SIERRA VARIABLE TRUST, 485APOS, 1997-01-10

SIERRA VARIABLE TRUST
485APOS, 1997-01-10

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<PAGE> 1

As filed with the Securities and Exchange Commission on January 10, 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. 6 / X /

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /___/

AMENDMENT NO. 7 / 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
X 75 days after filing pursuant to paragraph (a), or
_____
_____ on [date] pursuant to paragraph (a) of Rule 485.

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.

<PAGE> 2

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,
1995 was filed with the Securities and Exchange Commission on February 27, 1996.
It is anticipated that Registrant's Rule 24f-2 Notice for its fiscal year ended
December 31, 1996 will be filed with the Securities and Exchange Commission on
or before March 1, 1997.

<PAGE> 3
THE SIERRA VARIABLE TRUST

FORM N-1A

CROSS REFERENCE SHEET

_______________________________________

PART A

The enclosed Prospectus relates only to the Income Portfolio, Value Portfolio,
Balanced Portfolio, Growth Portfolio, Capital Growth Portfolio and Global Money
Fund, each a series 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 dated July 1, 1996 for The Sierra Variable Trust's 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, is incorporated by reference
to Post-Effective Amendment No. 5 to the Registrant's Registration Statement in
Form N-1A (File No. 033-57732) filed with the SEC on April 29, 1996 (Accession
No. 0000950150-96-000303).

Item No. Prospectus Heading
- -------- ------------------
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
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

(i)

<PAGE> 4
9. Pending Legal Proceedings. . Not Applicable

(ii)

<PAGE> 5

PART B
Heading in Statement of
Item No. Additional Information
- -------- -----------------------
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"

(iii)

<PAGE> 6

22. Calculation of Performance
Data . . . . . . . . . . . Performance; see Prospectus --
"Performance"

23. Financial Statements . . . . Financial Statements

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

INCOME PORTFOLIO
VALUE PORTFOLIO
BALANCED PORTFOLIO
GROWTH PORTFOLIO
CAPITAL GROWTH PORTFOLIO
GLOBAL MONEY FUND

The Sierra Variable Trust (the "Trust") is a mutual fund consisting of fourteen
different investment funds. This Prospectus describes six of the investment
funds - the INCOME, VALUE, BALANCED, GROWTH AND CAPITAL GROWTH PORTFOLIOS
(each, a "Portfolio," and together, the "Portfolios") and the GLOBAL MONEY FUND
(a "Fund").

The INCOME, VALUE, BALANCED, GROWTH AND CAPITAL GROWTH Portfolios invest in up
to nine other investment funds of the Trust, including the Global Money Fund,
within predetermined percentage ranges. The Portfolios are managed by Sierra
Investment Services Corporation ("Sierra Services" or the "Advisor"). The
Portfolios offer a range of asset allocation strategies designed to accommodate
different investment philosophies and goals.

The GLOBAL MONEY FUND invests directly in money market instruments of foreign
and U.S. issuers. The other eight investment funds of the Trust are 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 (each, a "Fund," and together, the "Funds"), and they invest directly in
securities or other financial instruments. The Funds are managed by Sierra
Investment Advisors Corporation ("Sierra Advisors").

Shares of the portfolios and the Funds are currently offered only to American
General Life Insurance Company ("AGL") for the purpose of providing investment
choices under its variable annuity contracts. The Portfolios and the Global
Money Fund are investment choices under the Sierra ______________ variable
annuity contract issued by AGL. The nine Funds listed above, including the
Global Money Fund, are investment choices under the Sierra Advantage variable
annuity contract issued by AGL.

Please read this Prospectus before allocating premiums to the Portfolios and the
Global Money Fund and keep it on file for future reference. It contains useful
information that can help you decide whether the investment philosophies and
goals of a Portfolio or the Global Money Fund match your own.

A Statement of Additional Information about the Trust, dated May 1, 1996, as
amended July 1, 1996 and March __, 1997, has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. It is available, at
no charge, by calling AGL at 800-247-6584 or by writing to American General Life
Insurance Company, Attention Annuity Administration, P.O. Box 1410, Houston,
Texas 177251-1410. You may also obtain a copy of the Prospectus for Sierra
Advantage, at no charge, by calling or writing in the same manner.

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 SECURITIES AND
EXCHANGE COMMISSION (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 MARCH ___, 1997

<PAGE> 8

CONTENTS

PAGE
----
Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Investment and Risk Considerations of the Portfolios . . . . . . . . . 6

Investment and Risk Considerations of the Funds, Including the
Global Money Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Your ___________ Contract . . . . . . . . . . . . . . . . . . . . . . 19
Management of the Trust . . . . . . . . . . . . . . . . . . . . . . . . 19
Board of Trustees . . . . . . . . . . . . . . . . . . . . . . . 19

The Advisor, Sierra Advisors, Their Affiliates and the
Portfolios' Service Providers . . . . . . . . . . . . . . . . . 20
Investment Advisor of the Portfolios . . . . . . . . . . . . . . 20
Investment Advisor and Investment Sub-Advisors of the Funds . . 20
Distributor . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Administration . . . . . . . . . . . . . . . . . . . . . . . . . 28
Independent Accountants . . . . . . . . . . . . . . . . . . . . 28
General Information and History . . . . . . . . . . . . . . . . . . . . 29
The Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Purchase and Redemption . . . . . . . . . . . . . . . . . . . . 30
Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . 31
Dividends, Distributions and Taxes . . . . . . . . . . . . . . . . . . 31
Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Appendix - Securities and Investment Practices . . . . . . . . . . . . A-1
Statement of Additional Information Table of Contents . . . . . . . . . A-20

-2-
<PAGE> 9

HIGHLIGHTS

INTRODUCTION

The Sierra Variable Trust (the "Trust") is a no-load, open-end management
investment company. The Trust is intended exclusively as an investment vehicle
for variable annuity or variable life insurance contracts offered by the
separate accounts of various insurance companies. Currently, investment in the
Trust is available only through the Sierra Advantage Annuity Contract (the
"Advantage Contract") and the Sierra _________ Annuity Contract (the
"_________ Contract") issued by AGL. Investment in the Portfolios is available
only through purchase of the __________ Contract. Direct investment in the
Funds, other than the Global Money Fund, is available only through purchase of
the Advantage Contract. Direct investment in the Global Money Fund is
available through either the ________ Contract or the Advantage Contract.
This Prospectus describes investment in the Portfolios and the Global Money
Fund through the _______ Contract. A Prospectus describing investment in the
Funds through the Advantage Contract is available upon request by calling AGL
at 800-247-6584 or by writing AGL at the address on the cover of this
Prospectus.

INVESTMENT OBJECTIVES AND POLICIES

The Portfolios and Global Money Fund each have distinct investment objectives
and policies. Each Portfolio and the Global Money Fund are 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 GROWTH PORTFOLIO seeks to provide long-term capital appreciation.

The CAPITAL GROWTH PORTFOLIO seeks to provide long-term capital appreciation.

-3-
<PAGE> 10

The investment objective of each Portfolio and the Global Money Fund and the
investment policies and restrictions that are specifically cited as fundamental
may not be changed without the approval of a majority of the outstanding shares
of that Portfolio or Fund, respectively. A complete list of investment
restrictions that identifies additional restrictions that cannot be changed
without the approval of a majority of an affected Portfolio's or Fund's
outstanding shares is contained in the SAI. There is no assurance that a
Portfolio or Fund will meet its stated objective.

Investors in the Portfolios should recognize that they may invest directly in
the Funds if they do not wish to participate in the Portfolios' asset
allocation strategies of investing in the Funds, but may do so only by
investing in an Advantage Contract. Through the Portfolios, investors will bear
not only their proportionate share of the expenses of the Portfolios (including
operating costs and investment advisory and administrative fees to the extent
the Advisor or Sierra Administration has not elected to waive such fees), but
will also indirectly bear similar expenses of the Funds. Shares of the Funds
are not subject to any sales load or distribution or shareholder service fees.
Consequently, a shareholder of a Portfolio's shares will not indirectly bear
expenses paid by a Fund for the sale or distribution of its shares.

INVESTMENT ADVISORS

Subject to the authority of the Board of Trustees, Sierra Investment Services
Corporation ("Sierra Services" or the "Advisor" or the "Distributor") serves as
the investment advisor of the Portfolios and has overall management of the
investment strategies and policies of the Portfolios. Subject to the same
authority, Sierra Investment Advisors Corporation ("Sierra Advisors") serves as
the investment advisor of the Funds and has overall management of the
investment strategies and policies of the Funds, including the Global Money
Fund. The Trust has secured the services of sub-advisors for each Fund,
including the Global Money Fund, to make investment decisions and place orders.

DISTRIBUTION

Sierra Services serves as the Trust's distributor and distributes the shares of
the Funds and the Portfolios 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 also 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.

-4-
<PAGE> 11
PURCHASING AND SELLING SHARES

You cannot purchase shares of the Portfolios or the Global Money Fund 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.

FINANCIAL HIGHLIGHTS

The financial highlights set forth certain information concerning the Trust's
investment results for the periods presented. As of December 31, 1996, the
Portfolios had not commenced operations. The financial highlights have been
audited by Price Waterhouse LLP, the Trust's independent accountants, whose
report is contained in the Trust's Annual Report to Shareholders which is
included in the SAI. 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 Ended Year Ended Year Ended Period 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
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . 0.053 0.037 0.016
---------- ---------- ----------
Total from investment operations . . . . . . . . . . . . . . . . . 0.053 0.037 0.016
---------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income . . . . . . . . . . . . . . . (0.053) (0.037) (0.016)
---------- ---------- ----------
Total distributions . . . . . . . . . . . . . . . . . . . . . . . . (0.053) (0.037) (0.016)
---------- ---------- ----------
Net asset value, end of year . . . . . . . . . . . . . . . . . . . $ 1.00 $ 1.00 $ 1.00
========== ========== ==========
TOTAL RETURN+ 5.46% 3.69% 1.59%
========== ========== ==========

RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:

Net assets, end of year (in 000's) . . . . . . . . . . . . . . . . $20,373 $6,159 $1,488

Ratio of operating expenses to average net assets . . . . . . . . . 0.50% 0.49% 0.39%**

Ratio of net investment income to average net assets . . . . . . . 5.30% 3.84% 2.54%**

Ratio of operating expenses to average net assets without
fees reduced by credits allowed by the custodian . . . . . . . 0.51%(a) N/A N/A

Ratio of operating expenses to average net assets
without fee waivers, expenses absorbed and/or fees
reduced by credits allowed by the custodian . . . . . . . . . 1.01%(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 . . . . . . . . . . . . . . . . . . . $0.048 $0.030 ($0.022)

</TABLE>
______________________________________________________________________________

* The Fund commenced operations on May 10, 1993.
** Annualized.
+ Total return represents aggregate total return for the period
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.

