<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Sife Trust Fund
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
SIFE
SIFE TRUST FUND
___________
NOTICE OF ANNUAL MEETING OF INVESTORS
TO BE HELD APRIL 1, 1996
NOTICE IS HEREBY GIVEN of the annual meeting of Investors (the "Meeting")
of SIFE Trust Fund (the "Trust Fund"), in accordance with the provisions of the
Restated Trust Agreement. The meeting will be held at The Centre Concord, 5298
Clayton Road, Concord, California (see back cover for directions) on Monday,
April 1, 1996, at 2:00 P.M., Pacific Standard Time, to consider and act upon the
following matters:
1. Election of seven (7) directors of the Trust Fund for succeeding one-
year terms, or until their successors are elected and have been
qualified;
2. Ratification of the selection by a majority of the independent members
of the Board of Directors of the Trust Fund of the firm of Deloitte &
Touche, L.L.P., as independent auditors for the Trust Fund for the
calendar year 1996;
3. Approval of the continuation of the current Investment Advisory
Agreement, as amended, which amendments are attached hereto as Exhibit
B and incorporated by reference herein, with SIFE, a California
corporation (the "Management Company"). The amendments change the
method of compensating and reimbursing the Management Company from (a)
the sum of (I) an investment advisory fee of approximately 0.60% of
the Trust Fund's average net assets (calculated on a per annum basis),
AND (II) reimbursement of expenses incurred by the Management Company
on behalf of the Trust Fund, to (b) a flat fee of 1.25% of the Trust
Fund's average net assets (calculated on a per annum basis), as
described more completely in the attached Proxy Statement. The Board
of Directors has determined that it is in the best interests of the
Trust Fund and the Investors to continue the Investment Advisory
Agreement, as amended, with the Management Company;
4. IF PROPOSAL #3 DOES NOT RECEIVE INVESTOR APPROVAL, the Investors are
asked, in the alternative, to approve continuation of the current
Investment Advisory Agreement with the Management Company, whereby the
Management Company will continue to act as the Investment Advisor to
the Trust Fund for the annual period commencing April 1, 1996. The
Board of Directors has determined that, if Proposal #3 does not pass,
it is in the best interests of the Trust Fund and the Investors to
continue the Investment Advisory Agreement with the Management
Company;
<PAGE>
5. Approval of an amendment to each of (a) the Restated Trust Agreement,
(b) the Underwriting Agreement and (c) the Investment Advisory
Agreement to provide for the creation of a multiple class structure
whereunder outstanding investment units would be designated "Class I
Units," and a Rule 12b-1 Plan would be adopted to apply to a to-be-
created class of investment interests, to be designated "Class II
Units," as described more completely completely in the attached Proxy
Statement. The amendments to the Investment Advisory Agreement, the
Underwriting Agreement and the Restated Trust Agreement are attached
hereto as Exhibits B, C and D, respectively, and are incorporated by
reference herein;
6. An amendment to the Trust Fund's investment policies to permit the
Trust Fund to (a) write covered put options up to 10% of the Trust
Fund's net assets, and (b) write call options up to 25% of the Trust
Fund's net assets; and
7. Any other matters which may properly come before the meeting or any
adjournment thereof.
This notice is given pursuant to the direction of the Board of Directors of
the Trust Fund. Only Investors of record at the close of business on February
9, 1996, are entitled to notice of, and to vote at, the Meeting and at any
adjournment thereof.
Investors who do not expect to attend the Meeting are requested to indicate
voting instructions on the enclosed Proxy (white card), date and sign it, and
return it in the accompanying envelope. In order to avoid unnecessary expense,
we ask your cooperation in mailing in your Proxy promptly, no matter how large
or how small your holdings may be and regardless of whether you plan to attend
the meeting. The return of a Proxy will not restrict or impair the right of any
Investor to revoke the same or to attend and vote personally at the meeting.
Dated: February 28, 1996
Walnut Creek, California
By order of the Board of Directors of
SIFE Trust Fund
Charles W. Froehlich, Jr.
SECRETARY
PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY.
YOUR VOTE IS IMPORTANT
<PAGE>
SIFE TRUST FUND
___________
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of SIFE Trust Fund for use at its 1996
annual meeting of Investors to be held at 2:00 P.M. on April 1, 1996, at The
Centre Concord, 5298 Clayton Road, Concord, California, or at any adjournment or
postponement thereof (the "Meeting"). This Proxy Statement and accompanying
Notice of Meeting and Proxy (white card) are first being mailed to holders of
the Trust Fund's Participating Agreements on or about February 28, 1996.
VOTING RIGHTS, SOLICITATION AND REVOCABILITY OF PROXIES
As of the close of business on February 9, 1996, there were issued and
outstanding Participating Agreements in aggregate amount of $---------------- ,
representing an aggregate equity in the Trust Fund of ----------------
investment units. A majority in interest of all investment units, present in
person or represented by proxy (including for this limited purpose abstentions
and broker non-votes) and entitled to vote, shall constitute a quorum for
purposes of the Meeting.
Investors of record as of February 9, 1996 will be entitled to one vote for
each investment unit owned, EXCEPT THAT with respect to election of Directors,
an Investor may cumulate his or her votes. This means that each Investor is
permitted to cast a number of votes equal to the number of Directors proposed
for election (seven), multiplied by the number of investment units held, and may
cumulate such votes for a single nominee or distribute such votes among as many
director nominees as he or she deems appropriate. Discretionary authority of
the Proxy Holders to cumulate votes is solicited by the Board of Directors.
Such discretionary authority may be withheld by checking the box marked
"WITHHOLD AUTHORITY." If this alternative is selected by an Investor, none of
the Investor's investment units will be voted (cumulatively or otherwise) for
any of the nominees unless such Investor appears and votes in person at the
Meeting.
All investment units represented at the Meeting by properly executed
proxies received prior to or at the Meeting will be voted in accordance with the
instructions thereon. If no instructions are indicated, properly executed
proxies will be voted "FOR" each of the nominees and "FOR" adoption of each of
the proposals set forth herein. With respect to the election of directors, the
seven nominees receiving the highest total number of votes at the Meeting shall
be elected as directors. In all other matters (other than the ratification of
the selection of auditors, for which a majority of votes cast by the Investors
at the Meeting is required), the Investor vote required for approval is the vote
of a majority in interest of all investment units, which is defined as the
lesser of (i) 67% or more in interest of the investment units represented at
such a meeting at which more than 50% of all outstanding investment units are
represented, either in person or by Proxy, or (ii) more than 50% in interest of
all Investors. Abstentions are treated as votes against a proposal, and broker
non-votes have no effect on the vote. A "broker non-vote" occurs when a nominee
holding investment units on behalf of a beneficial owner votes on one proposal
but does not vote on another proposal because the nominee does not have
discretionary voting power and has not received specific instructions from the
beneficial owner.
<PAGE>
A proxy given pursuant to this solicitation may be revoked at any time
before it is voted. Proxies may be revoked by filing with the Trust Fund (at
the corporate offices of the Management Company, at the address given below) an
instrument of revocation or a duly executed proxy bearing a later date. A proxy
may also be revoked by attending the Meeting and voting in person (although
attendance at the Meeting will not by itself constitute revocation of a proxy).
Any written notice revoking a proxy should be delivered to Sam A. Marchese,
President & Chief Executive Officer, SIFE Trust Fund, 490 North Wiget Lane,
Walnut Creek, California 94598.
The Trust Fund does not know of any matters, other than as described in the
Notice of Meeting, that are to come before the Meeting. If any other matters
are properly presented at the Meeting for action, the persons named in the
enclosed form of proxy and acting thereunder will have the discretion to vote on
such matters in accordance with their best judgment.
In addition to the use of the mail, solicitation of proxies may be made in
person or by telephone or otherwise by Directors and Officers of the Trust Fund.
No compensation will be paid to any person for any proxy solicitation, however
the cost of all proxy solicitation, including reimbursement of expenses incurred
by banks, brokerage firms, custodians, nominees and fiduciaries for their
reasonable expenses in forwarding proxy materials to Investors, will be borne by
the Trust Fund.
___________
PROPOSAL ONE
ELECTION OF DIRECTORS
The Restated Trust Agreement provides that the Board of Directors of the
Trust Fund shall consist of seven members, to be elected annually by the
Investors. The proxy holders will vote for the election of each of the seven
nominees unless otherwise instructed on the proxy. If any nominee is unable to
serve, the investment units represented by such proxies will be voted for the
election of such substitute as the Board of Directors may recommend. At this
time the Board of Directors knows of no reason why any of the nominees might be
unable to serve, if elected. Each nominee has consented to be named and has
indicated his or her intent to serve, if elected. The Board of Directors,
including the non-"interested" directors, recommends a vote "FOR" the election
of each of the persons named herein.
Set forth in the following table is information about each person who is
being nominated for election as a Director for a term which will expire on April
1, 1997, or at such time as his or her successor is elected and qualified.
2
<PAGE>
<TABLE>
<CAPTION>
Position Held in Length of Business Experience
Name Age Trust Fund Service During Past Five Years
---- ---- ---------- ------- ----------------------
<S> <C> <C> <C> <C>
David M. Sacks (1) 78 Director; Continuous Retired Vice President, American Broad-
Chairman of since casting Company; Retired General Mgr.,
the Board July 1983 KGO Television; President, DMS
Enterprises (broadcasting consultant);
Member, Board of Governors, National
Academy of Television Arts & Sciences
Diane Howard 39 Nominee Nominee Management Company employee, 1992-
Belding (2) (4) present; General Partner, Howard &
Howard Ranch (avocado ranch, Ventura
County, CA), 1987-present
Charles W. Director & Continuous Retired Appellate Court Judge; retired
Froehlich, Jr. (3) Secretary since Superior Court Judge; formerly Of
(4) March 1995 Counsel to Peterson, Thelan & Price;
principal, Froehlich & Peterson Dispute
Resolution
Sam A. Marchese (4) 53 Director; Continuous President & Chief Executive Officer,
President, since Management Company (December 1994 -
Chief Executive October present); Director, Management Company
Officer and 1988 (1989 - present); Vice President,
Treasurer Management Company (1989 - 1994);
Director, Scott Co. (mechanical
contractor)
Haig G. Mardikian 49 Director; Vice Continuous General Partner, George M. Mardikian
(1) Chairman of the since Enterprises (real estate investments);
Board January Managing Director, The United Broad-
1978 casting Corporation (radio broadcasting)
John A. Meany (1) 55 Director Continuous President, John's Valley Foods, Inc.;
since President, John's Town & Country
October Markets, Inc.; Director, Northern
1992 California Grocers Assn.; Advisory
Council, Fleming Foods
Walter S. Newman 74 Director Continuous Owner, WSN Enterprises (real estate
(1) since consultants); Retired President, San
January Francisco Planning Commission; Retired
1991 President, San Francisco Redevelopment
Agency; Retired President, San Francisco
Fine Arts Museums; Chairman of the
Board, National Brain Tumor Foundation
</TABLE>
3
<PAGE>
__________________________
(1) Member of the Audit Committee.
(2) Ms. Sharon Tudisco, a Director of the Trust Fund since 1981, has determined
not to stand for re-election. The Board of Directors has nominated Ms.
Diane Howard Belding, a shareholder and director of the Management Company,
to succeed Ms. Tudisco, whose term will expire at the Meeting.
(3) On March 21, 1995, Mr. Robert W. Pohl, a Director of the Trust Fund since
1975 and its President and Chief Executive Officer since 1983, died.
Pursuant to Article VI, Section 2, of the Restated Trust Agreement, the
remaining Directors appointed Judge Froehlich to fill the remainder of Mr.
Pohl's term, and, at the 1995 Annual Meeting, Judge Froehlich was elected a
Director in place of Mr. Pohl.
(4) Messrs. Froehlich and Marchese, and Ms. Belding, are "interested persons,"
as that term is defined in Section 2(a)(19) of the Investment Company Act
of 1940, as amended, by virtue of their positions as directors and/or
officers of the Trust Fund and as directors, officers and/or shareholders
of the Management Company.
BOARD OF DIRECTORS MEETINGS, COMPENSATION AND COMMITTEES
Regular meetings of the Board of Directors are held bi-monthly or at such
time as the Board may determine. During 1995 the Board of Directors held --
regular meetings; in addition, from time to time the non-"interested" directors
meet with officers of the Trust Fund and/or the Management Company to discuss
various matters relating to the administration of the Trust Fund. No director
attended fewer than 75% of the total number of meetings of the Board of
Directors and the total number of meetings of all committees on which any such
director served during 1995. Each director is paid an attendance fee of $5,000
for each Board meeting attended plus $250 per hour (subject to a per-meeting
maximum of $1,000) consultation fee.
