorporation, By-Laws and applicable laws have been taken to
authorize it to enter into this Agreement;
(d) a registration statement under the Securities Act of
1933, as amended, and the 1940 Act on behalf of each of the Portfolios
is currently effective and will remain effective, and all appropriate
state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale;
and
(e) all outstanding Shares are validly issued, fully paid
and non-assessable and when Shares are hereafter issued in accordance
with the terms of the Fund's Articles of Incorporation and its
Prospectus with respect to each Portfolio, such Shares shall be
validly issued, fully paid and non-assessable.
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN
THIS AGREEMENT, FDISG DISCLAIMS ALL OTHER REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF ANY COURSE OF
DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS PROVIDED
INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. FDISG DISCLAIMS ANY
WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE SET FORTH IN THIS
AGREEMENT.
7
<PAGE> 8
Article 10 Indemnification.
10.1 FDISG shall not be responsible for and the Fund shall indemnify
and hold FDISG harmless from and against any and all claims, costs, expenses
(including reasonable attorneys' fees), losses, damages, charges, payments and
liabilities of any sort or kind which may be asserted against FDISG or for
which FDISG may be held to be liable (a "Claim") arising out of or attributable
to any of the following:
(a) any actions of FDISG required to be taken pursuant to
this Agreement unless such Claim resulted from a negligent act or
omission to act or bad faith by FDISG in the performance of its duties
hereunder, with respect to the Fund;
(b) FDISG's reasonable reliance on, or reasonable use of
information, data, records and documents (including but not limited to
magnetic tapes, computer printouts, hard copies and microfilm copies)
received by FDISG from the Fund, or any authorized third party acting
on behalf of the Fund, including but not limited the prior transfer
agent for the Fund, in the performance of FDISG's duties and
obligations hereunder, with respect to the Fund;
(c) the reliance on, or the implementation of, any
Written or Oral Instructions or any other instructions or requests of
such Fund;
(d) the offer or sale of shares in violation of any
requirement under the securities laws or regulations of any state that
such shares be registered in such state or in violation of any stop
order or other determination or ruling by any state with respect to
the offer or sale of such shares in such state, with respect to the
Fund; and
(e) the Fund's refusal or failure to comply with the
terms of this Agreement, or any Claim which arises out of the Fund's
negligence or misconduct or the breach of any representation or
warranty of the Fund made herein.
10.2 In any case in which the Fund may be asked to indemnify or hold
FDISG harmless, FDISG will notify the Fund promptly after identifying any
situation which it believes presents or appears likely to present a claim for
indemnification against the Fund although the failure to do so shall not
prevent recovery by FDISG and shall keep the Fund advised with respect to all
developments concerning such situation. The Fund shall have the option to
defend FDISG against any Claim which may be the subject of this
indemnification, and, in the event that the Fund so elect, such defense shall
be conducted by counsel chosen by the Fund and satisfactory to FDISG, and
thereupon the Fund shall take over complete defense of the Claim and FDISG
shall sustain no further legal or other expenses in respect of such Claim.
FDISG will not confess any Claim or make any compromise in any case in which
the Fund will be asked to provide indemnification, except with the
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<PAGE> 9
Fund's prior written consent. The obligations of the parties hereto under this
Article 10 shall survive the termination of this Agreement.
10.3 Any claim for indemnification under this Agreement must be
made prior to the earlier of:
(a) one year after the Fund becomes aware of the event
for which indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.4 Except for remedies that cannot be waived as a matter of law
(and injunctive or provisional relief), the provisions of this Article 10 shall
be FDISG's sole and exclusive remedy for claims or other actions or proceedings
to which the Fund indemnification obligations pursuant to this Article 10 may
apply.
Article 11 Standard of Care.
11.1 FDISG shall at all times act in good faith and agrees to use its
best efforts within commercially reasonable limits to ensure the accuracy of
all services performed under this Agreement, but assumes no responsibility for
loss or damage to the Fund unless said errors are caused by FDISG's own
negligence, bad faith or willful misconduct or that of its employees.
11.2 Notwithstanding any provision in this Agreement to the contrary
and except for the gross negligence or willful misconduct of FDISG, FDISG's
cumulative liability (to the Funds) for all losses, claims, suits,
controversies, breaches, or damages for any cause whatsoever (including but not
limited to those arising out of or related to this Agreement) and regardless of
the form of action or legal theory shall not exceed (i) four million dollars
($4,000,000) or (ii) the fees received by FDISG for services provided under this
Agreement during the twelve months immediately prior to the date of such loss or
damage. The Fund understands the limitation on FDISG's damages to be a
reasonable allocation of risk and the Fund expressly consent with respect to
such allocation of risk. In allocating risk under the Agreement, the parties
agree that the damage limitation set forth above shall apply to any alternative
remedy ordered by a court in the event such court determines that sole and
exclusive remedy provided for in the Agreement fails of its essential purpose.
11.3 Neither party may assert any cause of action against the other
party under this Agreement that accrued more than two (2) years prior to the
filing of the suit (or commencement of arbitration proceedings) alleging such
cause of action.
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<PAGE> 10
11.4 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO
EVENT SHALL FDISG, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY THEORY OF TORT,
CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR LOST PROFITS,
EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES,
EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF
WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written
above and shall continue for a period of five (5) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of three (3) years ("Renewal Terms")
each, unless the Fund or FDISG provide written notice to the other of its
intent not to renew. Such notice must be received not less than ninety (90)
days and not more than one-hundred eighty (180) days prior to the expiration of
the Initial Term or the then current Renewal Term.
13.3 In the event a termination notice is given by the Fund, all
expenses associated with movement of records and materials and conversion
thereof to a successor transfer agent will be borne by the Fund, provided,
however, FDISG shall use its best efforts to mitigate the costs associated with
such conversion.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting
Party, and if such material breach shall not have been remedied within thirty
(30) days after such written notice is given, then the Non-Defaulting Party may
terminate this Agreement by giving thirty (30) days written notice of such
termination to the Defaulting Party. If FDISG is the Non-Defaulting Party, its
termination of this Agreement shall not constitute a waiver of any other rights
or remedies of FDISG with respect to services performed prior to such
termination or rights of FDISG to be reimbursed for out-of-pocket expenses. In
all cases, termination by the Non-Defaulting Party shall not constitute a
waiver by the Non-Defaulting Party of any other rights
10
<PAGE> 11
it might have under this Agreement or otherwise against the Defaulting Party.
13.5 (a) In the event that FDISG has failed to meet a specific
performance standard category, as set forth in Exhibit 1 of Schedule A,
with respect to in four of any rolling six month periods, the Fund may
terminate this Agreement. The Fund will provide FDISG with sixty (60)
days notice in writing if the Fund intends to exercise its option under
this Section 13.5. Notwithstanding the foregoing, the Fund's rights
under this Section 13.2, shall not become effective until August 1,
1996 with respect to the Print Mail and Shareholder Services
Performance Standards and October 1, 1996 with respect to Transaction
Processing (Financials and Non-Financials) Performance Standards.
(b) For purposes of the Funds' option to terminate this
Agreement under Section 13.5(a) above, FDISG's obligation to meet the
Performance Standards shall be measured in the aggregate with respect
to all of the mutual funds which have appointed FDISG transfer agent.
Article 14 Additional Portfolios.
In the event that the Fund establishes one or more Portfolios in
addition to those identified in Exhibit 1, with respect to which the Fund
desires to have FDISG render services as transfer agent under the terms hereof,
the Fund shall so notify FDISG in writing, and Exhibit 1 shall be amended to
include such additional Portfolios.
