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As filed with the Securities and Exchange Commission on April 25, 1997
File No. 2-17277
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UNITED STATES
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. 41 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 20 [X]
(Check appropriate box or boxes)
SIFE TRUST FUND
(Exact Name of Registrant as Specified in Charter)
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100 North Wiget Lane (800) 231-0356
Walnut Creek, California 94598 (510) 988-2430
(Address of Principal Executive Offices, with Zip Code) (Registrant's Telephone Number, including Area Code)
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Robert Linderman, Esq.
SIFE Trust Fund
100 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)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[x] on April 30, 1997 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
______________________________
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 number or amount
of its shares, representing fractional undivided interests in the Registrant,
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 will be filed with the
Securities and Exchange Commission on or before May 15, 1997.
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This amendment is being filed pursuant to Rule 414 under the Securities Act
of 1933. The successor issuer, SIFE Trust Fund, a Delaware business trust, is
filing this amendment to the registration statement of SIFE Trust Fund, a
California trust, the predecessor issuer, and is expressly adopting the
registration statement as its own for all purposes of the Securities Act of 1933
and the Investment Company Act of 1940.
This filing is made in anticipation of the reorganization of SIFE Trust
Fund, a California trust, whereby that fund will merge with and into SIFE Trust
Fund, a Delaware business trust. The reorganization and merger were approved by
the Investors in SIFE Trust Fund, a California trust, at the Annual Meeting of
Investors of SIFE Trust Fund on April 4, 1997.
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SIFE TRUST FUND
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
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FORM N-1A ITEM AND HEADING LOCATION
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Part A PROSPECTUS HEADING
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Item 1 Cover Page Cover Page
Item 2 Synopsis Prospectus Summary; Summary of Fees and
Expenses
Item 3 Condensed Financial Information Financial Highlights
Item 4 General Description of Registrant Prospectus Summary; Investment Objectives;
Investment Policies
Item 5 Management of the Fund Prospectus Summary - The Management
Company; Performance Overview
Item 5A Management's Discussion of Fund Performance Management's Discussion of Trust Fund's
Performance; Investment Objectives; Investment
Policies
Item 6 Capital Stock and Other Securities Calculation of Net Asset Value;
General Information; Federal Tax Matters
Item 7 Purchase of Securities Being Offered Purchase of Shares; Redemption of Shares;
Calculation of Net Asset Value
Item 8 Redemption or Repurchase Purchase of Shares; Redemption of Shares
Item 9 Legal Proceedings Not Applicable
HEADING IN STATEMENT OF ADDITIONAL
Part B INFORMATION (OR, IF SO INDICATED, IN PROSPECTUS)
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Item 10 Cover Page Cover Page
Item 11 Table of Contents Table of Contents
Item 12 General Information and History General Information & History
Item 13 Investment Objectives and Policies Investment Objectives & Policies
Item 14 Management of the Registrant Management of the Trust Fund
Item 15 Control Persons and Principal Holders of Management of the Trust Fund; Investment
Securities Advisory & Other Services; Underwriting of the
Trust Fund's Securities
Item 16 Investment Advisory and Other Services Management of the Trust Fund; Investment
Advisory & Other Services; Underwriting of the
Trust Fund's Securities; Performance Overview
(Prospectus)
Item 17 Brokerage Allocation Brokerage Allocation & Portfolio Turnover Rates
Item 18 Capital Stock and Other Securities Purchase of Shares; Redemption of Shares
Item 19 Purchase, Redemption and Pricing Purchasing Shares; Redeeming Shares; Calculation
of Securities Being Offered of Net Asset Value
Item 20 Tax Status Additional Federal Income Tax Information;
Dividends, Distributions and Tax Matters
(Prospectus)
Item 21 Underwriters Management of the Trust Fund; General
Information - Distribution of Shares (Prospectus)
Item 22 Calculation of Performance Data Performance Overview (Prospectus)
Item 23 Financial Statements Financial Statements
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Part C
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Information required to be included in Part C is set forth under the appropriate
Item in Part C of this Registration Statement.
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[logo]
SIFE TRUST FUND
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Managed by SIFE, Inc.
P.O. Box 9007
100 North Wiget Lane
Walnut Creek, California 94598
Telephone: (800) 231-0356 / (510) 988-2430
Fax: (510) 943-1783
Internet Address: http://www.sife.com
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PRINCIPAL OBJECTIVES OF A SIFE INVESTMENT
1. CONSERVATION OF 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 through the investment of not less than 30% of the Trust Fund's assets
in the equity securities of financial institutions, and the remainder in the
equity securities of a diverse portfolio of service and industrial enterprises
regarded by the Trust Fund's investment advisor as "stable growth" companies.
There can be no assurance that the Trust Fund will achieve its investment
objectives. Unless the Trust Fund receives instructions to the contrary, all
dividend income received by the Trust Fund from portfolio securities and net
capital gains realized by the Trust Fund from the sale of portfolio securities
is reinvested on behalf of each Investor in additional shares of the same class.
This Prospectus contains information a prospective investor should consider
before investing in the Trust Fund, and should be retained for future reference.
A Statement of Additional Information, dated April 30, 1997, 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. Information contained
on the Trust Fund's web site should not be deemed to be a part of this
Prospectus.
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, 1997
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TABLE OF CONTENTS
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Page
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Prospectus Summary 3
Investment Policies 3
Purchase & Redemption of Shares 3
Alternative Purchase Arrangements 3
The Management Company 4
Federal Income Taxes 4
Trust Characteristics of an Investment in the Trust Fund 5
Risk Considerations 5
Summary of Fees and Expenses 5
Investment Objectives 6
Conservation of Capital 6
Capital Growth 6
Diversification & Concentration 7
Investment Policies 7
Fundamental Investment Policies 7
Writing Covered Call and Put Options 8
Lending Portfolio Securities 8
Repurchase Agreements 9
Dividends, Distributions and Tax Matters 9
Distributions of Dividend Income and Capital Gains 9
Federal Tax Matters 9
Financial Highlights 10
Purchasing Shares 11
Class A-I Shares 11
Class A-II Shares 11
Class B Shares 11
Class C Shares 11
Factors to Consider in Choosing a Particular Class of Shares 11
Purchase at Net Asset Value 12
Initial Sales Charge Alternative: Class A-I and Class A-II Shares 12
Purchase at Net Asset Value 12
Class A-I and Class A-II Rights of Accumulation 12
Class A-I and Class A-II Letters of Intention 13
Deferred Sales Charge Alternative: Class B Shares 13
"Pay-As-You-Go" Alternative: Class C Shares 14
Systematic Purchase Plan 14
Right to Designate a Beneficiary 14
Distribution and Shareholder Servicing Plans 14
Redeeming Shares 14
Minimum Balance 15
Repayment Privilege after Partial Redemption 15
Waiver of Class B & Class C CDSC 15
Signature Guarantee 15
Redemption by Telephone 16
Systematic Withdrawal Plan 16
Calculation of Net Asset Value 16
Management's Discussion of Trust Fund Performance 17
Comparison Chart: Change in Value of $9,500 Net Investment vs. S&P 500 (10 years) 19
General Information 20
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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, OR THE SOLICITATION
OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY STATE OR
JURISDICTION IN WHICH SUCH OFFER MAY NOT LAWFULLY BE MADE.
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PROSPECTUS SUMMARY
SIFE Trust Fund (the "Trust Fund") was organized as a business trust under
the laws of the State of Delaware on February 28, 1997; the Trust Fund is the
successor-in-interest to SIFE Trust Fund, a California trust organized on
September 26, 1960. The Trust Fund, through its predecessor, has been offering
its securities, and conducting operations as a mutual fund, since July 2, 1963,
and is registered with the Securities and Exchange Commission as an open-end
diversified management investment company offering its shares on a continuous
basis to the public. All references and historical information, including
performance data, contained in either this Prospectus or in the Trust Fund's
Statement of Additional Information refer to SIFE Trust Fund, a California
trust, as its business and operations have been continued by SIFE Trust Fund, a
Delaware business trust.
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" (i.e., those 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
service and industrial enterprises generally regarded by the Trust Fund's
investment advisor 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 shares, voting together and not by class.
PURCHASE & REDEMPTION OF SHARES. 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. Shares may be purchased through authorized
investment representatives and certain broker/dealers at the public offering
price next determined after the Trust Fund receives a purchase order in good
form. Investments are made at net asset value ("NAV") per share (plus
applicable sales charges), with the NAV per share of each class determined daily
by dividing the NAV of the class by the number of shares of such class
outstanding on that day. Unless the Trust Fund receives instructions to the
contrary, all income received by the Trust Fund from portfolio securities and
net capital gains realized by the Trust Fund from the sale of portfolio
securities is reinvested on behalf of each Investor in additional shares of the
same class. Shares may be redeemed, either directly or pursuant to a regular
program of periodic redemptions, on any business day that the New York Stock
Exchange is open. Redemptions may be made directly through the Trust Fund, or
through certain broker/dealers, financial institutions and service
organizations.
ALTERNATIVE PURCHASE ARRANGEMENTS. The Trust Fund currently offers four
classes of shares, each subject to different expenses and sales charges.
CLASS A-I shares are offered at net asset value per share plus a sales
charge, which may range from -0- to a maximum of 5.0% of the public
offering price. Class A-I shares are available for purchase only by (i) a
Trust Fund account which was established on or prior to April 30, 1996,
(ii) directors, employees and registered representatives of the Management
Company and the Trust Fund, and their immediate family members; and (iii)
broker/dealers and certain other institutional purchasers.
CLASS A-II shares are offered at net asset value per share plus a
sales charge, which may range from -0- to a maximum of 5.0% of the public
offering price, and are subject to an annualized distribution fee of 0.25%
of the Trust Fund's average daily net assets attributable to the Class A-II
shares.
CLASS B shares are offered at net asset value per share, without the
imposition of a sales charge, but are subject to a contingent deferred
sales charge ("CDSC") of up to 5.0% if redeemed within six years of
purchase. Class B shares are subject to an annualized distribution fee of
0.75%, and an annualized investor servicing fee of 0.25%, of the Trust
Fund's average daily net assets attributable to the Class B shares. Class
B shares automatically convert into Class A-II shares, based on relative
net asset values, on the sixth anniversary of their purchase. The
Management Company will pay to the selling dealer, out of its own
resources, a sales commission of 4.0% of the Class B shares purchased.
CLASS C shares are offered at net asset value per share plus a sales
charge of 1.0% of the public offering price, and are subject to an
annualized distribution fee of 0.75%, and an annualized investor servicing
fee of 0.25%, of the Trust Fund's average daily net assets attributable to
the Class C shares. Class C shares have no conversion feature, and if
redeemed, in whole or in part, prior to one year following the initial
purchase, are subject to a 1.0% CDSC.
3
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The following table compares certain aspects relating to the purchase of
the different classes of the Trust Fund's shares:
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CLASS A-I CLASS A-II CLASS B CLASS C
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Sales Charge Initial sales charge Initial sales charge Declining CDSC Initial sales
at time of purchase at time of purchase (maximum of 5.0% charge at time of
of up to 5.0% of the of up to 5.0% of the of the amount purchase of 1.0%
offering price offering price invested) applicable of the offering
(5.26% of amount (5.26% of amount to any shares price; CDSC of
invested) invested) redeemed within the 1.0% of amount
first six years; no invested if shares
CDSC after six are redeemed
years (automatic prior to one year
conversion to Class following
A-II shares) purchase
12b-1 Distribution Fee None 0.25% of average 0.75% of average 0.75% of average
daily net assets daily net assets for daily net assets;
the first six years, no conversion
after which time the feature
Class B shares
convert to Class A-II
shares
Servicing Fee None None 0.25% of average 0.25% of average
daily net assets daily net assets
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Prior to the date of this Prospectus, the Trust Fund offered only Class A-I
and Class A-II shares. 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.
THE MANAGEMENT COMPANY. SIFE, Inc., a California corporation (the
"Management Company"), acts as the investment advisor and principal
underwriter for the Trust Fund. The Management Company receives an
investment management fee of 1.25% of the Trust Fund's average daily net
assets, computed and prorated daily, in exchange for which the Management
Company provides investment advice, manages the Trust Fund's investment
portfolio and performs and/or assumes responsibility for all of the Trust
Fund's administrative and shareholder services. As a result of this
"bundled" fee arrangement, the Investors are not subject to any other fee,
charge or assessment, other than (i) an ongoing shareholder servicing fee of
0.25% of average daily net assets of the Class B and Class C shares which may
be paid to dealers for servicing shareholder accounts, and (ii) ongoing
distribution fees payable by the Class A-II, Class B and Class C shares. The
Management Company does not act in a similar capacity for any other person or
entity.
FEDERAL INCOME TAXES. As a "regulated investment company" under Subchapter
M of the Internal Revenue Code of 1986, as amended (the "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 shares
(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 shares 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.
4
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TRUST CHARACTERISTICS OF AN INVESTMENT IN THE TRUST FUND. The Trust Fund
permits an owner of its shares to specify a beneficiary, in effect creating an
instrument of trust which may, under certain circumstances, provide for a
post-mortem transfer of the shares so specified without the imposition of the
probate process. However, the trust character of such a designation may not be
available to residents of states other than California.
RISK CONSIDERATIONS: Investments in equity securities in general are
subject to market risks that cause their prices to fluctuate over time.
Fluctuations in the value of the securities in which the Trust Fund invests will
cause the net asset value of each class of shares to fluctuate as well; an
investment in the Trust Fund, therefore, may be more suitable for long-term
investors who can bear the risk of such short-term fluctuations.
More specifically, the investment by the Trust Fund of not less than 30% of
its assets in the equity securities of financial institutions exposes the Trust
Fund to certain additional risks specific to the financial services industry.
Financial services are subject to greater governmental regulation than many
other industries, as well as capital risk (i.e., the risk that, in periods of
tight money or high inflation, the cost to attract deposits will rise
substantially), term and rate 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) and credit risk (i.e., the risk of lending money to
borrowers who may or may not be able to pay), all of which may, from time to
time, require substantial reserves against actual or anticipated losses. In
addition, industry consolidation and the erosion of the distinctions between
banks and other, less traditional financial institutions have resulted in
increased, and increasing, competition. Increased competition, with attendant
pressure on financial institution profitability, may also result from current
legislative initiatives which would reduce the separation between the commercial
and investment banking business and which, if enacted, could significantly
impact the industry and the Trust Fund.
SUMMARY OF FEES AND EXPENSES
The purpose of the following tables is to assist an Investor in
understanding the various costs and expenses, both direct and indirect,
associated with an investment in the Trust Fund.
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INVESTOR TRANSACTION EXPENSES CLASS A-I(1) CLASS A-II(1) CLASS B(2) CLASS C(2)
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Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 5.0% 5.0% none 1.0%
Maximum Sales Charge Imposed on Reinvestment
of Distributions (as a percentage of offering price) none none none none
3
Maximum Deferred Sales Charge none none 5.00% none
(as a percentage of the original purchase price)
Redemption Fees none none none none3
Exchange Fees n/a n/a none n/a
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees(4) 1.25% 1.25% 1.25% 1.25%
12b-1 Distribution Fees none 0.25% 0.75% 0.75%
Shareholder Servicing Fees none none 0.25% 0.25%
Total Fund Operating Expenses 1.25% 1.50% 2.25% 2.25%
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(1) Sales charges may be reduced for certain large purchases or for certain
institutional purchasers, see "Sales Charges Associated with Class A-I and
Class A-II Shares."
(2) Long-term investors may ultimately pay more than the economic equivalent of
the maximum front end sales charge otherwise permitted under the rules of
the National Association of Securities Dealers, Inc.
(3) Class C shares redeemed prior to one year following purchase are subject to
a 1.0% CDSC, based on the amount originally invested.
5
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(4) The Management Company is responsible for all of the Trust Fund's operating
expenses, without limitation, and, in exchange, is paid a fee equal to
1.25% of the Trust Fund's average daily net assets, per annum.
Example of Expenses(1)
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You would pay the following expenses on a $1,000
investment, assuming (i) a 5% annual return and (ii)
redemption at the end of each time period:
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1 Year 3 Years 5 Years 10 Years
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CLASS A-I $62 $88 $115 $194
CLASS A-II $65 $95 $128 $220
CLASS B(2) $73 $100 $140 $222
CLASS C $43 $80 $129 $266
You would pay the following expenses on a $1,000
investment, assuming no redemption:
CLASS A-I $62 $88 $115 $194
CLASS A-II $65 $95 $128 $220
CLASS B(2) $23 $70 $120 $222
CLASS C $33 $80 $129 $266
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(1) 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.
(2) Assumes conversion of the Class B shares on the sixth anniversary of
purchase.
INVESTMENT OBJECTIVES
Identified below in italics are the investment objectives of the Trust
Fund, which may not be changed without a vote of a "majority in interest" of all
shareholders, without regard to Class (when used in this Prospectus, this quoted
language means the LESSER of (a) 67% of the shares voting at a meeting at which
more than 50% of all outstanding shares are represented, or (b) more than 50% of
all outstanding shares).
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 "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
service and industrial enterprises generally regarded by the Management Company
as "stable growth" companies; the Trust Fund cannot invest more than 25% of its
assets in any one industry other than financial institutions. Since the Trust
Fund's assets consist primarily of common stocks, the value of an investment
will fluctuate in accordance with the market value of such stocks; accordingly,
in a declining market, the value of an investment in the Trust Fund's shares
will decline and, if the value of the investment declines below an Investor's
cost, that Investor will incur a loss upon a redemption of shares.
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
Management Company determines that a favorable relationship exists between the
"value" of a security, as determined by an analysis of price/earnings ratios and
certain other information, and its growth potential. In selecting an
investment, the Management Company will take into consideration such factors as
a company's management, growth prospects, business operations, revenues,
earnings, cash flows and strength of the balance sheet, as well as other
information which the Management Company may deem relevant, including size of
the dividend, if any. The Management Company invests in the securities of those
companies which show strong financial results coupled with good growth
prospects, and which the Management Company believes are well-managed. The
Management Company may also invest in the securities of financial institutions
which it believes
6
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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.
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 investment
risk. The Management Company 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
Management Company 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
greater governmental regulation than many other industries, as well as
capital risk (i.e., the risk that, in periods of tight money or high
inflation, the cost to attract deposits will rise substantially), term and
rate 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) and credit risk (i.e., the risk of lending money to borrowers who
may or may not be able to pay), all of which may, from time to time, require
substantial reserves against actual or anticipated losses. In addition,
insurance companies and other financial institutions which hold large
portions of their capital in marketable securities are subject to the risks
of the securities markets. Further, industry consolidation and the erosion
of the distinctions between banks and other, less traditional financial
institutions have resulted in increased, and increasing, competition.
Increased competition, with attendant pressure on financial institution
profitability, may also result from current legislative initiatives which
would reduce the separation between the commercial and investment banking
business and which, if enacted, could significantly impact the industry and
the Trust Fund.
INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT POLICIES. 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 Trust Fund's
shareholders. All other investment policies may be changed from time to time by
the Trust Fund's Board of Trustees. Additional information concerning the Trust
Fund's investment policies, 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 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 regarded by the Management Company 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.
7
<PAGE>
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, the company must have been in existence for
at least five years, have assets of more than $7,000,000, and 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 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, for a defined period of time and at a set price, 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 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 a put option, it will 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 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 if (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) exceeds 10% of the net asset value
of the Trust Fund, and (ii) the nominal value of the Trust Fund's unexpired call
options exceeds 25% of the net asset value of the Trust Fund, provided that the
total amount of such positions, at no time, may exceed 35% of the Trust Fund's
net asset value.
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
determined by the Management Company to present minimal credit risk, and must be
secured by collateral at least 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, debt
securities issued or guaranteed by the United States Government or its agencies,
irrevocable standby letters of credit issued by banks determined by the
Management Company to present minimal credit risk, 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 be entitled
to receive the equivalent of the interest or dividends paid by the issuer on the
securities loaned. In addition, the Trust Fund will be entitled to 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' notice. Voting rights may pass with the
lending of securities. However, the Trust Fund will be obligated either to call
the loan in
8
<PAGE>
time to vote or consent, or to otherwise obtain rights to vote or consent, if a
material event affecting the investment is expected 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 Management Company, 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 determined by the
Management Company to present minimal credit risk. 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.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DISTRIBUTIONS OF INCOME AND CAPITAL GAINS. Unless the Trust Fund
receives a specific written instruction to the contrary, all income on
portfolio securities and realized net capital gains are reinvested in
additional shares of the same class for the account of each Investor, without
the imposition of an additional sales charge in the case of Class A-I, Class
A-II or Class C shares. 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 includable in the Investor's
gross income as ordinary income or capital gain for tax purposes.
All available net investment income and net realized gains from options
as of the last business day of each February, May, August and December are
distributed proportionately to the account of each Investor on the basis of
the number of shares credited to each account relative to the total number of
shares outstanding as of the close of business on that day. The amount so
distributed is immediately reinvested in additional shares of the same class
at the net asset value per share 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 capital gains, if any, from securities
held one year or less 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 as soon thereafter as possible.
FEDERAL TAX MATTERS. The Trust Fund has qualified and intends to continue
to qualify as a "regulated investment company" under Subchapter M of the Code.
So long as the Trust Fund so qualifies, it will pay no separate federal income
tax on the 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 his or her shares. Investors
will be 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 shares. Investors not subject to
tax on their income generally are not required to pay tax on amounts distributed
to them. Redemptions of shares, as well as transfers between accounts, may be
taxable sales 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.
9
<PAGE>
FINANCIAL HIGHLIGHTS
The information set forth in this table from 1987 - 1995 has been audited
by Timpson Garcia, independent certified public accountants, and for 1996 has
been audited by Deloitte & Touche LLP, independent certified public accountants,
respectively, each as indicated in the "Independent Auditor's Report" contained
in the Statement of Additional Information.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
Class Class
A-I A-II(1)
1996 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year $4.58 $4.73 $3.55 $3.83 $3.68 $2.90 $2.12 $2.92 $2.63 $2.32 $2.70
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income 0.09 0.07 0.10 0.09 0.07 0.06 0.08 0.11 0.11 0.09 0.11
Net realized and unrealized gain
(loss) on investments 1.16 1.01 1.68 (0.13) 0.29 0.92 0.90 (0.75) 0.42 0.36 (0.30)
----- ----- ----- ------ ----- ----- ----- ------ ----- ----- ------
Total from investment operations 1.25 1.08 1.78 (0.04) 0.36 0.98 0.98 (0.64) 0.53 0.45 (0.19)
----- ----- ----- ------ ----- ----- ----- ------ ----- ----- ------
Less distributions to Investors:
Dividends from net investment
income (0.09) (0.07) (0.10) (0.09) (0.07) (0.06) (0.08) (0.11) (0.11) (0.09) (0.11)
Distributions from capital gains (0.88) (0.88) (0.65) (0.15) (0.14) (0.14) (0.12) (0.05) (0.13) (0.05) (0.08)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.97) (0.95) (0.75) (0.24) (0.21) (0.20) (0.20) (0.16) (0.24) (0.14) (0.19)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year $4.86 $4.86 $4.58 $3.55 $3.83 $3.68 $2.90 $2.12 $2.92 $2.63 $2.32
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL RETURN (%)(2) 27.4 22.8 49.9% (1.5) 9.3 33.9 47.3 (22.1) 20.2 19.8 (8.2)
----- ----- ------ ------ ----- ----- ----- ------ ----- ----- ------
----- ----- ------ ------ ----- ----- ----- ------ ----- ----- ------
RATIOS & SUPPLEMENTAL DATA
Net assets, end of year (in millions) $ 769 $ 18 $ 614 $ 410 $414 $ 345 $ 260 $204 $ 289 $ 241 $ 224
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Ratio to average net assets (%):
Expenses(3) 1.20 1.48 1.03 0.94 1.02 0.99 1.04 1.07 1.03 1.10 1.03
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income 1.82 1.77 2.25 2.27 1.69 1.73 3.03 4.63 3.52 3.52 3.31
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Portfolio turnover rate (%)(4) 140.2 95.8 93.5 25.2 28.7 33.4 77.6 42.3 41.7 20.7 37.2
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
- ------------------------------
</TABLE>
(1) No Class A-II shares were sold prior to May 1, 1996.
(2) Sales loads are not reflected in total return.
(3) Prior to April 1, 1996, the Management Company received (i) an investment
advisory fee of 0.60% per annum of the Trust Fund's net assets, plus (ii)
reimbursement of certain expenses attributable to the operation of the
Trust Fund. From April 1, 1996, the Management Company is responsible for
all of the Trust Fund's operating expenses, without limitation, and, in
exchange, is paid a fee equal to 1.25% of the Trust Fund's average daily
net assets, per annum, without further compensation or reimbursement for
any cost or expense attributable to the operation of the Trust Fund.
(4) The average commission rate attributable to the Class A-I and Class A-II
shares in 1996 was $0.03.
10
<PAGE>
PURCHASING SHARES
The Trust Fund currently offers four classes of shares, each of which is
subject to different sales, distribution and shareholder servicing charges.
Each class is offered on a continuous basis to the public at its respective net
asset value (plus applicable sales charge), which values are determined as of
the close of business on each business day. COMPLETED APPLICATIONS MUST BE
RECEIVED BY THE TRUST FUND BEFORE 1:00 PM PST TO BE EXECUTED AT THE NET ASSET
VALUE CALCULATED ON THE DAY OF RECEIPT. Investments in the Trust Fund's shares
may be made for a minimum initial investment of $200, and minimum subsequent
investments of $50. All orders and instructions must be in writing, specifying
which class of shares is intended for purchase (account applications which do
not specify which class of shares are desired will be considered an order for
Class A-II shares), and must be accompanied by proper payment, by check payable
to the Trust Fund and denominated in United States dollars.
CLASS A-I SHARES. Class A-I shares are offered at net asset value per
share plus an initial sales charge, which may range from -0- to 5.0% of the
public offering price (5.26% of the amount invested, net of sales charges),
depending upon the amount purchased; this initial sales charge may be
reduced or waived for certain purchasers. Class A-I shares are available
for purchase only by (i) a Trust Fund account established on or
prior to April 30, 1996, (ii) directors, employees and registered
representatives of the Management Company and the Trust Fund, and their
immediate family members; and (iii) broker/dealers and certain other
institutional purchasers, and are not subject to distribution or servicing
fees.
CLASS A-II SHARES. Class A-II shares are offered at net asset value per
share plus an initial sales charge, which may range from -0- to 5.0% of the
public offering price (5.26% of the amount invested, net of sales
charges), depending upon the amount purchased; this initial sales charge
may be reduced or waived for certain purchasers. The Class A-II shares are
subject to an annualized distribution fee of 0.25% of the Trust Fund's
average daily net assets attributable to the Class A-II shares. Due to the
imposition of the distribution fee, the Class A-II shares will have a
greater overall expense ratio than the Class A-I shares, and will pay lower
dividends per share than the Class A-I shares.
CLASS B SHARES. Class B shares are offered at net asset value per share,
without a sales charge, therefore the entire amount is immediately invested
in that Investor's Class B account. Class B shares are subject to an
annualized distribution fee of 0.75%, and an annualized investor servicing
fee of 0.25%, of the Trust Fund's average daily net assets attributable to
the Class B shares, and are subject to a contingent deferred sales charge
("CDSC") of up to 5.0% of the original purchase price if redeemed within
six years of purchase (no CDSC is imposed on Class B shares purchased
through the reinvestment of distributions). Class B shares automatically
convert into Class A-II shares, based on relative net asset values, on the
sixth anniversary of their purchase. The Management Company will pay to
the selling dealer, out of its own resources, a sales commission of 4.0% of
the purchase price. The higher distribution fees and the shareholder
servicing fees paid by the Class B shares should cause the Class B shares
to have a higher overall expense ratio, and therefore to pay lower
dividends, than the Class A-I and Class A-II shares.
CLASS C SHARES. Class C shares are offered at net asset value per share
plus an initial sales charge of 1.0% of the public offering price.
Thereafter, Investors "pay as they go" in the form of an annualized
distribution fee of 0.75%, and an annualized investor servicing fee of
0.25% of the Trust Fund's average daily net assets attributable to the Class
C shares. Class C shares have no conversion feature and any shares redeemed
prior to one year following the initial purchase are subject to a 1.0%
CDSC. The higher distribution fees and the shareholder servicing fees paid
by the Class C shares should cause the Class C shares to have a higher
overall expense ratio, and therefore to pay lower dividends, than the Class
A-I and Class A-II shares.
FACTORS TO CONSIDER IN CHOOSING A PARTICULAR CLASS OF SHARES. In deciding
which class of the Trust Fund's shares to purchase, prospective Investors should
consider, among other factors, the amount and intended length of their
investment. Investors who prefer not to pay an initial sales charge and who
intend to hold their investment for a minimum of six years may wish to consider
Class B shares; investors who prefer to pay a reduced initial sales charge but
who are unsure of their intended holding period may wish to consider Class C
shares.