The Board of Directors has an Audit Committee, which is responsible for (i)
the selection and review of the independent auditors of the Trust Fund and (ii)
oversight, with the auditors, of the current operating procedures of the Trust
Fund. The members of the Audit Committee are Messrs. Newman (Chair), Mardikian,
Meany and Sacks. During 1995 the Audit Committee held three meetings. The
Board of Directors has no nominating or compensation committee.
OWNERSHIP OF PARTICIPATING AGREEMENTS
As of February 1, 1996, no person (including any "group," as that term is
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended)
was known by the Trust Fund to be the beneficial holder of more than 5% of the
outstanding number of investment units of the Trust Fund. The beneficial
holdings of investment units, represented by Participating Agreements in the
Trust Fund, of the the Trust Fund's directors, nominees for director and
executive officers, as of January 31, 1996, are as follows:
4
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership (1) Percent of
Name of Beneficial Owner Title of Class (investment units) Class (2)
------------------------ -------------- ------------------------ ----------
<S> <C> <C> <C>
David M. Sacks Participating Agreements 181,678 0.14%
Diane Howard Belding (3)(4) Participating Agreements 92,465 0.07%
Charles W. Froehlich, Jr. (4) Participating Agreements -0- -0-
Sam A. Marchese (4) Participating Agreements 112,926 0.08%
Haig G. Mardikian Participating Agreements 18,435 0.01%
John A. Meany Participating Agreements 65,227 0.05%
Walter S. Newman Participating Agreements 6,325 (5)
Sharon E. Tudisco (3)(4) Participating Agreements 155,093 0.12%
All Directors and Executive Participating Agreements 632,149 0.47%
Officers as a Group (4)
</TABLE>
(1) Each person listed above has sole voting power and sole investment power
with respect to all investment units beneficially owned by him or her (or
shares such powers with his or her spouse). None of the above persons has
any right to acquire beneficial ownership of Participating Agreements as
specified in Rule 13d-3(d)(1) under the Securities Exchange Act of 1934.
As of January 31, 1996, each unit was valued at $4.67.
(2) Based on an aggregate of 134,566,388 investment units outstanding as of
January 31, 1996.
(3) Ms. Sharon Tudisco, a Director of the Trust Fund since 1981, has determined
not to stand for re-election. The Board of Directors has nominated Ms.
Diane Howard Belding Belding, a shareholder and director of the Management
Company, to succeed Ms. Tudisco.
(4) In addition to the investment units beneficially owned by the persons
identified by this footnote #4, each of such persons, by reason of his or
her ownership of shares in the Management Company, may also be deemed to be
the beneficial owner of 515,147 investment units owned by the Management
Company (see "Information About the Management Company," page 7.)
(5) Less than 0.01%.
MANAGEMENT COMPENSATION
The following table sets forth certain information regarding all
compensation paid or accrued for services rendered in all capacities to the
Trust Fund for the year ended December 31, 1995 to each of the three most highly
compensated executive officers and each of the directors of the Trust Fund:
5
<PAGE>
Aggregate Compensation
Name of Person and Position from the Trust Fund (1)
--------------------------- ------------------------
David M. Sacks; Director & Chairman of the Board $44,250
Charles W. Froehlich, Jr.; Director $20,000
Sam A. Marchese; Director, President, $189,450
Chief Executive Officer and Treasurer
Haig G. Mardikian; Director & Vice Chairman of the Board $32,750
John A. Meany; Director $32,250
Walter S. Newman; Director $32,250
Robert W. Pohl (2) $47,800
Sharon E. Tudisco (3) $179,850
__________________________
(1) No remuneration was paid directly by the Trust Fund to its officers and
directors. However, pursuant to Article V, Section 3 of the Trust
Agreement, and Section 3 of the Investment Advisory Agreement, officers and
directors receive indirect remuneration from the Trust Fund through
reimbursement of the Management Company for the Trust Fund's pro rata share
of certain office and other expenses, including salaries, bonuses,
commissions, Directors' fees and the benefit of a reduced sales charge.
(2) Mr. Pohl was a Director of the Trust Fund from 1975, and had been the Trust
Fund's President and Chief Executive Officer from 1983, until his death on
March 21, 1995.
(3) Ms. Tudisco has been a Director and Vice President of the Trust Fund from
1981, and had been the Trust Fund's Executive Secretary from 1983, until
her retirement on December 31, 1995.
Under special arrangement by the Trust Fund with the Management Company,
Participating Agreements are sold on a uniform basis at a reduced sales charge
of 1% of the offering price to directors, officers and bona fide full-time
employees and sales representatives of the Trust Fund and the Management
Company, as well as to pension and profit sharing plans for the benefit of such
persons. In 1995, investment units were purchased by or for the benefit of the
above-named directors and officers. The amount set forth in the above table
under the caption "Aggregate Compensation from the Trust Fund" includes the
spread between the acquisition price paid by or for the benefit of the directors
and officers for investment units purchased during the last fiscal year and the
price that would have been payable at the usual sales charge. The amount of
this spread on purchases made by Mr. Marchese was $15 and by Mr. Meany was $600.
The Trust Fund has no pension or retirement plan and pays no pension or
retirement benefits to its officers or directors.
6
<PAGE>
INFORMATION ABOUT THE MANAGEMENT COMPANY
The names, addresses and principal occupations of each of the Principal
Executive Officers and the Directors of the Management Company, and of each
shareholder owning beneficially or of record 10% or more of the outstanding
voting securities of the Management Company, are as follows:
<TABLE>
<CAPTION>
Percentage
Ownership of
Management
Name and Address Principal Occupation Company as of
---------------- -------------------- December 31, 1995
-----------------
<S> <C> <C>
Shirley A. Beaton Retired; formerly Accounting Manager for the 10.0%
490 North Wiget Lane Management Company
Walnut Creek, CA 94598
Diane Howard Belding Director, Management Company 20.0%
490 North Wiget Lane Director, Trust Fund
Walnut Creek, CA 94598
Charles W. Froehlich, Jr. (1) Director & Asst Secy, Management Company 14.1%
1444 Windsong Lane Director & Secretary, Trust Fund
Escondito, CA 92026 Retired Appellate Court Judge; retired
Superior Court Judge; formerly Of Counsel to
Peterson, Thelan & Price; principal,
Froehlich & Peterson Dispute Resolution
Sam A. Marchese Director, President & Chief Executive 20.0%
490 North Wiget Lane Officer, Management Company
Walnut Creek, CA 94598 Director, President, Chief Executive Officer
& Treasurer, Trust Fund
Sharon E. Tudisco Director, Management Company 10.0%
490 North Wiget Lane Director, Trust Fund
Walnut Creek, CA 94598 Formerly Vice President & Executive
Secretary - Management Company and Trust
Fund
Bruce W. Woods Director, Executive Vice President - 4.0%
490 North Wiget Lane Management Company
Walnut Creek, CA 94598
John W. Woods Director, Management Company 21.9%
Box 885
Sparks, NV 89432
</TABLE>
(1) As of March 23, 1995, Mr. Marchese purchased 50 shares (10.0%) and Judge
Froehlich purchased 55 shares (11.0%) from the estate of Mr. Pohl for a
total cash consideration of $5,000 per share.
7
<PAGE>
ALLOCATION OF PORTFOLIO BROKERAGE AND PORTFOLIO TURNOVER RATES
In executing portfolio transactions for securities traded on national
securities exchanges or in the over-the-counter market, the Trust Fund endeavors
always to obtain the most favorable terms and conditions, taking into account
the price of the security and any commissions or discounts applicable to the
transaction. The Management Company is responsible for carrying out this policy
in its placement of the Trust Fund's investments. Neither the Trust Fund nor
the Management Company is currently a party to any "soft dollar" arrangements.
During the last calendar year, the Trust Fund paid brokerage commissions of
$990,818 and total purchases and sales of portfolio securities aggregated
$915,870. Portfolio turnover rates for the years 1993, 1994 and 1995 were
28.7%, 25.2% and 93.5%, respectively.
___________
PROPOSAL TWO
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee (which consists of directors who are not interested
persons with respect to the Trust Fund) has recommended that the accounting firm
of Deloitte & Touche, L.L.P. be engaged as independent accountants for the year
ending December 31, 1996, replacing the Trust Fund's current independent
accounting firm, Timpson Garcia. This recommendation has been approved by the
full Board of Directors of the Trust Fund, and, subject to the ratification of
the Investors at the Meeting, will be effective as of January 19, 1996.
Representatives of neither Deloitte & Touche nor Timpson Garcia are expected to
be present at the Meeting.
Deloitte & Touche is an international accounting firm which serves as the
independent accountants of, and auditors for, many investment funds, whereas
Timpson Garcia is a local accouting firm and audits a much smaller number of
investment funds. Accordingly, the Board of Directors determined that the
engagement of Deloitte and Touche would be in the best interests of the
Investors and of the Trust Fund. Deloitte & Touche has no direct or indirect
financial interest in the Trust Fund except for services rendered as independent
accountants and except for other consulting services which may be rendered from
time to time. All compensation received by the independent accountants for
their services as such consists of auditing fees only. The employment of
Deloitte & Touche is conditioned upon the right of the Trust Fund to terminate
such employment at any time without any penalty by vote of a majority of the
non-"interested" directors, or a majority in interest of Investors at any
meeting called for such purpose.
On January 19, 1996, the Board of Directors notified Timpson Garcia, which
has served as the Trust Fund's independent accountants since 1964, that they
were being replaced as the Trust Fund's independent auditors and would not be
requested to audit the Trust Fund for the year ending December 31, 1996. During
the two most recent fiscal years and for the period from January 1, 1996 through
January 19, 1996, there were no disagreements with Timpson Garcia on any matter
of accounting principles or practices, financial statement disclosure, auditing
scope or procedure, or any "reportable events." The report of Timpson Garcia on
the financial statements of the Trust Fund for the past two years contained no
adverse opinion or disclaimer of opinion and was not qualified or modified as to
any uncertainty, audit scope or accounting principle. The Board of Directors of
the Trust Fund does not expect that the report of Timpson Garcia for the year
ending December 31, 1995 will contain an adverse opinion or disclaimer of
opinion, nor be qualified or modified as to any uncertainty, audit scope or
accounting principle. Timpson Garcia has, at the Trust Fund's request, furnished
a letter addressed to the Securities and Exchange
8
<PAGE>
Commission stating that Timpson Garcia agrees with the preceding statements; a
copy of such letter is attached hereto as Exhibit A.
The Board of Directors recommends a vote "FOR" the ratification of the
selection of Deloitte & Touche, L.L.P. as independent accountants of the Trust
Fund for the year ending December 31, 1996.
___________
PROPOSAL THREE
PROPOSAL TO CONTINUE THE INVESTMENT ADVISORY AGREEMENT,
AS AMENDED, AND TO AMEND THE RESTATED TRUST AGREEMENT,
TO PROVIDE FOR A FLAT FEE OF 1.25% OF
THE TRUST FUND'S AVERAGE NET ASSETS, PER
ANNUM, AS AN ALL-INCLUSIVE INVESTMENT MANAGEMENT FEE
BACKGROUND INFORMATION
The Management Company, which has served as the investment advisor to the
Trust Fund since the Trust Fund's inception in November 1962, is compensated
pursuant an Investment Advisory Agreement, dated April 3, 1972 and as amended on
April 3, 1995 (collectively the "Investment Advisory Agreement"). In addition
to providing investment advice and portfolio management to the Trust Fund, the
Management Company performs a broad range of administrative, regulatory and
other services for the Trust Fund and the Investors. Until 1995, the Management
Company received approximately 0.50% of the Trust Fund's average net assets, per
annum, in exchange for its investment management services; at the 1995 annual
meeting, the Investors approved an increase of 0.10% per annum in the Management
Company's investment advisory fee.
Pursuant to Section 3 of the Investment Advisory Agreement and Article V,
Section 3 of the Trust Agreement, the Trust Fund reimburses the Management
Company for certain expenses relating to the operation of the Trust Fund,
including, but not limited to, the Trust Fund's legal and auditing fees,
trustee's fees, taxes, directors' fees and the printing and mailing costs of
materials sent to Investors, as well as reimbursement of the Trust Fund's pro
rata share of overhead costs, including salaries, employee benefits, rent and
data processing costs. The Trust Fund's pro rata share of such expenses ranges
from 50% to 90%. In 1995, the Management Company received $3,039,425 for
investment advisory services (approximately 0.60% of average net assets), and
$2,283,029 for expense reimbursement services (approximately 0.43% of average
net assets); accordingly, total investment advisory and fund management expense
in 1995 constituted approximately 1.03% of the Trust Fund's average net assets.
