<PAGE>
As filed with the Securities and Exchange Commission on April 19, 1996
File No. 2-17277
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT of 1933 [x]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 39 [x]
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 18 [x]
(Check appropriate box or boxes)
SIFE TRUST FUND
(Exact Name of Registrant as Specified in Charter)
490 North Wiget Lane (510) 988-2430
Walnut Creek, California 94598
(Address of Principal Executive Offices, (Registrant's Telephone Number,
with Zip Code) including Area Code)
Sam A. Marchese
SIFE Trust Fund
490 North Wiget Lane
Walnut Creek, CA 94598
(Name and address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement
------------------------------------
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[x] on April 30, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 485
------------------------------------
DECLARATION PURSUANT TO RULE 24f-2(a)(1)
Pursuant to Rule 24f-2(a)(1) under the Investment Company Act of 1940, the
Registrant hereby declares that it has registered an indefinite amount of the
Registrant's Investment Units, representing beneficial interests in the
Registrant pursuant to Participating Agreements, under the Securities Act of
1933. The Rule 24f-2 Notice required by Rule 24f-2(b)(1) under the Investment
Company Act of 1940 was filed with the Securities and Exchange Commission on
February 28, 1996.
<PAGE>
SIFE TRUST FUND
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
FORM N-1A ITEM AND HEADING LOCATION
-------------------------- --------
Part A PROSPECTUS HEADING
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Item 1 cover page cover page
Item 2 Synopsis Summary of the Trust Fund; Summary
of Fees and Expense
Item 3 Condensed Financial Information Financial Highlights; Performance
Information
Item 4 General Description of Summary of the Trust Fund;
Registrant Investment Objectives; Investment
Policies
Item 5 Management of the Fund Management and Administration of
the Trust Fund and its Portfolio
Item 5A Management's Discussion of Fund Performance Overview
Performance
Item 6 Capital Stock and Other Investment and Valuation Matters;
Securities Privileges and Rights of Investors;
Federal Income Taxes
Item 7 Purchase of Securities Being Investment and Valuation Matters;
Offered Sales Charge, Rights of
Accumulation and Letters of Intent
Item 8 Redemption or Repurchase Privileges and Rights of Investors
Item 9 Pending Legal Proceedings Not Applicable
Part B
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HEADING IN STATEMENT OF
ADDITIONAL INFORMATION (OR, IF SO
INDICATED, IN PROSPECTUS)
---------------------------------
Item 10 Cover Page Cover Page
Item 11 Table of Contents Table of Contents
Item 12 General Information and History Not Applicable
Item 13 Investment Objectives and Investment Policies & Objectives
Policies
Item 14 Management of the Fund Management of the Trust Fund
Item 15 Control Persons and Principal Management of the Trust Fund
Holders of Securities
Item 16 Investment Advisory and Management and Administration
Other Services of the Trust Fund and its Portfolio
(Prospectus)
Item 17 Brokerage Allocation and Other Allocation of Portfolio Brokerage
Practices
Item 18 Capital Stock and Other Privileges and Rights of Investors
Securities (Prospectus)
Item 19 Purchase, Redemption and Pricing Investment and Valuation Matters
of Securities Being Offered (Prospectus); Sales Charge, Rights
of Accumulation and Letters of
Intent (Prospectus); Privileges and
Rights of Investors (Prospectus)
Item 20 Tax Status Additional Federal Income Tax
Information; Federal Income Taxes
(Prospectus)
Item 21 Underwriters Management of the Trust Fund;
Distribution Matters
Item 22 Calculation of Performance Data SIFE Trust Fund Performance Record;
Performance Information
Item 23 Financial Statements Financial Statements
Part C
------
Information required to be included in Part C is set forth under the appropriate
Item in Part C of this Registration Statement.
<PAGE>
[logo]
PROSPECTUS
SIFE TRUST FUND
CLASS I & CLASS II UNITS
------------------------------
Managed by SIFE, Inc.
490 North Wiget Lane
Walnut Creek, California 94598
Telephone: (800) 231-0356 / (510) 988-2430
Fax: (510) 943-1783
Internet Address: http://www.SIFE.com
------------------------------
PRINCIPAL OBJECTIVES OF A SIFE INVESTMENT
1. CONSERVATION OF THE INVESTOR'S CAPITAL
2. CAPITAL GROWTH
3. DIVERSIFICATION AND CONCENTRATION
SIFE Trust Fund (the "Trust Fund") seeks to conserve its Investors'
capital and provide capital growth consistent with prudent investment management
practices by investing not less than 30% of the Trust Fund's assets in the
equity securities of a number of carefully selected financial institutions, and
the remainder in the equity securities of a diverse portfolio of carefully
selected service and industrial enterprises generally regarded as "stable
growth" companies. Unless the Trust Fund receives instructions to the contrary,
all dividend income on portfolio securities received by the Trust Fund and net
capital gains realized upon the sale of portfolio securities is reinvested on
behalf of each Investor in additional investment units. For more details about
the Trust Fund's investment objectives and policies, see "Investment Objectives"
and "Investment Policies."
This Prospectus contains information a prospective investor should
consider before investing in the Trust Fund. A Statement of Additional
Information, dated April 30, 1996, containing additional and more detailed
information about the Trust Fund (the "Statement of Additional Information"),
has been filed with the Securities and Exchange Commission and is hereby
incorporated by reference into this Prospectus. The Statement of Additional
Information, which may be revised from time to time, is available without charge
and can be obtained by writing or calling the Trust Fund at the address or
telephone number set forth above.
INVESTORS SHOULD READ AND RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY OTHER REGULATORY AGENCY PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
APRIL 30, 1996
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary of the Trust Fund 3
Investment Policies 3
Investment in the Trust Fund 3
Class I & Class II Units 3
Sales Charge & Redemptions 3
Federal Income Taxes 3
Summary of Fees and Expenses 4
Financial Highlights 5
Performance Information 6
Investment Objectives 6
Conservation of Capital 6
Capital Growth 6
Diversification & Concentration 6
Investment Policies 7
Fundamental Investment Policies 7
Writing Covered Call and Put Options 7
Lending Portfolio Securities 9
Repurchase Agreements 9
Investment and Valuation Matters 9
The Investment Unit 10
Valuation of the Trust Fund 10
Distributions of Dividend Income and Capital Gains 10
Distribution of Investment Interests 10
Sales Charge, Rights of Accumulation and Letters of Intent 11
Privileges and Rights of Investors 12
Termination of Investment and Redemption of Value 12
Partial Redemptions 12
Repayment Privilege after Partial Redemption 12
Beneficiary and Transfer Rights 13
Voting Control of the Trust Fund 13
Dividends and Distributions 13
Management and Administration of the Trust Fund and its Portfolio 14
Performance Overview 14
Portfolio Overview 14
Takeovers 15
Turnover Rate 15
Cash Position 15
Performance During the Year 15
Non-Bank Investments 15
Federal Income Taxes 15
Comparison Chart: Change in Value of $9,500 Net Investment vs.
S&P 500 (10 years) 16
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE STATEMENT
OF ADDITIONAL INFORMATION, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY
STATE OR JURISDICTION IN WHICH SUCH OFFER MAY NOT LAWFULLY BE MADE.
2
<PAGE>
SUMMARY OF THE TRUST FUND
SIFE Trust Fund (the "Trust Fund") was organized as a trust under the
laws of the State of California on September 26, 1960; the Declaration of Trust
has been substantially amended several times.
The Trust Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end diversified investment company, and offers redeemable
securities, represented by "Participating Agreements" and denominated as
"investment units," to the public. SIFE, Inc., a California corporation (the
"Management Company"), acts as the investment adviser and principal underwriter
for the Trust Fund, as well as its Transfer Agent. The Management Company does
not act in a similar capacity for any other person or entity.
INVESTMENT POLICIES: The Trust Fund's investment policies require the
investment of not less than 30% of the Trust Fund's assets in selected
"financial institutions," which are defined as companies which derive a
significant portion of their income from dealing in money, credit, loans and
insurance. The Trust Fund also invests in the equity securities of a diverse
portfolio of carefully selected service and industrial enterprises generally
regarded as "stable growth" companies; however, the Trust Fund may not invest
25% or more of its assets in any one industry other than financial institutions.
These policies are regarded as fundamental investment policies, and may not be
changed other than by the approval of a majority in interest of the Trust Fund's
investment units.
INVESTMENT IN THE TRUST FUND: An investment in the Trust Fund may be
made for an initial minimum investment of $200; additional investments may be
made in increments of $50 or more. Investments in the Trust Fund are made at
net asset value per investment unit, with the value of each class of investment
unit determined daily by dividing the Trust Fund's net assets by the number of
investment units of each class outstanding on that day, less whatever fees and
expenses may be attributable to each class.
CLASS I & CLASS II UNITS: The Trust Fund currently offers two classes
of investment units, "Class I" and "Class II" units. Class I units are offered
only to Investors who had invested in the Trust Fund on or prior to April 30,
1996, and to directors, employees and registered representatives of the
Management Company, as well as to broker/dealers and immediate family members of
any of the foregoing. Class II units are similar in all respects to Class I
units, except that Class II units are subject to a Rule 12b-1 fee (a charge
against fund assets attributable to the Class II units that is used to pay
certain distribution expenses, in accordance with Rule 12b-1 under the
Investment Company Act of 1940). Although only Class I and Class II Units are
being offered currently, the Trust Fund has reserved the right to create
additional classes of investment units with different income and expense
characteristics in order to tailor such characteristics 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.
SALES CHARGE & REDEMPTIONS: The sales charge applicable to an investment
ranges from no sales charge for purchases of $1,000,000 or more to a maximum of
5.0% of the offering price (5.26% of the net amount invested). No sales charge
applies to reinvestments of dividends or capital gains. An Investor may redeem
Class I or Class II Units, and, under certain conditions, may invest an amount
representing previous redemptions into any eligible account maintained with the
Trust Fund without a sales charge or other fee being assessed.
FEDERAL INCOME TAXES: As a "regulated investment company" under
Subchapter M of the Internal Revenue Code, the Trust Fund distributes all of its
net income from dividends and capital gains to its Investors. Such
distributions are taxable to Investors currently even if such distributions are
reinvested on behalf of Investors in additional investment units (Investors not
subject to current taxation, such as retirement accounts, generally are not
required to pay tax on any amounts distributed until redemption occurs).
Redemptions and transfers between accounts may be taxable sales of investment
units and may result in the recognition of taxable gain or loss for federal
income tax purposes. Distributions and redemptions may also be subject to state
and local income taxes. The benefits of a California trust, which, under certain
circumstances, may include the avoidance of probate, may not be available to
residents of states other than California.
3
<PAGE>
SIFE TRUST FUND
------------------------------
SUMMARY OF FEES AND EXPENSES
The purpose of the following tables is to assist an Investor in
understanding the costs associated with an investment in the Trust Fund.
<TABLE>
<CAPTION>
INVESTOR TRANSACTION EXPENSES CLASS I UNITS CLASS II UNITS
<S> <C> <C>
Maximum Sales Load Imposed on Purchases(1)
(as a percentage of offering price) 5.0% 5.0%
Maximum Sales Load Imposed on Reinvestment of Dividends none none
Deferred Sales Load none none
Redemption Fees none none
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees(2) 1.25% 1.25%
Other Expenses(2) none none
12b-1 Distribution Fees(3) none 0.25%
Total Fund Operating Expenses 1.25% 1.50%
</TABLE>
Example of Expenses(4)
- - ----------------------
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
CLASS I UNITS $62 $88 $115 $194
CLASS II UNITS $65 $95 $128 $220
</TABLE>
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(1) Sales charges are reduced for certain large purchases, see "Sales
Charges, Rights of Accumulation and Letters of Intent."
(2) At the 1996 Annual Meeting, the Investors approved a change in the
method of reimbursing and compensating the Management Company, effective
April 1, 1996. Prior to that date, the Management Company received (i)
an investment advisory fee of 0.60% of the Trust Fund's net assets, per
annum, plus (ii) reimbursement of certain expenses attributable to the
operation of the Trust Fund (in 1995, such expenses were approximately
0.43% of the Trust Fund's net assets). From April 1, 1996, the
Management Company will be responsible for all of the Trust Fund's
operating expenses, without limitation, and, in exchange, receives 1.25%
of the Trust Fund's net assets, per annum, without further compensation
or reimbursement.
(3) Rule 12b-1 distribution fees, applicable to Class II units only, may not
exceed 0.25% per annum of the average net assets attributable to the
Class II units.
(4) Use of this assumed annual return of 5.0% is required by the Securities
and Exchange Commission, and should not be considered indicative of past
or future performance.
4
<PAGE>
SIFE TRUST FUND
------------------------------
FINANCIAL HIGHLIGHTS
The information set forth in this table has been audited by Timpson
Garcia, independent certified public accountants, as indicated in the
"Independent Auditor's Report" contained in the Statement of Additional
Information.
Selected data for an investment unit outstanding throughout each year
and ratios and supplemental data is as follows (information is for Class I units
only, in that no Class II units will be offered for sale or sold until May 1,
1996):
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER UNIT DATA:
Net asset value, beginning of year $3.55 $3.83 $3.68 $2.90 $2.12 $2.92 $2.63 $2.32 $2.70 $2.48
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income 0.10 0.09 0.07 0.06 0.08 0.11 0.11 0.09 0.11 0.12
Net realized and unrealized gains
(losses) on securities 1.68 (0.13) 0.29 0.92 0.90 (0.75) 0.42 0.36 (0.30) 0.25
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations 1.78 (0.04) 0.36 0.98 0.98 (0.64) 0.53 0.45 (0.19) 0.37
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net investment income (0.10) (0.09) (0.07) (0.06) (0.08) (0.11) (0.11) (0.09) (0.11) (0.12)
Distributions from capital gains (0.65) (0.15) (0.14) (0.14) (0.12) (0.05) (0.13) (0.05) (0.08) (0.03)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (0.75) (0.24) (0.21) (0.20) (0.20) (0.16) (0.24) (0.14) (0.19) (0.15)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of year 4.58 3.55 3.83 3.68 2.90 2.12 2.92 2.63 2.32 2.70
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL RETURN (%) * 49.9 (1.5) 9.3 33.9 47.3 (22.1) 20.2 19.8 (8.2) 16.0
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
RATIOS & SUPPLEMENTAL DATA
Net assets, end of year (in millions) $614 $410 $414 $345 $260 $204 $289 $241 $224 $217
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Ratio to average net assets (%):
Expenses# 1.03 0.94 1.02 0.99 1.04 1.07 1.03 1.10 1.03 1.05
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income 2.25 2.27 1.69 1.73 3.03 4.63 3.52 3.52 3.31 3.46
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Portfolio turnover rate (%) 93.5 25.2 28.7 33.4 77.6 42.3 41.7 20.7 37.2 25.8
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
- - ------------------------------
* Sales loads are not reflected in total return.
# At the 1996 Annual Meeting, the Investors approved a change in the
method of reimbursing and compensating the Management Company, effective
April 1, 1996. Prior to that date, the Management Company received (i)
an investment advisory fee of 0.60% of the Trust Fund's net assets, per
annum, plus (ii) reimbursement of certain expenses attributable to the
operation of the Trust Fund (in 1995, such expenses were approximately
0.43% of the Trust Fund's net assets). From April 1, 1996, the
Management Company will be responsible for all of the Trust Fund's
operating expenses, without limitation, and, in exchange, receives 1.25%
of the Trust Fund's net assets, per annum, without further compensation
or reimbursement.
5
<PAGE>
PERFORMANCE INFORMATION
From time to time the Trust Fund advertises, among other things, its
"average annual compounded total return" and its "average annual total return"
over the one, five and ten year periods. The terms "average annual compounded
total return" and "average annual total return" both refer to a calculation that
assumes a gross investment in the Trust Fund of $10,000 (resulting in a net
investment of $9,500 after deduction of the 5.0% maximum sales charge) at the
start of the applicable period. Total return is the percentage change in value
of the hypothetical $10,000 invested over a given period, assuming reinvestment
of all net capital gains and dividends attributable to such amount. Compounded
total return assumes continuing reinvestment of each year-end amount, with the
next year's return calculated based on the actual performance of the Trust Fund
in that calendar year. The annual percentage changes are then averaged, on a
compounded basis, over a ten year period resulting in an "average annual
compounded total return" or "average annual total return." Any performance
information used by the Trust Fund is based on historical results, and is not
intended to be representative of future performance. It should be noted that,
because Class II units are subject to a Rule 12b-1 distribution fee, the
future performance of Class II units will be less than that of Class I units.
INVESTMENT OBJECTIVES
The Trust Fund is designed for people who wish to create a capital fund
for some future use. Unless the Trust Fund receives instructions to the
contrary, all dividend income on portfolio securities received by the Trust Fund
and net capital gains realized upon the sale of portfolio securities is
reinvested on behalf of each Investor in additional investment units. Since the
Trust Fund's assets consist primarily of common stocks, it must be emphasized
that the value of an investment will fluctuate in accordance with the market
value of such stocks. Accordingly, in a declining market, the unit value of an
investment will decline and an Investor will incur a loss upon the termination
and redemption of an investment when the Investor's pro rata share of the Trust
Fund assets is less than his or her cost.
Set forth below are the investment objectives of the Trust Fund, which
may not be changed without a vote of a "majority in interest" of the holders of
investment units (when used in this Prospectus, this quoted language means the
LESSER of (a) 67% of the investment units voting at a meeting at which more than
50% of all outstanding investment units are represented, or (b) more than 50% of
all outstanding investment units).
CONSERVATION OF CAPITAL: As noted on the cover page of this Prospectus,
the Trust Fund seeks to conserve its Investors' capital by investing not less
than 30% of the Trust Fund's assets in the equity securities of a number of
carefully selected "financial institutions" (defined as companies which derive a
significant portion of their income from dealing in money, credit, loans and
insurance), and the remainder in the equity securities of a diverse portfolio of
carefully selected service and industrial enterprises generally regarded as
"stable growth" companies; the Trust Fund cannot invest more than 25% of its
assets in any one industry other than financial institutions. Unless the Trust
Fund receives instructions to the contrary, all dividend income and net capital
gains realized upon the sale of portfolio securities is reinvested on behalf of
each Investor in additional investment units.
CAPITAL GROWTH: The Trust Fund seeks to provide capital appreciation
consistent with prudent investment management practices by investing in the
equity securities of financial institutions and other enterprises where the
Trust Fund determines that a favorable relationship between the value of a
security, as determined by price/earnings ratios and certain other analytic
information, and its growth potential exists. In selecting an investment, the
Trust Fund will take into consideration such factors as the company's
management, growth prospects, business operations, revenues, earnings, cash
flows and strength of the balance sheet, as well as other information which the
Trust Fund may deem relevant, including size of the dividend, if any. The Trust
Fund invests in the securities of those companies which show strong financial
results coupled with good growth prospects, and which the Trust Fund believes
are well-managed. The Trust Fund may also invest in the securities of financial
institutions which it believes may be the target of, or will benefit from,
consolidation in the financial services industry. It is a fundamental
investment policy of the Trust Fund that not less than 30% of the Trust Fund's
assets will, at all times, be invested in the equity securities of financial
institutions. A "financial institution" is an enterprise which derives a
"significant portion" of its income from dealing in money, credit, loans and
insurance.
DIVERSIFICATION AND CONCENTRATION: Financial institutions, such as
banks and insurance companies, finance and engage directly in a broad range of
economic activities, thus providing an element of diversification of
6
<PAGE>
investment risk. The Trust Fund believes that the performance of a business
enterprise which participates in a broad range of economic activity, either
through direct investment or indirect financing, will be less likely to rise or
fall with the fortunes of any one type of business activity. Further, by
investing in financial institutions which are active in different regions (or,
in the case of large, "money center" banks, active internationally), the Trust
Fund attempts to minimize the effect of economic conditions which may affect one
region but not necessarily another.
It is clear, however, that diversification of the character discussed
above does not necessarily reduce or eliminate the risk inherent in an
investment in a portfolio containing a substantial number of financial
institution securities. Financial institutions, as a group, are subject to both
capital risk (i.e., the risk that, in periods of tight money or high inflation,
the cost to attract deposits will rise substantially) and credit risk (i.e., the
risks attendant to lending money for long periods of time at fixed or only
partially adjustable interest rates against the security of assets, the
valuations of which may fluctuate with economic conditions), both of which may,
from time to time, require substantial additions to reserves against losses.
Further, in that financial institutions are subject to regulation and
supervision by federal and/or state governmental authorities to a greater extent
than other enterprises, there is a certain degree of regulatory risk as the
policies of the federal and/or state governments change the way financial
institutions conduct their business. In addition, institutions such as
insurance companies that hold large portions of their capital in marketable
securities are subject to the risks of the securities market.
INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT POLICIES: All of the policies set forth in this
subsection, as well as any other policy in this section specifically noted as
such, are "fundamental investment policies" of the Trust Fund, and may not be
changed without a vote of a majority in interest of the holders of investment
units. All other investment practices may be changed from time to time by the
Trust Fund's Board of Directors. Additional information concerning the Trust
Fund's investment practices, including the Trust Fund's fundamental investment
policies, may be found in the Statement of Additional Information.
As described above, the Trust Fund invests not less than 30% of its
assets in the equity securities of a number of carefully selected financial
institutions. The Trust Fund will also invest in the common or preferred
stocks, or securities convertible into common or preferred stocks, of
non-financial institutions, generally service and industrial enterprises
generally regarded as "stable growth" companies. A reserve of cash may be
maintained by the Trust Fund for the purpose of making such cash payments as may
be required of it; pending application or investment, cash reserves are commonly
invested by the Trust Fund in repurchase agreements and other cash equivalents,
such as liquid securities of the United States, securities issued by state
governments or government agencies, certificates of deposit or other
interest-bearing accounts and high-grade commercial paper.
In addition to the securities of financial institutions and of service
and industrial companies domiciled in the United States, the Trust Fund may
invest in the American Depository Receipts ("ADRs") of certain international
business enterprises. ADRs are securities representing an undivided fractional
interest in a pool of securities issued by a non-United States company and
deposited in a trust for the benefit of the ADR holders. ADRs are registered
with the Securities and Exchange Commission by the trustee (commonly a
commercial bank) on behalf of the issuer, and are traded domestically on one or
more of the securities exchanges.
The Trust Fund may not invest 25% or more of its assets in any one
industry other than financial institutions. Insofar as 80% of the Trust Fund's
investment portfolio is concerned, in order for the shares of a company to be
eligible for investment, the company must have been in existence for at least
five years, must have assets of more than $7,000,000, and must have paid
dividends in each of the five years immediately preceding investment.
Investments may not be made in any one company in an amount greater than 5.0% of
the total asset value of the Trust Fund, nor may the Trust Fund acquire more
than 10% of the outstanding voting securities of any company.
WRITING COVERED CALL AND PUT OPTIONS: Subject to certain limits, the
Trust Fund may write (sell) covered "call" options on securities held by the
Trust Fund for non-speculative or hedging purposes, may write covered "put"
options on securities for the same purposes, and may enter into closing purchase
transactions with respect to such options. The premium paid by the purchaser of
an option reflects, among other things, the relationship of the
7
<PAGE>
exercise price to the market price and volatility of the underlying security,
the remaining term of the option, supply and demand and interest rates. The
exercise price of an option may be below, equal to, or above the current market
value of the underlying securities at the time the option is written.
Covered "put" options are defined as contracts entered into between the
Trust Fund, as seller, and the Options Clearing Corporation, as agent for
unaffiliated third parties, as purchaser, whereby the Trust Fund grants to the
purchaser the right, for a defined period of time and at a set price, to sell
specific securities to the Trust Fund. Similarly, covered "call" options
written by the Trust Fund enable the purchaser of the option to obligate the
Trust Fund to sell specific securities held in the Trust Fund's investment
portfolio. It should be noted that, so long as its obligation as a call option
writer continues, the Trust Fund, in return for the premium, has given up the
opportunity for profit from a price increase in the underlying security above
the exercise price and has retained the risk of loss should the price of the
security decline. As a covered call option writer, the Trust Fund has no
control over when it may be required to sell the underlying securities.
It is a fundamental investment policy of the Trust Fund that, so long as
the Trust Fund remains obligated as a writer of an 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 nominal value of the
put option (call options are backed by actual securities held in the Trust
Fund's investment portfolio); the Trust Fund does not write "naked," or
uncovered, options. Also, it is a fundamental investment policy that the Trust
Fund will not write options where (i) the aggregate value of the purchase
obligations underlying all unexpired put options written by the Trust Fund
(which positions are marked-to-market daily) will not at any time exceed 10% of
the value of the net assets of the trust fund, and (ii) the nominal value of
the Trust Fund's unexpired call options will not at any time exceed 25% of the
value of the net assets of the trust fund, provided that the total amount of
such positions would, at no time, exceed 35% of the Trust Fund's net assets..
The Trust Fund may write call or put options only if the underlying
securities are listed on a national securities exchange or the NASDAQ National
Market System and the options are issued by The Options Clearing Corporation.
As of the date of this Prospectus, such options are traded on the following
exchanges: Chicago Board Options Exchange, Incorporated, American Stock
Exchange, Inc., New York Stock Exchange, Inc., Philadelphia Stock Exchange,
Inc., and Pacific Stock Exchange, Incorporated.
If an option expires unexercised, the Trust Fund realizes a gain in the
amount of the premium. However, such a gain, in the case of a call option may
be offset by a decline in the market value of the underlying security during the
option period. In the case of a put option, the gain in the amount of the
premium may be offset by the additional amount of income, if any, that would
have been generated had the funds used to cover the potential exercise of the
put option not been maintained in the form of cash or cash-equivalents.
If a call option is exercised, the transaction may result in a loss to
the Trust Fund equal to the difference between the market price of the
underlying security at exercise and the sum of the exercise price of the call
plus the premium received from the sale of the call. If a put option is
exercised, there may be a loss to the Trust Fund equal to the difference between
(i) the exercise price of the put less the premium received from the sale of the
put, and (ii) the market price of the underlying security at exercise.
If the Trust Fund has written a call or put option and wishes to
terminate its obligation, it may effect a "closing purchase transaction" by
buying an option of the same series as the option previously written. The
effect of this purchase is that the Trust Fund's position as a writer of that
option will be canceled by The Options Clearing Corporation; however, the Trust
Fund may not effect a closing purchase transaction on a particular option after
it has been notified of the exercise of that option. If the Trust Fund wishes
to sell a security on which a call has been written, it may effect a closing
purchase transaction simultaneously with or before selling the security.
A closing purchase transaction is effected on an exchange which provides
a secondary market for an option of the same series. If the Trust Fund is unable
to effect a closing purchase transaction with respect to a call option, it will
not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. Accordingly, the Trust Fund may
run the risk of either foregoing the opportunity to sell the underlying security
at a profit or being unable to sell the underlying security as its price
declines. If the Trust Fund is unable to
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<PAGE>
effect a closing purchase transaction with respect to a put option, it will not
be able to remove funds from the segregated account maintained by the Trustee
which are being held to cover the potential exercise of the put option.
In the event a closing purchase transaction is effected, a profit or
loss may be realized depending on whether the cost of making the closing
purchase transaction is less or greater than the premium received upon writing
the original option. Because increases in the market price of a call will
generally reflect increases in the market price of the underlying security, any
loss resulting from a closing purchase transaction will often be offset in whole
or in part by appreciation of the underlying security owned by the Trust Fund.
If a closing purchase transaction results in a gain, that gain may be partially
or entirely offset by depreciation of the underlying security.
LENDING PORTFOLIO SECURITIES: The Trust Fund may lend its portfolio
securities in accordance with applicable regulatory requirements. Such loans
may be made only to banks and member firms of the New York Stock Exchange deemed
by the Management Company to be of good standing, and must be secured by
collateral equal to the market value of the securities loaned. If the market
value of the loaned securities increases over the value of the collateral, the
borrower must promptly put up additional collateral; if the market value
declines, the borrower is entitled to a return of the excess collateral. The
types of collateral currently permitted are cash, securities issued or
guaranteed by the United States Government or its agencies, irrevocable standby
letters of credit issued by banks acceptable to the Trust Fund, or any
combination thereof. It is a fundamental investment policy of the Trust Fund to
limit the quantity of loaned portfolio securities so that the aggregate market
value, at the time the loan is made, of all portfolio securities on loan will
not exceed one-third of the value of the Trust Fund's net assets.
During the existence of a loan, the Trust Fund will continue to receive
the equivalent of the interest or dividends paid by the issuer on the securities
loaned. In addition, the Trust Fund will receive a negotiated loan fee or
premium from the borrower or, in the case of loans collateralized by cash or
government securities, will retain part or all of the income realized from the
investment of cash collateral or the interest on the government securities.
Under the terms of its securities loans, the Trust Fund has the right to call
the loan and obtain the securities loaned at any time from the borrower within
three trading days of notice. Voting rights may pass with the lending of
securities. However, the Trust Fund will be obligated either to call the loan
in time to vote or consent or to otherwise obtain rights to vote or consent, if
a material event affecting the investment is to occur. The Trust Fund may pay
reasonable finder's, custodian and administrative fees in connection with the
securities loaned. As with other extensions of credit there are risks of delay
in recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. Loans of portfolio securities will be made only
when, in the judgment of the Trust Fund, the income to be generated by the
transaction justifies the attendant risks.
REPURCHASE AGREEMENTS: The Trust Fund may enter into repurchase
agreements with banks and member firms of the New York Stock Exchange deemed by
the Management Company to be of good standing. A repurchase agreement is a
contract under which the Trust Fund acquires United States Government securities
for a relatively short period (usually not more than one week) subject to the
obligations of the seller to repurchase and the Trust Fund to resell the
security at a fixed time and price (representing the Trust Fund's cost plus
interest). The Trust Fund bears a risk of loss in the event that the other
party to a repurchase agreement defaults on its obligations and the Trust Fund
is delayed or prevented from exercising its rights to dispose of the collateral
securities.
INVESTMENT AND VALUATION MATTERS
The Trust Fund continuously offers Class I and Class II units for a
minimum initial investment of $200, and minimum subsequent investments of $50.
Class I units are offered only to persons who became Investors on or prior to
April 30, 1996, and to directors, employees and registered representatives of
the Management Company, as well as to broker/dealers and immediate family
members of any of the foregoing. Class II units are similar in all respects to
Class I units, except that Class II units are subject to a Rule 12b-1
distribution fee, currently 0.25% per annum of assets invested. It should be
noted that, because Class II units are subject to a Rule 12b-1 distribution fee,
the net asset value of Class I and Class II units will differ.
If all necessary documentation, accompanied by proper payment, is
received by the Trust Fund by 1:00 p.m. Pacific Time, the purchase will be
effective on the day of receipt; if, however, documentation or payment is
received after such time, the purchase will be effective on the next day on
which the Trust Fund's assets are valued. All
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<PAGE>
orders and instructions must be in writing, and all payments must be denominated
in United States dollars and made by checks or other instruments which may be
cleared through the Federal Reserve System; no cash will be accepted.
THE INVESTMENT UNIT: Investments in Class I and Class II units are made
pursuant to a "Participating Agreement." Each individual Class I or Class II
unit represents an undivided fractional share of the Trust Fund's net assets,
with the value of each Class I or Class II unit, as the case may be, determined
by dividing the total net asset value of each class on any given day by the
total number of units of each such class then outstanding. Accordingly, an
investment in either class will result in a number of investment units of such
class determined by (1) subtracting from the payment received the appropriate
sales charge, if any, and then (2) dividing the result by the value of the
investment unit of such class, computed as of the next valuation of the Trust
Fund following receipt of the payment. The Management Company's records will at
all times reflect the number of investment units of each class attributable to
each Investor's account(s). The value of each account at any time can be
computed by multiplying the total number of units of each class held by the
accountholder by the then prevailing unit value.
In the case of Class II Units, the Rule 12b-1 distribution fee of 0.25%
per annum of assets invested is calculated on the basis of a 365-day year, and
charged on a daily basis against the total net asset value attributable to the
Class II Units. Thus, although the assets attributable to the Class I and Class
II Units will be commingled in the Trust Fund's portfolio, the value of each
Class II unit will be less than the value of each Class I Unit.