-5-
<PAGE> 12

INVESTMENT AND RISK CONSIDERATIONS OF THE PORTFOLIOS

The Portfolios offer investors the opportunity to pursue a selected asset
allocation strategy that is implemented through the Portfolios' investing in
Funds.

In order to achieve its investment objective, each Portfolio typically
allocates its assets, within predetermined percentage ranges, among some or all
of the Funds. The percentages reflect the extent to which each Portfolio will
invest in the particular market segment represented by each Fund, and the
varying degrees of potential investment risk and reward represented by each
Portfolio's investments in those market segments and their corresponding Funds.
The Advisor may alter these percentage ranges when it deems appropriate. The
assets of each Portfolio will be allocated among each of the Funds in
accordance with its investment objective, the Advisor's outlook for the economy
and the financial markets and the relative market valuations of the Funds. In
addition, in order to meet liquidity needs or for temporary defensive purposes,
each Portfolio may invest without limit its assets directly in cash, stock or
bond index futures and options thereon and the following short-term
instruments: (i) short-term obligations of the U.S. Government, its agencies,
instrumentalities, authorities or political subdivisions; (ii) other short-term
debt securities rated A or higher by Moody's or S&P, or if unrated, of
comparable quality in the opinion of the Portfolio's investment advisor; (iii)
commercial paper, including master notes; (iv) bank obligations, including
negotiable certificates of deposit, time deposits and bankers' acceptances; and
(v) repurchase agreements. At the time the Portfolio invests in any commercial
paper, bank obligations or repurchase agreements, the issuer must have
outstanding debt rated A or higher by Moody's or S&P; the issuer's parent
corporation, if any, must have outstanding commercial paper rated Prime-1 by
Moody's or A-1 by S&P; or, if no such ratings are available, the investment
must be of comparable quality in the opinion of the Portfolio's investment
advisor. The investment objective of each Portfolio is set forth below. Each
Portfolio's investment objective is a fundamental policy, and may not be
changed without shareholder approval. There can be no assurance that a
Portfolio will achieve its stated objective. For purposes of discussing
Portfolio objectives, the "Fixed Income Funds" include the Global Money Fund,
Short Term High Quality Bond Fund, Short Term Global Government Fund, U.S.
Government Fund and Corporate Income Fund and the "Equity Funds" include the
Growth and Income Fund, Growth Fund, Emerging Growth Fund and International
Growth Fund.

INCOME PORTFOLIO

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

<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT LIMIT (PERCENT OF
FUNDS THE INCOME PORTFOLIO'S NET ASSETS)
----- ----------------------------------
<S> <C>
Global Money Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50%

Short Term High Quality Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . 50%

Short Term Global Government Fund . . . . . . . . . . . . . . . . . . . . . . . . 50%

U.S. Government Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50%

Corporate Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50%

</TABLE>

-6-
<PAGE> 13
Except for defensive periods or liquidity needs, the Income Portfolio must
invest 100% of its net assets available for investment in Fixed Income Funds.

VALUE PORTFOLIO

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

FUNDS
----- PORTFOLIO INVESTMENT LIMIT (PERCENT OF THE
VALUE PORTFOLIO'S NET ASSETS)
-----------------------------
<S> <C>
Global Money Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%

Short Term High Quality Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . 40%

Short Term Global Government Fund . . . . . . . . . . . . . . . . . . . . . . . . 40%

U.S. Government Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%

Corporate Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%

Growth and Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%

Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%

Emerging Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%
</TABLE>

Except for defensive periods or liquidity needs, the Value Portfolio must
invest no more than 30% of its net assets available for investment in the
Equity Funds.

BALANCED PORTFOLIO

The BALANCED PORTFOLIO seeks total return consisting of a combination of
reinvestment income and capital appreciation, consistent with reasonable risk
through limited participation in domestic and international fixed income and
equity markets. In general, relative to other Portfolios, the Balanced
Portfolio should offer investors the potential for a medium level of income and
the potential for a medium level of capital growth while subjecting investors
to a medium level of principal risk. The Portfolio will invest in the following
Funds up to the percentage limits set forth below:

<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT LIMIT (PERCENT OF THE
FUNDS BALANCED PORTFOLIO'S NET ASSETS)
----- --------------------------------
<S> <C>
Global Money Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%

Short Term High Quality Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . 40%

Short Term Global Government Fund . . . . . . . . . . . . . . . . . . . . . . . . 40%

U.S. Government Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%

Corporate Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%

Growth and Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%

Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%

Emerging Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%

International Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%

</TABLE>

Except for defensive periods or liquidity needs, the Balanced Portfolio must
invest no less than 30% and no more than 70% of its net assets available for
investment in the Fixed Income Funds and no less than 30% and no more than 70%
of its net assets available for investment in the Equity Funds.

-7-
<PAGE> 14

GROWTH PORTFOLIO

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

<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT LIMIT (PERCENT OF THE
FUNDS GROWTH PORTFOLIO'S NET ASSETS)
----- ------------------------------
<S> <C>
Global Money Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%

Short Term High Quality Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . 30%

Short Term Global Government Fund . . . . . . . . . . . . . . . . . . . . . . . . 30%

U.S. Government Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%

Corporate Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%

Growth and Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%

Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%

Emerging Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%

International Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%

</TABLE>

Except for defensive periods or liquidity needs, the Growth Portfolio must
invest at least 60% of its net assets available for investment in Equity Funds.

CAPITAL GROWTH PORTFOLIO

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

<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT LIMIT (PERCENT OF THE
FUNDS CAPITAL GROWTH PORTFOLIO'S NET ASSETS)
----- --------------------------------------
<S> <C>
Global Money Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50%

Short Term High Quality Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . 50%

Short Term Global Government Fund . . . . . . . . . . . . . . . . . . . . . . . . 50%

Growth and Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50%

Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50%

Emerging Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50%

International Growth Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50%

</TABLE>

Except for defensive periods or liquidity needs, the Capital Growth Portfolio
must invest at least 75% of its net assets available for investment in Equity
Funds.

GENERAL INVESTMENT POLICIES OF THE PORTFOLIOS

Each of the Portfolios will attempt to achieve its investment objective by
purchasing shares of the Funds within the percentage ranges for such Portfolio
set forth above. In order to meet liquidity needs, or for temporary defensive
purposes, the Portfolios may purchase money market securities or other
short-term debt instruments rated in one of the top two categories by a
nationally recognized statistical rating organization ("NRSRO") at the time of
purchase or, if not rated, determined to be of comparable quality by the
Advisor. See the introductory paragraphs under "INVESTMENTS AND RISK
CONSIDERATIONS OF THE PORTFOLIOS" on the preceding pages.

-8-
<PAGE> 15

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

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

PORTFOLIO TURNOVER OF THE PORTFOLIOS

Each Portfolio's portfolio turnover rate (i.e., the rate at which the Portfolio
buys and sells shares of the Funds) for the Income, Value, Balanced and Growth
Portfolios is not expected to exceed 125% of the Portfolio's total assets. The
annual turnover rate for the Capital Growth Portfolio is not expected to exceed
150%. Asset reallocation decisions typically will occur only once every
quarter. However, if market conditions warrant, the Advisor may make more
frequent reallocation decisions, which will result in a higher portfolio
turnover rate. The Portfolios will purchase or sell shares of the Funds: (a) to
accommodate purchases and redemptions of each Portfolio's shares; (b) in
response to market or other economic conditions; and (c) to maintain or modify
the allocation of each Portfolio's assets among the Funds within the percentage
limits described above or as altered by the Advisor from time to time. It is
important to note, however, that the portfolio turnover rate of certain of the
Funds (i.e., the rate at which the Funds buy and sell securities) may exceed
100%. Such a turnover rate may result in higher transaction costs and may
result in additional tax consequences for shareholders (including the
Portfolios).

RISK FACTORS OF THE PORTFOLIOS

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

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

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

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

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<PAGE> 16
Prospectus and in the Trust's Statement of Additional Information,
and in the Prospectus(es) of each of the Funds.

. The Capital Growth Portfolio can invest as much as 50% of its
total assets in the Growth Fund and as much as 50% of its total
assets in the Emerging Growth Fund, each of which Funds may invest
as much as 35% of its total assets in lower-rated bonds, commonly
referred to as "junk bonds." As a result, this Portfolio will be
subject to the risks associated with investing in such lower-rated
bonds. See "Appendix - Securities and Investment Practices --
Lower-Rated Securities" for additional information about such
risks.

. Certain Portfolios invest as much as 50% of their total assets in
the Growth Fund or Emerging Growth Fund, each of which may invest
up to 25% of its total assets in foreign equity securities and as
much as 5% of its total assets in securities in developing or
emerging markets countries (a country in the initial stages of its
industrialization cycle). Certain Portfolios invest as much as
50% of their total assets in the International Growth Fund, which
invests primarily in foreign equity securities, and may invest as
much as 30% of its total assets in securities in developing or
emerging markets countries. These investments will subject such
Portfolios to risks associated with investing in foreign
securities. See "APPENDIX - SECURITIES AND INVESTMENT PRACTICES --
FOREIGN INVESTMENTS" for additional information about such risks.

. The officers and trustees of the Portfolios also serve as officers
and trustees of the Funds. In addition, Sierra Services, the
investment advisor and distributor of each Portfolio, and Sierra
Advisors, the investment advisor of the Funds, are both wholly
owned subsidiaries of Sierra Capital Management Corporation
("SCMC"). Also, the Advisor is the distributor of the shares of
the Funds. Conflicts may arise as these companies seek to fulfill
their fiduciary responsibilities to both the Portfolios and the
Funds.