At its meeting on February 9, 1996, the Board of Directors considered a
proposal from the Management Company to modify the current compensation
arrangement between the Trust Fund and the Management Company to provide for (i)
the elimination of the expense reimbursement component, and (ii) the
implementation of an all-inclusive investment management fee of 1.25% of 1.0% of
average net assets, per annum.
DISCUSSION OF THE FEE PROPOSAL
Since the Trust Fund's inception, the Management Company has been primarily
responsible not only for the provision of investment advice and associated
portfolio management services, but also for all of the administrative functions
associated with investor service, including the provision of transfer agency
9
<PAGE>
services to the Trust Fund and its Investors. The Management Company also
provides custody and certain fund accounting services to the Trust Fund for the
benefit of the Investors and, where certain services are not provided directly
to the Trust Fund and the Investors (such as legal and accounting services), the
Management Company undertakes to ensure that the Trust Fund and the Investors
receive services of the highest quality at competitive cost.
In the past few years, the Trust Fund has experienced significant growth in
terms of both Trust Fund assets and the number of Investors. In addition, the
increasing sophistication of the financial markets have required that the
Management Company undertake a major upgrading of both its data processing
capabilities and its investment advisory and portfolio management services. The
Board of Directors believes, however, that the current compensation and
reimbursement structure exposes the Trust Fund to certain risks. First, to the
extent that an investment advisory fee of approximately 0.60% of net assets is
determined by the Management Company to be non-competitive, the Management
Company at some point may no longer wish to provide investment advisory services
to the Trust Fund and the Investors. Second, to the extent that the Trust Fund
has agreed to provide reimbursement for certain expenses, the Management Company
has little or no incentive to control its costs. Although for the last ten
years expenses have ranged from 0.94% to 1.10% of average net assets, there is
no assurance that the Management Company will be able to continue to keep
reimburseable expenses low.
Fee and reimbursement structures such as those between the Management
Company and the Trust Fund have become increasingly less common in the mutual
fund industry, having been replaced by flat fee arrangements which require fund
managers to provide contractually set levels of service, both management and
investment advisory. The advantages to the Trust Fund and the Investors are (i)
the assurance that the Management Company will continue to provide services to
the Trust Fund and the Investors, (ii) the security of being able to predict, in
advance and with precision, all costs and expenses to which investment units
will be subject, (iii) the assurance that the expenses of administration,
including transfer agent and custodial service expenses, will be borne
exclusively by the Management Company, without pass-through to the Trust Fund,
and (iv) the benefits of improved operating efficiencies at the Management
Company.
The directors, in considering the Management Company's proposal, considered
the nature, scope and quality of the services provided by the Management Company
to the Trust Fund, the costs incurred and revenues generated by the Management
Company in rendering such services, the Management Company's pre-tax profits
from its activities, the compensation paid to investment advisors of mutual
funds with similar investment objectives, policies and asset sizes, the quality
of personnel provided to the Trust Fund by the Management Company, comparative
expense and performance information, and pro forma expense ratios and
performance data. The directors who are not interested persons, by vote at
their meeting on February 9, 1996, have unanimously approved the amendments as
proposed, based upon their determination that the proposed terms of the
Investment Advisory Agreement are fair and equitable, and that the fees and
expenses provided therein provide fair and reasonable compensation for services
to be rendered under the Trust Fund's investment policies, which services
include, but are not necessarily limited to, the provision of investment advice
and the servicing of the Trust Fund's investment portfolio. The Board has
concluded that there is no financial condition of the Management Company that is
reasonably likely to impact the financial ability of the Management Company to
fulfill its commitment to the Trust Fund under the Investment Advisory
Agreement, as amended.
PROPOSED AMENDMENTS TO THE RESTATED TRUST AGREEMENT AND THE INVESTMENT ADVISORY
AGREEMENT
Implementation of the all-inclusive investment management fee described
above requires approval by the Investors of certain amendments to the Investment
Advisory Agreement and the Restated Trust
10
<PAGE>
Agreement. The following summary, which describes the relevant portions of the
proposed amendments, is qualified in its entirety by reference to the text of
the proposed amendments, copies of which are attached to this Proxy Statement as
Exhibits B and D.
With respect to the Investment Advisory Agreement, the proposed amendment
would eliminate the current expense reimbursement component in favor of an
arrangement whereby the Management Company would receive an annual fee equal to
1.25% of the Trust Fund's average net assets. Such annual fee would encompass
the investment advisory fee paid to the Management Company, all Trustee's fees
and costs, and all miscellaneous costs and expenses related to the operation of
the Trust Fund paid by the Management Company on behalf of the Trust Fund. If
the actual expenses paid by the Management Company on behalf of the Trust Fund
exceed the amount of the fee, then the Management Company would not be entitled
to any further payment from the Trust Fund. Conversely, if the actual expenses
paid by the Management Company on behalf of the Trust Fund are less than the
amount of the fee, then the Management Company would not be required to refund
the difference to the Trust Fund.
The Restated Trust Agreement is proposed to be amended to be consistent
with the proposed amendment to the Investment Advisory Agreement with respect to
the implementation of the all-inclusive management fee arrangement.
FEE COMPARISON
The following table compares the current fees and expenses as of December
31, 1995, including investment advisory fees, on a pro forma basis to those fees
which would be paid by the Trust Fund if the amendments discussed above are
approved. In addition, the example following the table illustrates the effect
of the proposed all-inclusive fee arrangement for one, three, five and ten year
periods. The purpose of the table and examples is to assist an Investor in
understanding the various costs and expenses that an Investor in the Trust Fund
would bear directly or indirectly. Dollar figures have been rounded to the
nearest dollar and all percentages to the nearest hundredth of one percent.
<TABLE>
<CAPTION>
TOTAL EXPENSES OF THE TRUST
FUND FOR THE YEAR ENDED
FEE RATE DECEMBER 31, 1995
-------- -----------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
------ --------- ------ ---------
<S> <C> <C> <C> <C>
INVESTOR TRANSACTION EXPENSES
Maximum Sales Load on Purchases 5.0% 5.0% $1,452,138 $1,452,138
(percentage of offering price) ---------- ----------
---------- ----------
ANNUAL FUND OPERATING EXPENSES
(percentage of average net assets)
Management Fees 0.60% 1.25% $3,039,425 $6,449,254
Other Expenses 0.43% -0- 2,283,029 -0-
---------- ----------
Total Fund Operating Expenses 1.03% 1.25% $5,322,454 $6,449,254
---------- ----------
---------- ----------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
EXAMPLE (1) 1 year 3 years 5 years 10 years
- ----------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (I) 5% annual
return, and (ii) redemption at the end of each $62.50 $89.23 $117.98 $199.63
time period (no premium or other charge
is assessed on redemptions)
</TABLE>
____________________
(1) The return of 5% and expenses should not be considered representative of
past or future performance or expenses, both of which may vary.
REQUIRED VOTE AND RECOMMENDATION OF THE BOARD OF DIRECTORS
The amendments to the Investment Advisory Agreement and the Restated Trust
Agreement require the approval of the lesser of (i) 67% or more in interest of
the Investors represented at such a meeting at which more than 50% in interest
of the Investors are represented, either in person or by proxy, or (ii) more
than 50% in interest of all Investors. The Board of Directors believes that
continuation of the current Investment Advisory Agreement, as amended, is in the
best interests of the Investors and the Trust Fund; accordingly, the Board of
Directors recommends a vote "FOR" the continuation of the Investment Advisory
Agreement, as amended, with conforming amendments to the Restated Trust
Agreement
___________
PROPOSAL FOUR
ALTERNATE PROPOSAL TO APPROVE THE CONTINUATION
OF THE INVESTMENT ADVISORY AGREEMENT
If the proposed amendments to the Investment Advisory Agreement, described
in the preceding proposal, do not receive the necessary Investor approval, the
Board of Directors is recommending that the Investors approve the continuation
of the current Investment Advisory Agreement with the Management Company. Such
continuation requires only (1) the annual approval of a majority of the
Directors of the Trust Fund who are neither parties to the Investment Advisory
Agreement nor interested persons of any such party, and (2) the approval of
either (a) the full Board of Directors of the Trust Fund, or (b) the vote of a
majority in interest of the Investors at their annual meeting, which is defined
as the lesser of (i) 67% or more in interest of the Investors represented at
such a meeting at which more than 50% in interest of the Investors are
represented, either in person or by proxy, or (ii) more than 50% in interest of
all Investors. On February 9, 1996, the Board of Directors of the Trust Fund
unanimously approved the continuation of the Investment Advisory Agreement
provided that the amendments discussed above are not adopted by the Investors.
Although such Board approval satisfies the previously described approval
requirement, consistent with the representation to the Investors in the 1995
Proxy Statement, continuation of the Investment Advisory Agreement is being
submitted for Investor approval at the Meeting.
If for any reason Investors at this annual meeting were not to approve the
continuation of the Investment Advisory Agreement, the Trust Fund would seek
either to renegotiate such agreement with the Management Company or to obtain
investment advisory services from a competent firm at rates of compensation
within the limits provided by the Trust Agreement. The Investment Advisory
Agreement is terminable prior to its automatic expiration date upon sixty (60)
days' written notice, by vote of a majority
12
<PAGE>
of the Directors of the Trust Fund, or by vote of a majority in interest of the
Investors. The Investment Advisory Agreement is not assignable.
The Board of Directors believes that, if the amendments described in
Proposal Three are not adopted by the Investors, continuation of the current
Investment Advisory Agreement is in the best interests of the Investors and the
Trust Fund; accordingly, the Board of Directors recommends a vote "FOR" the
continuation of the Investment Advisory Agreement.
___________
PROPOSAL FIVE
PROPOSAL TO AMEND EACH OF THE RESTATED TRUST AGREEMENT,
THE INVESTMENT ADVISORY AGREEMENT AND
THE UNDERWRITING AGREEMENT TO PERMIT THE ESTABLISHMENT OF A
MULTIPLE CLASS STRUCTURE AND, IN CONNECTION THEREWITH, TO
ADOPT A DISTRIBUTION PLAN PURSUANT TO RULE 12B-1
BACKGROUND INFORMATION
The Board of Directors continuously reviews the benefits and features that
the Trust Fund offers to Investors. The Board of Directors believes that it is
desirable to provide, in as cost effective a manner as possible, services and
adopt marketing strategies that are responsive to the needs and circumstances of
existing and potential Investors. In order to meet ever-increasing competition
within the mutual fund industry for investment assets and changing trends in
pricing structures for funds distributed through a broker-dealer network, the
Board of Directors concluded that it would the in the best interests of the
Investors for the Restated Trust Agreement to be amended to permit the issuance
of different classes of investment units (the "Multiple Class Structure").
Accordingly, on February 9, 1996, the Board of Directors authorized the creation
of the Multiple Class Structure, subject to the approval by the Investors at the
Meeting of the necessary amendments to the Restated Trust Agreement, the
Investment Advisory Agreement and the Underwriting Agreement. It should be
noted that neither the adoption of the Multiple Class Structure nor the creation
of additional classes of investment interests will have any effect on the rights
and privileges of the investment interests represented by the Participating
Agreements now outstanding or those which would be outstanding at such time as
the Trust Fund begins offering different classes of interests.
DISCUSSION OF THE MULTIPLE CLASS STRUCTURE
The Board of Directors believes that the adoption of the Multiple Class
Structure will encourage investors with a broader range of investment objectives
to consider investment in the Trust Fund. The Multiple Class Structure offers
the Board of Directors the flexibility of tailoring payment for investment
interests to the needs and circumstances of different classes of investors, as
well as broker-dealers, financial institutions and other organizations, such as
pension and profit-sharing plans.
Implementation of a Multiple Class Structure is subject to a number of
conditions. These include approval by the shareholders to certain changes in
the Restated Trust Agreement, the Underwriting Agreement and the Investment
Advisory Agreement (the proposed amendments are reproduced in their entirety in
Exhibits B, C and D, attached hereto) and the filing and effectiveness of a new
registration statement with the Securities and Exchange Commission, which
registration statement will register for the offer and sale interests in any new
class or classes, and registration with various state securities authorities
13
<PAGE>
of any new class or classes. While it is anticipated that each of these
conditions will be accomplished, there can be no assurance that this will be the
case.
PROPOSED AMENDMENTS TO THE RESTATED TRUST AGREEMENT
As stated above, implementation of the Multiple Class Structure requires
approval by the Investors of certain amendments to the Restated Trust Agreement,
the Investment Advisory Agreement and the Underwriting Agreement. The following
summary, which describes the proposed amendments to the Trust Agreement, the
Investment Advisory Agreement and the Underwriting Agreement, is qualified in
its entirety by reference to the text of the proposed amendments, copies of
which are attached to this Proxy Statement as Exhibits B, C and D.