VALUATION OF THE TRUST FUND: The total net asset value per class of the
Trust Fund is computed on each business day for the New York Stock Exchange, as
of the closing of that Exchange (usually 1:00 p.m. Pacific Time); no valuation
is made, therefore, on weekends, customary holiday closings or under any
emergency circumstances as determined by the Securities and Exchange Commission.
The Trust Fund's portfolio value is calculated by adding together the values of
all securities, based on their closing prices on the exchange on which they are
primarily traded, or at the last available closing price or, if unavailable for
any reason, at the closing bid price. The net asset value is then determined by
adding the portfolio value to the actual value of all other Trust Fund assets,
and subtracting all liabilities and necessary reserves.
The value of a unit of any class is its net asset value ("NAV"), which
is calculated by dividing the total value of all assets attributable to such
class by the number of units of such class then outstanding. A pro rata portion
of the management fee of 1.25% per annum, and, in the case of Class II units,
the Rule 12b-1 distribution fee of 0.25% per annum, is charged against the
assets of the Trust Fund on a daily basis.
DISTRIBUTIONS OF DIVIDEND INCOME AND CAPITAL GAINS: Unless the Trust
Fund receives a specific written instruction to the contrary, all dividend
income on portfolio securities and realized net capital gains are reinvested in
additional investment units of the same class for the account of each Investor,
without the imposition of an additional sales charge by the Investor. It should
be noted that, notwithstanding the reinvestment of income and capital gain
items, the amount of the net investment income or gain will nevertheless be
includible in the Investor's gross income as ordinary income or capital gain for
tax purposes.
All available net investment income and realized gains from options as
of the last business day of February, May, August and December in each year are
distributed proportionately to the account of each Investor on the basis of the
number of units credited to each account related to the total number of units
outstanding as of the close of business on that day. The amount so distributed
is immediately reinvested in additional units at the net asset value per unit on
that day, calculated by including the distribution. Realized net capital gains,
if any, from securities held for more than one year are allocated
proportionately to the account of each Investor, in the same manner as net
investment income, once annually as of the last business day of November, and
are distributed to each Investor's account by December 31. Realized net
long-term capital gains, if any, from securities held for less than one year
are allocated proportionately to the account of each investor once annually as
of the last business day of December, and are distributed to each investor's
account by December 31.
DISTRIBUTION OF INVESTMENT INTERESTS: SIFE, Inc., located at 490 North
Wiget Lane, Walnut Creek, California 94598, acts as the Trust Fund's underwriter
in the continuous sale and distribution of the Trust Fund's investment units
pursuant to an Underwriting Agreement. All sales charges attributable to any
investment, including the Rule 12b-1 distribution fee attributable to Class II
Units, is retained by SIFE, Inc. as underwriting and
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distribution compensation. SIFE, Inc is solely responsible for all of the costs
and expenses of distribution, without limitation, including the payment of
commissions and related costs and expenses, and such other distribution fees as
may be necessary or appropriate, to broker/dealers, salespersons, financial
planners and other independent contractors. Sales are made not only through the
registered representatives of SIFE, Inc., but also through selected
broker/dealers who have entered into distribution agreements. Where sales are
made through such broker/dealers, a concession of up to 100% of the sales charge
may be allowed the broker/dealer. Certain directors of the Trust Fund
(including Sam A. Marchese, Diane Howard Belding and Charles W. Froehlich, Jr.)
are also officers and directors of SIFE, Inc.
SALES CHARGE, RIGHTS OF ACCUMULATION AND LETTERS OF INTENT
A sales charge of up to 5.0% of the amount of an investment may be
charged to the Investor to cover all direct selling expenses, including sales
commissions and expenses. The sales charge is made at the time of the initial
investment and upon each subsequent investment, however no sales charge is
assessed upon the periodic reinvestment of net investment income or capital
gains. As of April 1, 1996, the schedule of sales charges applicable to both
Class I and Class II units is as follows:
<TABLE>
<CAPTION>
CONCESSIONS TO
SALES CHARGE AS A SELECTED
SALES CHARGE AS A PERCENTAGE OF THE BROKER/DEALERS AS
AGGREGATE AMOUNT PURCHASED PERCENTAGE OF THE NET AMOUNT A PERCENTAGE OF THE
(INCLUDING AMOUNT OF CURRENT PURCHASE) OFFERING PRICE INVESTED OFFERING PRICE
-------------------------------------- -------------- -------- --------------
<S> <C> <C> <C>
$ 0 - $ 99,999 5.0% 5.26% 4.5%
$ 100,000 - $249,999 4.0% 4.17% 3.6%
$ 250,000 - $499,999 3.0% 3.09% 2.7%
$ 500,000 - $999,999 2.5% 2.56% 2.25%
$ 1,000,000 and over none none *
</TABLE>
- - -----------------
* Under certain circumstances, for an investment of this magnitude the
Management Company may pay a sales incentive of 0.60% of the invested
amount to the selling broker/dealer.
The amount of any sales charge assessed is based upon the dollar amount
of each investment. If, however, the account information supplied by the
Investor with respect to a current purchase (including Social Security or tax
identification number) is identical to account information supplied in
connection with previous purchases, the value of such previous purchases or
acquisitions will be accumulated for purposes of computing the current sales
charge. Thus, as an Investor adds to his or her account, the sales charge
attributable to each additional purchase may decline.
For purposes of determining whether an Investor qualifies for a reduced
sales charge, the aggregate value of investments made by that Investor may be
combined with investments made by the Investor's spouse and children under the
age of 21, as well as any investments made by any corporations 100% owned by
such Investor. In addition, the aggregate investments of a trustee or other
fiduciary account may be considered in determining whether a reduced sales
charge is available, even though there may be a number of beneficiaries of the
account.
An Investor may qualify for a reduced sales charge by signing a
nonbinding Investor's Letter of Intention and Price Agreement ( the "Letter of
Intent") in which the Investor states his or her intention to invest during the
13 months following execution of the Letter of Intent a specified amount which,
if made at one time, would qualify for a reduced sales charge. A Letter of
Intent may be signed at any time within 90 days after an investment to be
included, and thereafter each additional investment made will be entitled to the
sales charge applicable to the level of investment indicated in the Letter of
Intent. Investments made more than 90 days before the Letter of Intent is
signed will be counted towards completion of the investments specified in the
Letter of Intent but are not entitled to a retroactive adjustment of sales
charges. If the Investor does not complete the level of investment specified in
the Letter of Intent within the 13-month period, there will be an upward
adjustment of the sales charge, the amount of which will depend upon the amount
actually purchased during the period.
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Only one Letter of Intent with respect to any Investor may be in effect
at any time; however, if a "break point," for purposes of reduced sales charges,
specified in any Letter of Intent has been reached and the Investor wishes to
contribute additional sums into any qualifying account, an amended Letter of
Intent, identifying different break points and sales charges, may be submitted.
Five percent of the total intended purchase, as identified in any Letter
of Intent, with be held in escrow by the Trust Fund, in units of the class
purchased, to cover additional sales charges which may be due if the total
investments over the statement period are insufficient to qualify for the
reduced charges set forth in such Letter of Intent. See the account application
and the Statement of Additional Information under "Purchases at Reduced Sales
Charge."
Class I Units may be sold without sales charge to (i) directors,
officers, bona fide full time employees and sales representatives of the Trust
Fund and SIFE, Inc., (ii) registered broker/dealers (and their registered
representatives) who have entered into distribution agreements with SIFE, Inc.,
and (iii) members of the immediate family, and pension and profit sharing plans
for the benefit, of the foregoing persons; provided that, should such purchaser
cease to qualify under any of the above-noted tests, the sales charge concession
will no longer be extended. Such purchases may be made only upon the written
assurance of the purchaser that the purchase is made for investment purposes and
that the Class I Units so acquired will not be resold except through redemption
by the Trust Fund.
PRIVILEGES AND RIGHTS OF INVESTORS
TERMINATION OF INVESTMENT AND REDEMPTION OF VALUE: An Investor may
terminate his or her investment at any time, and receive the investment account
value, by giving written notice and surrendering the Participating Agreement
Certificate (if one has been issued) to the Management Company. Written
termination requests received before 1:00 p.m. Pacific Time will be executed at
the Class I or Class II unit valuation in effect for that day; written
termination requests received after that time will be executed at the Class I or
Class II unit valuation next determined by the Trust Fund (which, under ordinary
circumstances, will be the next business day). Payment in full must be made
within three days after the Trust Fund's receipt of notice (and acceptance of
the Certificate, if applicable) except that the right of redemption may be
suspended, or the date of payment postponed, for any period during which the New
York Stock Exchange is closed (other than customary weekend and holiday
closings) and during any period during which trading on the New York Stock
Exchange is restricted or suspended, or at any time during which an emergency
exists, as determined by the Securities and Exchange Commission, as a result of
which disposal by the Trust Fund of its securities, or determination of the fair
value of its assets, is not reasonably practicable, or otherwise as the
Securities and Exchange Commission may by order permit for the protection of
Investors in the Trust Fund.
PARTIAL REDEMPTIONS: Partial redemptions may be made at any time by
giving written notice to Management Company; executions depend upon the time
such request is received, as described above. There is no limitation on the
number of times the privilege may be exercised or any charge for redemptions,
nor is there any minimum dollar amount which must be redeemed; provided,
however, that if an Investor makes a redemption which results in there being
less than $200 in value remaining in his or her account after the redemption,
the Investor will not have the privilege of repaying previous redemptions
without being charged a sales charge. The Management Company reserves the right
to close an Investor's account if a partial redemption results in there being
less than $200 in value remaining.
An Investor may instruct the Management Company to make monthly,
quarterly or other regular periodic redemptions from his or her investment
account, thereby adding flexibility to retirement programs. The Investor is
free to continue or not continue a program of periodic redemptions, and the
termination of such a program will not result in any charges or costs. Partial
redemptions, if not replaced, have the effect of depleting the net investment.
REPAYMENT PRIVILEGE AFTER PARTIAL REDEMPTION: The Investor has the
privilege of reinvesting an amount representing previous redemptions into any
account maintained with the Trust Fund without a sales charge or other fee being
assessed, provided that the total amount redeemed is replaced in one or more
payments of at least $50 each, and further provided that the replacement
payments are clearly identified as replacements of previous
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<PAGE>
redemptions. The repayment privilege only applies to accounts containing a
minimum of $200 in value remaining, and not to a complete redemption and
termination of an account. It should be noted that, for income tax purposes, a
partial redemption is a sale of the Investor's investment units and may result
in taxable gain or loss to the Investor. Investors should consult their own tax
advisors with respect to the tax treatment of partial redemptions.
This privilege of repaying partial redemptions without charge may be
terminated by the Trust Fund at any time by giving each Investor at least 90
days' written notice, but any such termination will apply only to redemptions
made after the effective date of the termination. The Board of Directors of the
Trust Fund has no present intention of terminating this repayment privilege, and
would do so only if so required by changes in applicable law or regulations.
BENEFICIARY AND TRANSFER RIGHTS: By investing in the Trust Fund, an
Investor becomes a party to the Trust Agreement, as amended, and a beneficiary
of the Trust Fund during the term of the investment. The Investor may designate
who, in the event of his or her death, shall be entitled to succeed to all of
his or her rights, privileges and interests as an Investor in the Trust Fund;
thus, the Investor continues to enjoy all of the rights and benefits during his
or her life, yet upon the Investor's death the Investor's interest will pass to
his or her designated beneficiary without the costs and delays of probate
proceedings. The Investor may, from time to time, change his or her designation
of beneficiary, and the Investor may also make partial or complete assignments
of his or her interest to other persons. It should be noted that the benefits
of a California trust may not be available to residents of states other than
California.
VOTING CONTROL OF THE TRUST FUND: The Trust Fund is governed by its
Board of Directors. The sole securities issued by the Trust Fund are the Class
I and Class II Units, represented by their respective Participating Agreements,
and the only beneficiaries of the Trust Fund are the Investors who hold Class I
and Class II Units. The sole voting power of the Trust Fund, including the
right to elect directors of the Trust Fund, is held by the holders of Class I
and Class II Units.
Voting is tabulated on the basis of investment units, and hence each
Investor's voting power is directly related to the value of his or her
investment account. With respect to election of directors, an Investor may cast
a number of votes equal to the number of directors to be elected multiplied by
the number of units held, and may cumulate his or her votes among the candidates
as he or she thinks fit. Class I and Class II Units are not liable to further
calls or to assessment. The rights of the holders of Class I and Class II Units
may not be modified other than by vote of a majority in interest of the holders
of Class I and Class II Units.
DIVIDENDS AND DISTRIBUTIONS: Unless the Trust Fund receives
instructions to the contrary, all dividend income on portfolio securities
received by the Trust Fund and net capital gains realized upon the sale of
portfolio securities is reinvested on behalf of each Investor in additional
investment units. Dividends are distributed or posted to the accounts of
Investors, as the case may be, on the last business day of February, May,
August and December, net long-term capital gains on the last business day
of November, and net short-term capital gains on the last business day of
December.
The Trust Fund offers the following services, among others, to its
Investors:
- PROFESSIONAL ASSET MANAGEMENT
- QUARTERLY INVESTOR STATEMENTS & ANNUAL AND SEMI-ANNUAL REPORTS
- "VESTED INTEREST": SIFE'S QUARTERLY NEWSLETTER
- LOW $200 MINIMUM INVESTMENT WITH $50 MINIMUM FOR ADDITIONAL
INVESTMENTS
- AUTOMATIC DIVIDEND AND DISTRIBUTION REINVESTMENT AT NO ADDITIONAL
CHARGE
- AUTOMATIC INVESTMENT PLAN
- REDUCED SALES CHARGE PLANS
- PERIODIC REDEMPTION PLANS
- SUBSCRIPTION ACCOUNTS AS COLLATERAL SECURITY
For further information, please contact SIFE, Inc., 490 North Wiget
Lane, Walnut Creek, California 94598, (800) 231-0356 or (510) 988-2430. SIFE,
Inc. May also be contacted via the Internet at "http://www.SIFE.com."
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MANAGEMENT AND ADMINISTRATION OF THE TRUST FUND AND ITS PORTFOLIO
The Trust Fund is an unincorporated trust formed under the laws of the
State of California, with a Board of Directors, the members of which are elected
by the holders of the Trust Fund's investment units. The Board of Directors
establishes Trust Fund policies and has overall responsibility for its business
and affairs. The assets of the Trust Fund are held by its Trustee, State Street
Bank and Trust Company. SIFE, Inc. is the investment adviser and underwriter
for the Trust Fund and has acted in such capacities since the formation of the
Trust Fund.
Mr. Sam A. Marchese, President and Chief Executive Officer of SIFE,
Inc., held primary responsibility for the day-to-day management of the Trust
Fund's portfolio from 1984 through May 1995. From that point, the Trust Fund's
portfolio has been under the direction of Mr. Michael Stead, the Trust Fund's
Chief Investment Officer. From September 1988 until his assumption of the Trust
Fund's investment management activities, Mr. Stead held a variety of
increasingly responsible domestic and international positions with Bank of
America, N.T. & S.A., most recently as Senior Credit Officer for the Capital
Markets Division.
Subject to policy established by the Trust Fund's Board of Directors,
the administration and management of the daily affairs of the Trust Fund are
performed by SIFE, Inc. pursuant to an Investment Advisory Agreement between it
and the Trust Fund. By special delegation pursuant to specific written
instructions from the Trust Fund, SIFE, Inc. serves as transfer agent for the
Trust Fund and performs most of the accounting, record-keeping and housekeeping
requirements of the Trust Fund. Fees for all investment advisory services
rendered by SIFE, Inc. as investment adviser are included in the complete
management advisory fee of 1.25% per annum payable to SIFE, Inc. by the Trust
Fund. Such management advisory fee is calculated and paid monthly, and is based
on the average net assets of the Trust Fund in any month, with a post-annual
adjustment, if necessary, in January of each year.
Pursuant to the Restated Trust Agreement and the Investment Advisory
Agreement, all fees and expenses incurred in connection with the Trust Fund's
operations are borne, without limitation, by SIFE, Inc. Prior to April 1, 1996,
SIFE, Inc. received 0.60% of the average net assets of the Trust Fund, per
annum, as an investment advisory fee, and was entitled to receive reimbursement
of certain expenses. In 1995, the amount of expense reimbursement paid by the
Trust Fund to SIFE, Inc. was $2,283,029 (or 0.43% of average net assets).
PERFORMANCE OVERVIEW
The Trust Fund's total return for the year ending December 31, 1995 was
42.42%. This total return results from the Trust Fund's 49.92% return for the
year ending December 31, 1995 and the effect of the deduction of the maximum
sales charge of 5.0%. Therefore, an initial investment of $10,000 ($9,500 after
deduction of the maximum sales charge of $500) on December 31, 1994, would have
had a value of $14,242 on December 31, 1995.
The Trust Fund's average annual compound return as of December 31, 1995,
assuming that the maximum 5.0% sales charge was deducted from the initial
investment, was 42.42% for one year, 24.78% for five years and 13.71% for ten
years. Performance figures are based on historical results, and are not
intended to indicate future performance.
PORTFOLIO OVERVIEW: The Trust Fund's decision to continue investing in
financial stocks in 1995 stemmed from a positive economic outlook as well as
continued strengthening of the financial fundamentals for banks and thrifts. A
slow but growing economy combined with little inflation made for an environment
that attracted investors into equities and mutual funds at historic rates and by
December 31, 1995, the Trust Fund had reduced its holdings of regional, money
center and community banks and thrifts from 89.8% to 73.8% of the Trust Fund's
portfolio, reflecting the movement of the Trust Fund's investment portfolio into
other growth opportunities.
Throughout 1995 it became apparent that the rate of growth of the United
States economy was beginning to slow. This decline in the growth rate prompted
the Federal Reserve Board to begin to lower interest rates. The Federal Reserve
lowered interest rates in July and December. Historically, financial
institutions benefit from a declining interest rate environment as lower rates
tend to generate more business for financial firms.
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<PAGE>
TAKEOVERS: Further advancements in banks and financial stock came from
the continuing consolidation among banking institutions. Chemical Bank and
Chase Manhattan Bank, for example, merged to form what will be the largest bank
in the United States. SIFE held significant positions in both of these stocks.
Also, Wells Fargo Bank launched the first hostile takeover in the banking
industry in many years by pursuing First Interstate Bank. These two examples
were very high profile in nature; however, there were many smaller mergers and
acquisitions that also contributed to SIFE's 1995 positive performance.
TURNOVER RATE: During 1995, the Trust Fund's turnover rate was 93.5%,
up from 25.2% in 1994. The increase in the turnover rate reflects the increased
activity in the Trust Fund's portfolio trading. This increase in activity
stemmed from the strong stock market that allowed the investment advisor to
reposition the fund's investments into stocks that are believed to offer greater
investment potential. Accordingly, stocks that had appreciated significantly or
offer less potential were sold from the portfolio, thus increasing the sale of
stocks and increasing the capital gain distributions.
CASH POSITION: A decision was made during 1995 to increase the cash
position of the Trust Fund. This decision was made as a result of the strong
performance of the overall stock market as well as the stronger relative
performance of the financial stocks. It was felt that by increasing the cash
position of the fund (as the stock market reached historic levels) the
investment advisors could take advantage of any temporary weakness in the stocks
of its investment candidates. The cash and cash equivalents as of December 31,
1995 were 14.8% of the total assets of the fund compared to 2.1% as of December
31, 1994.
PERFORMANCE DURING THE YEAR: The investment advisor's investment
strategy proved beneficial to the Trust Fund's performance throughout the year.
The bank sector outperformed many other market sectors. Banks and financial
institutions continued to post strong earnings growth throughout the year. Many
of these companies found themselves in strong enough financial condition that
many raised dividends or announced stock buyback programs.
Although performance was fairly even throughout 1995, some downturns
occurred. Most significantly, during the month of October, concerns over
consumer credit quality pushed down the prices of financial companies. While
this had a negative short-term effect on the portfolio, it was mitigated by the
investment advisor's decision to maintain a higher than average cash position.
As financial stocks fell in October, the investment advisor utilized the cash to
purchase stocks at favorable prices. It is believed that this strategy
benefited the Trust Fund's performance in the final months of the year.
NON-BANK INVESTMENTS: The investment advisor has increased the level of
non-bank stocks held in the portfolio. As of December 31, 1995, the level of
non-bank investments was 10.8% of the assets of the funds compared to 7.7% as of
December 31, 1994.
While the Trust Fund remains confident that bank and thrift stocks will
return superior performance over the long-term, it was decided that a
diversification away from banks and into non-bank companies in which superior
return can also be expected was prudent. In selecting an investment, the Trust
Fund will take into consideration such factors as the company's management,
growth prospects, business operations, revenues, earnings, cash flows and
strength of the balance sheet, as well as other information which the Trust Fund
may deem relevant, including size of the dividend, if any. The Trust Fund
invests in the securities of those companies which show strong financial results
coupled with good growth prospects, and which the Trust Fund believes are well-
managed.
FEDERAL INCOME TAXES
The Trust Fund intends to qualify in the current year as a "regulated
investment company" under Subchapter M of the Internal Revenue Code. The Trust
Fund will distribute all of its net income and realized gains to the accounts of
the Investors by the end of each calendar year and, so long as the Trust Fund
qualifies as a regulated investment company, it will pay no separate taxes on
such income and gains distributed to Investors. For federal income tax
purposes, distributions from the Trust Fund's net investment income and net
realized short-term capital gains are taxable as ordinary income. Distributions
from net realized long-term capital gains are taxable as long-term capital gain,
regardless of how long the Investor may have held the investment units.
Investors will be
15
<PAGE>
notified annually by the Trust Fund as to the federal income tax status of
distributions made by the Trust Fund. Distributions are taxable to Investors
currently even though reinvested in additional investment units. Investors not
subject to tax on their income generally are not required to pay tax on amounts
distributed to them. Redemptions of investment units, as well as transfers
between accounts, may be taxable sales of such units which may result in the
recognition of taxable gain or loss for federal income tax purposes.
Redemptions and distributions may also be subject to state and local income
taxes.
The foregoing is only a summary of some of the important federal income
tax considerations generally affecting the Trust Fund and its Investors, and is
only accurate as of the date of this prospectus. See "Additional Federal Income
Tax Information" in the Statement of Additional Information. No attempt is made
to present a detailed explanation of the income tax treatment of the Trust Fund
or its Investors, and this discussion is not intended as a substitute for
careful tax planning. ACCORDINGLY, POTENTIAL INVESTORS IN THE TRUST FUND ARE
URGED TO CONSULT THEIR TAX ADVISERS WITH SPECIFIC REFERENCE TO THEIR OWN TAX
SITUATIONS.
COMPARISON OF CHANGE IN VALUE OF $9,500 NET INVESTMENT IN
SIFE TRUST FUND ON DECEMBER 31, 1985 AND $10,000 INVESTMENT IN THE S&P 500
COMPARISON CHANGE IN VALUE OF $9,500 NET INVESTMENT IN SIFE TRUST FUND
ON DECEMBER 31, 1985 AND $10,000 INVESTMENT IN THE S&P 500
[graph]
<TABLE>
<CAPTION>
AVERAGE AVERAGE
ANNUAL ANNUAL
RESULTS OF COMPOUNDED COMPOUNDED
$10,000 TOTAL RETURN TOTAL RETURN
INVESTED WITH INCLUDING INCLUDING TOTAL RETURN: TOTAL RETURN:
INVESTMENT 5.0% SALES MAXIMUM SALES MINIMUM SALES SIFE TRUST S&P 500 STOCK
TERM CHARGE CHARGE OF 5.0% CHARGE OF 0.0% FUND INDEX
---- ------ -------------- -------------- ---- -----
<S> <C> <C> <C> <C> <C>
1 year $14,242 42.42% 49.92% 49.92% 37.58%
3 years $15,334 15.32% 17.30% 61.41% 53.44%
5 years $30,253 24.78% 26.07% 218.46% 115.44%
10 years $36,135 13.71% 14.29% 280.37% 300.37%
</TABLE>
16
<PAGE>
RECEIPT FOR PROSPECTUS
I hereby acknowledge receipt of the SIFE
Trust Fund Prospectus dated April 30, 1996.
Date_______________________ , 199_
---------------------------------
Signature
---------------------------------
Signature
---------------------------------
Address
---------------------------------
Sales Representative
17
<PAGE>
PART B
SIFE TRUST FUND
STATEMENT OF ADDITIONAL INFORMATION
--------------------------
Managed by SIFE, Inc.
490 North Wiget Lane
Walnut Creek, California 94598
Telephone: (800) 231-0356 / (510) 988-2430
Internet Address: http://www.SIFE.com
--------------------------
This Statement of Additional Information, which may be amended from time
to time, is not a prospectus and is only authorized for distribution when
preceded or accompanied by the Trust Fund's Prospectus, dated April 30, 1996
(the "Prospectus"). This Statement of Additional Information contains
additional and more detailed information than that set forth in the Prospectus
and should be read in conjunction with the Prospectus, additional copies of
which may be obtained without charge by writing or calling your investment
adviser, broker/dealer or financial planner, or the Trust Fund at the address or
telephone number set forth above.
April 30, 1996
--------------------------
TABLE OF CONTENTS
PAGE
----
Investment Policies & Objectives 2
Performance Information 3
SIFE Trust Fund Performance Record 4
Pricing and Valuation of Participating Agreements 5
Management of the Trust Fund 6
Distribution Matters 7
Class II Units/Rule 12b-1 Matters 9
Letter of Intent 9
Allocation of Portfolio Brokerage 10
Investor Services 10
Automatic Reinvestment of Distributions at No Additional
Sales Charge 10
Individual Retirement Accounts 10
Use of Participating Agreements for Collateral 10
Additional Federal Income Tax Information 11
General Information 12
Independent Auditor's Report 13
Financial Statements
Statement of Assets and Liabilities B-17
Investment Portfolio B-18
Statement of Operations B-24
Statements of Changes in Net Assets B-
Financial Highlights B-25
Notes to Financial Statements B-26
B-1
<PAGE>
INVESTMENT POLICIES & OBJECTIVES
The Trust Fund has identified the policies described below as
"fundamental investment policies" of the Trust Fund, which may not be changed
without a vote of a "majority in interest" of the holders of investment units
(when used herein, this quoted language means the LESSER of (a) 67% of the
investment units voting at a meeting at which more than 50% of all outstanding
investment units are represented, or (b) more than 50% of all outstanding
investment units). All other investment practices, such as the Trust Fund's
practices with respect to writing covered put and covered call options, lending
portfolio securities and entering into repurchase agreements (in each case, as
described in the Prospectus) may be changed from time to time by the Trust
Fund's Board of Directors.
1. The Trust Fund invests not less than 30% of its assets in the
equity securities of a number of carefully selected "financial institutions"
(defined as companies which derive a significant portion of their income from
dealing in money, credit, loans and insurance), and the remainder in the common
or preferred stocks, or securities convertible into common or preferred stocks,
of non-financial institutions, generally service and industrial enterprises
generally regarded as "stable growth" companies. In addition to the securities
of financial institutions and of service and industrial companies domiciled in
the United States, the Trust Fund may invest in the American Depository Receipts
of certain international business enterprises.
2. The Trust Fund will also maintain a reserve of cash for the
purpose of making such cash payments as may be required of it; pending
application or investment, cash reserves are commonly invested by the Trust Fund
in repurchase agreements and other cash equivalents, such as liquid securities
of the United States, securities issued by state governments or government
agencies, certificates of deposit or other interest-bearing accounts and high-
grade commercial paper.
3. The Trust Fund may not invest 25% or more of its assets in any
one industry other than financial institutions. Investments may not be made in
any one company in an amount greater than 5.0% of the total asset value of the
Trust Fund, nor may the Trust Fund acquire more than 10% of the outstanding
voting securities of any company. Insofar as 80% of the Trust Fund's investment
portfolio is concerned, in order for the shares of a company to be eligible for
investment, the company must have been in existence for at least five years,
must have assets of more than $7,000,000, and must have paid dividends in each
of the five years immediately preceding investment.
4. It is the policy of the Trust Fund not to: (1) borrow money; (2)
underwrite securities of other issuers; (3) purchase and sell real estate; (4)
purchase and sell commodities or commodity contracts; (5) make loans (other than
through the purchase of publicly issued debt securities or of commercial paper
and the lending of the Trust Fund's portfolio securities in accordance with
applicable regulatory requirements); (6) invest in the securities of other
investment companies; (7) invest in companies for the purpose of exercising
control or management; (8) issue senior securities; or (9) make short sales or
purchases on margin.
5. The Trust Fund may write covered call options with respect to its
portfolio securities, may write covered put options with respect to securities
and may enter into closing purchase transactions with respect to such call and
put options, in accordance with applicable regulatory requirements. So long as
the Trust Fund remains obligated as a writer of a put option, it must 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 nominal value of
the put option. So long as the Trust Fund remains obligated as a writer of a
call options, it must collateralize the call option with actual securities held
in the Trust Fund's investment portfolio. The Trust Fund does not write
"naked," or uncovered, options. The Trust Fund will not write options where (i)
the aggregate value of the purchase obligations underlying all unexpired put
options written by the Trust Fund (which positions are marked-to-market daily)
will not at any time exceed 10% of the value of the net assets of the Trust
Fund, and (ii) the nominal value of the Trust Fund's unexpired call options
will not at any time exceed 25% of the value of the net assets of the Trust
Fund, provided that the total amount of such positions would, at no time, exceed
35% of the Trust Fund's net assets.
The Trust Fund has identified the following three italicized objectives
as "fundamental investment objectives" of the Trust Fund, which may not be
changed without a vote of a majority in interest of the holders of investment
units.
B-2
<PAGE>
1. CONSERVATION OF CAPITAL: The Trust Fund seeks to conserve its
Investors' capital by investing not less than 30% of the Trust Fund's assets in
the equity securities of a number of carefully selected financial institutions,
and the remainder in the common or preferred stocks, or securities convertible
into common or preferred stocks, of non-financial institutions, generally
service and industrial enterprises generally regarded as "stable growth"
companies.
2. CAPITAL GROWTH: The Trust Fund seeks to provide capital
appreciation consistent with prudent investment management practices by
investing in the equity securities of financial institutions and other
enterprises where the Trust Fund determines that a favorable relationship
between the value of a security, as determined by price/earnings ratios and
certain other analytic information, and its growth potential exists. In
selecting an investment, the Trust Fund will take into consideration such
factors as the company's management, growth prospects, business operations,
revenues, earnings, cash flows and strength of the balance sheet, as well as
other information which the Trust Fund may deem relevant, including size of the
dividend, if any. The Trust Fund invests in the securities of those companies
which show strong financial results coupled with good growth prospects, and
which the Trust Fund believes are well-managed. The Trust Fund may also invest
in the securities of financial institutions which it believes may be the target
of, or will benefit from, consolidation in the financial services industry.
3. DIVERSIFICATION AND CONCENTRATION: The Trust Fund believes that
the performance of a business enterprise which participates in a broad range of
economic activity, either through direct investment or indirect financing, is
less likely to rise or fall with the fortunes of any one type of business
activity. Accordingly, since financial institutions finance and engage directly
in a broad range of economic activities, the Trust Fund believes that an
investment in financial institutions will result in a degree of diversification
of investment risk. Further, by investing in financial institutions which are
active in different regions (or, in the case of large, "money center" banks,
active internationally), the Trust Fund attempts to minimize the effect of
economic conditions which may affect one region but not necessarily another.
It should be noted that diversification of the character discussed above
does not necessarily reduce or eliminate the risk inherent in an investment in a
portfolio containing a substantial number of financial institution securities.