. From time to time, one or more of the Funds used for investment by
a Portfolio may experience relatively large investments or
redemptions due to reallocations or rebalancings by the Portfolios
as recommended by the Advisor. These transactions will affect the
Funds, since the Funds that experience redemptions as a result of
reallocations or rebalancings may have to sell portfolio
securities and Funds that receive additional cash will have to
invest such cash. While it is impossible to predict the overall
impact of these transactions over time, there could be adverse
effects on portfolio management to the extent that the Funds may
be required to sell securities or invest cash at times when they
would not otherwise do so. These transactions could also have tax
consequences if sales of securities resulted in gains and could
also increase transaction costs. Sierra Advisors, representing the
interests of the Funds, is committed to minimizing the impact of
Portfolio transactions on the Funds; the Advisor, representing the
interest of the shareholders of the Portfolios, is also committed
to minimizing such impact on the Funds to the extent it is
consistent with pursuing the investment objectives of the
Portfolios. The Advisor and Sierra Advisors will nevertheless face
conflicts in fulfilling their respective responsibilities because
they are affiliates and employ some of the same investment
professionals. The Advisor and Sierra Advisors will monitor the
impact of Portfolio transactions on the Funds.

INVESTMENT LIMITATIONS OF THE PORTFOLIOS

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

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

2. Each Portfolio may borrow money from banks solely for temporary emergency
purposes, but not in an amount exceeding 30% of its total assets. Whenever
borrowings by a Portfolio, including reverse

-10-
<PAGE> 17

repurchase agreements, exceed 5% of the value of a Portfolio's total
assets, the Portfolio will not purchase any securities.

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

INVESTMENT AND RISK CONSIDERATIONS OF THE FUNDS, INCLUDING THE GLOBAL MONEY
FUND

The following section describes the distinct investment objective and policies
of each Fund and some of the risk considerations of investing in the Funds. The
"APPENDIX - SECURITIES AND INVESTMENT PRACTICES" section at the end of this
Prospectus provides more information about the types of securities and
investment practices that the Funds may use, and the risk considerations
related to such securities and investment practices. There can be no assurance
that the Funds will achieve their respective investment objectives. 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
the Trust reserves authority to invest in or implement them to the extent
consistent with its investment objectives and policies.

INVESTMENT GOALS OF THE FUNDS

The following table describes the investment goals of each Fund:

<TABLE>
<CAPTION>
FUNDS INVESTMENT GOAL
------------------ -------------------------------
<S> <C>
Global Money Fund . . . . . . . . . . . Income and Capital Preservation
Short Term High Quality Bond Fund . . . Income
Short Term Global Government Fund . . . Income
U.S. Government Fund . . . . . . . . . Income
Corporate Income Fund . . . . . . . . . Aggressive Income
Growth and Income Fund . . . . . . . . Growth of Capital and Income
Growth Fund . . . . . . . . . . . . . . Growth of Capital
Emerging Growth Fund . . . . . . . . . Growth of Capital
International Growth Fund . . . . . . . Growth of Capital
</TABLE>

THE MONEY MARKET FUND

GLOBAL MONEY FUND. The Global Money Fund invests 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:

-11-
<PAGE> 18

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. To accomplish its objective, the Fund will
invest primarily in high quality short-term bonds and other debt securities.
Under normal market conditions, the Fund will maintain a dollar-weighted
average portfolio maturity of three years or less. The Fund may hold
individual securities with remaining maturities of more than three years as
long as the dollar-weighted average portfolio maturity is three years or less.
For purposes of the weighted average maturity calculation, a mortgage
instrument's average life will be considered to be its maturity.

The Fund 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 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

-12-
<PAGE> 19
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. The Fund invests primarily in at least
three different countries, one of which may be the United States. The Fund
maintains a dollar-weighted average portfolio maturity not exceeding three
years but may hold individual securities with longer maturities. This policy
helps minimize the effect of interest rate changes on the Fund's share price.
The Sub-Advisor's 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); (ii) U.S. Government Securities; and (iii) debt
securities issued or guaranteed by Supranational Organizations, considered to
be "government securities."

-13-
<PAGE> 20

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

-14-
<PAGE> 21
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
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, 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

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<PAGE> 22
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 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 invests
primarily in dividend-paying Equity Securities. The Fund may also invest in
other Equity 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.

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 invests 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 of the
Fund.

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<PAGE> 23
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 invests
primarily in Equity Securities of companies with market capitalizations of less
than $1.4 billion at the time of purchase. Income is only an incidental
consideration of the Fund. 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.

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

-17-
<PAGE> 24
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 invests
primarily in Equity Securities of foreign issuers located in countries that the
Fund's Sub-Advisor deems to have attractive investment opportunities. Income
is only an incidental consideration of the Fund. The Fund will emphasize
established companies, although it may invest in companies of varying sizes as
measured by assets, sales and capitalization.

The Fund may invest in securities of issuers located in a variety of different
foreign regions and countries which includes, but is not limited to, the
following: Argentina, Australia, Austria, Belgium, Canada, Chile, Denmark,
Finland, France, Germany, Greece, Hong Kong, Indonesia, Ireland, Italy, Japan,
Luxembourg, Malaysia, Mexico, The Netherlands, New Zealand, Norway,
Philippines, Poland, Portugal, Singapore, 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.

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

-18-
<PAGE> 25
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.

YOUR _________ CONTRACT

The Trust provides an active investment management service offered by the
Advisor that allocates your investments in a combination of shares of certain
Funds that are selected to meet long-term investment objectives as well as, in
certain circumstances, current income objectives. Each Fund invests in a
diversified portfolio of securities in a manner designed to meet its own
investment objective. In addition to the considerable diversification among
individual securities you would receive by investing in a particular Fund
through the Sierra Advantage Annuity, you can further reduce risk by investing
in the Portfolios and the Global Money Fund through a _______ Contract by
having your assets actively managed among several different Funds that each
have different risk and return characteristics. The Advisor has incorporated
investment strategies into the Portfolios to meet the diverse financial needs
of different investors. You can choose one or more of the Portfolios which
allocates its assets among a number of the Funds and can choose to invest to
some extent in the Global Money Fund. The Portfolios have been designed for
long-term investors and retirement and other long-term investment and savings
accounts.

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 the Advisor, Sierra Advisors or
any of the Sub-Advisors.

-19-
<PAGE> 26

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

INVESTMENT ADVISOR OF THE PORTFOLIOS

Under an Investment Advisory Agreement with the Trust, Sierra Services, located
at 9301 Corbin Avenue, Northridge, California 91324, is the investment advisor
of each of the Portfolios. The Advisor provides its proprietary asset
allocation services to the Portfolios, formulates the Portfolios' investment
policies (subject to the terms of this Prospectus), analyzes economic and
market trends, exercises investment discretion over the assets of the
Portfolios and monitors the allocation of each Portfolio's assets and each
Portfolio's performance. Although it is expected that each Portfolio will
typically be fully invested in the Funds, the Advisor may, from time to time,
direct the investment of each Portfolio's cash balances in money market
securities or in other instruments, including stock or bond index futures and
options thereon. For its investment advisory services to the Portfolios, the
Advisor is entitled to a fee, which is calculated daily and paid monthly, at an
annual rate of 0.10% of each Portfolio's average daily net assets.

The Advisor became a registered broker-dealer member of the [ NASD ] and became
a registered investment advisor in 1992. The Advisor is a wholly-owned
subsidiary of [ SCMC ] , which is a wholly-owned subsidiary of [ Great
Western Financial Corporation ("GWFC") ] . GWFC is a publicly owned financial
services company listed on the New York, London and Pacific stock exchanges.
The Advisor, which serves as an investment advisor to another investment
company, the Sierra Asset Management Portfolios, and has provided asset
allocation services to individual Sierra Asset Management accounts since 1992,
had aggregate assets under management of approximately $____ million as of
December 31, 1996.

PORTFOLIO MANAGER

Stephen C. Scott, Senior Vice President of the Trust since 1993 and of the
Advisor since 1996, is the portfolio manager of each of the Portfolios. He
joined Great Western Financial Securities Corporation ("GW Securities") in
August 1988 and currently serves as the President and Chief Investment Officer
of Sierra Advisors. Prior to joining GW Securities, he served as President and
Chairman of SDS Investment Advisors, a firm he founded in which he developed
asset allocation technology. Mr. Scott has had primary management
responsibility for the Portfolios since their inception.

INVESTMENT ADVISOR AND INVESTMENT SUB-ADVISORS OF THE FUNDS

INVESTMENT ADVISOR OF THE FUNDS

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

-20-
<PAGE> 27

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

Sierra Advisors, which performs similar services for Sierra Trust Funds and
Sierra Prime Income Fund, had aggregate assets under management of
approximately $___ 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."

INVESTMENT SUB-ADVISORS OF THE FUNDS

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

<TABLE>
<S> <C>
Global Money Fund . . . . . . . . . . J.P. Morgan Investment
Management Inc. ("J.P. Morgan")

Short Term High Quality Bond Fund . . . Scudder, Stevens & Clark, Inc.
("Scudder")

Short Term Global Government Fund. . . . Scudder

U.S. Government Fund . . . . . . . . . BlackRock Financial Management,
Inc. ("BlackRock")

Corporate Income Fund. . . . . . . . . . TCW Funds Management, Inc. ("TCW
Management")

Growth and Income Fund. . . . . . . . . J.P. Morgan

Growth Fund. . . . . . . . . . . . . . . Janus Capital Corporation ("Janus")

Emerging Growth Fund . . . . . . . . . . Janus

International Growth Fund . . . . . . . Warburg Pincus Counsellors, Inc.
("Warburg")
</TABLE>

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 $__ billion.

-21-
<PAGE> 28
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 Vice
President of BlackRock since 1993.

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

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 $__ 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.

The advisor pays Janus separate fees for the Growth Fund and Emerging
Growth Fund based on the following annual percentage rate of the
average net assets of each respective Fund (.55% of the first $25
million of assets, 0.50% of assets over $25 million).

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.

-22-
<PAGE> 29
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. 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.

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

SCUDDER, 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 $___ 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.

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

-23-
<PAGE> 30
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 $___ 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.