With respect to the Restated Trust Agreement, the proposed amendment would
permit multiple classes of investment units in the Trust Fund (subject to future
Board and Investor approvals) and specifically creates two classes of investment
units: "Class I Units" and "Class II Units." Class I Units are those investment
units of the Trust Fund created prior to the commencement of the issuance and
sale of the Class II Units, as well as those similar investment units which may
be sold hereafter. Current holders of Class I Units will continue to be able to
purchase additional Class I Units.
Class II Units are similar in all respects to the Class I Units with one
exception: the difference between Class I Units and Class II Units is that Class
II Units are subject to a Rule 12b-1 fee in addition to the same front-end load
as Class I Units. After the commencement of the sale of Class II Units, new
investors in the Trust Fund (excepting the limited class of persons described in
the following paragraph) will only be permitted to purchase Class II Units.
Class I Units, Class II Units and any other class of invetsment units
subsequently created have equal voting rights and vote together except in cases
where a separate vote of any class is required under applicable law or upon a
determination by the Board of Directors that a class's interests are not
affected and that no separate vote of such class is required. Funds
attributable to Class I Units and Class II Units will be co-mingled and co-
invested in the Trust Fund's portfolio. Liabilities solely attributable to a
particular class of investment units will be charged against the assets of the
Trust Fund attributable to that class. Otherwise, liabilities are charged
against each class in the proportion that the net assets of the class bear to
the total net assets of the Trust Fund. Income, capital gains and losses and
other expenses are allocated in the proportion that the net assets of the class
bear to the total net assets of the Trust Fund. Numerous conforming changes
have been made to reflect the creation of two classes of investment units in the
Trust Fund.
In addition, the Restated Trust Agreement is proposed to be amended to make
certain conforming changes to reflect (i) the Trust Fund's reduction of its
sales charges effective April 1, 1995 (which amendment was approved by the
Investors at the 1995 annual meeting), and the elimination of sales charges for
Class ( Units for a limited class of purchasers, namely, directors, officers and
bona fide full time employees and sales representatives of the Trust Fund and
the Management Company, registered broker-dealers, their registered
representatives and the immediate family members of the foregoing persons. In
addition, the right of accumulation would be clarified to permit aggregation of
all accounts under an Investor's client identification number (including
retirement plans and business accounts) for purposes of meeting the sales charge
breakpoints.
The proposed amendments to the Investment Advisory Agreement make minor
clarifying changes to reflect the creation of two classes of investment units in
the Trust Fund.
14
<PAGE>
The Underwriting Agreement is proposed to be amended to be consistent with
the proposed amendments to the Restated Trust Agreement with respect to the
elimination of the sales charge for a limited class of purchasers and the
clarification of the right of accumulation with respect to sales charge
breakpoints, for which Investor approval is not required.
PROPOSED DISTRIBUTION OF CLASS II UNITS SUBJECT TO RULE 12B-1 CHARGES
It is anticipated that the Trust Fund initially will offer two classes of
units: (1) Participating Agreements of the same character as are now outstanding
(the "Class I Units"), and (2) Participating Agreements which will be subject to
a sales and distribution charge assessed pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended ("Class II Units"). Rule 12b-1
permits the Trust Fund, as a registered open-end investment company, to bear
expenses relating to the distribution of its shares only pursuant to a written
plan that has been approved by the Trust Fund's Board of Directors and its
Investors. The Rule 12b-1 plan attached to this Proxy Statement as Exhibit E
(the "Rule 12b-1 Plan"), was approved by a majority of the non-"interested"
directors of the Board of Directors on February 9, 1996, and is being proposed
for adoption by the Investors.
Given the reluctance among many in the broker-dealer community to continue
to make available to their customers for sale mutual fund interests that are not
priced in such a way as to provide ongoing compensation to such broker-dealers
for the distribution of fund interests, the Board of Directors believes that the
adoption of the Rule 12b-1 Plan will enhance the selling of Trust Fund interests
by providing ongoing compensation to dealers, and thereby providing an added
incentive to continue to sell investment units and maintain investments in the
Trust Fund.
CONSIDERATION BY THE BOARD OF DIRECTORS
In connection with its consideration of the proposed Rule 12b-1 Plan, the
Board of Directors of the Trust Fund was furnished with drafts of the Plan and
related materials, including information relating to the advantages and
disadvantages of Rule 12b-1 plans currently being used in the mutual fund
industry. Legal counsel for the Trust Fund provided additional information,
summarized the provisions of the proposed Rule 12b-1 Plan and have informed the
Board of Directors of the legal and regulatory considerations in adopting the
Rule 12b-1 Plan.
Based upon its review of the available information and the factors
discussed above, and in light of its fiduciary duties under relevant state law
and the Investment Company Act of 1940, as amended, the Board of Directors has
determined, in the exercise of its business judgment, that the Rule 12b-1 Plan
is reasonably likely to benefit the Trust Fund and the Investors. As noted
above, because distributors of units in the Trust Fund have little or no
incentive to incur promotional expenses on behalf of the Trust Fund if a Rule
12b-1 plan were not in place, the Board of Directors believes that adoption of
the Rule 12b-1 Plan is important to the long-term viability of the Trust Fund.
In addition, the adoption of the Rule 12b-1 Plan may lead to an increase in net
assets under management, given the enhanced marketing efforts of distributors
that may be expected to result from the availability of such additional
compensation.
The Board of Directors realizes that there can be no assurance that the
expenditure of Trust Fund assets to finance the distribution of Class II Units
will have the anticipated results; however, the Board of Directors believes that
there is a reasonable likelihood that one or more of such benefits will result.
15
<PAGE>
DESCRIPTION OF THE PROPOSED RULE 12B-1 PLAN
The proposed Rule 12b-1 Plan provides that the Trust Fund shall reimburse
the Management Company, in its capacity as the principal underwriter of the
Trust Fund's investment interests, for its distribution costs of up to 0.25% per
annum of the average daily net assets of the Trust Fund's Class II Units. Under
the terms of the Rule 12b-1 Plan, the Management Company is authorized and
intends to pay all or a portion of this fee to any securities dealer, financial
institution or any other person who renders assistance in distributing or
promoting the sale of the Class II Units. To the extent such fee is not paid to
such persons, the Management Company may be reimbursed for its own distribution
expenses incurred in connection with the sale of the Class II Units. In each
case where the Management Company agrees to pay a distribution fee to a person,
such payment shall only be pursuant to a written agreement between the
Management Company and such person (the "Rule 12b-1 Plan Agreement"), the form
of which is attached as Appendix A to Exhibit E. The form of the Rule 12b-1
Plan Agreement has been approved by a majority of the non-"interested" directors
of the Trust Fund's Board of Directors in connection with their approval of the
Rule 12b-1 Plan. If the Rule 12b-1 Plan is approved, the Management Company may
enter into Rule 12b-1 Plan Agreements with such persons without further
approval.
Payment of the distribution fee is to be made monthly, as soon as
practicable following the preparation of a written report from the Management
Company to the Board of Directors of the Trust Fund of all amounts expensed
pursuant to the Rule 12b-1 Plan; provided, however, that the aggregate payments
by the Trust Fund under the Rule 12b-1 Plan in any month shall not exceed
0.00020833% (0.25% on an annualized basis) of the average daily net assets of
the Class II Interests for the prior month; thus, the Rule 12b-1 Plan does not
provide for the payment of distribution fees in subsequent periods that relate
to expenses incurred in prior periods.
The Rule 12b-1 Plan and any related Rule 12b-1 Plan Agreement will continue
in effect for so long as its continuance is specifically approved at least
annually by majority of the non-"interested" directors of the Board of Directors
of the Trust Fund. The Rule 12b-1 Plan is terminable at any time, without
penalty, by vote of a majority of the non-"interested" directors of the Board of
Directors of the Trust Fund, or by vote of a majority of the outstanding voting
securities of the Trust Fund.
REQUIRED VOTE & RECOMMENDATION OF THE BOARD OF DIRECTORS
Adoption of the Multiple Class Structure and creation of Class II Units,
with associated adoption of the proposed Rule 12b-1 Plan, requires the
affirmative vote of a majority in interest of the Investors at the Meeting,
which is defined as the lesser of (i) 67% or more in interest of the Investors
represented at such a meeting at which more than 50% in interest of the
Investors are represented, either in person or by proxy, or (ii) more than 50%
in interest of all Investors. If the proposal is approved, it will go into
effect, and Class II Units may be offered for sale, on or after May 1, 1996.
The Board of Directors recommends a vote "FOR" the adoption of the Multiple
Class Structure and the adoption of the Rule 12b-1 Plan, as presented.
___________
16
<PAGE>
PROPOSAL SIX
PROPOSAL TO AMEND THE TRUST FUND'S INVESTMENT POLICIES
TO PERMIT THE TRUST FUND TO WRITE COVERED PUT OPTIONS IN AN
AMOUNT UP TO 10% OF THE TRUST FUND'S NET ASSETS, AND TO WRITE
CALL OPTIONS IN AN AMOUNT UP TO 25% OF THE TRUST FUND'S NET ASSETS
The Board of Directors is also seeking Investor approval for an amendment
to the Trust Fund's fundamental investment policies with respect to the Trust
Fund's ability to write "covered" put options. "Covered" put options are
defined as contracts entered into between the Trust Fund, as seller, and an
unaffiliated third party, as purchaser, whereby the Trust Fund has the right,
for a defined period of time and at a set price, to sell (or "put") securities
held in the Trust Fund's investment portfolio to the third party. The Trust
Fund does not write "naked," or "uncovered," put options, i.e., contracts to
sell securities not held in the Trust Fund's investment portfolio.
Currently, the Trust Fund's investment policies require that the Trust
Fund, so long as it remains obligated as a writer (or prospective seller,
pursuant to the terms of the option), maintain in a segregated account, cash,
U.S. Treasury securities or high-grade, short-term debt securities in an amount
equal to or greater than the exercise price of the put option. It is also a
fundamental policy that the Trust Fund will not write put options where (i) the
aggregate value of the purchase obligations underlying all unexpired put options
written by the Trust Fund, determined as of the date the put options are sold,
will not at any time exceed 10% of the value of the net assets of the Trust
Fund, and (ii) the aggregate value of the securities underlying the Trust Fund's
unexpired call options (i.e., contracts to purchase securities at a set price)
together with the obligations underlying all unexpired put options, determined
as of the date the options are sold, will not at any time exceed 25% of the
value of the net assets of the Trust Fund.
The portfolio managers of the Trust Fund's investment portfolio have
recommended that the Trust Fund be empowered (i) to sell covered put options in
an amount up to 10% of the value of its net assets, excluding the aggregate
value of the securities underlying the Trust Fund's unexpired call options, and
(ii) to sell call options in an amount up to 25% of the value of its net assets,
excluding the aggregate value of the securities underlying all unexpired put
options. Thus, the effect of the change, if adopted, would be to permit the
Trust Fund's portfolio managers to unlink the 25% limitation on the Trust Fund's
put and call option positions, provided that the total amount of such positions
would, at no time, exceed 35% of the Trust Fund's net assets.
The Board of Directors believes that the risks associated with the increase
in the Trust Fund's ability to write covered put and call options from 25% to
35%, as limited by the applicable regulatory requirements and by the Board's own
restrictions and oversight of the portfolio manager's performance, are
acceptable in light of the potential to generate additional investment income
for the Trust Fund from option premiums. Accordingly, the Board of Directors
recommends a vote "FOR" the adoption of the proposed modification to the Trust
Fund's fundamental investment policies to permit the Trust Fund to write
"covered" put options in an amount up to 10% of the Trust Fund's net assets, and
to permit the Trust Fund to write call options in an amount up to 25% of the
Trust Fund's net assets.
___________
GENERAL INFORMATION
The Board of Directors of the Trust Fund knows of no other matters which
may come before the meeting. However, if any matters other than those referred
to above shall properly come before the meeting,
17
<PAGE>
it is the intention of the persons named in
the enclosed Proxy to vote the Proxy in accordance with their judgment.
Investors' proposals intended to be presented at next year's annual meeting of
Investors must be received by the Trust Fund by October 25, 1996 to be eligible
for inclusion in the Trust Fund's proxy materials relating to such meeting.
Submission of a proposal does not guarantee its inclusion in a proxy statement
or its presentation at an Investor's meeting. A copy of the annual report for
the fiscal year ended December 31, 1995 is enclosed. The annual report will
also be furnished without charge to any Investor upon request by calling the
Management Company at 1-800-231-0356.
By order of the Board of Directors of
SIFE Trust Fund
Charles W. Froehlich, Jr.