Financial institutions, as a group, are subject to both capital risk (i.e., the
risk that, in periods of tight money or high inflation, the cost to attract
deposits will rise substantially) and credit risk (i.e., the risks attendant to
lending money for long periods of time at fixed or only partially adjustable
interest rates against the security of assets, the valuations of which may
fluctuate with economic conditions), both of which may, from time to time,
require substantial additions to reserves against losses. Further, in that
financial institutions are subject to regulation and supervision by federal
and/or state governmental authorities to a greater extent than other
enterprises, there is a certain degree of regulatory risk as the policies of the
federal and/or state governments change the way financial institutions conduct
their business. In addition, institutions such as insurance companies that hold
large portions of their capital in marketable securities are subject to the
risks of the securities market.
PERFORMANCE INFORMATION
Performance information relating to a hypothetical investment in the
Trust Fund for the ten-year period ended December 31, 1995 is set forth on the
following page, assuming that all net investment income and realized capital
gains were reinvested (at no sales charge). No adjustment has been made for
possible tax liabilities. Also shown is comparable performance information for
the unmanaged Standard & Poor's 500 Stock Index (assuming the reinvestment of
all dividends), a widely-used indicator of general stock market activity
(source: Standard & Poor's Corporation).
It should be noted that the performance information set forth on the
following page represents the performance of Class I Units only. Class II
Units, which will not be offered for sale or sold prior to May 1, 1996, carry an
additional Rule 12b-1 distribution fee of 0.25% of average net assets, per
annum.
B-3
<PAGE>
SIFE TRUST FUND PERFORMANCE RECORD
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF AMOUNT OF
AMOUNT OF INCOME & VALUE AT VALUE AT PERCENTAGE PERCENTAGE
CALENDAR CAPITAL GAINS DIVIDENDS YEAR END YEAR END INCREASE INCREASE
PERIODS REINVESTED REINVESTED (MAX. LOAD (MIN. LOAD (DECREASE) (DECREASE)
ENDING (MAX. LOAD. ADJ.) (MAX. LOAD. ADJ.) ADJ.) ADJ. 0%) TRUST FUND S&P 500
------ ----------------- ----------------- ----- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
1986 $489 $615 $14,797 $15,576 16.04% 18.67%
1987 $295 $761 $13,585 $14,300 (8.19)% 5.25%
1988 $287 $715 $16,278 $17,135 19.82% 16.61%
1989 $528 $1,212 $19,564 $20,594 20.19% 31.69%
1990 $230 $1,081 $15,233 $16,035 (22.14)% (3.10)%
1991 $388 $1,383 $22,440 $23,621 47.31% 30.47%
1992 $519 $1,174 $30,053 $31,635 33.93% 7.62%
1993 $521 $1,257 $32,857 $34,587 9.33% 10.08%
1994 $703 $1,258 $32,360 $34,061 (1.52)% 1.32%
1995 $5,381 $1,225 $36,140 $38,042 49.92% 37.58%
</TABLE>
For the year ended December 31, 1995, a $9,500 net investment in the Trust
Fund (calculated based on a $10,000 payment to the Trust Fund less the current
maximum 5.0% sales charge, and assuming investment for the entire period of
December 31, 1994 through December 31, 1995) would have increased to $14,242.
For the five year and ten year periods ended on the same date, a $9,500 net
investment in the Trust Fund (assuming investment for the entire period) would
have a redeemable value of $30,253 and $36,135, respectively. In percentage
terms, the increases in a Trust Fund investment and Standard & Poor's 500 Stock
Index - Dividends Reinvested for the one, three, five and ten year periods
described above would have been as follows:
<TABLE>
<CAPTION>
AVERAGE AVERAGE
RESULTS OF ANNUAL TOTAL ANNUAL
$10,000 RETURN RETURN
INVESTED WITH INCLUDING INCLUDING TOTAL RETURN: TOTAL RETURN:
INVESTMENT 5.0% SALES MAXIMUM SALES MINIMUM SALES SIFE TRUST S&P 500 STOCK
TERM CHARGE CHARGE OF 5.0% CHARGE OF 0.0% FUND INDEX
---- ----- -------------- -------------- ---- -----
<S> <C> <C> <C> <C> <C>
1 YEAR $14,242 42.42% 49.92% 49.92% 37.58%
3 YEARS $15,334 15.32% 17.30% 61.41% 53.44%
5 YEARS $30,253 24.78% 26.07% 218.46% 115.44%
10 YEARS $36,135 13.71% 14.29% 280.37% 300.37%
</TABLE>
The trust fund calculates average annual total return according to the
following formula, as required by the Securities and Exchange Commission:
"P(1+T)(n)= ERV", where the average annual total return ("T") is computed by
using the value at the end of the period ("ERV") of a hypothetical initial
investment of $10,000 ("P") over a period of years ("n"). Accordingly, to
calculate total return, an initial investment is divided by the per-unit
offering price (which includes the sales charge) as of the first day of the
period in order to determine the initial number of units purchased. Subsequent
dividends and capital gain distributions are then reinvested at net asset value
on the reinvestment date determined by the Board of Directors. The sum of the
initial units purchased and additional units acquired through reinvestment is
then multiplied by the net asset value per unit as of the end of the period in
order to determine ending value. The difference between the ending value and
the initial investment, divided by the initial investment and converted to a
percentage, equals total return. The resulting percentage indicates the
positive or negative investment results that an investor would have experienced
from reinvested dividends and capital gain distributions and changes in unit
price during the period. Total return may be calculated for one year, five
years, ten years and for other period. The average annual total return over
periods greater than one year also may be computed by utilizing ending values as
determined above.
The data quoted represents past performance. Past performance does not
indicate future performance. Effective April 1, 1995, the Trust Fund reduced
the maximum sales charge from 6.25% to 5.0% and the minimum sales charge was
reduced from 1.0% (on purchases of $2,000,000 or more) to no sales charge (on
purchases of
B-4
<PAGE>
$1,000,000 or more). The Trust Fund performance is affected by many factors
including: changes in the levels of equity prices and interest rates generally,
the Trust Fund's selection of specific securities for the portfolio, the Trust
Fund's expense ratio, and other factors. The investment return and principal
value of the investment will fluctuate so that an investor's units, when
redeemed, may be worth more or less than their original cost.
Prior to April 1, 1995, SIFE, Inc., the investment advisor for, and
distributor of, the Trust Fund (sometimes referred to herein as the "Management
Company") received compensation of 0.50% of average net assets, per annum, plus
reimbursement of certain expenses; from April 1, 1995 through March 31, 1996,
SIFE, Inc. received compensation of 0.60% of average net assets, per annum, plus
reimbursement of certain expenses. Effective May 1, 1996, SIFE, Inc. receives
1.25% of average net assets, per annum, without additional reimbursement for any
expense of any sort.
PRICING AND VALUATION OF PARTICIPATING AGREEMENTS
All funds received by the Trustee (State Street Bank and Trust Company) for
investment, and all funds reinvested from net investment income and realized
capital gains, if any, are accounted for in terms of investment "units." The
value of each unit is determined by dividing the total value of the net assets
of the Trust Fund on any given day by the total number of units outstanding.
See "Investment and Valuation Matters - The Investment Unit" in the Prospectus
for additional information concerning the timing and manner of valuation of
investment units, including but not limited to a description of net asset value
("NAV") of the Trust Fund and of Class I and Class II Units.
The NAV of each Class I and Class II investment unit is computed on each
day on which the New York Stock Exchange is open for trading. No valuation is
made, therefore, on weekends, customary holiday closings (New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day), or under any emergency circumstances as
determined by the Securities and Exchange Commission.
The valuation of the Trust Fund assets is based upon the closing price for
securities listed on a stock exchange and for securities traded over-the-counter
for which a closing price is readily available. Securities traded over-the-
counter for which a closing price is not readily available are valued at the
closing bid price. Set forth below is a specimen price mark-up sheet showing
the method of computing the offering, redemption or repurchase price per Class I
Unit(1) using as a basis the value of the Trust Fund assets as of December 31,
1995.
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at market (cost $429,460,094) $610,803,219
Cash 1,061,139
Receivables for:
Dividends 1,296,935
Investment securities sold 6,840,506
------------
Total Assets $620,001,799
------------
LIABILITIES
Payables for:
SIFE (the "Management Company") 525,822
Investment securities purchased 5,328,375
---------
Total liabilities 5,854,197
---------
Net assets at December 31, 1995 $614,147,602
------------
------------
Aggregate Investment Units 134,122,616
Net asset value (liquidating value) per investment unit $4.58
Sales Charge - 5.0% of Offering Price $0.24
Offering Price $4.82
</TABLE>
(1) Class II Units will not be offered for sale or sold prior to May 1, 1996.
B-5
<PAGE>
MANAGEMENT OF THE TRUST FUND
DIRECTORS AND OFFICERS: The table below sets forth the names,
addresses and business backgrounds of each director of the Trust Fund (the
Trust Fund has no Executive Officers who are not also directors):
NAME, ADDRESS AND AGE AND POSITION PRINCIPAL OCCUPATION
HELD DURING PAST FIVE YEARS
---- ----------------------
David M. Sacks (78) Retired Vice President, American
c/o SIFE Trust Fund Broadcasting Company; Retired General
490 N. Wiget Lane Mgr., KGO Television; President, DMS
Walnut Creek, CA 94598 Enterprises (broadcasting consultant);
Director; Chairman of the Board Member, Board of Governors, National
Academy of Television Arts &
Sciences
Haig G. Mardikian (49) General Partner, George M. Mardikian
c/o SIFE Trust Fund Enterprises (real estate investments);
490 N. Wiget Lane Managing Director, The United
Walnut Creek, CA 94598 Broadcasting Corporation (radio
Director; Vice Chairman of the Board broadcasting)
Sam A. Marchese (53)* President & Chief Executive Officer,
c/o SIFE Trust Fund Management Company (December 1994 -
490 N. Wiget Lane Present); Director, Management Company
Walnut Creek, CA 94598 (1989 - present); Vice President,
Director; President, Chief Executive Management Company (1989 - 1994);
Officer and Treasurer Director, Scott Co. (mechanical
contractor)
Charles W. Froehlich, Jr. (67) * Retired Appellate Court Judge; retired
c/o SIFE Trust Fund Superior Court Judge; formerly of
490 N. Wiget Lane Counsel to Peterson, Thelan, & Price;
Walnut Creek, CA 94598 principal, Froehlich & Peterson
Director; Secretary Dispute Resolution
Diane Howard Belding (39) * Management Company employee, 1992-
c/o SIFE Trust Fund present; General Partner, Howard &
490 N. Wiget Lane Howard Ranch (avocado ranch, Ventura
Walnut Creek, CA 94598 County, CA), 1983-present; Director,
Director Management Company (1982 - present)
John A. Meany (55) President, John's Valley Foods, Inc.;
c/o SIFE Trust Fund President, John's Town & Country
490 N. Wiget Lane Markets, Inc.; Director, Northern
Walnut Creek, CA 94598 California Grocers Assn.; Advisory
Director Council, Fleming Foods
Walter S. Newman (74) Owner, WSN Enterprises (real estate
c/o SIFE Trust Fund consultants); Retired President, San
490 N. Wiget Lane Francisco Planning Commission; Retired
Walnut Creek, CA 94598 President, San Francisco Redevelopment
Director Agency; Retired President, San
Francisco Fine Arts Museums; Chairman
of the Board, National Brain Tumor
Foundation
- - ------------------------------
* These persons are "interested persons" as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended.
B-6
<PAGE>
The following table contains information regarding the aggregate
remuneration paid during the year ended December 31, 1995 to each director of
the Trust Fund (the Trust Fund has no Executive Officers who are not also
directors):
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION
NAME OF PERSON AND POSITION FROM THE TRUST FUND (1)
--------------------------- -----------------------
<S> <C>
David M. Sacks; Director & Chairman of the Board $41,750
Diane H. Belding; Director (2) $68
Charles W. Froehlich, Jr.; Director & Secretary $20,000
Sam A. Marchese; Director, President,
Chief Executive Officer and Treasurer $186,965
Haig G. Mardikian; Director & Vice Chairman
of the Board $30,250
John A. Meany; Director $30,350
Walter S. Newman; Director $29,750
Robert W. Pohl (3) $45,300
Sharon E. Tudisco (4) $177,350
</TABLE>
- - -------------------------------
(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.
Each director is paid by the Trust Fund an attendance fee of $5,000 for
each Board meeting attended (the Board of Directors meets not less than
quarterly) plus $250 per hour (subject to a per-meeting maximum of $1,000)
consultation fee for services other than Board meetings. As of February 9,
1996, the officers and directors of the Trust Fund and their families, as a
group, owned beneficially or of record less than 1% of the outstanding
units.
(2) Ms. Belding was elected to the Trust Fund's Board of Directors on April 1,
1996.
(3) 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.
(4) Ms. Tudisco had 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.
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 1995 and the price that would have been payable at the
usual sales charge in effect at the time of investment. The amount of this
spread on purchases made by Ms. Belding was $68, $15 by Mr. Marchese, and $600
by Mr. Meany. The Trust Fund has no pension or retirement plan and pays no
pension or retirement benefits to its officers or directors.
DISTRIBUTION MATTERS
The Trust Fund is registered with the Securities and Exchange Commission as
an open-end diversified investment company, and offers redeemable securities,
represented by "Participating Agreements" and denominated as "investment units,"
to the public on a continuous basis. The Management Company acts as the
investment adviser
B-7
<PAGE>
and principal underwriter for the Trust Fund, as well as its Transfer Agent.
The Management Company does not act in a similar capacity for any other person
or entity.
The Management Company acts as investment adviser and principal
underwriter for the Trust Fund pursuant to an Investment Advisory Agreement
and Underwriting Agreement. The Investment Advisory Agreement and the
Underwriting Agreement may be terminated without penalty by either party on
sixty days' written notice and, unless terminated, shall continue in effect
from year to year by (1) the annual approval of a majority of the directors
of the Trust Fund who are not parties to such Agreement or interested persons
of any party to such Agreement, and (2) the approval of either (a) the Board
of Directors of the Trust Fund, or (b) the vote of a majority in interest of
the holders of Participating Agreements, as defined above under "Investment
Policies & Objections," at an annual meeting of Investors. The Investment
Advisory Agreement in its current form was adopted by the Trust Fund's
Investors at the annual meeting on April 3, 1972, and was last amended, and
continued by vote of the Investors, at the annual meeting on April 1, 1996.
The Underwriting Agreement was originally adopted by Investors at the annual
meeting on April 3, 1972, and was last amended, and continued by vote of the
Investors, at the annual meeting on April 1, 1996. The agreements terminate
automatically in the event of their assignment. The continued performance by
the Management Company of delegated duties (accounting, record-keeping and
housekeeping) pursuant to written instruction from the Trust Fund is subject
to termination at any time by either party.
As described in the Prospectus under "Management and Administration of the
Trust Fund and its Portfolio" the Management Company manages the Trust Fund's
operations, subject to policies established by the Trust Fund's Board of
Directors. As investment adviser to the Trust Fund, the Management Company
advises the directors of the Trust Fund on all matters pertaining to the Trust
Fund's portfolio of securities. Basic policy is set and determined by the Board
of Directors of the Trust Fund, and carried out by the Management Company.
Daily decisions with respect to purchases and sales of portfolio securities are
made by the Management Company based upon its own investment research (see also
"Allocation of Portfolio Brokerage"). Fees for services rendered by the
Management Company as investment adviser are accrued daily and computed and paid
monthly on the last business day of each month at the rate of 1/12th of 1.25% of
the average net assets of the Trust Fund. This fee is paid to the Management
Company and deducted from the Trust Fund on the first business day of the
following month. No distinction is made between Class I and Class II units for
purposes of calculating the management fee.
Prior to April 1, 1995, the Management Company received compensation of
0.50% of average net assets, per annum, plus reimbursement of certain
expenses; from April 1, 1995 through March 31, 1996, SIFE, Inc. received
compensation of 0.60% of average net assets, per annum, plus reimbursement of
certain expenses. Effective April 1, 1996, SIFE, Inc. receives 1.25% of
average net assets, per annum, without any additional reimbursement of
expenses. The Management Company is solely responsible for all of the costs
and expenses of the Trust Fund's operation, including, without limitation,
all Trustee fees, Board of Directors' meetings, legal and auditing fees, tax
matters, authenticating and registering all Trust Fund Certificates
representing Participating Agreements, dividend disbursements, issuance and
redemption of units, bookkeeping, maintenance of office and equipment,
brokerage, expenses of preparing, printing and mailing prospectuses to
Investors, and all expenses in connection with reporting to Investors and
compliance with governmental agencies. The Management Company does not
receive any additional fees for performing its duties as transfer agent to
the Trust Fund.
During the past three years the Management Company was paid investment
advisory fees and earned sales commissions for its services as principal
underwriter as set forth below.
<TABLE>
<CAPTION>
NET COMMISSIONS
PAID TO TO THE
TOTAL SALES INDEPENDENT PAID TO ITS OWN MANAGEMENT INVESTMENT
YEAR COMMISSIONS AGENTS SALESPERSONS COMPANY ADVISORY FEE
- - ---- ----------- ------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
1993 $2,862,425 $743,932 $1,911,970 $206,523 $1,999,023
1994 $1,725,060 $440,188 $1,184,899 $99,973 $2,184,928
1995 $1,452,138 $376,255 $1,075,083 $(800) $3,039,425
B-8
</TABLE>
<PAGE>
The amount of expense reimbursement to the Management Company by the
Trust Fund during the last fiscal year was $2,283,029, which is in addition
to the payment set forth above for sales commissions and investment advisory
fees.
The directors of the Management Company, the business addresses for whom
are all c/o SIFE, Inc., 490 North Wiget Lane, Walnut Creek, California 94598
are: Sam A. Marchese (Chairman); Shirley A. Beaton; Diane H. Belding; Charles
W. Froehlich, Jr.; Sharon E. Tudisco; Bruce W. Woods; and John W. Woods. The
directors have the following positions with the Management Company: Mr.
Marchese is Chief Executive Officer and President; Mr. Bruce W. Woods is
Executive Vice President; and Mr. Froehlich is Secretary; Mrs. Tudisco and
Mrs. Beaton are retired. Ms. Belding, Mr. Marchese and Mr. Froehlich are
also officers and/or directors of the Trust Fund; their other business
affiliations are set forth above in "Directors and Officers." Mr. John W.
Woods owns approximately 22% of the outstanding shares of the Management
Company, Mr. Marchese owns 20%, Mrs. Tudisco owns 10%, Mrs. Beaton owns 10%,
Mrs. Belding owns 20%, Mr. Froehlich owns approximately 14%, and Mr. Bruce W.
Woods owns 4% of the outstanding shares of the Management Company.
The following table sets forth all commissions and other compensation
received during the Trust Fund's last fiscal year by the Management Company,
as principal underwriter for the Trust Fund's Class I units.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
NET UNDERWRITING COMPENSATION ON
NAME OF PRINCIPAL DISCOUNTS AND REDEMPTION AND BROKERAGE OTHER
UNDERWRITER COMMISSIONS REPURCHASES COMMISSIONS COMPENSATION
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
SIFE $(800) -0- -0- -0-
</TABLE>
CLASS II UNITS/RULE 12b-1 MATTERS: The Trust Fund has adopted a Plan of
Distribution pursuant to Rule 12b-1 (the "Plan"). In accordance with the
terms and conditions of the Plan, the Management Company, as Principal
Underwriter, will receive amount payable pursuant to the Plan (it should be
noted that no Class II units will be offered for sale or sold prior to May 1,
1996; Class I units are not subject to Rule 12b-1 distribution charges).
As required by Rule 12b-1, the Plan (together with the Underwriting
Agreement, as amended) has been approved by the Board of Directors, and
separately by a majority of the directors who are not interested persons of
the Trust Fund and who have no direct or indirect financial interest in the
operation of the Plan or the Underwriting Agreement, and the Plan has been
approved by the affirmative vote of a majority of the outstanding Class I
units. The officers and directors who are "interested persons" of the Trust
Fund may be considered to have a direct or indirect financial interest in the
operation of the Plan due to present or past affiliations with the Management
Company. Potential benefits of the Plan to the Trust Fund include improved
investor services, benefits to the investment process from growth or
stability of assets and maintenance of a financially healthy management and
investment advisor organization. The selection and nomination of directors
who are not "interested persons" of the Trust Fund are committed to the
discretion of the directors who are not interested persons during the
existence of the Plan. The Plan is reviewed quarterly and must be renewed
annually by the Board of Directors.
Under the Plan the Trust Fund may expend up to 0.25% of its net assets
attributable to the Class II units to finance any activity which is primarily
intended to result in the sale of Class II units, provided the Trust Fund's
Board of Directors has approved the category of expenses for which payment is
being made. These include service fees for qualified dealers and dealer
commissions and wholesaler compensation attributable to the distribution of
Class II units.
LETTER OF INTENT: The reduced sales charges discussed in the Prospectus
applicable to purchases of certain amounts made within a 13-month period are
subject to the following terms and conditions. The Letter of Intent is not a
binding obligation to purchase the indicated amount; however, when an
Investor elects to utilize the Letter of Intent in order to qualify for a
reduced sales charge, units equal to 5% of the dollar amount specified in the
Letter of Intent will be held in escrow in the Investor's account out of the
initial purchase (or subsequent purchase, if necessary) by the Management
Company, acting as Transfer Agent. All dividends and any capital gains
distributions on units held in escrow will be credited to the Investor's
account in units of the same class as specified in the Letter of Intent (or
paid in cash, if requested). If the intended investment is not completed
within the specified 13-month
B-9
<PAGE>
period, the Investor will remit to the Management Company, acting as
Principal Underwriter, the difference between the sales charge actually paid
and the sales charge which would have been paid if the total of such
purchases had been made at a single time. If the difference is not paid
within 45 days after written request by the Management Company, the
appropriate number of units held in escrow will be redeemed to pay such
difference. If the proceeds from this redemption are inadequate, the
Investor will be liable to the Management Company for the balance still
outstanding. The Letter of Intent may be revised upward at any time during
the 13-month period, and such a revision will be treated as a new Letter of
Intent, except that the 13-month period during which the purchase of the
stated amount must be completed will remain unchanged and there will be no
retroactive reduction of the sales charges paid on any prior purchases.
Existing holdings eligible for rights of accumulation may be credited toward
satisfying the stated amount. During the Letter of Intent period, reinvested
dividends and capital gains distributions and investments made under a right
of repayment will not be credited toward satisfying the stated amount.
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
$915,869,856. Portfolio turnover rates for the years 1993, 1994 and 1995
were 28.7%, 25.2% and 93.5%, respectively. The portfolio turnover rate in
1995 was relatively high, due to the extremely active market for financial
institutions stocks, specifically, and equities, generally.
During the last three fiscal years, the Trust Fund has not paid any
brokerage commissions to any broker which is an affiliated person of the
Trust Fund or the Management Company. Listed below is certain information
regarding the Trust Fund's payment of brokerage commissions in portfolio
transactions during the last three years:
<TABLE>
<CAPTION>
TOTAL AMOUNT OF TOTAL SECURITIES
YEAR NUMBER OF BROKERS BROKERAGE PAID PURCHASED AND SOLD
---- ----------------- -------------- ------------------
<S> <C> <C> <C>
1993 25 $483,946 $283,467,318
1994 78 $418,962 $229,615,630
1995 56 $990,818 $915,869,856
</TABLE>
INVESTOR SERVICES
AUTOMATIC REINVESTMENT OF DISTRIBUTIONS AT NO ADDITIONAL SALES CHARGE:
Unless the Trust Fund receives instructions to the contrary, all dividend
income on portfolio securities received by the Trust Fund and net capital
gains realized upon the sale of portfolio securities is reinvested on behalf
of each Investor in additional investment units. Dividends are distributed
or posted to the accounts of Investors, as the case may be, on the last
business day of February, May, August and December. Net long-term capital
gains are distributed or posted on the last business day of November, and net
short-term capital gains on the last business day of December.
INDIVIDUAL RETIREMENT ACCOUNTS: The Trust Fund makes available to
Investors IRAs which satisfy the requirements of Section 408 of the Internal
Revenue Code. The custodian of each IRA is State Street Bank and Trust
Company, which makes no charge for this service. Individual Investors who
are employees or self-employed persons may generally establish an IRA and
make annual contributions equal to the lesser of $2,000 or 100% of
compensation for the year. In the case of an Investor filing a joint return
with a non-working spouse, the Investor may establish a separate IRA for the
non-working spouse and contribute up to $2,250 for both IRAs (or 100% of the
working spouse's annual compensation, if less), but not more than $2,000 in
either IRA. As described above, IRAs are eligible for reduced Sales Charges.
An IRA generally is exempt from federal income tax and the earnings of
the account accumulate tax-free until they are distributed. However, for tax
years beginning after December 31, 1986, deductions for contributions to an
IRA are limited or eliminated if the individual or the individual's spouse is
an active participant in an
B-10
<PAGE>
employer-sponsored qualified retirement plan, and adjusted gross income is in
excess of certain limits. An Investor should consult his or her tax adviser
about these limits before establishing an IRA.
If an Investor has made only deductible contributions to an IRA, then
all amounts distributed are treated as ordinary income for the year in which
received. If the Investor has made any non-deductible contributions to the
IRA, then a portion of the distributions will be tax-free. The tax-free
amount will be determined by multiplying the amount distributed by a
fraction, the numerator of which is the total non-deductible contributions
made to the account, and the denominator of which is the account balance (not
reduced by the annual distributions). Investors are cautioned, however, that
no withdrawal may be made from an IRA until the Investor has (1) reached the
age of 59 1/2 years, (2) become disabled (as defined in Section 72(m)(7) of
the Internal Revenue Code), (3) died, or (4) pays a penalty of 10% of the sum
withdrawn (plus the regular tax at ordinary rates on the amount distributed).
In addition, withdrawal generally must begin no later than April 1 following
the calendar year in which the Investor reaches age 70 1/2.
The foregoing is merely a summary of the more important features of the
law as it exists on the date of this Statement of Additional Information.
Investors contemplating investment in an Individual Retirement Account should
consult their tax advisers, as the law may produce different tax consequences
for some individuals and the law may be changed. The Investor should contact
the Management Company for more information about Individual Retirement
Accounts.
USE OF PARTICIPATING AGREEMENTS FOR COLLATERAL: Participating Agreements
may be used by Investors as collateral security, and the Trust Fund will
cooperate with banks and other lending agencies in arranging collateral
financing, and by furnishing and completing Trust Fund forms as desired by
the Investor or the bank. Upon such collateral assignment of a Participating
Agreement, the Trust Fund and the Trustee may rely upon notices of default
from the assignee and may, after receiving such notice, honor and pay a
demand by the assignee, treating the same as a partial withdrawal or
termination by the Investor. The Trust Fund, Trustee and Management Company
shall be fully protected in relying upon any document furnished by an
assignee in this manner. Except for the initial Participating Agreement
Certificate issued at the time of enrollment in the Trust Fund, no
certificates as such are issued to Investors. The collateral assignments are
not valid until received and registered on the books of the Trust Fund
maintained by the Trustee. Forms for this purpose are made available by the
Management Company to Investors and prospective lenders upon receipt of a
request by the Investor.
ADDITIONAL FEDERAL INCOME TAX INFORMATION
In addition to the information contained in "Federal Income Taxes" in
the Prospectus, an Investor may wish to consider the following.
The Trust Fund operates as an open-end diversified management company
and is registered as such under the Investment Company Act of 1940. Such
registration, together with other requirements as set forth in Internal
Revenue Code sections 851 - 855, with which the management of the Trust Fund
intends to comply in the current year, will qualify the Trust Fund as a
"regulated investment company," thereby entitling the Trust Fund to escape
taxation as a separate entity under the Internal Revenue Code.
Generally, to qualify as a "regulated investment company" ("RIC") a fund
must (a) derive at least 90% of its gross income from dividends, interest,
certain payments with respect to securities loans, gains from the sale or
other disposition of stock, securities and currencies, or other income
derived with respect to its business of investing in stock, securities and
currencies, (b) derive less than 30% of its gross income from the gains or
sales or other disposition of stock or securities held less than three
months, and (c) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets is
represented by cash, cash items, U.S. government securities, securities of
other RICs, and other securities (but such other securities must be limited,
in respect of any one issuer, to an amount not greater than 5% of the value
of the fund's assets and 10% of the outstanding voting securities of such
issuer), and (ii) not more than 25% of the value of the fund's assets is
invested in the securities of any one issuer (other than U.S. government
securities or securities of other RICs), or in two or more issuers which the
fund controls and which are engaged in the same or similar trades or
businesses or related trades or businesses.
B-11
<PAGE>
Under the Code, a nondeductible excise tax of 4% is imposed on the
excess of a RIC's "required distribution" for the calendar year ending within
the regulated investment company's taxable year over the "distributed amount"
for such calendar year. "Required distribution" means the sum of (i) 98% of
ordinary income (generally net investment income) for the calendar year, (ii)
98% of capital gains (both long and short term) for the one-year period
ending on October 31 (as though the one-year period ending on October 31)
were the RIC's taxable year), and (iii) the sum of any untaxed, undistributed
net investment income and net capital gains of the RIC for prior periods.
The term "distributed amount" generally means the sum of (i) amounts actually
distributed by the fund from the current year's ordinary income and capital
gain net income and (ii) any amount on which the fund pays income tax for the
year. The Trust fund intends to distribute net investment income and net
capital gains so as to minimize or avoid the excise tax liability.
The Trust Fund also intends to continue distributing to Investors all
net capital gains. If the net asset value of units of any class of the Trust
Fund should, by reason of a distribution of net capital gains, be reduced
below an Investor's cost, such distribution would to that extent be a return
of capital to that Investor even though taxable to the Investor, and a sale
of units by an Investor at net asset value at that time would establish a
capital loss for federal tax purposes.
Corporate Investors may be eligible for the dividends-received deduction
on the dividends (excluding the net capital gains dividends) to the extent
that the Trust Fund's income is derived from domestic corporations dividends
which, if received directly, would qualify for such deduction.
The Trust Fund may be required to withhold for U.S. federal income taxes
31% of all distributions and redemption and withdrawal proceeds otherwise
payable to an Investor who fails to provide the Trust Fund with the
Investor's correct taxpayer identification number, who fails to make required
certifications, or with respect to whom the Trust Fund has been notified by
the Internal Revenue Service of an obligation to withhold under the backup
withholding rules.
The foregoing is only a summary of some of the important federal income
tax considerations generally affecting the Trust Fund and its Investors, and
is only accurate as of the date of this Statement of Additional Information.
No attempt is made to present a detailed explanation of the federal income
tax treatment of the Trust Fund or its Investors, and this discussion is not
intended as a substitute for careful tax planning. Accordingly, potential
investors in the Trust Fund are urged to consult their tax advisers with
specific reference to their own tax situation.
GENERAL INFORMATION
THE TRUSTEE: Prior to April 4, 1996, the Trustee for the Trust Fund was
Bank of America National Trust and Savings Association, 50 California Street,
28th Floor, San Francisco, California 94111. On April 4, 1996, State Street
Bank & Trust Company, 225 Franklin Street, Boston, MA 02110 assumed the
duties of Trustee.
As Trustee, State Street Bank & Trust Company holds all Trust Fund
securities in safekeeping, receives and pays for Trust Fund securities
purchased, delivers and receives payment for Trust Fund securities sold, and
collects all Trust Fund income. The determination of the time, amount, and
nature of securities sales and purchases is made by the directors of the
Trust Fund, with the assistance and advice of the Management Company. Such
sales and purchases are then accomplished by the Trustee upon direction of
the directors of the Trust Fund. The Trustee has no responsibility and can
incur no liability with respect to selection of securities to be sold or
purchased or the timing of purchases and sales. Under an arrangement with
the Management Company, certain administrative tasks, including the
following, have been delegated by the Trustee to the Management Company:
preparation of reports for
B-12
<PAGE>
Investors and the handling of communications to Investors; maintaining
records of the Trust Fund and of the Investors; and the sending of annual
audit reports and other periodic reports to Investors.
INDEPENDENT ACCOUNTANTS: Timpson Garcia, 1610 Harrison Street, Oakland,
California 94612, provided auditing services as the Trust Fund's independent
certified public accountants for the 1995 fiscal year. Deloitte & Touche LLP
has been engaged to provide auditing services as the Trust Fund's independent
certified public accountants for the 1996 fiscal year.