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

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. ("Counsellors G.P."), a New York
general partnership. E.M. Warburg, Pincus & Co., Inc. ("EMW")
controls Warburg through its ownership of a class of voting preferred
stock of Warburg. Lionel I. Pincus may be deemed a controlling person
of EMW. Counsellors G.P. has no business other than being a holding
company of Warburg and its subsidiaries. Warburg is a professional
investment counselling firm which provides investment services to
investment endowment funds, foundations and other institutions and
individuals. As of December 31, 1996, Warburg managed approximately
$16.3 billion of assets, including approximately $___ 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 the firm to found the department and has 28 years of investment
experience. Prior to joining Warburg, Mr. King was chief investment
officer and a director of Fiduciary Trust Company International S.A.
in London beginning in 1984. Nicholas P. Edwards, Senior Vice
President, has 12 years of investment experience. Prior to joining
Warburg, Mr. Edwards was a director and senior analyst at Jardine
Fleming Investment Advisers in Tokyo from 1991 to 1995. Harold W.
Ehrlich, CFA, CIC, Senior Vice President, has 13 years of investment
experience. Prior to joining Warburg, Mr. Ehrlich was a senior vice
president, portfolio manager and analyst at Templeton Investment
Counsel Inc. from 1987 to 1995. Nicholas P.W. Horsley, Senior Vice
President, has 15 years of investment experience. Prior to joining
Warburg, Mr. Horsley was a director, portfolio manager and analyst at
Barclays de Zoete Wedd in New York from 1986 to 1993. Vincent J.
McBride, Vice President, has 9 years of investment experience. Prior
to joining Warburg, Mr. McBride was an international equity analyst at
Smith Barney Inc. from 1993 to 1994. He was an international

-24-
<PAGE> 31
equity analyst at General Electric Investments from 1992 to 1993 and a
portfolio manager/analyst at United Jersey Bank from 1989 to 1992.

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

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

ADVISORY FEES. For investment advisory services, monthly fees are paid to the
Advisor and Sierra Advisors by each Portfolio and Fund, respectively, based
upon a percentage of the average net assets of such Portfolio or Fund. Absent
fee waivers, the Advisor is entitled to be paid at an effective annual rate of
.10% for each Portfolio and Sierra Advisors is entitled to be paid the
following effective annual rates for the Funds:

MONEY MARKET AND BOND FUND ADVISORY FEES

<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 .50% .45% .75% .60% .65%
million

More than $500 million .40% .40% .65% .50% .50%
</TABLE>

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<PAGE> 32
EQUITY FUND ADVISORY FEES

<TABLE>
<CAPTION>
Growth and Emerging International
Income Growth Growth Growth
Assets Fund Fund Fund 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>

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.

The Advisor, Sierra Advisors or 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 Sierra Advisors may pass part or all of
such fee waivers through to the Funds. Sierra Advisors 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 of the Funds will not exceed 1.00%, 1.45%, 1.30%, 1.40%, 1.55%, 1.10%,
1.00%, 1.15% and 1.35% for the Global Money, Growth, Growth and Income,
Emerging Growth, International Growth, U.S. Government, Short Term High Quality
Bond, Corporate Income and Short Term Global Government Funds, respectively.
In addition, Sierra Advisors and the Administrator have each agreed to further
limit the average annual total expenses of the Global Money Fund so that they
will not exceed 0.65%. Absent these voluntary waivers and reimbursements, the
annual management fees, other expenses and total expenses for the Global Money
Fund would be 0.50%, 0.51% and 1.01%, respectively. Expenses for a Portfolio
or 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
Portfolio or a Fund may vary from day to day. The Advisor, Sierra Advisors and
the Administrator retain the ability to be repaid by a Portfolio or 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, Sierra
Advisors 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: 0.06%; SHORT TERM HIGH
QUALITY BOND FUND: 0.36%; SHORT TERM GLOBAL GOVERNMENT FUND: 0.74%; U.S.
GOVERNMENT FUND: 0.59%;

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<PAGE> 33
CORPORATE INCOME FUND: 0.65%; GROWTH AND INCOME FUND: 0.70%; GROWTH FUND:
0.90%; EMERGING GROWTH FUND: 0.82% AND INTERNATIONAL GROWTH FUND: 0.94%.]

TRUST EXPENSES. In addition to investment advisory and certain administrative
expenses incurred by Sierra Administration, each Portfolio and Fund pays all
expenses not assumed by the Advisor and 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 the Advisor, 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 Portfolios and the Funds, which will be reflected in share prices.

PORTFOLIO TRANSACTIONS AND TURNOVER. All orders for the purchase or redemption
of shares of the Funds on behalf of a Portfolio are placed by the Advisor. All
orders for the purchase or sale of other securities on behalf of a Portfolio or
a Fund are placed by the Advisor or the Fund's Sub-Advisor, respectively, with
broker-dealers that it selects. A Portfolio or a Fund may, at the discretion
of the Advisor or the Fund's Sub-Advisor, utilize broker-dealers affiliated
with the Advisor, Sierra Advisors 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, the Advisor, 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
GWFC. 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

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the cost of reproducing prospectuses, statements of additional information or
any other Trust documents (such as semi-annual reports) used as sales
materials.

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
computes and pays dividends to shareholders. Sierra Administration is an
indirect wholly-owned subsidiary of GWFC. Boston Safe, One Boston Place,
Boston, Massachusetts 02108, acts as custodian of the Funds' assets.

For its services to the Funds, 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, 1995, the
following fees based upon the average net assets of each Fund were paid by the
Trust to Sierra Administration: Global Money Fund: 0.12%; Short Term High
Quality Bond Fund: 0.18%; Short Term Global Government Fund: 0.18%; U.S.
Government Fund: 0.18%; Corporate Income Fund: 0.18%; Growth and Income Fund:
0.18%; Growth Fund: 0.18%; Emerging Growth Fund: 0.18%; and International
Growth Fund: 0.18%. 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.

For its services to the Portfolios, Sierra Administration is paid a monthly fee
at an effective annual rate of 0.15% of each Portfolio's average net assets.
Sierra Administration pays this fee to AGL for administrative services provided
to the Portfolios.

INDEPENDENT ACCOUNTANTS

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

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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
14 separate series. The Trust offers shares of beneficial interest, each
without par value. Additional series may be established.

Currently, the shares of the Portfolios are sold only to a separate account of
AGL to fund ______ Contracts and shares of the Funds, except the Global Money
Funds, are sold only to a separate account of AGL to fund Advantage 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 Portfolios or 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 Portfolio or Fund on all matters except when the 1940 Act permits
shares of the Portfolios or Funds to be voted in the aggregate. When matters
are submitted for shareholder vote, shareholders of each Portfolio or Fund will
have one vote for each full share owned and proportionate, fractional votes for
fractional shares held. The shareholders of the Portfolios are the insurance
companies whose separate accounts invest in them and the shareholders of the
Funds are the Portfolios and the insurance companies whose separate accounts
invest in the Funds. The Trust expects that its shareholders will offer their
________ Contract and Advantage Contract owners the opportunity to instruct
them as to how shares allocable to their ______ Contracts and Advantage
Contracts, respectively, 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 attributable to _______ Contracts for
which instructions are not received, in the same proportion that __________
Contract owners vote. Matters may be submitted by the Funds for vote by the
shareholders of the Funds, in which case the Portfolios, as shareholders of the
Funds, will be entitled to vote the shares they hold. Each Portfolio will vote
its Fund shares in proportion to the votes of all other shareholders of each
respective Fund.

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

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assets. As a result, the risk of personal liability for insurance companies or
Portfolios as shareholders is remote.

PURCHASE AND REDEMPTION

The shares of the Portfolios and the Global Money Fund 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 Portfolios or the
Global Money Fund corresponding to such divisions. Each of the separate
accounts purchases and redeems shares of these Portfolios or the Global Money
Fund for its divisions at net asset value without sales or redemption charges.

For each day on which a Portfolio's or the Fund's net asset value is
calculated, each separate account transmits to the Trust any orders to purchase
or redeem shares of the Portfolio or Global Money Fund 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 Portfolio or Global
Money Fund at the Portfolio or Global Money 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 Portfolio's or the Global Money 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.

From time to time, one or more of the separate account investment divisions may
experience relatively large investments or redemptions due to allocations or
rebalancings recommended by the Advisor for the Portfolios. These transactions
will affect the Funds that are available to the Portfolios for investment,
since Funds that experience redemptions as a result of reallocations or
rebalancings in the Portfolio 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 Funds' 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.
Sierra Advisors, representing the interests of the Trust, is committed to
minimizing the impact of Portfolio transactions on the Funds; the Advisor,
representing the interests of Portfolio shareholders, is also committed to
minimizing such impact on the Funds to the extent it is consistent with
pursuing the investment objectives of the Portfolios. The Advisor and Sierra
Advisors will nevertheless face conflicts in fulfilling their respective
responsibilities, because they are affiliates and employ some of the same
professionals. In addition, the Advisor is also the Trust's Distributor and
has contracted with American General Securities Incorporated, the principal
underwriter of the _______ Contracts, for the Advisor to

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distribute the _______ Contracts and the Advantage Contracts. Although the
Advisor is not compensated for sales of Trust shares, it is compensated for
sales of the ______ Contracts and the Advantage Contracts.

NET ASSET VALUE

The net asset value (the current market value of a Fund share) of each
Portfolio's and 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, Washington's Birthday, 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 Portfolio or Fund by dividing the
value of total Portfolio or Fund assets, less liabilities (including Trust
expenses, which are accrued daily), by the total number of shares of that
Portfolio or Fund outstanding. The net asset value per share of each Portfolio
or Fund is determined each business day at the close of business. Values of
assets in each Portfolio's and 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 Portfolios and the Funds
and their insurance company and Portfolio shareholders based on current tax
laws and regulations, which may be changed by subsequent legislative, judicial,
or administrative action.

Each Portfolio and 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 portfolio or Fund to restrict the
extent of its short-term trading or its transactions in options or futures
contracts.

As a RIC, each Portfolio or 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 Portfolio
or 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 each Portfolio and Fund will be operated
so that they will have no federal income tax liability, if any such liability
is nevertheless incurred, the investment performance of that Portfolio or Fund
incurring such liability will be adversely affected. In addition, Portfolios
or Funds

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investing in foreign securities and currencies may be subject to foreign taxes.
These taxes would reduce the investment performance of such Portfolios or
Funds.

Because the Trust funds certain types of variable annuities, each Portfolio and
Fund is also subject to the investment diversification requirements of
Subchapter L of the Code. Were any Portfolio or 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.

Certain additional tax information appears in the SAI.

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 Portfolio or Fund. Dividends and distributions paid by a
Portfolio or Fund will be automatically reinvested (at current net asset value)
in additional full and fractional shares of that Portfolio or Fund. Each of the
Income Portfolio, Value Portfolio, Balanced Portfolio and Global Money Fund
intends to distribute its net income as dividends every day net asset value is
determined. Such dividends will be declared daily and paid monthly. Each of
the Growth Portfolio, 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, the Capital Growth Portfolio
and the Growth and Income, Growth, Emerging Growth and International Growth
Funds will declare and pay such dividends annually. All Portfolios and Funds
will distribute any net long-term capital gains annually. Distributions of any
net short-term capital gains earned by a Portfolio or Fund will be distributed
no less frequently than annually at the discretion of the Board of Trustees.