SECRETARY
18
<PAGE>
EXHIBIT A
[TIMPSON GARCIA LETTERHEAD]
January 22, 1996
Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D. C. 20549
RE: CHANGE IN AUDITORS - SIFE Trust Fund
Dear Sirs:
We have received a letter (attached) from SIFE Management Company for SIFE
Trust Fund, dated January 19, 1996, terminating our services effective for
the annual audit for the 1996 calendar year. We are in agreement with the
statements that no problem existed during the 24 months preceding the
termination relating to any matter of accounting or practices, financial
disclosure, auditing scope or procedure, or compliance with applicable rules
of the Commission, nor were any accountant's reports on their financial
statements for the past two years contained an adverse opinion or a
disclaimer of opinion or was qualified as to uncertainties, audit scope or
accounting principles. We are currently auditing the financial statements
for the 1995 calendar year and have not experienced any problems of the above
mentioned nature nor do we anticipate any.
Please accept this as our response to the above mentioned letter pursuant to
Rule 17a-5(f)(4).
If there are any questions, please contact Mr. Dennis S. Kaneshiro.
Sincerely,
/s/ Timpson Garcia
Timpson Garcia
cc: w/o attachment Mr. David M. Sacks, Chairman
SIFE Trust Fund
w/o attachment Mr. Sam Marchese, President, CEO
SIFE, Inc.
w/attachment Mr. William J. Newell, attorney-at-law
McCutchen, Doyle, Brown & Enersen
<PAGE>
EXHIBIT B
AMENDMENT TO INVESTMENT ADVISORY AGREEMENT
THIS AMENDMENT TO INVESTMENT ADVISORY AGREEMENT ("Amendment") is made and
entered into as of the first day of April, 1996, by and between SIFE TRUST FUND,
a trust established under the laws of the State of California (the "Fund") and
SIFE, a California corporation (the "Company"), as approved by BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association duly
organized and existing under and by virtue of the laws of the United States
(the "Trustee"), and by the holders of a majority in interest of Participating
Agreements representing beneficial interests in the Fund, at a regular annual
meeting of Investors duly called and held on April 1, 1996, at which a quorum
was at all times present.
WITNESSETH:
WHEREAS, the parties (including the Trustee's predecessors-in-interest)
have previously entered into an Investment Advisory Agreement dated April 3,
1972 and amended on April 3, 1995 (the "Advisory Agreement") under which the
Company acts as investment adviser of the Fund;
WHEREAS, the Fund, pursuant to an Amendment to Restated Trust Agreement of
even date herewith, has created two classes of investment units in the Fund
designated as "Class I Units" and "Class II Units" and may create additional
classes of investment units in the future;
WHEREAS, the parties agree that it is in the best interests of the Fund and
its Investors to clarify and confirm the Advisory Agreement in light of the new
classifications of Class I Units and Class II Units;
WHEREAS, the parties agree that it is in the best interests of the Fund and
its Investors to adopt a flat fee to be paid to the Company as reimbursement for
costs and expenses incurred by the Company in its capacity as the Fund's
investment adviser; and
WHEREAS, it is necessary to amend the Advisory Agreement to accomplish the
foregoing.
NOW, THEREFORE, the parties hereby agree as follows:
1. Subsection (c) of Section 1 of the Advisory Agreement shall be
amended to read as follows:
"1. APPOINTMENT OF THE COMPANY AS INVESTMENT ADVISER.
(c) PORTFOLIO SERVICING. The Company shall perform those services
which are reasonably necessary to the continued management of the portfolio
of the Fund, including the receipt and filing of notices and reports from
portfolio companies; the exercise or other proper disposition of proxies,
rights and options; the accounting for receipts and disbursements
occasioned by the purchase and sales of securities; the daily pricing of
the net asset value of the Fund's total portfolio attributable to each and
every type of investment unit in the Fund."
2. Section 3 of the Advisory Agreement shall be amended to read in
its entirety as follows:
B-1
<PAGE>
"3. AGREEMENT AS TO FUND EXPENSES
Total costs and expenses of operation of the Fund will consist of (1)
the investment advisory fee to the Company described hereinabove, (2) fees
payable to the Trustee for its services, and (3) miscellaneous costs and
expenses as described in Article V, Section 3 of the Trust Agreement. All
of these amounts will be paid on behalf of the Fund by the Company for
which the Company shall receive from the Fund assets an aggregate amount
such that the sum of (i) the amounts paid to the Company as an investment
advisory fee pursuant to the preceding Section 2 plus (ii) the Trustee's
fees pursuant to Article V, Section 3 of the Trust Agreement plus (iii) the
amounts paid pursuant to this sentence shall equal (on an annual basis) one
and twenty-five one hundredths percent (1.25%) of the Fund's average net
assets. The Fund shall make a good faith estimate of the amount due to the
Company for the preceding month and shall pay such amount to the Company
promptly. In the event the Fund pays the Company more than it is obligated
to pursuant to the preceding sentence or pays the Company less than it is
obligated to pursuant to the preceding sentence, the Company shall be paid
or shall refund the difference, as the case may be. In the event that the
expenses paid by the Company on behalf of the Fund exceed the amounts
received by the Company pursuant to this Section 3, the Company shall not
be entitled to and shall not receive any additional payment from the Fund.
In the event that the expenses paid by the Company on behalf of the Fund
are less than the amounts received by the Company pursuant to this Section
3, the Company shall not be obligated to refund nor shall the Company pay
the difference to the Fund."
3. The introductory language and subsections (a) and (b) of Section 1 of
the Advisory Agreement and all other provisions of the Advisory Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have duly executed and approved this
Amendment to the Advisory Agreement as of the date first above written.
<TABLE>
<CAPTION>
<S> <C>
SIFE TRUST FUND SIFE
By By
------------------------------ ---------------------------------
Chairman of the Board President
By By
------------------------------ ---------------------------------
Secretary Secretary
Approved by Investors:
Approved by Trustee:
BANK OF AMERICA, N.T. & S.A. I hereby certify that the holders of a majority in
interest of Participating Agreements representing
By beneficial interests in SIFE Trust Fund, at a
------------------------------ regular annual meeting of Investors duly called
Vice President and held on April 1, 1996, at which a quorum was
at all times present in person or by proxy,
approved the above amendment.
By By
------------------------------ --------------------------------
Trust Officer Secretary, SIFE Trust Fund
</TABLE>
B-2
<PAGE>
EXHIBIT C
AMENDMENT TO RESTATED UNDERWRITING AGREEMENT
THIS AMENDMENT TO RESTATED UNDERWRITING AGREEMENT ("Amendment") is made and
entered into as of this first day of April, 1996, by and between SIFE TRUST
FUND, a trust established under the laws of the State of California (the "Fund")
and SIFE, a California corporation (the "Company"), as approved by BANK OF
AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association
duly organized and existing under and by virtue of the laws of the United States
(the "Trustee") and by the holders of a majority in interest of Participating
Agreements representing beneficial interests in the Fund at a regular annual
meeting of Investors duly called and held on April 1, 1996, at which a quorum
was at all times present.
WITNESSETH:
WHEREAS, the parties have previously entered into an Underwriting Agreement
dated April 3, 1972 and amended April 1, 1974, April 1, 1976, April 1, 1985,
April 2, 1990, February 24, 1993, April 1, 1993, April 4, 1994, February 1, 1995
and February 9, 1996 (the "Underwriting Agreement") under which the Company acts
as the principal underwriter and distributor of the securities of the Fund;
WHEREAS, the Fund, pursuant to an Amendment to Restated Trust Agreement of
even date herewith, has created a new class of investment "units" in the Fund
designated as "Class II Units";
WHEREAS, the parties agree that it is in the best interests of the Fund and
its Investors to clarify and confirm that the Sales Charge applies to
Participating Agreements for Class II Units;
WHEREAS, the parties agree that it is in the best interests of the Fund and
its Investors to eliminate the Sales Charge applicable to (i) directors,
officers, employees and sales representatives of the Fund and the Company (and
their immediate family members) and (ii) registered broker-dealers (and their
registered representatives) (and the immediate family members of such broker-
dealers and representatives) purchasing Class I Units; and
WHEREAS, it is necessary to amend the Underwriting Agreement to accomplish
all of the foregoing.
NOW, THEREFORE, the parties hereby agree as follows:
l. Article 2 of the Underwriting Agreement shall be amended to read in
its entirety as follows:
2. COMPENSATION. The percentage of the offering price of each
Participating Agreement for Class I Units and Class II Units to be paid to
the Company hereunder as a sales and creation fee (the "Sales Charge")
shall be as follows: (1) 5.0% of the offering price on purchases up to
$99,999, (2) 4.0% of the offering price on purchases of $100,000 to
$249,999, (3) 3.0% of the offering price on purchases of $250,000 to
$499,999, (4) 2.5% of the offering price on purchases of $500,000 to
$999,999, and no Sales Charge for purchases of $1,000,000 or more; provided
that in computing the amount of the purchase made by an Investor for the
purpose of determining the Sales Charge applicable to his purchase, there
shall be included the aggregate value of all investment units previously
purchased or acquired and then owned by such Investor in addition to the
investment units being purchased and on which the Sales Charge is to be
calculated.
C-1
<PAGE>
For purposes of this paragraph only, the term "Investor" shall include (i)
the spouse and natural children or legally adopted children under the age
of 21 of such Investor, and (ii) Keogh plans, retirement plans, IRAs, SEP
IRAs, and trust and business accounts owned by such Investor, provided that
(x) such Investor can provide satisfactory documentation that no persons
other than the individuals listed in (i) above have an ownership right in
the subject Investor account, and (y) the subject Investor account tax
identification number is consistent with the above provisions. The value
of the investment units previously purchased or acquired shall, for the
purposes of this Article, be computed at the actual offering price at which
such units were purchased.
The entire Sales Charge, as computed above, shall be paid to and
retained by the Company as its sales commission and as compensation to the
Company for its functions as Sales Agent. The Company shall make such
compensation arrangements with its sales agents, whether employees or
independent contractors, as it may deem appropriate, under the terms of
which a portion or all of the Sales Charge shall be paid to the sales agent
as his commission. The Fund shall not be concerned with the nature of such
compensation arrangements. Class I Units shall be sold on a uniform basis
at no Sales Charge (instead of the regular Sales Charges described above)
to (i) directors, officers, bona fide full-time employees and sales
representatives of the Trust Fund and the Company (and their immediate
family members) and (ii) registered broker-dealers (and their registered
representatives) who have entered into distribution agreements with the
Company (and the immediate family members of such broker-dealers); provided
such purchaser has acted in such capacity at least ninety (90) days prior
to the purchase. Such purchases shall be made only upon the written
assurance of the purchaser that the purchase is made for investment
purposes and that the Participating Agreement so acquired will not be
resold except through redemption by the Trust Fund.
The Sales Charge may be, but need not be, reduced from time to time.
Notwithstanding anything to the contrary in this Agreement, any reduction
of the Sales Charge shall not require Investor approval. Any reduction of
the Sales Charge must be approved by a majority of the directors of the
Fund who are not interested persons and by the Company. Immediately upon
such approval, this Article shall be amended to reflect the reduced Sales
Charge.
C-2
<PAGE>
2. Every other provision of the Underwriting Agreement which makes
reference to Article 2 shall be deemed to be amended so as to make reference to
Article 2 as so amended. Capitalized terms used herein which are not defined
shall have the meanings ascribed to them in the Underwriting Agreement.
IN WITNESS WHEREOF, the parties have duly executed and approved this
Amendment to Underwriting Agreement as of the date first above written.
<TABLE>
<CAPTION>
<S> <C>
SIFE TRUST FUND SIFE
By By
------------------------------ ---------------------------------------
----------------------- ----------------------
Chairman of the Board President
By By
------------------------------ ---------------------------------------
----------------------- ----------------------
Secretary Secretary
Approved by Investors:
Approved by Trustee:
BANK OF AMERICA, N.T. & S.A. I hereby certify that the holders of a
majority in interest of Participating
By Agreements representing beneficial
------------------------------ interests in SIFE Trust Fund, at a regular
Vice President annual meeting of Investors duly called
and held on April 1, 1996, at which a
quorum was at all times present in person
or by proxy, approved the above amendment.
By By
------------------------------ ---------------------------------------
----------------------- ----------------------
Trust Officer Secretary, SIFE Trust Fund
</TABLE>
C-3
<PAGE>
EXHIBIT D
AMENDMENT TO RESTATED TRUST AGREEMENT
THIS AMENDMENT TO RESTATED TRUST AGREEMENT ("Amendment") is made and
entered into as of the first day of April, 1996, by and between SIFE, a
California corporation (the "Company"), and BANK OF AMERICA, NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking association duly organized and existing
under and by virtue of the laws of the United States (the "Trustee"), as
approved by the holders of a majority in interest of Participating Agreements
representing beneficial interests in SIFE TRUST FUND, a trust established under
the laws of the State of California (the "Fund"), at a regular annual meeting of
Investors duly called and held on April 1, 1996, at which a quorum was at all
times present.