11
<PAGE>
Over time, the cumulative expense of the higher distribution and
shareholder servicing fees associated with the Class B and Class C shares may
be expected to approximate or exceed the expense of the lower distribution
fee and applicable initial sales charge associated with the Class A-II
shares. Thereafter, Class C shares (and unconverted Class B shares, if
applicable) will experience higher cumulative expenses. Investors who expect
to maintain their investment in the Trust Fund over the long term might elect
to purchase Class A-II shares, even if the size of the purchase does not
qualify for a reduction in sales charge, because the indirect cost of the
higher fees associated with Class B and Class C shares may outweigh the
benefit of having all their invested dollars put to work immediately. Any
positive return on this initial investment advantage could offset the higher
fees associated with the Class B and Class C shares; however, because the
Trust Fund's future returns cannot be predicted, there can be no assurance
that a positive return will be achieved.
INITIAL SALES CHARGE ALTERNATIVE: CLASS A-I AND CLASS A-II SHARES. A
sales charge of up to 5.0% of the public offering price (5.26% of the amount
invested, net of sales charges) may be charged to the Investor to cover sales
commissions and certain selling expenses. The sales charge is made at the time
of the initial investment and upon each subsequent investment (no sales charge
is assessed upon the reinvestment of income or capital gains distributions).
The schedule of sales charges applicable to both Class A-I and Class A-II shares
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% 4.75%
$ 100,000 - $249,999 4.0% 4.17% 3.80%
$ 250,000 - $499,999 3.0% 3.09% 2.85%
$ 500,000 - $999,999 2.5% 2.56% 2.375%
$ 1,000,000 and over none none *
</TABLE>
- --------------------------
* For an investment of this magnitude the Management Company may pay, from
its own resources, a one-time fee of 0.60% of the invested amount to the
selling broker/dealer.
PURCHASE AT NET ASSET VALUE. Class A-I shares may be purchased without
the imposition of sales charges by directors, employees and registered
representatives of the Management Company and the Trust Fund, as well as by
immediate family members of any of the foregoing. Under certain
circumstances, the sales charges attributable to Class A-I and/or Class A-II
shares may be reduced or waived for purchases by broker/dealers or certain
institutional investors who provide additional consulting or asset allocation
services for the benefit of their clients. Such reductions or waivers are
subject to certain minimum requirements. Sales of Class A-I or Class A-II
shares at net asset value are allowed if the purchaser is (i) a federal or
state governmental agency or authority prohibited by law from paying certain
front-end sales charges or ongoing distribution fees, (ii) a charitable
organization or charitable remainder trust, (iii) an employee benefit plan
account or insurance company separate account, or (iv) a trust (including
bank trust) or other fiduciary account, including accounts managed by
registered broker/dealers and investment advisers, for which an asset-based
account fee is charged by the account manager. Generally, such accounts are
subject to minimum requirements as to the amount of purchase, as well as
other investment limitations which may be established from time to time by
the Management Company, and which may be discontinued at any time.
CLASS A-I AND CLASS A-II RIGHTS OF ACCUMULATION. Generally, the amount
of any sales charge assessed in connection with an initial purchase of Class
A-I or Class A-II shares is based upon the dollar amount of such investment.
The sales charge for subsequent investments may be reduced if the Investor's
account value at the time of the investment plus the amount to be purchased
reaches certain breakpoints. Accounts may be linked for the purpose of
determining whether such breakpoints are reached if such accounts are (1)
identified by the same Social Security or tax identification number, (2)
owned by the Investor's spouse, minor children or any corporations 100% owned
by such Investor or (3) fiduciary accounts (such as IRA or employee benefit
plan
12
<PAGE>
accounts) controlled by such Investor. Purchases made through omnibus accounts
established for financial intermediaries are not eligible for any rights of
accumulation.
CLASS A-I AND CLASS A-II LETTERS OF INTENTION. An Investor purchasing
Class A-I or Class A-II shares may qualify for a reduced sales charge by signing
a nonbinding 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, and thereafter each additional investment (plus all
investments made up to 90 days prior to the execution of the Letter of Intent)
will be entitled to the sales charge applicable to the level indicated in the
Letter of Intent. The account value at the time of execution of the Letter of
Intent will be counted as an accumulation credit toward the completion of the
investment intention specified in the Letter of Intent, but no retroactive
adjustment of the sales charge will be made for investments made more than 90
days' prior to such execution. If the Investor does not satisfy the investment
commitment specified in the Letter of Intent within the 13-month period, there
may be an upward adjustment of the sales charge depending upon the amount
actually purchased. 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. The Management Company will hold in escrow an amount of
shares equal to five percent of the total intended purchase, as identified in
any Letter of Intent, 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.
DEFERRED SALES CHARGE ALTERNATIVE: CLASS B SHARES. Investors may choose to
purchase Class B shares of the Trust Fund at net asset value per share, without
the imposition of an initial sales charge. Class B shares offer an Investor the
advantage of having the entire amount invested immediately in the Trust Fund,
however such Class B shares are subject to a contingent deferred sales charge,
which declines from 5.0% to zero over a six-year term. The Class B shares
are subject to an annualized distribution fee of 0.75%, and an annualized
investor servicing fee of 0.25%, of the Trust Fund's average daily net assets
attributable to the Class B shares until the expiration of the six-year CDSC
term, at which time the Class B shares automatically convert to Class A-II
shares, on the basis of relative net asset values; the Class A-II shares are
subject to a pro rata annualized distribution fee of 0.25%, of the average
daily net assets, and are not subject to an investor servicing fee.
Class B shares which are redeemed prior to the sixth anniversary of their
purchase will be subject to a contingent deferred sales charge at the rates
set forth below. The CDSC is calculated based on the lesser of (i) the
original cost of the shares being redeemed or (ii) the net asset value of
such shares at the time of redemption. No CDSC will be imposed on increases
in net asset value above the initial purchase price; in addition, no CDSC is
imposed on Class B shares purchased through the reinvestment of dividends or
other distributions.
In determining whether a CDSC is applicable to a redemption of Class B
shares, the calculation will be made in a manner which results in the lowest
rate being charged. Thus, redemptions will be processed, first, from Class B
shares representing capital appreciation, second from Class B shares acquired
through the reinvestment of dividends and distributions, and third from Class B
shares held for the longest period of time.
Contingent Deferred Sales Charge
Number of Years Since Purchase (as a percentage of dollar amount)
------------------------------ ----------------------------------
First. . . . . . . . . . . . . 5.0%
Secon. . . . . . . . . . . . . 4.0%
Third. . . . . . . . . . . . . 3.0%
Fourt. . . . . . . . . . . . . 3.0%
Fifth. . . . . . . . . . . . . 2.0%
Sixth. . . . . . . . . . . . . 1.0%
Seventh and thereafter . . . . -0-
13
<PAGE>
14
<PAGE>
The Management Company will pay from its own resources commissions of up
to 4.0% of the amount purchased to broker/dealers selling Class B shares.
The CDSC and higher distribution and investor servicing fees attributable to
the Class B shares will be used, in whole or in part, by the Management
Company to defray distribution and investor servicing related expenses
incurred by the Management Company in connection with the sale of the Class B
shares.
"PAY-AS-YOU-GO" ALTERNATIVE: CLASS C SHARES. Investors electing to
purchase Class C shares will pay a sales charge of 1.0% of the amount purchased,
and, if the Class C shares are redeemed prior to the expiration of one year from
the date of purchase, a CDSC of 1.0%. Class C shares are not eligible for
conversion to Class A-II shares, and will be subject to a continuing annualized
distribution fee of 0.75%, and an annualized investor servicing fee of 0.25%, of
the Trust Fund's average daily net assets attributable to the Class C shares.
SYSTEMATIC PURCHASE PLAN. Investors wishing to purchase shares
systematically may elect to make additional purchases (minimum of $50)
automatically on a monthly or quarterly basis by electronic funds transfer
from a bank account by completing the appropriate portions of the Account
Application. A shareholder enrolling in a systematic purchase program may
terminate his or her participation at any time.
RIGHT TO DESIGNATE A BENEFICIARY. The Trust Fund permits an owner of a
personal account (e.g., an account other than an IRA or other tax-qualified
account) to specify a beneficiary, in effect creating an instrument of trust
which may, under certain circumstances, provide for a post-mortem transfer of
the shares so specified outside of the probate process. However, because the
laws of an Investor's state of residence at the time of his or her death will
govern whether or not shares may be transferred outside of the probate process,
each Investor should consult his or her tax and/or estate planning advisor to
determine whether it is advisable for such Investor to designate a beneficiary,
and whether such a designation will, in fact, result in an effective post-mortem
transfer of such shares outside of the probate process.
DISTRIBUTION AND SHAREHOLDER SERVICING PLANS. The Trust Fund has adopted
distribution plans pursuant to Rule 12b-1 with respect to each of the Class
A-II, Class B and Class C shares, which plans provide for expenditures of 0.25%,
0.75% and 0.75%, respectively, of the average daily net asset value of each
class to pay for the expenses of distributing the shares of such class. In
addition, the Class B and Class C distribution plans provide for expenditures of
0.25% of the average daily net asset value of each class to pay for the expenses
of servicing the accounts of Class B and Class C shareholders. Payments under
each distribution plan are payable to the Management Company, which may reallow
all or part of such distribution plan payments as commissions for shares sold,
or payments for accounts serviced, to broker/dealers and others participating in
the distribution of such shares.
REDEEMING SHARES
An Investor may redeem shares, either directly or pursuant to a regular
program of periodic redemptions, on any business day that the New York Stock
Exchange is open by giving written notice to the Management Company. Shares
may also be redeemed through certain broker/dealers, financial institutions
or service organizations, which may charge a fee which would otherwise not be
payable if such shares were redeemed directly from the Trust Fund.
REDEMPTION REQUESTS RECEIVED AFTER 1:00 PM PST WILL BE PRICED AT THE NET
ASSET VALUE DETERMINED AS OF THE CLOSE OF BUSINESS ON THE BUSINESS DAY
FOLLOWING RECEIPT.
Redemptions will be effective at the net asset value per share next
determined after the receipt by the Management Company, the Transfer Agent or
other broker/dealer or financial intermediary of a written redemption request in
proper form. A redemption request must identify the account, state the number
of shares or dollar amount to be redeemed, and must be signed by each registered
owner exactly as the account is registered. The Management Company or the
Transfer Agent will normally send redemption proceeds (less any applicable CDSC
in the case of Class B or Class C shares) on the next business day following a
redemption request, but in any event redemption proceeds will be sent within
seven calendar days of receipt of a redemption request in proper form.
Redemptions of $5,000 or more may also be made by wire transfer directly to any
bank previously designated by
15
<PAGE>
the shareholder on the account application; a request for redemption by wire
transfer must be received prior to 1:00 pm (Pacific Time) to be processed on the
next business day. The Management Company does not, at present, impose any fee
for redemptions made by wire from any account, however the Management Company
has reserved the right to impose such a fee in the future. Shareholders
redeeming by wire may be required to pay such fees as may be imposed by the
shareholder's bank for wire service.
The Trust Fund will satisfy all redemption requests in cash, so long as the
payments would not, in the opinion of the Trustees, require the Trust Fund to
sell assets under disadvantageous circumstances, or under conditions which are
to the detriment of the remaining shareholders of the Trust Fund. The Trust
Fund may suspend the right of redemption or postpone the date of payment for
more than seven days during any period when 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 or permit for the protection of
Investors.
MINIMUM BALANCE. Due to the relatively high cost of maintaining smaller
accounts, the Trust Fund reserves the right to make involuntary redemptions of
all shares in any account (other than the account of a shareholder who is a
participant in a tax-qualified retirement plan) if at any time the total
investment does not have a value of $200. Before any such involuntary
redemption, the Investor will be notified that the value of his or her account
is less than the required minimum, and will be allowed at least 60 days to bring
the value of the account up to at least $200 before the redemption is processed.
REPAYMENT PRIVILEGE AFTER PARTIAL REDEMPTION: An Investor holding Class
A-I or Class A-II shares has the privilege of reinvesting an amount representing
previous redemptions into any account of the same class without any sales charge
or other fee being assessed, provided that the total amount redeemed is replaced
in one or more purchases of at least $50 each, and further provided that such
purchases are clearly identified as replacements of previous redemptions. This
repayment privilege only applies to partial redemptions in 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 considered a sale of the Investor's Class A-I or Class
A-II shares and may result in taxable gain or loss to the Investor. 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.
WAIVER OF CLASS B AND CLASS C CDSC. The contingent deferred sales charge
applicable to redemptions of Class B and Class C shares, will be waived by the
Trust Fund (i) following the death or disability (as defined in Section 72(m)(7)
of the Code) of a shareholder, if such redemption is made within one year of
death or disability, (ii) to the extent that the redemption represents a minimum
required distribution from an individual retirement account or other retirement
plan to a shareholder who has attained the age of 701/2, (iii) if such a
withdrawal is made under a systematic withdrawal plan, provided that such a
systematic withdrawal is limited to no more than 12% of the annual beginning
account value, (iv) if such a withdrawal (in the case of Class B shares only) is
followed by a reinvestment in Class B shares within 60 days of the initial
redemption (this permits a redeeming Investor to change his or her mind and
recover from the Trust Fund the CDSC paid upon such Investor's redemption), and
(v) in the case of tax-exempt employee benefit plans, if the Internal Revenue
Service or the Department of Labor, as the case may be, determined by rule or
regulation that continuation of the investment in such shares would be improper.
To the extent that the CDSC is waived pursuant to (iv) (which privilege may not
be extended more than once), the CDSC period applicable to the reinvestment
shares will be extended by the number of calendar days between the original
redemption date and the reinvestment date.
SIGNATURE GUARANTEE. To prevent fraudulent redemptions, a signature
guarantee for the signature of each person in whose name the account is
registered is required for all redemption requests for (i) amounts of $50,000 or
more, (ii) checks made payable to someone other than the account holder, (iii)
checks mailed to an address different than the address of record for the
account, and (iv) if the account registration has changed within the past 30
days. A signature guarantee may be obtained from any commercial bank, trust
company, savings and loan association, federal savings bank, broker/dealer or
other eligible financial institution. Notary public endorsements
16
<PAGE>
will not be accepted as a substitute for a signature guarantee. Additional
documentation may be required for redemptions made by corporations, executors,
administrators, trustees, guardians and qualified plan administrators.
REDEMPTION BY TELEPHONE. Shareholders who have so indicated on their
account applications may redeem shares by instructing the Management Company by
telephone. Shareholders may redeem shares by calling (800) 231-0356 on any day
when the New York Stock Exchange is open. In order to arrange for telephone
redemption after an account is opened, or to change the bank or account
designated to receive a wire transfer, a written request with a signature
guarantee must be sent to the Management Company, at the address listed on the
front of this Prospectus.
Neither the Trust Fund nor the Management Company will be liable for any
loss or expense in acting on telephone instructions that are reasonably believed
to be genuine. In attempting to confirm that telephone requests are genuine,
the Management Company will use procedures that are considered reasonable,
including requesting a shareholder to state his or her account number, the name
in which the account is registered, the Social Security or Taxpayer
Identification number, banking institution and account number, and such other
information as may appear necessary or appropriate to verify the identity of the
requesting shareholder. The Trust Fund and the Management Company reserve the
right to refuse to honor a telephone or wire redemption request if it is
believed advisable to do so. Procedures for redeeming shares may be modified or
terminated at any time by the Trust Fund after at least 30 days' prior written
notice to the shareholders.
SYSTEMATIC WITHDRAWAL PLAN. The Trust Fund offers a systematic withdrawal
plan which permits shareholders to receive (either by check or by electronic
funds transfer) periodic payments of $100 or more from the shareholder's
account, either on a monthly or a quarterly basis. Shares of the applicable
class will be redeemed as required (Class B shares may be redeemed without the
imposition of any CDSC provided that such redemptions are limited to 12% of the
value of the beginning annual account value).
Purchases of Class A-I or Class A-II shares while a systematic withdrawal
plan is in effect may be disadvantageous because of the imposition of sales
charges on new purchases. Further, depending upon the shareholder's tax
basis, purchase of any shares of any class while a systematic withdrawal plan
is in effect, whether directly or through the reinvestment of dividends and
distributions, may have adverse tax consequences. Finally, shareholders
should be aware that, to the extent that withdrawals exceed purchases plus
reinvestments, a systematic withdrawal plan will ultimately exhaust the value
of the subject account.
CALCULATION OF NET ASSET VALUE
The total net asset value 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 sale price or, if unavailable for any reason, at the closing bid
price. The total net asset value is then determined by adding the portfolio
value to the value of all other Trust Fund assets, and subtracting all
liabilities and necessary reserves. A pro rata portion of the management fee of
1.25% of average net assets per annum is accrued daily.
The net asset value ("NAV") per share of each class of shares is calculated
by dividing the total value of all assets attributable to such class by the
number of shares of such class then outstanding. The net asset values per share
of the Class B and Class C shares are generally expected to be the same. The
net asset value per share of the Class A-I shares is expected to be higher than
the net asset value per share of the Class A-II shares due to the daily expense
accrual of the distribution fee attributable to the Class A-II shares;
similarly, the net asset value per share of the Class A-II shares is expected to
be higher than the net asset values per share of the Class B and Class C shares
due to the higher daily expense accruals of the distribution fees, as well as
the shareholder servicing fees, imposed on the Class B and Class C shares.
17
<PAGE>
MANAGEMENT'S DISCUSSION OF TRUST FUND PERFORMANCE
The Trust Fund was organized as a business trust under the laws of the
State of Delaware on February 28, 1997, and operates as an open-end diversified
management investment company offering its shares on a continuous basis to the
public. The Trust Fund is the successor-in-interest to SIFE Trust Fund, a
California trust organized on September 26, 1960 which has been offering its
securities, and conducting operations as a mutual fund, since July 2, 1963. The
Management Company is the investment advisor and underwriter for the Trust Fund
and has acted in such capacities since the formation of the Trust Fund.
The Trust Fund's Board of Trustees, the members of which are elected by the
Trust Fund's shareholders, establishes investment and other material policies,
and has overall responsibility for the business and affairs of the Trust Fund.
Mr. Michael Stead, the Management Company's Chief Investment Officer, has held
primary responsibility for the day-to-day management of the Trust Fund's
portfolio since May 1995. From 1984 through May 1995, the Trust Fund's
investment portfolio was managed by Mr. Sam A. Marchese, then President and
Chief Executive Officer of the Management Company. 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 the Management Company pursuant to an Investment Advisory Agreement
between it and the Trust Fund. Fees for all investment advisory services
rendered by the Management Company are included in the management advisory fee
of 1.25% per annum payable to the Management Company by the Trust Fund. Such
management advisory fee is calculated and accrued daily, 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 Declaration of Trust and the Investment Advisory
Agreement, all fees and expenses incurred in connection with the Trust Fund's
operations are borne, without limitation, by the Management Company. Prior
to April 1, 1996, the Management Company 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 1996, the amount
of expense reimbursement paid by the Trust Fund to the Management Company was
$696,880.
Generally, 1996 performance reflected the strong overall performance of the
stock market. The positive domestic (and, to a lesser extent, international)
economic environment, coupled with relatively low inflation, resulted in an
average annual compounded total return of 27.4% for the Class A-I shares, and an
average annual compounded total return of 22.8% for the Class A-II shares (Class
A-II shares were first offered on May 1, 1996; as of the date of this
Prospectus, no Class B or Class C shares have been offered or sold). The
combination of steady economic growth coupled with low inflation permitted the
Federal Reserve Board to leave interest rates mostly unchanged throughout 1996.
For the second year in a row, the stocks of financial institutions,
particularly banks, outperformed the general stock market. Consolidation among
banks had a relatively minor, but important, impact on the Trust Fund's
portfolio investments in 1996. During 1996, the Trust Fund added a carefully
selected group of brokerage firms to the portfolio, which investments proved to
be very strong performers, especially in the fourth quarter.
The Trust Fund's decision to continue investing in financial stocks in 1996
stemmed from a positive economic outlook as well as continued strengthening of
the financial fundamentals for banks, thrifts and other financial institutions.
A strong economy combined with relatively little inflation made for an
environment that attracted investors into equities and mutual funds at historic
rates. At December 31, 1996, the Trust Fund had 75.6% of the portfolio's assets
invested in financial industry stocks. This was down slightly from 1995 as the
Trust Fund dedicated more of its assets to non-financial industry investments.
18
<PAGE>
TURNOVER RATE: During 1996, the Trust Fund's turnover rate was 140.2%, up
from 93.5% in 1995. 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 1996 to maintain a relatively
stable cash position. This decision was made as part of an investment strategy
to remain invested in equities while maintaining sufficient cash to take
advantage of any market corrections or weaknesses in the stock of investment
candidates. As the stock market posted strong returns and the economy continued
to be robust, the potential for an interest rate increase grew throughout the
year; this potential increased the likelihood of a short-term correction near
year's end, making a relatively high cash position more prudent. The cash and
cash equivalents at December 31, 1996 were 13.5% of the portfolio assets of the
Trust Fund, as compared to 14.9% at December 31, 1995.
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. Furthermore, consolidation among
financial institutions remained a driving force among the stocks of financial
institutions.
NON-FINANCIAL INDUSTRY INVESTMENTS: The investment advisor increased the
level of non-financial industry stocks held in the portfolio in 1996. At
December 31, 1996, the level of non-financial investments was 10.9% of the Trust
Fund's portfolio assets, as compared to 7.7% at December 31, 1995. This was
primarily a result of the decision to increase the portfolio's exposure to the
"stable growth" (i.e., companies which have demonstrated strong historic
earnings growth, while maintaining a degree of stability in that growth) sector
of the stock market.
While the Management Company remains confident that bank and thrift stocks
will return superior performance over the long-term, diversification away from
banks and into non-bank companies in which superior return can also be expected
was considered prudent in 1996. In selecting an investment, the Management
Company 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 Management
Company may deem relevant, including size of the dividend, if any. The
Management Company invests in the securities of those companies which show
strong financial results coupled with good growth prospects, and which the
Management Company believes are well-managed.
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 Class A-I shares of $10,000 (resulting in a net
investment of $9,500 after deduction of the 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 different classes of shares are subject to different sales charges and
distribution and/or shareholder servicing fees, the performance of those classes
will be different from, and in most cases less than, that of Class A-I shares.
19
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $9,500 NET INVESTMENT IN
CLASS A-I SHARES OF SIFE TRUST FUND
ON DECEMBER 31, 1986 AND $10,000 INVESTMENT IN THE S&P 500
($9,500 REPRESENTS A $10,000 INVESTMENT WITH THE MAXIMUM SALES CHARGE DEDUCTED)
[GRAPH]
<TABLE>
<CAPTION>
AVERAGE AVERAGE
ANNUAL ANNUAL
RESULTS OF COMPOUNDED COMPOUNDED
$10,000 TOTAL RETURN TOTAL RETURN CUMMULATIVE CUMMULATIVE
INVESTED WITH INCLUDING INCLUDING TOTAL RETURN: TOTAL RETURN:
INVESTMENT 5.0% SALES MAXIMUM SALES MINUMUM SALES SIFE TRUST S&P 500 STOCK
TERM CHARGE CHARGE OF 5.0% CHARGE OF 5.0% FUND INDEX
---- ------ -------------- -------------- ---- -----
<S> <C> <C> <C> <C> <C>
1 year $12,099 20.99% 27.36% 27.36% 22.96%
3 years $17,864 21.34% 23.43% 88.04% 71.40%
5 years $26,157 21.20% 22.45% 175.34% 103.05%
10 years $39,661 14.77% 15.36% 317.49% 314.16%
</TABLE>
The graph and table above reflects performance and return figures for the
Class A-I shares. The Class A-II shares were first sold on May 1, 1996, and
performance and return information for the eight-month period ended December 31,
1996 is not meaningful. The Class B and Class C shares were first offered to
the public on May 1, 1997.
The Trust Fund's Class A-I total return for the year ending December 31,
1996 was 20.99%. This total return results from the Trust Fund's 27.36% return
for the year ending December 31, 1996 and the effect of the deduction of the
maximum sales charge of 5.0% (5.26% of the net amount invested). Therefore, an
initial investment of $10,000 ($9,500 after deduction of the maximum sales
charge of $500) on December 31, 1995, would have had a value of $12,099 on
December 31, 1996.
The Trust Fund's Class A-I average annual compound return as of December
31, 1996, assuming that the maximum sales charge was deducted from the initial
investment, was 20.99% for one year, 21.20% for five years and 14.77% for ten
years. Performance figures are based on historical results, and are not
intended to indicate future performance.
20
<PAGE>
GENERAL INFORMATION
VOTING RIGHTS. Shareholders are entitled to one full or fractional vote
for each full or fractional share, and may vote for the election of Trustees and
on such other matters as may be submitted to meetings of shareholders, or as
required by the Investment Company Act of 1940, as amended.
DISTRIBUTION OF SHARES. SIFE, Inc., located at 100 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 shares pursuant to an
Underwriting Agreement. 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 or
shareholder servicing 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 are also officers and directors of SIFE,
Inc.
Each of the Class A-II, Class B and Class C shares has in effect a
distribution plan complying with the provisions of Rule 12b-1 under the
Investment Company Act of 1940, as amended (individually, a "Plan"). Each Plan
permits the Trust Fund to pay to the Management Company, as principal
underwriter of the Trust Fund's securities, a specified percentage of the assets
attributable to each class of shares to compensate the Management Company for
expenses incurred, services rendered and facilities provided in connection with
the distribution of shares and the servicing of shareholder accounts.. The
Management Company is responsible for all distribution expenses in excess of
such payments, however no portion of the fees paid to the Management Company
pursuant to any Plan are refundable in the event that the fees are less than
such expenses.
As required by Rule 12b-1, each Plan has been approved by the Board of
Trustees, and separately by a majority of the Trustees who are not "interested
persons" of the Trust Fund and who have no direct or indirect financial interest
in the operation of the Plan, in each case pursuant to a finding that the Plan
was in the best interests of the shareholders of the respective class of shares.
Each Plan requires that, at least quarterly, the Audit Committee of the Board of
Trustees must receive a written report prepared by the Chief Financial Officer
of the Trust Fund enumerating the amounts spent by each class and the purposes
therefor. Each Plan further requires that, for so long as each such Plan is in
effect, the nomination and selection of those trustees who are not "interested
persons" of the Trust Fund is committed to the exclusive discretion of the other
trustees who are not "interested persons" of the Trust Fund.
For further information, please contact SIFE, Inc., P.O. Box 9047, 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."
21
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22
<PAGE>
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23
<PAGE>
RECEIPT FOR PROSPECTUS
I hereby acknowledge receipt of the SIFE
Trust Fund Prospectus dated April 30, 1997
Date:________________________________, 199__
__________________________________________
SIGNATURE
__________________________________________
SIGNATURE
__________________________________________
ADDRESS
__________________________________________
SALES REPRESENTATIVE
24
<PAGE>
PROSPECTUS
_LOGO_
SIFE TRUST FUND
APRIL 30, 1997
--------------
INVESTMENT ADVISER AND UNDERWRITER
SIFE
A CALIFORNIA CORPORATION
P.O. Box 9047
100 North Wiget Lane
Walnut Creek, CA 94598
---------------
CUSTODIAN
STATE STREET BANK AND
TRUST COMPANY
225 Franklin Street
Boston, Massachusetts 02110
25
<PAGE>
PART B
SIFE TRUST FUND
STATEMENT OF ADDITIONAL INFORMATION
APRIL 30, 1997
------------------------------
Managed by SIFE, Inc.
100 North Wiget Lane - P.O. Box 9007
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, concerning SIFE Trust Fund (the "Trust Fund") is not a prospectus and is
only authorized for distribution when preceded or accompanied by the Trust
Fund's Prospectus, dated April 30, 1997 (the "Prospectus"). This Statement of
Additional Information contains additional and more detailed information than in
the Prospectus and should be read in conjunction with the Prospectus.
Additional copies of the Prospectus 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.
TABLE OF CONTENTS
PAGE
----
General Information & History B-2
Investment Objectives & Policies B-2
Investment Objectives B-2
Fundamental Investment Policies B-3
American Depositary Receipts B-3
Repurchase Agreements B-4
Options Policies B-4
Lending Portfolio Securities B-5
Risk Considerations B-6
Performance Information B-6
Management of the Trust Fund B-8
Compensation of Trustees and Officers B-8
Investment Advisory & Other Services B-9
Investment Advisory Services B-9
Management and Administration B-9
Custody Services B-10
Independent Accountants B-10
Brokerage Allocation & Portfolio Turnover Rates B-10
Calculation of Net Asset Value B-10
Underwriting of the Trust Fund's Securities B-11
Underwriting Services B-11
Distribution Plans B-12
Additional Federal Income Tax Information B-13
Financial Statements B-15
B-1
<PAGE>
GENERAL INFORMATION & HISTORY
The Trust Fund was organized as a business trust under the laws of the
State of Delaware on February 28, 1997; the Trust Fund is the
successor-in-interest to SIFE Trust Fund, a California trust organized on
September 26, 1960 (the "California Trust"). The Trust Fund, through its
predecessor, the California Trust, has been offering its securities to the
public on a continuous basis, and conducting operations as a mutual fund, since
July 2, 1963. The Trust Fund is registered with the Securities and Exchange
Commission as an open-end diversified management investment company. All
information, including but not limited to historical business and financial
information, presented in this Statement of Additional Information and/or the
Prospectus relates to the California Trust as its business has been, or will be,
continued by the Trust Fund. SIFE, Inc. (the "Management Company") is the Trust
Fund's investment advisor, and also functions as the principal underwriter of
the Trust Fund's securities.