PERFORMANCE

The Trust may, from time to time, calculate the yield and effective yield of
the Global Money Fund, the yield of Portfolios or the other Funds or total
return of all Portfolios and Funds, and may include such information in reports
to shareholders. Performance information should be considered in light of the
Portfolio's or 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 Portfolios and 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

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total return for a Portfolio or Fund will be expressed in terms of the average
annual compounded rate of return on a hypothetical investment in the Portfolio
or Fund over certain periods that will include periods of 1, 5, and 10 years
(up to the life of the Portfolio or 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 Portfolio or Funds include each
Portfolio's or Fund's expenses, but may not include charges and expenses
attributable to any particular insurance product. Since shares of the
Portfolios and 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 Portfolio's or
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 Portfolios and 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
that identifies additional restrictions that cannot be changed without the
approval of a majority of an affected Fund's outstanding shares is contained in
the SAI.

AMERICAN DEPOSITARY RECEIPTS, 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

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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.

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.

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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.

DOLLAR ROLL TRANSACTIONS

Any Fund which seeks a high level of current income, except the Equity and
Global Money Funds, 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

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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 high-grade debt
obligations equal in value at all times to its obligations in respect of dollar
rolls, and, accordingly, the Fund will not treat such obligations as senior
securities for purposes of the 1940 Act. "Covered rolls" are not subject to
these segregation requirements. 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 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

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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 Portfolios or 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

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may, upon the notice specified in the note, demand payment of the principal of
and accrued interest on the note at any time and may resell the note at any
time to a third party. The absence of such an active secondary market,
however, could make it difficult for a Fund to dispose of a particular variable
rate demand note in the event the issuer of the note defaulted on its payment
obligations, and the Fund could, for this or other reasons, suffer a loss to
the extent of the default.

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 high-grade debt obligations 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

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<PAGE> 46
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 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 may
suffer a decline against the U.S. dollar, it may hedge such risk by entering
into a forward contract to sell an amount of foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
foreign currency.

Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and the Funds hold various foreign currencies
from time to time, the value of the net assets of the Funds as measured in U.S.
dollars will be affected favorably or unfavorably by changes in exchange rates.
The

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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.

FUTURES AND OPTIONS ON FUTURES

When deemed advisable by the Advisor to meet liquidity needs or temporary
defensive purposes, each Portfolio may, and when deemed advisable by its
Sub-Advisor, each Fund, 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 Portfolios and the Funds and, for the Funds, for other
purposes described under "Strategic Transactions." A Portfolio or 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

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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 Portfolio or 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, on the one hand,
and price movements in the securities which are the subject of the futures
contracts or options on futures contracts, on the other hand. Positions in
futures contracts and options on futures contracts may be closed out only on
the exchange or board of trade on which they were entered into, and there can
be no assurance that an active market will exist for a particular contract or
option at any particular time. If a Portfolio or Fund has hedged against the
possibility of an increase in interest rates or bond prices adversely affecting
the value of securities held in its portfolio and rates or prices decreased
instead, the Portfolio or Fund will lose part or all of the benefit of the
increased value of securities that it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations,
if a Portfolio or Fund has insufficient cash, it may have to sell securities to
meet daily variation margin requirements at a time when it may be
disadvantageous to do so. These sales of securities may, but will not
necessarily, be at increased prices that reflect the decline in interest rates
or bond prices, as the case may be. In addition, the Portfolio or Fund would
pay commissions and other costs in connection with such investments, which may
increase the Portfolio's or Fund's expenses and reduce its return. While
utilization of options, futures contracts and similar instruments may be
advantageous to the Portfolio or Fund, if the Advisor or the Fund's Sub-Advisor
is not successful in employing such instruments in managing the Portfolio's or
Fund's investments, the Portfolio's or 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 Portfolio's or 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 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.
[ADD PORTFOLIOS' CONCENTRATION IN INVESTMENT COMPANIES.]

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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

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<PAGE> 50

restricted under federal securities laws (excluding Rule 144A Securities,
described below). The Funds will not include for purposes of the restrictions
on illiquid investments securities sold pursuant to Rule 144A under the
Securities Act of 1933, as amended, so long as such securities meet liquidity
guidelines established by the Trust's Board of Trustees. Under Rule 144A,
securities which would otherwise be restricted may be sold by persons other
than issuers or dealers to qualified institutional buyers.

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.

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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.

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

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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.

OPTIONS ON SECURITIES

OPTION PURCHASE. All Funds 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

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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 Funds will either (1) deposit with Boston Safe in a segregated account
cash, U.S. Government Securities or other short-term high-grade debt
obligations having a value at least equal to the exercise price of the
underlying securities or (2) continue to own an equivalent number of puts on
the same "series" (that is, puts on the same underlying security having the
same exercise prices and expiration dates as those written by the Fund), or an
equivalent number of puts on the same "class" (that is, puts on the same
underlying security) with exercise prices greater than those that it has
written (or, if the exercise prices of the puts it holds are less than the
exercise prices of those it has written, it will deposit the difference with
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 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

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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 changes in the market
values of the stocks included in the index. An example of a

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<PAGE> 55

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 cash equivalents or a combination of

A-16
<PAGE> 56
both in an amount equal to the market value of the option, and will maintain
the account while the option is open.

OVER THE COUNTER OPTIONS

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.

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
custodian of the Portfolio or Fund or a duly appointed sub-custodian. The
Portfolio or Fund will enter into Repurchase Agreements only with banks and
broker-dealers that have been determined to be creditworthy by the Trust's
Board of Trustees under criteria established with the assistance of the Advisor
or Sierra Advisors. 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 Portfolio or 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 Portfolio or Fund may be delayed or
limited in its ability to sell the collateral.

REVERSE REPURCHASE AGREEMENTS

All Portfolios and 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 Portfolio or Fund
would assume the role of seller/borrower in the transaction. The Portfolio or
Fund will maintain segregated accounts with the Trust's custodian consisting of
U.S. Government Securities, cash or money market instruments that at all times
are in an amount equal to their obligations under Reverse Repurchase
Agreements. Reverse Repurchase Agreements involve the risk that the market
value of the securities sold by a Portfolio or Fund may decline below the
repurchase price of the

A-17
<PAGE> 57

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. The Advisor or 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 Portfolio or Fund, including Reverse Repurchase Agreements,
exceed 5% of the value of the total assets of the Portfolio or Fund, the
Portfolio or 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").

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.

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<PAGE> 58
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, U.S.
Government Securities or other high grade debt obligations in an amount equal
to the amount of its when-issued and delayed-delivery commitments.

A-19
<PAGE> 59
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 . . . . . . . . B-15
(See the Prospectus "Highlights" and "Investment
Policies")

Purchase and Pricing of Shares . . . . . . . . . . . . . . . . B-41
(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-20
<PAGE> 60

STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1996
AS SUPPLEMENTED MARCH __, 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 MAY 1, 1996, AS AMENDED OR SUPPLEMENTED JULY
1, 1996, AND MARCH __, 1997 RESPECTIVELY. IT 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 THE
PROSPECTUSES IN ITS ENTIRETY.

B-1
<PAGE> 61
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.

Page

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-41
(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

B-2
<PAGE> 62
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
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 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
Portfolios invests primarily in certain of the Funds.

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.

TRUSTEES:

*F. BRIAN CERINI (1/23/51)
President
Sierra Capital Management Corporation
9301 Corbin Avenue
Northridge, California 91324

B-3

<PAGE> 63

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. He was educated at Cornell
University and is 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 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. (9/4/28)
Partner
Brobeck, Phleger & Harrison
550 South Hope Street, 21st Floor
Los Angeles, California 90071-2604

B-4

<PAGE> 64
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.

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."

B-5

<PAGE> 65
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 as well as an MBA in Finance from UCLA.

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

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

STEPHEN C. SCOTT (1/18/45), SENIOR VICE PRESIDENT

In August 1988 joined 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 a member on Board of
Directors of several corporations and private organizations. For 17 years, has
served as a Trustee on the Long Beach State University Foundation and currently
chairs the Investment Committee. He holds a B.A. degree in Economics and
Finance as well as an MBA in Finance from Long Beach State University.

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

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

B-6

<PAGE> 66
RICHARD H. ROSE (7/8/55), ASSISTANT TREASURER

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

CRAIG M. MILLER (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.

The aggregate remuneration paid to Trustees by the Trust for
attendance at Board and committee meetings for the period ended December 31,
1995 was $55,692 (including reimbursement for travel and out-of-pocket
expenses). As of December 31, 1995, the Trustees and officers of the Trust
owned, in the aggregate, less than 1% of the outstanding shares of any of the
Funds.

B-7

<PAGE> 67

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, 1995.

<TABLE>
<CAPTION>
COMPENSATION TABLE
===================================================================================================================================
(1) Name of Person, Position (2) Aggregated (3) Pension or (4) Estimated Annual (5) Total Compensation
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, 1995 December 31, 1995
===================================================================================================================================
<S> <C> <C> <C> <C>
**F. Brian Cerini $0 $0 $0 $0
Chairman of the Board,
President and Trustee

Arthur H. Bernstein, Esq. $12,250 $0 $0 $31,250
Trustee for service on 2 boards

David E. Anderson $12,750*** $0 $0 $32,250***
Trustee for service on 2 boards

Edmond R. Davis, Esq. $12,250 $0 $0 $31,250
Trustee for service on 2 boards

John W. English $12,250 $0 $0 $31,250
Trustee for service on 2 boards

Alfred E. Osborne, Jr. **** **** **** ****
Trustee
===================================================================================================================================
</TABLE>

* The Fund Complex consisted of the Trust and STF as of December 31, 1995.
** 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 and STF.
**** Mr. Osborne was not a trustee of either the Trust or STF during the fiscal
year ended December 31, 1995.

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 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."