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined
below) and the contents of this Agreement (collectively "Confidential
Information") are confidential information of the parties and their respective
licensors. The Fund and FDISG shall exercise at least the same degree of care,
but not less than reasonable care, to safeguard the confidentiality of the
Confidential Information of the other as it would exercise to protect it's own
confidential information of a similar nature. The Fund and FDISG may use the
Confidential Information only to exercise its rights under this Agreement. The
Fund and FDISG shall not duplicate, sell or disclose to others the Confidential
Information of the other, in whole or in part, without the prior written
permission of the other party. The Fund and FDISG may, however, disclose
Confidential Information to its employees who have a need to know the
Confidential Information to perform work for the other, provided that each
shall use reasonable efforts to ensure that the Confidential Information is not
duplicated or disclosed by its employees in breach of this Agreement. The Fund
and FDISG may also disclose the Confidential Information to independent
contractors, auditors, and professional advisors, provided they first agree in
writing to be bound by the confidentiality obligations substantially similar to
this Section 15.1. Notwithstanding the previous sentence, in no event shall
either the Fund or FDISG disclose the
11
<PAGE> 12
Confidential Information to any competitor of the other without specific, prior
written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively
sensitive material, and not generally known to the public, including,
but not limited to, information about product plans, marketing
strategies, finance, operations, customer relationships, customer
profiles, sales estimates, business plans, and internal performance
results relating to the past, present or future business activities of
the Fund or FDISG, their respective subsidiaries and affiliated
companies and the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design,
process, procedure, formula, or improvement that is commercially
valuable and secret in the sense that its confidentiality affords the
Fund or FDISG a competitive advantage over its competitors; and
(c) all confidential or proprietary concepts,
documentation, reports, data, specifications, computer software,
source code, object code, flow charts, databases, inventions,
know-how, show-how and trade secrets, whether or not patentable or
copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes
and models, and any other tangible manifestation of the foregoing of either
party which now exist or come into the control or possession of the other.
Article 16 Force Majeure.
No party shall be liable for any default or delay in the performance
of its obligations under this Agreement if and to the extent such default or
delay is caused, directly or indirectly, by (i) fire, flood, elements of nature
or other acts of God; (ii) any outbreak or escalation of hostilities, war,
riots or civil disorders in any country, (iii) any act or omission of the other
party or any governmental authority; (iv) any labor disputes (whether or not
the employees' demands are reasonable or within the party's power to satisfy);
or (v) nonperformance by a third party or any similar cause beyond the
reasonable control of such party, including without limitation,_failures or
fluctuations in telecommunications or other equipment. In any such event, the
non-performing party shall be excused from any further performance and
observance of the obligations so affected only for as long as such
circumstances prevail and such party continues to use commercially reasonable
efforts to recommence performance or observance as soon as practicable.
Article 17 Assignment and Subcontracting.
12
<PAGE> 13
This Agreement, its benefits and obligations shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned or otherwise transferred by either
party hereto, without the prior written consent of the other party, which
consent shall not be unreasonably withheld; provided, however, that FDISG may,
in its sole discretion, assign all its right, title and interest in this
Agreement to an affiliate, parent or subsidiary, or to the purchaser of
substantially all of its business. FDISG may, in its sole discretion, engage
subcontractors to perform any of the obligations contained in this Agreement to
be performed by FDISG.
Article 18 Arbitration.
18.1 Any claim or controversy arising out of or relating to this
Agreement, or breach hereof, shall be settled by arbitration administered by
the American Arbitration Association in Boston, Massachusetts in accordance
with its applicable rules, except that the Federal Rules of Evidence and the
Federal Rules of Civil Procedure with respect to the discovery process shall
apply.
18.2 The parties hereby agree that judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article 18.
Article 19 Notice.
Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or FDISG, shall be sufficiently
given if addressed to that party and received by it at its office set forth
below or at such other place as it may from time to time designate in writing.
To the Fund:
Sierra Variable Trust
9301 Corbin Avenue
Northridge, California 91324
Attention: __________________
To FDISG:
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<PAGE> 14
First Data Investor Services Group, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to FDISG's General Counsel
Article 20 Governing Law/Venue.
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement
of this agreement. All actions arising from or related to this Agreement
shall be brought in the state and federal courts sitting in the City of Boston,
and FDISG and Client hereby submit themselves to the exclusive jurisdiction of
those courts.
Article 21 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall, together,
constitute only one instrument.
Article 22 Captions.
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 23 Publicity.
Neither FDISG nor the Fund shall release or publish news releases,
public announcements, advertising or other publicity relating to this Agreement
or to the transactions contemplated by it without the prior review and written
approval of the other party; provided, however, that either party may make such
disclosures as are required by legal, accounting or regulatory requirements
after making reasonable efforts in the circumstances to consult in advance with
the other party.
Article 24 Relationship of Parties/Non-Solicitation.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year
afterward, the Fund shall not recruit, solicit, employ or engage, for the Fund
or others, FDISG's employees.
14
<PAGE> 15
Article 25 Entire Agreement; Severability.
25.1 This Agreement, including Schedules, Addenda, and Exhibits
hereto, constitutes the entire Agreement between the parties with respect to
the subject matter hereof and supersedes all prior and contemporaneous
proposals, agreements, contracts, representations, and understandings, whether
written or oral, between the parties with respect to the subject matter hereof.
No change, termination, modification, or waiver of any term or condition of the
Agreement shall be valid unless in writing signed by each party. No such
writing shall be effective as against FDISG unless said writing is executed by
a Senior Vice President, Executive Vice President, or President of FDISG. A
party's waiver of a breach of any term or condition in the Agreement shall not
be deemed a waiver of any subsequent breach of the same or another term or
condition.
25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such
case, the parties shall in good faith modify or substitute such provision
consistent with the original intent of the parties. Without limiting the
generality of this paragraph, if a court determines that any remedy stated in
this Agreement has failed of its essential purpose, then all other provisions
of this Agreement, including the limitations on liability and exclusion of
damages, shall remain fully effective.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as of the day and year first above
written.
SIERRA VARIABLE TRUST
By: /s/ Keith B. Pipes
----------------------------------
Title: Executive Vice President
& Treasurer
-------------------------------
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: /s/ Jerry Kokos
----------------------------------
Title: Executive Vice President
-------------------------------
16
<PAGE> 17
Exhibit 1
LIST OF PORTFOLIOS
Global Money Fund
US Government Fund
Growth and Income Fund
Corporate Income Fund
Emerging Growth Fund
International Growth Fund
Short Term Global Government Fund
Growth Fund
Short Term High Quality Bond Fund
17
<PAGE> 18
Schedule A
DUTIES OF FDISG
1. Shareholder Information. FDISG shall maintain a record of
the number of Shares held by each Shareholder of record which shall include
name, address, taxpayer identification and which shall indicate whether such
Shares are held in certificates or uncertificated form.
2. Shareholder Services. FDISG shall respond as appropriate to
all inquiries and communications from Shareholders relating to Shareholder
accounts with respect to its duties hereunder and as may be from time to time
mutually agreed upon between FDISG and the Funds.
3. Mailing Communications to Shareholders; Proxy Materials.
FDISG will address and mail to Shareholders of the Funds, all reports to
Shareholders, dividend and distribution notices and proxy material for the
Funds' meetings of Shareholders. In connection with meetings of Shareholders,
FDISG will prepare Shareholder lists, mail and certify as to the mailing of
proxy materials, process and tabulate returned proxy cards, report on proxies
voted prior to meetings, act as inspector of election at meetings and certify
Shares voted at meetings.
4. Sales of Shares
(a) FDISG shall not be required to issue any Shares of the
Funds where it has received a Written Instruction from the Funds or official
notice from any appropriate authority that the sale of the Shares of the Funds
has been suspended or discontinued. The existence of such Written Instructions
or such official notice shall be conclusive evidence of the right of FDISG to
rely on such Written Instructions or official notice.
(b) In the event that any check or other order for the
payment of money is returned unpaid for any reason, FDISG will endeavor to:
(i) give prompt notice of such return to the Funds or its designee; (ii) place
a stop transfer order against all Shares issued as a result of such check or
order; and (iii) take such actions as FDISG may from time to time deem
appropriate.
5. Transfer and Repurchase
(a) FDISG shall process all requests to transfer or redeem
Shares in accordance with the transfer or repurchase procedures set forth in
the Fund's Prospectus.
(b) FDISG will transfer or repurchase Shares upon receipt of
Oral or Written Instructions or otherwise pursuant to the Prospectus and Share
certificates, if any, properly endorsed for transfer or redemption, accompanied
by such documents as FDISG reasonably may deem
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<PAGE> 19
necessary.
(c) FDISG reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the endorsement on the
instructions is valid and genuine. FDISG also reserves the right to refuse to
transfer or repurchase Shares until it is satisfied that the requested transfer
or repurchase is legally authorized, and it shall incur no liability for the
refusal, in good faith, to make transfers or repurchases which FDISG, in its
good judgement, deems improper or unauthorized, or until it is reasonably
satisfied that there is no basis to any claims adverse to such transfer or
repurchase.