INVESTMENT OBJECTIVES & POLICIES
The Trust Fund's investment objectives and policies are more completely
described in the Prospectus, which should be read in conjunction with the
additional information provided below.
INVESTMENT OBJECTIVES
- ---------------------
The Trust Fund has three fundamental investment objectives which may not be
changed without a vote of a "majority in interest" of the holders of the Trust
Fund's shares, regardless of class (when used herein, this quoted language means
the LESSER of (a) 67% of the shares voting at a meeting at which more than 50%
of all outstanding shares are represented, or (b) more than 50% of all
outstanding shares).
1. CONSERVATION OF CAPITAL: The Trust Fund seeks to conserve its
Investors' capital by investing not less than 30% of its assets in the
equity securities of 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 regarded by the Management Company as "stable
growth" companies. Unless a contrary instruction is received, the
Trust Fund will reinvest on behalf of each Investor all interest and
dividend income from portfolio securities, as well as all net capital
gains on sales of portfolio securities, in additional shares of the
same class.
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 Management Company 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 Management
Company takes 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 Management Company may deem relevant, including
size of the dividend, if any. The Management Company invests in the
securities of those companies which show strong financial results
coupled with good growth prospects, and which the Management Company
believes are well-managed. The Management Company 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 Management Company 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. Since financial institutions
finance and engage directly in a broad range of economic activities,
the Management Company believes that an investment in financial
institutions may result in a certain 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 Management Company attempts to
minimize the effect of economic conditions which may affect one region
but not necessarily another.
B-2
<PAGE>
FUNDAMENTAL INVESTMENT POLICIES
- -------------------------------
The Trust Fund has identified the policies described below as "fundamental
investment policies." Such policies may not be changed without a vote of a
majority in interest (as described above) of the holders of the Trust Fund's
shares. 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 Trustees without shareholder approval.
1. The Trust Fund invests not less than 30% of its assets in the equity
securities of "financial institutions" (companies which derive a
significant portion of their income from dealing in money, credit,
loans and insurance), and the remainder in the equity securities
(including securities convertible into common or preferred stocks) of
a diverse portfolio of domestic and certain international service and
industrial enterprises generally regarded by the Management Company as
"stable growth" companies. See "American Depository Receipts," below.
2. The Trust Fund maintains cash reserves in order to make such payments
as may be required of it. Pending application or investment, the
Trust Fund's cash reserves are invested in repurchase agreements and
other cash equivalents, such as securities issued by the United States
and state governments or their agencies, certificates of deposit or
other interest-bearing accounts and high-grade commercial paper. See
"Repurchase Agreements" and "Lending Portfolio Securities," below.
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% 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. With
respect to 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. The Trust Fund may not: (i) borrow money or make loans (provided,
however, that this restriction shall not prevent the Trust Fund from
purchasing certain publicly issued debt securities or commercial
paper, or lending its portfolio securities in accordance with
applicable regulatory requirements); (ii) underwrite the securities of
other issuers; (iii) purchase or sell real estate; (iv) purchase or
sell commodities or commodity contracts; (v) invest in the securities
of other investment companies; (vi) invest in companies for the
purpose of exercising control or management; (vii) issue senior
securities; or (viii) 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 options, in accordance with applicable regulatory
requirements. So long as the Trust Fund remains obligated as a writer
of an option, it must (i) in the case of a put option, maintain cash,
U.S. Treasury securities or high-grade, short-term debt securities in
a segregated account in an amount equal to or greater than the nominal
value of the option, and (ii) in the case of a call option,
collateralize the option with actual securities held in the Trust
Fund's investment portfolio. The Trust Fund does not write "naked,"
or uncovered, options. See "Options Policies," below.
AMERICAN DEPOSITARY RECEIPTS
- ----------------------------
American Depositary Receipts ("ADRs") are created when a foreign company
deposits its securities into a trust account administered by a domestic
financial institution (generally, a large, commercial bank); the trust account
may be located in the United States or at a foreign branch of the receiving
financial institution. The receiving financial institution then issues ADRs,
which represent an undivided fractional interest in the pool of securities so
deposited.
B-3
<PAGE>
The Management Company believes that certain large, international
non-domestic corporations may represent attractive investment opportunities, as
well as providing a certain degree of economic and geographic diversification.
Historically, the Trust Fund has invested less than 1.0% of its assets in ADRs.
REPURCHASE AGREEMENTS
- ---------------------
The Trust Fund may enter into repurchase agreements with banks and member
firms of the New York Stock Exchange determined by the Management Company to
present minimal credit risk. A repurchase agreement is a contract under which
one party acquires certain securities held by another party pursuant to an
agreement whereby the selling party agrees to repurchase from the acquiring
party the subject securities at a fixed time and price. Repurchase agreements
are generally short-term (usually not more than one week), with the acquiring
party profiting to the extent that the repurchase obligation exceeds the
acquiring party's cost. Under the terms of a typical repurchase agreement, the
Trust Fund acquires United States Government securities for a relatively short
period of time, subject to the seller's obligation to repurchase, and the Trust
Fund to resell, the securities. 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 subject securities, including the risk that the market value of the
subject securities might decline prior to the Trust Fund being able to dispose
of them. The Management Company reviews, on an ongoing basis, the
creditworthiness of the counterparties, as well as the market values of
collateral securities, to evaluate potential risks.
Under the relevant terms of the Investment Company Act of 1940, as amended
(the "1940 Act"), a repurchase agreement is considered to be a loan
collateralized by the underlying securities.
OPTIONS POLICIES
- ----------------
The Trust Fund may write (i.e., sell) "covered" put and call options for
non-speculative purposes; a "covered" option position is one where the Trust
Fund holds the securities (in the case of call options) or cash (in the case of
put options), as distinct from "naked," or unsecured, options, which are
generally bought or sold for speculative purposes. The Trust Fund uses options
sales to hedge specific portfolio positions (i.e., to lock in a fixed price in a
stock which, for whatever reason, may be subject to increasing volatility), and
does not purchase (or write) "naked" options.
When the Trust Fund writes a put option, the Trust Fund assumes for a
defined period of time an obligation to purchase the underlying security at a
set price from the purchaser of the option, and receives as consideration for
its undertaking the option obligation an option premium equal to the difference
between the market price of the underlying security at the time the option is
written and the exercise, or "strike," price, adjusted for certain economic
factors reflecting, among other things, the relationship of the exercise price
to the market price, the volatility of the underlying security, the remaining
term of the option, supply and demand and interest rates. If the market price
of the underlying security rises above the strike price, the option will expire
unexercised, and the Trust Fund will profit to the full extent of the premium;
if, however, the market price falls below the strike price and the option is
exercised, the Trust Fund will be forced to acquire securities at an
above-market price, and may suffer a loss (however, the amount of any loss is
reduced by the premium received). All put options written by the Trust Fund are
covered with cash, United States Treasury securities or other, high-grade,
short-term debt securities, held in a segregated account, in an amount equal to
or greater than the nominal value of the option (i.e., the amount which the
Trust Fund would have to pay in order to close out the option position).
When the Trust Fund writes a call option, the Trust Fund assumes for a
defined period of time an obligation to sell the underlying security at a set
price to the purchaser of the option. Again, the option premium is equal to the
difference between the market price of the underlying security at the time the
option is written and the exercise, or "strike," price, adjusted for the market
factors described above. If the market price of the underlying security falls
below the strike price, the option will expire unexercised, and the Trust Fund
will profit to the full extent of the premium; if, however, the market price
rises above the strike price and the option is exercised, the
B-4
<PAGE>
Trust Fund will be forced to deliver securities which it may not wish to sell.
All call options written by the Trust Fund are covered with securities held in
the Trust Fund's investment portfolio.
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 has
written, 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 effect a closing purchase
transaction with respect to a put option it has written, it will not be able to
remove funds from the segregated account maintained by the Custodian which are
being held to cover the potential exercise of the put option.
If 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 option 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, subject to regulatory
restrictions and to the restrictions stated in the Prospectus, for the purpose
of increasing the Trust Fund's income or for liquidity purposes. Under
applicable regulatory requirements, the loan collateral must, on each business
day, be equal to or greater than the market value of the securities loaned;
acceptable forms of collateral are cash, bank letters of credit or securities
issued by the United States. The Trust Fund receives an amount equal to the
dividends or interest on the loaned securities, and may also receive a
negotiated fee from the borrower, which may include all or some of the interest
on the securities held as collateral. Each loan agreement enables the Trust
Fund to reacquire the loaned securities within specified time frames.
B-5
<PAGE>
RISK CONSIDERATIONS
- -------------------
Diversification of the character discussed above does not necessarily
reduce or eliminate the risk inherent in an investment in a portfolio containing
the securities of a substantial number of financial institutions. Financial
services are subject to greater governmental regulation than many other
industries, as well as capital risk (i.e., the risk that, in periods of tight
money or high inflation, the cost to attract deposits will rise substantially),
term and rate 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) and credit risk (i.e., the risk of lending money to borrowers who
may or may not be able to pay), all of which may, from time to time, require
substantial reserves against actual or anticipated losses. Further, industry
consolidation and the erosion of the distinctions between banks and other, less
traditional financial institutions has resulted in increased, and increasing,
competition. Increased competition, with attendant pressure on financial
institution profitability, may also result from current legislative initiatives
which would reduce the separation between the commercial and investment banking
business and which, if enacted, could significantly impact the industry and the
Trust Fund. 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.
Since the Trust Fund's assets consist primarily of common stocks, it must
be emphasized that the value of an investment in the Trust Fund will fluctuate
as the market value of such stocks rises or falls. Accordingly, in a declining
market, the net asset value of the Trust Fund's shares will decline just as, in
a rising market, the net asset value of the Trust Fund's shares will rise.
These fluctuations in the net asset value of each class of shares may make the
Trust Fund more suitable for long-term investors who can bear the risk of such
short-term fluctuations.
PERFORMANCE INFORMATION
Annual, uncompounded performance information relating to a hypothetical
investment of $10,000 (adjusted for maximum sales charges) in Class A-I shares
for the ten-year period ended December 31, 1996 is set forth below. Such
information assumes 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).
SIFE TRUST FUND PERFORMANCE RECORD(1)
<TABLE>
<CAPTION>
AMOUNT OF
CAPITAL GAINS VALUE AT YEAR VALUE AT YEAR AMOUNT OF AMOUNT OF
CALENDAR REINVESTED AMOUNT OF END END (ADJUSTED PERCENTAGE PERCENTAGE
PERIODS (ADJUSTED FOR INCOME & (ADJUSTED FOR FOR MINIMUM INCREASE INCREASE
ENDING MAXIMUM [5%] DIVIDENDS MAXIMUM [5%] [0%] SALES (DECREASE) (DECREASE)
------ SALES LOAD) REINVESTED SALES LOAD) LOAD) TRUST FUND S&P 500
----------- ---------- ----------- ----- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
1987 $189 $488 $8,722 $9,181 (8.19)% 5.25%
1988 $184 $459 $10,451 $11,001 19.82% 16.61%
1989 $339 $778 $12,561 $13,222 20.19% 31.69%
1990 $148 $694 $9,780 $10,294 (22.14)% (3.10)%
1991 $249 $887 $14,406 $15,165 47.31% 30.47%
1992 $334 $754 $19,295 $20,310 33.93% 7.62%
1993 $335 $808 $21,095 $22,205 9.33% 10.08%
1994 $457 $819 $20,774 $21,868 (1.52)% 1.32%
1995 $4,637 $1,956 $31,145 $32,784 49.92% 37.58%
1996 $5,905 $2,895 $39,661 $41,753 27.36% 22.96%
- ----------------------------
</TABLE>
(1) Information given for Class A-I shares only. Class A-II shares (which are
identical in all respects to Class A-I shares except that Class A-II shares bear
a 0.25% 12b-1 distribution fee, were first offered for sale on May 1, 1996, and
therefore have a limited performance history. Class B and Class C shares will
not be offered for sale or sold prior to May 1, 1997.
B-6
<PAGE>
For the year ended December 31, 1996, a $9,500 net investment in the Trust
Fund (calculated based on a $10,000 investment less the current maximum 5.0%
sales charge, assuming re-investment of all distributions for the entire period
of January 1, 1996 through December 31, 1996) would have increased to $12,099.
For the five year and ten year periods ended on the same date, and using the
same assumptions, a $9,500 net investment in the Trust Fund would have increased
to $26,157 and $39,661, respectively. In percentage terms, the performance of a
Trust Fund investment and the Standard & Poor's "500 Stock Index - Distributions
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 TOTAL
$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 $12,099 20.99% 27.36% 27.36% 22.96%
3 years $17,864 21.34% 23.43% 88.04% 71.40%
5 years $26,157 21.20% 22.45% 175.34% 103.05%
10 years $39,661 14.77% 15.36% 317.49% 314.16%
</TABLE>
The Trust Fund calculates average annual total return according to the
following formula, as required by the Securities and Exchange Commission:
n
"P(1+T) = 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 Trustees. The sum of the
initial shares purchased and additional shares acquired through reinvestment is
then multiplied by the net asset value per share 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 periods 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 is no
guarantee of future performance. Effective April 1, 1995, the Trust Fund
reduced the maximum sales charge on Class A-I shares 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 zero (on purchases of $1,000,000 or more). The Trust Fund's 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 shares, when redeemed, may be worth more or less than their
original cost.
Prior to May 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 May 1, 1995 through March 31, 1996, the
Management Company received compensation of 0.60% of average net assets, per
annum, plus reimbursement of certain expenses. Effective April 1, 1996, the
Management Company receives 1.25% of average net assets, per annum, and is
responsible for all of the Trust Fund's expenses, without exception.
MANAGEMENT OF THE TRUST FUND
The business affairs of the Trust Fund are overseen by a Board of Trustees
currently composed of seven members, four of whom are not "interested persons"
as that term is defined in Section 2(a)(19) of the 1940 Act.
B-7
<PAGE>
COMPENSATION OF TRUSTEES AND OFFICERS
The Trust Fund does not pay any remuneration directly to any officer or
trustee. Prior to April 1, 1996, the Trust Fund's officers and trustees (then
called "directors") received indirect remuneration from the Trust Fund through
reimbursement paid to the Management Company for the Trust Fund's pro rata share
of certain office and other expenses, including salaries, bonuses and Board
fees; after this date, such costs have been borne directly by the Management
Company. No officer or trustee of the Trust Fund received remuneration in
excess of $60,000, either directly or indirectly, from the Trust Fund in 1996.
Each trustee is paid an attendance fee of $5,000 for each Board meeting
attended (the Board of Trustees meets not less than quarterly). In addition,
members of the Audit Committee receive a per-meeting fee of $1,000. As of
February 14, 1996, the officers and trustees of the Trust Fund and their
families, as a group, owned beneficially or of record less than 1% of the
outstanding shares. The following table sets forth the names, ages and business
backgrounds of each trustee of the Trust Fund (the Trust Fund has no Executive
Officers who are not also Trustees). The address of each trustee is c/o SIFE
Trust Fund, 100 North Wiget Lane, Walnut Creek, California 94598. Trustees who
are "interested persons" of the Trust Fund are identified by an asterisk
following their names.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, ADDRESS AND AGE AND POSITION HELD DURING PAST FIVE YEARS
--------------------------------------- ----------------------
<S> <C>
Haig G. Mardikian (49) General Partner, George M. Mardikian Enterprises (real estate
Trustee; Chairman of the Board (1) investments); Managing Director, The United Broadcasting
Corporation (radio broadcasting)
Walter S. Newman (75) Owner, WSN Enterprises (real estate consultants); Retired President,
Trustee; Vice-Chairman of the Board (1) San Francisco Planning Commission; Retired President, San
Francisco Redevelopment Agency; Chairman of the Board, National
Brain Tumor Foundation
Diane Howard Belding (40) * Management Company employee, 1992-present; General Partner,
Trustee (2) Howard & Howard Ranch (avocado and lemon ranch), 1983-present;
Director, Management Company (1982 - present)
Neil L. Diver (59) Chairman, Systems Integrators, Inc., 1995-present; Chairman,
Trustee (1) Ameriwood Industries International Corporation, 1990-present;
Chairman/President & Co-Founder, Cryopharm Corporation, 1987-
1996; President & Co-Founder, Exogene Corporation, 1987-1992
Charles W. Froehlich, Jr. (68) * Retired Appellate Court Judge; retired Superior Court Judge;
Trustee; Secretary formerly Of Counsel to Peterson, Thelan & Price; principal,
Froehlich & Peterson Dispute Resolution
John A. Meany (56) President, John's Valley Foods, Inc.; President, John's Town &
Trustee Country Markets, Inc.; Director, Northern California Grocers
Association
Bruce W. Woods (44)* President & Chief Executive Officer and Director, Management
Trustee; President & Chief Executive Officer (3) Company & Trust Fund, July 1996-present; Management Company
employee, June 1986-present
</TABLE>
- ------------------------------
(1) On July 14, 1996, Mr. David M. Sacks, a Director of the Trust Fund from
1983 through 1996 and its Chairman since 1988, died. On August 16, 1996,
Mr. Mardikian was elected Chairman of the Board to fill the remainder of
Mr. Sacks' unexpired term as Chairman, Mr. Newman was elected Vice-Chairman
of the Board to fill the remainder of Mr. Mardikian's unexpired term as
Vice-Chairman, and Mr. Diver was elected a member of the Board to fill the
remainder of Mr. Sacks' unexpired term as a Director.
B-8
<PAGE>
(2) Ms. Tudisco, a shareholder and a director of the Management Company,
declined to stand for re-election in April 1996; Ms. Belding was elected to
the Trust Fund's Board on April 1, 1996.
(3) On July 26, 1996, Mr. Sam A. Marchese, President and Chief Executive
Officer of the Trust Fund since 1994 retired. On that date, Mr. Woods was
elected to fill the remainder of Mr. Marchese's unexpired term as a
Director, and was appointed President & Chief Executive Officer of the
Trust Fund.
INVESTMENT ADVISORY & OTHER SERVICES
INVESTMENT ADVISORY SERVICES
The Management Company acts as the investment adviser to the Trust Fund,
subject to policies established by the Board of Trustees. As investment adviser
to the Trust Fund, the Management Company is responsible for the management of
the Trust Fund's investment portfolio, as well as the administration of its
operations. Basic policy is set and determined by the Board of Directors of the
Trust Fund and carried out by the Management Company pursuant to an Investment
Advisory Agreement dated as of April 30, 1997 (the "Investment Advisory
Agreement"). The Advisory Agreement was last approved by the Board of Trustees
(then the Board of Directors), including a majority of the directors who are not
"interested persons," as that term is defined in the 1940 Act, at a meeting on
February 14, 1997, which approval was ratified by the shareholders of the Trust
Fund on April 4, 1997. The Management Company does not act in a similar
capacity for any other person or entity.
The Advisory Agreement is for an initial term of one year, and may be
renewed from year to year provided that any such renewal has been approved
annually by (i) the majority of the outstanding voting securities of the Trust
Fund, or (ii) a majority of the trustees who are neither parties to the Advisory
Agreement, nor "interested persons" with respect to the Management Company at a
meeting called for the purpose of voting on such matter. The Advisory Agreement
also provides that either party has the right to terminate the Advisory
Agreement without penalty upon 60 days' written notice to the other party, and
that the Advisory Agreement automatically terminates in the event of its
assignment.
Prior to May 1, 1995, the Management Company received compensation of 0.50%
of average net assets, per annum, plus reimbursement of certain expenses; from
May 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, the Management Company receives 1.25% of average net
assets, per annum, without any additional reimbursement of expenses. Investment
advisory fees 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 deducted from the Trust Fund on the first
business day of the following month. During the past three years the Management
Company was paid investment advisory fees of $2,184,928 (1994), $3,039,425
(1995) and $7,607,105 (1996). The amount of expense reimbursement to the
Management Company by the Trust Fund during the last fiscal year was $696,880
(from January 1, 1996 through March 31, 1996), which is in addition to the
payment set forth above for investment advisory services.
MANAGEMENT AND ADMINISTRATION
The Management Company manages the Trust Fund's operations, and is solely
responsible for all of the costs and expenses of the Trust Fund's operation,
including, without limitation, all fees for custodial and transfer agency
services, Trustees' fees, legal and auditing fees, tax matters, dividend
disbursements, 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 has contracted with Boston
Financial Data Services for the performance of certain shareholder accounting
and transfer agency functions, and is solely responsible for all fees, costs and
expenses associated with the performance by Boston Financial Data Services of
such functions.
B-9
<PAGE>
CUSTODY SERVICES
State Street Bank & Trust Company, 225 Franklin Street, Boston, MA 02110
("State Street Bank") acts as the custodian for the assets of the Trust Fund.
As such, State Street Bank holds all Trust Fund securities in safekeeping,
receives and pays for portfolio securities purchased, delivers and receives
payment for portfolio 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 Management Company, acting under the direction of the Board of
Trustees. The custodian 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.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP, 50 Fremont Street, San Francisco, California 94105,
provided auditing services as the Trust Fund's independent certified public
accountants for the 1996 fiscal year.
BROKERAGE ALLOCATION & 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.
During the last calendar year, the Trust Fund paid brokerage commissions of
$1,598,407 and total purchases and sales of portfolio securities aggregated
$1,900,773,494. Portfolio turnover rates for the years 1994, 1995 and 1996 were
25.2%, 93.5% and 140.2%, respectively. The portfolio turnover rate in 1995 and
1996 was relatively high, due to the extremely active market for financial
institutions stocks, specifically, and equities, generally, as well as to the
substantial portfolio re-configuration undertaken in mid-1995.
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:
TOTAL AMOUNT OF TOTAL SECURITIES
YEAR NUMBER OF BROKERS BROKERAGE PAID PURCHASED AND SOLD
---- ----------------- -------------- ------------------
1994 78 $418,962 $229,615,630
1995 56 $990,818 $915,869,856
1996 57 $1,598,407 $1,900,773,494
CALCULATION OF NET ASSET VALUE
All funds received by the Trust Fund for investment, and all funds
reinvested from net investment income and realized capital gains, if any, are
accounted for in terms of shares, with the per-share value determined daily by
dividing (i) the difference between (a) the total value of the net assets
attributable to each class of the Trust Fund's shares on that day and (b) all
charges, such as distribution fees, shareholder servicing fees and management
fees (each of which is calculated and charged daily), for that class as well as
any other appropriate costs or expenses, by (ii) the total number of shares of
that class then outstanding. See "Calculation of Net Asset Value" in the
Prospectus for additional information concerning the timing and manner of
valuation of each class of shares.
The net asset value ("NAV") of each class of shares is computed on each day
on which the New York Stock Exchange is open for trading. No valuation occurs
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.
B-10
<PAGE>
Equity securities held by the Trust Fund are valued at the last sale price
on the exchange or in the over-the-counter market in which such securities are
primarily traded as of the close of business on the day the securities are being
valued. Securities for which a closing sale price is not readily available are
valued at the closing bid price. Short-term debt securities (held for liquidity
purposes) are amortized to maturity based on their cost, and marked-to-market
daily. Option positions are marked-to-market based on their nominal, as quoted
value.
The different expenses borne by each class of shares will result in
different net asset values and different dividends. The per-share net asset
value of the Class A-I shares will be higher than that of the Class A-II shares
because of the 0.25% distribution fee applicable to the Class A-II shares.
Similarly, the net asset value of the Class A-II shares may be expected to be
higher than the net asset value of the Class B and Class C shares because of the
higher expenses attributable to those classes. Set forth below is a specimen
price mark-up sheet showing the method of computing the offering, redemption or
repurchase price for the Class A-I shares1, using as a basis the value of the
Trust Fund assets as of December 31, 1996.
ASSETS
Investments in securities, at market (cost $458,188,046) $ 679,384,669
Repurchase Agreement 105,874,000
Cash 1,354,392
Receivables for:
Dividends 1,762,937
Investment securities sold 170,500
-------------
Total assets 788,546,498
-------------
LIABILITIES
Payables for:
SIFE (the "Management Company") 866,717
Investment securities purchased 296,590
-------------
Total liabilities 1,163,307
-------------
Net assets $ 787,383,191
-------------
-------------
CLASS I:
Net asset value per investment unit
($769,122,121 DIVIDED BY 158,142,752 units outstanding) $4.86
-----
-----
Maximum offering price per unit (100/95 of $4.86) $5.12
-----
-----
CLASS II:
Net asset value per investment unit
($18,261,070 DIVIDED BY 3,754,743 units outstanding) $4.86
-----
-----
Maximum offering price per unit (100/95 of $4.86) $5.12
-----
-----
- ------------------------
(1) Class A-II shares were first offered for sale on May 1, 1996. Class B and
Class C shares will not be offered for sale until May 1, 1997, or later.
UNDERWRITING OF THE TRUST FUND'S SECURITIES
UNDERWRITING SERVICES
The Management Company acts as principal underwriter for the Trust Fund
pursuant to an Underwriting Agreement. The Underwriting Agreement is for an
initial term of one year, and may be renewed from year to year provided that any
such renewal has been approved annually by (i) the majority of the outstanding
voting securities of the Trust Fund, or (ii) a majority of the trustees who are
neither parties to the Underwriting Agreement, nor "interested persons" with
respect to the Management Company at a meeting called for the purpose of voting
on such matter. The Underwriting Agreement also provides that either party has
the right to terminate the Underwriting Agreement without penalty upon 60 days'
written notice to the other party, and that the Underwriting Agreement
automatically terminates in the event of its assignment. The Underwriting
Agreement was last approved by the Board of Trustees (then the Board of
Directors), including a majority of the directors who
B-11
<PAGE>
are not "interested persons," as that term is defined in the 1940 Act, at a
meeting on February 14, 1997, which approval was ratified by the shareholders of
the Trust Fund on April 4, 1997.
During the past three years the Management Company and earned sales
commissions for its services as principal underwriter for the Class A-I and
Class A-II shares as set forth below.
<TABLE>
<CAPTION>
TOTAL SALES PAID TO INDEPENDENT PAID TO ITS OWN NET COMMISSIONS TO
THEYEAR COMMISSIONS AGENTS SALESPERSONS MANAGEMENT COMPANY
<S> <C> <C> <C> <C>
1994 $1,725,060 $440,188 $1,184,899 $99,973
1995 $1,452,138 $376,255 $1,075,083 $(800)
1996 $2,178,040 $538,437 $1,628,368 $11,235
</TABLE>
The directors of the Management Company, the business addresses for whom
are all c/o SIFE, Inc., 100 North Wiget Lane, Walnut Creek, California 94598
are: Diane H. Belding; Charles W. Froehlich, Jr.; Sam A. Marchese; Michael J.
Stead; Sharon E. Tudisco; Bruce W. Woods; and John W. Woods. The directors have
the following positions with the Management Company: Mr. Bruce W. Woods is
Chief Executive Officer and President; Mr. Stead is Portfolio Manager; and Mr.
Froehlich is Secretary; Mrs. Tudisco and Mr. John W. Woods are retired. Ms.
Belding, Mr. Froehlich and Mr. Bruce W. Woods 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 11.56% of the outstanding
shares of the Management Company, Mr. Marchese owns 22.22%, Mrs. Tudisco owns
11.11%, Mrs. Belding owns 22.22%, Mr. Froehlich owns 15.67%, and Mr. Bruce W.
Woods owns 17.22% 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 securities.
<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 $11,235 -0- -0- -0-
</TABLE>
DISTRIBUTION PLANS
As described in the Prospectus, the Trust Fund has adopted a separate Plan
of Distribution pursuant to Section 12(b) of the 1940 Act and Rule 12b-1
thereunder (individually, a "Plan") for each of the Class A-II, Class B and
Class C shares. The terms and conditions of each such Plan provide that each
such Class is authorized to spend certain sums (0.25% of average daily net
assets, in the case of the Class A-II shares, and 0.75% of average daily net
assets, in the case of the Class B and Class C shares) on activities primarily
intended to support the distribution and sale of such shares. The Class B Plan
and Class C Plan also provide that each such Class is authorized to spend an
additional 0.25% of average daily net assets for services relating to the
servicing of shareholders' accounts.