B-8

<PAGE> 68

Warburg, Pincus Counsellors, Inc. ("Warburg") replaced J.P. Morgan
Investment Management Inc. as the sub-advisor of the International Growth Fund
on April 8, 1996. The sub-adviser agreement with Warburg was approved by the
Fund's shareholders at a Special Meeting of the Shareholders of the Trust held
on June 21, 1996. The sole shareholder of the Trust currently is AGL. Those
persons who are Contract owners of record of the investment division that
corresponds to the International Growth Fund of AGL's Separate Account D as of
the close of business on April 23, 1996 will be given the opportunity to
instruct AGL as to how it should vote at the Special Meeting.

BlackRock Financial Management L.P. replaced Van Kampen Merritt
Management Inc. ("Van Kampen") as the sub-advisor of the U.S. Government Fund
on December 8, 1994. On February 28, 1995, BlackRock Financial Management L.P.
was acquired and reorganized as BlackRock Financial Management, Inc.
("BlackRock"), a Delaware corporation, by a wholly-owned subsidiary of PNC Bank
Corp.

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 Investor Services Group, Inc. ("FDISG") (formerly known as The
Shareholders Services Group, Inc.), a wholly-owned subsidiary of First Data
Corporation, began serving as Transfer Agent. FDISG 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, 1993, 1994, and 1995, the
Funds paid to Sierra Advisors the following advisory fees*:

<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>

B-9
<PAGE> 69

<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>

<TABLE>
<CAPTION>
1993
----------------------------------------
Expenses
Fees Paid Fees Waived Reimbursed
--------- ----------- ----------
<S> <C> <C> <C>
Global Money Fund $ 0 $ 2,408 $25,747
Short Term High Quality Bond Fund -- -- --
Short Term Global Government Fund $ 0 $ 26,934 $16,855
U.S. Government Fund $ 0 $ 38,193 $15,862
Corporate Income Fund $ 0 $ 44,712 $ 9,066
Growth and Income Fund -- -- --
Growth Fund $ 0 $ 49,497 $ 481
Emerging Growth Fund -- -- --
International Growth Fund $ 0 $19,018 $17,769
- -----------------
</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> 70
For the fiscal years ended December 31, 1993, 1994, and 1995,
Sierra Advisors paid to the Sub-Advisors the following sub-advisory
fees*:

<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
Fees Fees Fees Fees Fees Fees
Paid Waived Paid Waived Paid Waived
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Global Money Fund $ 17,061 $ 0 $ 5,914 $ 0 $ 722 $ 0
Short Term High Quality $ 21,114 $ 0 $ 12,800 $ 0 $ 0 $ 0
Bond Fund
Short Term Global $ 76,262 $ 0 $ 77,081 $ 0 $10,055 $ 0
Government Fund
U.S. Government Fund
BlackRock** $ 88,293 $ 0 $ 5,754 $ 0 $ 0 $ 0
Van Kampen $ 72,782 $ 0 $12,731 $ 0
Corporate Income Fund $169,395 $ 0 $141,954 $ 0 $20,638 $ 0
Growth and Income Fund $151,189 $ 0 $ 48,423 $ 0 $ 0 $ 0
Growth Fund $412,538 $ 0 $243,892 $ 0 $28,657 $ 0
Emerging Growth Fund $164,136 $ 0 $ 57,538 $ 0 $ 0 $ 0
International Growth Fund $259,788 $ 0 $185,779 $ 0 $12,012 $ 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 replaced Van Kampen as the investment
Sub-advisor for the U.S. Government Fund.

For the fiscal years ended December 31, 1993, 1994, and 1995 the Funds
paid to Sierra Administration the following administration fees*:

<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
Fees Fees Fees Fees Fees Fees
Paid Waived Paid Waived Paid Waived
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Global Money Fund $ 13,156 $7,317 $ 0 $ 7,097 $0 $ 868
Short Term High Quality $ 25,337 $ 0 $ 9,777 $ 5,583 -- --
Bond Fund
Short Term Global $ 49,025 $ 0 $14,152 $35,400 $0 $ 6,464
Government Fund
U.S. Government Fund $ 84,887 $ 0 $33,462 $37,220 $0 $11,458
Corporate Income Fund $101,657 $ 0 $41,687 $43,486 $0 $12,382
</TABLE>

B-11

<PAGE> 71

<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth and Income Fund $ 60,476 $0 $12,587 $ 6,782 -- --
Growth Fund $143,997 $0 $54,385 $28,906 $0 $ 9,376
Emerging Growth Fund $ 54,833 $0 $11,510 $ 7,321 -- --
International Growth Fund $ 77,936 $0 $32,169 $23,565 $0 $ 3,603
- ------
</TABLE>

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.

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 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.

Massachusetts law provides that shareholders, under certain
circumstances, could be held personally liable for the obligations of the
Trust. However, the Declaration of Trust disclaims

B-12

<PAGE> 72

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 Securities
and Exchange Commission ("SEC") and a member of the National Association of
Securities Dealers, Inc. ("NASD"). J.P. Securities is active as a dealer in
the securities of 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

B-13

<PAGE> 73
("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.

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

B-14

<PAGE> 74
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 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.

B-15

<PAGE> 75

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 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.

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<PAGE> 76

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 a governmental agency or instrumentality.

Entities may create mortgage loan pools offering pass-through
investments in addition to those described above. The mortgages underlying
these securities may be alternative mortgage instruments, that is, mortgage
instruments in which principal or interest payments may vary or terms to
maturity may be shorter than previously customary. As new types of
mortgage-backed securities are developed and offered to investors, the Funds
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

B-17

<PAGE> 77
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 United States, Small Business Administration, Government National
Mortgage Association ("GNMA"), General Services Administration, Central Bank
for Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks, Federal
Home Loan Mortgage Corporation ("FHLMC"), Federal Intermediate Credit Banks,
Resolution Trust Corporation, Federal Land Banks, Federal National Mortgage
Association ("FNMA"), Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board and Student Loan Marketing Association.
Direct obligations of the U.S. Treasury include a variety of securities that
differ in their interest rates, maturities and dates of issuance. Because the
U.S. Government is not obligated by law to provide support to an
instrumentality it sponsors, a Fund 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

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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.

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

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

To ensure that transactions constitute bona fide hedges in instances
involving the purchase or sale of a futures contract, the Funds will be
required to either (i) segregate sufficient cash or high-grade liquid assets to
cover the outstanding position or (ii) cover the futures contract by either
owning the instruments underlying the futures contract or by holding a
portfolio of securities with characteristics substantially similar to the
underlying index or stock index comprising the futures contract or by holding a
separate option permitting it to purchase or sell the same futures contract.
Because of the imperfect correlation between the movements in the price of
underlying indexes or stock indexes of various futures contracts and the
movement of the price of securities in the Funds' portfolios, the Funds will
periodically make adjustments to their index futures contracts positions to
appropriately reflect the relationship between the underlying portfolio and the
indexes. The Fund will not maintain short positions in index or stock index
futures contracts, options written on index or stock index futures contracts
and options written on indexes or stock indexes, if in the aggregate, the value
of these positions exceeds the current market value of its securities portfolio
plus or minus the unrealized gain or loss on those positions, adjusted for the
historical volatility relationship between the portfolio and the index
contracts.

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

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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 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

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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 as 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 Stock 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 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

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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.

Use of options on securities indexes also entails the risk that
trading in such options may be interrupted if trading in certain securities
included in the index is interrupted. The Fund will not purchase 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."

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STRATEGIES AVAILABLE TO ALL FUNDS EXCEPT THE GLOBAL MONEY FUND

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. Moreover, no Fund currently intends to enter
into Strategic Transactions, excluding Strategic Transactions that are
"covered" or entered into for bona fide hedging purposes, that are in the
aggregate principal amount in excess of 15% of the Fund's net assets.

Strategic Transactions have associated risks including possible
default by the other party to the transaction, illiquidity and, to the extent
the Sub-Advisor's view as to certain market movements is incorrect, losses
greater than if they had not been used. Use of put and call options, currency
transactions or options and futures transactions entails certain risks as
described herein and in the Appendix to the Prospectuses in sections relating
to such investment or instruments. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized.

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

The use of Strategic Transactions for portfolio management purposes
involves special considerations and risks. Additional risks pertaining to
particular strategies that make up Strategic Transactions are described in
other sections to this SAI. Successful use of most Strategic Transactions
depends upon the Sub-Advisor's ability to predict movements of the overall
securities and interest rate markets, which requires different skills than
predicting changes

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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).

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

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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 arising in connection with the purchase or sale of its portfolio
securities. Position hedging is the sale of forward foreign currency with
respect to portfolio security positions denominated or quoted in such foreign
currency. A Fund may not position hedge with respect to a particular currency
to an extent greater than the aggregate market value (at the time of making
such sale) of the securities held in its portfolio denominated or quoted in or
currently convertible into that particular currency.

If a Fund enters into a position hedging transaction, the Trust's
custodian or sub-custodian will, except in circumstances where segregated
accounts are not required by the 1940 Act and the rules adopted thereunder,
place cash, U.S. Government Securities or high-grade debt obligations in a
segregated account for the Fund in an amount at least equal to the value of the
Fund's total assets committed to the consummation of the forward contract. For
each forward foreign currency exchange contract that is used to hedge a
securities position denominated in a foreign currency, but for which the
hedging position no longer provides, in the opinion of the Sub-Advisor or the
Advisor, sufficient protection to consider the contract to be a hedge, the Fund
maintains with its custodian a segregated account of cash, U.S. Government
Securities or high-grade debt obligations in an amount at least equal to the
portion of the contract that is no longer

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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.

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

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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 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,

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<PAGE> 88
and the diminution in value of portfolio securities will be offset by the
amount of the premium received. As in the case of other types of options,
however, the writing of a foreign currency option will constitute only a
partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and
the Fund would be required to purchase or sell the underlying currency at a
loss that may not be offset by the amount of the premium. Through the writing
of options on foreign currencies, the Fund may also be required to forego all
or a portion of the benefits that might otherwise have been obtained from
favorable movements in exchange rates.

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

Options on foreign currencies traded on national securities exchanges
are within the jurisdiction of the SEC, as are other securities traded on those
exchanges. As a result, many of the 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.

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.

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<PAGE> 89
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.