WITNESSETH:
WHEREAS, the parties (including the Trustee's predecessors-in-interest)
have previously entered into a Trust Agreement dated November 13, 1962, which
was recompiled and restated on May 2, 1986 to incorporate all previous
amendments and amended on April 1, 1987, April 2, 1990, April 1, 1991, February
24, 1993, April 1, 1993, April 4, 1994 and April 3, 1995 (the "Trust Agreement")
and under which the Trustee acts as trustee of the Fund;
WHEREAS, the parties agree that it is in the best interests of the Fund and
its Investors to authorize the Board of Directors to create from time to time a
new class or classes of investment "units" in the Fund, such class or classes to
have such terms as may be authorized by the Board of Directors from time to
time, subject to and in accordance with the Trust Agreement and the Investment
Company Act of 1940, the rules and regulations thereunder, and the
interpretations thereof, in each case as from time to time amended, modified or
superseded;
WHEREAS, the parties agree that it is in the best interests of the Fund and
its Investors to authorize the Board of Directors to designate the class of
investment units in the Fund presently outstanding as "Class I Units" and to
create a second class of investment units to be designated as "Class II Units;"
WHEREAS, the parties agree that it is in the best interests of the Fund and
its Investors to eliminate the Sales Charge applicable to (i) directors,
officers, employees and sales representatives of the Fund and the Company (and
their immediate family members) and (ii) registered broker-dealers (and their
registered representatives) (and the immediate family members of such broker-
dealers and representatives) purchasing Class I Units; and
WHEREAS, it is necessary to amend the Trust Agreement to accomplish all of
the foregoing.
NOW, THEREFORE, the parties hereby agree as follows:
<PAGE>
1. Article I, Section 7 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article I, Section 7: PARTICIPATING AGREEMENT
The term "Participating Agreement" shall mean the individual agreement
made with each Investor under the terms of which the Investor's funds are
contributed to the Trust Fund and the Investor becomes a party to this
Trust Agreement. The term "Participating Agreement" shall collectively
refer to Participating Agreements for each and every class of investment
unit in the Fund, whether presently existing or hereafter created, unless
specifically stated otherwise."
2. Article I of the Trust Agreement shall be amended to add a new Section
11 which will read in its entirety as follows:
"Article I, Section 11: CLASS I UNITS
The term "Class I Units" shall mean the initial class of investment
units of the Fund arising under or in connection with Participating
Agreements purchased by Investors prior to May 1, 1996 (or such later date
as the Board of Directors of the Fund may determine to commence the sale
and distribution of Class II Units) (the "Class II Unit Commencement
Date"), together with investment units, which are designated as Class I
Units, purchased after the Class II Commencement Date by persons, firms or
corporations who were Investors immediately prior to the Class II
Commencement Date, or by the beneficiaries, transferees, successors and
assigns of such Investor's Class I Units, or by (i) directors, officers and
bona fide full time employees and sales representatives of the Fund and of
the Company (and their immediate family members) and (ii) registered
broker-dealers (and their registered representatives) who have entered into
distribution agreements with the Company (and the immediate family members
of such broker-dealers and registered representatives), provided such
purchaser has acted in such capacity at least ninety (90) days prior to the
purchase. For purposes of this paragraph only, "immediate family members"
shall mean the spouse (as determined in accordance with the laws of the
State of California from time to time), parents and natural children or
legally adopted children under the age of 21 of the individuals set forth
in (i) and (ii) of this Article I, Section 11."
3. Article I of the Trust Agreement shall be amended to add a new Section
12 which will read in its entirety as follows:
"Article I, Section 12: CLASS II UNITS
The term "Class II Units" shall mean the second class of investment
units of the Fund arising under or in connection with all Participating
Agreements purchased by Investors which class is being created by this
Amendment and which investment units are designated as Class II Units."
<PAGE>
4. Article II, Section 1 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article II, Section 1: EXECUTION OF AGREEMENTS
An Investor may become a party to the Agreement and obtain the
benefits and burdens of all of its terms and conditions by executing a
Subscription for Participating Agreement for an investment unit in the Fund
and delivering the same to the Fund or an authorized agent thereof. The
Subscription for Participating Agreement shall thereupon be accepted by the
Fund and delivered to the Trustee for authentication and registration.
Upon receipt of such Subscription for Participating Agreement, the Trustee
shall issue a Certificate of Participating Agreement in respect of the
applicable class of investment unit in such form as may be adopted from
time to time by the Fund and the Trustee and shall thereupon send the
original Certificate of Participating Agreement to the Investor. Before
any Certificate of Participating Agreement shall be issued, the full amount
subscribed for in the Subscription for Participating Agreement shall have
been received by the Fund. Said amount shall be a minimum of $200.00 and
may be a sum equal to any even dollar amount above the sum of $200.00.
Subsequent contributions to a Participating Agreement may be made by an
Investor at any time in a sum equal to or above the sum of $50.00."
5. Article III, Section 3 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article III, Section 3: ACCOUNT FOR EACH INVESTOR
All securities purchased for the Trust Fund shall be held in the name
of the Trustee or its nominee. The Trustee shall keep an account for each
Investor, indicating and accounting for the undivided interest of each
Investor in respect of his investment units in the total securities of the
Fund. All credits to the account of the Investor shall conclusively be
deemed to be, and upon deposit shall become, additions to the Trust
principal. Such account shall be open for inspection to any Investor
during regular business hours of the Trustee."
6. Article IV of the Trust Agreement shall be amended to add a new
Section 1 which will read in its entirety as follows:
"Article IV, Section 1: UNIT CHARACTERISTICS
(a) Except as specified to the contrary herein, each investment
unit of the Fund shall represent the same interest in the Fund and shall
have the same preferences, privileges, voting powers and other rights and
obligations, limitations, restrictions and terms and conditions of
redemption and partial withdrawal, except that: (I) expenses related to the
distribution of any class of investment units or an arrangement for
shareholder services for any class of investment units shall be borne
solely by such class; (ii) the Class I Units shall be subject to a front-
end sales load as provided herein from time to time; (iii) the Class II
Units shall be subject to a front-end sales load as provided herein from
time to time and a Rule 12b-1 service, administrative or distribution fee
as adopted, amended and continued from time to time; and (iv) any
subsequently created class of investment units of the Fund shall be subject
to such front-end sales loads, such 12b-1 service, administrative or
distribution fees and/or such contingent deferred sales charges or other
charges as
<PAGE>
the Board of Directors in its sole discretion may fix pursuant to Article
VI, Section 1. All units of a particular class shall represent an equal
proportionate interest in that class, and each unit of any particular class
shall be equal to each other unit of that class.
(b) On each matter submitted to a vote of the Investors, all
issued and outstanding investment units of each class of investment units
in the Fund shall vote together as a single class; PROVIDED, HOWEVER, that
(i) as to any matter with respect to which a separate vote of any class is
required by the Investment Company Act of 1940, the rules and regulations
thereunder, and the interpretations thereof, in each case as from time to
time amended, modified or superseded, including (without limitation)
matters related solely to a class' arrangement for services or the
distribution of units of such class or both and matters in which the
interests of one class differ from the interests of any other class, or by
the laws of the State of California, such requirement as to a separate vote
by that class shall apply in lieu of a combined vote of all classes as
described above; (ii) in the event that the separate vote requirements
referred to in subsection (b)(i) above apply with respect to one or more
classes, then subject to subsection (b)(iii) below, the units of all other
classes not entitled to a separate vote shall vote together as a single
class; and (iii) as to any matter which in the judgment of the Board of
Directors (which shall be conclusive) does not affect the interest of a
particular class, such class shall not be entitled to any vote and only the
holders of units of the one or more affected classes shall be entitled to
vote."
7. Sections 1, 2, 3, 4, 5, 6, 7 and 8 of Article IV of the Trust
Agreement are hereby renumbered as Sections 2, 3, 4, 5, 6, 7, 8 and 9,
respectively, and all references in the Trust Agreement to such Sections 1, 2,
3, 4, 5, 6, 7 and 8 are hereby amended to reflect such renumbering.
8. As renumbered pursuant to Paragraph 7 above, Article IV, Section 2 of
the Trust Agreement shall be amended to read in its entirety as follows:
"Article IV, Section 2: LIQUIDITY
The Investor may terminate or redeem his Participating Agreement
at any time without penalty or fee of any kind for such termination or
redemption. The value of the Investor's Participating Agreement at
termination will be his pro rata share (based on his investment units) of
the value of the net assets of the Trust Fund at that time as detailed
hereunder in Section 4 of this Article IV."
9. As renumbered pursuant to Paragraph 7 above, Article IV, Section 3 of
the Trust Agreement shall be amended to read in its entirety as follows:
"Article IV, Section 3: VALUATION OF TRUST FUND
The Trust Fund shall be evaluated by the Directors for all
purposes for which a total value of the Fund or an Investor's pro rata
share thereof, based on his investment units, is required, on each business
day. The time of evaluation for all assets shall be the time of closing of
the New York Stock Exchange. The basis for evaluation of the Trust Fund
assets shall be as follows: for securities which are listed, the closing
price on the Stock Exchange; for securities which are traded over the
counter and for which over-the-counter quotations are readily available,
<PAGE>
the closing bid price; for securities for which market quotations are not
readily available, the Directors' good faith appraisal. The total value of
the Trust Fund assets shall be determined by taking the sum of the value of
the securities held by the Trust Fund and adding the actual value of all
other assets of the Trust Fund. From such total value of assets all
liabilities and necessary reserves shall be deducted and the balance
resulting shall be the total net asset value of the Fund. Mechanical
computation of the daily Fund value will be made by the Trustee upon
specific instructions, including instructions as to pricing, furnished by
the Directors. The Trustee shall not be responsible for the method of
pricing selected by the Directors, and shall incur no liability or
responsibility for errors or omissions in pricing or evaluation, provided
it acts in accordance with instructions from the Fund."
10. As renumbered pursuant to Paragraph 7 above, Article IV, Section 4 of
the Trust Agreement shall be amended to read in its entirety as follows:
"Article IV, Section 4: THE INVESTMENT UNIT - VALUATION OF ACCOUNTS
(a) All funds received by the Trustee for the issue or sale of
any investment unit in the Fund, together with all funds derived from any
investment and reinvestment thereof, shall irrevocably remain attributable
to that class of units for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of the Fund. Such funds
and any funds derived from any investment and reinvestment are herein
referred to as "assets belonging to" that class. The assets belonging to
all classes of investment units in the Fund shall be invested in the same
investment portfolio of the Fund.
(b) Subject to Section 1 of this Article IV, the assets
belonging to any class of units shall be charged with the liabilities of
the Fund with respect to that class of units, if any, and with that class'
share of the liabilities of the Fund not attributable to any particular
class of units, if any, in the latter case in the proportion that the net
asset value of that class (determined without regard to such liabilities)
bears to the net asset value of all classes of the Fund's units (determined
without regard to such liabilities). The determination of the Board of
Directors shall be conclusive as to the allocation of liabilities,
including accrued expenses and reserves, and assets to a particular class
or classes.
(c) The allocation of income and capital gains and losses and
expenses (not allocated to a particular class of units pursuant to Article
IV, Section 1) of the Fund among all classes of the Fund's units shall be
determined by the Board of Directors in a manner that is consistent with
the Investment Company Act of 1940, the rules and regulations thereunder,
and the interpretations thereof, in each case as from time to time amended,
modified or superseded and in the proportion that the net asset value of
each class bears to the net asset value of all classes of the Fund's units.
The determination of the Board of Directors shall be conclusive as to the
allocation of income or capital gains and losses and expenses and assets to
a particular class or classes.
(d) All funds received by the Trustee for investment and all
funds reinvested from dividends and gains are accounted for by the Trustee
in terms of investment units, which are designated as Class I Units, Class
II Units or such other class of investment units as may be subsequently
created in accordance with this Trust Agreement, as the case may be. The
investment unit offering price shall originally be equal to one dollar of
capital invested by original Investors in the initial offering. The unit
value for investment units in any class of the Fund's investment units
<PAGE>
shall be determined by dividing the net asset value of the Fund allocable
to that class by the total number of investment units of that class
outstanding. The initial unit value will therefore be equal to the initial
unit offering price less the creation fee and such other expenses and
charges as may be applicable upon the initial contribution of assets to the
Fund. The unit value will vary after the initial investment of capital
depending upon changes in the total value of the Trust Assets belonging to
each class of investment units, and the unit offering price for each class,
being the applicable unit value plus the creation and initiation charges,
will vary accordingly. As to each class of units, amounts contributed by
Investors subsequent to the initial investment capital will be accounted
for in units of investment at the per unit offering price prevailing on the
day of investment. The Trustee's records will at all times reflect the
units of investment held by an Investor in each class of units, and the
value of the Investor's total account for each class of investment units at
any time can be computed by multiplying, for each such class of units held
by the Investor, the total number of such units held by an Investor by the
then prevailing unit value."