(d) FDISG shall not process or effect any repurchase with
respect to Shares of the Funds after receipt by FDISG or its agent of
notification of the suspension of the determination of the net asset value of
the Funds.
6. Dividends. Upon the declaration of each dividend and each
capital gains distribution by the Board of Directors of the Funds with respect
to Shares of the Funds, the Funds shall furnish or cause to be furnished to
FDISG Written Instructions setting forth the date of the declaration of such
dividend or distribution, the ex-dividend date, the date of payment thereof,
the record date as of which Shareholders entitled to payment shall be
determined, the amount payable per Share to the Shareholders of record as of
that date, the total amount payable on the payment date and whether such
dividend or distribution is to be paid in Shares at net asset value.
7. In addition to and neither in lieu nor in contravention of the
services set forth above, FDISG shall perform all the customary services of a
transfer agent, registrar, dividend disbursing agent and agent of the dividend
reinvestment and cash purchase plan as described herein consistent with those
requirements in effect as at the date of this Agreement. The detailed
definition, frequency, limitations and associated costs (if any) set out in the
attached fee schedule, include but are not limited to: maintaining all
Shareholder accounts, preparing Shareholder meeting lists, mailing proxies,
tabulating proxies, mailing Shareholder reports to current Shareholders,
withholding taxes on U.S. resident and non-resident alien accounts where
applicable, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders.
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<PAGE> 20
Exhibit 1 of Schedule A
Performance Standards
FDISG's obligation to meet the following Performance Standards shall be
measured in the aggregate with respect to all Funds.
First Data will report to Sierra on a monthly basis the percent of items
completed within standard as well as a quality rating. Reporting will be
detailed to the transaction type level. A pass/fail determination for
contractual penalties will however be based on the categories listed below.
For example, the accuracy of purchases, redemptions, exchanges and adjustments
will be reported to Sierra on an individual basis and as a collective group.
First Data will receive a "fail" for the month if the collective score for all
financials falls below the contractual level. Note that completion standards
are measured in business days.
CATEGORY COMPONENTS (TO BE REPORTED INDIVIDUALLY)
Financials Purchases, Redemptions, Exchanges, Adjustments (both financial
and non-financial adjustments)
Minimum Acceptable Quality Score: 99%
Print Mail Statements, Confirms, Checks
Minimum Acceptable Quality Score: 98%
COMPLETION STANDARDS
TRANSACTION PROCESSING
A. Complete on day of receipt:
a) - Purchases, redemptions, exchanges, financial adjustments
B. Complete within three days of receipt:
a) - Non-financial adjustments, legal transfers
C. Complete within 5 days of receipt
a) - Maintenance
b)
c)
PRINT MAIL *
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<PAGE> 21
A. Mailed within one day of receipt
a) - Confirms
B. Mailed within five business days following the end of the reporting
period
a) - Statements
b)
*
Note that Print Mail performance standards will be in effect only for
those mailings where services are provided by FDISG.
21
<PAGE> 22
Schedule B
FEE SCHEDULE
Sierra Variable Trust
FEES:
- - $1000 per month per Portfolio for the first six Portfolios, $500 per
month per Portfolio for each additional Portfolio
- - Each year, effective on the anniversary date of the Agreement, the per
account fee will increase by a percentage equal to an amount one
percent greater than the Consumer Price Index as reported monthly by
Bloomberg Financial Markets and Comodity News in the month preceding
the effective date of the increase. This provides FDISG with an
opportunity to manage uncontrollable expenses due to inflationary
increases.
FEES INCLUDE:
- - Transaction Processing, and Research
- - Corporate Actions
- - Management Company and Broker/Dealer Support
ADDITIONAL FEES:
- - Standard Out-of Pocket-expenses
22
<PAGE> 23
Schedule C
OUT-OF-POCKET EXPENSES
The Funds shall reimburse FDISG monthly for applicable out-of-pocket expenses,
including, but not limited to the following items:
- - Microfiche/Microfilm/Image production
- - Magnetic media tapes and freight
- - Printing costs, including certificates, envelopes, checks and
stationery
- - Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct pass
through to the Funds
- - Due diligence mailings
- - Telephone and telecommunication costs, including all lease,
maintenance and line costs
- - Ad hoc reports
- - Proxy solicitations, mailings and tabulations
- - Daily & Distribution advice mailings
- - Shipping, Certified and Overnight mail and insurance
- - Year-end form production and mailings
- - Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
- - Duplicating services
- - Courier services
- - Incoming and outgoing wire charges
- - Federal Reserve charges for check clearance
- - Overtime, as approved by the Funds
- - Temporary staff, as approved by the Funds
- - Travel and entertainment, as approved by the Funds
- - Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
- - Third party audit reviews
- - Ad hoc SQL time
- - All Systems enhancements after the conversion at the rate of $100.00
per hour
- - Insurance
- - Such other miscellaneous expenses reasonably incurred by FDISG in
performing its duties and responsibilities under this Agreement.
x
23
<PAGE> 24
24
<PAGE> 25
The Funds agree that postage and mailing expenses will be paid on the day of or
prior to mailing as agreed with FDISG. In addition, the Funds will promptly
reimburse FDISG for any other unscheduled expenses incurred by FDISG whenever
the Funds and FDISG mutually agree that such expenses are not otherwise
properly borne by FDISG as part of its duties and obligations under the
Agreement.
25
<PAGE> 26
Schedule D
Fund Documents
- - Certified copy of the Articles of Incorporation of the Fund, as
amended
x
- - Certified copy of the By-laws of the Fund, as amended,
x
- - Copy of the resolution of the Board of Directors authorizing the
execution and delivery of this Agreement
x
- - Specimens of the certificates for Shares of the Fund, if applicable,
in the form approved by the Board of Directors of the Fund, with a
certificate of the Secretary of the Fund as to such approval
x
- - All account application forms and other documents relating to
Shareholder accounts or to any plan, program or service offered by the
Fund
x
- - Certified list of Shareholders of the Fund with the name, address and
taxpayer identification number of each Shareholder, and the number of
Shares of the Fund held by each, certificate numbers and denominations
(if any certificates have been issued), lists of any accounts against
which stop transfer orders have been placed, together with the reasons
therefore, and the number of Shares redeemed by the Fund
x
- - All notices issued by the Fund with respect to the Shares in
accordance with and pursuant to the Articles of Incorporation or
By-laws of the Fund or as required by law and shall perform such other
specific duties as are set forth in the Articles of Incorporation
including the giving of notice of any special or annual meetings of
shareholders and any other notices required thereby.
26
<PAGE> 1
EXHIBIT 9(a)
ADMINISTRATION AGREEMENT
July 1, 1996
Sierra Fund Administration Corporation
9301 Corbin Avenue, Suite 333
Nothridge, California 91324
Ladies and Gentlemen:
The Sierra Variable Trust (the "Trust"), an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts, confirms
its agreements with Sierra Fund Administration Corporation ("Sierra
Administration"), a corporation organized under the laws of the state of
California, regarding administration services to be provided by Sierra
Administration in connection with each of the investment funds offered from
time to time by the Trust (individually, a "Fund" and together, the "Funds").
Sierra Administration agrees to provide services upon the following terms and
conditions:
1. Investment Description; Appointment
The Trust desires to employ the Trust's capital by investing and
reinvesting (a) in investments of the kind and in accordance with the
limitations specified in (i) the Trust's Agreement and Declaration of Trust
dated January 27, 1993, as amended from time to time (the "Declaration of
Trust"), and (ii) the prospectus (the "Prospectus"] and statement of additional
information (the "Statement") relating to the Trust contained in the Trust's
Registration statement on Form N-1A, File No. 33-57732, filed with the
Securities and Exchange Commission (the "Registration Statement") and (b) in
such manner and to such extent as may from time to time be approved by the
Trust's Board of Trustees. Copies of the Prospectus, the Statement and the
Declaration of Trust have been submitted to Sierra Administration. The Trust
desires to employ and hereby appoints Sierra Administration to act as the
Trust's administrator. Sierra Administration accepts this appointment and
agrees to furnish the services described herein for the compensation set forth
below.