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

B-30

<PAGE> 90
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 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

B-31

<PAGE> 91

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 Securities and Exchange
Commission ("SEC");

6. Will not borrow, except from banks for temporary or emergency (not
leveraging) purposes including the meeting of redemption requests that
might otherwise require the untimely disposition of securities in an
aggregate amount not exceeding 30% of the value of the Portfolio's
total assets (including the amount borrowed) valued at market less
liabilities (not including the amount borrowed) at the time the
borrowing is made; and whenever borrowings by a Portfolio, including
reverse repurchase agreements, exceed 5% of the value of a Portfolio's
total assets, the Portfolio will not purchase any securities;

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

8. Write or acquire options or interests in oil, gas or other mineral
exploration or development programs.

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

1. Purchase or retain securities of an issuer if those officers and
trustees of the Portfolio or its investment advisor owning more than
1/2 of 1% of such securities together own more than 5% of such
securities;

2. Pledge, mortgage, or hypothecate any of its assets except to secure
borrowings permitted by the Portfolio's fundamental limitation on
borrowing;

3. Invest for the purpose of exercising control over management of any
company;

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

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

B-32

<PAGE> 92

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 numbered 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.

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.

B-33

<PAGE> 93
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 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

B-34

<PAGE> 94
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 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 covered 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.

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<PAGE> 95
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. Purchasing any security if as a result the Fund would then have more
than 5% of its total assets invested in securities of companies
(including predecessors) that have been in continuous operation for
less than three years.

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

20. Purchasing or retaining securities of any company if, to the knowledge
of the Trust, any of the Trust's officers or Trustees or any officer
or director of Sierra Advisors or a Sub-Advisor individually owns more
than 0.5% of the outstanding securities of such company and together
they own beneficially more than 5% of the securities.

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

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

23. Investing in mineral leases.

The percentage limitations contained in the restrictions listed above
apply at the time of purchases of securities.

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<PAGE> 96
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 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

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<PAGE> 97
the other accounts managed by its Sub-Advisor, investments of the type the Fund
may make may also be made by those other accounts. When a Fund and one or more
other accounts managed by its Sub-Advisor are prepared to invest in, or desire
to dispose of, the same security, available investments or opportunities for
sales will be allocated in a manner believed by the Sub-Advisor to be equitable
to each. In some cases, this procedure may adversely affect the price paid or
received by a Fund or the size of the position obtained or disposed of by the
Fund. In other cases, however, it is believed that coordination and the ability
to participate in volume transactions will be to the benefit of the Fund.

Transactions on U.S. exchanges involve the payment of negotiated
brokerage commissions. With respect to exchanges on which commissions are
negotiated, the cost of transactions may vary among different brokers. There
is generally no stated commission in the case of securities traded in the
over-the-counter markets, but the prices of those securities include
undisclosed commissions or concessions, and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-up or mark-down.
U.S. Government Securities may be purchased directly from the U.S. Treasury or
from the issuing agency or instrumentality.

In selecting brokers or dealers to execute portfolio transactions on
behalf of a Fund, the Fund's Sub-Advisor seeks the best overall terms
available. In assessing the best overall terms available for any transaction,
each Sub-Advisor will consider the factors the Sub-Advisor deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or dealer and
the reasonableness of the commission, if any, for the specific transaction and
on a continuing basis. In addition, each advisory agreement 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

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<PAGE> 98
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.

For the fiscal years ended December 31, 1993, 1994 and 1995, the Funds
paid the following brokerage commissions*:

<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
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
</TABLE>

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<PAGE> 99

<TABLE>
<S> <C> <C> <C>
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>

<TABLE>
<CAPTION>
1993
-----------------------------------------------------------------------
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 -- -- --
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 -- -- --

Growth Fund $29,084 $0 $95,867,241
Emerging Growth Fund -- -- --

International Growth Fund $30,480 $0 $ 6,917,014

Total for Trust $59,564
Amount Paid to
Affiliated $ 0
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, 1995, the
Growth and Income Fund held common stock of Dean Witter, Discover & Company
valued at $404,200.

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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.

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:

. 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.

. 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

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consideration of other factors by or under the direction of the
Trust's Board of Trustees or its delegates.

. 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 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.

. An option is generally valued at the last sale price or, in the
absence of a last sale price, the last offer price.

. Investments in U.S. Government Securities (other than short-term
securities) are valued at the average of the quoted bid and
asked prices in the over-the-counter market.

. Short-term investments that mature in 60 days or less are valued
at amortized cost when the Board of Trustees determines that
this constitutes fair value; assets of the Global Money Fund are
also valued at amortized cost.

. The value of a futures contract equals the unrealized gain or
loss on the contract, which is determined by marking the
contract to the current settlement price for a like contract
acquired on the day on which the futures contract is being
valued. A settlement price may not be used if the market makes
a limited move with respect to the security or index underlying
the futures contract. In such event, the futures contract will
be valued at a fair market price to be determined by or under
the direction of the Trust's Board of Trustees.

In carrying out the Board's valuation policies, First Data Investor
Services Group, Inc. ("FDISG"), formerly known as The Shareholder Services
Group, Inc., a wholly-owned subsidiary of First Data Corporation, as
sub-administrator, may consult with one or more independent pricing services
("Pricing Service") retained by the Trust. Debt securities of U.S. issuers
(other than U.S. Government Securities and short-term investments) 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.

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<PAGE> 102

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 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 to shorten
average portfolio maturity; withholding dividends or paying distributions from
capital or capital gains; redeeming shares in kind; or establishing a net asset
value per share by using available market quotations.

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.

THE FUNDS AND PORTFOLIOS OF THE TRUST MAY NOT BE PURCHASED DIRECTLY.
THE FUNDS ARE CURRENTLY AVAILABLE ONLY THROUGH PURCHASE OF SIERRA ADVANTAGE, A
TAX-DEFERRED VARIABLE ANNUITY ISSUED BY AGL. THE PORTFOLIOS ARE CURRENTLY
AVAILABLE ONLY THROUGH PURCHASE OF SIERRA __________, A TAX-DEFERRED VARIABLE
ANNUITY ISSUED BY AGL. 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 SIERRA ADVANTAGE CONTRACT. 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.

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<PAGE> 103
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 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 shares 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, 1995, the yield for the Global Money Fund was 5.28%, and the
effective yield for the Global Money Fund for the same period was 5.42%.

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 Balanced
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.

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<PAGE> 104
The yield formula prescribed by the SEC can be expressed as follows:

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

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

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

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

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

For the purpose of determining the interest earned (variable "a" in
the formula) on debt obligations that were purchased by one of the 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, 1995, the yields for the Short Term High Quality Bond, the Short
Term Global Government, the U.S. Government and the Corporate Income Funds were
5.74%, 5.50%, 6.20% and 6.21%, respectively.

TOTAL RETURN INFORMATION

From time to time, a Portfolio or Fund, 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

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<PAGE> 105

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 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, 1995 and from inception through December 31,
1995 and the aggregate total returns for the Funds from inception through
December 31, 1995, were as follows*:

<TABLE>
<CAPTION>
Average Annual
Total Return Average Aggregate
for Fiscal Annual Total Total Return
Year Ended Return Since Since
Fund 12/31/95 Inception Inception*
---- -------- --------- ----------
<S> <C> <C> <C>
Global Money Fund 5.46% 4.05% 12.47%

Short Term High Quality Bond Fund 9.30% 3.76% 7.10%

Short Term Global Government Fund 8.09% 2.24% 6.87%

U.S. Government Fund 16.89% 5.31% 13.33%

Corporate Income Fund 25.09% 7.59% 15.59%

Growth and Income Fund 32.41% 14.33% 39.49%

Growth Fund 37.34% 18.80% 69.56%

Emerging Growth Fund 30.99% 17.75% 53.19%

International Growth Fund 6.61% 8.08% 27.71%
- -----
</TABLE>

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

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<PAGE> 106

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 ("VARDSR") 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.
VARDSR rankings compare only variable annuity issuers. The performance
analyses prepared by Lipper and VARDSR 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, VARDSR 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

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<PAGE> 107
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 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

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<PAGE> 108

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 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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<PAGE> 109
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 rated '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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<PAGE> 110
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
BB obligations when due. Present or prospective financial
BB- protection factors fluctuate according to industry conditions or
company fortunes. Overall quality may move up or down frequently
within this category.

B-52

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B+ Below investment grade and possessing risk that obligations B
will not be met when due. Financial protection factors
B- will fluctuate widely according to economic cycles, industry
conditions and/or company fortunes. 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 very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. 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.

B-53

<PAGE> 113

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 a 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 funds 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 alternate liquidity is maintained.

NOT PRIME Issuers rated 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.

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<PAGE> 116
FINANCIAL STATEMENTS

The Audited Financial Statements for the fiscal year ended December
31, 1995, and the Report of Price Waterhouse LLP, Independent Accountants, dated
February 15, 1996, included in the Annual Report to Shareholders for the year
ended December 31, 1995, and the unaudited Financial Statements for the period
ended June 30, 1996, included in the Semi-Annual Report to Shareholders for the
period ended June 30, 1996, are hereby incorporated by reference into 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, 1995.

Financial Statements (incorporated by reference in Part B)

Audited Financial Statements for the fiscal year ended
December 31, 1995 and unaudited Financial Statements for the
period ended June 30, 1996, including the following:

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

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(b) Exhibits: (* Filed herewith)

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)

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)

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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)

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)

5(a)-8 Form of Investment Advisory Agreement between the Trust and
Sierra Services (*)

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)

(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 &

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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 Form of Sub-Adviser Agreement between Sierra Advisors and J.P.
Morgan with respect to the Growth and Income Fund.(3)

5(b)-8 Form of Sub-Adviser Agreement between Sierra Advisors and
Scudder with respect to the Short Term High Quality Bond Fund.
(3)

5(b)-9 Form of Sub-Adviser Agreement between Sierra Advisors and
Janus with respect to the Emerging Growth Fund. (3)

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 Form of Custody Agreement between the Trust and Boston Safe
Deposit & Trust Company. (2)

9(a) Administration Agreement, dated April 19, 1993, between the
Trust and Sierra Fund Administration Corporation ("Sierra
Administration").(3)

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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 27,
1996.

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)

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.

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16(a) Certain Performance Data relating to the Funds. (4)

Ex-27 Financial Data Schedules (6)
__________

(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.

Item 25. Persons Controlled by or Under Common Control with Registrant

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
</TABLE>

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<TABLE>
<S> <C>
Shares of the Capital Growth Portfolio, without par 0*
value
</TABLE>

* The Portfolios have not yet commenced operations.

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

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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 (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

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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.

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

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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 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

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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 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

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--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 Filed 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

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<PAGE> 130
unions and state and local governments and the accounts of other institutional
investors.