Under each Plan, the distribution (and, in the case of the Class B and
Class C shares, the servicing) fees are designed to compensate the Management
Company for expenses incurred, and services rendered and facilities provided, in
connection with the distribution of shares and the servicing of shareholder
accounts. Such expenses and services include, but are not necessarily limited
to, the payment of trail commissions and other payments to broker/dealers,
financial institutions and others who sell shares and/or service shareholder
accounts. It should be noted that the distribution and servicing fees are
payable to the Management Company even if the amount paid exceeds the Management
Company's actual expenses of providing such services.
As required by Rule 12b-1, each Plan has been approved by the Board of
Trustees, and separately by a majority of the Trustees who are not "interested
persons" of the Trust Fund and who have no direct or indirect financial interest
in the operation of the Plan, in each case pursuant to a finding that the Plan
was in the best
B-12
<PAGE>
interests of the shareholders of the respective class of shares. The officers
and Trustees who are "interested persons" of the Trust Fund may be considered to
have a direct or indirect financial interest in the operation of the Plans due
to present or past affiliations with the Management Company. Potential benefits
of each 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. Payments
under each Plan are reviewed quarterly, and each Plan must be renewed annually
by the Board of Trustees.
Each Plan requires that, at least quarterly, the Audit Committee of the
Board of Trustees must review a written report prepared by the Chief Financial
Officer of the Trust Fund enumerating the amounts spent by each class pursuant
to its Plan and the purposes therefor. Each Plan further requires that, for so
long as each such Plan is in effect, the nomination and selection of those
Trustees who are not "interested persons" of the Trust Fund is committed to the
exclusive discretion of the other Trustees who are not "interested persons" of
the Trust Fund.
ADDITIONAL FEDERAL INCOME TAX INFORMATION
The Trust Fund has qualified and elected, and intends to continue to
qualify, to be treated as a regulated investment company (a "RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), for
each taxable year by complying with all applicable requirements regarding the
source of its income, the diversification of its assets, and the timing of its
distributions. The Trust Fund's policy is to distribute to its Investors all of
its investment company taxable income and any net realized capital gains for
each year in a manner that complies with the distribution requirements of the
Code, so that the Trust Fund will not be subject to any federal income or excise
taxes based on net income. However, the Board of Trustees may elect to pay such
excise taxes if it determines that payment is, under the circumstances, in the
best interests of the Trust Fund.
To qualify as a RIC, the Trust Fund must, among other things, (a) derive at
least 90% of its gross income each year from dividends, interest, payments with
respect to loans of stock and securities, gains from the sale or other
disposition of stock or securities or foreign currency gains related to
investments in stock or securities, or other income (generally including gains
from options) derived with respect to the business of investing in stock,
securities or currency, (b) derive less than 30% of its gross income each year
from the sale or other disposition of stock or securities (or options thereon)
held less than three months (excluding some amounts otherwise included in income
as a result of certain hedging transactions), and (c) diversify its holdings so
that, at the end of each fiscal quarter, (i) at least 50% of the market value of
its assets is represented by cash, cash items, U.S. Government securities,
securities of other RICs and other securities limited, for purposes of this
calculation, in the case of other securities of any one issuer to an amount not
greater than 5% of the Fund's assets or 10% of the voting securities of the
issuer, and (ii) not more than 25% of the value of its 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 Trust Fund
controls and which are engaged in the same or similar trades or businesses or
related trades or businesses. As such, and by complying with the applicable
provisions of the Code, the Trust Fund will not be subject to federal income tax
on taxable income (including realized capital gains) that is distributed to
shareholders in accordance with the timing requirements of the Code. If the
Trust Fund is unable to meet certain requirements of the Code, it may be subject
to taxation as a corporation.
Distributions of net investment income and net realized capital gains by
the Trust Fund will be taxable to Investors whether made in cash or reinvested
by the Trust Fund in shares. In determining amounts of net realized capital
gains to be distributed, any capital loss carryovers from prior years will be
applied against capital gains. Investors receiving distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share of the Trust Fund on
the reinvestment date. Trust Fund distributions also will be included in
individual and corporate shareholders' income on which the alternative minimum
tax may be imposed.
The Trust Fund or the securities dealer effecting a redemption of the Trust
Fund's shares by an Investor generally will be required to file information
reports with the Internal Revenue Service (the "IRS") with respect to
distributions and payments made to the Investor. In addition, the Trust Fund
will be required to withhold federal income tax at the rate of 31% on taxable
dividends, redemptions and other payments made to accounts of individual or
other non-exempt Investors who have not furnished their correct taxpayer
identification numbers and certain required certifications
B-13
<PAGE>
on the Account Application Form or with respect to which the Trust Fund or the
securities dealer has been notified by the IRS that the number furnished is
incorrect or that the account is otherwise subject to withholding.
The Trust Fund intends to declare and pay dividends and other
distributions, as stated in the Prospectus. In order to avoid the payment of a
4% nondeductible federal excise tax based on net income, the Trust Fund must
declare on or before December 31 of each year, and pay on or before January 31
of the following year, distributions at least equal to 98% of its ordinary
income for that calendar year and at least 98% of the excess of any capital
gains over any capital losses realized in the one-year period ending October 31
of that year, together with any undistributed amounts of ordinary income and
capital gains (in excess of capital losses) from previous calendar years.
The Trust Fund will receive dividend distributions from U.S. corporations.
To the extent that the Trust Fund receives such dividends and distributes them
to Investors, and meets certain other requirements of the Code, corporate
Investors in the Trust Fund may be entitled to the "dividends received"
deduction. Availability of the deduction is subject to certain holding period
and debt-financing limitations.
The Trust Fund may be subject to foreign withholding taxes on dividends and
interest earned with respect to securities of foreign corporations. Foreign
corporations in which the Trust Fund invests may be treated as "passive foreign
investment companies" ("PFICs") under the Code. Part of the income and gains
that the Trust Fund derives from PFIC stock may be subject to a non-deductible
federal income tax at the Trust Fund level. In some cases, the Trust Fund may
be able to avoid this tax by electing to be taxed currently on its share of the
PFIC's income, whether or not such income is actually distributed by the PFIC.
The Trust Fund will endeavor to limit its exposure to the PFIC tax by investing
in PFICs only where the election to be taxed currently will be made. Because it
is not always possible to identify a foreign issuer as a PFIC in advance of
making the investment, the Trust Fund may incur the PFIC tax in some instances.
Investing in options contracts involves complex rules that will determine
the character and timing of recognition of the income received in connection
therewith by the Trust Fund. Income from transactions in options derived by the
Trust Fund with respect to its business of investing in securities will qualify
as permissible income under Subchapter M of the Code. Any security, option, or
other position entered into or held by the Trust Fund that substantially
diminishes the Trust Fund's risk of loss from any other position held by the
Trust Fund may constitute a "straddle" for federal income tax purposes. In
general, straddles are subject to certain rules that may affect the amount,
character and timing of the Trust Fund's gains and losses with respect to
straddle positions (including rules that may result in gain being treated as
short-term capital gain rather than long-term capital gain).
Redemptions and exchanges of shares of the Trust Fund will result in gains
or losses for tax purposes to the extent of the difference between the proceeds
and the Investor's adjusted tax basis for the shares. Any loss realized upon
the redemption or exchange of shares within six months from their date of
purchase will be treated as a long-term capital loss to the extent of
distributions of long-term capital gain dividends during such six-month period.
All or a portion of a loss realized upon the redemption of shares may be
disallowed to the extent shares are purchased (including shares acquired by
means of reinvested dividends) within 30 days before or after such redemption.
In addition, the sales charge savings that may be available for reinvesting
amounts from previous redemptions will, in certain circumstances, increase the
amount of the gain (or reduce the amount of the loss) from those redemptions.
Distributions and redemptions may be subject to state and local income taxes,
and the treatment thereof may differ from the federal income tax treatment.
Nonresident aliens and foreign persons are subject to different tax rules, and
may be subject to withholding of up to 30% on certain payments received from the
Fund.
The foregoing and the related discussion in the Prospectus are 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. The law firm of Heller, Ehrman,
White & McAuliffe has expressed no opinion in respect thereof. 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 concerning the application of
foreign, federal, state and local taxes to an investment in the Fund , and with
specific reference to their own tax situation.
B-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Investors and Board of Directors
of SIFE Trust Fund:
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of SIFE Trust Fund as of December 31, 1996, the
related statement of operations for the year then ended, the statement of
changes in net assets for the year ended December 31, 1996, and the financial
highlights for the year ended December 31, 1996 for Class I units and for the
period from May 1, 1996 (commencement of operations) through December 31, 1996
for Class II units. 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
audit. The statement of changes in net assets for the year ended December 31,
1995 and financial highlights of the Class I units for the years ended December
31, 1992 through 1995 were audited by other auditors whose report dated January
30, 1996 expressed an unqualified opinion on such financial statement and
financial highlights.
We conducted our audit 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 the securities owned at December 31, 1996 by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. 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 audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of SIFE Trust Fund at
December 31, 1996, the results of its operations, the changes in its net assets,
and its financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
San Francisco, California
February 5, 1997
B-15
<PAGE>
SIFE TRUST FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
ASSETS:
Investments in securities, at market (cost $458,188,046) $ 679,384,669
Repurchase agreement 105,874,000
Cash 1,354,392
Receivables for:
Dividends 1,762,937
Investment securities sold 170,500
-------------
Total assets 788,546,498
-------------
LIABILITIES:
Payables for:
SIFE (the "Management Company") 866,717
Investment securities purchased 296,590
-------------
Total liabilities 1,163,307
-------------
NET ASSETS $ 787,383,191
-------------
-------------
CLASS I:
Net asset value per investment unit
($769,122,121 divided by 158,142,752 units outstanding) $ 4.86
-------------
-------------
Maximum offering price per unit (100/95 of $4.86) $ 5.12
-------------
-------------
CLASS II:
Net asset value per investment unit
($18,261,070 divided by 3,754,743 units outstanding) $ 4.86
-------------
-------------
Maximum offering price per unit (100/95 of $4.86) $ 5.12
-------------
-------------
See Notes to Financial Statements.
B-16
<PAGE>
SIFE TRUST FUND
INVESTMENT PORTFOLIO
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
NUMBER
OF MARKET
SHARES VALUE
COMMON STOCKS: 86.3%
BANKS: 66.9%
Ambanc Corp. 5,000 $ 142,500
Amcore Financial, Inc. 43,100 1,152,925
Bank of Boston Corp. 400,000 25,700,000
Bank of New York Co., Inc. 650,000 21,937,500
Bankers Trust New York Corp. 275,000 23,718,750
Barnett Banks, Inc. 360,000 14,805,000
Boatmen's Bancshares, Inc. 150,000 9,675,000
Chase Manhattan Corp. 383,000 34,230,625
Chittenden Corp. 88,125 2,103,984
Citicorp 345,000 35,535,000
City National Corp. 100,000 2,162,500
Colonial BancGroup, Inc. 73,400 2,936,000
Comerica, Inc. 204,600 10,715,925
Community First Bankshares, Inc. 224,713 6,179,594
Compass Bancshares, Inc. 301,500 11,984,625
Corestates Financial Corp. 150,000 7,781,250
Crestar Financial Corp. 200,000 14,875,000
CU Bancorp 173,400 2,015,775
Cullen Frost Bankers, Inc. 138,400 4,601,800
First American Corp. of Tennessee 100,000 5,762,500
First Bank System, Inc. 150,000 10,237,500
First Chicago Corp. 336,000 18,060,000
First Commerce Corp 196,000 7,619,500
First Empire State Corp. 33,000 9,504,000
First Hawaiian, Inc. 74,800 2,618,000
First Tennessee National Corp. 408,400 15,315,000
George Mason Bankshares, Inc. 108,585 2,470,309
Hibernia Corp. 300,000 3,975,000
Imperial Bancorp* 275,400 6,609,600
Independent Bank Corp. MA 582,500 6,116,250
Mark Twain Bancshares, Inc. 60,000 2,925,000
Mellon Bank Corp. 115,000 8,165,000
Mercantile Bancorporation, Inc. 200,000 10,275,000
Morgan, J.P. & Co., Inc. 390,000 38,073,750
National City Corp. 500,000 22,437,500
NationsBank Corp. 20,307 1,984,982
Northern Trust Corp. 135,800 4,939,725
Norwest Corp. 225,000 9,787,518
Old Kent Financial Corp. 3,200 152,800
See Notes to Financial Statements. (Continued)
B-17
<PAGE>
SIFE TRUST FUND
INVESTMENT PORTFOLIO
DECEMBER 31, 1996 NUMBER MARKET
OF SHARES VALUE
PNC Financial Corp. 250,000 $ 9,406,250
Regions Financial Corp. 60,000 3,101,250
Republic New York Corp. 312,500 25,507,813
SouthTrust Corp. 172,200 6,005,475
Southern National Corp. 125,000 4,531,250
State Street Boston Corp. 210,000 13,571,250
Sterling Bancshares, Inc. (TX) 145,000 2,736,875
Summit Bancorp 148,500 6,496,875
Summit Bancshares, Inc. Texas 150,000 3,375,000
Union Planters Corp. 300,000 11,700,000
U.S. Bancorp of Oregon 100,000 4,493,750
Ventura County National Bancorp* 85,000 456,875
Wachovia Corp. 200,000 11,300,000
Westamerica Bancorporation 90,000 5,197,500
------------
527,162,850
------------
THRIFTS: 1.1%
Charter One Financial, Inc. 127,050 5,336,100
North Side Savings Bank 24,000 1,308,000
Virginia First Financial Corp. 162,500 2,071,875
------------
8,715,975
------------
CONSUMER FINANCIAL SERVICES: 2.8%
AFLAC, Inc. 100,000 4,275,000
Capital One Financial Corp. 65,000 2,340,000
Federal National Mortgage Association 300,000 11,325,000
Green Tree Financial 100,000 3,862,500
------------
21,802,500
------------
BROKERAGES: 4.6%
Alex Brown, Inc. 50,000 3,625,000
Dean Witter Discover & Co. 50,000 3,312,500
Edwards, A. G., Inc. 100,000 3,362,500
Inter Regional Financial Group, Inc. 105,000 3,701,250
Legg Mason, Inc. 80,000 3,080,000
Lehman Brothers Holding, Inc. 100,000 3,137,500
McDonald & Co. 76,200 2,647,950
Morgan Keegan, Inc. 157,400 2,695,475
Paine Webber Group, Inc. 125,000 3,515,625
Raymond James Financial, Inc. 134,300 4,045,788
Schwab, Charles Corp. 100,000 3,200,000
------------
36,323,588
------------
See Notes to Financial Statements. (Continued)
B-18
<PAGE>
SIFE TRUST FUND
INVESTMENT PORTFOLIO
DECEMBER 31, 1996 NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
TECHNOLOGY: 0.8%
Andrew Corp.* 12,100 $ 642,056
Intel Corp. 30,000 3,928,125
Microsoft 17,000 1,404,625
-----------
5,974,806
-----------
PHARMACEUTICALS AND HEALTHCARE: 3.4%
Abbott Laboratories 140,000 7,105,000
Johnson & Johnson 150,000 7,462,500
Pfizer, Inc. 73,700 6,117,100
Schering Plough Corp. 95,100 6,157,725
-----------
26,842,325
-----------
CONSUMER NON-DURABLE PRODUCTS: 6.7%
Airgas, Inc.* 390,000 8,580,000
Cabletron Systems, Inc.* 122,400 4,069,800
Disney, Walt Co. 100,000 6,975,000
DollarGeneral Corp. 130,000 4,160,000
Elf Aquitane 20,000 905,000
Gillette Co. 100,000 7,775,000
Harley-Davidson, Inc. 117,900 5,511,825
Proctor & Gamble Co. 50,000 5,381,250
Reuters Holdings Plc 11,500 879,750
Sealed Air Corp.* 200,000 8,325,000
-----------
52,562,625
-----------
TOTAL COMMON STOCKS (COST $458,188,046) 679,384,669
-----------
REPURCHASE AGREEMENT: 13.4%
State Street Bank and Trust Company, 4.9%, due 01/02/97,
Collateral: U.S. government obligations, market value of $107,995,500
105,874,000
-----------
TOTAL INVESTMENTS (COST $564,062,046): 99.7% 785,258,669
OTHER ASSETS LESS LIABILITIES, NET: 0.3% 2,124,522
-----------
NET ASSETS: 100% $787,383,191
-----------
-----------
(Concluded)
*Non-income producing
See Notes to Financial Statements.
B-19
<PAGE>
SIFE TRUST FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Income:
Dividends $ 16,726,463
Interest 4,267,833
Securities lending 73,799
Miscellaneous 56,684
---------------
Total investment income 21,124,779
---------------
EXPENSES:
Management fees 6,637,453
Investment advisory fees 969,652
Officers' and administrative salaries 219,266
Accounting and administrative services 109,283
Office supplies and expenses 121,900
Directors' fees 75,000
Legal and auditing fees and expenses 73,285
Trustee's fee 40,856
Other operating expenses 57,290
Distribution fee - Class II 12,925
---------------
Total expenses 8,316,910
---------------
Net investment income 12,807,869
---------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain 116,859,030
Loss on expiration of option contracts (84,118)
Net increase in unrealized appreciation 39,853,498
---------------
Net gain on investments 156,628,410
---------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 169,436,279
---------------
---------------
See Notes to Financial Statements.
B-20
<PAGE>
SIFE TRUST FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
1996 1995
INCREASE IN NET ASSETS:
<S> <C> <C>
Operations:
Net investment income $ 12,807,869 $ 11,580,866
Net realized gain from investment transactions 116,774,912 102,916,571
Net increase in unrealized appreciation of investments 39,853,498 88,509,822
------------ ------------
Net increase in net assets resulting from operations 169,436,279 203,007,259
------------ ------------
Distributions paid to investors:
From net investment income:
Class I (12,534,678) (11,818,969)
Class II (139,373) -
From net realized gain on investments:
Class I (122,196,058) (74,755,496)
Class II (2,364,853) -
------------ ------------
Total distributions (137,234,962) (86,574,465)
------------ ------------
Participating agreement transactions:
Proceeds from investor purchases:
Class I 55,568,657 47,981,061
Class II 17,188,608 -
Proceeds from reinvestment of distributions from net investment
income and net realized gain on investments:
Class I 134,730,736 86,574,465
Class II 2,504,226 -
Cost of units repurchased from investors:
Class I (68,443,396) (47,030,017)
Class II (514,559) -
------------ ------------
Net increase in net assets resulting from
participating agreement transactions 141,034,272 87,525,509
------------ ------------
Total increase in net assets 173,235,589 203,958,303
NET ASSETS:
Beginning of year 614,147,602 410,189,299
------------ ------------
End of year $ 787,383,191 $ 614,147,602
------------ ------------
------------ ------------
NET ASSETS CONSIST OF:
Units of beneficial interests $ 545,199,343 $ 404,165,071
Undistributed (over-distributed) net investment income 48,306 (85,512)
Undistributed net realized gain on sale of
investment securities, net of disallowed loss from wash sales 20,938,919 28,724,918
Unrealized appreciation of investments securities 221,196,623 181,343,125
------------ ------------
TOTAL $ 787,383,191 $ 614,147,602
------------ ------------
------------ ------------
See Notes to Financial Statements.
</TABLE>
B-21
<PAGE>
SIFE TRUST FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 State Street Bank and Trust Company (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 reinvestment of
distributions 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 investments,
reinvestment of distributions from net investment income and realized
capital gains, as well as redemptions) 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.
The Trust Fund offers two classes of investment units, Class I and Class
II. Class I units are offered to accounts existing on or prior to April
30, 1996. Class I units are also available to directors, employees and
registered representatives of the Management Company and the Trust Fund, as
well as to broker-dealers and immediate family members of any of the
foregoing. The offering of Class II units began May 1, 1996. Class II
units are similar in all respects to Class I units, except that Class II
units are subject to a charge against fund assets that is used to pay
certain distribution expenses, in accordance with Rule 12b-1 under the
Investment Company Act of 1940. Realized and unrealized gains or losses
and investment income, net of management fees, are allocated daily to each
class of investment units based upon the relative proportion of net assets
of each class.
The following summarizes the significant accounting policies consistently
followed by the Trust Fund in the preparation of its financial statements.
The policies are in conformity with generally accepted accounting
principles for investment companies.
SECURITIES 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) 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 on settlement date and is recorded daily on
the accrual basis. Dividend income is recorded on the ex-dividend date.
B-22
<PAGE>
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 and regulations thereunder applicable to
regulated investment companies and to distribute all of 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 equivalent
liability. The amount of the liability is subsequently "marked-to-market"
to reflect the current market value of the option written. The current
market value of a written option is the last sale price or in 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 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 cost basis of the underlying
security 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 Trustee
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.
ESTIMATES AND ASSUMPTIONS - The preparation of the financial statements in
accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
B-23
<PAGE>
reported amounts of assets and liabilities at the date of the financial
statements and the amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
2. AFFILIATED PARTY TRANSACTIONS - AGREEMENTS WITH SIFE (THE "MANAGEMENT
COMPANY")
State Street Bank and Trust Company as Trustee for the Trust Fund has the
following responsibilities: (a) custodian of the assets, (b) transfer agent
and (c) 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. Effective April 1, 1996, all expenses related to the
operation of the Trust Fund are now the responsibility of the Management
Company (see "Investment Advisory Agreement" below). Under the previous
terms, certain Trust Fund expenses were paid by the Management Company and
reimbursed by the Trust Fund monthly. During the three month period ended
March 31, 1996, the Management Company was reimbursed $696,880 for such
services and reimbursement of expenses.
INVESTMENT ADVISORY AGREEMENT - The Trust Fund has entered into an
investment advisory agreement with the Management Company, which was
amended on April 1, 1996. The amendment to the Investment Advisory
Agreement was approved by the Trust Fund's investors at the investors'
annual meeting held on April 1, 1996. Under the previous terms, the Trust
Fund paid an investment 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. During the three month period ended March 31,1996, investment
advisory fees paid by the Trust Fund totaled $969,652.
Under the terms of the Investment Advisory Agreement and the Restated Trust
Agreement, as amended, the Management Company provides investment advice, a
broad range of administrative, regulatory and other services for the Trust
Fund and the investors, and receives an all-inclusive management fee of
1.25% of average daily net assets, per annum. The all-inclusive management
fee eliminates the expense reimbursement feature mentioned above. During
the nine month period ended December 31, 1996, management fees paid by the
Trust Fund totaled $6,637,453.
DISTRIBUTION PLAN AND UNDERWRITING AGREEMENT - Under the terms of a
distribution plan pursuant to Rule 12b-1 of the Investment Company Act of
1940, which became effective for Class II units on May 1, 1996, the Trust
Fund will reimburse the Management Company in an amount equal to 0.25% per
annum of the average daily net assets of the Class II units for costs
incurred in the promotion, offering and marketing of the Class II units.
Fees incurred by the Trust Fund under the distribution plan totaled $12,925
for the eight month period ended December 31, 1996.
In its capacity as principal underwriter for the Trust Fund, the Management
Company receives commissions of 2.5% to 5.0% on sales of the Trust Fund's
Class I and Class II units. No sales charge is assessed on purchases of
$1,000,000 or more, purchases by directors, employees and registered
representatives of the Management Company and the Trust Fund, as well as
broker-dealers and immediate family members of any of the foregoing. All
sales and distribution costs are incurred and paid by the Management
Company. Commissions are deducted from the gross proceeds received from
the sale of
B-24
<PAGE>
investment units, and as such are not expenses of the Trust Fund.
Commissions retained by the Management Company totaled $2,178,040 for the
year ended December 31, 1996.
Certain officers and directors of the Trust Fund are also officers and
directors of the Management Company. On December 31, 1996, the Management
Company owned 483,512 Class I units of the Trust Fund.
3. UNREALIZED APPRECIATION OF INVESTMENTS
On December 31, 1996, the net unrealized appreciation for all securities
was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost $ 222,145,865
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value (949,242)
--------------
Net unrealized appreciation $ 221,196,623
--------------
--------------
The tax cost basis used in the above calculation is the same as that used
for financial statement purposes.
4. PARTICIPATING AGREEMENT TRANSACTIONS
(MEASURED IN INVESTMENT UNITS)
CLASS I - Transactions in participating agreements for the years ended
December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
UNITS AMOUNT
-------------------------------------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sold to investors 11,408,711 10,673,280 $55,568,657 $47,981,061
Issued as reinvestment of
distributions 26,405,051 18,821,723 134,730,736 86,574,465
Repurchased from investors (13,793,626) (10,768,712) (68,443,396) (47,030,017)
----------- ----------- ----------- -----------
Net change 24,020,136 18,726,291 $121,855,997 $87,525,509
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
CLASS II - Transactions in participating agreements for the period May 1, 1996
(commencement of operations) to December 31, 1996 were as follows:
1996
------------------------------
UNITS AMOUNTS
Sold to investors 3,363,648 $17,188,608
Issued as reinvestment of distributions 491,508 2,504,226
Repurchased from investors (100,413) (514,559)
------------ --------------
Net change 3,754,743 $ 19,178,275
------------ --------------
------------ --------------
B-25
<PAGE>
5. SECURITIES 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 $73,799 for the year ended
December 31, 1996.
The Trust Fund receives 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. As of December 31, 1996, there were
securities on loan having a value of $14,475,060.
6. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, other than U.S. Treasury
obligations, were $951,964,999 and $948,808,495, respectively for the year
ended December 31, 1996. Purchases and sales of U.S. Treasury obligations
were $124,231,983 and $179,782,033, respectively for the year ended
December 31, 1996.
7. CONCENTRATION OF CREDIT RISK
On December 31, 1996, approximately $535,878,825 (68.1% of net assets) of
the Trust Fund's investments were in equities of banks and thrifts.
8. FINANCIAL INSTRUMENTS
The Trust Fund may trade in financial instruments with off-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 as of
December 31, 1996.
******
B-26
<PAGE>
SIFE TRUST FUND
FINANCIAL HIGHLIGHTS
YEARS ENDED DECEMBER 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS I CLASS II
--------------------------------------------- --------
1996 1995 1994 1993 1992 1996**
<S> <C> <C> <C> <C> <C> <C>
PER UNIT DATA
(For one unit outstanding throughout each period):
Net asset value, beginning of period $4.58 $3.55 $3.83 $3.68 $2.90 $4.73
------- ------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.09 0.10 0.09 0.07 0.06 0.07
Net realized and unrealized gain (loss) on investments 1.16 1.68 (0.13) 0.29 0.92 1.01
------- ------ ------ ------ ------ ------
Total from investment operations
Less distributions to investors 1.25 1.78 (0.04) 0.36 0.98 1.08
------- ------ ------ ------ ------ ------
Dividends from net investment income (0.09) (0.10) (0.09) (0.07) (0.06) (0.07)
Distributions from capital gains (0.88) (0.65) (0.15) (0.14) (0.14) (0.88)
------- ------ ------ ------ ------ ------
Total distributions (0.97) (0.75) (0.24) (0.21) (0.20) (0.95)
------- ------ ------ ------ ------ ------
Net asset value, end of period $4.86 $4.58 $3.55 $3.83 $3.68 $4.86
------- ------ ------ ------ ------ ------
------- ------ ------ ------ ------ ------
TOTAL RETURN *** 27.4% 49.9% (1.5)% 9.3% 33.9% 22.8%
------- ------ ------ ------ ------ ------
------- ------ ------ ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in millions) $ 769 $ 614 $ 410 $ 414 $ 345 $ 18
------- ------ ------ ------ ------ ------
------- ------ ------ ------ ------ ------
Ratios to average net assets:
Expenses 1.20% 1.03% 0.94% 1.02% 0.99% 1.48%
------- ------ ------ ------ ------ ------
------- ------ ------ ------ ------ ------
Net investment income 1.82% 2.25% 2.27% 1.69% 1.73% 1.77%
------- ------ ------ ------ ------ ------
------- ------ ------ ------ ------ ------
Portfolio turnover rate 140.20% 93.5% 25.2% 28.7% 33.4% 95.76%
------- ------ ------ ------ ------ ------
------- ------ ------ ------ ------ ------
Average commission rate* $ 0.03 n/a n/a n/a n/a $ 0.03
------- ------
------- ------
</TABLE>
* Average commission rate is calculated for the period beginning on or
after January 1, 1996.
** For the period May 1, 1996 (commencement of operations) to December 31,
1996.
***Sales loads are not reflected in total return.
See Notes to Financial Statements
B-27
<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, 1987 through 1996.