11. As renumbered pursuant to Paragraph 7 above, Article IV, Section 5 of
the Trust Agreement shall be amended to read in its entirety as follows:
"Article IV, Section 5: PARTIAL WITHDRAWAL
The Investor may withdraw in cash a portion of the value of his
Participating Agreement (determined in the manner set forth in Sections 3
and 4 above) by giving written notice to the Trustee of the amount so
desired to be withdrawn. Withdrawal may be made of any amount provided
that a minimum of $200.00 in the then present value of the account remains
for each Plan. Amounts so withdrawn from Participating Agreements may be
replaced without charge of Sales Charge, provided that the total amount
withdrawn is replaced in lump sums of not less than $50.00 each, and
further provided that said replacement payments are clearly identified as
replacements of capital previously withdrawn. An Investor may allocate any
replacement payment among any or all accounts listed for such Investor
under the client identification number maintained by the Company for such
Investor so long as such portion of any replacement payment allocated to
any particular account is in a lump sum of not less than $50.00. The
Trustee shall be empowered, however, to charge such fees upon partial
withdrawal and repayment as may be necessary and reasonable to cover the
actual bookkeeping and processing costs.
Payment of amounts withdrawn by Investors shall be made in cash within
three (3) days from the date or receipt by the Trustee of notice of partial
withdrawal, subject, however, to such postponements as are provided for in
Section 22(e) of the Investment Company Act of 1940.
The right of repayment of amounts withdrawn from an account in a
partial withdrawal, without charge of a Sales Charge upon such repayment,
may be terminated by resolution of the Directors of the Fund. Such
termination of the right of reinvestment of partial withdrawals without
Sales Charge shall not be effective, however, until after the expiration of
ninety days from the date of notice to all Investors of the resolution of
the Directors so terminating the right of repaying of partial withdrawals
without Sales Charge. Further, such right shall not be terminated by the
Directors except upon the determination by the Directors that continuation
of such right is in contravention to requirements of the Investment Company
Act of 1940 or rules promulgated under the authority thereof."
<PAGE>
12. Article V, Section 1 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article V, Section 1: CHARGES AND EXPENSES
To cover the costs of creation of the Investor's account, a Sales
Charge, as set forth below, shall be charged for both Class I Units and
Class II Units. A Sales Charge shall be payable from each payment for
Class I Units and Class II Units by the Investor into the Fund.
The Sales Charge shall be as follows: (1) 5.0% of the offering price
on purchases up to $99,999; (2) 4.0% of the offering price on purchases of
$100,000 to $249,999; (3) 3.0% of the offering price on purchases of
$250,000 to $499,999; (4) 2.5% of the offering price on purchases of
$500,000 to $999,999; and (5) no Sales Charge for purchases of $1,000,000
or more; provided that in computing the amount of the purchase made by an
Investor for the purpose of determining the Sales Charge applicable to its
purchase, there shall be included the aggregate value of all investment
units previously purchased or acquired and then owned by such Investor in
addition to the investment units being purchased and on which the Sales
Charge is to be calculated. For purposes of this paragraph only, the term
"Investor" shall include (i) the spouse (as determined in accordance with
the laws of the State of California from time to time) and natural children
or legally adopted children under the age of 21 of such Investor, and (ii)
Keogh plans, retirement plans, IRAs, SEP IRAs, and trust and business
accounts owned by such Investor, provided that (x) such Investor can
provide satisfactory documentation that no persons other than the
individuals listed in (i) above have an ownership right in the subject
Investor account, and (y) the subject Investor account tax identification
number is consistent with the above provisions. The value of the
investment units previously purchased or acquired shall, for the purposes
of this Article, be computed at the actual offering price at which such
units were purchased.
In addition to the Sales Charge set forth above, Class II Units shall
be subject to such other charges as may be imposed thereon in connection
with any Rule 12b-1 plan with respect to such Class II Units adopted,
amended and continued in accordance with and pursuant to the Investment
Company Act of 1940, the rules and regulations thereunder, and the
interpretations thereof, in each case as from time to time amended,
modified or superseded.
The Sales Charge and Rule 12b-1 fees may be, but need not be, reduced
from time to time. Notwithstanding anything to the contrary in Article IX,
any reduction of the Sales Charge or Rule 12b-1 fees shall not require
Investor approval. Any reduction of the Sales Charge must be approved by a
majority of the Directors who are not interested persons and by the Company
and shall be incorporated herein by this reference to Article 2 of the
Underwriting Agreement as the same may be amended from time to time. Any
reduction of the Rule 12b-1 fees must be approved in accordance with the
terms of the Rule 12b-1 plan.
No Sales Charge shall be imposed for sales of Class I Units made to
(i) directors, officers and bona fide full time employees and sales
representatives of the Fund and of the Company (and their immediate family
members) and (ii) registered broker-dealers (and their registered
representatives) who have entered into distribution agreements with the
Company (and the immediate family members of such broker-dealers and
registered representatives); provided such purchaser has acted in such
capacity for at least ninety days prior to the purchase, the purchase is
made for investment and not for resale, and the purchaser agrees that the
Participating Agreement so purchased will not be resold except through
redemption by the Fund. For purposes of this
<PAGE>
paragraph only, "immediate family members" shall mean the spouse (as
determined in accordance with the laws of the State of California from time
to time), parents and natural children or legally adopted children under
the age of 21 of the individuals set forth at the beginning of this
paragraph.
The Sales Charge shall be reduced for volume purchases of
Participating Agreements by the following organizations: Corporations,
foundations, associations and other organizations exempt from Federal
Income Tax as the same are defined by Internal Revenue Code section
501(c)(3); and employees' trust, pension, profit-sharing and other employee
benefit plans qualified for tax exempt status under Internal Revenue Code
Section 401, Individual Retirement Accounts, Custodial Accounts and
Simplified Employee Pensions (all as defined in Internal Revenue Code
Section 408; custodial accounts for annuities purchased under Internal
Revenue Code 403(b) and eligible Deferred Compensation Plans as defined in
Internal Revenue Code Section 457.
The Directors of the Trust Fund shall adopt regulations, as part of
the Trust Fund Regulations of this Fund, and shall amend the same from time
to time as the Directors deem appropriate, which regulations shall provide
a uniform schedule of rate reductions based upon increased volume
purchases, and shall further define the terms and conditions upon which
sales to such tax exempt organizations at reduced Sales Charge shall be
made."
13. Article V, Section 3 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article V, Section 3: TRUSTEE'S FEES AND FUND EXPENSES
The Trustee's fees shall be charged to the Trust Fund, which will pay
such fees periodically. The fees charged by the Trustee shall be in
accordance with actual services performed by the Trustee, at a rate
prevailing in the Trustee's business operations for similar services
performed for other entities. In addition, costs and expenses will be
incurred by the Fund for requirements and services other than the
underwriting and investment advisory services provided by the Company, such
as all expenses in connection with Board of Directors' meetings; the
compensation of Directors and Officers of the Fund; legal and auditing
fees; its taxes; transfer and dividend disbursing fees; costs incurred in
the issuance and redemption of shares; its bookkeeping costs; its allocable
share of office rent and other expenses related to maintenance of an
office; data processing and computer expense; brokerage; and all expenses
in connection with reporting to investors and governmental agencies. All
of these amounts will be paid on behalf of the Fund by the Company for
which the Company shall receive from the Fund assets an aggregate amount
such that the sum of (i) the amounts paid to the Company as an investment
advisory fee pursuant to the preceding Article V, Section 2 plus (ii) the
Trustee's fees pursuant to this Article V, Section 3 plus (iii) the amounts
paid pursuant to this sentence shall equal (on an annual basis) one and
twenty-five one hundredths percent (1.25%) of the Trust Fund's average net
assets. The Fund shall make a good faith estimate of the amount due to the
Company for the preceding month and shall pay such amount to the Company
promptly. In the event the Fund pays the Company more than it is obligated
to pursuant to the preceding sentence or pays the Company less than it is
obligated to pursuant to the preceding sentence, the Company shall be paid
or shall refund the difference, as the case may be. In the event that the
expenses paid by the Company on behalf of the Fund exceed the amounts
received by the Company pursuant to this Article V, Section 3, the Company
shall not be entitled to and shall not receive any additional payment from
the Fund. In the event that the expenses paid by the Company on behalf of
the Fund are less than the amounts
<PAGE>
received by the Company pursuant to this Article V, Section 3, the Company
shall not be obligated to refund nor shall the Company pay the difference
to the Fund."
14. Article V, Section 5 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article V, Section 5: MANNER OF PAYMENT OF FEES AND COSTS
Fees for special services as set forth in Section 4 above shall be
collected by the Trustee from the Investor prior to performance of the
requested services. Management Fees, Trustee's Fees, Rule 12b-1 fees and
operational costs of the Fund, as set forth in Sections 2 and 3 above shall
be deducted by the Trustee from general Fund assets. The Sales Charge
shall be deducted by the Trustee upon investment of the amounts paid by
Investors. Accounting for the deduction of all such fees and costs shall
be reflected in each Investor's account by virtue of his respective
undivided interest in the Fund asset values, rather than by the individual
itemization in the Investor's account. All fees and charges made to the
Fund by the Trustee shall be allocated and disbursed by the Trustee in
accordance with instructions from the Fund."
15. Article VI, Section 1 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article VI, Section 1: GENERAL CONTROL OF THE FUND
The business and affairs of the Fund shall be managed by a Board of
Directors, except insofar as specified functions are delegated to the
Trustee under the terms of this Agreement. It shall be the responsibility
of the Directors to administer and assure administration of all of the
rights and privileges of Investors as the same are set forth in this
Agreement, to designate and retain agents and employees to aid in the
administration of the Fund, and to maintain working relations with the
Trustee and the Company for the purpose of carrying out the duties of all
parties to this Trust Agreement.
Subject to Article IX of this Trust Agreement and to the Investment
Company Act of 1940, the rules and regulations thereunder, and the
interpretations thereof, in each case as from time to time amended,
modified or superseded, the Board of Directors may create from time to time
any new class of investment units of the Fund and set such front-end sales
loads, such 12b-1 service, administrative or distribution fees and/or such
contingent deferred sales charges or other charges as the Board of
Directors in its sole discretion may determine."
16. Article VI, Section 3 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article VI, Section 3: MEETINGS OF INVESTORS
Annual meetings of the Investors for the purpose of electing Directors
and conducting such other business as may be brought before the Investors
shall be held on the first business day in April of each year. Special
meetings of the Investors may also be called by resolution of the
<PAGE>
Directors of the Trust Fund or by notice executed by holders of at least
10% in interest of beneficial interests in the Trust Fund. At least
fifteen (15) days prior to each annual or special meeting the Directors
shall cause to be sent to each Investor a notice of meeting which shall
indicate the time and place of meeting. The notice shall also provide the
Investor with a form for voting by proxy. Any action taken by the
Investors at a meeting at which a majority in interest of Investors is
present, either in person or by proxy, shall be effective and binding,
regardless of failure to give notice of the meeting, if all of the
Investors consent in writing to the holding of the meeting and the taking
of the said action, the said written consents being executed either before
or after the meeting. All meetings of the Investors shall be conducted by
the President or the Chairman of the Board of the Trust Fund, and voting by
Investors may be in person or by proxy. Investors' voting interest shall
be tabulated upon the basis of investment units, as set forth in Article
IV, Section 4. Subject to Article IV, Section 1(b), investors shall have
the right to vote upon the following matters:
(a) Election of Directors (at annual meetings);
(b) Ratification of agreements made by the Directors for continued
management and investment advisory services;
(c) Approve the selection of the Trust Fund auditor;
(d) Approve any changes in fundamental policy of the Trust Fund which
may be proposed by the Directors;
(e) Vote upon any other matter or proposal in connection with which
the vote of the Investors is required by the Investment Company Act of 1940
or any other Federal or State Law governing the Trust Fund."
IN WITNESS WHEREOF, the parties have duly executed and approved this
Amendment to the Trust Agreement as of the date first above written.
SIFE Approved by Trustee:
By BANK OF AMERICA, N.T. & S.A.