2. Services as Administrator
Subject to the supervision and direction of the Board of Trustees of
the Trust, Sierra Administration is responsible for all administrative
functions with respect to the Trust and will (a) assist in supervising all
aspects of the operations of the Trust except those performed by the Trust's
investment adviser and sub-advisers under their respective investment
management and sub-advisory agreements; (b) supply the Trust with office
facilities (which may be in Sierra Administration's own offices, statistical
and research data, data processing services, clerical,
<PAGE> 2
accounting and bookkeeping services (including, but not limited to, the
calculation of the net asset values of shares of the Trust), internal auditing
and legal services, internal executive and administrative services, and
stationery and office supplies; (c) prepare reports to the Trust's shareholders
and materials for the Board of Trustees of the Trust; (d) prepare tax returns;
(e) prepare reports to and filings with the Securities and Exchange Commission
and state regulatory authorities; (f) cooperate with the Trust's transfer agent
for the purpose of establishing and implementing procedures to ensure that the
Trust's transfer agency and shareholder relations functions are efficiently
carried out; and (g) provide such other similar services as the Trust may
reasonably request to the extent permitted under application statutes, rules
and regulations. The services to be performed by Sierra Administration
hereunder may be delegated by it, in whole or in part, to a sub- administrator
provided that any delegation of duties to the sub-administrator shall not
relieve Sierra Administration of its responsibilities hereunder.
Notwithstanding anything to the contrary in this Agreement, Sierra
Administration shall not be responsible for the performance of any duties which
are required to be performed by the Trust's transfer agent.
3. Compensation
(a) In consideration of services rendered pursuant to this Agreement,
the Trust will pay Sierra Administration on the first business day of each
month a fee for the previous month at an annual rate of 0.18% of each Fund's
average daily net assets, out of which fee Sierra Administration shall pay
expenses as described in Section 5 including, without limitation, fees of any
sub-administrator engaged by Sierra Administration and the base fees and
charges (but not transaction based fees and out-of-pocket expenses) of the
Trust's custodian. The fee for the period from the date the Trust commences
operations to the end of that month shall be prorated according to the
proportion such period bears to the full monthly period.
(b) Upon any termination of this Agreement before the end of any
month, the fee such part of a month shall be prorated according to the
proportion which such period bears to the full monthly period and shall be
payable upon the date of termination of this Agreement. For the purpose of
determining fees payable to Sierra Administration, the value of each Fund's net
assets shall be computed at the times and in the manner specified in the
Prospectus and/or the Statement relating to the Fund as from time to time in
effect.
4. Expenses
Sierra Administration will bear all expenses in connection with the
performance of its services under this Agreement, including, without
limitation, payment of the fee to the custodian, and any sub-administrator
described in Paragraph 4 above. The Trust will bear certain other expenses to
be incurred in its operation, including: organizational expenses; taxes,
interest, brokerage fees and commissions, if any; fees of trustees of the Trust
who are not officers, director, or employees of Sierra Investment Advisors,
each Fund's sub-adviser or sub- administrator, sub-transfer agent or any of
their affiliates; Securities and Exchange Commission
-2-
<PAGE> 3
fees and state Blue Sky qualification fees; out-of-pocket expenses of
custodians, transfer and dividend disbursing agents and the Trust's sub-
administrator or sub-transfer agent and transaction charges of custodians;
insurance premiums; outside auditing and legal expenses; costs of maintenance
of the Trust's existence; costs attributable to investor services, including,
without limitation, telephone and personnel expenses; costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders; costs of shareholders'
reports and meetings of the shareholders of the Trust and of the officers or
Board of Trustees of the Trust; and any extraordinary expenses.
5. Standard of Care
Sierra Administration shall exercise its best judgment in rendering
the services listed in Paragraph 2 above. Sierra Administration shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates, except
a loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
6. Term of Agreement
This Agreement shall become effective as of the date the Trust
commences its investment operations and shall continue for an initial two-year
term and shall continue automatically from year-to-year thereafter unless
terminated in accordance with the following sentence. This Agreement is
terminable at any time, without penalty, on 60 days' written notice, by the
Board of Trustees of the Trust or upon 90 days' written notice, by Sierra
Administration.
7. Service to Other Companies or Accounts
The Trust understands that Sierra Administration may act in the future
as administrator to other investment companies or series of investment
companies, and the Trust has no objection to Sierra Administration's so acting.
The Trust understands that the persons employed by Sierra Administration to
assist in the performance of Sierra Administration's duties under this
Agreement will not devote their full time to such service and nothing contained
in this Agreement shall be deemed to limit or restrict the right of Sierra
Administration affiliate or any affiliate of Sierra Administration to engage in
and devote time and attention to other businesses or to render services of
whatever kind or nature.
8. Representations of the Trust and Sierra Administration
The Trust represents that (i) a copy of the Declaration of Trust is on
file in the office of the Secretary of the Commonwealth of Massachusetts, (ii)
the appointment of Sierra Administration has been duly authorized and (iii) it
has acted and will continue to act in
-3-
<PAGE> 4
conformity with the 1940 Act and other applicable laws. Sierra Administration
represents that it is authorized to perform the services described herein.
9. Limitation of Liability
This Agreement has been executed on behalf of the Trust by the
undersigned officer of the Trust in his capacity as an officer of the Trust.
The obligations of this Agreement shall be binding only upon the assets and
property of the Trust and shall not be binding upon any Trustee, officer, or
shareholder of the Trust individually.
10. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto.
11. Governing Law
This Agreement shall be governed in accordance with the laws of the
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,
THE SIERRA VARIABLE TRUST
By /s/ F. Brian Cerini
----------------------------
Name: F. Brian Cerini
Title: Chairman and President
Accepted:
SIERRA FUND ADMINISTRATION
CORPORATION
By /s/ Keith B. Pipes
------------------------
Name: Keith B. Pipes
Title: Chief Financial Officer, Treasurer
and Secretary
-4-
<PAGE> 1
THE SIERRA VARIABLE TRUST
POWER OF ATTORNEY
Alfred E. Osborne, Jr., whose signature appears below, does hereby
constitute and appoint F. Brian Cerini, Keith B. Pipes, Michael D. Goth and
Richard W. Grant, and each of them acting alone, his true and lawful attorney
and agent, with power of substitution or resubstitution, to do any and all acts
and things and to execute any and all instruments which said attorney and agent
may deem necessary or advisable or which may be required to enable The Sierra
Variable Trust (the "Trust") to comply with the Securities Act of 1933, as
amended (the "1933 Act") and the Investment Company Act of 1940, as amended
(the "1940 Act"), and any rules, regulations or requirements of the Securities
and Exchange Commission in respect thereof, in connection with the Trust's
Registration Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act,
together with any and all amendments thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee of the Trust
such Registration Statement and any and all such amendments filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorney and agent shall do or cause to be
done by virtue hereof.
/s/ Alfred E. Osborne, Jr.
--------------------------------
Alfred E. Osborne, Jr.
Date: March 26, 1993
<PAGE> 2
THE SIERRA VARIABLE TRUST
POWER OF ATTORNEY
F. Brian Cerini, whose signature appears below, does hereby constitute
and appoint Keith B. Pipes, Michael D. Goth and Richard W. Grant, and each of
them acting alone, his true and lawful attorney and agent, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorney and agent may deem
necessary or advisable or which may be required to enable The Sierra Variable
Trust (the "Trust") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the Trust's
Registration Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act,
together with any and all amendments thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee of the Trust
such Registration Statement and any and all such amendments filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorney and agent shall do or cause to be
done by virtue hereof.
/s/ F. Brian Cerini
--------------------------------
F. Brian Cerini
Date: March 26, 1993
<PAGE> 3
THE SIERRA VARIABLE TRUST
POWER OF ATTORNEY
David E. Anderson, whose signature appears below, does hereby
constitute and appoint F. Brian Cerini, Keith B. Pipes, Michael D. Goth and
Richard W. Grant, and each of them acting alone, his true and lawful attorney
and agent, with power of substitution or resubstitution, to do any and all acts
and things and to execute any and all instruments which said attorney and agent
may deem necessary or advisable or which may be required to enable The Sierra
Variable Trust (the "Trust") to comply with the Securities Act of 1933, as
amended (the "1933 Act") and the Investment Company Act of 1940, as amended
(the "1940 Act"), and any rules, regulations or requirements of the Securities
and Exchange Commission in respect thereof, in connection with the Trust's
Registration Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act,
together with any and all amendments thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee of the Trust
such Registration Statement and any and all such amendments filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorney and agent shall do or cause to be
done by virtue hereof.