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, 1996
3. Statement of Operations for the year ended December 31, 1996
4. Statement of Changes in Net Assets for the years ended December 31,
1992 and December 31, 1995
5. Investment Portfolio as of December 31, 1996
6. Notes to Financial Statements as of December 31, 1996
7. Financial Highlights for years ended December 31, 1992 through 1996
(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 reappointment of successor
trustee (11)
n. Copy of Agreement and Declaration of Trust, dated February 28,
1997
o. Copy of Certificate of Trust
2. By-laws of SIFE Trust Fund, a Delaware Business Trust
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(10)
c. Assignment Agreement with respect to Investment Advisory
Agreement, dated as of April 30, 1997
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)
C-1
<PAGE>
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)
j. Copy of Underwriting Agreement, dated as of April 30, 1997
7. Inapplicable
8. a. Custodian Contract between SIFE Trust Fund and State Street
Bank & Trust Co. (11)
b. Retirement Plans Service Contract among SIFE, Inc., SIFE Trust
Fund and State Street Bank & Trust Co. (11)
c. Assignment & Assumption Agreement
9. Inapplicable
10. Opinion and Consent of Counsel
11. Consent of Independent Accountants
a. Consent of Deloitte & Touche LLP
b. Consent of Timpson Garcia
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 (11)
c. Copy of State Street Bank and Trust Company's 403(b) Account
Package (11)
d. Copy of provisions governing State Street Bank and Trust
Company's IRA accounts (11)
15. Copies of Rule 12b-1 Plans
a. Rule 12b-1 Plan of Distribution and Rule 12b-1 Agreement for
Class A-II Shares (10)
b. Rule 12b-1 Plan of Distribution and Rule 12b-1 Agreement for
Class B Shares
c. Rule 12b-1 Plan of Distribution and Rule 12b-1 Agreement for
Class C Shares
16. Schedule of Performance Advertising Quotations
17. Financial Data Schedules(12)
18. Other Exhibits:
a. Power of Attorney
b. Rule 18f-3 Plan (11)
c. Restated Rule 18f-3 Plan
d. Agreement and Plan of Reorganization (13)
- ----------------------
(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 Post-Effective
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 Post-Effective
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 Post-Effective
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 Post-Effective
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 Post-Effective
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 Post-Effective
Amendment No. 13, File No. 2-17277, and incorporated herein by reference.
C-2
<PAGE>
(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 Post-Effective
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 Post-Effective
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 Post-Effective
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 April 19, 1996, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 39 and
Registration Statement under Investment Company Act of 1940 Post-Effective
Amendment No. 18, File No. 2-17277, and incorporated herein by reference.
(12) Filed April 30, 1997, as an exhibit to Registrant's Form NSAR for the
period ended December 31, 1996, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, and incorporated herein by
reference.
(13) Filed February 28, 1997, as Exhibit A to Registrant's Definitive Proxy
Statement pursuant to Section 14(a) 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
TITLE OF CLASS NUMBER OF RECORD HOLDERS (MARCH 31, 1997)
-------------- -----------------------------------------
Class I 12,672 investors (20,153 accounts)
Class II 2,350 investors (2,989 accounts)
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
C-3
<PAGE>
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.
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, 100 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(a) under the Securities Act of 1933,
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 25th day of April, 1997.
SIFE Trust Fund
By: Bruce W. Woods /s/
------------------------------
Bruce W. Woods
President & Chief Executive Officer
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
--------- ----- ----
BRUCE W. WOODS /s/ Director; President & Chief April 25,
------------------ Executive Officer of the Trust 1997
(Bruce W. Woods) Fund (Principal Executive Officer
& Principal Accounting Officer)
JACK GEE /s/ Chief Financial Officer of the April 25,
------------ Trust Fund (Principal Accounting 1997
(Jack Gee) Officer)
HAIG G. MARDIKIAN /s/ Director; Chairman of the Board *
---------------------
(Haig G. Mardikian)
WALTER S. NEWMAN /s/ Director; Vice Chairman of the Board *
--------------------
(Walter S. Newman)
CHARLES W. FROEHLICH, JR. /s/ Director; Secretary *
----------------------------
(Charles W. Froehlich, Jr.)
NEIL L. DIVER /s/ Director *
-----------------
(Neil L. Diver)
DIANE HOWARD BELDING /s/ Director *
------------------------
(Diane Howard Belding)
JOHN A. MEANY /s/ Director *
-----------------
(John A. Meany)
* By: BRUCE W. WOODS/S/ Dated: APRIL 25, 1997
---------------------------- --------------------------
Bruce W. Woods, Attorney-in-Fact
C-5
<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 reappointment of successor
trustee (11)
n. Copy of Agreement and Declaration of Trust, dated February 28,
1997
o. Copy of Certificate of Trust
2. By-laws of SIFE Trust Fund, a Delaware Business Trust
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(10)
c. Assignment Agreement with respect to Investment Advisory
Agreement, dated as of April 30, 1997
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)
j. Copy of Underwriting Agreement, dated as of April 30, 1997
7. Inapplicable
8. a. Custodian Contract between SIFE Trust Fund and State Street
Bank & Trust Co. (11)
b. Retirement Plans Service Contract among SIFE, Inc., SIFE Trust
Fund and State Street
Bank & Trust Co. (11)
c. Assignment & Assumption Agreement
9. Inapplicable
10. Opinion and Consent of Counsel
11. Consent of Independent Accountants
a. Consent of Deloitte & Touche LLP
b. Consent of Timpson Garcia
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 (11)
<PAGE>
c. Copy of State Street Bank and Trust Company's 403(b) Account
Package (11)
d. Copy of provisions governing State Street Bank and Trust
Company's IRA accounts(11)
15. Copies of Rule 12b-1 Plans
a. Rule 12b-1 Plan of Distribution and Rule 12b-1 Agreement for
Class A-II Shares (10)
b. Rule 12b-1 Plan of Distribution and Rule 12b-1 Agreement for
Class B Shares
c. Rule 12b-1 Plan of Distribution and Rule 12b-1 Agreement for
Class C Shares
16. Schedule of Performance Advertising Quotations
17. Financial Data Schedules(12)
18. Other Exhibits:
a. Power of Attorney
b. Rule 18f-3 Plan (11)
c. Restated Rule 18f-3 Plan
d. Agreement and Plan of Reorganization (13)
- ------------------------
(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 Post-
Effective 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 Post-
Effective 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
Post-Effective 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 Post-
Effective 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 Post-
Effective 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 Post-
Effective 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 Post-
Effective 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 Post-
Effective 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 Post-
Effective 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 April 19, 1996, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 39 and
Registration Statement under Investment Company Act of 1940 Post-
Effective Amendment No. 18, File No. 2-17277, and incorporated herein by
reference.
(12) Filed February 28, 1997, as an exhibit to Registrant's Form NSAR for the
period ended December 31, 1996, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, and incorporated herein by
reference.
(13) Filed February 28, 1997, as Exhibit A to Registrant's Definitive Proxy
Statement pursuant to Section 14(a) of the Securities Exchange Act of
1934, as amended, and incorporated herein by reference.
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
of
SIFE TRUST FUND
a Delaware Business Trust
WHEREAS, THIS AGREEMENT AND DECLARATION OF TRUST is made and entered
into as of the date set forth below by the sole Trustee (the "Sole Trustee")
named hereunder for the purpose of forming a Delaware business trust in
accordance with the provisions hereinafter set forth,
NOW, THEREFORE, the Sole Trustee hereby directs that a Certificate of
Trust, in the form attached hereto as Exhibit A, be filed with Office of the
Secretary of State of the State of Delaware.
ARTICLE I
Definitions
Whenever used herein, unless otherwise required by the context or
specifically provided, the following terms shall have the following meanings:
(a) "By-Laws" shall mean the By-Laws of the Trust Fund as amended from
time to time and incorporated herein by reference.
(b) "Class" means a Class of Shares established and designated under or in
accordance with the provisions of Article III.
(c) "Declaration of Trust" means this Agreement and Declaration of Trust,
as it may be amended from time to time.
(d) "Investment Adviser" means a party furnishing services to the Trust
Fund pursuant to any contract described in Article IV, Section 7(a)
hereof.
(e) "Investment Company Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from time to
time, and the terms "Commission," "Interested Person" and "Principal
Underwriter" shall have the meanings given them in the Investment
Company Act.
(f) "Series" refers to each Series of Shares established and designated
under or in accordance with the provisions of Article III.
(g) "Shareholder" means a record owner of outstanding Shares, and
"Shareholders" shall mean the record owners of all Shares of the Trust
Fund, a particular Series or a specific Class of Shares, in each case
as the context shall require.
<PAGE>
(h) "Shares" means the shares of beneficial interest into which the
beneficial interest in the Trust shall be divided from time to time,
and includes fractional, as well as whole, shares, and if the Shares
of any Series shall be divided into Classes, "Shares" shall mean the
Shares belonging to a particular Class (as the context may require)
(i) "Trust Fund" refers to the SIFE Trust Fund, a Delaware business trust
established pursuant to this Declaration of Trust, as it may be
amended and restated from time to time hereafter.
(j) "Trust Property" means any and all property, real or personal,tangible
or intangible, which is owned or held by or for the account
of the Trust Fund.
(k) "Trustees" shall mean each of (i) the Sole Trustee named below, for
so longs he shall continue in office in accordance with the terms and
conditions of this Declaration of Trust, (ii) the Board of Trustees of
the Trust Fund, and each of them so long as they shall continue in
office, and (iii) all other persons who may from time to time be duly
elected or appointed to serve on the Board of Trustees, and reference
herein to a "Trustee" or "the Trustees" shall refer to such persons in
their capacity as Trustees hereunder.
(l) "Voting Interests" shall mean (i) the number of Shares outstanding
times net asset value per unit where two or more Series or Classes of
Shares of the Trust Fund are voted in the aggregate or (ii) the number
of Shares of each Series or Class where Shareholders vote by separate
Series or Classes.
ARTICLE II
Organization
SECTION 1. NAME. This trust shall be known as "SIFE Trust Fund,"
and the Board of Trustees of SIFE Trust Fund shall conduct the business of
the Trust Fund under that name or any other name as may from time to time be
determined.
SECTION 2. PURPOSE. The purpose of the Trust Fund is to conduct,
operate and carry on the business of an open-ended management investment
company registered pursuant to the relevant provisions of the Investment
Company Act through one or more Series investing primarily in securities.
The Trustees will hold IN TRUST all cash, securities and other assets which
the Trust Fund now possesses or may hereafter acquire from time to time in
any manner and manage and dispose of the same upon the following terms and
conditions for the pro rata benefit of the holders of Shares in this Trust
Fund.
SECTION 3. OFFICE. The office of the Trust Fund shall be at 490
North Wiget Lane, Walnut Creek, California, or at such other address as the
Trustees may designate by notice to the Shareholders.
2
<PAGE>
ARTICLE III
Shares
SECTION 1. DIVISION OF BENEFICIAL INTEREST. The beneficial interest
in the Trust Fund shall at all times be divided into an unlimited number of
Shares, with no par value. The Board of Trustees may authorize the division
of Shares into separate Series and the division of Series into separate
Classes of Shares. Different Series and Classes shall be authorized,
established and designated, and the variations in the relative rights and
preferences as between different Series and Classes shall be fixed and
determined, by the Board of Trustees without any action required to be taken
by the Shareholders.
Subject to the provisions of Section 6 of this Article III, each Share
shall have voting rights as provided in Article V hereof, and holders of
Shares of any Series shall be entitled to receive dividends and distributions
when, if and as declared with respect thereto in the manner provided in
Article VI, Section 1 hereof. All dividends and distributions shall be made
ratably among all Shareholders of a particular Class of a particular Series
or, if a particular Series is not divided into Classes, among all
Shareholders of such Series, from the assets held with respect to such Series
or Class according to the number of Shares of such Series or Class held of
record by such Shareholders on the record date for any dividend or
distribution or on the date of termination of such Series or Class, as the
case may be. Shareholders shall have no preemptive or other right to
subscribe for any additional Shares or other securities which may be issued
by the Trust Fund or any Series or Class thereof, although the Trustees may
provide for the automatic conversion of one Class of Shares of a Series into
another Class of Shares of the same Series upon the occurrence of certain
specific events. The Trustees may from time to time divide or combine the
Shares of any particular Series or Class into a greater or lesser number of
Shares of that Series or Class without thereby materially changing the
proportionate beneficial interest of the Shares of that Series or Class in
the assets held with respect to that Series or Class or materially affecting
the rights of the Shares of any other Series or Class.
SECTION 2. OWNERSHIP OF SHARES. No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
determine from time to time. The ownership of Shares shall be recorded on
the books of the Trust Fund or a transfer or similar agent for the Trust
Fund, which books shall be maintained separately for the Shares of each
Series or Class.
The Trustees may make such rules as they consider appropriate for the
transfer of Shares of each Series or Class and similar matters. The record
books of the Trust Fund as kept by the Trust Fund or any transfer or similar
agent, as the case may be, shall be conclusive as to the identity of the
Shareholders of each Series or Class and as to the number of Shares of each
Series or Class held from time to time by each Shareholder.
3
<PAGE>
SECTION 3. INVESTMENTS IN THE TRUST FUND. Investments may be accepted
by the Trust Fund from such persons, at such times, on such terms, and for
such consideration as the Trustees from time to time may authorize.
SECTION 4. STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY.
Shares shall be deemed to be personal property giving only the rights
provided in this instrument. Every Shareholder, by virtue of having become a
Shareholder, shall be held to have expressly assented and agreed to the terms
hereof and to have become a party hereto. The death of a Shareholder during
the existence of the Trust Fund shall not operate to terminate the Trust
Fund, nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere against the Trust
Fund, the Board of Trustees or any individual Trustee, but entitles such
representative only to the rights of a deceased Shareholder under this
Declaration of Trust. Ownership of Shares shall not entitle a Shareholder to
any title in or to the whole or any part of the Trust Property or any right
to call for a partition or division of the same or for an accounting, nor
shall the ownership of Shares constitute the Shareholders as partners.
Neither the Trust Fund nor the Board of Trustees, nor any individual Trustee,
officer, employee or agent of the Trust Fund, shall have any power to bind
personally any Shareholder, nor, except as specifically provided herein, to
call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally
agree to pay.
SECTION 5. POWER OF BOARD OF TRUSTEES TO CHANGE PROVISIONS RELATING
TO SHARES. Notwithstanding any other provision of this Declaration of Trust
and without limiting the amendatory power of the Board of Trustees, the
Trustees shall have the power to amend this Declaration of Trust, at any time
and from time to time, in such manner as the Board of Trustees may determine
in their sole discretion, without the need for Shareholder action, so as to
add to, delete, replace or otherwise modify any provision contained in this
Declaration of Trust relating to the Shares, provided that before adopting
any such amendment without Shareholder approval the Board of Trustees shall
determine that it is consistent with the fair and equitable treatment of all
Shareholders or that Shareholder approval is not otherwise required by the
Investment Company Act or other applicable law. If Shares have been issued,
Shareholder approval shall be required to adopt any amendments to this
Declaration of Trust that would adversely affect to a material degree the
rights and preferences of the Shares of any Series or Class of any Series or
to increase or decrease the par value of the Shares of any Series or Class of
any Series.
Subject to the foregoing Paragraph, the Board of Trustees may amend
this Declaration of Trust to amend any of the provisions set forth in
paragraphs (a) through (i) of Section 6 of this Article III.
SECTION 6. ESTABLISHMENT AND DESIGNATION OF SERIES AND CLASSES. The
establishment and designation of any Series or Class of Shares shall be
effective upon the adoption by a majority of the Board of Trustees of a
resolution that sets forth such
4
<PAGE>
establishment and designation and the relative rights and preferences of such
Series or Class. Each such resolution shall be incorporated herein by
reference upon such adoption.
Shares of each Series or Class established pursuant to this Section 6,
unless otherwise provided in the resolution establishing such Series, shall
have the following relative rights and preferences:
(a) ASSETS HELD WITH RESPECT TO A PARTICULAR SERIES. All consideration
received by the Trust Fund for the issuance or sale of Shares of a particular
Series, together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits, and proceeds thereof from whatever
source derived, including, without limitation, any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same may
be, shall irrevocably be held with respect to that Series for all purposes,
subject only to the rights of creditors respecting such Series, and shall be
so recorded upon the books of account of the Trust Fund. Such consideration,
assets, income, earnings, profits and proceeds thereof, from whatever source
derived, including, without limitation, any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds, in whatever form the same may be, are
herein referred to as "assets held with respect to" that Series. In the
event that there are any assets, income, earnings, profits and proceeds
thereof, funds or payments which are not readily identifiable as assets held
with respect to any particular Series (collectively "General Assets"), the
Trustees shall allocate such General Assets to, between or among any one or
more of the Series in such manner and on such basis as the Trustees, in
their sole discretion, shall deem fair and equitable, and any General Asset
so allocated to a particular Series shall be held with respect to that
Series. Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders and creditors of all Series for all purposes.
(b) LIABILITIES HELD WITH RESPECT TO A PARTICULAR SERIES OR CLASS. The
assets of the Trust Fund held with respect to each particular Series shall be
charged with all liabilities, expenses, costs, charges and reserves
attributable to that Series. Specific Classes within each Series shall be
charged with the liabilities, expenses, costs, charges and reserves
attributable to that Class. Any general liabilities of the Trust Fund which
are not readily identifiable as being held with respect to any particular
Series or, within a Series, to any particular Class shall be allocated and
charged by the Trustees to and among any one or more of the Series or
Classes in such manner and on such basis as the Trustees in their sole
discretion shall deem fair and equitable. Each allocation of liabilities,
expenses, costs, charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders and creditors of all Series and Classes for all
purposes. All persons who have extended credit, or who have a claim or
contract, which has been allocated to any particular Series, shall look, and
shall be required by contract to look exclusively, to the assets of that
particular Series for payment of such credit, claim, or contract. In the
absence of an express contractual agreement so limiting the claims of
5
<PAGE>
such creditors, claimants and contract providers, each creditor, claimant and
contract provider will be deemed nevertheless to have impliedly agreed to
such limitation unless an express provision to the contrary has been
incorporated in the written contract or other document establishing the
claimant relationship.
(c) DIVIDENDS, DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES.
Notwithstanding any other provision of this Declaration of Trust, including,
without limitation, Article VI, no dividend or distribution including,
without limitation, any distribution paid upon termination of the Trust Fund
or of any Series or Class with respect to, nor any redemption or repurchase
of, the Shares of any Series or Class shall be effected by the Trust Fund
other than from the assets held with respect to such Series or Class, nor,
except as specifically provided in Section 7 of this Article III, shall any
Shareholder of any particular Series or Class otherwise have any right or
claim against the assets held with respect to any other Series or Class
except to the extent that such Shareholder has such a right or claim
hereunder as a Shareholder of such other Series or Class. The Trustees shall
have full discretion, to the extent not inconsistent with the Investment
Company Act, to determine which items shall be treated as income and which
items as capital, and each such determination and allocation shall be
conclusive and binding upon the Shareholders.
(d) VOTING. All Shares of the Trust Fund entitled to vote on a matter
shall vote separately by Series (and, if applicable, by Class), that is, the
Shareholders of each Series or Class shall have the right to vote on any
matter set forth in Article V, Section 2 hereof, as if each respective Series
or Class were a separate company. There are, however, two exceptions to
voting by separate Series or Classes: (1) if the Investment Company Act
requires all Shares of the Trust Fund to be voted in the aggregate without
differentiation between separate Series or Classes, then all of the Trust
Fund's Shares shall be entitled to vote based on the dollar value of their
Shares as described below in Article V, Section 1; and (2) if any matter
affects only the interests of some but not all Series or Classes, then only
the Shareholders of such affected Series or Classes shall be entitled to vote
on the matter.
(e) EQUALITY. All Shares of each particular Series shall represent an
equal proportionate interest in the assets held with respect to that Series
(subject to the liabilities held with respect to particular Classes within
that Series and such rights and preferences as may have been established and
designated with respect to Classes of Shares within such Series), and, except
for rights and preferences among Classes, each Share of any particular Series
shall be equal to each other Share of that Series.
(f) FRACTIONS. Any fractional Share of a Series or Class shall carry
proportionately all the rights and obligations of a whole Share of that
Series or Class, including rights with respect to voting, receipt of
dividends and distributions, redemption of Shares and termination of the
Trust Fund.
6
<PAGE>
(g) EXCHANGE PRIVILEGE. The Trustees shall have the authority to
provide that the holders of Shares of any Series or Class shall have the
right to exchange their Shares for Shares of one or more other Series or
Class in accordance with such requirements and procedures as may be
established by the Trustees.
(h) COMBINATION OF SERIES. The Trustees shall have the authority,
without the approval of the Shareholders of any Series unless otherwise
required by applicable law, to combine the assets and liabilities held with
respect to any two or more Series or Classes into assets and liabilities held
with respect to a single Series or Class.
(i) ELIMINATION OF SERIES. If, at any time, there are no Shares
outstanding of any particular Series or Class previously established and
designated, the Trustees may by resolution abolish that Series or Class and
rescind the establishment and designation thereof.
SECTION 7. INDEMNIFICATION OF SHAREHOLDERS. If any Shareholder or
former Shareholder shall be exposed to liability by reason of a claim or
demand relating to his or her being or having been a Shareholder, and not
because of his or her acts or omissions, the Shareholder or former
Shareholder (or his or her heirs, executors, administrators, or other legal
representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled to be held harmless
from and indemnified out of the assets of the applicable Series of the Trust
against all loss and expense arising from such claim or demand.
ARTICLE IV
The Board of Trustees
SECTION 1. NUMBER, ELECTION AND TENURE. The number of Trustees
constituting the Board of Trustees shall be fixed from time to time by a
written instrument signed, or by resolution approved at a duly constituted
meeting, by a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be less than one (1) nor more than fifteen (15).
The Shareholders may also fix the number of Trustees and elect Trustees at
any meeting of Shareholders called by the Board of Trustees for that purpose.
Each Trustee shall serve during the continued lifetime of the Trust Fund
until he or she dies, resigns, is declared bankrupt or incompetent by a court
of appropriate jurisdiction, or is removed, or, if sooner, until the next
meeting of Shareholders called for the purpose of electing Trustees and until
the election and qualification of his or her successor. Any Trustee may
resign at any time by written instrument signed by him or her and delivered
to any officer of the Trust Fund or to a meeting of the Trustees. Such
resignation shall be effective upon receipt unless specified to be effective
at some other time. Except to the extent expressly provided in a written
agreement with the Trust Fund, no Trustee resigning and no Trustee removed
shall have any right to any compensation for any period following his or her
resignation or removal, or any right to damages on account of such removal.
Subject to the applicable provisions of the Investment Company Act, the Board
of Trustees, by action of a majority of the
7
<PAGE>
Trustees at a duly constituted meeting, may fill vacancies in the Board of
Trustees or remove a Trustee with cause. Any Trustee may be removed for any
reason at any meeting of Shareholders by a vote of two-thirds of the Voting
Interests of the Trust Fund. A meeting of Shareholders for the purpose of
electing or removing one or more Trustees may be called (i) by the Board of
Trustees upon their own vote, or (ii) upon the demand of Shareholders owning
10% or more of such Voting Interests.
SECTION 2. EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE. The
death, declination, resignation, retirement, removal, or incapacity of one or
more Trustees, or all of them, shall not operate to annul the trust or to
revoke any existing agency created pursuant to the terms of this Declaration
of Trust. Whenever a vacancy in the Board of Trustees shall occur, until
such vacancy is filled as provided in Article IV, Section l, the Trustees
then in office, regardless of their number, shall have all the powers granted
to the Board of Trustees and shall discharge all the duties imposed upon the
Board of Trustees by this Declaration of Trust. As conclusive evidence of
such vacancy, a written instrument certifying the existence of such vacancy
may be executed by an officer of the Trust Fund or by a majority of the
Trustees. In the event of the death, declination, resignation, retirement,
removal, or incapacity of all the then Trustees within a short period of time
and without the opportunity for at least one Trustee being able to appoint
additional Trustees to fill vacancies, the Trust Fund's Investment Adviser(s)
are empowered to appoint new Trustees subject to the provisions of Section
16(a) of the Investment Company Act.
SECTION 3. POWERS. Subject to the provisions of this Declaration of
Trust, the business of the Trust Fund shall be managed by the Board of
Trustees, and such Trustees shall have all powers necessary or convenient to
carry out that responsibility, including the power to engage in securities
transactions of all kinds on behalf of the Trust Fund. Without limiting the
foregoing, the Trustees may: (a) adopt By-Laws not inconsistent with this
Declaration of Trust providing for the regulation and management of the
affairs of the Trust Fund and may amend and repeal them to the extent that
such By-Laws do not reserve that right to the Shareholders; (b) fill
vacancies in, or remove from, their number, and may elect and remove such
officers and appoint and terminate such agents as they consider appropriate;
(c) appoint from their own number and establish and terminate one or more
committees consisting of one or more Trustees, which may exercise the powers
and authority of the Board of Trustees to the extent that the Board of
Trustees may determine; (d) employ one or more trustees or custodians of the
assets of the Trust Fund and may authorize such trustees or custodians to
employ subagents and to deposit all or any part of such assets in a system or
systems for the central handling of securities or with a Federal Reserve
Bank; (e) retain an administrator and an investment adviser for each Series
of Shares; (f) retain a transfer agent or a Shareholder servicing agent, or
both; (g) provide for the issuance and distribution of Shares by the Trust
Fund directly or through one or more Principal Underwriters or otherwise; (h)
redeem, repurchase and transfer Shares pursuant to applicable law; (i) set
record dates for the determination of Shareholders; (j) declare and pay
dividends and distributions to Shareholders of each Series from the assets of
such Series; and (k) in general, delegate such authority as they
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consider desirable to any officer of the Trust Fund, to any committee of the
Board of Trustees and to any agent or employee of the Trust Fund or to any
such custodian, transfer or Shareholder servicing agent, or Principal
Underwriter. Any determination as to what is in the interests of the Trust
Fund made by the Trustees in good faith shall be conclusive. In construing
the provisions of this Declaration of Trust, the presumption shall be in
favor of a grant of power to the Trustees. Unless otherwise specified or
required by law, any action by the Trustees shall be deemed effective if
approved or taken by a majority of the Trustees then in office.
Without limiting the foregoing, the Trust Fund shall have power and
authority:
(a) To invest and reinvest cash, to hold cash uninvested, and to
subscribe for, invest in, reinvest in, purchase or otherwise acquire, own,
hold, pledge, sell, assign, transfer, exchange, distribute, write options on,
lend or otherwise deal in or dispose of contracts for the future acquisition
or delivery of fixed income or other securities, of every nature and kind,
including, without limitation, all types of stocks, warrants, options, bonds,
debentures, negotiable or non-negotiable instruments, obligations, evidences
of indebtedness, certificates of deposit, commercial paper, repurchase and
reverse repurchase agreements, bankers' acceptances, and any other securities
issued, created, guaranteed, or sponsored by any and all persons, including,
without limitation, states, territories, and possessions of the United States
and the District of Columbia and any political subdivision, agency, or
instrumentality thereof, any foreign government or any political subdivision
of the U.S. Government or any foreign government, or any international
instrumentality, or by any bank or savings institution, or by any corporation
or organization organized under the laws of the United States or of any
state, territory, or possession thereof, or by any corporation or
organization organized under any foreign law, or in "when issued" contracts
for any such securities, to change the investments of the assets of the
Trust; and to exercise any and all rights, powers, and privileges of
ownership or interest in respect of any and all such investments of every
kind and description, including, without limitation, the right to consent and
otherwise act with respect thereto, with power to designate one or more
persons, to exercise any of said rights, powers, and privileges in respect of
any of said instruments;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or
write options with respect to or otherwise deal in any property rights
relating to any or all of the assets of the Trust Fund or any Series;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Board of
Trustees shall deem proper, granting to such person or persons such power and
discretion with relation to securities or property as the Board of Trustees
shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which in
any manner may arise out of the ownership of securities;
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(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in its
own name or in the name of a custodian or subcustodian or a nominee or
nominees or otherwise;
(f) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in or by the Trust Fund; to consent to any contract, lease, mortgage,
purchase or sale of property by such corporation or issuer; and to pay calls
or subscriptions with respect to any security held in or by the Trust Fund;
(g) To join with other security holders in acting through a committee,
depository, voting trustee or otherwise, and in that connection to deposit
any security with, or transfer any security to, any such committee,
depository or trustee, and to delegate to them such power and authority with
relation to any security (whether or not so deposited or transferred), and to
agree to pay, and to pay, such portion of the expenses and compensation of
such committee, depository or trustee, as the Trustees shall deem proper;
(h) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust Fund or any matter in controversy, including but not
limited to claims for taxes;
(i) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
(j) To borrow funds or other property in the name of the Trust Fund
exclusively for Trust Fund purposes;
(k) To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;
(l) To purchase and pay for entirely out of Trust Property such
insurance as the as the Trustees may deem necessary or appropriate for the
conduct of the business, including, without limitation, insurance policies
insuring the assets of the Trust Fund or payment of distributions and
principal on its portfolio investments, and insurance policies insuring the
Shareholders, the Board of Trustees , officers, employees, agents, investment
advisers, principal underwriters or independent contractors of the Trust
Fund, individually or collectively, against all claims and liabilities of
every nature arising by reason of holding Shares, holding, being or having
held any such office or position, or by reason of any action alleged to have
been taken or omitted by any such person as Trustee, officer, employee,
agent, investment adviser, principal underwriter, or independent contractor,
including any action taken or omitted that may be determined to constitute
negligence, whether or not the Trust Fund would have the power to indemnify
such person against liability; and
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(m) To adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life
insurance and annuity contracts as a means of providing such retirement and
other benefits, for any or all of the Trustees, officers, employees and
agents of the Trust Fund.