------------------------------- By
President ------------------------------
Vice President
By By
------------------------------- -------------------------------
Secretary Trust Officer
Approved by Investors:
I herby certify that the holders of a majority in interest of Participating
Agreements representing beneficial interests in SIFE Trust Fund, at a regular
meeting of Investors duly called and held on April 1, 1996, at which a quorum
was at all times present in person or by proxy, approved the above amendment.
By
---------------------------------
Secretary, SIFE Trust Fund
<PAGE>
EXHIBIT E
PLAN OF DISTRIBUTION
February 9, 1996
This Plan of Distribution (the "Plan") is adopted in accordance with Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, as amended (the
"1940 Act"), by SIFE TRUST FUND, a trust established under the laws of the State
of California (the "Fund"), with respect to the Class II Units (the "Class II
Units") of the Fund which are proposed to be created, subject to the following
terms and conditions:
Section 1. ANNUAL FEE
The Fund will reimburse the distributor of its Units, SIFE, a California
corporation (the "Distributor"), or any entity that may in the future act as a
distributor for the Fund, for certain expenses incurred by the Distributor in
connection with the offering and sale of the Fund's Class II Units, provided
that payment shall be made in any month only to the extent that such payment,
together with any other payments for such expenses made by the Fund, shall not
exceed .00020833% (.249996% on an annualized basis) of the average daily net
assets of the Fund attributable to Class II Units of the Fund, for the prior
month. The expense reimbursement to the Distributor will be calculated and paid
on a monthly basis. Distribution expenses which benefit only the Class II Units
of the Fund will be borne solely by that class. Distribution expenses which
benefit more than one class of units of the Fund will be allocated in accordance
with the aggregate average daily net assets of the Fund attributable to each
such class of units.
Section 2. EXPENSES COVERED BY PLAN
Reimbursable distribution expenses incurred by the Distributor under
Section 1 of this Plan shall be all expenditures borne by the Distributor or by
any other person with which the Distributor has an agreement approved by the
Fund, which expenditures represent payment for activities primarily intended to
result in the sale of Class II Units, including, but not limited to, the
following: (i) payments to securities dealers and others engaged in the sale of
Class II Units; (ii) expenditures for support services such as telephone
facilities and expenses and Class II Unitholder services as the Fund may
reasonably request; (iii) formulation and implementation of marketing and
promotional activities, including but not limited to direct mail promotions and
television, radio, newspaper, magazine and other mass media advertising; (iv)
preparation, printing and distribution of sales literature; (v) preparation,
printing and distribution of Prospectuses of the Fund and reports for recipients
other than existing Class II Unitholders of the Fund; and (vi) provision to the
Fund of such information, analyses and opinions with respect to marketing and
promotional activities as the Fund may, from time to time, reasonably request;
except that distribution expenditures shall not include overhead costs of the
Distributor or any expenditures in connection with services which the
Distributor, any of its affiliates, or any other person have agreed to bear
without reimbursement. To the extent any activity covered by this Section 2 is
also an activity which the Company may pay for without regard to the existence
or terms and conditions of a plan of distribution under Rule 12b-1 of the 1940
Act, this Plan shall not be construed to prevent or restrict the Company from
paying such amounts outside of this Plan and without limitation hereby and
without such payments being included in the calculation in Section 1 of the
maximum amount of reimbursable payments under this Plan.
<PAGE>
Section 3. APPROVAL BY INVESTORS
The Plan will not take effect, and no fee will be payable in accordance
with Section 1 of the Plan, until the Plan has been approved by a vote of at
least a majority of the outstanding voting securities of the Fund; provided,
however, that (even if so approved) the Plan will not take effect if the
creation of the Class II Units of the Fund is not concurrently approved by a
vote of at least a majority of the outstanding voting securities of the Fund.
Section 4. APPROVAL BY DIRECTORS
Neither the Plan nor any related agreements will take effect until approved
by a majority vote of both (a) the full Board of Directors of the Fund, and (b)
those directors who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to it (the "Independent Directors"), cast in person at a
meeting or meetings called for the purpose of voting on the Plan and the related
agreements, as the case may be.
Section 5. CONTINUANCE OF THE PLAN
The Plan will continue in effect for so long as its continuance is
specifically approved at least annually by the Fund's Board of Directors in the
manner described in Section 4 above.
Section 6. TERMINATION
The Plan may be terminated at any time with respect to the Fund by a
majority vote of the Independent Directors or by vote of a majority of the
outstanding voting securities of the Fund.
The Plan may not be amended with respect to the Fund so as to increase
materially the amount of the fee described in Section 1 above with respect to
the Fund, unless the amendment is approved by a vote of at least a majority of
the outstanding voting securities of the Fund affected by such fee. Amendments
to the Plan to reduce the amount of the fee described in Section 1 above shall
not require the approval of the outstanding voting securities of the Fund
affected by such fee. In addition, no material amendment to the Plan may be
made unless approved by the Fund's Board of Directors in the manner described in
Section 4 above.
Section 8. SELECTION OF CERTAIN DIRECTORS
While the Plan is in effect, the selection and nomination of the Fund's
directors who are not interested persons of the Fund will be committed to the
discretion of the directors then in office who are not interested persons of the
Fund.
Section 9. WRITTEN REPORTS
In each year during which the Plan remains in effect, any person authorized
to direct the disposition of monies paid or payable by the Fund pursuant to the
Plan or any related agreement will prepare and furnish to the Fund's Board of
Directors, and the Board will review, at least quarterly, written reports,
complying with the requirements of the Rule, which set out the amounts expended
under the Plan and the purposes for which those expenditures were made.
<PAGE>
Section 10. PRESERVATION OF MATERIALS
The Fund will preserve copies of the Plan, any agreement relating to the
Plan and any report made pursuant to Section 9 above, for a period of not less
than six years (the first two years in an easily accessible place) from the date
of the Plan, agreement or report.
Section 11. MEANINGS OF CERTAIN TERMS
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have in light of this Plan under the Act and the rules and
regulations under the Act, subject to any exemption that may be granted to the
Fund under the Act by the Securities and Exchange Commission.
<PAGE>
APPENDIX A
TO PLAN OF DISTRIBUTION
SIFE
490 North Wiget Lane
Walnut Creek, CA 94596
____________________, 1996
[Recipient's Address]
_________________
_________________
Ladies and Gentlemen:
This letter will confirm our understanding and agreement with respect to
payments to be made to you pursuant to a plan of distribution (the "Plan")
adopted by SIFE Trust Fund (the "Trust Fund") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "Act") with respect to the sale
of Class II Units of the Trust Fund. The Plan and this related agreement (the
"Rule 12b-1 Agreement") have been approved by a majority of the Board of
Directors of the Trust Fund, including a majority of the Board of Directors who
are not "interested persons" of the Trust Fund, as defined in the Act, and who
have no direct or indirect financial interest in the operation of the Plan or in
this or any other Rule 12b-1 Agreement (the "Disinterested Directors"), cast in
person at a meeting called for the purpose of voting thereon. Such approval
included a determination by the Board of Directors of the Trust Fund that, in
the exercise of reasonable business judgment and in light of their fiduciary
duties, there is a reasonable likelihood that the Plan will benefit the Trust
Fund and its Investors. The Plan has also been approved by a vote of at least a
majority of the outstanding voting securities, as defined in the Act, of the
Trust Fund.
To the extent you provide distribution and marketing services in the
promotion of Class II Units of the Trust Fund, including furnishing services and
assistance to your customers who invest in and own shares of the Trust Fund, and
including but not limited to answering routine inquiries regarding the Trust
Fund and assisting in changing distribution options, account designations and
addresses, we shall pay you a fee of up to 0.25%, on an annual basis, of the net
asset value of the Trust Fund's Class II Units which are owned of record by your
firm as nominee for your customers or which are owned by those customers of your
firm whose records, as maintained by the Trust Fund or any agent of the Trust
Fund, designate your firm as the customer's dealer of record. We reserve the
right to increase, decrease or discontinue the fee at any time in our sole
discretion upon written notice to you.
We shall make the determination of the net asset value of Trust Fund Class
II Units, which determination shall be made in the manner specified in the Trust
Fund's current prospectus, on or about the 45th day of each quarter and pay to
you quarterly, on the basis of such determination, the fee specified above. No
such quarterly fee will be paid to you with respect to any Class I Units sold by
or through you, or any Class II Units purchased by you and redeemed or
repurchased by the Trust Fund or by us as agent within seven (7) business days
after the date of our confirmation of such purchase. In addition, no such
quarterly fee will be paid to you with respect to any of your customers if the
amount of such fee based
<PAGE>
upon the value of such customer's Class II Units will be less than $1.00.
Payment of such quarterly fee shall be made within 45 days after the close of
each quarter for which such fee is payable.
You shall furnish us with such information as shall reasonably be requested
by the Trust Fund with respect to the fees paid to you pursuant to this Rule
12b-1 Related Agreement.
If this letter correctly sets for our mutual understandings with respect to
the provision and payment of a quarterly fee based on Rule 12b-1, please
evidence your agreement by countersigning the enclosed copy of this letter and
returning it to the undersigned in the accompanying self-addressed envelope.
Very truly yours,
SIFE
Agreed and Accepted:
_________________
[Recipient]
<PAGE>
APPENDIX A
SIFE TRUST FUND
PROXY FOR ANNUAL MEETING OF INVESTORS TO BE HELD APRIL 1, 1996.
The undersigned hereby appoints Sam A. Marchese and Charles W. Froehlich,
Jr. and each of them his or her proxies, with power of substitution, to
vote that number of votes (based on units of investment held) which the
undersigned is entitled to vote pursuant to all Participating Agreements
owned by the undersigned at the ANNUAL MEETING OF INVESTORS OF SIFE TRUST
FUND to be held April 1, 1996, and at any adjournments or postponements
thereof, on any business that may properly come before the meeting,
including: The items shown below, which are referred to by the same Item
No. in the Notice of Annual Meeting set forth in the Proxy Statement.
A VOTE "FOR" PROPOSALS NUMBERED 1, 2, 3, 4, 5 AND 6 IS RECOMMENDED.
ITEM NO. 1 Election of Directors.
David M. Sacks, Diane Howard Belding, Charles W. Froehlich,
Jr., Sam A. Marchese, Haig G. Mardikian, John A. Meany and
Walter S. Newman.
(MARK ONE)
/ / FOR all nominees listed above.
/ / FOR all nominees listed above except
/ / WITHHOLD AUTHORITY to vote for all nominees listed
above.
ITEM NO. 2 Ratification of the selection of Deloitte & Touche LLP
as independent auditors for the Trust Fund for the year
ending December 31, 1996.
FOR / / AGAINST / / ABSTAIN / /
ITEM NO. 3 Approval of the continuation of the current Investment
Advisory Agreement, as amended, which amendments change the
method of compensating and reimbursing SIFE, a California
corporation.
FOR / / AGAINST / / ABSTAIN / /
IMPORTANT
---------
PLEASE
SIGN
PROXY
ON
REVERSE
SIDE
(continued on reverse side)
<PAGE>
ITEM NO. 4 Approval, in the alternative to Item No. 3, of the
continuation of the current Investment Advisory
Agreement with SIFE, a California corporation.
FOR / / AGAINST / / ABSTAIN / /
ITEM NO. 5 Approval of certain amendments to the Restated Trust
Agreement, the Underwriting Agreement and the Investment
Advisory Agreement to provide for the creation of a multiple
class structure, the designation of currently outstanding
investment units as "Class I Units," and the adoption of a
Rule 12b-1 Plan for a to-be-created class of investment
interests, to be designated "Class II Units."
FOR / / AGAINST / / ABSTAIN / /
ITEM NO. 6 Approval of an amendment to the Trust Fund's investment
policies to permit the Trust Fund to write covered put
options up to 10% of the Trust Fund's net assets, and write
call options up to 25% of the Trust Fund's net assets.
FOR / / AGAINST / / ABSTAIN / /
UNLESS OTHERWISE SPECIFIED ABOVE, THE UNITS OF INVESTMENT REPRESENTED BY
THIS PROXY SHALL BE VOTED FOR ITEMS 1, 2, 3, 4, 5 AND 6.
This Proxy will cover all investment units attributable to all
Participating Agreements owned by the undersigned. Joint owners must each
sign. Please sign the Proxy exactly as name appears below. Executors,
Administrators, Trustees, Attorneys, etc. should so indicate, when signing.
/ / Will attend Annual Meeting on April 1, 1996.
/ / Will not attend Annual Meeting.
Dated:
-----------------------------------------
------------------------------------------------
(Signature)
------------------------------------------------
(Signature)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE TRUST FUND.
RETURN
PROMPTLY
IN
THE
ENVELOPE
PROVIDED