/s/ David E. Anderson
--------------------------------
David E. Anderson
Date: March 26, 1993
<PAGE> 4
THE SIERRA VARIABLE TRUST
POWER OF ATTORNEY
Arthur H. Bernstein, whose signature appears below, does hereby
constitute and appoint F. Brian Cerini, Keith B. Pipes, Michael D. Goth and
Richard W. Grant, and each of them acting alone, his true and lawful attorney
and agent, with power of substitution or resubstitution, to do any and all acts
and things and to execute any and all instruments which said attorney and agent
may deem necessary or advisable or which may be required to enable The Sierra
Variable Trust (the "Trust") to comply with the Securities Act of 1933, as
amended (the "1933 Act") and the Investment Company Act of 1940, as amended
(the "1940 Act"), and any rules, regulations or requirements of the Securities
and Exchange Commission in respect thereof, in connection with the Trust's
Registration Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act,
together with any and all amendments thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee of the Trust
such Registration Statement and any and all such amendments filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorney and agent shall do or cause to be
done by virtue hereof.
/s/ Arthur H. Bernstein
--------------------------------
Arthur H. Bernstein
Date: March 26, 1993
<PAGE> 5
THE SIERRA VARIABLE TRUST
POWER OF ATTORNEY
Edmond R. Davis, whose signature appears below, does hereby constitute
and appoint F. Brian Cerini, Keith B. Pipes, Michael D. Goth and Richard W.
Grant, and each of them acting alone, his true and lawful attorney and agent,
with power of substitution or resubstitution, to do any and all acts and things
and to execute any and all instruments which said attorney and agent may deem
necessary or advisable or which may be required to enable The Sierra Variable
Trust (the "Trust") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the Trust's
Registration Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act,
together with any and all amendments thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee of the Trust
such Registration Statement and any and all such amendments filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorney and agent shall do or cause to be
done by virtue hereof.
/s/ Edmond R. Davis
-------------------------------
Edmond R. Davis
Date: March 26, 1993
<PAGE> 1
THE SIERRA VARIABLE TRUST
POWER OF ATTORNEY
John W. English, whose signature appears below, does hereby constitute
and appoint F. Brian Cerini, Keith B. Pipes, Michael D. Goth and Richard W.
Grant, and each of them acting alone, his true and lawful attorney and agent,
with power of substitution or resubstitution, to do any and all acts and things
and to execute any and all instruments which said attorney and agent may deem
necessary or advisable or which may be required to enable The Sierra Variable
Trust (the "Trust") to comply with the Securities Act of 1933, as amended (the
"1933 Act") and the Investment Company Act of 1940, as amended (the "1940
Act"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the Trust's
Registration Statement on Form N-1A pursuant to the 1933 Act and the 1940 Act,
together with any and all amendments thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee of the Trust
such Registration Statement and any and all such amendments filed with the
Securities and Exchange Commission under the 1933 Act and the 1940 Act, and any
other instruments or documents related thereto, and the undersigned does hereby
ratify and confirm all that said attorney and agent shall do or cause to be
done by virtue hereof.
/s/ John W. English
---------------------------
John W. English
Date: February 1, 1995
<PAGE> 1
EXHIBIT 16(a)
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
Fund: SIERRA ADVANTAGE VARIABLE TRUST U.S. GOVERNMENT FUND
1. Formula: MONTHLY RATE OF RETURN (M'ly ROR)
[(MV-P)/P)] x 100%
Where: MV = Market Value at the end of the current reporting
period (reporting periods are equal to
calendar months) *
P = initial Principal value (returns are
calculated to the last day of each month from
the last day of the preceding month) month)
For: MAR 1994 (In Lotus Format)
((974.00-999.00)/999.00)) = 2.50%
2. Formula: 3 MONTH RETURN (3-MO ROR)
{[(1+Month 1)*(1 + Month 2)*(1+Month 3)]-1} x 100%
Where: Monthly RORs are expressed in decimal form
For: MAR 1994 (In Lotus Format)
((1+.0129)*(1-.0177)*(1-.0250))-1= -2.99%
3. Formula: YEAR-TO-DATE RATE OF RETURN (YR-T-DT ROR)
Same formula as for monthly returns, substituting
3-Month ROR where possible for efficiency of
calculation
{[(1+3-Mo ROR) x (1+Month 1) x (1+Month 2)]-1}
x 100%
For: OCT 1993 (In Lotus Format)
((1=.0010)*(1+.0273)*(1+.0011)*(1+.0010))-1=3.05%
4. Formula: 12 MONTH RATE OF RETURN
Same formula as for monthly returns, substituting
3-Month RORs for monthly RORs
[(1+3-Mo ROR)x(1+3-Mo ROR)x(1+3-Mo ROR)x
(1+3-Mo ROR)]-1
Where: Returns are calculated only when there is a
trailing 12-month period
<PAGE> 2
5. Formula: FROM INCEPTION RATE OF RETURN (FM INCEP ROR)
({[(1+Yr-T-Dt ROR) x (1+3-Mo ROR) x (1+Month 1)]
(exp 12/n)}-1) x 100%
Where: n = number of months in the reporting period
Yr-T-Dt ROR, 3-Mo ROR and Monthly ROR are used when
efficient Returns are annualized using monthly ROR
data taken to the power of (12 months/number of
months during the reporting period), when there are
more than 12 months in the reporting period.
For: MAR 1994 (In Lotus Format)
((1+.0227)*(1-.0299))-1 = -0.079%
NOTE: The Rate of Return model is set up to keep a running balance of
month-end market values. Initially, 100 shares are purchased as a
beginning share balance and updated each quarter-end as dividends are
reinvested. Reinvestment is calculated by dividing the dividend (in
dollars per share) by the NAV on the date on which dividends are paid.
The additional shares calculated using this method are added to the
previous share balance in order to determine a new (current) share
balance. As a result;
Market Value = (current share balance) x (month-end NAV)
<PAGE> 3
<TABLE>
<CAPTION>
SIERRA VARIABLE TRUST GROWTH FUND INCEPTION: May 7, 1993
ENDING DIV DIV. INCR
NAV PAY NAV @ DIV/SHR PAID IN SHRS SHARE M'LY 3 MO
DATE CURR MO DATE PAY DT CURR MO IN SHRS FM DIV. VALUE ROR ROR
- ---- ------- ---- ------ ------- ------- ------- ----- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993
MAY 7 10.00 100.0000 1000.00
MAY 10.25 100.0000 1025.00 2.50% ---
JUN 10.41 --- 10.41 0.0000 0.00000 100.0000 1041.00 1.56% ---
JUL 10.22 --- 10.22 0.0000 0.00000 100.0000 1022.00 -1.83% ---
AUG 10.53 --- 10.53 0.0000 0.00000 100.0000 1053.00 3.03% 2.73%
SEP 10.81 --- 10.81 0.0000 0.00000 100.0000 1081.00 2.66% 3.84%
OCT 10.98 --- 10.98 0.0000 0.00000 100.0000 1098.00 1.57% 7.44%
NOV 10.90 --- 10.90 0.0000 0.00000 100.0000 1090.00 -0.73% 3.51%
DEC 11.19 12/31 11.19 0.0000 0.00000 100.0000 1119.00 2.66% 3.52%
1994
BEG BAL 11.19 100.0000 1119.00
JAN 11.73 --- 11.73 0.0000 0.00000 100.0000 1173.00 4.83% 6.83%