The Trust Fund shall not be limited to investing in obligations maturing
before the possible termination of the Trust Fund or one or more of its
Series. Subject to the appropriate provisions of the Investment Company Act,
the Trust Fund shall not in any way be bound or limited by any present or
future law or custom in regard to investment by fiduciaries. The Trust Fund
shall not be required to obtain any court order to deal with any assets of
the Trust Fund or take any other action hereunder.
SECTION 4. PAYMENT OF EXPENSES BY THE TRUST FUND. The Trustees are
authorized to pay or cause to be paid out of the principal or income of the
Trust Fund, or partly out of the principal and partly out of income, as they
deem fair, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust Fund, or in connection with the
management thereof, including, but not limited to, the Trustees' compensation
and such expenses and charges for the services of the Trust Fund's officers,
employees, investment adviser(s) or manager(s), principal underwriter(s),
auditors, counsel, trustee or custodian, transfer agent, Shareholder
servicing agent, and such other agents or independent contractors and such
other expenses and charges as the Trustees may deem necessary or proper to
incur.
SECTION 5. PAYMENT OF EXPENSES BY SHAREHOLDERS. The Trustees shall
have the power, as frequently as they may determine, to cause each
Shareholder, or each Shareholder of any particular Series, to pay directly,
in advance or arrears, for charges of the Trust Fund's custodian or transfer,
Shareholder servicing or similar agent, an amount fixed from time to time by
the Trustees, by setting off such charges due from such Shareholder from
declared but unpaid dividends owed such Shareholder and/or by reducing the
number of Shares in the account of such Shareholder by that number of full
and/or fractional Shares which represents the outstanding amount of such
charges due from such Shareholder.
SECTION 6. OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the
assets of the Trust Fund shall at all times be considered as vested in the
Trust Fund, except that the Trustees shall have the power to cause legal
title to any Trust Property to be held by or in the name of any other person
as nominee, on such terms as the Trustees may determine.
SECTION 7. SERVICE CONTRACTS.
(a) Subject to such requirements and restrictions as may be set forth
in the By-Laws, the Trustees may, at any time and from time to time, contract
for exclusive or nonexclusive advisory, management, administrative and/or any
other services for the
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Trust Fund or for any Series with any corporation, trust, association or
other organization; and any such contract may contain such other terms as the
Trustees may determine, including without limitation, authority for the
Investment Adviser or administrator to determine from time to time without
prior consultation with the Trustees what investments shall be purchased,
held, sold or exchanged and what portion, if any, of the assets of the Trust
Fund shall be held uninvested and to make changes in the Trust Fund's
investments, or such other activities as may specifically be delegated to
such party, in writing.
(b) The Trustees may, at any time and from time to time, contract with
any person, corporation, trust, association or other organization, appointing
it exclusive or nonexclusive distributor or Principal Underwriter for the
Shares of one or more of the Series or Classes or other securities to be
issued by the Trust Fund. Every such contract shall comply with such
requirements and restrictions as may be set forth in the By-Laws; and any
such contract may contain such other terms as the Trustees may determine.
(c) The Trustees may, at any time and from time to time, contract with
any person, corporation, trust, association or other organization, appointing
it or them the custodian, transfer agent and/or Shareholder servicing agent
for the Trust Fund or one or more of its Series. Every such contract shall
comply with such requirements and restrictions as may be set forth in the
By-Laws or stipulated by resolution of the Board of Trustees.
(d) The Trustees are further empowered, at any time and from time to
time, to contract with any entity to provide such other services to the Trust
Fund or one or more of the Series, as the Trustees determine to be in the
best interests of the Trust Fund and the applicable Series.
(e) The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust Fund
may be a Shareholder, director, officer, partner, trustee,
employee, investment adviser, manager, principal underwriter,
distributor, or affiliate or agent of or for any corporation,
trust, association, or other organization or person, or for any
parent or affiliate of any organization with which an advisory,
management or administration contract, or principal underwriter's
or distributor's contract, or transfer, Shareholder servicing or
other type of service contract may have been or may hereafter be
made, or that any such organization, or any parent or affiliate
thereof, is a Shareholder or has an interest in the Trust Fund,
or
(ii) any corporation, trust, association or other organization or
person with which an advisory, management or administration
contract or principal underwriter's or distributor's contract, or
transfer, Shareholder
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servicing or other type of service contract may have been or may
hereafter be made also has an advisory, management or
administration contract, or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing or
other service contract with one or more other corporations,
trusts, associations, or other organizations, or has other
business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust Fund from voting upon or
executing the same, or create any liability or accountability to the Trust
Fund or its Shareholders, provided approval of each such contract is obtained
in a manner consistent with the requirements of the Investment Company Act.
ARTICLE V
Shareholders' Voting Powers and Meetings
SECTION 1. VOTING POWERS. Subject to the provisions of Article III,
Section 6(d), the Shareholders shall have power to vote only (a) for the
election or removal of Trustees as provided in Article IV, Section 1, and
(b) with respect to such additional matters relating to the Trust as may be
required by applicable law, this Declaration of Trust, the By-Laws or any
registration of the Trust Fund with the Commission (or any successor agency)
or any state, or as the Trustees may consider necessary or desirable. As
appropriate, voting may be by Series or Class. A Shareholder in any Series
shall be entitled to one vote for each dollar of net asset value (number of
Shares owned times net asset value per Share) of such Series on any matter on
which such Shareholder is entitled to vote, and each fractional dollar amount
shall be entitled to a proportionate fractional vote. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person
or by proxy. A proxy with respect to Shares held in the name of two or more
persons shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust Fund receives a specific written notice to
the contrary from any one of them. A proxy purporting to be executed by or
on behalf of a Shareholder shall be deemed valid unless challenged at or
prior to its exercise and the burden of proving invalidity shall rest on the
challenger. The Trustees may allow the use of electronic, telegraph,
facsimile and other types of proxies to the fullest extent consistent with
applicable law.
SECTION 2. VOTING POWER AND MEETINGS. Meetings of the Shareholders
may be called by the Board of Trustees for the purpose of electing Trustees
as provided in Article IV, Section l and for such other purposes as may be
required by applicable law, by this Declaration of Trust or by the By-Laws.
Meetings of the Shareholders may also be called by the Board of Trustees from
time to time for the purpose of taking action upon any other matter deemed by
the Trustees to be necessary or desirable. A meeting of Shareholders may be
held at any place designated by the Trustees. Written notice of any meeting
of Shareholders shall be given or caused to be given by the Trustees by
mailing such notice at least ten (10) days before such meeting, postage
prepaid, stating the time
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and place of the meeting, to each Shareholder at the Shareholder's address as
it appears on the records of the Trust Fund. Whenever notice of a meeting is
required to be given to a Shareholder under this Declaration of Trust or the
By-Laws, a written waiver thereof, executed before or after the meeting by
such Shareholder or his or her attorney thereunto authorized and filed with
the records of the meeting, shall be deemed equivalent to such notice.
SECTION 3. QUORUM AND REQUIRED VOTE. Except when a larger quorum is
required by applicable law, by the By-Laws or by this Declaration of Trust,
one third of the Voting Interests entitled to vote shall constitute a quorum
at any Shareholders' meeting. When any Series or Class is entitled to vote
as a single Series or Class, one third of the Shares of each such Series or
Class entitled to vote shall constitute a quorum at any Shareholders' meeting
of that Series or Class. Any meeting of Shareholders may be adjourned from
time to time by a majority of the Voting Interests properly cast upon the
question of adjourning a meeting to another date and time, whether or not a
quorum is present, and the meeting may be held as adjourned within sixty (60)
days after the date set for the original meeting without further notice.
Subject to the provisions of Article III, Section 6(d), when a quorum is
present at any meeting, a majority of the Voting Interests voted shall decide
any questions and a plurality shall elect a Trustee, except when a larger
vote is required by any provision of this Declaration of Trust, the By-Laws
or applicable law.
SECTION 4. ACTION BY WRITTEN CONSENT. Any action taken by
Shareholders may be taken without a meeting if Shareholders holding a
majority of the Voting Interests entitled to vote on the matter (or such
larger proportion thereof as shall be required by any express provision of
this Declaration of Trust, the By-Laws or applicable law) and holding a
majority (or such larger proportion as aforesaid) of the Shares of any Series
or Class entitled to vote separately on the matter consent to the action in
writing and such written consents are filed with the records of the meetings
of Shareholders. Such consent shall be treated for all purposes as a vote
taken at a meeting of Shareholders.
SECTION 5. RECORD DATES. For the purpose of determining the
Shareholders of any Series or Class who are entitled to vote or act at any
meeting or any adjournment thereof, the Trustees may from time to time fix a
time, which shall be not more than ninety (90) days before the date of any
meeting of Shareholders, as the record date for determining the Shareholders
of such Series or Class having the right to notice of and to vote at such
meeting and any adjournment thereof, and in such case only Shareholders of
record on such record date shall have such right, notwithstanding any
transfer of Shares on the books of the Trust Fund after the record date. For
the purpose of determining the Shareholders of any Series or Class who are
entitled to receive payment of any dividend or of any other distribution, the
Trustees may from time to time fix a date, which shall be before the date for
the payment of such dividend or other distribution, as the record date for
determining the Shareholders of such Series or Class having the right to
receive such dividend or distribution. Without fixing a record date the
Trustees may for voting and/or distribution purposes close the register or
transfer books for one or more Series for all or
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any part of the period between a record date and a meeting of Shareholders or
the payment of a distribution. Nothing in this Section shall be construed as
precluding the Trustees from setting different record dates for different
Series or Classes.
SECTION 6. ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
Net Asset Value, Distributions and Redemptions
SECTION 1. DETERMINATION OF NET ASSET VALUE, NET INCOME AND
DISTRIBUTIONS. Subject to Article III, Section 6 hereof, the Trustees, in
their absolute discretion, may prescribe and shall set forth in the By-Laws
or in a duly adopted resolution of the Board of Trustees such bases and time
for determining the per-Share net asset value of the Shares of any Series and
Class or net income attributable to the Shares of any Series and Class, or
the declaration and payment of dividends and distributions on the Shares of
any Series and Class, as they may deem necessary or desirable.
SECTION 2. REDEMPTIONS AND REPURCHASES. The Trust Fund shall
purchase such Shares as may be offered by any Shareholder for redemption,
upon the presentation of a proper instrument of transfer together with a
request directed to the Trust Fund or any person designated by the Trust Fund
that the Trust Fund re-purchase such Shares or in accordance with such other
procedures for redemption as the Trustees may from time to time authorize;
and, subject to Article VI, Section 4, below, the Trust Fund will pay
therefor the net asset value thereof, in accordance with the By-Laws and
applicable law. Payment for said Shares shall be made by the Trust Fund to
the Shareholder within such time period after the date on which the request
is made in proper form as may be required by applicable law or regulation.
The obligation set forth in this Article VI, Section 2 is subject to the
provision that in the event that any time the New York Stock Exchange (the
"Exchange") is closed for other than weekends or holidays, or if permitted by
the Rules of the Commission during periods when trading on the Exchange is
restricted or during any emergency which makes it impracticable for the Trust
Fund to dispose of the investments of the applicable Series or to determine
fairly the value of the net assets held with respect to such Series or during
any other period permitted by order of the Commission for the protection of
Shareholders, such obligations may be suspended or postponed by the Trustee.
The redemption price may in any case or cases be paid wholly or partly
in kind if the Trustees determines that such payment is advisable in the
interest of the remaining Shareholders of the Series for which the Shares are
being redeemed. Subject to the foregoing, the fair value, selection and
quantity of securities or other property so paid or delivered as all or part
of the redemption price may be determined by or under authority of the
Trustees. In no case shall the Trust Fund be liable for any delay of any
person in transferring securities selected for delivery as all or part of any
payment in kind.
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SECTION 3. REDEMPTIONS AT THE OPTION OF THE TRUST FUND. The Trust
Fund shall have the right, at its option and at any time, to redeem Shares of
any Shareholder at the net asset value thereof as described in Section 1 of
this Article VI: (a) if at such time such Shareholder owns Shares of any
Series having an aggregate net asset value of less than an amount determined
from time to time by the Trustees prior to the acquisition of said Shares; or
(b) to the extent that such Shareholder owns Shares of a particular Series
equal to or in excess of a percentage of the outstanding Shares of that
Series determined from time to time by the Trustees; or (c) to the extent
that such Shareholder owns Shares equal to or in excess of a percentage,
determined from time to time by the Trustees, of the outstanding Shares of
the Trust Fund or of any Series.
SECTION 4. SALES AND OTHER CHARGES. Without limiting the power of
the Trustees to fix the rights, preferences and privileges of any Series or
Class of Shares, the Trustees may authorize or continue the assessment of a
sales or other charge in connection with the sale, distribution, redemption
or servicing of any Series or Class of Shares by any Principal Underwriter,
securities dealer or financial institution, subject to any applicable rule or
regulation of the Commission or the National Association of Securities
Dealers, Inc. and the provisions of this Declaration of Trust.
SECTION 5. RIGHTS OF REPAYMENT. With respect to any Series or Class
of Shares for which the Trustees have authorized or continued a sales charge,
the Trustees may authorize, continue, curtail or terminate, in whole or in
part, the purchase of Shares of such Series or Class by any Shareholder in a
dollar amount equal to the dollar amount of all Shares of such Series or
Class previously redeemed by such Shareholder (a "right of repayment"). For
purposes of any right of repayment authorized, continued, curtailed or
terminated pursuant to the provisions of this Article VI, Section 5, the
Trustees may permit any Shareholder to combine one or more accounts owned by
such Shareholder or such Shareholder's "immediate family" (as that term is
defined in Rule 2720(b)(9) of the National Association of Securities Dealers,
Inc., as such Rule may be amended from time to time, or in any successor
rule), provided that any such combination of accounts shall be limited to
accounts of the same Series or Class.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
SECTION 1. COMPENSATION. The Trustees shall be entitled to
reasonable compensation from the Trust Fund, and they may fix the amount of
such compensation. Nothing herein shall in any way prevent the employment of
any Trustee for advisory, management, legal, accounting, investment banking
or other services and payment for the same by the Trust Fund.
SECTION 2. INDEMNIFICATION AND LIMITATION OF LIABILITY. The
Trustees shall not be responsible or liable in any event for any neglect or
wrong-doing of any officer, agent, employee, Investment Adviser or Principal
Underwriter of the Trust Fund, nor shall any Trustee be responsible for the
act or omission of any other Trustee, and the Trust Fund,
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out of its assets, to the fullest extent permitted by law, shall indemnify
and hold harmless each and every Trustee from and against any and all claims
and demands whatsoever arising out of or related to each Trustee's
performance of his or her duties as a Trustee of the Trust Fund; provided
that nothing herein contained shall indemnify, hold harmless or protect any
Trustee from or against any liability to the Trust Fund or any Shareholder to
which he or she would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his or her office.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on behalf
of the Trust Fund or the Trustees or any of them in connection with the Trust
Fund shall be conclusively deemed to have been issued, executed or done only
in or with respect to their or his or her capacity as Trustee, and such
Trustee shall not be personally liable thereon.
The liability of the Trustees or any of them shall further be limited by
the provisions attached hereto as Exhibit B, which provisions are hereby
incorporated herein by reference.
SECTION 3. TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretion hereunder
shall be binding upon every interested person. A Trustee shall be liable to
the Trust Fund and to any Shareholder solely for his or her own willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and shall not be liable for
errors of judgment or mistakes of fact or law. The Board of Trustees may
take advice of counsel or other experts with respect to the meaning and
operation of this Declaration of Trust, and shall be under no liability for
any act or omission in accordance with such advice or for failing to follow
such advice. The Trustees shall not be required to give any bond as such,
nor any surety if a bond is required.
SECTION 4. INSURANCE. The Trustees shall be entitled and empowered
to the fullest extent permitted by law to purchase with Trust Property
insurance for liability and for all expenses reasonably incurred or paid or
expected to be paid by a Trustee or officer in connection with any claim,
action, suit or proceeding in which he or she becomes involved by virtue of
his or her capacity or former capacity with the Trust Fund.
ARTICLE VIII
Miscellaneous
SECTION 1. LIABILITY OF THIRD PERSONS DEALING WITH TRUST FUND. No
person dealing with the Trust Fund shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the Trust
Fund or to see to the application of any payments made or property
transferred to the Trust Fund or upon its order.
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SECTION 2. TERMINATION OF TRUST FUND, SERIES OR CLASS. Unless
terminated as provided herein, the Trust Fund shall continue without
limitation of time. The Trust Fund may be terminated at any time by vote of
a majority of the Shares of each Series entitled to vote, voting separately
by Series, or by the Trustees by written notice to the Shareholders without a
vote of such Shareholders. Any Series or Class (in the case of a proposed
termination of a Class) may be terminated at any time by vote of a majority
of the Shares of that Series or Class, or by the Trustees by written notice
to the Shareholders of that Series or Class without a vote of such
Shareholders.
Upon termination of the Trust Fund (or any Series or Class, as the case
may be), after paying or otherwise providing for all charges, taxes, expenses
and liabilities held, severally, with respect to each terminated Series and
Class, whether due or accrued or anticipated as may be determined by the
Trustees, the Trust Fund shall, in accordance with such procedures as the
Trustees may consider appropriate, reduce the remaining assets held,
severally, with respect to each terminated Series and Class, to distributable
form in cash or Shares or other securities, or any combination thereof, and
distribute the proceeds held with respect to each terminated Series and
Class, to the Shareholders of that Series or Class, ratably according to the
number of Shares of that Series or Class held by the several Shareholders on
the date of termination. No Share shall have any priority or preference over
any other Share of the same Series or Class with respect to dividends or
distributions made pursuant to Article VIII, Section 2 hereof upon
termination of the Trust Fund or of any Series or Class thereof.
SECTION 3. MERGER AND CONSOLIDATION. The Trustees may cause (a) the
Trust Fund or one or more of its Series or Classes to be merged into or
consolidated with another trust or company, or Series or Class thereof, to
the extent permitted by law, (b) the Shares of the Trust Fund or any Series
to be converted into beneficial interests in another trust or entity, or
series thereof, created pursuant to this Declaration of Trust or otherwise,
or (c) the Shares to be exchanged under or pursuant to any state or federal
statute to the extent permitted by law. Such merger or consolidation, Share
conversion or Share exchange must be authorized by vote of a majority of the
Voting Interests of the Trust Fund, as a whole, or any affected Series, as
may be applicable; provided that in all respects not governed by statute or
applicable law, the Trustees shall have the power to prescribe the procedure
necessary or appropriate to accomplish a sale of assets, merger or
consolidation, including but not limited to the power to create one or more
separate business trusts or other entities to which all or any part of the
assets, liabilities, profits or losses of the Trust Fund may be transferred
and to provide for the conversion of Shares of the Trust Fund or any Series
into beneficial interests in such separate business trust or trusts or other
entities (or series thereof).
SECTION 4. AMENDMENTS. This Declaration of Trust may be restated
and/or amended at any time by an instrument in writing signed by a majority
of the then Trustees and, if required, by approval of such amendment by
Shareholders in accordance with Article V, Section 3 hereof. Any such
restatement and/or amendment hereto shall be effective immediately upon
execution (and approval by the Shareholders, if required).
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The Certificate of Trust may be restated and/or amended by a similar
procedure, and any such restatement or amendment shall be effective
immediately upon filing with the Office of the Secretary of State of the
State of Delaware, or upon such future date as may be stated therein.
SECTION 5. FILING OF COPIES, REFERENCES, HEADINGS. The original or
a copy of this instrument and of each restatement and/or amendment hereto
shall be kept at the office of the Trust Fund where it may be inspected by
any Shareholder. Anyone dealing with the Trust Fund may rely on a
certificate by an officer of the Trust Fund as to whether or not any such
restatements and/or amendments have been made and as to any matters in
connection with the Trust Fund hereunder; and, with the same effect as if it
were the original, may rely on a copy certified by an officer of the Trust
Fund to be a copy of this instrument or of any such restatements and/or
amendments. In this instrument and in any such restatements and/or
amendment, references to this instrument, and all expressions like "herein,"
"hereof" and "hereunder" shall be deemed to refer to this instrument as
amended or affected by any such restatements and/or amendments. Headings are
placed herein for convenience of reference only and shall not be taken as a
part hereof or control or affect the meaning, construction or effect of this
instrument.
Whenever the term "person" is used herein, such term shall mean any
individual, corporation, partnership, trust, association, joint venture,
estate and any other entity, whether or not a legal entity, and any
government, agency or political subdivision thereof, whether domestic or
foreign. Whenever the singular number is used herein, the same shall include
the plural; and the neuter, masculine and feminine genders shall include each
other, as applicable. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
SECTION 6. APPLICABLE LAW. This Declaration of Trust is created
under and is to be governed by and construed and administered according to
the laws of the State of Delaware and the Delaware Business Trust Act, as
amended from time to time (the "Act"), and without limiting the provisions
hereof, the Trust Fund may exercise all powers which are ordinarily exercised
by a business trust created under the laws of the State of Delaware.
SECTION 7. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of the Declaration of Trust are severable, and if
the Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the Investment Company Act, the regulated
investment company provisions of the Internal Revenue Code or with other
applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of the Declaration of Trust; provided,
however, that such determination shall not affect any of the remaining
provisions of the Declaration of Trust or render invalid or improper any
action taken or omitted prior to such determination.
19
<PAGE>
(b) If any provision of the Declaration of Trust shall be held invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability
shall attach only to such provision in such jurisdiction and shall not in any
manner affect such provision in any other jurisdiction or any other provision
of the Declaration of Trust in any jurisdiction.
SECTION 8. OPERATION AS A TRUST FOR BUSINESS PURPOSES ONLY It is
the intention of the Trustees to create a trust only for the business purpose
of an open-ended, registered management investment company, as that term is
used in the Investment Company Act, pursuant to the provisions of Title 12,
Part V, Chapter 38 of the Delaware General Corporation Law. It is not the
intention of the Trustees to create a general partnership, limited
partnership, joint stock association, corporation, bailment, or any form of
legal relationship other as described in the preceding sentence. Nothing in
this Declaration of Trust shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
SECTION 9. USE OF THE IDENTIFYING WORDS "SIFE" AND "SIFE TRUST
FUND". The identifying words "SIFE" and "SIFE Trust Fund," and all rights to
the use of such identifying words, belong to SIFE, Inc., the Investment
Adviser of the Trust Fund. SIFE, Inc. has licensed the Trust Fund to use the
identifying words "SIFE" and "SIFE Trust Fund" in the Trust Fund's name and
to use the identifying word "SIFE" in the name of any series or class of the
Trust Fund. In the event that SIFE, Inc. or an affiliate of SIFE, Inc. is
not appointed or ceases to be the Investment Adviser of the Trust Fund, the
non-exclusive license may be revoked by SIFE, Inc., and the Trust Fund and
any series thereof shall respectively cease using the identifying words
"SIFE" and "SIFE Trust Fund" unless otherwise consented to by SIFE, Inc. or
any successor to SIFE, Inc.'s interest.
IN WITNESS WHEREOF, the sole Trustee named below does hereby make and
enter into this Declaration of Trust as of the 28th day of February, 1997.
--------------------------------------
Bruce W. Woods
Sole Trustee
THE PRINCIPAL PLACE OF BUSINESS OF THE TRUST FUND IS
490 N. WIGET LANE, WALNUT CREEK, CALIFORNIA
20
<PAGE>
PAGE 1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
BUSINESS TRUST REGISTRATION OF "SIFE TRUST FUND", FILED IN THIS OFFICE ON THE
TWENTY-EIGHTH DAY OF FEBRUARY, A.D. 1997, AT 10 O'CLOCK A.M.
[GREAT SEAL OF THE STATE OF DELAWARE]
[1793-1847-1907]
/s/ EDWARD J. FREEL
[SEAL]---------------------------------------
EDWARD J. FREEL, SECRETARY OF STATE
2723860 8100 AUTHENTICATION: 8356251
971068277 DATE: 03-04-97
<PAGE>
BY-LAWS
for the regulation, except as
otherwise provided by statute or
the Agreement and Declaration of Trust of
SIFE TRUST FUND
a Delaware Business Trust
(as of April 4, 1997)
<PAGE>
TABLE OF CONTENTS
-----------------
BY-LAWS
SIFE TRUST FUND
PAGE
----
ARTICLE I OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Principal Office . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Delaware Office. . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Other Offices. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II Meetings Of Shareholders. . . . . . . . . . . . . . . . . . . 1
1. Place Of Meetings. . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Call Of Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Notice Of Shareholders' Meeting. . . . . . . . . . . . . . . . . . 1
4. Manner Of Giving Notice; Affidavit Of Notice . . . . . . . . . . . 2
5. Adjourned Meeting; Notice. . . . . . . . . . . . . . . . . . . . . 2
6. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
7. Waiver Of Notice By Consent Of Absent Shareholders . . . . . . . . 3
8. Shareholder Action By Written Consent Without A Meeting. . . . . . 4
9. Record Date For Shareholder Notice, Voting And Giving Consents . . 4
10. Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
11. Inspectors Of Election . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III Trustees. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2. Number Of Trustees . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Place Of Meetings And Meetings By Telephone. . . . . . . . . . . . 7
5. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 7
6. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 7
7. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8. Waiver Of Notice . . . . . . . . . . . . . . . . . . . . . . . . . 8
9. Adjournment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10. Notice Of Adjournment. . . . . . . . . . . . . . . . . . . . . . . 8
11. Action Without A Meeting . . . . . . . . . . . . . . . . . . . . . 8
12. Fees And Compensation Of Trustees. . . . . . . . . . . . . . . . . 9
13. Delegation Of Power To Other Trustees. . . . . . . . . . . . . . . 9
ARTICLE IV Committees. . . . . . . . . . . . . . . . . . . . . . . . . . 9
1. Committees Of Trustees . . . . . . . . . . . . . . . . . . . . . . 9
i
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TABLE OF CONTENTS
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(continued)
PAGE
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2. Meetings And Action Of Committees. . . . . . . . . . . . . . . . . 10
ARTICLE V Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2. Election Of Officers . . . . . . . . . . . . . . . . . . . . . . . 10
3. Subordinate Officers . . . . . . . . . . . . . . . . . . . . . . . 11
4. Removal And Resignation Of Officers. . . . . . . . . . . . . . . . 11
5. Vacancies In Offices . . . . . . . . . . . . . . . . . . . . . . . 11
6. Chairman Of The Board. . . . . . . . . . . . . . . . . . . . . . . 11
7. President. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8. Vice Presidents. . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. Secretary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10. Treasurer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VI Indemnification Of Trustees Officers Employees And Other
Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1. Agents, Proceedings And Expenses . . . . . . . . . . . . . . . . . 13
2. Actions Other Than By Trust. . . . . . . . . . . . . . . . . . . . 13
3. Actions By The Trust . . . . . . . . . . . . . . . . . . . . . . . 14
4. Exclusion Of Indemnification . . . . . . . . . . . . . . . . . . . 14
5. Successful Defense By Agent. . . . . . . . . . . . . . . . . . . . 15
6. Required Approval. . . . . . . . . . . . . . . . . . . . . . . . . 15
7. Advance Of Expenses. . . . . . . . . . . . . . . . . . . . . . . . 15
8. Other Contractual Rights . . . . . . . . . . . . . . . . . . . . . 16
9. Limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11. Fiduciaries Of Employee Benefit Plan . . . . . . . . . . . . . . . 16
ARTICLE VII Records And Reports . . . . . . . . . . . . . . . . . . . . . 16
1. Maintenance And Inspection Of Share Register . . . . . . . . . . . 16
2. Maintenance And Inspection Of By-laws. . . . . . . . . . . . . . . 17
3. Maintenance And Inspection Of Other Records. . . . . . . . . . . . 17
4. Inspection By Trustees . . . . . . . . . . . . . . . . . . . . . . 17
5. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VIII General Matters . . . . . . . . . . . . . . . . . . . . . . . 18
1. Checks, Drafts, Evidence Of Indebtedness . . . . . . . . . . . . . 18
2. Contracts And Instruments; How Executed. . . . . . . . . . . . . . 18
3. Certificates For Shares. . . . . . . . . . . . . . . . . . . . . . 18
4. Lost Certificates. . . . . . . . . . . . . . . . . . . . . . . . . 18
5. Representation Of Shares Of Other Entities Held By Trust . . . . . 19
6. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ii
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TABLE OF CONTENTS
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(continued)
PAGE
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ARTICLE IX Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . 19
1. Amendment By Shareholders. . . . . . . . . . . . . . . . . . . . . 19
2. Amendment By Trustees. . . . . . . . . . . . . . . . . . . . . . . 19
3. Incorporation By Reference Into Agreement And Declaration Of
Trust Of The Trust . . . . . . . . . . . . . . . . . . . . . . . . 19
iii
<PAGE>
BY-LAWS
OF
SIFE TRUST FUND
A Delaware Business Trust
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The Board of Trustees shall fix and, from
time to time, may change the location of the principal executive office of SIFE
Trust Fund (the "Trust") at any place within or outside the State of Delaware.