B-13
<PAGE>
SIFE TRUST FUND
FINANCIAL REPORT
DECEMBER 31, 1995
B-14
<PAGE>
C O N T E N T S
Page
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Statement of assets and liabilities 2
Investment portfolio 3 - 8
Statement of operations 9
Statements of changes in net assets 10
Notes to financial statements 11 - 16
FINANCIAL HIGHLIGHTS 17
B-15
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Investors and Board of Directors
SIFE Trust Fund
We have audited the accompanying statement of assets and liabilities of SIFE
TRUST FUND, including the investment portfolio, as of December 31, 1995, and the
related statement of operations for the year then ended, statements of changes
in net assets for each of the two years in the period then ended, and the
financial highlights for each of the ten years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Trust Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of SIFE
TRUST FUND as of December 31, 1995, the results of its operations for the year
then ended, the changes in its net assets for each of the respective two years
in the period then ended, and the financial highlights for each of the ten years
in the period then ended, in conformity with generally accepted accounting
principles.
Oakland, California
January 30, 1996
B-16
<PAGE>
ASSETS
SIFE TRUST FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at market (Note 1)
(cost $429,460,094) $ 610,803,219
Cash 1,061,139
Receivables for:
Dividends (Note 1) 1,296,935
Investment securities sold 6,840,506
-------------
Total assets 620,001,799
-------------
<CAPTION>
LIABILITIES
<S> <C>
Payables for:
SIFE (the "Management Company") (Note 2) 525,822
Investment securities purchased 5,328,375
-------------
Total liabilities 5,854,197
-------------
Net assets $ 614,147,602
-------------
-------------
Net asset value per investment unit
on 134,122,616 units outstanding $ 4.579
-------------
-------------
Maximum offering price per unit
(100/95 of $4.579) $ 4.820
-------------
-------------
</TABLE>
See Notes to Financial Statements.
B-17
<PAGE>
PORTFOLIO
SIFE TRUST FUND
INVESTMENT PORTFOLIO
December 31, 1995
<TABLE>
<CAPTION>
Number % of
of Market Net
Shares Value Assets
------ ------ ------
Common Stocks:
Banks:
<S> <C> <C> <C>
Amcore Financial, Inc. 43,100 $ 872,775
AMFED Financial, Inc. 28,000 952,000
Argentbank 62,400 1,528,800
BancFirst Corp. 24,000 447,000
Bank of Boston Corp. 215,500 9,966,875
Bank of Granite Corp. 13,500 391,500
Bank of New York Co., Inc. 422,800 20,611,500
Bank South Corp. 77,000 2,338,875
BankAmerica Corp. 345,000 22,338,750
Bankers Trust New York Corp. 30,000 1,995,000
BankNorth Group, Inc. 12,500 481,250
Barnett Banks, Inc. 62,300 3,675,700
BayBanks, Inc. 170,000 16,702,500
Benson Financial Corp. 40,000 750,000
Boatmen's Bancshares, Inc. 205,000 8,379,375
California Bancshares, Inc. 140,000 3,718,750
California State Bank 70,000 910,000
Capital Bancorporation 55,300 2,046,100
Centennial Bancorp* 40,020 530,265
Charter Bancshares, Inc. 124,485 2,443,018
Chase Manhattan Corp. 125,000 7,546,875
Chemical Banking Corp. 165,800 9,740,750
Chittenden Corp. 53,500 1,712,000
Citicorp 335,000 22,528,750
Citizens Bancshares, Inc. 7,300 323,025
Citizens Banking Corp. 66,300 1,972,425
City National Corp. 150,000 2,100,000
Colonial BancGroup, Inc. 42,500 1,370,625
Comerica, Inc. 80,000 3,200,000
Community First Bankshares, Inc. 30,000 682,500
Compass Bancshares, Inc. 180,000 5,940,000
Corestates Financial Corp. 88,000 3,333,000
Corpus Christi Bancshares, Inc. 49,100 583,063
Crestar Financial Corp. 64,000 3,784,000
CU Bancorp 173,400 1,777,350
</TABLE>
See Notes to Financial Statements.
(Continued)
B-18
<PAGE>
PORTFOLIO
SIFE TRUST FUND
INVESTMENT PORTFOLIO
December 31, 1995
<TABLE>
<CAPTION>
Number % of
of Market Net
Shares Value Assets
------ ------ ------
Common Stocks:(continued)
Banks:(continued)
<S> <C> <C> <C>
Cullen Frost Bankers, Inc. 90,400 $ 4,520,000
Deposit Guaranty Corp. 101,000 4,494,500
FB and T Financial Corp. 14,600 474,500
Fifth Third Bancorp 22,500 1,648,125
First American Corp. of Tennessee 110,000 5,211,250
First Bank System, Inc. 64,500 3,200,812
First Chicago Corp. 420,000 16,590,000
First Commercial Corp. 97,905 3,230,865
First Empire State Corp. 32,000 6,976,000
First Fidelity Bancorporation 114,000 8,592,750
First Interstate Bancorp 40,000 5,460,000
First Merchants Corp. 36,000 927,000
First State Bancorporation 93,750 1,136,719
First Tennessee National Corp. 105,000 6,352,500
First Union Corp. 70,200 3,904,875
First Virginia Banks, Inc. 85,800 3,582,150
Fort Wayne National Corp. 43,000 1,354,500
George Mason Bankshares, Inc. 72,390 1,990,725
Hancock Holding Co. 65,000 2,437,500
Hawkeye Bancorporation 35,000 931,875
Hibernia Corp. 712,200 7,656,150
Imperial Bancorp 170,000 4,080,000
Independent Bank Corp. MA 582,500 4,295,937
Integra Financial Corp. 305,000 19,253,125
J.P. Morgan and Co., Inc. 113,600 9,116,400
Keycorp 100,000 3,625,000
Liberty Bancorp, Inc. Oklahoma 95,000 3,538,750
Magna Group, Inc. 25,000 593,750
Mahaska Investment 40,000 600,000
Mark Twain Bancshares, Inc. 60,000 2,325,000
Mellon Bank Corp. 80,000 4,300,000
Mercantile Bancorporation, Inc. 239,500 11,017,000
Mercantile Bankshares Corp. 40,000 1,115,000
Metrobank 56,300 1,759,375
Midlantic Corp. 100,000 6,562,500
</TABLE>
See Notes to Financial Statements.
(Continued)
B-19
<PAGE>
PORTFOLIO
SIFE TRUST FUND
INVESTMENT PORTFOLIO
December 31, 1995
<TABLE>
<CAPTION>
Number % of
of Market Net
Shares Value Assets
------ ------ ------
Common Stocks:(continued)
Banks:(continued)
<S> <C> <C> <C>
Mountain Parks Financial Corp.* 113,500 $ 2,525,375
National Bancshares Corp. Texas* 51,500 527,875
National City Corp. 65,000 2,153,125
National Commerce Bancorporation 315,500 8,281,875
NationsBank Corp. 108,500 7,554,313
Northern Trust Corp. 67,900 3,802,400
Norwest Corp. 157,300 5,190,900
Pinnacle Financial Services, Inc. 12,600 223,650
Premier Bancorp, Inc. 50,000 1,168,750
Regions Financial Corp. 60,000 2,580,000
Republic New York Corp. 40,000 2,485,000
River Forest Bancorp, Inc. 118,140 3,012,570
Seacoast Banking Corp. of Florida 21,500 467,625
Signet Banking Corp. 250,000 5,937,500
Southwest Bancorp, Inc. (OK) 50,000 925,000
State Street Boston Corp. 90,000 4,050,000
Sterling Bancshares, Inc. (TX) 90,000 1,575,000
Summit Bancshares, Inc. Texas 150,000 2,400,000
Texas Regional Bancshares, Inc. 31,000 534,750
U.S. Bancorp of Oregon 221,750 7,456,344
UJB Financial Corp. 140,000 4,987,500
UMB Financial Corp. 104,004 3,666,141
Union Planters Corp. 450,000 14,343,750
United Security Bancorporation* 133,000 1,828,750
Ventura County National Bancorp* 85,000 318,750
Victoria Bankshares, Inc. 35,000 1,207,500
Wachovia Corp. 105,000 4,803,750
Wainwright Bank and Trust Co.* 107,000 561,750
West Coast Bancorp 46,200 768,075
Westamerica Bancorporation 90,000 3,892,500
Western Bank 72,269 1,336,976
Wilmington Trust Corp. 47,500 1,466,563
-----------
432,563,086 70.4%
-----------
</TABLE>
See Notes to Financial Statements.
(Continued)
B-20
<PAGE>
PORTFOLIO
SIFE TRUST FUND
INVESTMENT PORTFOLIO
December 31, 1995
<TABLE>
<CAPTION>
Number % of
of Market Net
Shares Value Assets
------ ------ ------
Common Stocks:(continued)
Thrifts:
<S> <C> <C> <C>
American Federal Bank, FSB 107,500 $ 1,639,375
BankAtlantic Bancorp, Inc. 95,000 1,781,250
Charter One Financial, Inc. 66,000 2,021,250
Eagle Bancshares, Inc. 3,000 57,000
First Essex Bancorp, Inc. 126,348 1,437,209
First Financial Corp., Inc. 17,000 391,000
First Indiana Corp. 50,000 1,287,500
Hibernia Savings Bank 32,500 528,125
Home Federal Bancorp 15,000 397,500
Lawrence Savings Bank* 81,000 374,625
Leader Financial Corp. 76,000 2,840,500
MAF Bancorp, Inc. 42,900 1,072,500
North Side Savings Bank 7,500 228,750
NS Bancorp, Inc. 9,000 348,750
People's Bank 115,000 2,185,000
Poughkeepsie Savings Bank FSB 100,000 525,000
Virginia First Financial Corp. 200,000 2,275,000
Westcorp, Inc. 78,100 1,444,850
-----------
20,835,184 3.4%
-----------
Non-Bank Financials:
Advanta Corp. 40,000 1,530,000
AFLAC, Inc. 26,700 1,161,450
Capital One Financial Corp. 217,900 5,202,362
Federal National Mortgage Association 34,200 4,236,525
First USA, Inc. 15,000 665,625
Franklin Resources, Inc. 70,000 3,526,250
Green Tree Financial 80,000 2,110,000
Investor Financial Services Corp.* 30,000 622,500
-----------
19,054,712 3.1%
-----------
</TABLE>
See Notes to Financial Statements.
(Continued)
B-21
<PAGE>
PORTFOLIO
SIFE TRUST FUND
INVESTMENT PORTFOLIO
December 31, 1995
<TABLE>
<CAPTION>
Number % of
of Market Net
Shares Value Assets
------ ------ ------
Common Stocks:(continued)
Pharmaceuticals and Healthcare:
<S> <C> <C> <C>
Healthcare Compare Corp.* 41,100 $ 1,787,850
Johnson & Johnson 20,000 1,710,000
Merck and Co., Inc. 70,000 4,593,750
Mylan Laboratories, Inc. 72,000 1,692,000
Pfizer, Inc. 55,000 3,465,000
-----------
13,248,600 2.2%
-----------
Consumer Non-durable Products:
Albertsons, Inc. 25,000 821,875
Campbell Soup Co. 65,500 3,930,000
Coca-Cola Enterprises, Inc. 30,000 2,227,500
MacDonalds Corp. 10,000 451,250
Walt Disney Co., The 30,000 1,766,250
-----------
9,196,875 1.5%
-----------
Communications and Technology:
Compaq Computer Corp.* 10,000 480,000
Dell Computer Corp.* 20,000 692,500
Hewlett-Packard Co. 20,000 1,675,000
Intel Corp. 37,500 2,128,125
International Business Machines Corp. 20,000 1,827,500
-----------
6,803,125 1.1%
-----------
Integrated Petroleum Companies
Amoco Corp. 30,000 2,145,000
Atlantic Richfield Co. 20,000 2,215,000
Chevron Corp. 50,000 2,618,750
Exxon Corp. 35,300 2,841,650
Mobil Corp. 20,000 2,235,000
Occidential Petroleum Co. 88,600 1,893,825
Phillips Petroleum Co. 58,600 1,999,725
Sun Company, Inc. 68,500 1,875,187
-----------
17,824,137 2.9%
----------- -----
Total common stocks (cost $338,182,594) 519,525,719 84.6%
</TABLE>
See Notes to Financial Statements.
(Continued)
B-22
<PAGE>
PORTFOLIO
SIFE TRUST FUND
INVESTMENT PORTFOLIO
December 31, 1995
<TABLE>
<CAPTION>
% of
Market Net
Value Assets
------ ------
<S> <C> <C>
U. S. Treasury bills - principal at maturity $55,000,000
due January 11, 1996 $ 54,917,500 8.9%
Repurchase agreement** - Harris Trust at 5.75%,
due January 2, 1996, maturity amount $36,360,000 36,360,000 5.9%
-------------- -------
Total investments 610,803,219 99.4%
Excess of other assets over payables 3,344,383 0.6%
-------------- -------
Net assets $ 614,147,602 100.0%
-------------- -------
-------------- -------
</TABLE>
* Non-income producing
** Collateralized by U.S. Government obligations
See Notes to Financial Statements.
B-23
<PAGE>
Operations
SIFE TRUST FUND
STATEMENT OF OPERATIONS
Year Ended December 31, 1995
<TABLE>
<S> <C> <C>
Investment income:
Income:
Dividends $ 13,550,976
Interest 3,345,723
Security lending 6,621
-----------
Total investment income $ 16,903,320
Expenses:
Investment advisory fee (Note 2) 3,039,425
Officers' salaries 345,600
Office salaries 583,357
Accounting and administrative services 208,092
Office supplies and expenses 446,603
Trustee's fee 164,969
Legal and auditing 129,967
Directors' fees 215,500
Notices to investors 176,309
Registration fees 12,632
-----------
Total expenses 5,322,454
--------------
Net investment income 11,580,866
Realized and unrealized gain on investments:
Net realized gain 97,398,427
Gain on expiration of option contracts 5,518,144
Net increase in unrealized appreciation
of investments during the year 88,509,822
-----------
Net gain on investments 191,426,393
Net increase in net assets
resulting from operations $ 203,007,259
--------------
--------------
</TABLE>
See Notes to Financial Statements.
B-24
<PAGE>
SIFE TRUST FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
PER UNIT DATA
(For one unit outstanding
throughout each year):
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $ 3.55 $ 3.83 $ 3.68 $ 2.90 $ 2.12 $ 2.92 $ 2.63 $ 2.32 $ 2.70 $ 2.48
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.10 0.09 0.07 0.06 0.08 0.11 0.11 0.09 0.11 0.12
Net realized and
unrealized gains
(losses) on securities 1.68 -0.13 0.29 0.92 0.90 -0.75 0.42 0.36 -0.30 0.25
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations 1.78 -0.04 0.36 0.98 0.98 -0.64 0.53 0.45 -0.19 0.37
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions to shareholders:
Dividends from net
investment income -0.10 -0.09 -0.07 -0.06 -0.08 -0.11 -0.11 -0.09 -0.11 -0.12
Distributions from
capital gains -0.65 -0.15 -0.14 -0.14 -0.12 -0.05 -0.13 -0.05 -0.08 -0.03
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions -0.75 -0.24 -0.21 -0.20 -0.20 -0.16 -0.24 -0.14 -0.19 -0.15
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 4.58 $ 3.55 $ 3.83 $ 3.68 $ 2.90 $ 2.12 $ 2.92 $ 2.63 $ 2.32 $ 2.70
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL RETURN* 49.9% (1.5)% 9.3% 33.9% 47.3% (22.1)% 20.2% 19.8% (8.2)% 16.0%
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of year
(in millions) $ 614 $ 410 $ 414 $ 345 $ 260 $ 204 $ 289 $ 241 $ 224 $ 217
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Ratios to average net assets:
Expenses 1.03% 0.94% 1.02% 0.99% 1.04% 1.07% 1.03% 1.10% 1.03% 1.05%
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income 2.25% 2.27% 1.69% 1.73% 3.03% 4.63% 3.52% 3.52% 3.31% 3.46%
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Portfolio turnover rate 93.5% 25.2% 28.7% 33.4% 77.6% 42.3% 41.7% 20.7% 37.2% 25.8%
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
*Sales loads are not reflected in total return.
B-25
<PAGE>
SIFE TRUST FUND
NOTES TO FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies
SIFE Trust Fund (the "Trust Fund") is an open-ended, diversified
investment company offering redeemable securities represented by
"Participating Agreements" to the public at a price equal to the net
asset value per investment "unit." The Trust Fund is organized under
the laws of the State of California as a trust, with Bank of America
(the "Trustee") as Trustee. The Trust Fund is registered under the
Investment Company Act of 1940, as amended.
All funds received by the Trustee for investment and all funds
reinvested from net investment income and realized capital gains, if
any, are accounted for by the Trustee in terms of investment units.
The number of units allocated to the initial investments in the Trust
Fund was determined by allocating one unit for each dollar of
investment. Since then, the value of investment units (for purposes
of new investment, reinvestment of net investment income and gains, as
well as redemption) has been determined by dividing the total value of
the net assets of the Trust Fund on any given day by the total number
of units then outstanding.
Management uses estimates and assumptions in preparing these
financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported
amounts of assets, liabilities, revenues and expenses.
The following is a summary of significant accounting policies
consistently followed by the Trust Fund in the preparation of their
financial statements. The policies are in conformity with generally
accepted accounting principles for investment companies.
Security valuations:
Securities which are listed on a national stock exchange are valued
at the closing price on the stock exchange on which they are primarily
traded; if there has been no daily trading in a listed security, that
security is valued at the last available closing price; securities
which are traded over-the-counter and for which closing prices are
readily available (such as NASDAQ National Market System issues) are
valued at the closing price; other securities which are traded over-
the-counter but for which closing prices are not readily available are
valued at the closing bid price. Short-term obligations having 60
days or less to maturity are valued at amortized cost which
approximates market value. Temporary investments in repurchase
agreements are valued at cost.
Security transactions and related investment income:
Security transactions are accounted for on the date the securities
are purchased or sold (trade date). Realized gains or losses on
security transactions are computed on the basis of specific
identification of the securities sold. Interest income is recorded as
earned
B-26
<PAGE>
from settlement date and is recorded daily on the accrual basis.
Dividend income is recorded on the ex-dividend date.
(Continued)
SIFE TRUST FUND
NOTES TO FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies (Continued)
Distributions to investors:
Dividends to investors are recorded on the ex-dividend date. Net
investment income and net realized gain from options are distributed
proportionately to each investor's account as of the last business day
in February, May, August, and December. Realized gains, net of
losses, from securities held for more than one year are distributed
annually as of the last business day in November. Realized gains, net
of losses, from securities held for less than one year are distributed
annually as of the last business day in December.
Income taxes:
The Trust Fund's policy is to comply with the requirements of the
Internal Revenue Code that are applicable to regulated investment
companies and to distribute all its taxable income to its investors.
Therefore, no provision for federal income taxes is recorded in the
financial statements.
Covered call and put options:
The Trust Fund may write covered call options on securities held by
the Trust Fund for non-speculative or hedging purposes, may write
covered put options on securities for the same purposes, and may enter
into closing purchase transactions with respect to such options.
Options written by the Trust Fund normally will have expiration dates
between three and nine months from the date written.
All call and put options written by the Trust Fund must be
"covered." A call option will be considered covered if the Trust
Fund, so long as it remains obligated as a writer, owns the securities
underlying the options. A put option will be covered if the Trust
Fund, so long as it remains obligated as a writer, maintains in a
segregated account held by the Trustee under the Trust Agreement,
cash, U.S. Treasury Bills or high-grade short term debt securities in
an amount equal to or greater than the exercise price of the put
option.
The exercise price of an option may be below, equal to, or above
the current market value of the underlying security at the time the
option is written. When the Trust Fund writes an option, an amount
equal to the premium received by the Trust Fund is recorded as an
asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of
the option written. The current
B-27
<PAGE>
market value of a written option is the last sale price, or the
absence of a sale, the mean between the last bid and asked prices on
that day. If a written option expires on the stipulated expiration
date, or if the Trust Fund enters into
(Continued)
SIFE TRUST FUND
NOTES TO FINANCIAL STATEMENTS
Note 1. Significant Accounting Policies (Continued)
Covered call and put options: (Continued)
a closing purchase transaction, the Trust Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received
when the option was written) without regard to any unrealized gain or
loss on the underlying security, and the liability related to such
option is extinguished. If a written call option is exercised, the
Trust Fund realizes a gain or a loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium
originally received. If a written put option is exercised, the Trust
Funds cost basis is reduced by the premium originally received.
Repurchase agreements:
The Trust Fund may invest in repurchase agreements secured by U.S.
Government obligations or by other securities. Securities pledged as
collateral for repurchase agreements are held by the Trust Fund's
custodian bank until maturity of the repurchase agreements.
Provisions of the agreements ensure that the market value of the
collateral is sufficient in the event of default; however, in the
event of default or bankruptcy by the other party to the agreements,
realization and/or retention of the collateral may be subject to legal
proceedings.
Note 2. Affiliated Party Transactions - Agreements with SIFE (the "Management
Company")
Bank of America is the Trustee of the Trust Fund. In general terms,
the Trustee has the following responsibilities as: (a) custodian of
the assets, (b) investor of the assets, (c) transfer agent and (d)
service provider to existing investors. Through a series of
agreements among the Trust Fund, Trustee and the Management Company,
the Trustee has transferred certain responsibilities to the Management
Company. The following is a summary of the agreements:
Transfer agency agreement and administrative services agreement:
The Trust Fund, pursuant to a transfer agency agreement with the
Management Company and as delegated to the Management Company by the
Trust Fund's Board of Directors, has authorized the Management
Company to act as the Trust Fund's transfer agent, to service
existing investors, and to perform all accounting duties. The Trust
Fund has agreed to reimburse the Management Company, on a monthly
basis, all costs incurred in performing these duties. In addition,
all Trust Fund expenses are paid by the Management Company and
reimbursed by the Trust Fund
B-28
<PAGE>
monthly. Certain expenses such as rent and salaries are charged to
the Trust Fund in accordance with space or time used or by other
reasonable methods. During the year ended December 31, 1995, the
Management Company was reimbursed $2,283,029 for such services and
reimbursement of expenses.
SIFE TRUST FUND
NOTES TO FINANCIAL STATEMENTS
Note 2. Affiliated Party Transactions - Agreements with SIFE
(the "Management Company") (Continued)
Investment advisory agreement:
The Trust Fund has entered into an investment advisory
agreement with the Management Company. Under the terms of the
investment advisory agreement, the Trust Fund pays an advisory
fee to the Management Company at a monthly rate of 1/20 of 1% of
the net assets of the Trust Fund as of the close of each month.
This agreement requires the Management Company to reduce its
fees, or, if necessary, make payments to the Trust Fund for the
extent required to keep total Trust Fund expenses below 1.5% of
the first $30,000,000 of average monthly net assets of the Trust
Fund, plus 1% of the remaining average monthly net assets of the
Trust Fund. There were no excess expenses absorbed by the
Management Company during the year.
The investment advisory agreement was amended on April 3,
1995. The amendment to the investment advisory agreement was
approved by the Trust Fund's investors at the investors' annual
meeting held on April 3, 1995. Under the previous terms, the
Trust Fund paid an investment advisory fee to the Management
Company at a monthly rate of 1/24 of 1% of the net assets of the
Trust Fund as of the close of each month.
Underwriting agreement:
The Trust Fund has entered into a distribution agreement with
the Management Company wherein the Management Company serves as
the principal underwriter of the Trust Fund. 2.5% to 5.0% of the
sales load, based on the amounts purchased, is retained by the
Management Company. No sales charge is assessed on purchases of
$1,000,000 or more. A sales charge of 1% is retained by the
Management Company for purchases by employees and directors of the
Trust Fund, the Management Company and qualified sales
representatives. Sales charges retained by the Management Company
amounted to $1,452,138. All sales and distribution costs are
incurred and paid by the Management Company. The sales charges
are not an expense of the Trust Fund and hence are not reflected
in the accompanying statement of operations.
Certain officers and directors of the Trust Fund are also
officers and directors of the Management Company. On December
31, 1995, the Management Company owned 515,147 investment units
of the Trust Fund.
B-29
<PAGE>
SIFE TRUST FUND
NOTES TO FINANCIAL STATEMENTS
Note 3. Appreciation (Depreciation) of Investments
On December 31, 1995, the net unrealized appreciation for all
securities was as follows:
<TABLE>
<S> <C>
Aggregate gross unrealized appreciation for
all investments in which there is an excess
of value over tax cost $ 182,557,885
Aggregate gross unrealized (depreciation) for
all investments in which there is an excess of
tax cost over value ( 1,214,760)
---------------
Net unrealized appreciation $ 181,343,125
--------------
--------------
</TABLE>
The tax cost basis used in the above calculation is the same as that
used for financial statement purposes.
Note 4. Participating Agreement Transactions (Measured in Investment Units)
Changes in the Trust Fund's investment units outstanding for the years
ended December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Sold to investors 10,673,280 12,037,270
Issued as reinvestment of
distributions from net
investment income and net
realized gain on investment 18,821,723 6,688,858
Repurchased from investors (10,768,712) (11,461,510)
---------- ----------
Net change 18,726,291 7,264,618
---------- ----------
---------- ----------
</TABLE>
Note 5. Security Lending
The Trust Fund, pursuant to an agency agreement with the Trustee,
authorized the Trustee to lend securities to certain brokers for a
negotiated lenders' fee. These fees amounted to $6,621 for the year
ended December 31, 1995.
The Trust Fund received collateral against loaned securities in an
amount at least equal to 102% of the market value of the loaned
securities at the inception of the loan agreement. The collateral must
be maintained at not less than 102% of the market value of the loaned
securities. On December 31, 1995, there were securities on loan having
a value of approximately $9,775,500.
B-30
<PAGE>
SIFE TRUST FUND
NOTES TO FINANCIAL STATEMENTS
Note 6. Purchases and Sales of Securities
In 1995, purchases and sales of investment securities, other than U.S.
Treasury obligations, were $426,681,345 and $489,188,511, respectively.
Fund purchases and sales of U.S. Treasury obligations were $250,747,160
and $205,765,302, respectively for 1995.
Note 7. Concentration of Credit Risk
On December 31, 1995, approximately $472,452,982 (76.9% of net assets)
of the Trust Fund's investments are in equities of financial
institutions.
Note 8. Financial Instruments
The Trust Fund may trade in financial instruments withoff-balance-sheet
risk during the normal course of investing activities to assist in
managing exposure to various market risks. These financial instruments
include written covered call and put options and may involve, to a
varying degree, elements of risk in excess of the amounts recognized
for financial statement purposes. No such investments were held by the
Trust Fund on December 31, 1995.
B-31
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS:
Financial statements filed in Part A of Registration Statement:
Financial Highlights for years ended December 31, 1986 through
1995.
Financial statements filed in Part B of Registration Statement:
1. Report of Independent Certified Public Accountants
2. Statement of Assets and Liabilities as of December 31, 1995
3. Statement of Operations for the year ended December 31, 1995
4. Statement of Changes in Net Assets for the years ended December
31, 1995 and December 31, 1994
5. Investment Portfolio as of December 31, 1995
6. Notes to Financial Statements as of December 31, 1995
7. Financial Highlights for years ended December 31, 1986 through
1995
(b) EXHIBITS FILED IN PART C OF THE REGISTRATION STATEMENT:
EXHIBIT
NUMBER
1. Copy of Registrant's Trust Agreement as currently in effect:
a. Copy of Trust Agreement recompiled as of May 1, 1976(1)
b. Copy of Appointment of Successor Trustee(2)
c. Copy of Certificate of Successor Trustee(2)
d. Copy of Restated Trust Agreement recompiled as of May 2,
1986(4)
e. Copy of Amendment to Restated Trust Agreement dated April 1,
1987(4)
f. Copy of Amendment to Restated Trust Agreement dated April 2,
1990(5)
g. Copy of Amendment to Restated Trust Agreement dated April 1,
1991(6)
h. Copy of Amendment to Restated Trust Agreement dated February
24, 1993(7)
i. Copy of Amendment to Restated Trust Agreement dated April 1,
1993(7)
j. Copy of Amendment to Restated Trust Agreement dated April 4,
1994(8)
k. Copy of Amendment to Restated Trust Agreement dated April 3,
1995(9)
l. Copy of Amendment to Restated Trust Agreement dated April 1,
1996(10)
m. Copy of Agreement between SIFE, Inc. and State Street
Bank and Trust Company re appointment of successor trustee
2. See Exhibit 1
3. Inapplicable
4. Sample of Participating Agreement Certificate(3)
5. Copy of Investment Advisory Agreement dated April 3, 1972(1)
a. Copy of Amendment to Investment Advisory Agreement dated
April 3, 1995(9)
b. Copy of Amendment to Investment Advisory Agreement dated
April 1, 1996
6. Copy of Underwriting Agreement dated April 3, 1972(1)
a. Copy of Amendment to Underwriting Agreement dated April 1,
1974(1)
b. Copy of Amendment to Underwriting Agreement dated April 1,
1976(1)
c. Copy of Amendment to Underwriting Agreement dated April 1,
1985(3)
d. Copy of Amendment to Underwriting Agreement dated April 2,
1990(5)
e. Copy of Amendment to Underwriting Agreement dated February
24, 1993(7)
f. Copy of Amendment to Underwriting Agreement dated April 1,
1993(7)
C-1
<PAGE>
g. Copy of Amendment to Underwriting Agreement dated April 4,
1994(8)
h. Copy of Amendment to Underwriting Agreement dated as of
February 1, 1995, effective April 1, 1995(9)
i. Copy of Amendment to Underwriting Agreement dated April 1,
1996(10)
7. Inapplicable
8. a. Custodian Contract between SIFE Trust Fund and State Street
Bank and Trust Company
b. Retirement Plans Service Contract among SIFE, Inc., SIFE
Trust Fund and State Street Bank and Trust Company
9. Inapplicable
10. Opinion and Consent of Counsel
11. Inapplicable
12. Inapplicable
13. Inapplicable
14. Copies of Model Plans Used in the Establishment of Retirement
Plans:
a. Copy of Registrant's Individual Retirement Account
Disclosure Statement(5)
b. Copy of Registrant's 403(b)(7) Plan Description(6)
c. Copy of State Street Bank and Trust Company's 403(b) Account
Package
15. Rule 12b-1 Plan of Distribution and Rule 12b-1 Agreement(10)
16. Schedule of Performance Advertising Quotations
17. Financial Data Schedules(11)
18. Other Exhibits:
a. Special Power of Attorney
b. Board Resolution re signature authority
c. Rule 18f-3 Plan
- - ----------------------------------
(1) Filed March 31, 1980, as an exhibit to Form N-1 Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 23 and
Registration Statement under Investment Company Act of 1940 Amendment No.
2, File No. 2-17277, and incorporated herein by reference.
(2) Filed April 27, 1981, as an exhibit to Form N-1 Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 24 and
Registration Statement under Investment Company Act of 1940 Amendment No.
3, File No. 2-17277, and incorporated herein by reference.
(3) Filed February 28, 1986, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 29 and
Registration Statement under Investment Company Act of 1940 Amendment No.
8, File No. 2-17277, and incorporated herein by reference.
(4) Filed April 17, 1987, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 30 and
Registration Statement under Investment Company Act of 1940 Amendment No.
9, File No. 2-17277, and incorporated herein by reference.
(5) Filed February 26, 1990, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 33 and
Registration Statement under Investment Company Act of 1940 Amendment No.
12, File No. 2-17277, and incorporated herein by reference.
(6) Filed February 26, 1991, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 34 and
Registration Statement under Investment Company Act of 1940 Amendment No.
13, File No. 2-17277, and incorporated herein by reference.
(7) Filed February 26, 1993, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 36 and
Registration Statement under Investment Company Act of 1940 Amendment No.
15, File No. 2-17277, and incorporated herein by reference.
(8) Filed February 25, 1994, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 37 and
Registration Statement under Investment Company Act of 1940 Amendment No.
16, File No. 2-17277, and incorporated herein by reference.