FEB 11.68 --- 11.68 0.0000 0.00000 100.0000 1168.00 -0.43% 7.16%
MAR 11.39 03/31 11.39 0.0000 0.00000 100.0000 1139.00 2.48% 1.79%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION: May 7, 1993
YR-T-
DT 12 MOS 2 YRS 2 YRS 3 YRS 3 YRS FM INCEP
DATE ROR ROR ROR ANN'L ROR ANN'L ROR*
- ---- --- --- --- ----- --- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1993
MAY 7
MAY 2.50% 2.50%
JUN 4.10% 4.10%
JUL 2.20% 2.20%
AUG 5.30% 5.30%
SEP 8.10% 8.10%
OCT 9.80% 9.80%
NOV 9.00% 9.00%
DEC 11.90% 11.90%
1994
BEG BAL
JAN 4.83% 17.30%
FEB 4.38% 16.80%
MAR 1.79% 13.90%
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
SIERRA VARIABLE TRUST INTERNATIONAL GROWTH FUND INCEPTION: May 7, 1993
ENDING DIV DIV. INCR
NAV PAY NAV @ DIV/SHR PAID IN SHRS SHARE M'LY 3 MO
DATE CURR MO DATE PAY DT CURR MO IN SHRS FM DIV. VALUE ROR ROR
- ---- ------- ---- ------ ------- ------- ------- ----- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993
MAY 7 10.00 100.0000 1000.00
MAY 10.41 100.0000 1041.00 4.10% ---
JUN 10.12 --- 10.12 0.0000 0.00000 100.0000 1012.00 -2.79% ---
JUL 10.37 --- 10.37 0.0000 0.00000 100.0000 1037.00 2.47% ---
AUG 11.03 --- 11.03 0.0000 0.00000 100.0000 1103.00 6.36% 5.96%
SEP 11.08 --- 11.08 0.0000 0.00000 100.0000 1108.00 0.45% 9.49%
OCT 11.43 --- 11.43 0.0000 0.00000 100.0000 1143.00 3.16% 10.22%
NOV 10.82 --- 10.82 0.0000 0.00000 100.0000 1082.00 -5.34% -1.90%
DEC 11.31 12/31 11.31 0.0000 0.00000 100.0000 1131.00 4.53% 2.08%
1994
BEG BAL 11.31 100.0000 1131.00
JAN 11.8 --- 11.8 0.0000 0.00000 100.0000 1180.00 4.33% 3.24%
FEB 11.89 --- 11.89 0.0000 0.00000 100.0000 1189.00 0.76% 9.89%
MAR 11.47 03/31 11.47 0.0000 0.00000 100.0000 1147.00 -3.53% 1.41%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION: May 7, 1993
YR-T-
DT 12 MOS 2 YRS 2 YRS 3 YRS 3 YRS FM INCEP
DATE ROR ROR ROR ANN'L ROR ANN'L ROR*
- ---- --- --- --- ----- --- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1993
MAY 7
MAY 4.10% 4.10%
JUN 1.20% 1.20%
JUL 3.70% 3.70%
AUG 10.30% 10.30%
SEP 10.80% 10.80%
OCT 14.30% 14.30%
NOV 8.20% 8.20%
DEC 13.10% 13.10%
1994
BEG BAL
JAN 4.33% 18.00%
FEB 5.13% 18.90%
MAR 1.41% 1.470%
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
SIERRA VARIABLE TRUST U.S. GOVERNMENT FUND INCEPTION: May 6, 1993
ENDING DIV DIV. INCR YR-T-
NAV PAY NAV @ DIV/SHR PAID IN SHRS SHARE M'LY 3 MO DT
DATE CURR MO DATE PAY DT CURR MO IN SHRS FM DIV. VALUE ROR ROR ROR
---- ------- ---- ------ ------- ------- ------- ----- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993
MAY 6 10.00 100.0000 1000.00
MAY 10.01 100.0000 1001.00 0.10%
JUN 10.07 06/30 10.07 0.0230 0.22840 100.2284 1009.30 0.83% --- 0.93%
JUL 10.13 --- 10.13 0.0000 0.00000 100.2284 1015.31 .60% --- 1.53%
AUG 10.26 --- 10.26 0.0000 0.00000 100.2284 1028.34 1.28% 2.73% 2.83%
SEP 10.20 09/30 10.20 0.0710 0.69767 100.9261 1029.45 0.11% 2.00% 2.94%
OCT 10.21 --- 10.21 0.0000 0.00000 100.9261 1030.46 0.10% 1.49% 3.05%
NOV 10.07 --- 10.07 0.0000 0.00000 100.9261 1016.33 -1.37% -1.17% 1.63%
DEC 10.04 12/31 10.04 0.0930 0.93487 101.8609 1022.68 0.63% -0.66% 2.27%
1994
BEG BAL 10.04 100.0000 1004.00
JAN 10.17 --- 10.17 0.0000 0.00000 100.0000 1017.00 1.29% 0.53% 1.29%
FEB 9.99 --- 9.99 0.0000 0.00000 100.0000 999.00 -1.77% 0.12% -0.50%
MAR 9.63 03/31 9.63 0.11 1.14226 101.1423 974.00 -2.50% -2.99% -2.99%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION: May 6, 1993
12 MOS 2 YRS 2 YRS 3 YRS 3 YRS FM INCEP
DATE ROR ROR ANN'L ROR ANN'L ROR*
---- --- --- ----- --- ----- ----
<S> <C> <C> <C> <C> <C> <C>
1993
MAY 6
MAY
JUN 0.93%
JUL 1.53%
AUG 2.83%
SEP 2.94%
OCT 3.05%
NOV 1.63%
DEC 2.27%
1994
BEG BAL
JAN 3.59%
FEB 1.76%
MAR -0.79%
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
SIERRA VARIABLE TRUST CORPORATE INCOME FUND INCEPTION: May 7, 1993
ENDING DIV DIV. INCR YR-T-
NAV PAY NAV @ DIV/SHR PAID IN SHRS SHARE M'LY 3 MO DT 12 MOS
DATE CURR MO DATE PAY DT CURR MO IN SHRS FM DIV. VALUE ROR ROR ROR ROR
---- ------- ---- ------ ------- ------- ------- ----- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993
MAY 7 10.00 100.0000 1000.00
MAY 9.95 100.0000 995.00 -0.50% -0.50%
JUN 10.20 06/30 10.20 0.0240 0.23529 100.2353 1022.40 2.75% --- 2.24%
JUL 10.26 --- 10.26 0.0000 0.00000 100.2353 1028.41 0.59% --- 2.84%
AUG 10.57 --- 10.57 0.0000 0.00000 100.2353 1059.49 3.02% 6.48% 5.95%
SEP 10.49 09/30 10.49 0.0750 0.71665 100.9519 1058.99 -0.05% 3.58% 5.90%
OCT 10.56 --- 10.56 0.0000 0.00000 100.9519 1066.05 0.67% 3.66% 6.61%
NOV 10.39 --- 10.39 0.0000 0.00000 100.9519 1048.89 -1.61% -1.00% 4.89%
DEC 10.34 12/31 10.34 0.1220 1.19112 102.1431 1056.16 0.69% -0.27% 5.62%
1994
BEG BAL 10.34 100.0000 1034.00
JAN 10.54 --- 10.54 0.0000 0.00000 100.0000 1054.00 1.93% 0.99% 1.93%
FEB 10.21 --- 10.21 0.0000 0.00000 100.0000 1021.00 -3.13% -0.57% -1.26%
MAR 9.66 03/31 9.66 0.14 1.44928 101.4493 980.00 -4.02% -5.22% -5.22%
</TABLE>
<TABLE>
<CAPTION>
SIERRA VARIABLE TRUST CORPORATE INCOME FUND INCEPTION: May 7, 1993
FM
2 YRS 2 YRS 3 YRS 3 YRS INCEP
DATE ROR ANN'L ROR ANN'L ROR
---- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
1993
MAY 7
MAY
JUN 2.24%
JUL 2.84%
AUG 5.95%
SEP 5.90%
OCT 6.61%
NOV 4.89%
DEC 5.62%
1994
BEG BAL
JAN 7.66%
FEB 4.29%
MAR 0.10%
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
SIERRA VARIABLE TRUST S/T GLOBAL GOVERNMENT FUND INCEPTION: May 12, 1993
ENDING DIV DIV. INCR
NAV PAY NAV @ DIV/SHR PAID IN SHRS SHARE M'LY 3 MO
DATE CURR MO DATE PAY DT CURR MO IN SHRS FM DIV. VALUE ROR ROR
---- ------- ---- ------ ------- ------- ------- ----- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993
MAY 12 2.50 100.0000 250.00
MAY 2.50 100.0000 250.00 0.00%
JUN 2.49 06/30 2.49 0.0030 0.12048 100.1205 249.30 -0.28% ---
JUL 2.48 --- 2.48 0.0000 0.00000 100.1205 248.30 -0.40% ---
AUG 2.48 --- 2.48 0.0000 0.00000 100.1205 248.30 0.00% -0.68%
SEP 2.47 09/30 2.47 0.0000 0.71665 100.1205 247.30 -0.40% -0.80%
OCT 2.48 --- 2.48 0.0000 0.00000 100.1205 248.30 0.40% 0.00%
NOV 2.48 --- 2.48 0.0000 0.00000 100.1205 248.30 0.00% 0.00%
DEC 2.49 12/31 2.49 0.0100 0.40209 100.5226 250.30 0.81% 1.21%
1994
BEG BAL 2.49 100.0000 249.00 0.40% 1.21%
JAN 2.5 --- 2.5 0.0000 0.00000 100.0000 250.00 -0.40% 0.81%
FEB 2.49 --- 2.49 0.0000 0.00000 100.0000 249.00 -0.40% -0.40%
MAR 2.46 03/31 2.46 0.02 0.81301 100.8130 248.00 -0.40% - 0.28%
</TABLE>
<TABLE>
<CAPTION>
INCEPTION: May 12, 1993
YR-T-
DT 12 MOS 2 YRS 2 YRS 3 YRS 3 YRS FM INCEP
DATE ROR ROR ROR ANN'L ROR ANN'L ROR*
---- --- --- --- ----- --- ----- ----
<S> <C> <C>
1993
MAY 12
MAY 0.00% 0.00%
JUN -0.28% -0.28%
JUL -0.68% -0.68%
AUG --- -0.68%
SEP --- -1.08%
OCT --- -0.68%
NOV -0.68% -0.68%
DEC 0.12% 0.12%
1994
BEG BAL
JAN 0.40% 0.52%
FEB 0.00% 0.12%
MAR -0.40% -0.28%
</TABLE>
<PAGE> 8
Sierra Investment Advisors
LONG TERM PERFORMANCE BY SECURITY INCLUDING ACCRUED INTEREST
Sierra Advantage Global Money Fund
From 05-01-96 to 12-31-93
<TABLE>
<CAPTION>
Security 05-10-93 Realized Unrealized Interest IRR 12-31-93 Pct. of
Market Value Gains Gains Dividends + Fees Market Value Assets
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mutual Funds