Section 2. DELAWARE OFFICE. The Board of Trustees shall establish a
registered office in the State of Delaware and shall appoint as the Trust's
registered agent for service of process in the State of Delaware an individual
resident of the State of Delaware or a Delaware corporation or a corporation
authorized to transact business in the State of Delaware; in each case the
business office of such registered agent for service of process shall be
identical with the registered Delaware office of the Trust.
Section 3. OTHER OFFICES. The Board of Trustees may at any time establish
branch or subordinate offices at any place or places where the Trust intends to
do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at
any place designated by the Board of Trustees. In the absence of any such
designation, shareholders' meetings shall be held at the principal executive
office of the Trust.
Section 2. CALL OF MEETING. A meeting of the shareholders may be called
at any time by the Board of Trustees or by the Chairman of the Board or by the
President.
Section 3. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 4 of
this Article II not less than seven (7) nor more than seventy-five (75) days
before the date of the meeting. The notice shall specify (i) the place, date
and hour of the meeting, and (ii) the general nature of the business to be
transacted. The notice of any meeting at which Trustees are to
<PAGE>
be elected also shall include the name of any nominee or nominees whom at the
time of the notice are intended to be presented for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a Trustee has a direct or indirect financial
interest, (ii) an amendment of the Trust's Agreement and Declaration of Trust,
(iii) a reorganization of the Trust, or (iv) a voluntary dissolution of the
Trust, the notice shall also state the general nature of that proposal.
Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of shareholders shall be given either personally or by first-class mail
or telegraphic or other written communication, charges prepaid, addressed to the
shareholder at the address of that shareholder appearing on the books of the
Trust or its transfer agent or given by the shareholder to the Trust for the
purpose of notice. If no such address appears on the Trust's books or is given,
notice shall be deemed to have been given if sent to that shareholder by first-
class mail or telegraphic or other written communication to the Trust's
principal executive office, or if published at least once in a newspaper of
general circulation in the county where that office is located. Notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that shareholder
appearing on the books of the Trust is returned to the Trust by the United
States Postal Service marked to indicate that the Postal Service is unable to
deliver the notice to the shareholder at that address, all future notices or
reports shall be deemed to have been duly given without further mailing if these
shall be available to the shareholder on written demand of the shareholder at
the principal executive office of the Trust for a period of one year from the
date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholder's meeting shall be executed by the Secretary, Assistant Secretary or
any transfer agent of the Trust giving the notice and shall be filed and
maintained in the minute book of the Trust.
Section 5. ADJOURNED MEETING; NOTICE. Any shareholder's meeting, whether
or not a quorum is present, may be adjourned from time to time by the vote of
the majority of the Voting Interests, as defined in Article I, Section 2(o) of
the Agreement
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<PAGE>
and Declaration of Trust of the Trust, represented at that meeting, either in
person or by proxy.
When any meeting of shareholders is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed or unless the
adjournment is for more than sixty (60) days from the date set for the original
meeting, in which case the Board of Trustees shall set a new record date.
Notice of any such adjourned meeting shall be given to each shareholder of
record entitled to vote at the adjourned meeting in accordance with the
provisions of Sections 3 and 4 of this Article II. At any adjourned meeting,
the Trust may transact any business which might have been transacted
at the original meeting.
Section 6. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of the
Agreement and Declaration of Trust of the Trust, as in effect at such time. The
shareholders' vote may be by voice vote or by ballot, provided, however, that
any election for Trustees must be by ballot if demanded by any shareholder
before the voting has begun. On any matter other than elections of Trustees,
any shareholder may vote part of the shares in favor of the proposal and refrain
from voting the remaining shares or vote them against the proposal, but if the
shareholder fails to specify the number of shares which the shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to the total shares that the shareholder is
entitled to vote on such proposal.
Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The
transactions of the meeting of shareholders, however called and noticed and
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice if a quorum be present either in person or by proxy and
if either before or after the meeting, each person entitled to vote who was not
present in person or by proxy signs a written waiver of notice or a consent to a
holding of the meeting or an approval of the minutes. The waiver of notice or
consent need not specify either the business to be transacted or the purpose of
any meeting of shareholders.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in
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<PAGE>
the notice of the meeting if that objection is expressly made at the beginning
of the meeting.
Section 8. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any
action which may be taken at any meeting of shareholders may be taken without a
meeting and without prior notice if a consent in writing setting forth the
action so taken is signed by the holders of the Voting Interests, as defined in
Article I, Section 2(o) in the Agreement and Declaration of Trust of the Trust,
having not less than the minimum number of votes that would be necessary to
authorize or take that action at a meeting at which all shares entitled to vote
on that action were present and voted. All such consents shall be filed with
the Secretary of the Trust and shall be maintained in the Trust's records. Any
shareholder giving a written consent or the shareholder's proxy holder or a
transferee of the shares or a personal representative of the shareholder or
their respective proxy holders may revoke the consent by a writing received by
the Secretary of the Trust before written consents of the number of shares
required to authorize the proposed action have been filed with the Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of the action approved by the shareholders without a meeting. This
notice shall be given in the manner specified in Section 4 of this Article II.
In the case of approval of (i) contracts or transactions in which a Trustee has
a direct or indirect financial interest, (ii) indemnification of agents of the
Trust, and (iii) a reorganization of the Trust, the notice shall be given at
least ten (10) days before the consummation of any action authorized by that
approval.
Section 9. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING CONSENTS.
For purposes of determining the shareholders entitled to notice of any meeting
or to vote or entitled to give consent to action without a meeting, the Board of
Trustees may fix in advance a record date which shall not be more than ninety
(90) days nor less than seven (7) days before the date of any such meeting as
provided in the Agreement and Declaration of Trust of the Trust.
If the Board of Trustees does not so fix a record date:
(a) The record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business
on the business day next preceding the day on which notice is given or
if
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<PAGE>
notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held.
(b) The record date for determining shareholders entitled to give consent
to action in writing without a meeting, (i) when no prior action by
the Board of Trustees has been taken, shall be the day on which the
first written consent is given, or (ii) when prior action of the Board
of Trustees has been taken, shall be at the close of business on the
day on which the Board of Trustees adopt the resolution relating to
that action or the seventy-fifth day before the date of such other
action, whichever is later.
Section 10. PROXIES. Every person entitled to vote for Trustees or on any
other matter shall have the right to do so either in person or by one or more
agents authorized by a written proxy signed by the person and filed with the
Secretary of the Trust. A proxy shall be deemed signed if the shareholder's
name is placed on the proxy (whether by manual signature, typewriting,
telegraphic or facsimile transmission or otherwise) by the shareholder or the
shareholder's attorney-in-fact. The Trustees may allow the use of electronic,
telegraphic and facsimile proxies to the fullest extent consistent with
applicable law. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) revoked by the
person executing it before the vote pursuant to that proxy by a writing
delivered to the Trust stating that the proxy is revoked or by a subsequent
proxy executed by or attendance at the meeting and voting in person by the
person executing that proxy; or (ii) written notice of the death or incapacity
of the maker of that proxy is received by the Trust before the vote pursuant to
that proxy is counted; provided however, that no proxy shall be valid after the
expiration of eleven (11) months from the date of the proxy unless otherwise
provided in the proxy.
Section 11. INSPECTORS OF ELECTION. Before any meeting of
shareholders, the Board of Trustees may appoint any persons other than
nominees for office to act as inspectors of election at the meeting or its
adjournment. If no inspectors of election are so appointed, the chairman of
the meeting may and on the request of any shareholder or a shareholder's
proxy shall, appoint inspectors of election at the meeting. The number of
inspectors shall be either one (1) or three (3). If inspectors are appointed
at a meeting on the request of one or more shareholders or proxies, the
holders of a majority of shares or their proxies present at the meeting shall
determine whether one (1) or three
-5-
<PAGE>
(3) inspectors are to be appointed. If any person appointed as inspector fails
to appear or fails or refuses to act, the Chairman of the meeting may and on the
request of any shareholder or a shareholder's proxy, shall appoint a person to
fill the vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting power of
each, the shares represented at the meeting, the existence of a quorum
and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way arising in
connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election or vote
with fairness to all shareholders.
ARTICLE III
TRUSTEES
Section 1. POWERS. Subject to the applicable provisions of the Agreement
and Declaration of Trust of the Trust and these By-Laws relating to action
required to be approved by the shareholders or by the outstanding shares, the
business and affairs of the Trust shall be managed and all powers shall be
exercised by or under the direction of the Board of Trustees.
Section 2. NUMBER OF TRUSTEES. The exact number of Trustees within the
limits specified in the Agreement and Declaration of Trust of the Trust shall be
fixed from time to time by a written instrument signed or a resolution approved
at a duly constituted meeting by a majority of the Board of Trustees.
Section 3. VACANCIES. Vacancies in the Board of Trustees may be filled by
a majority of the remaining Trustees, though less than a quorum, or by a sole
remaining Trustee, unless the Board of Trustees calls a meeting of shareholders
for the purpose of electing Trustees. In the event that at any time less than a
majority of the Trustees holding office at that time were so elected by the
holders of the Voting Interests of the Trust as defined in Article I, Section
2(o) of the Agreement and Declaration of Trust of the Trust, the Board of
Trustees shall forthwith cause to be held as promptly as possible, and in any
event within sixty (60) days, a meeting of such holders for the purpose of
electing Trustees to fill any existing vacancies in
-6-
<PAGE>
the Board of Trustees, unless such period is extended by order of, or other
relief granted by, the United States Securities and Exchange Commission or its
staff.
Notwithstanding the above, whenever and for so long as the Trust is a
participant in or otherwise has in effect a Plan under which the Trust may be
deemed to bear expenses of distributing its shares as that practice is described
in Rule 12b-1 under the Investment Company Act of 1940, then the selection and
nomination of the Trustees who are not interested persons of the Trust (as that
term is defined in the Investment Company Act of 1940) shall be, and is,
committed to the discretion of such disinterested Trustees.
Section 4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings of
the Board of Trustees may be held at any place that has been designated from
time to time by resolution of the Board. In the absence of such a designation,
regular meetings shall be held at the principal executive office of the Trust.
With the exception of meetings at which an investment management agreement,
portfolio advisory agreement or any distribution plan adopted pursuant to Rule
12b-1 is approved by the Board, any meeting, regular or special, may be held by
conference telephone or similar communication equipment, so long as all Trustees
participating in the meeting can hear one another and all such Trustees shall be
deemed to be present in person at the meeting.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of Trustees
shall be held without call at such time as shall from time to time be fixed by
the Board of Trustees. Such regular meetings may be held without notice.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of Trustees
for any purpose or purposes may be called at any time by the Chairman of the
Board or the President or any Vice President or the Secretary or any two (2)
Trustees.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each Trustee or sent by first-class mail or
telegram, charges prepaid, addressed to each Trustee at that Trustee's address
as it is shown on the records of the Trust. In case the notice is mailed, it
shall be deposited in the United States mail at least seven (7) calendar days
before the time of the holding of the meeting. In case the notice is delivered
personally or by telephone or to the telegraph company or by express mail or
similar service, it shall be given at least forty-eight (48) hours before the
time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the Trustee or to a person at the office
of the Trustee whom the person giving the
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<PAGE>
notice has reason to believe will promptly communicate it to the Trustee. The
notice need not specify the purpose of the meeting or the place if the meeting
is to be held at the principal executive office of the Trust.
Section 7. QUORUM. A majority of the authorized number of Trustees shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or made
by a majority of the Trustees present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Board of Trustees, subject to the
provisions of the Trust's Agreement and Declaration of Trust. A meeting at
which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of Trustees if any action taken is approved by a
least a majority of the required quorum for that meeting.
Section 8. WAIVER OF NOTICE. Notice of any meeting need not be given to
any Trustee who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting, or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents, and approvals shall be filed with the records of the
Trust or made a part of the minutes of the meeting. Notice of a meeting shall
also be deemed given to any Trustee who attends the meeting without protesting
before or at its commencement the lack of notice to that Trustee.
Section 9. ADJOURNMENT. A majority of the Trustees present, whether or
not constituting a quorum, may adjourn any meeting to another time and place.
Section 10. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given unless the meeting is adjourned
for more than forty-eight (48) hours, in which case notice of the time and place
shall be given before the time of the adjourned meeting in the manner specified
in Section 6 of this Article III to the Trustees who were present at the time of
the adjournment.
Section 11. ACTION WITHOUT A MEETING. With the exception of the approval
of an investment management agreement, portfolio advisory agreement, or any
distribution plan adopted pursuant to Rule 12b-1, any action required or
permitted to be taken by the Board of Trustees may be taken without a meeting if
a majority of the members of the Board of Trustees shall individually or
collectively consent in writing to that action. Such action by written consent
shall have the same force and effect as a majority vote of the Board of
Trustees. Such written consent or
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consents shall be filed with the minutes of the proceedings of the Board of
Trustees.
Section 12. FEES AND COMPENSATION OF TRUSTEES. Trustees and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board of Trustees. This Section 12 shall not be construed to preclude any
Trustee from serving the Trust in any other capacity as an officer, agent,
employee or otherwise and receiving compensation for those services.
Section 13. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his or her power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall fewer than two (2) Trustees personally exercise the powers granted to
the Trustees under the Trust's Agreement and Declaration of Trust except as
otherwise expressly provided herein or by resolution of the Board of Trustees.
Except where applicable law may require a Trustee to be present in person, a
Trustee represented by another Trustee pursuant to such power of attorney shall
be deemed to be present for purposes of establishing a quorum and satisfying the
required majority vote.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF TRUSTEES. The Board of Trustees may by
resolution adopted by a majority of the authorized number of Trustees designate
one or more committees, each consisting of one (1) or more Trustees, to serve at
the pleasure of the Board. The Board may designate one or more Trustees as
alternate members of any committee who may replace any absent member at any
meeting of the committee. Any committee to the extent provided in the
resolution of the Board, shall have the authority of the Board, except with
respect to:
(a) the approval of any action which under applicable law also requires
shareholders' approval or approval of the outstanding shares, or
requires approval by a majority of the entire Board or certain members
of said Board;
(b) the filling of vacancies on the Board of Trustees or in any committee;
(c) the fixing of compensation of the Trustees for serving on the Board of
Trustees or on any committee;
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(d) the amendment or repeal of the Trust's Agreement and Declaration of
Trust or of the By-Laws or the adoption of new By-Laws;
(e) the amendment or repeal of any resolution of the Board of Trustees
which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the Trust, except at a rate or
in a periodic amount or within a designated range determined by the
Board of Trustees; or
(g) the appointment of any other committees of the Board of Trustees or
the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
committees shall be governed by and held and taken in accordance with the
provisions of Article III of these By-Laws, with such changes in the context
thereof as are necessary to substitute the committee and its members for the
Board of Trustees and its members, except that the time of regular meetings of
committees may be determined either by resolution of the Board of Trustees or by
resolution of the committee. Special meetings of committees may also be called
by resolution of the Board of Trustees. Alternate members shall be given notice
of meetings of committees and shall have the right to attend all meetings of
committees. The Board of Trustees may adopt rules for the government of any
committee not inconsistent with the provisions of these By-Laws.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the Trust shall be a President, a
Secretary and a Treasurer. The Trust may also have, at the discretion of the
Board of Trustees, a Chairman of the Board, one or more Vice Presidents, one or
more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article V. Any number of offices may be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the Trust, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article V, shall be chosen by the Board of Trustees, and each
shall serve at the pleasure of the Board of Trustees, subject to the rights, if
any, of an officer under any contract of employment.
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Section 3. SUBORDINATE OFFICERS. The Board of Trustees may appoint and
may empower the President to appoint such other officers as the business of the
Trust may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in these By-Laws or as the
Board of Trustees may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if
any, of an officer under any contract of employment, any officer may be removed,
either with or without cause, by the Board of Trustees at any regular or special
meeting of the Board of Trustees or by the principal executive officer or by
such other officer upon whom such power of removal may be conferred by the Board
of Trustees.
Any officer may resign at any time by giving written notice to the Trust.
Any resignation shall take effect at the date of the receipt of that notice or
at any later time specified in that notice; and unless otherwise specified in
that notice, the acceptance of the resignation shall not be necessary to make it
effective. Any resignation is without prejudice to the rights, if any, of the
Trust under any contract to which the officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled in
the manner prescribed in these By-Laws for regular appointment to that office.
The President may make temporary appointments to a vacant office pending action
by the Board of Trustees.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
Officer is elected, shall, if present, preside at meetings of the Board of
Trustees, subject to the control of the Board of Trustees, have general
supervision, direction and control of the business and the Officers of the Trust
and exercise and perform such other powers and duties as may be from time to
time assigned to him or her by the Board of Trustees or prescribed by the By-
Laws. The Chairman of the Board shall serve as chief executive officer in the
chief executive officer's absence.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may
be given by the Board of Trustees to the Chairman of the Board, if there be such
an officer, the President shall, subject to the control of the Board of Trustees
and the Chairman, have general supervision, direction and control of the
business and the officers of the Trust. He or she shall preside at all meetings
of the shareholders and, in the absence of the Chairman of the Board or if there
be none, at all meetings of the Board of
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Trustees. He or she shall have the general powers and duties of management
usually vested in the offices of president, chief executive officer and chief
operating officer of a corporation and shall have such other powers and duties
as may be prescribed by the Board of Trustees or these By-Laws.
Section 8. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Trustees or if not ranked, the Executive Vice President (who shall be
considered first ranked) and such other Vice Presidents as shall be designated
by the Board of Trustees, shall perform all the duties of the President and,
when so acting, shall have all powers of and be subject to all the restrictions
upon the President. The Vice Presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the Board of Trustees or the President or the Chairman of the
Board or by these By-Laws.
Section 9. SECRETARY. The Secretary shall keep or cause to be kept at the
principal executive office of the Trust or such other place as the Board of
Trustees may direct a book of minutes of all meetings and actions of Trustees,
committees of Trustees and shareholders with the time and place of holding,
whether regular or special, and if special, how authorized, the notice given,
the names of those present at Trustees' meetings or committee meetings, the
number of shares present or represented at shareholders' meetings, and the
proceedings.
The Secretary shall keep or cause to be kept at the principal executive
office of the Trust or at the office of the Trust's transfer agent or registrar,
a share register or a duplicate share register showing the names of all
shareholders and their addresses, the number and classes of shares held by each,
the number and date of certificates issued for the same and the number and date
of cancellation of every certificate surrendered for cancellation.
The Secretary shall give or cause to be given notice of all meetings of the
shareholders and of the Board of Trustees required to be given by these By-Laws
or by applicable law and shall have such other powers and perform such other
duties as may be prescribed by the Board of Trustees or by these By-Laws.
Section 10. TREASURER. The Treasurer shall be the chief financial officer
and chief accounting officer of the Trust and shall keep and maintain or cause
to be kept and maintained adequate and correct books and records of accounts of
the properties and business transactions of the Trust, including accounts of its
assets, liabilities, receipts, disbursements,
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gains, losses, capital, retained earnings and shares. The books of account
shall at all reasonable times be open to inspection by any Trustee.
The Treasurer shall deposit all monies and other valuables in the name and
to the credit of the Trust with such depositaries as may be designated by the
Board of Trustees. The Treasurer shall disburse the funds of the Trust as may
be ordered by the Board of Trustees, shall render to the President and Trustees,
whenever they request it, an account of all of his or her transactions as chief
financial officer and of the financial condition of the Trust and shall have
other powers and perform such other duties as may be prescribed by the Board of
Trustees or these By-Laws.
ARTICLE VI
INDEMNIFICATION OF TRUSTEES OFFICERS
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a Trustee, officer, employee or
other agent of the Trust or is or was serving at the request of the Trust as a
Trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
Trustee, director, officer, employee or agent of a foreign or domestic
corporation that was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes, without limitation, attorney's fees and any expenses of
establishing a right to indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. The Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of the Trust) by reason of
the fact that such person is or was an agent of the Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding, if it is determined that person acted in
good faith and reasonably believed: (a) in the case of conduct in his or her
official capacity as a Trustee of the Trust, that his or her conduct was in the
Trust's best interests and (b), in all other cases, that his or her conduct was
at least not opposed to the Trust's best interests and (c) in the case of a
criminal proceeding, that he or she had no reasonable cause to believe the
conduct of that person was unlawful. The termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not of
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itself create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of the
Trust or that the person had reasonable cause to believe that the person's
conduct was unlawful.
Section 3. ACTIONS BY THE TRUST. The Trust shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action by or in the right of the Trust to procure a judgment in its
favor by reason of the fact that such person is or was an agent of the Trust,
against expenses actually and reasonably incurred by that person in connection
with the defense or settlement of that action if that person acted in good
faith, in a manner that person believed to be in the best interests of the Trust
and with such care, including reasonable inquiry, as an ordinarily prudent
person in a like position would use under similar circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision to
the contrary contained herein, there shall be no right to indemnification for
any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the agent's office with the Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue or matter as to which that person shall
have been adjudged to be liable on the basis that personal benefit was
improperly received by him or her, whether or not the benefit resulted
from an action taken in the person's official capacity; or
(b) In respect of any claim, issue or matter as to which that person shall
have been adjudged to be liable in the performance of that person's
duty to the Trust, unless and only to the extent that the court in
which that action was brought shall determine upon application that in
view of all the circumstances of the case, that person was not liable
by reason of the disabling conduct set forth in the preceding
paragraph and is fairly and reasonably entitled to indemnity for the
expenses which the court shall determine; or
(c) Of amounts paid in settling or otherwise disposing of a threatened or
pending action, with or without court approval, or of expenses
incurred in defending a threatened or pending action that is settled
or otherwise disposed of without court approval, unless
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the required approval set forth in Section 6 of this Article is
obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
the Trust has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article or in defense of any claim, issue
or matter therein, before the court or other body before whom the proceeding was
brought, the agent shall be indemnified against expenses actually and reasonably
incurred by the agent in connection therewith, provided that the Board of
Trustees, including a majority who are disinterested, non-party Trustees, also
determines that, based upon a review of the facts, the agent was not liable by
reason of the disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by the Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) a majority vote of a quorum consisting of Trustees who are not parties
to the proceeding and are not interested persons of the Trust (as
defined in the Investment Company Act of 1940); or
(b) a written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by the Trust before the final disposition of the
proceeding upon a written undertaking by or on behalf of the agent, to repay the
amount of the advance if it is ultimately determined that he or she is not
entitled to indemnification, together with at least one of the following as a
condition to the advance: (i) security for the undertaking; or (ii) the
existence of insurance protecting the Trust against losses arising by reason of
any lawful advances; or (iii) a determination by a majority of a quorum of
Trustees who are not parties to the proceeding and are not interested persons of
the Trust, or by an independent legal counsel in a written opinion, based on a
review of readily available facts, that there is reason to believe that the
agent ultimately will be found entitled to indemnification. Determinations and
authorizations of payments under this Section must conform to the standards set
forth in Section 6 of this Article for determining that the indemnification is
permissible.
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Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than Trustees
and officers of the Trust or any subsidiary hereof may be entitled by contract
or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made under
this Article, except as provided in Sections 5 or 6 in any circumstances where
it appears:
(a) that it would be inconsistent with a provision of the Trust's
Agreement and Declaration of Trust, a resolution of the shareholders
of the Trust, or an agreement in effect at the time of accrual of the
alleged cause of action asserted in the proceeding in which the
expenses were incurred or other amounts were paid which prohibits or
otherwise limits indemnification; or
(b) that it would be inconsistent with any condition expressly imposed by
a court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by the
Board of Trustees of the Trust to purchase such insurance, the Trust shall
purchase and maintain insurance on behalf of any agent of the Trust against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such, but only to the extent that the Trust would
have the power to indemnify the agent against that liability under the
provisions of this Article and the Trust's Agreement and Declaration of Trust.
Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article VI does
not apply to any proceeding against any Trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of the Trust as defined in Section l of
this Article VI. Nothing contained in this Article VI shall limit any right to
indemnification to which such a Trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article VI.
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The Trust shall
keep at its principal executive office or at the office of its transfer agent or
registrar, if either be appointed and as determined by resolution of the Board
of Trustees, a
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record of its shareholders, giving the names and addresses of all shareholders
and the number, series and, where applicable, class of shares held by each
shareholder.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The Trust shall keep at
its principal executive office the original or a copy of these By-Laws as
amended from time to time, which shall be open to inspection by the shareholders
at all reasonable times during office hours.
Section 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The accounting
books and records and minutes of proceedings of the shareholders and the Board
of Trustees and any committee or committees of the Board of Trustees shall be
kept at such place or places designated by the Board of Trustees or in the
absence of such designation, at the principal executive office of the Trust.
The minutes shall be kept in written form, and the accounting books and records
shall be kept either in written form or in any other form capable of being
converted into written form. The minutes and accounting books and records shall
be open to inspection upon the written demand of any shareholder or holder of a
voting trust certificate at any reasonable time during usual business hours of
the Trust for a purpose reasonably related to the holder's interests as a
shareholder or as the holder of a voting trust certificate. The inspection may
be made in person or by an agent or attorney and shall include the right to copy
and make extracts.
Section 4. INSPECTION BY TRUSTEES. Every Trustee shall have the absolute
right at any reasonable time to inspect all books, records and documents of
every kind as well as the physical properties of the Trust. This inspection by
a Trustee may be made in person or by an agent or attorney, and the right of
inspection includes the right to copy and make extracts of documents.
Section 5. FINANCIAL STATEMENTS. A copy of any financial statements and
any income statement of the Trust for each quarterly period of each fiscal year
and accompanying balance sheet of the Trust as of the end of each such period
that has been prepared by the Trust shall be kept on file in the principal
executive office of the Trust for at least twelve (12) months, and each such
statement shall be exhibited at all reasonable times to any shareholder
demanding an examination of any such statement or a copy shall be mailed to any
such shareholder.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the Trust or the certificate of an authorized officer of
the Trust that the
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financial statements were prepared without audit from the books and records of
the Trust.
ARTICLE VIII
GENERAL MATTERS
Section 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks, drafts
or other orders for payment of money, notes or other evidences of indebtedness
issued in the name of or payable to the Trust shall be signed or endorsed in
such manner and by such person or persons as shall be designated from time to
time in accordance with the resolution of the Board of Trustees.
Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of
Trustees, except as otherwise provided in these By-Laws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the Trust and this authority may be
general or confined to specific instances; and unless so authorized or ratified
by the Board of Trustees or within the agency power of an officer, no officer,
agent or employee shall have any power or authority to bind the Trust by any
contract or engagement, to pledge its credit or to render it liable for any
purpose or for any amount.
Section 3. CERTIFICATES FOR SHARES. A certificate or certificates for
shares of beneficial interest in any series of the Trust may be issued to a
shareholder upon the shareholder's request when such shares are fully paid. All
certificates shall be signed in the name of the Trust by the Chairman of the
Board or the President or Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or any Assistant Secretary, certifying the number of
shares and the series of shares owned by the shareholders. Any or all of the
signatures on the certificate may be facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
on a certificate shall have ceased to be that officer, transfer agent or
registrar before that certificate is issued, it may be issued by the Trust with
the same effect as if that person were an officer, transfer agent or registrar
at the date of issue. Notwithstanding the foregoing, the Trust may adopt and
use a system of issuance, recordation and transfer of its shares by electronic
or other means.
Section 4. LOST CERTIFICATES. Except as provided in this Section 4, no
new certificate for shares shall be issued to replace an old certificate unless
the latter is surrendered to the Trust and cancelled at the same time. The
Board of Trustees may in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of
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a replacement certificate on such terms and conditions as the Board of
Trustees may require, including a provision for indemnification of the Trust
secured by a bond or other adequate security sufficient to protect the Trust
against any claim that may be made against it, including any expense or
liability on account of the alleged loss, theft or destruction of the
certificate or the issuance of the replacement certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER ENTITIES HELD BY TRUST. The
Chairman of the Board, the President, any Vice President or any other person
authorized by resolution of the Board of Trustees or by any of the foregoing
designated officers, is authorized to vote or represent on behalf of the Trust
any and all shares of any corporation, partnership, trust or other entity,
foreign or domestic, standing in the name of the Trust. The authority granted
may be exercised in person or by a proxy duly executed by such designated
person.
Section 6. FISCAL YEAR. The fiscal year of the Trust, and of the several
Series thereof, shall be fixed and refixed or changed from time to time by
resolution of the Trustees. The fiscal year of the Trust shall be the taxable
year of each Series of the Trust, unless otherwise provided by the Trustees.