(9) Filed February 24, 1995, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 38 and
Registration Statement under Investment Company Act of 1940 Amendment No.
17, File No. 2-17277, and incorporated herein by reference.
(10) Filed February 23, 1996, as an exhibit to Registrant's Definitive Proxy
Statement under Section 14(a) of the Securities Exchange Act of 1934, as
amended, and incorporated herein by reference.
(11) Filed February 24, 1996, as an exhibit to Registrant's Form N-SAR for the
period ended December 31, 1995, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, and incorporated herein by
reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
No person is directly or indirectly controlling, controlled by, or under
common control with the Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
NUMBER OF RECORD HOLDERS
TITLE OF CLASS (DECEMBER 31, 1995)
<S> <C>
Participating Agreements 134,122,616
</TABLE>
C-2
<PAGE>
ITEM 27. INDEMNIFICATION
Reference is made to Article VI, Section 5 of Registrant's Trust Agreement,
as amended, filed as Exhibit 1 under Part C, Item 24(b) (the "Trust Agreement"),
which generally provides that no director or officer shall be liable to the
Registrant or to its Investors or to any other person for any action which such
director or officer may in good faith take or refrain from taking as a director
or officer; provided, however, that no officer or director of the Registrant
shall be protected against any liability to the Registrant or its Investors
caused by such officer's or director's willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office, nor shall anything in Section 5 protect any officer or director
against any liability arising under any provision of the Securities Act of 1933
(the "Securities Act").
Reference is also made to Article VI, Section 6 of Registrant's Trust
Agreement, which generally provides that an officer or director shall be
indemnified by the Registrant to the maximum extent permitted by applicable law
against all expenses, judgments, fines, settlements and other amounts reasonably
incurred or suffered by such person in connection with any threatened, pending
or completed legal proceeding brought by a third party in which he or she is
involved by reason of his or her relationship to the Registrant. No
indemnification shall be provided, however, with respect to any liability
arising by reason of the "Disabling Conduct" of the person seeking indemnity.
"Disabling Conduct" generally means willful misfeasance, bad faith, gross
negligence, reckless disregard of duties, or any conduct that amounts to a
violation of the Securities Act.
Any officer or director who is a party to an action which is brought by the
Registrant shall also be indemnified, provided that if such person is adjudged
by a court to be liable to the Registrant in the performance of his or her duty,
indemnification shall be made only to the extent a court determines that there
has been no Disabling Conduct and that such person is fairly and reasonably
entitled to indemnity.
Expenses incurred in connection with a legal proceeding shall be advanced
by the Registrant to an officer or director prior to the proceeding's final
disposition, provided such officer or director agrees to repay all advanced
amounts unless it is ultimately determined that he or she is entitled to
indemnification, and such officer or director meets certain other conditions to
the advance.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant understands that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Registrant's response to Part B, Item 14 contained in "Management of the
Trust Fund," is hereby incorporated herein by reference.
C-3
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITER
a. The underwriter of the Registrant is SIFE. SIFE acts as
underwriter and investment adviser only for the Registrant.
b. Registrant's response to Part B, Item 14, contained in
"Management of the Trust Fund," is hereby incorporated herein by
reference.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 are kept at the offices of
SIFE, 490 North Wiget Lane, Walnut Creek, CA 94598.
ITEM 31. MANAGEMENT SERVICES
Inapplicable.
ITEM 32. UNDERTAKINGS
Inapplicable.
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933,
and specifically the Registrant certifies that this Post-Effective Amendment to
Registration Statement No. 39 is filed solely for one or more of the purposes
specified in Paragraph (b)(1) of Rule 485, and that no material event requiring
disclosure in the prospectus, other than one listed in Paragraph (b)(1) of Rule
485, or one for which the Commission has approved a filing under Paragraph
(b)(1)(ix) of Rule 485, has occurred since April 30, 1995, the effective date of
Registrant's most recent Post-Effective Amendment to this Registration
Statement, and has duly caused this Post-Effective Amendment to Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in this City of Walnut Creek and State of California, on the 19th
day of April, 1996.
SIFE Trust Fund
By: /s/ SAM A. MARCHESE
------------------------------
Sam A. Marchese
President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
SAM A. MARCHESE /s/ Director; President, Treasurer April 19,
------------------- & Chief Executive Officer of 1996
(Sam A. Marchese) the Trust Fund (Principal
Executive Officer & Principal
Accounting Officer)
DAVID M. SACKS /s/ Director; Chairman of the Board *
-----------------
(David M. Sacks)
HAIG G. MARDIKIAN /s/ Director; Vice-Chairman of the *
--------------------- Board
(Haig G. Mardikian)
CHARLES W. FROEHLICH, JR. /s/ Director; Secretary *
----------------------------
(Charles W. Froehlich, Jr.)
DIANE HOWARD BELDING /s/ Director *
-----------------------
(Diane Howard Belding)
JOHN A. MEANY /s/ Director *
----------------
(John A. Meany)
WALTER S. NEWMAN /s/ Director *
-------------------
(Walter S. Newman)
* By: /s/ SAM A. MARCHESE Dated: April 19, 1996
------------------------------------ -----------------------
Sam A. Marchese, Attorney-in-Fact
C-5
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
SIFE Trust Fund
490 North Wiget Lane
Walnut Creek, California 94598
We hereby consent to the use in this Post-Effective Amendment No. 39 to the
Registration Statement under the Securities Act of 1933 and this Amendment No.
18 to the Registration Statement under the Investment Company Act of 1940, both
on Form N-1A and the related Prospectus and Statement of Additional Information,
of our report dated January 30, 1996 accompanying and pertaining to the
financial statements of SIFE Trust Fund and the information set forth in the
Prospectus under the caption "Financial Highlights," which are included in such
amendments to Registration Statements, Prospectus and Statement of Additional
Information.
TIMPSON GARCIA
Certified Public Accountants
Oakland, California
April 17, 1996
C-6
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number
-------
1. Copy of Registrant's Trust Agreement as currently in effect:
a. Copy of Trust Agreement recompiled as of May 1, 1976(1)
b. Copy of Appointment of Successor Trustee(2)
c. Copy of Certificate of Successor Trustee(2)
d. Copy of Restated Trust Agreement recompiled as of May 2, 1986(4)
e. Copy of Amendment to Restated Trust Agreement dated April 1,
1987(4)
f. Copy of Amendment to Restated Trust Agreement dated April 2,
1990(5)
g. Copy of Amendment to Restated Trust Agreement dated April 1,
1991(6)
h. Copy of Amendment to Restated Trust Agreement dated February 24,
1993(7)
i. Copy of Amendment to Restated Trust Agreement dated April 1,
1993(7)
j. Copy of Amendment to Restated Trust Agreement dated April 4,
1994(8)
k. Copy of Amendment to Restated Trust Agreement dated April 3,
1995(9)
l. Copy of Amendment to Restated Trust Agreement dated April 1,
1996(10)
m. Copy of Agreement between SIFE, Inc. and State Street Bank and
Trust Company re appointment of successor trustee
2. See Exhibit 1
3. Inapplicable
4. Sample of Participating Agreement Certificate(3)
5. Copy of Investment Advisory Agreement dated April 3, 1972(1)
a. Copy of Amendment to Investment Advisory Agreement dated April 3,
1995(9)
b. Copy of Amendment to Investment Advisory Agreement dated
April 1, 1996
6. Copy of Underwriting Agreement dated April 3, 1972(1)
a. Copy of Amendment to Underwriting Agreement dated April 1,
1974(1)
b. Copy of Amendment to Underwriting Agreement dated April 1,
1976(1)
c. Copy of Amendment to Underwriting Agreement dated April 1,
1985(3)
d. Copy of Amendment to Underwriting Agreement dated April 2,
1990(5)
e. Copy of Amendment to Underwriting Agreement dated February 24,
1993(7)
f. Copy of Amendment to Underwriting Agreement dated April 1,
1993(7)
g. Copy of Amendment to Underwriting Agreement dated April 4,
1994(8)
h. Copy of Amendment to Underwriting Agreement dated as of February
1, 1995, effective April 1, 1995(9)
i. Copy of Amendment to Underwriting Agreement dated April 1,
1996(10)
7. Inapplicable
8. a. Custodian Contract between SIFE Trust Fund and State Street Bank
and Trust Company
b. Retirement Plans Service Contract among SIFE, Inc., SIFE Trust
Fund and State Street Bank and Trust Company
9. Inapplicable
10. Opinion and Consent of Counsel
11. Inapplicable
12. Inapplicable
13. Inapplicable
14. Copies of Model Plans Used in the Establishment of Retirement Plans:
a. Copy of Registrant's Individual Retirement Account Disclosure
Statement(5)
b. Copy of Registrant's 403(b)(7) Plan Description(6)
c. Copy of State Street Bank and Trust Company's 403(b) Account
Package
15. Rule 12b-1 Plan of Distribution and Rule 12b-1 Agreement(10)
16. Schedule of Performance Advertising Quotations
17. Financial Data Schedules(11)
18. Other Exhibits:
a. Special Power of Attorney
b. Board Resolution re signature authority
c. Rule 18f-3 Plan
- - ------------------------------
(1) Filed March 31, 1980, as an exhibit to Form N-1 Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 23 and
Registration Statement under Investment Company Act of 1940 Amendment No.
2, File No. 2-17277, and incorporated herein by reference.
(2) Filed April 27, 1981, as an exhibit to Form N-1 Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 24 and
Registration Statement under Investment Company Act of 1940 Amendment No.
3, File No. 2-17277, and incorporated herein by reference.
C-7
<PAGE>
(3) Filed February 28, 1986, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 29 and
Registration Statement under Investment Company Act of 1940 Amendment No.
8, File No. 2-17277, and incorporated herein by reference.
(4) Filed April 17, 1987, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 30 and
Registration Statement under Investment Company Act of 1940 Amendment No.
9, File No. 2-17277, and incorporated herein by reference.
(5) Filed February 26, 1990, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 33 and
Registration Statement under Investment Company Act of 1940 Amendment No.
12, File No. 2-17277, and incorporated herein by reference.
(6) Filed February 26, 1991, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 34 and
Registration Statement under Investment Company Act of 1940 Amendment No.
13, File No. 2-17277, and incorporated herein by reference.
(7) Filed February 26, 1993, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 36 and
Registration Statement under Investment Company Act of 1940 Amendment No.
15, File No. 2-17277, and incorporated herein by reference.
(8) Filed February 25, 1994, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 37 and
Registration Statement under Investment Company Act of 1940 Amendment No.
16, File No. 2-17277, and incorporated herein by reference.
(9) Filed February 24, 1995, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 38 and
Registration Statement under Investment Company Act of 1940 Amendment No.
17, File No. 2-17277, and incorporated herein by reference.
(10) Filed February 23, 1996, as an exhibit to Registrant's Definitive Proxy
Statement under Section 14(a) of the Securities Exchange Act of 1934, as
amended, and incorporated herein by reference.
(11) Filed February 24, 1996, as an exhibit to Registrant's Form NSAR for the
period ended December 31, 1995, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, and incorporated herein by
reference.
C-8
<PAGE>
AGREEMENT
THIS AGREEMENT ("Agreement"), is made and entered into as of this
day of April, 1996, by and between SIFE, Inc., a California corporation (the
"Company") and State Street Bank and Trust Company, a trust company duly
organized and existing under and by virtue of the laws of The Commonwealth of
Massachusetts (the "Trustee").
WHEREAS, the Trustee, on the date hereof, shall become successor to Bank
of America, National Association (the "Prior Trustee") as trustee of SIFE Trust
Fund (the "Trust Fund"), a registered investment company under the Investment
Company Act of 1940, under a Trust Agreement which was restated in its entirety
as of May 2, 1986 (the "Restated Trust Agreement");
WHEREAS, Article VIII, Section 4 of the Restated Trust Agreement provides
that the Company, which acts as investment adviser and principal underwriter for
the Trust Fund, "shall perform for the Trustee such routine administrative
functions as may be necessary and reasonable for continued contacts with the
Investors" in the Trust Fund;
WHEREAS, the Trustee and the Company have also agreed that the Company
shall be responsible for certain other duties relating to the administration of
the Trust Fund;
WHEREAS, the Company and the Trustee desire to enter into this Agreement
in order to define those duties, services and functions to be performed by the
Company rather than the Trustee; and
WHEREAS, the Company and the Trustee desire that this Agreement replace
in its entirety an agreement dated May 15, 1986 between the Company and the
Prior Trustee relating to the same subject matter;
NOW, THEREFORE, in consideration of these premises and the mutual
covenants and agreements contained hereafter, the parties hereto agree as
follows:
1. PRIOR AGREEMENT. Effective with the execution of this
Agreement, the parties hereby agree that, notwithstanding the assumption by the
Trustee of the obligations of the Prior Trustee under the Restated Trust
Agreement, the related agreement dated May 15, 1986 between the Company and the
Prior Trustee relating to the subject matter described herein is expressly not
assumed by the Trustee and shall be superseded on its entirety by this
Agreement.
2. SERVICES AND FUNCTIONS TO BE PERFORMED BY COMPANY.
Notwithstanding anything to the contrary contained in the Restated Trust
Agreement, the parties agree that the
<PAGE>
Company, and not the Trustee, shall have full authority and responsibility
for the following services and functions relating to the operation of the
Trust Fund:
a. distributing applications or subscription agreements for
accounts in the Trust Fund;
b. issuing and canceling and recording partial or complete
assignments of Participating Agreements representing an Investor's
"units" in the Trust Fund;
c. maintaining all records with respect to designation of a
beneficiary under each Investor's account;
d. establishing and maintaining current accounts for all
Investors in the Trust Fund;
e. maintaining all records with respect to current unit
balances in each Investor's account, including computation as required in
the Restated Trust Agreement of the net asset value of a unit in the
Trust Fund;
f. crediting and reinvesting net investment income and
capital gains distributions for the accounts of Investors;
g. collecting, receipting and accounting for all
contributions made by Investors;
h. making payments to Investors upon redemptions or partial
withdrawals of the value of an Investor's account;
i. preparing all statements and reports to Investors
concerning their individual accounts;
j. preparing and distributing prospectuses and statements of
additional information, as required, to prospective and current
Investors;
k. responding to Investor inquiries regarding account
information;
l. providing any required tax information to Investors
regarding their accounts;
m. receiving and registering on its books any collateral
assignment of a Participating Agreement in connection with an Investor's
use of such Participating Agreement as collateral security.
n. taking or refraining from taking any action required to
ensure compliance by the Trust Fund with all federal and state laws and
regulations applicable to the
2
<PAGE>
operation of the Trust Fund, including without limitation, federal and state
securities and tax laws;
o. investing the assets of the Trust Fund and monitoring such
investments to ensure compliance with all the guidelines, restrictions and
limitations set forth in the Restated Trust Agreement and the Trust Fund's
prospectus and statement of additional information, in each case as in effect
from time to time.
3. TERMINATION AND AMENDMENT. This Agreement shall terminate only
upon the effective date of the resignation or removal of the Trustee under the
Restated Trust Agreement (or any successor trust agreement) and the appointment
of a successor trustee. This Agreement, including the description of the
Company's delegated responsibilities hereunder, shall be amended only by written
document duly executed by both parties hereto.
4. RECORDS; ACCESS BY TRUSTEE. The Company and the Trustee hereby
acknowledge and agree pursuant to Rule 31a-3 under the Investment Company Act of
1940 that any records and Investor account information which may be maintained
by the Trustee or the Company relating to the Fund are the property of the
Trust Fund and shall be promptly surrendered to the Trust Fund upon its request.
The Company further agrees to permit the Trustee access to the books and records
of the Trust Funds at reasonable intervals and with reasonable prior notice to
the Company and to cooperate with the Trustee in such periodic reviews of the
Company's performance of its obligation to the Trust Fund as the Trustee may
deem necessary.
5. INDEMNIFICATION. The Company hereby indemnifies and holds
harmless the Trustee from and against any and all losses, liabilities, claims,
damages and expenses (including reasonable attorney's fees) suffered or incurred
by the Trustee by reason of (i) the Company's performance of the services and
functions described in Paragraph 2 above, (ii) the performance by the Prior
Trustee of any of its duties and obligations under the Restated Trust Agreement,
(iii) any act or failure to act by the Trustee with respect to the Trust Fund
done or omitted in good faith in reliance upon any instruction which it believes
to be genuine and to have been signed or executed by a person authorized to give
such instruction, (iv) any taxes, additions for late payment, interest,
penalties or other expenses which may be assessed against the Trustee with
respect to the Trust Fund (excluding taxes based on the Trustee's net income),
and (v) any other act or failure to act by the Trustee with respect to the
Trust Fund (including without limitation any making of advances by the Trustee
to the Trust Fund in its capacity as custodian of the assets of the Trust Fund
for which the Trustee is not promptly reimbursed by the Trust Fund) except, in
any of the foregoing cases, for losses and liabilities arising from acts or
failures to act which constitute negligence or willful misconduct on the part of
the Trustee in the performance of its duties as custodian of the assets of the
Trust Fund. In no event shall the Trustee be liable for indirect, special or
consequential damages nor for any failure or delay in performance of its
obligations under this Agreement or the Restated Trust Agreement arising out of
or caused, directly or indirectly, by circumstances beyond its control,
including without limitation, work stoppage, power or other mechanical failure,
computer virus, natural disaster, governmental action or communication
disruption. The foregoing indemnities shall survive the
3
<PAGE>
resignation or removal of the Trustee or the termination of the Restated
Trust Agreement (or any successor agreement) or this Agreement..
6. RESTATED TRUST AGREEMENT. The Company and the Trustee agree to
negotiate in good faith a restatement of the Restated Trust Agreement to be
presented to the Investors in the Trust Fund at the annual meeting of the
Investors in April 1997. The Company acknowledges and agrees that such
restatement is necessary in order to, among other things, clarify that the
responsibilities of the Trustee are limited to maintaining custody of the assets
of the Trust Fund and providing certain ministerial services related to such
custodial services, all as set forth in the Custodian Contract, of even date
herewith, and that the Company, and not the Trustee, is responsible for the
investment of Trust Assets, transfer agency functions and compliance by the
Trust Fund with applicable securities and tax laws.
7. INSTRUCTIONS AND ADVICE. At any time, the Trustee may apply to
any officer of the Company or the Fund for instructions and may consult with its
own legal counsel or outside counsel for the Company or the Fund or the
independent accountants for the Company or the Fund at the expense of the
Company, with respect to any matter arising in connection with the services to
be performed by the Trustee under this Agreement or the Restated Trust
Agreement. The Trustee shall not be liable, and shall be indemnified by the
Company and the Fund, for any action taken or omitted by it in good faith in
reliance upon any such instructions or advice or upon any paper or document
believed by it to be genuine and to have been signed by a person authorized to
give such instruction or advice. The Trustee shall not be held to have notice
of any change of authority of any person until receipt of written notice thereof
from the Company.
8. NON-ASSIGNABILITY. This Agreement shall not be assigned by
either party hereto without the prior consent in writing of the other party,
except that the Trustee may assign this Agreement to a successor of all or a
substantial portion of its business, or to a party controlling, controlled by or
under common control with the Trustee.
9. SUCCESSORS. This Agreement shall be binding on and shall inure
to the benefit of the Fund and the Administrator and their respective successors
and permitted assigns.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by their duly authorized officers as of the day and year first above
written.
SIFE, INC.
By:
---------------------------
Sam A. Marchese
President
STATE STREET BANK AND TRUST COMPANY
By: /s/
---------------------------
Agreed and accepted:
SIFE TRUST FUND
By:
--------------------------------
Sam A. Marchese
President
5
<PAGE>
CUSTODIAN CONTRACT
Between
SIFE TRUST FUND
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By
It. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian . . . . . . . . . . . . . . . . . . .1
2.1 Holding Securities.............................................1
2.2 Delivery of Securities.........................................1
2.3 Registration of Securities.....................................4
2.4 Bank Accounts..................................................4
2.5 Availability of Federal Funds..................................4
2.6 Collection of Income...........................................5
2.7 Payment of Fund Monies.........................................5
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased...........................................6
2.9 Appointment of Agents..........................................6
2.10 Deposit of Fund Assets in Securities System....................7
2.11 Fund Assets Held in the Custodian's Direct
Paper System...................................................8
2.12 Segregated Account.............................................9
2.13 Ownership Certificates for Tax Purposes........................9
2.14 Proxies........................................................9
2.15 Communications Relating to Portfolio
Securities.....................................................9
3. Payments for Repurchases or Redemptions and Sales
of Shares of the Fund . . . . . . . . . . . . . . . . . . . . . . . . 10
4. Proper Instructions . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. Actions Permitted Without Express Authority . . . . . . . . . . . . . 11
6. Evidence of Authority . . . . . . . . . . . . . . . . . . . . . . . . 11
7. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income . . . . . . . . . . 11
8. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
9. Opinion of Fund's Independent Accountants . . . . . . . . . . . . . . 12
10. Reports to Fund by Independent Public Accountants . . . . . . . . . . 12
11. Compensation of Custodian . . . . . . . . . . . . . . . . . . . . . . 12
12. Responsibility of Custodian . . . . . . . . . . . . . . . . . . . . . 13
13. Effective Period, Termination and Amendment . . . . . . . . . . . . . 13
14. Successor Custodian . . . . . . . . . . . . . . . . . . . . . . . . . 14
15. Interpretive and Additional Provisions. . . . . . . . . . . . . . . . 15
16. New York Law to Apply. . . . . . . . . . . . . . . . . . . . . . . . 15
17. Prior Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
18. Shareholder Communications Election . . . . . . . . . . . . . . . . . 15
<PAGE>
CUSTODIAN CONTRACT
This Contract between SIFE Trust Fund, a trust organized and existing
under the laws of California, having its principal place of business at 490
North Wiget Lane, Walnut Creek, California 94598 hereinafter called the "Fund",
and State Street Bank and Trust Company, a Massachusetts trust company, having
its principal place of business at 225 Franklin Street, Boston, Massachusetts,
02110, hereinafter called the "Custodian",
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of its assets.
The Custodian represents that it has obtained all authorizations and
qualifications necessary under applicable law to perform its duties under this
Contract. The Fund agrees to deliver to the Custodian all securities and cash
owned by it, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for such new shares
of beneficial interest, ("Shares") of the Fund as may be issued or sold from
time to time. The Custodian shall not be responsible for any property of the
Fund held or received by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 4),
the Custodian shall from time to time employ one or more sub-custodians, but
only in accordance with an applicable vote by the Board of Directors of the
Fund, and provided that the Custodian shall have no more or less responsibility
or liability to the Fund on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the Custodian.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE
CUSTODIAN
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, including all
securities owned by the Fund, other than (a) securities which are
maintained pursuant to Section 2.10 in a clearing agency which acts as a
securities depository or in a book-entry system authorized by the U.S.
Department of the Treasury, collectively referred to herein as
"Securities System" and (b) commercial paper of an issuer for which
State Street Bank and Trust Company acts as issuing and paying agent
("Direct Paper") which is deposited and/or maintained in the Direct
Paper System of the Custodian pursuant to Section 2.11.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
securities owned by the Fund which are held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only
upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and only in the
following cases:
<PAGE>
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units; PROVIDED that, in any such case, the new
securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Fund, to
the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered
to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
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10) For delivery in connection with any loans of securities made by
the Fund, BUT ONLY against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund,
which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is
to be credited to the Custodian's account in the book-entry
system authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the
delivery of securities owned by the Fund prior to the receipt of
such collateral;
11) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by the Fund, BUT ONLY
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered
under the Securities Exchange Act of 1934 (the "Exchange Act")
and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the Fund's currently
effective prospectus and statement of additional information
("prospectus"), in satisfaction of requests by holders of Shares
for repurchase or redemption;
15) For delivery as required by any attachment, levy of other legal
process or judicial order affecting such securities, in such
manner as the Custodian or its legal counsel reasonably deems
appropriate. If the Custodian complies with any process,
order, writ, judgment or decree relating to the securities
subject to this Contract, then the Custodian shall not be liable
to the Fund or to any other person or entity even if such order
or process is subsequently modified, vacated or otherwise
determined to have been without legal force or effect; and
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16) For any other proper corporate purpose, BUT ONLY upon receipt
of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors or of the Executive
Committee signed by an officer and certified by the Secretary or
an Assistant Secretary, specifying the securities to be
delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of
such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the Fund or
in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund,
UNLESS the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered investment companies having
the same investment adviser as the Fund, or in the name or nominee name
of any agent appointed pursuant to Section 2.9 or in the name or nominee
name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Fund under the
terms of this Contract shall be in "street name" or other good delivery
form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best
efforts only to timely collect income due the Fund on such securities
and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the name of the Fund, subject only to draft or
order by the Custodian acting pursuant to the terms of this Contract,
and shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account of the Fund,
other than cash maintained by the Fund in a bank account established and
used in accordance with Rule 17f-3 under the Investment Company Act of
1940. Funds held by the Custodian for the Fund may be deposited by it
to its credit as Custodian in the Banking Department of the Custodian or
in such other banks or trust companies as it may in its discretion deem
necessary or desirable; PROVIDED, however, that every such bank or trust
company shall be qualified to act as a custodian under the Investment
Company Act of 1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust company shall be
approved by vote of a majority of the Board of Directors of the Fund.
Such funds shall be deposited by the Custodian in its capacity as
Custodian and shall be withdrawable by the Custodian only in that
capacity. Subject to receipt by the Custodian of standing instructions
from the Fund, the Custodian shall sweep excess cash in the Fund's
account into an overnight investment vehicle designated by the Fund.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions, make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and
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the Custodian in the amount of checks received in payment for Shares of
the Fund which are deposited into the Fund's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to registered securities held hereunder to which the Fund
shall be entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date of payment by
the issuer, such securities are held by the Custodian or its agent
thereof and shall credit such income, as collected, to the Fund's
custodian account. Without limiting the generality of the foregoing,
the Custodian shall detach and present for payment all coupons and other
income items requiring presentation as and when they become due and
shall collect interest when due on securities held hereunder. Income
due the Fund on securities loaned pursuant to the provisions of Section
2.2 (10) shall be the responsibility of the Fund. The Custodian will
have no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of
the income to which the Fund is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out monies of the Fund in the following cases only:
1) Upon the purchase of securities, options, futures contracts or
options on futures contracts for the account of the Fund but
only (a) against the delivery of such securities or evidence of
title to such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm or trust
company doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, as amended,
to act as a custodian and has been designated by the Custodian
as its agent for this purpose) registered in the name of the
Fund or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer; (b) in the
case of a purchase effected through a Securities System, in
accordance with the conditions set forth in Section 2.10 hereof;
(c) in the case of a purchase involving the Direct Paper System,
in accordance with the conditions set forth in Section 2.11; (d)
in the case of repurchase agreements entered into between the
Fund and the Custodian, or another bank, or a broker-dealer
which is a member of NASD, (i) against delivery of the
securities either in certificate form or through an entry
crediting the Custodian's account at the Federal Reserve Bank
with such securities or (ii) against delivery of the receipt
evidencing purchase by the Fund of securities owned by the
Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Fund or (e) for
transfer to a time deposit account of the Fund in any bank
whether foreign or domestic; such transfer may be effected prior
to receipt of a confirmation from a
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broker and/or the applicable bank pursuant to Proper
Instructions as defined in Article 4;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Fund as
set forth in Article 3 hereof;
4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments for
the account of the Fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying
the amount of such payment, setting forth the purpose for which
such payment is to be made, declaring such purpose to be a
proper purpose, and naming the person or persons to whom such
payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of securities for the account of
the Fund is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions
from the Fund to so pay in advance, the Custodian shall be absolutely
liable to the Fund for such securities to the same extent as if the
securities had been received by the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; PROVIDED, however, that the appointment of any agent shall
not relieve the Custodian of its responsibilities or liabilities
hereunder.
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2.10 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may deposit
and/or maintain securities owned by the Fund in a clearing agency
registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance with applicable
Federal Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Fund;
3) The Custodian shall pay for securities purchased for the account
of the Fund upon (i) receipt of advice from the Securities
System that such securities have been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account
of the Fund. The Custodian shall transfer securities sold for
the account of the Fund upon (i) receipt of advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and
payment for the account of the Fund. Copies of all advices from
the Securities System of transfers of securities for the account
of the Fund shall identify the Fund, be maintained for the Fund
by the Custodian and be provided to the Fund at its request.
Upon request, the Custodian shall furnish the Fund confirmation
of each transfer to or from the account of the Fund in the form
of a written advice or notice and shall furnish to the Fund
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Fund;
4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 14 hereof;
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<PAGE>
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Securities System by reason
of any negligence, misfeasance or misconduct of the Custodian or
any of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the Securities
System; at the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any
claim against the Securities System or any other person which
the Custodian may have as a consequence of any such loss or
damage if and to the extent that the Fund has not been made
whole for any such loss or damage.
2.11 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM. The Custodian
may deposit and/or maintain securities owned by the Fund in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions;
2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the account
of the Fund upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to
the account of the Fund. The Custodian shall transfer
securities sold for the account of the Fund upon the making of
an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's transaction in
the Securities System for the account of the Fund;
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may reasonably
request from time to time.
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2.12 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for
and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Fund, (ii) for purposes of segregating cash or
government securities in connection with options purchased, sold or
written by the Fund or commodity futures contracts or options thereon
purchased or sold by the Fund, (iii) for the purposes of compliance by
the Fund with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts
by registered investment companies and (iv) for other proper corporate
purposes, BUT ONLY, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of the
Board of Directors or of the Executive Committee signed by an officer of
the Fund and certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
2.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund held by it and in
connection with transfers of securities.
2.14 PROXIES. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 COMMUNICATIONS RELATING TO FUND SECURITIES. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund all
written information (including, without limitation, pendency of calls
and maturities of securities and expirations of rights in connection
therewith and notices of exercise of call and put options written by the
Fund and the maturity of futures contracts purchased or sold by the
Fund) received by the Custodian from issuers of the securities being
held for the Fund. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund all written information
received by the Custodian from issuers of the securities whose tender or
exchange is sought and from
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the party (or his agents) making the tender or exchange offer. If the
Fund desires to take action with respect to any tender offer, exchange
offer or any other similar transaction, the Fund shall notify the
Custodian at least three business days prior to the date on which the
Custodian is to take such action.
3. PAYMENTS FOR REPURCHASES OR REDEMPTIONS AND SALES OF SHARES OF THE FUND
From such funds as may be available for the purpose but subject to the
limitations of the Restated Trust Agreement and any applicable votes of the
Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the
redemption or repurchase of Shares of the Fund, the Custodian shall honor checks
drawn on the Custodian by a holder of Shares, which checks have been furnished
by the Fund to the holder of Shares, when presented to the Custodian in
accordance with such procedures and controls as are mutually agreed upon from
time to time between the Fund and the Custodian.
The Custodian shall receive from the distributor for the Fund's Shares
or from the Transfer Agent of the Fund and deposit into the Fund's account such
payments as are received for Shares of that Fund issued or sold from time to
time by the Fund. The Custodian will provide timely notification to the Fund
and the Transfer Agent of any receipt by it of payments for Shares of the Fund.
4. PROPER INSTRUCTIONS
Proper Instructions as used herein means a writing signed or initialed
by one or more person or persons as the Board of Directors shall have from time
to time authorized. Each such writing shall set forth the specific transaction
or type of transaction involved, including a specific statement of the purpose
for which such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in
writing. Upon receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Board of Directors of the Fund
accompanied by a detailed description of procedures approved by the Board of
Directors, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Directors and the Custodian are satisfied that such procedures afford adequate
safeguards for the Fund's assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.12.
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5. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Contract, PROVIDED that no single such expense shall exceed
$1,000,00 and all such payments shall be accounted for to the
Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property of
the Fund except as otherwise directed by the Board of Directors
of the Fund.
6. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Directors pursuant to the Restated Trust Agreement as described
in such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
7. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION
OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Directors of the Fund to keep
the books of account of the Fund and/or compute the net asset value per share of
the outstanding shares of the Fund or, if directed in writing to do so by the
Fund, shall itself keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also calculate daily the
net income of the Fund as described in the Fund's currently effective prospectus
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value
per share and the daily
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income of the Fund shall be made at the time or times described from time to
time in the Fund's currently effective prospectus.