- ---------------------------
Advantage Global Money Fund 1,000.00 0.00 0.00 15.90 1.59 1,015.90 100.00
----------------------------------------------------------------------------------------------
1,000.00 0.00 0.00 15.90 1.59 1,015.90 100.00
CASH AND EQUIVALENTS [Fees]
----------------------------- -------------------------------------------------
0.00 0.00 0.00 0.00 0.00 0.00
---------------------------------------------------------------------------------------------
TOTAL PORTFOLIO 1,000.00 0.00 0.00 15.90 1.59 1,015.90 100.00
=============================================================================================
</TABLE>
<PAGE> 9
SEC YIELD COMPARISON SHEET
<TABLE>
<CAPTION>
FUND NAME CLASS 12/31/93 INTEREST EXPENSES AVERAGE NAV
YIELD EARNED ACCRUED SHARES LAST DAY
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
DEC Sierra Var. Tr. - U.S. GOVT. 4.73% 98,049.56 8,367.95 2,287,725.63 10.04
=================================================================================================================================
DEC Sierra Var. Tr. - Corp. 6.58% 150,843.47 11,496.78 2,492,541.99 10.34
=================================================================================================================================
DEC Sierra Var.Tr. - S-T Global Govt 5.16% 76,065.28 6,944.26 6,528,192.53 2.49
=================================================================================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> SIERRA VT GLOBAL MONEY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 24,072,917
<INVESTMENTS-AT-VALUE> 24,072,917
<RECEIVABLES> 64,851
<ASSETS-OTHER> 1,248
<OTHER-ITEMS-ASSETS> 11,406
<TOTAL-ASSETS> 24,150,422
<PAYABLE-FOR-SECURITIES> 849,014
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 35,891
<TOTAL-LIABILITIES> 884,905
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,249,640
<SHARES-COMMON-STOCK> 23,261,642
<SHARES-COMMON-PRIOR> 20,369,543
<ACCUMULATED-NII-CURRENT> 15,877
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 23,265,517
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,108,964
<OTHER-INCOME> 0
<EXPENSES-NET> 118,336
<NET-INVESTMENT-INCOME> 990,628
<REALIZED-GAINS-CURRENT> 544
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 991,172
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (986,806)
<DISTRIBUTIONS-OF-GAINS> (3,822)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,763,701
<NUMBER-OF-SHARES-REDEEMED> (10,862,230)
<SHARES-REINVESTED> 990,628
<NET-CHANGE-IN-ASSETS> 2,892,643
<ACCUMULATED-NII-PRIOR> 8,764
<ACCUMULATED-GAINS-PRIOR> 3,278
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 102,014
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 180,339
<AVERAGE-NET-ASSETS> 20,402,890
<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> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> SIERRA VT GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 101,820,608
<INVESTMENTS-AT-VALUE> 115,509,002
<RECEIVABLES> 800,355
<ASSETS-OTHER> 6,706
<OTHER-ITEMS-ASSETS> 27,122
<TOTAL-ASSETS> 116,343,185
<PAYABLE-FOR-SECURITIES> 79,520
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 199,881
<TOTAL-LIABILITIES> 279,401
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 87,316,438
<SHARES-COMMON-STOCK> 7,247,908
<SHARES-COMMON-PRIOR> 6,342,412
<ACCUMULATED-NII-CURRENT> 145,343
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,913,903
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,688,100
<NET-ASSETS> 116,063,784
<DIVIDEND-INCOME> 650,285
<INTEREST-INCOME> 670,538
<OTHER-INCOME> 0
<EXPENSES-NET> 1,309,073
<NET-INVESTMENT-INCOME> 11,750
<REALIZED-GAINS-CURRENT> 15,391,961
<APPREC-INCREASE-CURRENT> 124,075
<NET-CHANGE-FROM-OPS> 15,527,786
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (13,385,659)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 740,880
<NUMBER-OF-SHARES-REDEEMED> (716,599)
<SHARES-REINVESTED> 881,215
<NET-CHANGE-IN-ASSETS> 16,364,871
<ACCUMULATED-NII-PRIOR> 12,981
<ACCUMULATED-GAINS-PRIOR> 13,024,922
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 961,131
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,313,350
<AVERAGE-NET-ASSETS> 107,700,644
<PER-SHARE-NAV-BEGIN> 15.72
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 2.42
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.13)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.01
<EXPENSE-RATIO> 1.22
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> SIERRA GROWTH VT INTERNATIONAL GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 57,881,532
<INVESTMENTS-AT-VALUE> 61,410,425
<RECEIVABLES> 789,096
<ASSETS-OTHER> 3,488
<OTHER-ITEMS-ASSETS> 331,105
<TOTAL-ASSETS> 62,534,114
<PAYABLE-FOR-SECURITIES> 56,457
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 123,141
<TOTAL-LIABILITIES> 179,598
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56,794,730
<SHARES-COMMON-STOCK> 4,790,516
<SHARES-COMMON-PRIOR> 3,790,504
<ACCUMULATED-NII-CURRENT> 619,142
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,053,707
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,886,937
<NET-ASSETS> 62,354,516
<DIVIDEND-INCOME> 960,203
<INTEREST-INCOME> 130,375
<OTHER-INCOME> 0
<EXPENSES-NET> 775,440
<NET-INVESTMENT-INCOME> 315,138
<REALIZED-GAINS-CURRENT> 1,963,901
<APPREC-INCREASE-CURRENT> 2,364,693
<NET-CHANGE-FROM-OPS> 4,643,732
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (741,545)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,119,133
<NUMBER-OF-SHARES-REDEEMED> (177,556)
<SHARES-REINVESTED> 58,435
<NET-CHANGE-IN-ASSETS> 16,445,658
<ACCUMULATED-NII-PRIOR> 702,004
<ACCUMULATED-GAINS-PRIOR> (569,940)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 524,048
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 776,824
<AVERAGE-NET-ASSETS> 55,781,967
<PER-SHARE-NAV-BEGIN> 12.11
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 1.01
<PER-SHARE-DIVIDEND> (0.17)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.02
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> SIERRA VT U.S. GOVERNMENT FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 78,514,903
<INVESTMENTS-AT-VALUE> 79,659,257
<RECEIVABLES> 741,567
<ASSETS-OTHER> 3,804
<OTHER-ITEMS-ASSETS> 509,865
<TOTAL-ASSETS> 80,914,493
<PAYABLE-FOR-SECURITIES> 401,694
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,949,504
<TOTAL-LIABILITIES> 14,351,198
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 67,513,521
<SHARES-COMMON-STOCK> 6,815,332
<SHARES-COMMON-PRIOR> 5,229,508
<ACCUMULATED-NII-CURRENT> 25,240
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,332,406)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,356,940
<NET-ASSETS> 66,563,295
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,274,470
<OTHER-INCOME> 116,700
<EXPENSES-NET> 650,998
<NET-INVESTMENT-INCOME> 3,740,172
<REALIZED-GAINS-CURRENT> (316,015)
<APPREC-INCREASE-CURRENT> (900,475)
<NET-CHANGE-FROM-OPS> 2,523,682
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,671,725)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,582,359