The list required by this Item 28 of officers and directors of J.P.
Morgan, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules
A and D of Form ADV filed by J.P. Morgan pursuant to the Advisers Act (SEC File
No. 801-21011).

Item 28(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.

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<PAGE> 131
The list required by this Item 28 of officers and directors of
Scudder, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules
A and D of Form ADV, filed by Scudder pursuant to the Advisers Act (SEC File
No. 801-252).

Item 28(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

C-15

<PAGE> 132
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, 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).

Item 30. Location of Accounts and Records

(1) The Sierra Variable Trust
9301 Corbin Avenue

C-16

<PAGE> 133
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)

(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.

C-17

<PAGE> 134
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)

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

Item 31. Management Services

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<PAGE> 135
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-19

<PAGE> 136
**********

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-20

<PAGE> 137

EXHIBIT INDEX
(*Filed herewith)

EDGAR
Exhibit No. Exhibit No. Description

1(a) Agreement and Declaration of Trust,
dated January 27, 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)

2 By-Laws of the Trust. (1)

3 Not Applicable.

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<PAGE> 138

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. (4)

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)

Ex.-99.B 5(a)-8 Form of Investment Advisory
Agreement between the Trust and
Sierra Services (*)

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<PAGE> 139

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)

(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

C-23

<PAGE> 140

5(b)-6B Amended restated Sub-Adviser
Agreement between Sierra Advisors
and Janus with respect to the Growth
Fund. (4)

5(b)-7 Form of Sub-Adviser Agreement
between Sierra Advisors and J.P.
Morgan with respect to the Growth
and Income Fund. (3)

5(b)-8 Form of Sub-Adviser Agreement
between Sierra Advisors and Scudder
with respect to the Short Term High
Quality Bond Fund. (3)

5(b)-9 Form of Sub-Adviser Agreement
between Sierra Advisors and Janus
with respect to the Emerging Growth
Fund. (3)

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 Form of Custody Agreement between the
Trust and Boston Safe Deposit & Trust
Company. (2)

9(a) Administration Agreement, dated
April 19, 1993, between the Trust
and Sierra Fund Administration
Corporation ("Sierra
Administration"). (3)

C-24

<PAGE> 141

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 27, 1996.

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)

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)

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<PAGE> 142

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 (6)

__________
(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.

C-26

<PAGE> 143
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. 6 [ X ]
---
and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]

AMENDMENT NO. 7 [ X ]
---

THE SIERRA VARIABLE TRUST
--------------------------------------------
(Exact Name of Registrant as Specified in Charter)

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

EXHIBITS

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

<PAGE> 144

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. 6 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 9th day of January, 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. 6 Registration Statement has been signed below by
the following persons in the capacities and on the date(s) indicated.

Signature Title(s) Date

/s/ F. Brian Cerini President and Trustee January 9, 1997
- ------------------------------ (Principal Executive Officer)
F. Brian Cerini

/s/ Keith B. Pipes Executive Vice President, January 9, 1997
- ------------------------------ Treasurer and Secretary
Keith B. Pipes (Principal Financial and
Accounting Officer)

* Trustee January 9, 1997
- ------------------------------
David E. Anderson

* Trustee January 9, 1997
- ------------------------------
Arthur H. Bernstein

* Trustee January 9, 1997
- ------------------------------
Edmond R. Davis

* Trustee January 9, 1997
- ------------------------------
John W. English

* Trustee January 9, 1997
- ------------------------------
Alfred E. Osborne, Jr. Ph.D.

*By: /s/ F. Brian Cerini
---------------------
F. Brian Cerini
Attorney-In-Fact

<PAGE> 1
EXHIBIT 5(a)-8

FORM OF
INVESTMENT ADVISORY AGREEMENT

____________ __, 1997

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

Dear Sirs:

The Sierra Variable Trust (the "Trust"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, hereby agrees
with Sierra Investment Services Corporation ("Sierra Services"), a corporation
organized under the laws of the state of California, as follows:

1. Investment Description; Appointment

The Trust desires to employ the capital of the Trust's managed investment
portfolios listed in the SCHEDULE(S) attached hereto and made a part of this
Agreement, (each, a "Portfolio," and together, the "Portfolios") by investing
and reinvesting in investments of the kind and in accordance with the
limitations specified in the Trust's Agreement and Declaration of Trust, as
amended (the "Trust Agreement"), and in its prospectus(es) and statement(s) of
additional information relating to the Portfolios as from time to time in effect
(the "Prospectus" and the "Statement of Additional Information", respectively),
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 Prospectus, Statement of
Additional Information and Trust Agreement have been or will be submitted to
Sierra Services. The Trust agrees to provide copies of all amendments to the
Prospectus, Statement of Additional Information and Trust Agreement to Sierra
Services on an ongoing basis. The Trust desires to employ and hereby appoints
Sierra Services to act as investment advisor to the Portfolios. Sierra Services
accepts the appointment and agrees to furnish the services described herein for
the compensation set forth below.

<PAGE> 2

2. Services as Investment Advisor

Subject to the supervision and direction of the Board of Trustees of the
Trust, Sierra Services has general oversight responsibility for the investment
advisory services provided to the Portfolios and will exercise this
responsibility in accordance with the Trust Agreement, the Investment Company
Act of 1940, as amended (the "1940 Act"), and the Investment Advisers Act of
1940, as amended, and with the Portfolios' investment objectives and policies as
stated in the Prospectus and Statement of Additional Information relating to the
Portfolios as from time to time in effect. In connection therewith, Sierra
Services will, among other things, (a) make investment decisions for the
Portfolios in accordance with the Portfolios' investment policies, (b) place
purchase and sale orders on behalf of the Portfolios to effectuate the
investment decisions made, (c) maintain books and records with respect to the
securities transactions of the Portfolios and will furnish the Trust's Board of
Trustees such periodic, regular and special reports as the Board may request.

3. Information Provided to the Trust

Sierra Services will keep the Trust informed of developments materially
affecting the Portfolios, and will, on its own initiative, furnish the Trust
from time to time with whatever information Sierra Services believes is
appropriate for this purpose.

4. Standard of Care

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

5. Compensation

In consideration of the services rendered pursuant to this Agreement, the
Trust will pay Sierra Services on the first business day of each month a fee for
the previous month at the annual rate specified in the SCHEDULE(S) which is
attached hereto and made part of this Agreement. The fee will be calculated
based on each Portfolio's average daily net assets. Upon any termination of

<PAGE> 3

this Agreement before the end of a month, the fee for such part of that month
shall be prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to Sierra Services, the
value of each Portfolio's average daily net assets shall be computed at the
times and in the manner specified in the Prospectus or Statement of Additional
Information relating to the Portfolio as from time to time in effect.

6. Expenses

Sierra Services will bear all expenses in connection with the performance
of its services under this Agreement. The Trust will bear certain other expenses
to be incurred in its operation, including but not limited to: organizational
expenses; taxes, interest, brokerage fees and commissions, if any; fees of
Trustees of the Trust who are not officers, directors, or employees of Sierra
Services, the Portfolios' sub-administrator or any of their affiliates;
Securities and Exchange Commission fees and state Blue Sky notification fees;
transfer agent fees; out-of-pocket expenses of custodians, transfer and dividend
disbursing agents and the Portfolios' sub-administrator and transaction charges
of custodians; insurance premiums; outside auditing and legal expenses; costs of
maintenance of the Trust's existence; costs attributable to investor services,
including, without limitation, telephone and personnel expenses; costs of
preparing and printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings of the shareholders of the Trust and of the
officers or Board of Trustees of the Trust; and any extraordinary expenses.

7. Services to Other Companies or Accounts

The Trust understands that Sierra Services now acts as investment advisor
to other investment companies and each of the Portfolios, and may act now or in
the future as investment advisor to (i) other series of the Trust; (ii)
fiduciary and other managed accounts; and (iii) one or more other investment
companies or series of investment companies; and the Trust has no objection to
Sierra Services so acting. The Trust understands that the persons employed by
Sierra Services to assist in the performance of Sierra Services' duties
hereunder will not devote their full time to such service and nothing contained
herein shall be deemed to limit or restrict the right of Sierra Services or any
affiliate of Sierra Services to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.

8. Term of Agreement

This Agreement shall become effective as of the date first written above
and shall continue for an initial two-year term and shall continue thereafter
with respect to any of the Portfolios so

<PAGE> 4

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 outstanding voting securities of such Portfolio; 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 with respect to
any of the Portfolios, without penalty, on 60 days' written notice, by the Board
of Trustees of the Trust or by vote of holders of a majority of the outstanding
voting securities of such Portfolio, or upon 90 days' written notice, by Sierra
Services. This Agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act). Sierra Services agrees to notify the
Trust of any circumstances that might result in this Agreement being deemed to
be assigned.

9. Representations of the Trust and Sierra Services

The Trust represents that (i) a copy of the Trust Agreement, dated January
29, 1993, together with all amendments thereto, is on file in the office of the
Secretary of the Commonwealth of Massachusetts, (ii) the appointment of Sierra
Services has been duly authorized and (iii) the Trust has acted and will
continue to act in conformity with the requirements of the 1940 Act and other
applicable laws.

Sierra Services represents that it is authorized to perform the services
described herein.

10. 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 with respect to each Portfolio shall be binding upon the
assets and property of such Portfolio only and not upon the assets and property
of any other investment fund (i.e., series) of the Trust and shall not be
binding upon any Trustee, officer or shareholder of the Portfolios and/or the
Trust individually.

11. Entire Agreement

This Agreement constitutes the entire agreement between the parties
hereto.

12. Governing Law

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

<PAGE> 5

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

Accepted:

SIERRA INVESTMENT SERVICES CORPORATION

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

<PAGE> 6

INVESTMENT ADVISORY AGREEMENT
Dated ___________ __, 1997

PORTFOLIO AND FEE SCHEDULE
(Pursuant to Sections 1 and 5)

The following Portfolios (as defined in the Investment Advisory Agreement
attached hereto) are governed by such Agreement and the Trust will pay Sierra
Investment Services Corporation (as such parties are defined in such Agreement)
fees at the annual rate set forth opposite the name of such Portfolio below:

<TABLE>
<CAPTION>
Portfolio Annual Rate
<S> <C>
Capital Growth [ ]
Growth [ ]
Balanced [ ]
Value [ ]
Income [ ]
</TABLE>

Schedule Adopted as of ___________ __, 1997