8. RECORDS
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of
securities owned by the Fund and held by the Custodian and shall, when requested
to do so by the Fund and for such compensation as shall be agreed upon between
the Fund and the Custodian, include certificate numbers in such tabulations.
9. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
10. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
11. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.
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12. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund's assets
to the extent necessary to obtain reimbursement.
13. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; PROVIDED,
however that the Custodian shall not act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors of the Fund has approved the initial use
of a particular Securities System, as required by Rule 17f-4 under the
Investment Company Act of 1940, as amended and that the Custodian shall not act
under Section 2.11 hereof in the absence of receipt of an initial certificate of
the Secretary or an Assistant Secretary that the Board of Directors has approved
the initial use of the Direct Paper System; PROVIDED FURTHER, however, that the
Fund
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<PAGE>
shall not amend or terminate this Contract in contravention of any applicable
federal or state regulations, or any provision of the Restated Trust Agreement,
and further provided, that the Fund may at any time by action of its Board of
Directors (i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or receiver for
the Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
14. SUCCESSOR CUSTODIAN
If a successor custodian shall be appointed by the Board of Directors of
the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in the State of California, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract and to
transfer to an account of such successor custodian all of the Fund's securities
held in any Securities System. Thereafter, such bank or trust company shall be
the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
14
<PAGE>
15. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and the
Fund, may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, PROVIDED that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Restated Trust Agreement of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
16. NEW YORK LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the State of New York.
17. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Fund's assets.
18. SHAREHOLDER COMMUNICATIONS ELECTION
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's
name, address, and share positions.
15
<PAGE>
16
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the day of April, 1996.
SIFE TRUST FUND
By:
---------------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ Darrell E. Lynn
-----------------------------
Executive Vice President
<PAGE>
RETIREMENT PLANS SERVICE CONTRACT
AMONG
SIFE TRUST FUND,
SIFE, INC.
AND
STATE STREET BANK AND TRUST COMPANY
4/93
<PAGE>
TABLE OF CONTENTS
Page
Article 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Article 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Article 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Article 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Article 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Article 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Article 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Article 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Article 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Article 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
<PAGE>
This contract is made as of the day of April, 1996 among SIFE Trust Fund
(such fund and all series and portfolios thereof individually hereinafter called
the "Fund") and SIFE, Inc., organized and existing under the laws of the State
of California, having its principal place of business in Walnut Creek,
California, (hereinafter called the "Company"), and State Street Bank and Trust
Company, a Massachusetts trust company, having its principal place of business
in Boston, Massachusetts (hereinafter called "State Street").
WHEREAS, the Fund is an open-end and diversified management company registered
under the Investment Company Act of 1940, as amended, and
WHEREAS, the Company is a service company which provides management,
administrative, transfer agency, dividend disbursing and/or other services to
the Fund and is an affiliate thereof,
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties agree as follows:
ARTICLE 1 RECITALS
1.1 This Contract sets forth the terms and conditions under which
State Street agrees to serve as Custodian or Trustee of Separate Plans
established using certain Prototypes or Models (as hereinafter defined)
sponsored by the Company.
ARTICLE 2 DEFINITIONS
As used in this Contract, the following terms have the following
meanings:
2.1 "Permitted Investments" means shares of the Fund offered for
sale to the public by the Fund or an affiliate of the Fund.
2.2 "Prototype" means any plan already or hereafter designed to be
made available by the Fund or the Company which (i) provides that it will be
funded in whole or in part by the purchase of Permitted Investments, and which
(ii) together with a custodial or trust agreement (naming State Street as
Custodian or Trustee) has, as of the relevant point in time, been approved by
the IRS as to form as a prototype or master plan (or as to which such approval
has not been obtained because there are no IRS procedures for obtaining
approval)
<PAGE>
and, as adopted by an investor, is designed to satisfy the requirements of
Section 401(a), 403(b)(7), or 408 of the Internal Revenue Code of 1986 as
amended from time to time (the "Code"), or any successor to such section.
2.3 "Model" means any plan which would be a Prototype but for the
fact that, as of the relevant point in time, it has not yet been so approved by
the IRS.
2.4 "Separate Plan" means the individual plan and custodial or trust
agreement in the form of a Prototype or Model, as already or hereafter adopted
by an investor who is a client of the Fund or the Company.
2.5 "Participant" means any person having an interest in any assets
held under a Separate Plan.
ARTICLE 3 EMPLOYMENT OF STATE STREET AS CUSTODIAN OR TRUSTEE
3.1 State Street agrees to continue to serve as Custodian or Trustee
of any Separate Plan heretofore established using the Prototypes (or any
predecessor documents to the Prototypes). In addition, State Street agrees to
serve as Custodian or Trustee of any Separate Plan hereafter established by a
client of the Fund or the Company using the Prototypes, the application for
which has been accepted by State Street. As such Custodian or Trustee, State
Street will be designated as the owner of the Permitted Investments purchased
for each Separate Plan on the records of the Fund or the Company, the Fund's
transfer agent.
3.2 Records of the Custodian's or Trustee's ownership of shares of
the Fund will be maintained by the transfer agent for such shares in the name of
State Street as Custodian or Trustee (or its nominee) and no physical shares
will be issued.
3.3 State Street, the Fund and the Company acknowledge and agree
that:
(a) Under the terms of each Prototype, State Street as Custodian or
Trustee has no investment responsibility for the selection of Permitted
Investments for a Separate Plan and State Street will have no liability for any
investments made for a Separate Plan other than to maintain custody of the
investments subject to the terms of this Contract.
(b) State Street will not serve as "plan administrator" (as defined
in the Employee Retirement Income Security Act of 1974, as amended) of any
Separate Plan, or in any other
2
<PAGE>
administrative capacity or other capacity except as Custodian or Trustee
thereof. State Street will not keep records of participants' accounts under any
Separate Plan or maintain any other records (except those that are necessary to
serve as Custodian or Trustee).
(c) The Fund and the Company agrees that, in any communications from
the Fund or the Company to any prospective or actual client, it will not state
or represent that State Street has any investment discretion or other power
concerning investments of any Separate Plan or that State Street will serve as
plan administrator or have any administrative or other responsibility for the
administration or operation of any Separate Plan.
3.4 If a Prototype or Model already or hereafter designates the Fund
or the Company as an independent contractor to perform services for each
Separate Plan thereunder, and if State Street accepts the application for such a
Separate Plan and thereby becomes Custodian or Trustee of that plan, the Fund or
the Company, as independent contractor, will perform services required of the
Custodian or Trustee for that Separate Plan.
3.5 To the extent that any Prototype or Model already or hereafter
provides that State Street in its discretion, may designate the Fund or the
Company as an independent contractor, State Street hereby makes that designation
if it has not already done so. In turn, the Fund and the Company hereby agrees
to:
(a) Perform all of State Street's duties and obligations as
Custodian or Trustee (as the case may be under that Prototype or Model and each
Separate Plan thereunder).
(b) To exercise the same degree of care in each case without
exception as State Street would be obligated to exert if it were performing and
exercising the same itself.
3.6 The Fund and the Company will upon reasonable advance notice
make available access to its facilities and access to or copies of such records
to State Street as State Street may request in order that State Street may
determine that the Fund and Company are properly performing their duties and
obligations hereunder; State Street's right of access under this sentence will
include access to any service provider or service bureau performing any of the
Fund's or Company's duties and obligations under this Contract on behalf of the
Fund or the Company.
3
<PAGE>
ARTICLE 4 REVIEWS AND MAINTENANCE OF MODELS AND PROTOTYPES
4.1 The Fund and the Company will, from and after the date of this
Agreement, use only Prototypes and Models furnished to the Fund and the Company
by State Street and will submit to State Street and await State Street's
advance approval concerning (a) all forms of application for the Prototypes and
Models, all amendments thereto, all related forms, all applications of employers
for Separate Plans, and any and all other documents which require State Street's
signature (and in no event will the Fund of the Company sign State Street's name
to a document without State Street's prior written approval, which may be a
standing approval); and (b) all other printed material concerning State Street
and the Prototypes, Models and Separate Plans or the duties of the Custodian or
Trustee which will be used by the Fund or the Company in marketing its
investment products or the Prototypes or Models to prospective or actual clients
of the Fund or the Company or in communicating with clients who have established
Separate Plans. State Street will not unreasonably withhold its approval of any
such materials.
4.2 Approvals by State Street under Section 5.1 will constitute
State Street's acquiescence to the use of the materials involved and not its
approval or their contents or their effect. The Fund and the Company will
assume full responsibility to State Street and to all other interested persons
for such contents and such effect.
4.3 State Street will be responsible for preparation and submission
of any Model or Prototype or any amendment thereto for any required IRS
determination. State Street will take all measures including preparing, filing,
and distributing all amendments required under current and future applicable
provisions of the Code and regulations thereunder, IRS procedures and any other
applicable law to assure the qualification of any Model or continued
qualification of any Prototype.
ARTICLE 5 APPLICATIONS AND CORRESPONDENCE
5.1 State Street will sign all applications for Separate Plans or
other documents related to the Prototypes or Separate Plans which the Fund and
the Company submit to State Street for its signature. State Street will execute
any other instruments and documents in regard to such Plans (including
correspondence with various persons such as employers, Participants and
beneficiaries) which the Fund and the Company also submit to State Street for
that purpose. However, State Street may in writing authorize the Fund or the
Company to
4
<PAGE>
execute State Street's name to one or more specific documents or categories of
documents (and such authorization may be a blanket or standing authorization
until revoked by State Street). In no event will the Fund or the Company sign
State Street's name on any application or other document without State Street's
prior written approval.
5.2 Upon receipt, State Street will promptly forward or transfer all
written and oral inquiries from participants to the Fund or the Company.
ARTICLE 6 RETURNS AND REPORTS
6.1 The Fund and the Company will prepare all returns, reports and
statements relating to Separate Plans required by the Code and regulations
thereunder or any other applicable federal or state law.
ARTICLE 7 FEES AND EXPENSES
7.1 In consideration for State Street's services as Custodian or
Trustee hereunder, the Fund and the Company will pay State Street such
compensation and is specified in the attached Fee Schedule.
7.2 State Street will receive reimbursement for its expenses to the
extent provided for under the applicable Prototype, and as Custodian or Trustee
will have the right to charge such expenses to each Separate Plan (or any
account under a Separate Plan) as provided for under the applicable Model or
Prototype. To the extent that State Street does not collect the entire amount
of any such expense from the Separate Plan involved, the Fund and the Company
will pay such shortfall to State Street.
ARTICLE 8 INDEMNIFICATION OF STATE STREET
8.1 To the full extent permitted by applicable law, the Fund and the
Company and their successors and assigns will at all times jointly and severally
indemnify and hold State Street and its successors and assigns harmless from
any and all liability, claims, actions, loss, costs or expense (including (a)
reasonable fees for counsel and (b) taxes, penalties, expenses or fees hereafter
referred to as "Losses", which in any manner arise from or are claimed to have
arisen from or out of or in connection with the performance or non-performance
by the Fund or the Company of their duties and obligations
5
<PAGE>
pursuant to this Contract or applicable law or which arise out of or are
attributable to State Street's being named Custodian or Trustee of a Prototype
or Model or any Separate Plan under this Contract, provided that State Street is
acting in good faith and without negligence or willful misconduct.
8.2 No losses which might be subject to the indemnification
provision in Section 8.1 will be confessed, settled or compromised by State
Street until the Fund and the Company have been given at least ten business
days' written notice of the material facts, and the Fund and the Company will
have the right, upon written demand given to State Street within ten business
days after the date of such notice from State Street, to confess or defend
against such losses.
ARTICLE 9 RESIGNATION OR REMOVAL OF CUSTODIAN OR TRUSTEE
9.1 If at any time hereafter the Fund or the Company choose to discontinue
performing any of their duties and obligations described in or contemplated by
this Contract, either of a general nature or in respect to any or all Separate
Plans it will give State Street at least 120 days' written notice prior to such
discontinuance. State Street may thereupon resign as Custodian or Trustee in
respect to any or all Separate Plans in accordance with the provisions of the
applicable Prototype or Model. If within 30 days after State Street received
such a notice from the Fund or the Company, or if at any other time prior to
receipt of any such notice from the Fund or the Company, State Street chooses to
resign as Custodian or Trustee of any or all Separate Plans, the Fund and the
Company will promptly distribute the notice of State Street's resignation to
such persons and in such manner as are called for under the applicable
provisions of the Prototype or Model and in form and content satisfactory to and
signed by State Street. The Fund and the Company will continue to perform such
duties and obligations, and to exercise its rights, in respect to such Separate
Plans at least until State Street's resignation takes effect and the assets have
been transferred to its successor custodian or trustee or have been distributed.
ARTICLE 10 MISCELLANEOUS
10.1 No party to this Contract will be liable to any other party for
consequential damages under any provision of this Contract or for any
consequential damages arising out of any act or failure to act hereunder.
6
<PAGE>
10.2 This Contract will become effective as of the date contained
herein and will continue in full force while State Street serves as Custodian
or Trustee of any Separate Plan established by a client of the Fund or the
Company, and will terminate when State Street no longer serves as Custodian
or Trustee of any such Separate Plan; provided, however, that the
indemnification provisions of Article 9 will continue to apply after
termination of this Contract with respect to any act or omission which is
alleged to have occurred while this Contract was in effect. This Contract
may be amended from time to time by mutual written agreement of the parties.
Schedules appended hereto may be amended by written agreement between the
parties without re-execution of this Contract.
10.3 The Fund and the Company represents and warrant to State Street
that they have power under their Articles of Incorporation and by-laws (or
equivalent) to enter into and perform its obligations under this Contract, and
has duly executed this Contract so as to constitute a valid and binding
obligation of the Fund and the Company.
10.4 Notices and other writings will be delivered or mailed postage
prepaid to the Fund and the Company at 490 North Wiget Lane, Walnut Creek, CA
94598-2408 or to State Street at P.O. Box 351, Boston, MA 02101, or to such
other addresses the Fund and the Company or State Street may hereafter
specify in writing.
10.5 This Contract will be construed and the provisions thereof
interpreted under and in accordance with laws of the Commonwealth of
Massachusetts. The Fund and the Company hereby submits to the jurisdiction of
the courts located in the Commonwealth of Massachusetts including any appellate
court thereof.
10.6 This Contract supersedes and terminates, as of the date hereof,
all prior contracts between the Fund and the Company and State Street relating
to the custody of the assets of the Separate Plans.
10.7 Unless otherwise required by law, each party agrees to maintain
in confidence any confidential or proprietary information of any other party and
not to disclose any such information without the consent of the other party.
7
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed.
SIFE TRUST FUND
BY
-----------------------------------------
Authorized Officer
ATTEST:
- - ------------------------------
STATE STREET BANK AND
TRUST COMPANY
BY: /s/ Darrell E Lynn
----------------------------------------
ATTEST:
/s/ Francene Hayes
- - ------------------------------
8
<PAGE>
FEE SCHEDULE
In consideration for State Street's Services as Custodian or Trustee, the Fund
and the Company will pay State Street the following compensation:
FIRST 10,000 ACCOUNTS $3.00 per account
ANY ADDITIONAL ACCOUNTS $2.00 per account
MINIMUM ANNUAL CHARGE - $20,000.00
9
<PAGE>
POWER OF ATTORNEY
In connection with SIFE Trust Fund/ SIFE, Inc./State Street Bank and Trust
Company service contract concerning the delegation of custodian powers under
SIFE, Inc. sponsored retirement plans, executed between us, State Street Bank
and Trust Company hereby authorizes SIFE, Inc., through employees authorized by
your firm to sign on behalf of State Street Bank and Trust Company all Adoption
Agreements and Transfer Authorizations necessary to the performance of duties
delegated to you under that agreement:
STATE STREET BANK AND TRUST COMPANY
By: /s/ Darrell E. Lynn
-------------------------------
Date:
------------------------------
In consideration of the authority granted above, SIFE, Inc. hereby agrees to
indemnify and hold State Street Bank and Trust Company harmless from any and all
liability, claims, actions, loss or expense resulting in the unauthorized
exercise of authority incurred above or any allegations thereby arising out of
its bad faith or negligence in the exercise thereof.
SIFE, INC.
By:
--------------------------------
Title:
-----------------------------
Date:
------------------------------
10
<PAGE>
April 19, 1996
Board of Directors
SIFE Trust Fund
490 North Wiget Lane
Walnut Creek, CA 94598
Re: Post-Effective Amendment No. 39 to Registration Statement
SIFE TRUST FUND (FORM N-1A)/SEC FILE NO. 2-17277
Ladies and Gentlemen:
I am the duly appointed and acting General Counsel of SIFE Trust Fund. (the
"Trust Fund"), and have acted as such in connection with the preparation of the
post-effective amendment no. 39 to the registration statement on Form N-1A (the
"Post-Effective Amendment"), relating to an indeterminate number of units of
beneficial interest in the Trust Fund (the "Units"), such Post-Effective
Amendment to be filed by the Trust Fund with the Securities and Exchange
Commission ("SEC") under the relevant provisions of the Securities Act of 1933,
as amended (the "1933 Act") and the Investment Company Act of 1940, as amended
(the "1940 Act").
In my capacity as counsel and for the purposes of this opinion, I have examined
originals or copies, certified or otherwise identified to my satisfaction, of
such documents and corporate records as I have deemed appropriate for the giving
of this opinion.
Based upon the foregoing, it is my opinion that:
1. The Units being registered have been duly authorized; and
2. The Units to be offered by the Trust Fund will be, when and if
issued, sold and paid for as contemplated by the Post-Effective
Amendment, legally issued, fully paid and non-assessable.
I am a member of the bar of the State of California, and my opinion is limited
to the laws of that state and the federal laws of the United States of America.
Neither this opinion nor any extract herefrom or reference hereto shall be
published or delivered to any other person or relied upon for any other purpose
without my express written consent.
<PAGE>
Board of Directors
SIFE Trust Fund
March 31, 1996
Page 2
I understand that this opinion is being given in connection with the filing of
the Post-Effective Amendment, and hereby consent to the inclusion of my opinion
as Exhibit No. 10 thereto. In giving this consent, I do not admit that I am
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities Exchange Commission thereunder.
Very truly yours,
Robert Linderman
General Counsel
<PAGE>
STATE STREET BANK AND TRUST COMPANY
(DATE, 1995)
Dear 403(b) Customer:
Enclosed is a new State Street Bank and Trust Company 403(b) Account
package. This replaces your existing State Street Bank 403(b) Account
materials. There have been no changes in the law that affect your 403(b)
account. Some minor clarifying changes have been made to the documents.
You need not complete a new 403(b) Adoption Agreement or send anything back
to State Street Bank and Trust Company. We ask simply that you keep this
package with your other 403(b) records. Your 403(b) Account will continue to
operate under the same rules and provisions as it has in the past.
If you have any questions about your 403(b) Account, including the enclosed
materials, please call ( ) at ( ).
Sincerely,
State Street Bank
<PAGE>
LETTERHEAD OF CLIENTS SERVICE OFFICER
RE: SPONSORED MUTUAL FUNDS (THE "FUND") / 403(B) PLANS
Dear:
Enclosed for your review is a copy of the State Street Bank Materials for a
403(b) custodial account and a diskette of the materials in the Windows 6.0
format.
The specific form of these documents as presented is not absolutely necessary.
The Fund has some degree of control with respect to alterations. For instance,
many mutual funds using the State Street Bank 403(b) custodial account materials
incorporated the information requested on these forms into their account
applications. However, a majority of the information requested is important
from an operational standpoint with respect to the establishment and maintenance
of the account.
403(b) custodial accounts are special tax-deferred savings arrangements for
employees of certain tax-exempt organizations. 403(b) arrangements may be
invested only in custodial accounts invested in mutual fund shares or in annuity
contracts issued by insurance companies. Our client fund groups may therefore
offer 403(b) custodial accounts for tax-deferred investments in their fund
shares.
403(b) custodial accounts may be opened only by:
* employees of non-profit tax-exempt organizations such as colleges,
schools, hospitals and other charitable organizations, or
* employees of a state or local government who work for an educational
institution (for example, local public school teachers and employees
of a state college or university).
Sometimes a 403(b) plan is used by a tax-exempt employer as its basic
retirement plan, with the employer making contributions to participants' plan
accounts. More often, a 403(b) account is opened by an eligible employee as a
supplemental savings arrangement, much like an IRA. The employee agrees with
the employer institution to reduce his taxable pay, and the employer contributes
the agreed amount to the employee's 403(b) account each payroll period. The
State Street Bank materials, are suitable ONLY for the latter type of 403(b) (an
individual's supplemental savings arrangement), not for an institution's 403(b)
retirement plan.
There are complex limits on the amount by which an individual may reduce
his salary for 403(b) contributions. As a rule-of-thumb guideline, the employee
may generally contribute up to $9,500 or 20% of pay (whichever is less) to his
403(b) account for a year; thus, contribution limits are higher than for IRA's.
Within the limits, 403(b) contributions
<PAGE>
reduce the employee's pay for federal income tax purposes. Earnings and gains
are tax-deferred until distribution to the employee or beneficiary.
Under the 403(b) materials, State Street Bank serves as custodian of the
account. A 403(b) custodial account must be invested only in mutual fund
shares; permitted investments are limited to mutual funds in the client's family
of funds.
The 403(b) materials include a summary of the legal rules entitled "THE
STATE STREET BANK and TRUST COMPANY 403(b) ACCOUNT" (item number one below). You
may want to review this for additional background information.
403(b) PACKAGE
The items in the 403(b) package include the following:
(1) 403(B) ACCOUNT. This contains general information and a summary of the
tax rules governing 403(b) custodial accounts.
(2) 403(B) ACCOUNT AGREEMENT. This contains the legal terms and
conditions governing the custodial account established by the eligible
employee.
(3) 403(B) ACCOUNT ADOPTION AGREEMENT. This is the document signed by the
employee to establish the account. This document must be tailored for
each fund family that wishes to offer 403(b) accounts. In particular,
the INVESTMENTS section must be completed to indicate the funds
available so the employee can specify which fund(s) his 403(b)
custodial account will be invested in.
Also, any telephone transfer authorization applicable to a fund family
must be inserted. In the event that you wish to reduce or waive fees
for investors who commit to invest a specified mimimum amount. There
is a commitment feature, the adoption agreement often has a section
addressing this. The adoption agreement must be signed on behalf of
State Street Bank and Trust Company. If you wish this authority to be
delegated to you please advise.
(4) SALARY REDUCTION AGREEMENT. This form may be used by the employee to
request his employer to reduce the employee's salary and transmit the
amounts as contributions to the employee's 403(b) account.
(5) TRANSFER OF 403(B) ASSETS FORM. This form may be completed by the
employee to direct the current custodian or insurer holding the
employee's 403(b) assets to transfer the assets to State Street Bank
for investment in the designated fund(s). Again, this form must be
tailored to list the available funds. If you want this form pre-
signed by or on behalf of State Street Bank please advise.
(6) DESIGNATION OF BENEFICIARY. This should be completed by the employee
to designate the primary and/or alternate beneficiary(ies) to receive
the account in the event of the employee's death.
<PAGE>
(7) MAXIMUM SALARY REDUCTION WORKSHEET. This may be included in the
403(b) fulfillment kit. The worksheet may be used by the employee to
compute his maximum salary reduction.
Please do not make any substantive changes beyond cosmetic changes such as the
addition of the mutual fund name and logo to the State Street Bank 403(b)
custodial account materials.
As with all situations where State Street Bank is the named custodian for a
403(b) custodial account whether or not the mutual fund is using the State
Street Bank 403(b) custodial account materials. State Street Bank reserves the
right to review all documentation used in connection with such appointment prior
to the printing of these documents. Once you have a draft of the State Street
Bank 403(b) custodial account materials, please forward copy to my attention for
review before going to print.
If you have any questions, please call.
Sincerely,
Client Service Officer
Enclosures
<PAGE>
THE STATE STREET BANK AND TRUST COMPANY 403(B) ACCOUNT
ELIGIBILITY A 403(b) account is a special, tax-advantaged
savings vehicle available only to employees of
non-profit tax-exempt organizations (under Section
501(c)(3) of the Internal Revenue Code) such as
charitable, educational, scientific and religious
organizations. Examples are hospitals or
colleges. Also, an employee of a state or local
government who is employed by a school (for
example, a local school system or state college or
university) can have a 403(b) account. Check with
your employer to determine whether you qualify for
a 403(b) account.
If you change jobs to another qualified employer,
you may continue to contribute to your 403(b)
account. If your new employer is not a qualified
organization, you may not make further
contributions to your 403(b) account, but your
account will continue to accumulate tax-free until
you begin making withdrawals.
HOW TO MAKE You contribute to your 403(b) account through a
CONTRIBUTIONS salary reduction agreement with your employer.
This specifies the amount you want to contribute.
Your compensation will be reduced by this amount,
which is contributed by your employer to your
403(b) account.
Salary reduction contributions to a 403(b)
account, within the tax law limits, reduce your
pay for federal income tax purposes. Because you
save on federal income taxes, you may be able to
save more with a 403(b) account than you could
with conventional savings. Salary reduction
contributions are subject to Social Security
withholding if you are covered by Social Security.
You may use the salary reduction agreement
included with your State Street Bank 403(b)
materials. Read the form for an explanation of
IRS restrictions on changing the amount of your
salary reduction.
MAXIMUM Determining your maximum 403(b) contribution is
CONTRIBUTION complex because several different tax law limits
apply depending on your individual situation. For
most individuals, the maximum salary reduction
contribution for a calendar year is the smaller of
20% of compensation or $9,500. Under current law,
the $9,500 limit will eventually be indexed for
inflation annually; when the limit will increase
depends on future inflation.
Employees of some employers (for example, schools,
hospitals and home health agencies) can elect
different limits in some situations. Also,
long-service employees (15 or more years of
service) of such employers may have increased
limits.
Your employer's personnel or business office may
be available to calculate your 403(b) maximum
contribution. If not, you may use the worksheet
with your State Street Bank 403(b) materials. You
should consult an accountant or tax adviser to
confirm your maximum contribution.
<PAGE>
EXCESS CONTRIBUTIONS If you exceed the $9,500 limit for a year, you
should withdraw the excess with earnings. You
should request the withdrawal no later than March
1 of the following year.
If your contributions for a year exceed any of the
other limits, you must include the excess in your
income for federal income tax purposes. There is
also a penalty tax equal to 6% of the "excess
contribution." The penalty tax also applies to
excess contributions left over from prior years.
You can avoid paying the penalty tax if you
withdraw the amount of the excess from your
account before the end of the year in which the
excess contribution was made.
Even if you have to pay the penalty tax in one
year, you can avoid paying it for later years by
either of two methods. The first method is to
contribute less than your maximum for the later
year; the excess is reduced by the difference
between your maximum and your actual contribution.
The second method is to make a withdrawal from
your account equal to the excess. Notify State
Street Bank of the amount of the excess and we
will pay the amount of the excess to you.
INVESTMENT CHOICES Contributions to your 403(b) account must be
invested in the mutual funds available under this
program. These are described in the 403(b)
account adoption agreement or in the other
materials included in your State Street Bank
403(b) materials.
Before investing, be sure to read the current
prospectuses for the funds to learn about their
investment objectives and policies and the sales
or other charges applicable to a fund. Procedures
for transferring from one fund to another, minimum
investment amounts, and any charges applicable to
a fund are also described in the prospectus(es).
TRANSFERS FROM You may be able to transfer your existing 403(b)
EXISTING 403(B) to State Street Bank. Complete the State Street
Bank Transfer of 403(b) Assets Form. Consult your
personnel or benefits department or your tax
advisor for additional information.
TRANSFER OF ACCOUNT TO You may transfer all or part of your State Street
ANOTHER 403(B) SPONSOR Bank 403(b) account to another 403(b) custodial
account or 403(b) annuity contract by sending
written instructions to State Street Bank stating
the amount to be transferred and the custodian or
insurance company to whom the transfer is to be
made. State Street Bank must also be provided
with a letter of acceptance from the receiving
custodian or insurance company. The receiving
403(b)'s restrictions on withdrawals must be at
least as stringent as those in the sending 403(b)
(see "WITHDRAWALS" below). State Street Bank has
no responsibility for determining whether such
other custodial account or annuity contract meets
the requirements of Section 403(b) of the Internal
Revenue Code or the requirement for equally
stringent restrictions on withdrawals. You should
consult a tax advisor if you have any questions
about such transfers.
TAX FREE BUILDUP Another advantage of a 403(b) account is that
interest, dividends and other earnings compound in
your account without federal income tax. This can
mean greater returns than with a taxable
investment earning the same, even after you pay
income taxes on amounts you withdraw from your
403(b) account.
<PAGE>
Of course, with mutual funds there is the
possibility of fluctuations in rate of return or
in the value of underlying assets. Therefore, no
particular rate of return can be predicted or
guaranteed.
WITHDRAWALS You choose when to make withdrawals from your
403(b) account. However, withdrawals may not
begin until you have retired or terminated
employment with your employer, reached age 59-l/2
(even though you are still employed by your
employer), or died. Earlier withdrawals are
permitted only if you become disabled or suffer a
financial hardship (as defined in IRS
regulations). You may be requested to verify
disability with a doctor's certificate or a Social
Security disability benefits award. You may have
to verify financial hardship by a certificate from
an independent person appointed by your employer,
and financial hardship withdrawals are limited to
the amount of your salary reduction contributions
(no earnings or investment gains).
You must begin making withdrawals by the April 1
of the year following the year when you reach age
701/2. This is required by the tax laws even
though you are still working.
You may choose either a withdrawal of your entire
account or periodic installment withdrawals.
Installments may not extend beyond your life
expectancy or the joint life expectancy of you and
your designated beneficiary. Also, there are
required minimum amounts for installments after
age 701/2. Substantial penalty taxes (up to 50%)
may apply if you do not make the minimum required
withdrawals.
DEATH Upon your death, your account balance goes to the
beneficiary(ies) you designate. If you do not
designate a beneficiary or if no designated
beneficiary survives you, your account balance
will go to your estate.
Withdrawals by a beneficiary are also subject to
rules on when withdrawals must begin and minimums
for installment withdrawals.
TAXES Generally, amounts withdrawn from your account are
taxed on your federal income tax return as
ordinary income in the year when received. In
addition, with limited exceptions, amounts
withdrawn before age 591/2 are subject to an
additional 10% penalty tax.
Special five-year averaging, applicable to lump
sum distributions from certain retirement plans,
does not apply to 403(b) accounts.
State tax treatment varies from state to state.
Consult your tax adviser with any questions on how
a 403(b) account would affect your state taxes.
Most amounts withdrawn from your State Street Bank
403(b) account are eligible for rollover (see
ROLLOVERS below). Such amounts are subject to
mandatory 20% federal income tax withholding,
unless you direct us to transfer the amount
withdrawn directly to another 403(b) arrangement
or to an IRA (this is called a "direct rollover").
Amounts withdrawn that are not eligible for
rollover are subject to 10% withholding of federal
income tax, but you can elect not to have
withholding on these withdrawals.
<PAGE>
ROLLOVERS You can defer income taxes on withdrawals from
your 403(b) account if you make either a "direct
rollover" or a "regular rollover" of all or part
of the withdrawal into another 403(b) account or
annuity or into an IRA.
Most withdrawals from your 403(b) account are now
eligible for rollover. The main exceptions are:
- Withdrawals over your life expectancy
(or the life expectancies of you and a
designated beneficiary),
- Installment withdrawals over a period of
10 years or more, and
- Required distributions starting at age
701/2.
If you will receive an amount that is eligible for
rollover, you can defer paying federal income
taxes by directing State Street Bank to transfer
the amount directly to another 403(b) arrangement
or an IRA (this is called a "direct rollover").
Or you may receive the withdrawal and roll it over
to another 403(b) or IRA within 60 days after you
receive it (this is a "regular rollover").