<NUMBER-OF-SHARES-REDEEMED> (376,308)
<SHARES-REINVESTED> 379,773
<NET-CHANGE-IN-ASSETS> 14,259,801
<ACCUMULATED-NII-PRIOR> 20,383
<ACCUMULATED-GAINS-PRIOR> (2,083,272)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 363,268
<INTEREST-EXPENSE> 83,013
<GROSS-EXPENSE> 653,183
<AVERAGE-NET-ASSETS> 60,544,662
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.58
<PER-SHARE-GAIN-APPREC> (0.23)
<PER-SHARE-DIVIDEND> (0.58)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.77
<EXPENSE-RATIO> 0.94
<AVG-DEBT-OUTSTANDING> 4,800,671
<AVG-DEBT-PER-SHARE> 0.78
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> SIERRA VT CORPORATE INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 61,455,456
<INVESTMENTS-AT-VALUE> 61,919,260
<RECEIVABLES> 1,116,742
<ASSETS-OTHER> 3,874
<OTHER-ITEMS-ASSETS> 8,456
<TOTAL-ASSETS> 63,048,332
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,165,132
<TOTAL-LIABILITIES> 3,165,132
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61,606,907
<SHARES-COMMON-STOCK> 6,095,560
<SHARES-COMMON-PRIOR> 5,792,000
<ACCUMULATED-NII-CURRENT> 55,812
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,243,323)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 463,804
<NET-ASSETS> 59,883,200
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,598,536
<OTHER-INCOME> 42,589
<EXPENSES-NET> 575,801
<NET-INVESTMENT-INCOME> 4,065,324
<REALIZED-GAINS-CURRENT> (162,462)
<APPREC-INCREASE-CURRENT> (3,654,948)
<NET-CHANGE-FROM-OPS> 247,914
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,024,172)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 376,148
<NUMBER-OF-SHARES-REDEEMED> (486,535)
<SHARES-REINVESTED> 413,947
<NET-CHANGE-IN-ASSETS> (793,050)
<ACCUMULATED-NII-PRIOR> 29,513
<ACCUMULATED-GAINS-PRIOR> (2,099,005)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 381,643
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 575,892
<AVERAGE-NET-ASSETS> 58,714,279
<PER-SHARE-NAV-BEGIN> 10.48
<PER-SHARE-NII> 0.68
<PER-SHARE-GAIN-APPREC> (0.66)
<PER-SHARE-DIVIDEND> (0.68)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.82
<EXPENSE-RATIO> 0.98
<AVG-DEBT-OUTSTANDING> 1,755,625
<AVG-DEBT-PER-SHARE> 0.29
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 06
<NAME> SIERRA VT ST GLOBAL GOVERNMENT FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 20,722,662
<INVESTMENTS-AT-VALUE> 21,168,147
<RECEIVABLES> 833,052
<ASSETS-OTHER> 1,522
<OTHER-ITEMS-ASSETS> 8,905
<TOTAL-ASSETS> 22,011,626
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 101,241
<TOTAL-LIABILITIES> 101,241
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,535,336
<SHARES-COMMON-STOCK> 8,843,198
<SHARES-COMMON-PRIOR> 9,536,788
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (208,526)
<ACCUMULATED-NET-GAINS> (182,141)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 765,716
<NET-ASSETS> 21,910,385
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,542,852
<OTHER-INCOME> 0
<EXPENSES-NET> 284,022
<NET-INVESTMENT-INCOME> 1,258,830
<REALIZED-GAINS-CURRENT> 280,399
<APPREC-INCREASE-CURRENT> 297,489
<NET-CHANGE-FROM-OPS> 1,836,718
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,947,360)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 175,234
<NUMBER-OF-SHARES-REDEEMED> (1,649,684)
<SHARES-REINVESTED> 780,860
<NET-CHANGE-IN-ASSETS> (1,894,209)
<ACCUMULATED-NII-PRIOR> 323,195
<ACCUMULATED-GAINS-PRIOR> (309,022)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 166,447
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 284,138
<AVERAGE-NET-ASSETS> 22,192,874
<PER-SHARE-NAV-BEGIN> 2.50
<PER-SHARE-NII> 0.14
<PER-SHARE-GAIN-APPREC> 0.07
<PER-SHARE-DIVIDEND> (0.23)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 2.48
<EXPENSE-RATIO> 1.28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 07
<NAME> SIERRA VT EMERGING GROWTH
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 45,915,281
<INVESTMENTS-AT-VALUE> 55,936,702
<RECEIVABLES> 400,988
<ASSETS-OTHER> 3,356
<OTHER-ITEMS-ASSETS> 74,618
<TOTAL-ASSETS> 56,415,664
<PAYABLE-FOR-SECURITIES> 283,529
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 244,646
<TOTAL-LIABILITIES> 528,175
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43,271,548
<SHARES-COMMON-STOCK> 3,801,138
<SHARES-COMMON-PRIOR> 3,350,979
<ACCUMULATED-NII-CURRENT> 160,114
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,592,824
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,863,003
<NET-ASSETS> 55,887,489
<DIVIDEND-INCOME> 98,942
<INTEREST-INCOME> 100,110
<OTHER-INCOME> 0
<EXPENSES-NET> 634,425
<NET-INVESTMENT-INCOME> (435,373)
<REALIZED-GAINS-CURRENT> 3,240,181
<APPREC-INCREASE-CURRENT> 1,812,579
<NET-CHANGE-FROM-OPS> 4,617,387
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (1,615,533)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 893,632
<NUMBER-OF-SHARES-REDEEMED> (548,857)
<SHARES-REINVESTED> 105,384
<NET-CHANGE-IN-ASSETS> 9,829,089
<ACCUMULATED-NII-PRIOR> 6,696
<ACCUMULATED-GAINS-PRIOR> 1,556,967
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 461,791
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 637,989
<AVERAGE-NET-ASSETS> 52,857,782
<PER-SHARE-NAV-BEGIN> 13.74
<PER-SHARE-NII> (0.12)
<PER-SHARE-GAIN-APPREC> 1.52
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.44)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.70
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 08
<NAME> SIERRA VT GROWTH AND INCOME
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 54,820,944
<INVESTMENTS-AT-VALUE> 62,480,412
<RECEIVABLES> 123,730
<ASSETS-OTHER> 3,338
<OTHER-ITEMS-ASSETS> 2,219
<TOTAL-ASSETS> 62,609,699
<PAYABLE-FOR-SECURITIES> 75,601
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 89,563
<TOTAL-LIABILITIES> 165,164
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 47,704,551
<SHARES-COMMON-STOCK> 4,370,788
<SHARES-COMMON-PRIOR> 3,612,541
<ACCUMULATED-NII-CURRENT> 497,122
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,583,394
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,659,468
<NET-ASSETS> 62,444,535
<DIVIDEND-INCOME> 1,027,283
<INTEREST-INCOME> 99,669
<OTHER-INCOME> 0
<EXPENSES-NET> 617,306
<NET-INVESTMENT-INCOME> 509,646
<REALIZED-GAINS-CURRENT> 6,622,266
<APPREC-INCREASE-CURRENT> 3,780,341
<NET-CHANGE-FROM-OPS> 10,912,253
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (449,287)
<DISTRIBUTIONS-OF-GAINS> (4,043,586)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 910,887
<NUMBER-OF-SHARES-REDEEMED> (503,372)
<SHARES-REINVESTED> 350,732
<NET-CHANGE-IN-ASSETS> 16,082,693
<ACCUMULATED-NII-PRIOR> 436,763
<ACCUMULATED-GAINS-PRIOR> 4,004,714
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 436,358
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 617,873
<AVERAGE-NET-ASSETS> 54,544,774
<PER-SHARE-NAV-BEGIN> 12.83
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 2.54
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<TABLE> <S> <C>
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<NAME> SIERRA VT SHORT TERM HIGH QUALITY BOND
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