However, UNLESS you elect a direct rollover of the
amount withdrawn, we MUST WITHHOLD 20% OF YOUR
WITHDRAWAL for federal income taxes. Finally, if
your surviving spouse receives a distribution from
your account upon your death, the rollover rules
described above apply to your spouse.
CAUTION: Rollovers must meet technical IRS
requirements which cannot be described in detail
here. Consult your tax adviser for assistance in
carrying out a rollover.
IMPORTANT The preceding questions and answers are general
and are provided for informative purposes only.
More information is available in IRS Publication
571, "Tax-Sheltered Annuity Plans for Employees of
Public Schools and Certain Tax-Exempt
Organizations." This publication is available
from the IRS. Always consult your tax adviser for
advice on how the tax laws apply to you and how a
State Street Bank 403(b) Account will affect your
tax situation.
(9/94)
304649.1
<PAGE>
STATE STREET BANK AND TRUST COMPANY 403(b) ACCOUNT AGREEMENT
ARTICLE 1: INTRODUCTION
1.1 ESTABLISHMENT OF ACCOUNT. This Agreement is intended to establish a
403(b) Custodial Account meeting the requirements of Code Section 403(b)(7) and
any other applicable requirements of the Internal Revenue Code of 1986. This
Agreement and the Adoption Agreement will be interpreted and administered so as
to carry out such intent.
The Adoption Agreement signed by the Employee and accepted by State
Street Bank and Trust Company as Custodian and this Agreement (which is
incorporated by reference into the Adoption Agreement), as either may be amended
from time to time, are the legal documents governing the Account.
1.2 EFFECTIVE DATE. This Agreement will become effective on the date on
which the Custodian accepts the Adoption Agreement signed by the Employee. Such
acceptance is indicated by the Custodian (or its agent) signing the Adoption
Agreement and by the Custodian opening the Account for the Employee's benefit.
The Account will be opened on the date when the Custodian receives and accepts a
contribution to the Account.
ARTICLE 2: DEFINITIONS
2.1 ACCOUNT or EMPLOYEE'S ACCOUNT means the account established and
maintained by the Custodian under this Agreement for the benefit of the
Employee.
2.2 ADOPTION AGREEMENT means the State Street Bank and Trust Company
403(b) Account Adoption Agreement signed by the Employee, as it may be amended
from time to time.
2.3 AGREEMENT means this State Street Bank and Trust Company 403(b)
Account Agreement, as it may be amended from time to time.
2.4 BENEFICIARY means an individual or entity designated by the Employee
to receive payment of all or part of the amount in the Account upon the death of
the Employee.
2.5 CODE means the Internal Revenue Code of 1986, as it may be amended
from time to time or any successor statute enacted in lieu thereof. Reference
to any provision of the Code includes reference to any similar provision in a
successor statute.
2.6 CUSTODIAN means State Street Bank and Trust Company, or any party
serving as successor Custodian in accordance with this Agreement.
2.7 EMPLOYEE means the individual who signed the Adoption Agreement to
establish the Account.
At the time any Employer contributions to the Employee's Account are
made, the Employee must be a common law employee of an employer described in
subsection 2.07(a), or a common law employee of an employer described in
subsection 2.07(b) who performs services for an educational organization (as
defined in Code Section 170(b)(1)(A)(ii)).
2.8 EMPLOYER means the Employer of the Employee. The Employer must be
(a) an organization described in Code Section 501(c)(3) exempt from
taxation under Code Section 501(a), or
(b) a state, political subdivision of a state, or an agency or
instrumentality of a state or political subdivision of a state.
2.9 FUND or FUNDS means one or more mutual funds the shares of which are
available from time to time as investments for the Account, provided however
that shares of the Fund may legally be offered for sale in the state where the
Employee resides. The Fund(s) available will be designated in the Adoption
Agreement or in another listing provided to the Employee.
<PAGE>
ARTICLE 3: CONTRIBUTIONS TO ACCOUNT
3.1 ESTABLISHMENT OF ACCOUNT. The Custodian will open and maintain the
Account in the name of the Employee. The Employee's interest in the Account
will be nonforfeitable at all times.
3.2 CONTRIBUTIONS TO ACCOUNT.
(c) SALARY REDUCTION CONTRIBUTIONS. In connection with the Account,
the Employee and the Employer may enter into a salary reduction
agreement, and the Employer will contribute to the Employee's
Account all amounts by which the Employee's salary is reduced
under such salary reduction agreement. Any salary reduction
agreement between the Employer and the Employee will be effective
only as to amounts earned by the Employee after such agreement
becomes effective. A salary reduction agreement may not be
retroactively revoked or modified with respect to amounts already
earned by the Employee.
Either the Employee or the Employer may terminate a salary
reduction agreement at the end of any payroll period, and such
agreement will not apply to compensation subsequently earned by
the Employee. Following termination of a salary reduction
agreement, the Employee may not enter into a new salary reduction
agreement with the Employer until the following calendar year.
The Employee may modify the salary reduction agreement at any
time, but not during the calendar year in which the Employee
first entered into the salary reduction agreement and not more
than once in any calendar year.
(d) TRANSFERS OR ROLLOVERS. The Employee may by appropriate
instructions direct a transfer or direct rollover to the Account
from an existing custodial account described in Code Section
403(b)(7) or any annuity contract described in Code Section
403(b)(1). Transfers must be in cash.
The Custodian will accept cash rollover contributions from the
Employee provided such amounts constitute rollover amounts under
Code Section 403(b)(8) or rollover contributions under Code
Section 408(d)(3)(A)(iii).
Transfers or rollovers will be accepted only if the Employee
verifies that the 403(b) account or annuity from which the
transfer or rollover is being made does not contain withdrawal or
distribution restrictions that are more restrictive than those
contained in this Agreement. The Employee will be responsible
for insuring such a transfer or rollover satisfies this
requirement and all other applicable provisions of the Code in
order for the rollover to be a tax-free transaction.
ARTICLE 4: INVESTMENT OF CONTRIBUTIONS
4.1 PURCHASE OF SHARES. As soon as is practicable after the Custodian
receives a contribution under Section 3.2, it will invest such contribution in
shares or fractional shares of one or more Funds in accordance with the
Employee's investment instructions. The Account may be invested in the shares
of one or more Funds provided that any minimum investment requirements specified
by the Funds' prospectuses are met.
The Employee will specify his or her investment instructions for the
investment of contributions to the Account at the same time he or she completes
the Adoption Agreement for the Account, and such instructions will remain in
effect until the Custodian receives new written instructions acceptable to the
Custodian. If any instructions received by the Custodian are incomplete or
ambiguous in the judgment of the Custodian, the Custodian may continue to invest
contributions to the Account in accordance with the Employee's most recent
investment instructions (if any) until such incompleteness or ambiguity has been
resolved to the Custodian's satisfaction; alternatively, the Custodian may
return any contributions received for the
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<PAGE>
Employee's Account until such incompleteness or ambiguity has been resolved. In
either event, the Custodian will have no liability for interest or for loss or
changes in investment values of Fund shares which occur pending the resolution
of such incompleteness or ambiguity.
Any shares of a Fund held hereunder for the Employee's Account may be
registered in the name of the Custodian or its nominee and will be held in
unissued form.
4.2 REPORTS AND VOTING OF SECURITIES. The Custodian will deliver to the
Employee or, if applicable, his or her Beneficiary, all notices or reports to
shareholders, prospectuses, financial statements, proxies and proxy solicitation
materials received by it with respect to shares of a Fund held in the Employee's
Account. The Custodian will vote shares in accordance with the timely
instructions of the Employee (or, if applicable, Beneficiary) as expressed in an
executed proxy, if received. If no timely written instructions are received
from the Employee (or Beneficiary), the Custodian will not vote the shares in
the Account.
4.3 DIVIDENDS. The Custodian will invest all dividends and capital gains
or other distributions received on the shares of a Fund held in the Account in
additional shares and fractional shares of that Fund.
4.4 CHANGE OF INVESTMENTS. Subject to any minimum investment requirement
applicable to a Fund, the Employee (or his or her Beneficiary, if the Employee
is deceased) may at any time direct the Custodian to redeem all or a specified
portion of the shares of a Fund in the Employee's Account and to invest the net
redemption proceeds in shares and fractional shares of one or more other Funds.
The Employee (or Beneficiary) will give such directions by written or
(if permitted) telephonic or other electronic notice acceptable to the
Custodian, and the Custodian will process such directions as soon as practicable
after receipt thereof. If any such directions are incomplete or ambiguous in
the judgment of the Custodian, the Custodian will refrain from carrying out any
exchange until such incompleteness or ambiguity has been resolved to its
satisfaction, without liability for any loss or change in investment values of
Fund shares which occur pending the resolution of such incompleteness or
ambiguity.
Any sales or redemption fee or other charge payable in connection with
such exchange will be paid from the Employee's Account.
ARTICLE 5: WITHDRAWALS
5.1 INSTRUCTIONS TO CUSTODIAN. The Custodian will process written
directions from the Employee to make withdrawals. However, the Employee must
insure that withdrawals directed by the Employee comply with the requirements of
this article. No withdrawals will be processed upon the death of the Employee
unless the Custodian has been notified in writing of the Employee's death, and
the Custodian has been provided with verification of such death which is
adequate in its judgment.
5.2 WITHDRAWALS BY EMPLOYEE. The Employee may make withdrawals from the
Account at the time(s) directed by the Employee on a form or other written
directions acceptable to and filed with the Custodian, subject to the provisions
of this section.
(a) EVENTS PERMITTING WITHDRAWAL. No withdrawal may be made before
the earliest of
(i) the date the Employee reaches age 59-1/2;
(ii) the date the Employee terminates service with the
Employer for any reason, including retirement;
(iii) the date the Employee becomes disabled; as used in this
subsection (iii), "disabled" means unable to engage in
any substantial gainful activity by reason of any
medically determinable physical or mental impairment
which can be expected to result in death or to be of
long-continued and indefinite duration; the Custodian
may require the Employee to furnish a certificate of a
licensed physician stating that the Employee is so
disabled or may
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require the Employee to provide satisfactory evidence
that the Employee has been awarded Social Security
disability benefits before processing any withdrawals
on account of the Employee's disability; or
(iv) the date the Employee encounters financial hardship
within the meaning of Code Section 403(b)(7)(A)(ii) and
applicable Treasury regulations; before processing a
hardship withdrawal, the Custodian may require the
Employee to provide a certificate of an independent
person appointed by the Employer, stating that the
Employee has a financial hardship and the amount needed
to meet the financial hardship, or such other evidence
or certification of the Employee's financial hardship
and the amount needed to meet the financial hardship as
the Custodian determines.
(b) WITHDRAWAL OF EXCESS CONTRIBUTIONS OR DEFERRALS. If for any
taxable year, any portion of the contributions to the Employee's
Account is an excess contribution under Code Section 4973, the
Employee may instruct the Custodian to pay such amount (plus
earnings) to the Employee and the Custodian will process such
withdrawal. Alternatively, the Employee may designate such
amount as a contribution for a subsequent taxable year by
appropriate written instructions to the Custodian.
If, on or before March 1 following the close of a calendar year,
the Employee notifies the Custodian in writing that an amount in
the Account constitutes a deferral (including salary reduction
contributions) in excess of the applicable limit in Code Section
402(g) (generally, $9,500) and requests to withdraw such amount
(plus earnings), the Custodian will process such withdrawal and
pay such amount (and any earnings allocable to such amount) to
the Employee (or to his or her order) on or before the next
following April 15.
(c) REQUIRED START OF WITHDRAWALS. An Employee must begin taking
withdrawals from the Account no later than the April 1 of the
year following the year in which the Employee reaches age 70-1/2.
5.3 FORM OF DISTRIBUTION. The Employee may elect to receive the assets of
his Account, in cash or in shares, in either or any combination of the following
forms, as directed by the Employee:
(a) a single sum;
(b) in monthly, quarterly or annual installment payments over a
period certain specified by the Employee, but not exceeding the
life expectancy of the Employee or the joint life and last
survivor expectancy of the Employee and his designated
beneficiary, or such shorter period as is necessary to meet any
applicable minimum distribution requirement under Code Section
401(a)(9) and regulations thereunder. The life expectancy of
the Employee or the joint life and last survivor expectancy of
the Employee and his designated beneficiary will be determined at
the time of the first mandatory distribution from the Account.
At the written direction of the Employee (or where applicable,
the surviving spouse), life expectancies of the Employee and his
spouse (but not any other designated beneficiary) may be
recalculated annually thereafter in accordance with applicable
regulations. Life expectancies will be determined using the
expected return multiples of Section 1.72-9 of the Treasury
Regulations. If the Employee elects to receive installments in
accordance with this subsection (b), the amount of any
installment will be calculated by dividing the value of the
assets in the Account by the number of installments remaining in
the specified period certain.
If the Employee fails to elect the time or form of distribution
of benefits, the Custodian will assume that the Employee is
satisfying any minimum
4
<PAGE>
distribution requirements from another 403(b) arrangement. The
Custodian will not distribute any assets from the Employee's
account in the absence of a written withdrawal direction from the
Employee (or, if applicable the Employee's beneficiary) and the
Custodian will have no liability or responsibility for not making
a distribution in such event.
5.4 DISTRIBUTIONS AT THE EMPLOYEE'S DEATH. At the Employee's death,
distributions will be made in the form elected by the Beneficiary unless the
Employee has specified the form of distribution. The Beneficiary must notify
the Custodian in writing of the Employee's death and provide such evidence of
the Employee's death as the Custodian requests. To the extent the Beneficiary
may elect the form of distribution, the Beneficiary must provide written notice
to the Custodian listing the date on which distribution will commence, and the
manner in which and the period over which distribution will be made. The
Custodian will have no liability or responsibility for following the written
directions of the Beneficiary (or the Employee) or for not acting in the absence
of such written directions.
Any form of distribution must comply with the following requirements:
(a) DEATH WHILE RECEIVING WITHDRAWALS UNDER AN INSTALLMENT PROGRAM.
If the Employee was taking withdrawals under a program of
periodic installments from the Account, the balance remaining in
the Account at the time of the Employee's death must continue to
be withdrawn at least as rapidly as under the installment
schedule in effect at the time of the Employee's death.
(b) DEATH BEFORE STARTING AN INSTALLMENT WITHDRAWAL PROGRAM.
(i) If the Employee dies before starting to take
installment withdrawals from the Account, and the
Employee's spouse is not the Beneficiary, the
Employee's Account must be withdrawn by the Beneficiary
either (A) within five years after the Employee's
death, or (B) if the Beneficiary was designated by the
Employee and withdrawals by the Beneficiary begin
within one year after the Employee's death, in
substantially equal annual or more frequent
installments over a period not exceeding the life
expectancy of the Beneficiary (as determined as of the
date of the Employee's death by using the return
multiples in Section 1.72-9 of the Treasury
Regulations).
(ii) If the Employee dies before starting to take
installment withdrawals from the Account, and the
Employee's spouse is the Beneficiary, the Employee's
entire Account must be distributed to the Employee's
spouse either (A) within five years after the
Employee's death, or (B) in substantially equal annual
or more frequent installments over a period not longer
than the spouse's life expectancy (as determined as of
the time distribution is commenced and recalculated
annually if requested by the spouse, using the return
multiples contained in Section 1.72-9 of the Treasury
Regulations), provided that withdrawals under this
clause (B) must begin on or before the later of the
date on which the Employee would have attained age
70-1/2 or one year after the Employee's death.
5.5 INCOMPETENT RECIPIENT. If an amount is payable to a person known by
the Custodian to be a minor or under a legal disability, the Custodian may, in
its absolute discretion, pay all or any part of such amount to (a) a parent of
such person, (b) the guardian, committee or other legal representative, wherever
appointed, of such person, including a custodian for such person under a Uniform
Gifts to Minors Act or similar act, (c) any person having the control and
custody of such person, or (d) to such person directly.
5.6 DISTRIBUTIONS UNDER COURT ORDERS. Notwithstanding any other provision
hereof, the Custodian will make payments in accordance with any
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<PAGE>
apparently valid order issued by a probate, domestic relations, bankruptcy or
other court having authority over the Account. The Employee (or beneficiary)
will have the responsibility for directing the Custodian whether or not to
contest, defend against or appeal the issuance of any such order, but the
Custodian will have no responsibility to so contest, defend or appeal unless it
has been indemnified by the Employee (or Beneficiary) to its satisfaction
against its costs, expenses (including attorneys' fees) and other liabilities
arising therefrom.
5.7 WITHDRAWALS PAYABLE IN CASH OR IN SHARES. All withdrawals will be
paid in cash or in shares of one or more Funds, as designated in writing by the
Employee or Beneficiary. When required to pay a withdrawal in cash, the
Custodian will redeem sufficient shares of one or more Funds in the Employee's
Account to provide the amount necessary; any such redemptions will be in
accordance with the Employee's instructions (or, in the absence of such
instruction, in proportion to the value of the shares of each Fund held in the
Account, and the Custodian will be fully protected in so doing).
Payment in shares will be effected by reregistering the shares in the
name of the payee.
5.8 TRANSFER OF ACCOUNT. At the written direction of the Employee, the
Custodian will redeem a portion or all of the shares of one or more Funds in the
Employee's Account and will transfer the cash received, less any charges, to the
custodian or insurer of another custodial account or annuity contract
established for the benefit of the Employee under Code Section 403(b) or to the
trustee or custodian of a rollover individual retirement account specified by
the Employee. Neither the Custodian nor any Fund hereunder (or any entity or
person affiliated with the Custodian or a Fund) will have any responsibility to
determine whether such other custodial account or annuity contract or individual
retirement account or annuity meets the requirements of Code Section 403(b) or
408 or whether the transfer or rollover will constitute a tax-free transaction.
5.9 DIRECT ROLLOVERS.
(e) This Section 5.9 applies to withdrawals or distributions from the
Employee's account on or after January 1, 1993. Notwithstanding any provision
of this Agreement to the contrary that would otherwise limit a distributee's
election under this section, a distributee may elect, at the time and in the
manner prescribed by the Custodian, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover.
(b) For purposes of this section, the following terms have the
definitions given.
(i) Eligible rollover distribution: An eligible rollover
distribution is any withdrawal or distribution of all or any portion of the
balance to the credit of the distributee, except that an eligible rollover
distribution does not include: any withdrawal or distribution that is one
of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the distributee or
the joint lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period of ten
years or more; any withdrawal or distribution to the extent such
distribution is required under Code Section 401(a)(9); and the portion of
any withdrawal or distribution that is not includible in gross income.
(ii) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in Code Section 408(a), an
individual retirement annuity described in Code Section 408(b), or an
arrangement described in Code Section 403(b), that accepts the
distributee's eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or individual
retirement annuity.
(iii) Distributee: A distributee includes the Employee. In
addition, the Employee's surviving spouse and the employee's spouse or
former spouse who is the alternate
6
<PAGE>
payee under a qualified domestic relations order, as defined in Code Section
414(p) (if applicable), are distributees with regard to the interest of the
spouse or former spouse.
(c) Direct rollover. A direct rollover is a payment from the
Employee's account to the eligible retirement plan specified by the distributee.
(d) Neither the Custodian nor any Fund hereunder (or any entity) or
person affiliated with the Custodian or a Fund will have any responsibility to
determine whether such eligible retirement plan meets the requirements of Code
Section 403(b) or 408 or whether the direct rollover will constitute a tax-free
transaction.
ARTICLE 6: THE CUSTODIAN
6.1 DUTIES. The Custodian will perform the following duties related to
the administration of the Employee's Account:
(a) Receive contributions under Section 3.2, invest such
contributions in shares of one or more Funds in accordance with
the Employee's investment instructions, and credit such shares to
the Employee's Account;
(b) Maintain custody of the assets in the Account;
(c) Collect income and reinvest such income as provided in this
Agreement;
(d) Carry out the Employee's (or Beneficiary's) instructions for the
purchase, sale or exchange of shares of Funds for the Account and
make settlements in accordance with general practice;
(e) Maintain records of all transactions in the Account;
(f) Not less frequently than annually, provide the Employee (or
Beneficiary) appropriate statements of the Account showing all
transactions of the Account;
(g) File with the Internal Revenue Service and/or any other
government agency such returns, reports, forms, and other
information (if any) as may be required of it as Custodian;
(h) Perform such other duties and services as may be necessary under
this Agreement.
The Custodian may appoint one or more service providers or contractors
(including a contractor or affiliate of a Fund or the transfer agent for a Fund)
to carry out any of its duties hereunder.
6.2 SHARE REDEMPTIONS. If cash is needed to pay taxes, fees, or other
expenses properly chargeable to the Account or to make payments to the Employee
or Beneficiary under Article 5, the Employee (or Beneficiary, if applicable)
will instruct the Custodian in writing (or, if applicable, by telephone or other
electronic means) which Fund should be redeemed or sold if the Account is
invested in more than one Fund. In the absence of such written instructions,
the Custodian will redeem shares of all Funds in the Account in proportion to
the value of the shares of each such Fund held in the Account and will be fully
protected in so doing.
6.3 LIMITATIONS ON LIABILITIES AND DUTIES.
(a) The Custodian will be fully protected in acting in accordance
with or in reliance upon any document, order or other direction
believed by the Custodian to be genuine and properly given, or in
not
7
<PAGE>
acting in the absence of proper instructions or when it believes
that any document, order or other direction either is not genuine
or was not properly given.
(b) To the extent permitted by law, 30 days after providing to the
Employee (or Beneficiary) any statement referred to in Section
6.1(f), the Custodian will be released and discharged from all
liability to the Employee (or Beneficiary) and any other person
as to the matters contained in such statement unless the Employee
(or Beneficiary) files written objections with the Custodian
within such 30-day period.
(c) The Employee (or Beneficiary) will be solely responsible for his
investment directions and the selection of the Fund(s) in which
the Account is invested. Neither the Custodian nor any Fund (nor
any entity or person affiliated with the Custodian or a Fund)
will be under any fiduciary or other duty to the Employee (or
Beneficiary) with respect to the selection of investments or be
liable for any loss or diminution in value incurred on account of
a selected investment.
(d) Neither the Custodian nor any Fund (nor any entity or person
affiliated with the Custodian or a Fund) will have any
responsibility for determining the amount of any contribution or
for collecting any contribution from any person. Neither will
have any responsibility for determining whether the amount of any
contribution is within any applicable limitation under the Code.
The Employee will have sole responsibility for the computation of
the Employee's exclusion allowance under Code Section 403(b)(2),
the limitation(s) on contributions under Code Section 415(c), any
election available to the Employee under Code Section 415, any
limit on elective deferrals (including salary reduction
contributions) under Code Section 402(g), and any and all matters
relating to any tax consequences with respect to contributions,
earnings, withdrawals, transfers or rollovers to or from the
Account.
(e) Neither the Custodian nor any Fund (nor any entity or person
affiliated with the Custodian or a Fund) will be responsible for
determining the propriety, amount or timing of any withdrawal by
the Employee (or Beneficiary), or for any taxes or penalties
imposed because of improper or insufficient withdrawals.
(f) The Custodian will not be required to carry out any instructions
not given in accordance with this Agreement. Neither the
Custodian nor any Fund (nor any entity or person affiliated with
the Custodian or a Fund) will be liable for loss of income, or
for appreciation or depreciation in share value resulting from
the Custodian's failure to follow instructions not given in
accordance with this Agreement.
(g) The Custodian will have no responsibility to pay any withdrawal
directed by the Employee or Beneficiary unless the Employee's or
Beneficiary's written withdrawal instructions state the reason
for the withdrawal and contain all signature guarantees and other
documents (including proof of any legal representative's
authority) requested by the Custodian.
(h) Neither the Custodian nor any Fund (nor any entity or person
affiliated with the Custodian or a Fund) will have any liability
to the Employee or Beneficiary for any tax penalty or other
damages resulting from any inadvertent failure by the Custodian
to pay a withdrawal when requested.
(i) Neither the Custodian nor any Fund (nor any entity or person
affiliated with the Custodian or any Fund) will have any
liability to the Employee or any Beneficiary as a result of
transferring the amount in the Account to the proper state
authority in accordance with any applicable law relating to
escheat or abandoned or unclaimed property.
(j) To the extent permitted by law, the Employee (or where applicable
Beneficiary) agrees to indemnify the Custodian and hold it
harmless from any and all liability whatsoever which may arise
either (i) in connection with this
8
<PAGE>
Agreement and the Employee's Account (except liability arising
from the Custodian's fraud or willful misconduct) or (ii) with
respect to making or failing to pay any withdrawal, other than
for failure to make any distribution in accordance with
instructions therefor which are in full compliance with this
Agreement.
(k) The Custodian will not be obligated to commence or to defend a
legal action or proceeding in connection with this Agreement
unless the Custodian agrees to do so and is indemnified to its
satisfaction.
(l) Neither the Employer nor any Fund (nor any entity or person
affiliated with a Fund) will have any responsibility or liability
for any acts or omissions of the Custodian hereunder.
(m) The limitations on the liabilities and duties of the Custodian,
and the protections accorded the Custodian, in this Section 6.3
are not exclusive, but rather are in addition to any other
limitations on the Custodian's liabilities and duties and any
other protections accorded the Custodian under this Agreement.
6.4 COMPENSATION. The Custodian will receive the fees specified in its
then current fee schedule. The Custodian may substitute a revised fee schedule
from time to time upon 30 days' written notice to the Employee. The Custodian
will be entitled to such reasonable additional fees as it may from time to time
determine for services required of it in addition to those reflected in the fee
schedule.
6.5 RESIGNATION. The Custodian may resign by giving at least 30 days'
written notice to the Employee (or Beneficiary) at the Employee's (or
Beneficiary's) last known address as shown on the Custodian's records. In such
event, the Distributor of the Funds will designate a successor 403(b) custodian
or individual retirement account to which the assets of the Account are to be
transferred. If the Distributor does not timely designate a successor Custodian
or individual retirement account, the incumbent Custodian may designate a
successor by giving at least 30 days' written notice of such successor to the
Employee (or Beneficiary), and the Employee (or Beneficiary) will be deemed to
have consented to such appointment unless, within such period, the Employee (or
Beneficiary) directs the Custodian to transfer the Employee's Account to a
different Custodian in accordance with Section 5.8 hereof.
On the effective date of its resignation, the incumbent Custodian will
transfer to the successor custodian the assets and records (or copies thereof)
of the Account; provided, however, that the Custodian may retain whatever assets
it deems necessary for payment of its fees, costs, expenses, compensation, and
any other liabilities which constitute a charge on or against the assets of the
Account or on or against the Custodian
ARTICLE 7: FEES, TAXES, AND OTHER EXPENSES
Any income or other taxes that may be levied or assessed upon the Account
(including any transfer taxes incurred in connection with the investment and
reinvestment of Account assets), expenses, fees and administrative costs
incurred by the Custodian in the performance of its duties (including fees for
legal services rendered to the Custodian), and the Custodian's compensation
under Section 6.4, will constitute a charge upon the assets of the Account. If
not paid by the Employee within 30 days after being billed therefor by the
Custodian, the Custodian will withdraw such fee, tax or expense from the Account
and may redeem sufficient shares of any Fund held in the Account to effect such
payment without liability for any loss incurred thereby.
9
<PAGE>
ARTICLE 8: PROTECTION OF ACCOUNT
No part of the Account will be used for purposes other than for the
exclusive benefit of the Employee (and the payment of fees, expenses and charges
as provided herein). To the extent permitted by law, no right or benefit under
this Agreement will be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any attempt at such
will be void. To the extent permitted by law, no right or benefit hereunder
will be subject to the debts, contracts, liabilities, engagements or torts of
the person who is entitled to such right or benefit, and no such right or
benefit will be subject to attachment or legal process for or against such
person. However, the Custodian will carry out the requirements of any
apparently valid court order relating to the Account.
ARTICLE 9: BENEFICIARY DESIGNATION
The Employee may submit to the Custodian a signed written designation of
beneficiary acceptable to the Custodian. Any such designation of beneficiary
will be effective when filed with the Custodian during the Employee's lifetime.
Whether or not fully dispositive of the Account, the most recently filed
designation of beneficiary accepted by the Custodian will revoke all previously
filed designations. Any amount payable as a result of the Employee's death that
is not disposed of by a designation of beneficiary, for any reason whatsoever,
will be paid to the Employee's estate. If a Beneficiary dies while receiving
distributions, the portion of the Account to which the Beneficiary would have
been entitled (had he or she survived) shall be paid to the Beneficiary's
beneficiary or beneficiaries (or to the Beneficiary's estate) in a lump sum
within 90 days after the Custodian receives notification and evidence acceptable
to it of the Beneficiary's death.
ARTICLE 10: AMENDMENT
10.1 AMENDMENT. The Custodian may amend this Agreement in its entirety or
any portion thereof. The Custodian will provide copies of such amendment to the
Employee. Nothing in this Agreement will impose on the Custodian an affirmative
obligation to amend the Agreement.
10.2 LIMITATIONS. No amendment will be made:
(a) which would cause or permit any part of the Account to be
diverted to purposes other than for the exclusive benefit of the
Employee (or Beneficiary), or cause or permit any portion of such
assets to revert to or become the property of the Employer, or
(b) which would retroactively deprive any Employee of any benefit to
which he or she was entitled under the Agreement,
unless such amendment is necessary, in the opinion of counsel to the Custodian,
to conform the Agreement to, or satisfy the conditions of, Code Section 403(b)
or any other applicable law.
ARTICLE 11: TERMINATION
11.1 AUTOMATIC TERMINATION ON DISTRIBUTION. This Agreement will terminate
when all the assets held in the Account have been distributed or otherwise
transferred out of the Account.
11.2 TERMINATION ON DISQUALIFICATION. This Agreement will terminate if,
after notification by the Internal Revenue Service that the Employee's Account
does not qualify under Code Section 403(b)(7), the Custodian does not make such
amendments as are necessary to so qualify the Account. On such termination of
this Agreement, the Custodian will distribute all assets in the Account to the
Employee or, in the event of the Employee's death, to the Beneficiary, subject
to the Custodian's right to reserve funds as provided in Section 6.5.
10
<PAGE>
ARTICLE 12: MISCELLANEOUS
12.1 EMPLOYEE BENEFIT PLAN. The Employer must permit employees to
establish 403(b) accounts in accordance with Department of Labor Regulations
Section 2510.3-2(f) so that the Account will not be deemed to be an employee
pension benefit plan for purposes of the Employee Retirement Income Security Act
of 1974, as amended.
12.2 APPLICABLE LAW. This Agreement will be construed, administered and
enforced in accordance with the laws of the Commonwealth of Massachusetts, the
state where the principal offices of the Custodian are located, and any action
involving the Custodian brought by any other party must be brought in a state or
federal court in such Commonwealth.
12.3 CHANGE OF ADDRESS. The Employer or the Employee will notify the
Custodian in writing of any change of address within 30 days of such change.
12.4 NOTICE. Any notice from the Custodian to the Employer or the Employee
under this Agreement will be effective when sent by U.S. mail to the address of
the Employer or Employee as then shown on the Custodian's records. Any notice
to the Custodian under this Agreement will be by first class mail addressed to
its principal office or such other address as the Custodian specifies.
12.5 SUCCESSORS. This Agreement will be binding upon and inure to the
benefit of the successors in interest of the parties hereto.
12.6 SEPARABILITY. If any provision of this Agreement is held invalid or
illegal for any reason, such determination will not affect any remaining
provisions of this Agreement, but this Agreement will be construed and enforced
as if such invalid or illegal provision has never been included in this
Agreement.
(9/94)
304652.1
11
<PAGE>
[NAME OF MUTUAL FUND FAMILY]
STATE STREET BANK AND TRUST COMPANY 403(b) ACCOUNT
ADOPTION AGREEMENT
_______________________________________________________________________________
TO OPEN A STATE STREET BANK 403(b) ACCOUNT, please
complete this Adoption Agreement. This Adoption
Agreement and the State Street Bank and Trust
Company 403(b) Account Agreement are the legal
documents governing your 403(b) Account.
_______________________________________________________________________________
EMPLOYEE INFORMATION Name Birthdate
-------------------------------------------------
Print the following Street
information about -------------------------------------------------
yourself City State Zip
-------------------------------------------------
Social Security #
-------------------------------------------------
Day Telephone # ( )
-------------------------------------------------
_______________________________________________________________________________
EMPLOYER INFORMATION Name
-------------------------------------------------
Print the following Street
information about your -------------------------------------------------
Employer (this is City State Zip
necessary only if your -------------------------------------------------
Employer will make Name of Contact Person
contributions to the -------------------------------------------------
Account) Telephone # ( )
-------------------------------------------------
_______________________________________________________________________________
INVESTMENTS [Fund 1] ----%
[Fund 2] ----%
Indicate your investment [Fund 3] ----%
choices here [Fund 4] ----%
[etc.] 100%
Be sure to read the current prospectus(es) of the
Fund(s) you select before investing.
_______________________________________________________________________________
Custodian Fee Schedule Account Establishment $
Annual Maintenance $
Termination, Rollover or
Transfer of Account to
Successor Custodian $
Include a separate check for $ payable
to State Street Bank and Trust Company to pay the
establishment fee and first annual maintenance
fee.
_______________________________________________________________________________
[Telephone Transfers Authorization - ??]
_______________________________________________________________________________
[Letter of Intent - type provisions - ??]
_______________________________________________________________________________
<PAGE>
SIGNATURE The undersigned establishes a State Street Bank
and Trust Company 403(b) Account for the
Sign here to establish benefit of the Employee, the terms of which are
your 403(b) Account contained in this Adoption Agreement and the State
Street Bank and Trust Company 403(b) Account
Agreement (which is incorporated herein by
reference), and appoints State Street Bank and
Trust Company as Custodian. The undersigned
acknowledges that I have received the current
prospectus(es) for each of the Fund(s) chosen
above.
-------------------------------------------------
Employee Signature Date
_______________________________________________________________________________
CUSTODIAN ACCEPTANCE [State Street Bank and Trust Company accepts
appointment as Custodian of the Employee's 403(b)
Account. However, this agreement is not binding
upon the Custodian until the Employee has received
a statement confirming the initial transaction for
the Account.]
STATE STREET BANK AND TRUST COMPANY, CUSTODIAN
By:
---------------------------------------------
Date: , 19
_______________________________________________________________________________
<PAGE>
STATE STREET BANK AND TRUST COMPANY 403(b) ACCOUNT
MAXIMUM SALARY REDUCTION WORKSHEET
Check with your Employer's benefits or personnel department or business
office to see whether they will calculate your maximum salary reduction
contribution. Often these departments will calculate an employee's 403(b)
maximum. If not, you may use this worksheet for your own calculation. Read the
information following the worksheet first. After completing the worksheet,
consult your tax adviser to verify your calculation or answer your questions.
The tax laws change often and individual situations can vary. This worksheet
and the questions and answers following it are not intended to be tax advice.
You are responsible for meeting the tax law limits on contributions to your
403(b) account and excess contributions can result in tax penalties.
To help you, the example demonstrates a typical salary reduction situation
and the worksheet provides spaces for your own computations. In the example, a
teacher will earn $30,000 in 1994. He will have worked for the employer for 10
years at the end of 1994. The employer has contributed $20,000 to the
employee's account under the employer's 403(b) retirement plan; these are
employer contributions, not employee salary reduction contributions. The
employer will contribute 10% of his salary ($3,000) to its retirement plan for
1994. In addition, the employee has reduced his salary in prior years by a
total of $10,000 for contribution to his own salary reduction 403(b) account.
How much can this employee reduce his salary for 1994?
<TABLE>
<CAPTION>
Step 1 - Exclusion Allowance Example You
- - ---------------------------- ------- ---
<S> <C> <C>
(a) Expected salary for the current year before reduction $30,000
for contributions to your 403(b) account -------------
(b) Multiply (a) by .20 $6,000
-------------
(c) Number of years of service (including whole and 10
fractional years) as of the end of the current year -------------
(d) Multiply (b) by (c) $60,000
-------------
(e) Salary reduction contributions by you, and employer $30,000
contributions for you to a 403(b) retirement plan or -------------
to a qualified retirement plan, in PRIOR years
(f) Expected employer contributions for you to a 403(b) $ 3,000
retirement plan for the current year -------------
(g) Subtract (e) and (f) from (d) $27,000
(h) Divide (c) by five and add one 3
-------------
(i) Divide (g) by (h); this is your exclusion allowance $9,000
for the year -------------
<PAGE>
Step 2 - ERISA Limit
- - --------------------
(a) Expected salary for the current year (before reduction for $30,000
contributions to your 403(b) account) -------------
(b) Multiply (a) by .20 $6,000
-------------
(c) Expected employer contributions for you for the current $3,000
year to a 403(b) retirement plan -------------
(d) Multiply (c) by .80 $2,400
-------------
(e) Subtract (d) from (b) (but not in excess of $30,000); this $3,600
is your ERISA limit -------------
Step 3 - ERISA Alternatives
- - ---------------------------
ALTERNATIVE A
Same as exclusion allowance (see Step 1 for calculation) $9,000 -------------
but determined using only the last ten years of service
with employer (but not in excess of $30,000); this alternative
is available only for the year the employee terminates service
ALTERNATIVE B
(a) Your exclusion allowance (Step 1) $9,000 -------------
(b) Your ERISA limit (Step 2) plus $3,200 $ 6,800 -------------
(c) $15,000 $15,000 $15,000
-------------
(d) The smallest of (a), (b) or (c) $ 6,800 -------------
ALTERNATIVE C
Your ERISA limit (Step 2) $ 3,600 -------------
2
<PAGE>
Step 4 - The $9,500 Limit
- - -------------------------
(a) $9,500 $ 9,500
$9,500
-------------
(b) If eligible (see Q+A 14 below), use the increased limit.
(NOTE: the employee in this example would not qualify for
an increased limit because he has fewer than 15 years of service;
however we have ignored his ineligibility for purposes of this
part of the example).
(i) $3,000 $3,000
$3,000
-------------
(ii) $15,000 reduced by all increases to the $9,500 limit you $15,000
used in prior years -------------
(iii) $5,000 times your years of service, minus all salary $40,000
reduction contributions to a 403(b) account or annuity -------------
or to a 401(k) plan in prior years
(iv) Add $9,500 to the smallest of (i), (ii) or (iii); this $12,500
is your limit for the year under this step -------------
Step 5 - Maximum Salary Reduction
- - ---------------------------------
(a) Your exclusion allowance (Step 1) $9,000
-------------
(b) Your ERISA limit (Step 2) $3,600
-------------
(c) Smaller of (a) or (b) $3,600
-------------
(d) Alternative A limit (if applicable) $9,000*
-------------
(e) Alternative B limit $6,800
-------------
(f) Alternative C limit $3,600
-------------
(g) The largest of (c), (d), (e) or (f) $6,800*
-------------
(h) The $9,500 limit or increased limit (Step 4) $9,500**
-------------
(i) The smaller of (g) or (h). This is your maximum salary $6,800
reduction for this year -------------
</TABLE>
* The employee in the example is not terminating employment, so he may not
use Alternative A.
** The employee in the example does not qualify for an increased limit because
he does not have 15 years of service.
For this employee, the Alternative B limit of $6,800 is the largest for
this year. Keep in mind that the largest alternative for this year may not
necessarily be the best over the long run. See Questions 9 and 12.
3
<PAGE>
QUESTIONS AND ANSWERS ON SALARY REDUCTION LIMITS
MAXIMUM CONTRIBUTION
1. What is the maximum annual contribution to my 403(b) account?
The maximum contribution you can exclude from your taxable income
(sometimes called your "maximum exclusion allowance" or "MEA") is the
smaller of your "403(b) exclusion allowance" (Questions 2-5) or your "415
limit" (Questions 6-12). Finally, your salary reduction contributions for
a year cannot exceed $9,500 (increased for certain employees) (Questions 13
and 14).
EXCLUSION ALLOWANCE
2. How do I compute my "exclusion allowance?"
Use the following steps to compute your 403(b) exclusion allowance:
(a) Take 20 percent of your expected salary for the current year
(before reduction for your 403(b) contributions, but after other
reductions such as salary reduction contributions under a
cafeteria or flexible benefits plan or 401(k) plan if your
employer maintains such a plan).
(b) Multiply (a) by your number of years of service with your current
employer as of the end of the current year.
(c) Subtract the following total from (b):
- your total 403(b) salary reduction contributions in previous
years (which you excluded from your income),
- your employer's contributions in previous years on your
behalf to a 403(b) retirement plan or to a qualified
retirement plan,
- your employer's expected contributions to a 403(b)
retirement plan for you for the current year.
(d) Divide your number of years of service as of the end of the
current year by five, and add one to the result. Then divide
this number into the result you obtained in step (c).
The resulting figure is the amount of your exclusion allowance for the
current year.
3. What if I do not know how much my employer has contributed to a retirement
plan for me in previous years?
If you cannot learn this from the benefits or personnel office of your
employer, IRS regulations provide a method for determining your employer's
prior contributions. Consult your employer or tax adviser for further
information.
4
<PAGE>
YEARS OF SERVICE
4. How do I determine my years of service?
Count one year of service for each full year you were a full-time employee.
Count a fraction of a year of service for years in which you were a
part-time employee or did not work a full year. Add your full and
fractional years of service together to determine your total years of
service. Only service with your current employer can be counted.
PART-TIME FRACTION. For part-time work, the fraction is your work
schedule divided by the normal work schedule for a full-time employee
holding the same position. For example, if for a year you taught one
course for six hours per week, and a full-time teacher normally teaches 18
hours per week, your fraction would be one-third of a year.
PARTIAL YEAR FRACTION. If you were a full-time employee for part of
the year, the fraction is the number of weeks or months you worked divided
by the number of weeks or months in your employer's annual work period.
For example, if you taught full-time for four and one-half months and your
employer's annual work period is an academic year of nine months, your
fraction would be one-half of a year.
PART-TIME, PARTIAL YEAR FRACTION. If you were a part-time employee
for part of a year, calculate one fraction as though you were a part-time
employee for a full year and one fraction as though you were a full-time
employee for a part of a year. Then multiply the two fractions together to
obtain your fractional year of service. For example, if you taught one
course for six hours per week for one semester at a school where full-time
teachers teach 18 hours per week for two semesters, your fractional year of
service would be one-sixth (part-time fraction of one-third multiplied by
full-time for part-of-a-year fraction of one-half).
5. What if I have less than one year of service?
You may compute your exclusion allowance based on one year of service even
if you have worked for your employer for less than a year or if your
fractional years of service total less than a year.
ERISA LIMITS
6. What are the ERISA limits?
The ERISA limits come from the federal Pension Reform Law ("ERISA"). The
ERISA limits apply even though your 403(b) exclusion allowance for the year
is greater. There is a main ERISA limit and certain alternatives that may
permit a larger maximum.
7. How do I compute the main ERISA limit?
This ERISA limit is the smaller of:
(a) - 20% of your compensation for the year (before reduction for
contributions to your 403(b) account, but after reduction
for salary reduction contributions under any cafeteria or
flexible benefits plan or 401(k) plan your employer
maintains), reduced by
- 80% of your employer's expected contributions for you to its
403(b) retirement plan.
- OR -
(b) $30,000 (This $30,000 figure will eventually be indexed for
cost-of-living changes. When indexing begins will depend on
future inflation.)
5
<PAGE>
ERISA ALTERNATIVES
8. What is the reason for having ERISA alternatives?
In the past, many employees eligible for 403(b) did not enter into salary
reduction agreements because they expected to make large "catch-up"
contributions later. The main ERISA limit might prevent those employees
from saving enough for retirement. To remedy this situation, there are
three alternatives.
These alternatives are available only to employees of an educational
organization, a hospital, a home health service agency, a health and
welfare service agency or a church or association of churches. If you do
not work for such an employer, you can skip Questions 9 through 12.
9. What are the three alternatives?
ALTERNATIVE A may be used only once, in the year you terminate
employment with your employer. Under this alternative, the percentage
limit (see Question 7(a)) is disregarded and you may calculate your 403(b)
exclusion allowance using your years of service with your employer up to a
maximum of ten years. The $30,000 limit still applies, however, even if
your exclusion allowance is higher.
In other words, you are limited to your 403(b) exclusion allowance
based on a maximum of ten years of service, or $30,000, whichever is less.
ALTERNATIVE B is the smallest of:
(a) your 403(b) exclusion allowance;
(b) 20 percent of your compensation (before reduction for
contributions to your 403(b) account) plus $3,200;
(c) $15,000
ALTERNATIVE C is to disregard the 403(b) exclusion allowance
altogether. Under this alternative, contributions are subject only to the
main ERISA limit described in Question 7.
10. Are there any special rules for electing one of the alternatives?
Yes. You may elect only one of the three alternatives. If you use one
alternative, you may not elect either other alternative in any future year.
Alternative A (for the year of separation) may be elected only once. If
you elect this alternative in any year, you may not elect an alternative at
any time in the future.
If you elect alternative B or C, your election is irrevocable for that
year. However, with alternatives B and C, you may elect to use the
alternative in one year, choose not to use it in the following year, and
then elect the same alternative again in the third year.
11. How do I elect an alternative?
You elect an alternative simply by computing your income tax liability in a
manner consistent with the alternative.
6
<PAGE>
12. Which alternative is best for me?
This depends upon your current compensation, expected future compensation,
years of service, expected future years of service, expected ability to
make future salary reduction contributions, and so forth. The alternative
which is best this year may not be best in later years. Only you can
decide which alternative is best for you.
THE $9,500 CAP
13. Where did the $9,500 limit come from?
In the 1986 tax law, Congress decided to limit salary reduction
contributions by employees. For 403(b), Congress chose a $9,500 cap. This
is the maximum salary reduction contribution even though your 403(b)
exclusion allowance or ERISA limit is higher. This cap applies only to
your salary reduction contributions, not to employer contributions to a
403(b) retirement plan for you.
The $9,500 cap is indexed for future cost-of-living increases. However,
when the cap will increase depends on future inflation rates.
14. Who qualifies for an increased $9,500 cap?
Congress realized that the $9,500 cap would hurt employees who expected to
make "catch-up" contributions. Therefore, an increased cap is available to
some employees.
There are two requirements for an increased cap. First, your employer must
be one of the types listed in Question 8. Second, you must have 15 or more
years of service with your employer. If you qualify, your $9,500 cap is
increased by the smallest of the following:
(a) $3,000;
(b) $15,000 (reduced by all amounts by which your $9,500 cap was
increased in prior years under this special rule); or
(c) $5,000 multiplied by your number of years of service, minus all
previous salary reduction contributions under 403(b) (or under
any 401(k) plan in which you participated).
ADDITIONAL RULES FOR AN EMPLOYEE WITH ANOTHER RETIREMENT PROGRAM
15. If for the current year my employer or any other employer contributes to
another 403(b) account or annuity for me, must such contributions be added
to my salary reduction contributions when determining my maximum
contribution?
Yes. To determine your 403(b) exclusion allowance, your ERISA limit or one
of the alternatives (but not the $9,500 cap - only your salary reduction
contributions count against the $9,500 cap), your employer's current
contributions to a 403(b) plan or arrangement for you must be included.
(See the worksheet for an example of this situation). If your employer has
a retirement plan, you should find out whether it is a 403(b) plan.
7
<PAGE>
16. If for the current year my employer makes contributions for me to a
retirement plan that is "qualified" under Section 401(a) of the Internal
Revenue Code, must such contributions be counted when determining my
maximum contribution?
If this situation applies to you, you should consult your tax adviser. The
following is only a general summary of the rules on combining contributions
to your 403(b) account with contributions to a qualified plan.
Contributions for you to a qualified plan during the CURRENT year by an
employer are not counted in determining your 403(b) EXCLUSION ALLOWANCE
this year.
However, for your ERISA limit, the answer depends on whether you have
elected one of the alternatives and on whether you "control" your employer.
If you have not elected an alternative, or if you have elected alternative
A or B, you need not combine contributions to your 403(b) account with
contributions on your behalf to a qualified plan of the same or any other
employer unless you control the employer by owning a 50% or greater
interest.
If you have elected alternative C (to disregard the exclusion allowance
entirely), you must count contributions to your 403(b) account with
contributions for you to a qualified retirement plan maintained by any
employer regardless of whether you "control" the employer.
8
<PAGE>
1. NAME AND ADDRESS OF EMPLOYEE
Name
-----------------------------------------------------------------------
Address
--------------------------------------------------------------------
Street City State Zip
Day Telephone No. Social Security No.
---------------- --------------------
2. INSTRUCTIONS TO PRESENT CUSTODIAN OR INSURER (Completed by Employee)
Name of Custodian/Insurer
--------------------------------------------------
Attn: Mr./Ms.
-------------------------------------------------------------
Address
--------------------------------------------------------------------
Street City State Zip
Account no.
------------------------
Please transfer assets of my present 403(b) Custodial Account or Annuity to
State Street Bank and Trust Company. All assets should be transferred as
cash according to the following instructions:
[ ] Transfer the total asset or [ ] Transfer $ and
value/cash surrender value ________
retain the balance.
For partial transfers, indicate which investment(s) are to be liquidated and
transferred in a separate sheet and attach it to this form.
- - --------------------------------------------------------------------------------
Make check payable to: State Street Bank and Trust Company, Custodian
FBO (insert Employee's name)
P.O. Box ______
Boston, MA
3. INVESTMENT INSTRUCTIONS TO STATE STREET BANK AND TRUST COMPANY
Invest the transferred [Fund 1] %
____________
amount as follows: [Fund 2] %
[etc.] ____________
100%
Be sure to read the current prospectus(es) of the Fund(s) you select before
investing.
4. SIGNATURE OF EMPLOYEE
I understand that this transfer will be a tax-free transaction as long as
the restrictions on withdrawals under my existing 403(b) are no more
restrictive than those provided under Section 5.2 of the State Street Bank
and Trust Company 403(b) Account Agreement. I acknowledge that it is my
responsibility to make this determination.
-------------------- -------------------------------------------------
Date Signature of Employee
SIGNATURE GUARANTEE (only if required by current Custodian/Insurer)
Signature guaranteed by:
--------------------------------------------------
Name of Bank or Dealer Firm
--------------------------------------------------
Signature of Officer and Title
5. ACCEPTANCE BY NEW CUSTODIAN (Completed by State Street Bank and Trust
Company)
State Street Bank and Trust Company will accept transfer of assets directed
by the Employee as Custodian of the Employee's State Street Bank and Trust
Company 403(b) Custodial Account.
By:
----------------------------- ------------------------------------
Date
<PAGE>
STATE STREET BANK AND TRUST COMPANY 403(b) ACCOUNT
DESIGNATION OF BENEFICIARY
Print Name of Employee
---------------------------------------------------------
I hereby make the following designation of beneficiary in accordance with the
State Street Bank and Trust Company 403(b) Account Agreement:
In the event of my death, pay any interest I may have under my 403(b) Account to
the following Primary Beneficiary or Beneficiaries that survive me. Make
payment in the proportions specified below (or in equal proportions if no
different proportions are specified). If any Primary Beneficiary predeceases
me, his share is to be divided among the Primary Beneficiaries who survive me in
the relative proportions assigned to each such surviving Primary Beneficiary.
PRIMARY BENEFICIARY OR BENEFICIARIES:
Name Relationship Date of Birth Social Security Number Proportion
- - ---------- -------------- --------------- ------------------------- ------------
- - ---------- -------------- --------------- ------------------------- ------------
- - ---------- -------------- --------------- ------------------------- ------------
If none of the Primary Beneficiaries survives me, pay any interest I may have
under my 403(b) Account to the following Alternate Beneficiary or Beneficiaries
that survive me. Make payment in the proportions specified below (or in equal
proportions if no different proportions are specified). If any Alternate
Beneficiary predeceases me, his share is to be divided among the Alternate
Beneficiaries who survive me in the relative proportions assigned to each such
surviving Alternate Beneficiary.
ALTERNATE BENEFICIARY OR BENEFICIARIES:
Name Relationship Date of Birth Social Security Number Proportion
- - ---------- -------------- --------------- ------------------------- ------------
- - ---------- -------------- --------------- ------------------------- ------------
- - ---------- -------------- --------------- ------------------------- ------------
I understand that the beneficiaries named herein may be changed or revoked at
any time by filing a new designation in writing with the Custodian. All forms
must be acceptable to the Custodian and dated and signed by the Employee.
Signature of Employee Date
- - ----------------------------------- -----------------------------------------
IMPORTANT: This Designation of Beneficiary may have important tax or estate
planning effects. Also, if you are married and reside in a community property
state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas or
Washington), you may need to obtain your spouse's consent if you have not
designated your spouse as primary beneficiary for at least half of your 403(b)
Account. See your lawyer or other tax professional for additional information
and advice.
<PAGE>
STATE STREET BANK AND TRUST COMPANY 403(b) ACCOUNT
SALARY REDUCTION AGREEMENT
PARTIES Employee Name: ___________________________________
Complete the information Social Security No. ______________________________
about the Employee and the
Employer Name: ___________________________________
Check one box. / / Initial Agreement / / Modification
AGREEMENTS The Employee and the Employer agree as follows:
1. The Employee has signed the State Street Bank and
Trust Company 403(b) Account Adoption Agreement
establishing the Account for the benefit of the
Employee. The Employee and the Employer are
entering into this salary reduction agreement
("this Agreement") to provide for contributions to
the Account.
Fill in EITHER the 2. The Employee requests, and the Employer agrees, to
dollar amount OR reduce the compensation of the Employee by
percentage which $______ or by ______% per pay period, starting
you want to with the first pay period which begins after the
contribute. Employee and the Employer have signed this
Agreement.
3. As soon as possible after each pay day, the
Employer will transmit the amount by which the
Employee's compensation is reduced for that pay
period to State Street Bank and Trust Company as
Custodian (or its agent) to be credited to the
Employee's Account in accordance with the State
Street Bank and Trust Company 403(b) Account
Agreement. For federal income tax purposes, such
amounts are considered Employer contributions to
the Employee's Account.
Checks should be made payable to State Street Bank
and Trust Company, Custodian, FBO _______________
"[insert name of Employee] 403(b) Account."
4. This Agreement will be effective only with respect
to compensation not yet earned by the Employee,
and not with respect to compensation already
earned by the Employee on the date this Agreement
is signed.
This Agreement is binding and irrevocable with
respect to compensation earned by the Employee
while this Agreement is in effect. The Employer
or the Employee may terminate this Agreement at
any time with respect to compensation not yet
earned by the Employee at the date of termination,
by giving written notice to the other party.
After termination, the Employee may reinstate this
Agreement or enter a new salary reduction
agreement with the Employer (with the same or a
different salary reduction amount); however, the
Employee may not reinstate this Agreement or enter
a new salary
<PAGE>
reduction agreement with the Employer during the
same calendar year that the Employee (or Employer)
terminated this Agreement.
The Employee may modify the amount of salary
reduction elected in Paragraph 2 above at any time
by giving the Employer signed instructions
specifying the new salary reduction amount.
However, the Employee may not modify this
Agreement during the same calendar year that the
Employee originally signed this Agreement or in
any calendar year when the Employee has already
modified this Agreement once during such year.
5. Unless the Employer agrees to calculate the
Employee's maximum 403(b) contribution, neither
the Employer nor the Custodian has any
responsibility for determining that the amount by
which the Employee's compensation is reduced, as
set forth in Paragraph 2 above, does not exceed
the limitations applicable to the Employee under
Internal Revenue Code Sections 402(g), 403(b) or
415. The Employee agrees to indemnify the
Employer for any and all charges, expenses, taxes,
interest or penalties imposed on the Employer as a
result of any reduction in compensation in excess
of such limitations.
SIGNATURES IN WITNESS WHEREOF, the parties hereto
- - ---------------- have signed this Agreement on
____________, 19__.
Date and sign here.
EMPLOYEE
-------------------------------------------------
(Signature)
EMPLOYER
-------------------------------------------------
(Name of Employer)
By:
---------------------------------------------
(Signature and Title of Authorized Official)
2
<PAGE>
EXHIBIT 16
SCHEDULE FOR COMPUTATION OF EACH PERFORMANCE QUOTATION
PROVIDED IN THE REGISTRATION STATEMENT
(1) ENDING REDEEMABLE VALUE AND TOTAL RETURN
----------------------------------------
Value of an initial investment at the end of a period and total return for
the period are computed as set forth below.
(A) INITIAL INVESTMENT divided by
UNIT PRICE FOR ONE UNIT AT BEGINNING
OF PERIOD equals
NUMBER OF UNITS INITIALLY PURCHASED
(B) NUMBER OF UNITS INITIALLY PURCHASED plus
NUMBER OF UNITS ACQUIRED AT NET ASSET
VALUE THROUGH REINVESTMENT OF DIVIDENDS
AND CAPITAL GAIN DISTRIBUTIONS DURING
PERIOD equals
NUMBER OF UNITS PURCHAESD DURING PERIOD
(c) NUMBER OF UNITS PURCHASED DURING PERIOD multiplied by
NET ASSET VALUE OF ONE UNIT AS OF THE LAST
DAY OF THE PERIOD equals
VALUE OF INVESTMENT AT END OF PERIOD
(D) VALUE OF INVESTMENT AT END OF PERIOD divided by
INITIAL INVESTMENT minus one and
then multiplied
by 100 equals
TOTAL RETURN FOR THE PERIOD EXPRESSED AS
A PERCENTAGE
<PAGE>
(2) AVERAGE ANNUAL TOTAL RETURN
---------------------------
Average annual total return quotations for the 1-, 3-, 5-, and 10-year
periods ended on the date of the most recent balance sheet are computed
according to the formula set forth below.
P(1=T)(n)=ERV
WHERE: P == a hypothetical initial investment of $10,000
T == average annual total return
(n) == number of years
ERV == ending redeemable value of a hypothetical $10,000
investment as of the end of 1-, 3-, 5-, and 10-year
periods (computed in accordance with the formula shown in
(1), above)
THUS:
Applying the actual return figures for the Trust Fund for the 1-, 3-, 5-, and
10-year period ending December 31, 1995, the calculation is as follows:
<TABLE>
<CAPTION>
(a) With the 5% maximum (b) With no sales charge
sales charge*
<S> <C> <C>
1 Year Total Return $10,000(1+T)(1) = $14,242 $10,000(1+T)(1) = $14,992
T = 42.42% T = 49.92%
3 Year Avg. Total Return $10,000(1+T)(3) = $15,334 $10,000(1+T)(3) = $16,141
T = 15.32% T = 17.30%
5 Year Avg. Total Return $10,000(1+T)(5) = $30,253 $10,000(1+T)(5) = $31,846
T = 24.78% T = 26.07%
10 Year Avg. Annual $10,000(1+T)(10) = $36,135 $10,000(1+T)(10) = $38,037
Total Return T = 13.71% T = 14.29%
</TABLE>
* The initial investment for the fee adjusted figures is $9,500 after
deducting the maximum sales charge of 5%.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Sam Marchese, as true and lawful attorney-in-fact
and agent with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities to sign any or all amendments
(including post-effective amendments) to the Registration Statement of SIFE
Trust Fund, other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent for his substitute or substitutes may
lawfully do or cause to be done by virtue thereof.
Dated: February 9, 1996
/s/David M. Sacks
------------------------------
David M. Sacks
/s/Haig G. Mardikian
------------------------------
Haig G. Mardikian
/s/Walter S. Newman
------------------------------
Walter S. Newman
/s/John Meany
------------------------------
John Meany
/s/Sharon Tudisco
------------------------------
Sharon Tudisco
/s/Charles W. Froehlich
------------------------------
Charles W. Froehlich
<PAGE>
CERTIFICATION OF ASSISTANT SECRETARY
SIFE TRUST FUND
I, ROBERT LINDERMAN, do hereby certify that:
1. I am the duly elected, qualified and acting Assistant Secretary of
SIFE Trust Fund;
2. Attached hereto as Exhibit A is a complete, true and correct copy of a
resolution duly adopted by the Board of Directors of SIFE Trust Fund at a
meeting of said Board of Directors held on February 9, 1996, at which meeting a
quorum of said Board of Directors was at all times present and acting; and
3. Said Resolution has in no way been amended, supplemented or rescinded
and is in full force and effect as of the date hereof.
DATED: April 17, 1996
--------------------
Robert Linderman
Assistant Secretary
<PAGE>
EXHIBIT A
WHEREAS, the Board of Directors deems it to be in the best interests
of this Trust Fund and its Investors that certain officers be empowered to
act on behalf of this Trust Fund,
NOW, THEREFORE, BE IT RESOLVED, that, pursuant to the Power of
Attorney, in the form attached hereto as Exhibit 3, and as signed by each
of the Directors of this Trust Fund, Sam A. Marchese be, and he hereby is,
authorized to act for and on behalf of the Trust Fund in all matters
outlined in such power of attorney, with full right of substitution and
delegation.
<PAGE>
SIFE TRUST FUND
RULE 18f-3 MULTI-CLASS PLAN
I. Introduction
Pursuant to Rule 18f-3 ("Rule 18f-3") under the Investment Company Act of
1940, as amended (the "1940 Act"), the following sets forth the method for
allocating management company fees between the Class I and Class II units of
SIFE Trust Fund (the "Fund"). In addition, this Rule 18f-3 Multi-Class Plan
(the "Plan") sets forth the maximum initial sales loads, Rule 12b-1 distribution
fees and other investor services applicable to a particular class of units of
the Fund.
The Fund is an open-end investment company registered under the 1940 Act,
with units registered on Form N-1A under the Securities Act of 1933, as amended.
The Company hereby elects to offer multiple classes of units of the Fund
pursuant to the provisions of Rule 18f-3 and the Plan.
The Fund currently offers only one fund, and is authorized to issue two
classes of investment units, Class I Units and Class II Units. The Class I
Units and the Class II Units are identical in all respects, except that the
Class II Units are subject to a Rule 12b-1 distribution fee of 0.25% of net
assets, per annum.
II. Allocations.
Pursuant to Rule 18f-3, the Fund will allocate (a) to the Class II Units,
any and all fees incurred by the Fund pursuant to the Rule 12b-1 Plan, and (b)
to each investment unit outstanding, without regard to class designation, a pro
rata portion of the management fee of 1.25% of net assets, per annum. There are
no other fees or expenses, except as described below in Section III, which are
allocable to either Class I Units or Class II Units. The initial determination
of such allocations have been reviewed and approved by the Board of Directors of
the Fund, including a majority of the Directors who are not interested persons
of the Fund.
Income and realized and unrealized capital gains and losses shall be
allocated to each class of the Fund based upon the relative net asset value of
such class in relation to the aggregate net asset value of the Fund.
<PAGE>
III. Class Arrangements.
The following summarizes the maximum initial sales loads, maximum sales
load imposed on reinvestment of distributions, contingent deferred sales
charges, Rule 12b-1 distribution fees, redemption fees, Investor servicing fees,
conversion features, exchange privileges and other Investor services applicable
to the Class I Units and the Class II Units.
CLASS I CLASS II
UNITS UNITS
1. Maximum sales load imposed on purchases
(as a percentage of offering price) 5.0% 5.0%
2. Maximum sales load imposed on reinvestment of
distributions none none
3. Contingent deferred sales charges none none
4. Rule 12b-1 distribution fees(1) none 0.25%
5. Redemption fees none none
6. Investor servicing fees none none
7. Conversion features none none
8. Management fees 1.25% 1.25%
9. Other class-specific Investor services none none
- - --------------------------------------
(1) Rule 12b-1 fees are calculated daily, based upon average net assets
attributable to the Class II Units, and payable monthly.
IV. Board Review.
The Board of Directors of the Fund shall review the Plan as it deems
necessary. Prior to any material amendment(s) to the Plan, the Fund's Board of
Directors, including a majority of the Directors that are not interested persons
of the Fund, shall find, without limitation, that the Plan, as proposed to be
amended is in the best interest of each class of units of the Fund,
individually, and the Fund as a whole. In considering whether to approve any
proposed amendment(s) to the Plan, the Directors of the Fund shall request and
evaluate such information as it considers reasonably necessary or appropriate.