ARTICLE IX
AMENDMENTS
Section l. AMENDMENT BY SHAREHOLDERS. These By-Laws may be amended or
repealed by the affirmative vote or written consent of a majority of the Voting
Interests, as defined in Article I, Section 2(o) of the Agreement and
Declaration of Trust of the Trust, entitled to vote, except as otherwise
provided by applicable law or by the Trust's Agreement and Declaration of Trust
or these By-Laws.
Section 2. AMENDMENT BY TRUSTEES. Subject to the right of shareholders as
provided in Section l of this Article IX to adopt, amend or repeal By-Laws, and
except as otherwise provided by applicable law or by the Trust's Agreement and
Declaration of Trust, these By-Laws may be adopted, amended or repealed by the
Board of Trustees.
Section 3. INCORPORATION BY REFERENCE INTO AGREEMENT AND DECLARATION OF
TRUST OF THE TRUST. These By-Laws and any amendments thereto shall be
incorporated by reference to the Trust's Agreement and Declaration of Trust.
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ASSIGNMENT AGREEMENT
Reference is made to that certain Investment Advisory Agreement, dated as
of April 3, 1972, as amended (collectively the "Investment Advisory Agreement")
by and between SIFE Trust Fund, a California trust (the "California Trust") and
SIFE, Inc. (the "Management Company").
WHEREAS, California Trust is to be reorganized as a Delaware business
trust (the "Delaware Trust"), effective on midnight April 30, 1997, or as soon
thereafter as may be practicable (such transactions are hereinafter referred to
collectively as the "Reorganization"); and
WHEREAS, the Management Company, the California Trust and the Delaware
Trust each desire to maintain the terms and conditions of the Investment
Advisory Agreement,
NOW, THEREFORE, the parties agree as follows:
1. Effective upon the close of the Reorganization, the California Trust
assigns to the Delaware Trust all of its rights, duties,
responsibilities and liabilities under the Investment Advisory
Agreement, and the Delaware Trust hereby expressly agrees to assume
all of such rights, duties, responsibilities and liabilities of the
California Trust under the Agreements, and the Management Company
hereby expressly consents to the foregoing assignment.
2. All of the other terms and conditions of the Investment Advisory
Agreement are expressly ratified and affirmed.
IN WITNESS WHEREOF, each of the parties has caused this Assignment
Agreement to be executed as of the 30th day of April, 1997.
SIFE Trust Fund, a California Trust ATTEST:
By: By:
------------------------------- -------------------------------
Haig G. Mardikian, Chairman Robert Linderman, Asst. Secretary
SIFE Trust Fund, a Delaware Business Trust ATTEST:
By: By:
------------------------------- -------------------------------
Haig G. Mardikian, Chairman Robert Linderman, Asst. Secretary
SIFE, Inc. ATTEST:
By: By:
------------------------------- -------------------------------
Bruce W. Woods, President Robert Linderman, Asst. Secretary
<PAGE>
UNDERWRITING AGREEMENT
THIS UNDERWRITING AGREEMENT, between SIFE Trust Fund, a Delaware business
trust ("Trust Fund") and SIFE, Inc., a California corporation ("Company"), is
made effective as of April 30, 1997.
WHEREAS, pursuant to the Trust Fund's Declaration of Trust, the
underwriting and distribution of the Trust Fund's securities is to be performed
by a "principal underwriter" (the "Underwriter") as that term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust Fund has registered its securities with the Securities
and Exchange Commission ("SEC") on Form N-1A (the "Registration Statement")
containing therein a form of prospectus (the "Prospectus") pursuant to which the
Trust Fund's securities may be offered for sale and sold; and
WHEREAS, the Trust Fund and the Company desire to designate the Company as
the Underwriter of the Trust Fund's securities,
NOW, THEREFORE, the Trust Fund and the Company agree as follows:
1. APPOINTMENT.
(a) PRINCIPAL UNDERWRITER. The Company is hereby appointed as the
"principal underwriter," as that term is defined in the 1940 Act, with respect
to the Trust Fund's securities, and, in connection therewith, is hereby
designated by the Trust Fund as the Trust Fund's exclusive sales agent.
(b) SALES OBLIGATION. The Company agrees to use its best efforts to sell
the securities of the Trust Fund, and to organize and maintain sales offices and
retain and contract with sales agents and representatives in such manner as may
be appropriate for the effective sale and distribution of the Trust Fund's
securities.
(c) TERMS OF SALE. The Company shall distribute and sell the securities
of the Trust Fund at the current sales price thereof, as computed in accordance
with the manner set forth in the Registration Statement (including but not
limited to any Rule 18f-3 Plan attached as an exhibit to such Registration
Statement) and the Prospectus, as such may be amended from time to time.
(d) REGISTRATION OF SECURITIES. The Trust Fund agrees that it will
prepare and file all amendments to the Registration Statement and all periodic
and other reports and applications, in such form and manner and at such times as
may be necessary or appropriate to maintain the effectiveness of the
Registration Statement with the SEC and in such states, and with such regulatory
authorities, as the Company and the Trust Fund shall agree.
<PAGE>
(e) DOCUMENTS. It shall be the obligation of the Company to prepare,
amend, cause to be printed and disseminate all printed materials required in
connection with the sales and distribution of the Trust Fund's securities.
2. COMPENSATION. The Company shall be entitled to receive the sales
charge in such amounts as may be approved, from time to time, by the Board of
Trustees with respect to any series or class of the Trust Fund's securities;
provided that the terms and conditions of such sales charge shall be disclosed
in the Prospectus. Thereafter, the Company may make such compensation
arrangements with its sales agents, whether employees or independent
contractors, as it may deem appropriate, in its exclusive discretion.
3. ALLOCATION OF COSTS. The Company shall pay all costs and expenditures
reasonably related to its appointment hereunder, and as required in the
performance of its duties as principal underwriter and exclusive distributor of
the Trust Fund's securities.
4. DURATION OF APPOINTMENT. This Agreement shall become effective as of,
and shall remain in full force and effect for a period of one (1) year from, the
date first above written. This Agreement may be continued for additional
periods of one (1) year each by (a) the affirmative vote of a majority of the
Trustees then in office who are not "interested persons" of the Trust Fund, as
that term is defined in the 1940 Act, and (b) either (y) the approval of the
Board of Trustees or (z) the vote of a majority in interest of the Investors
(provided that the Trustees recommend such approval to the Investors). Upon
request of the Trustees, the Company shall furnish such information as may be
reasonably necessary for the Trustees to evaluate the terms of this Agreement.
This Agreement may be terminated at any time, upon sixty (60) days' written
notice to the Company, without payment of any penalty, by a vote of a majority
of the Trustees then in office, or by the vote of a majority in interest of the
Investors. This Agreement shall automatically terminate in the event of its
assignment by the Trust Fund or by the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
SIFE TRUST FUND
Dated: By:
---------------------------------- -------------------------------
Haig G. Mardikian, Chairman
SIFE, Inc.
Dated: By:
---------------------------------- -------------------------------
Bruce W. Woods, President
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
Reference is made to those certain Custodian Agreement, Retirement Plans
Service Contract and Transfer Agency Agreement, each of which has been executed
by, and is among, one or more of SIFE Trust Fund, a California trust (the
"California Trust"), SIFE, Inc. ("SIFE") and State Street Bank and Trust Company
("State Street"), on its own behalf and on behalf of Boston Financial Data
Services, Inc. (collectively, the "Agreements").
WHEREAS, SIFE Trust Fund is to be reorganized as a Delaware
business trust (the "Delaware Trust"), effective on midnight April 30,
1997, or as soon thereafter as may be practicable (such transactions are
hereinafter referred to collectively as the "Reorganization"); and
WHEREAS, State Street, the California Trust and SIFE each desire
to maintain the terms and conditions of the Agreements,
NOW, THEREFORE, the parties agree as follows:
1. Effective upon the close of the Reorganization, the California Trust
assigns to the Delaware Trust all of its rights, duties,
responsibilities and liabilities under the Agreements, and the
Delaware Trust hereby expressly agrees to assume all of such rights,
duties, responsibilities and liabilities of the California Trust under
the Agreements, and State Street hereby expressly consents to the
foregoing assignment and assumption.
2. All of the other terms and conditions of each of the Agreements are
expressly ratified and affirmed.
IN WITNESS WHEREOF, each of the parties has caused this
Assignment and Assumption Agreement to be executed as of the 30th day of
April, 1997.
SIFE Trust Fund, a California Trust ATTEST:
By State Street Bank & Trust Company, Trustee
By:____________________________________ By:_____________________________
Name & Title Name & Title
ATTEST:
SIFE Trust Fund, a Delaware Business Trust
By:____________________________________ By:_____________________________
Bruce W. Woods, President Robert Linderman, Asst. Secy.
ATTEST:
SIFE Trust Fund, a Delaware Business Trust
By:____________________________________ By:_____________________________
Bruce W. Woods, President Robert Linderman, Asst. Secy.
ATTEST:
STATE STREET BANK & TRUST COMPANY
By:____________________________________ By:_____________________________
Name & Title Name & Title
<PAGE>
[LETTERHEAD]
April 24, 1997
Board of Trustees
SIFE Trust Fund
100 North Wiget Lane
Walnut Creek, CA 94598
Re: Post-Effective Amendments Nos. 41 & 20 to
Registration Statement on Form N-1A
SIFE Trust Fund/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 a
post-effective amendment to the registration statement on Form N-1A (the
"Post-Effective Amendment"), relating to an indeterminate number of Class A-I,
Class A-II, Class B and Class C shares representing undivided fractional units
of beneficial interest in the respective classes of the Trust Fund (collectively
the "Shares"). The Post-Effective Amendments have been filed by the Trust Fund
with the Securities and Exchange Commission under the relevant provisions of the
Securities Act of 1933, as amended and the Investment Company Act of 1940, as
amended. 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 Shares being registered have been duly authorized; and
2. The Shares 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, which consent is expressly given for
purposes of the Post-Effective Amendment.
Very truly yours,
Robert Linderman
General Counsel
<PAGE>
INDEPENDENT AUDITORS' CONSENT
SIFE Trust Fund
We consent to (a) the use in this Post-Effective Amendment No. 41 to
Registration Statement No. 2-17277 of SIFE Trust Fund on Form N-1A of our report
dated February 5, 1997 appearing in the Statement of Additional Information
which is part of this Registration Statement, and (b) the reference to us under
the caption "Financial Highlights" appearing in the Prospectus which is also a
part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
April 24, 1997
<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.
41 to the Registration Statement under the Securities Act of 1933
and this Amendment No. 20 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 the
information set forth in the Prospectus under the caption
"Financial Highlights," which is included in such amendments to
Registration Statements, Prospectus and Statement of Additional
Information.
TIMPSON GARCIA
Certified Public Accountants
Oakland, California
April 24, 1996
<PAGE>
CLASS B SHARES
PLAN OF DISTRIBUTION
April 30, 1997
This Plan of Distribution (the "Plan") is adopted in accordance with Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, as amended (the
"1940 Act"), by SIFE TRUST FUND, a business trust established under the laws of
the State of Delaware (the "Fund"), with respect to the Class B Shares (the
"Class B Shares") of the Fund which are proposed to be created. This Plan has
been approved by a majority of the Fund's Board of Trustees, including a
majority of the Trustees who are not "interested persons" of the Fund and who
have no direct or indirect financial interest in the operation of this Plan (the
"Independent Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan.
In reviewing this Plan, the Board of Trustees considered the schedule and
nature of payments and the terms of the Investment Advisory Agreement between
the Fund and its investment adviser, and the nature and amount of all other
payments, fees and commissions which may be paid to such investment adviser or
its affiliates. The Board of Trustees' approval included a determination that,
in the exercise of the Trustees' reasonable business judgment and in light of
their fiduciary duties, there is a reasonable likelihood that this Plan will
benefit the Fund and the Class B shareholders.
Section 1. ANNUAL FEE
The Fund will reimburse the principal distributor of its Shares, SIFE, a
California corporation, or any entity that may in the future act as the
principal distributor for the Fund (the "Distributor"), for certain expenses
incurred by the Distributor in connection with the offering and sale of the
Fund's Class B Shares, provided that payment shall be made in any month only to
the extent that such payment, together with any other payments for such expenses
made by the Fund, shall not exceed 0.0625% (0.75% on an annualized basis) of the
average daily net assets of the Fund attributable to Class B Shares of the Fund,
for the prior month. The Fund will also reimburse the Distributor for certain
expenses incurred by the Distributor in connection with the servicing of the
accounts of Class B shareholders, provided that payment shall be made in any
month only to the extent that such payment, together with any other payments for
such expenses made by the Fund, shall not exceed .00020833% (.249996% on an
annualized basis) of the average daily net assets of the Fund attributable to
Class B Shares of the Fund, for the prior month. The expense and shareholder
account service reimbursement to the Distributor will be calculated and paid in
arrears on a monthly basis. Distribution and shareholder servicing expenses
which benefit only the Class B Shares of the Fund will be borne solely by that
class. Distribution and shareholder servicing expenses which benefit more than
one class of shares of the Fund will be allocated in accordance with the
aggregate average daily net assets of the Fund attributable to each such class
of shares.
All fees paid by the Fund hereunder shall be paid in accordance with Rule
2830 of the Conduct Rules of the National Association of Securities Dealers,
Inc. ("NASD"), as such Rule may be in effect from time to time ("Rule 2830"),
including without limitation the limitations set forth in Rule 2830 on the
maximum asset-based sales charges (as defined in Rule 2830) payable to the
Distributor with respect to the Class B shares. If, by reason of the
limitations set forth in Rule 2830, the Fund is prevented from paying a monthly
fee at the stated annual rate set forth above, the Fund shall pay as high a fee
as permitted by Rule 2830.
<PAGE>
Section 2. EXPENSES COVERED BY PLAN
Reimbursable distribution and shareholder servicing expenses incurred by
the Distributor under Section 1 of this Plan shall be borne by the Distributor
or by any other person with which the Distributor has an agreement approved by
the Fund, which expenditures represent payment for activities primarily intended
to result in the sale of Class B Shares, including, but not limited to, the
following: (i) payments to securities dealers and others engaged in the sale of
Class B Shares; (ii) expenditures for support services such as telephone
facilities and expenses and Class B Shareholder services as the Fund may
reasonably request; (iii) formulation and implementation of marketing and
promotional activities, including but not limited to direct mail promotions and
television, radio, newspaper, magazine and other mass media advertising; (iv)
preparation, printing and distribution of sales literature; (v) preparation,
printing and distribution of Prospectuses of the Fund and reports for recipients
other than existing Class B Shareholders of the Fund; (vi) provision to the Fund
of such information, analyses and opinions with respect to marketing and
promotional activities as the Fund may, from time to time, reasonably request;
and (vii) provision of personalized services to Class B shareholders and/or
maintenance of Class B shareholder accounts and such other information and
administrative services as the Fund or the Class B shareholders may reasonably
request; except that distribution expenditures shall not include overhead costs
of the Distributor or any expenditures in connection with services which the
Distributor, any of its affiliates, or any other person have agreed to bear
without reimbursement. To the extent any activity covered by this Section 2 is
also an activity which the Company may pay for without regard to the existence
or terms and conditions of a plan of distribution under Rule 12b-1 of the 1940
Act, this Plan shall not be construed to prevent or restrict the Company from
paying such amounts outside of this Plan and without limitation hereby and
without such payments being included in the calculation in Section 1 of the
maximum amount of reimbursable payments under this Plan.
Section 3. APPROVAL BY TRUSTEES
Neither the Plan nor any related agreements will take effect until approved
by a majority vote of both (a) the full Board of Trustees of the Fund, and (b)
the Independent Trustees, cast in person at a meeting or meetings called for the
purpose of voting on the Plan and the related agreements, as the case may be.
Section 4. CONTINUANCE OF THE PLAN
The Plan will continue in effect for so long as its continuance is
specifically approved at least annually by the Fund's Board of Trustees in the
manner described in Section 3, above.
Section 5. TERMINATION
The Plan may be terminated without penalty at any time with respect to the
Fund by a majority vote of the Independent Trustees or by vote of a majority of
the Class B shares. This Plan may also be terminated without penalty at any
time by the Distributor on at least 60 days' written notice to the Fund. The
Distributor may not assign its rights and obligations under this Plan without
the prior written approval of the Board of Trustees, including the prior
approval of a majority of the Independent Trustees.
The Plan may not be amended with respect to the Fund so as to increase
materially the amount of the fee described in Section 1 above with respect to
the Fund, unless the amendment is approved by a vote of at least a majority of
the outstanding voting securities of the Fund affected by such fee. Amendments
to the Plan to reduce the amount of the fee described in Section 1 above shall
not require the approval of the outstanding voting securities of the Fund
affected by such fee. In addition, no
<PAGE>
material amendment to the Plan may be made unless approved by the Fund's Board
of Trustees in the manner described in Section 3, above.
Section 6. SELECTION OF CERTAIN TRUSTEES
While the Plan is in effect, the selection and nomination of the Fund's
trustees who are not interested persons of the Fund will be committed to the
discretion of the trustees then in office who are not interested persons of the
Fund.
Section 7. WRITTEN REPORTS
In each year during which the Plan remains in effect, the Distributor and
any other person authorized to direct the disposition of monies paid or payable
by the Fund pursuant to the Plan or any related agreement will prepare and
furnish to the Fund's Board of Trustees, and the Board will review, at least
quarterly, written reports, complying with the requirements of the Rule, which
set out the amounts expended under the Plan and the purposes for which those
expenditures were made. The Distributor shall furnish to the Board of Trustees
such information as the Board of Trustees shall reasonably request, including
but not limited to information with respect to the payments made under this
Plan, in order to enable the Board of Trustees to make an informed determination
as to whether this Plan should be continued in accordance with the provisions of
Section 3, or terminated in accordance with the provisions of Section 5.
Section 8. PRESERVATION OF MATERIALS
The Fund will preserve copies of the Plan, any agreement relating to the
Plan and any report made pursuant to Section 7 above, for a period of not less
than six years (the first two years in an easily accessible place) from the date
of the Plan, agreement or report.
Section 9. MEANINGS OF CERTAIN TERMS
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have in light of this Plan under the 1940 Act and the rules and
regulations under the 1940 Act, subject to any exemption, interpretation or "no
action" position that may be granted to the Fund under the 1940 Act by the
Securities and Exchange Commission or its staff.
<PAGE>
APPENDIX A
TO PLAN OF DISTRIBUTION (CLASS B SHARES)
SIFE
100 North Wiget Lane
Walnut Creek, CA 94596
__________________, 199__
[Recipient's Address]
- ---------------------
- ---------------------
Ladies and Gentlemen:
This letter will confirm our understanding and agreement with respect to
payments to be made to you pursuant to a plan of distribution (the "Plan")
adopted by SIFE Trust Fund (the "Trust Fund") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended with respect to the sale of Class B
Shares of the Trust Fund. The Plan and this related agreement (the "Rule 12b-1
Agreement") have been approved by a majority of the Board of Directors of the
Trust Fund, including a majority of the Board of Directors who are not
"interested persons" of the Trust Fund, as defined in the Act, and who have no
direct or indirect financial interest in the operation of the Plan or in this or
any other Rule 12b-1 Agreement (the "Disinterested Directors"), cast in person
at a meeting called for the purpose of voting thereon. Such approval included a
determination by the Board of Directors of the Trust Fund that, in the exercise
of reasonable business judgment and in light of their fiduciary duties, there is
a reasonable likelihood that the Plan will benefit the Trust Fund and its
Investors. The Plan has also been approved by a vote of at least a majority of
the outstanding voting securities, as defined in the Act, of the Trust Fund.
To the extent you provide distribution and marketing services and
shareholder account servicing assistance in the promotion of Class B Shares of
the Trust Fund, including furnishing services and assistance to your customers
who invest in and own shares of the Trust Fund, and including but not limited to
answering routine inquiries regarding the Trust Fund and assisting in changing
distribution options, account designations and addresses, we shall pay you a fee
of up to 1.00%, on an annual basis, of the net asset value of the Trust Fund's
Class B Shares which are owned of record by your firm as nominee for your
customers or which are owned by those customers of your firm whose records, as
maintained by the Trust Fund or any agent of the Trust Fund, designate your firm
as the customer's dealer of record. We reserve the right to increase, decrease
or discontinue the fee at any time in our sole discretion upon written notice to
you.
We shall make the determination of the net asset value of Trust Fund Class
B Shares, which determination shall be made in the manner specified in the Trust
Fund's current prospectus, on or about the 45th day of each quarter and pay to
you quarterly, on the basis of such determination, the fee specified above. No
such quarterly fee will be paid to you with respect to any Class I Shares sold
by or through you, or any Class B Shares purchased by you and redeemed or
repurchased by the Trust Fund or by us as agent within seven (7) business days
after the date of our confirmation of such purchase. In addition, no such
quarterly fee will be paid to you with respect to any of your customers if the
amount of such fee based upon the value of such customer's Class B Shares will
be less than $1.00. Payment of such quarterly fee shall be made within 45 days
after the close of each quarter for which such fee is payable.
<PAGE>
You shall furnish us with such information as shall reasonably be requested
by the Trust Fund with respect to the fees paid to you pursuant to this Rule
12b-1 Related Agreement.
If this letter correctly sets for our mutual understandings with respect to
the provision and payment of a quarterly fee based on Rule 12b-1, please
evidence your agreement by countersigning the enclosed copy of this letter and
returning it to the undersigned in the accompanying self-addressed envelope.
Very truly yours,
SIFE
Agreed and Accepted:
- --------------------
[Recipient]
<PAGE>
CLASS C SHARES
PLAN OF DISTRIBUTION
April 30, 1997
This Plan of Distribution (the "Plan") is adopted in accordance with Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, as amended (the
"1940 Act"), by SIFE TRUST FUND, a business trust established under the laws of
the State of Delaware (the "Fund"), with respect to the Class C Shares (the
"Class C Shares") of the Fund which are proposed to be created. This Plan has
been approved by a majority of the Fund's Board of Trustees, including a
majority of the Trustees who are not "interested persons" of the Fund and who
have no direct or indirect financial interest in the operation of this Plan (the
"Independent Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan.
In reviewing this Plan, the Board of Trustees considered the schedule and
nature of payments and the terms of the Investment Advisory Agreement between
the Fund and its investment adviser, and the nature and amount of all other
payments, fees and commissions which may be paid to such investment adviser or
its affiliates. The Board of Trustees' approval included a determination that,
in the exercise of the Trustees' reasonable business judgment and in light of
their fiduciary duties, there is a reasonable likelihood that this Plan will
benefit the Fund and the Class C shareholders.
Section 1. ANNUAL FEE
The Fund will reimburse the principal distributor of its Shares, SIFE, a
California corporation, or any entity that may in the future act as the
principal distributor for the Fund (the "Distributor"), for certain expenses
incurred by the Distributor in connection with the offering and sale of the
Fund's Class C Shares, provided that payment shall be made in any month only to
the extent that such payment, together with any other payments for such expenses
made by the Fund, shall not exceed 0.0625% (0.75% on an annualized basis) of the
average daily net assets of the Fund attributable to Class C Shares of the Fund,
for the prior month. The Fund will also reimburse the Distributor for certain
expenses incurred by the Distributor in connection with the servicing of the
accounts of Class C shareholders, provided that payment shall be made in any
month only to the extent that such payment, together with any other payments for
such expenses made by the Fund, shall not exceed .00020833% (.249996% on an
annualized basis) of the average daily net assets of the Fund attributable to
Class C Shares of the Fund, for the prior month. The expense and shareholder
account service reimbursement to the Distributor will be calculated and paid in
arrears on a monthly basis. Distribution and shareholder servicing expenses
which benefit only the Class C Shares of the Fund will be borne solely by that
class. Distribution and shareholder servicing expenses which benefit more than
one class of shares of the Fund will be allocated in accordance with the
aggregate average daily net assets of the Fund attributable to each such class
of shares.
All fees paid by the Fund hereunder shall be paid in accordance with Rule
2830 of the Conduct Rules of the National Association of Securities Dealers,
Inc. ("NASD"), as such Rule may be in effect from time to time ("Rule 2830"),
including without limitation the limitations set forth in Rule 2830 on the
maximum asset-based sales charges (as defined in Rule 2830) payable to the
Distributor with respect to the Class C shares. If, by reason of the
limitations set forth in Rule 2830, the Fund is prevented from paying a monthly
fee at the stated annual rate set forth above, the Fund shall pay as high a fee
as permitted by Rule 2830.
<PAGE>
Section 2. EXPENSES COVERED BY PLAN
Reimbursable distribution and shareholder servicing expenses incurred by
the Distributor under Section 1 of this Plan shall be borne by the Distributor
or by any other person with which the Distributor has an agreement approved by
the Fund, which expenditures represent payment for activities primarily intended
to result in the sale of Class C Shares, including, but not limited to, the
following: (i) payments to securities dealers and others engaged in the sale of
Class C Shares; (ii) expenditures for support services such as telephone
facilities and expenses and Class C Shareholder services as the Fund may
reasonably request; (iii) formulation and implementation of marketing and
promotional activities, including but not limited to direct mail promotions and
television, radio, newspaper, magazine and other mass media advertising; (iv)
preparation, printing and distribution of sales literature; (v) preparation,
printing and distribution of Prospectuses of the Fund and reports for recipients
other than existing Class C Shareholders of the Fund; (vi) provision to the Fund
of such information, analyses and opinions with respect to marketing and
promotional activities as the Fund may, from time to time, reasonably request;
and (vii) provision of personalized services to Class C shareholders and/or
maintenance of Class C shareholder accounts and such other information and
administrative services as the Fund or the Class C shareholders may reasonably
request; except that distribution expenditures shall not include overhead costs
of the Distributor or any expenditures in connection with services which the
Distributor, any of its affiliates, or any other person have agreed to bear
without reimbursement. To the extent any activity covered by this Section 2 is
also an activity which the Company may pay for without regard to the existence
or terms and conditions of a plan of distribution under Rule 12b-1 of the 1940
Act, this Plan shall not be construed to prevent or restrict the Company from
paying such amounts outside of this Plan and without limitation hereby and
without such payments being included in the calculation in Section 1 of the
maximum amount of reimbursable payments under this Plan.
Section 3. APPROVAL BY TRUSTEES
Neither the Plan nor any related agreements will take effect until approved
by a majority vote of both (a) the full Board of Trustees of the Fund, and (b)
the Independent Trustees, cast in person at a meeting or meetings called for the
purpose of voting on the Plan and the related agreements, as the case may be.
Section 4. CONTINUANCE OF THE PLAN
The Plan will continue in effect for so long as its continuance is
specifically approved at least annually by the Fund's Board of Trustees in the
manner described in Section 3, above.
Section 5. TERMINATION
The Plan may be terminated without penalty at any time with respect to the
Fund by a majority vote of the Independent Trustees or by vote of a majority of
the Class C shares. This Plan may also be terminated without penalty at any
time by the Distributor on at least 60 days' written notice to the Fund. The
Distributor may not assign its rights and obligations under this Plan without
the prior written approval of the Board of Trustees, including the prior
approval of a majority of the Independent Trustees.
The Plan may not be amended with respect to the Fund so as to increase
materially the amount of the fee described in Section 1 above with respect to
the Fund, unless the amendment is approved by a vote of at least a majority of
the outstanding voting securities of the Fund affected by such fee. Amendments
to the Plan to reduce the amount of the fee described in Section 1 above shall
not require the approval of the outstanding voting securities of the Fund
affected by such fee. In addition, no
<PAGE>
material amendment to the Plan may be made unless approved by the Fund's Board
of Trustees in the manner described in Section 3, above.
Section 6. SELECTION OF CERTAIN TRUSTEES
While the Plan is in effect, the selection and nomination of the Fund's
trustees who are not interested persons of the Fund will be committed to the
discretion of the trustees then in office who are not interested persons of the
Fund.
Section 7. WRITTEN REPORTS
In each year during which the Plan remains in effect, the Distributor and
any other person authorized to direct the disposition of monies paid or payable
by the Fund pursuant to the Plan or any related agreement will prepare and
furnish to the Fund's Board of Trustees, and the Board will review, at least
quarterly, written reports, complying with the requirements of the Rule, which
set out the amounts expended under the Plan and the purposes for which those
expenditures were made. The Distributor shall furnish to the Board of Trustees
such information as the Board of Trustees shall reasonably request, including
but not limited to information with respect to the payments made under this
Plan, in order to enable the Board of Trustees to make an informed determination
as to whether this Plan should be continued in accordance with the provisions of
Section 3, or terminated in accordance with the provisions of Section 5.
Section 8. PRESERVATION OF MATERIALS
The Fund will preserve copies of the Plan, any agreement relating to the
Plan and any report made pursuant to Section 7 above, for a period of not less
than six years (the first two years in an easily accessible place) from the date
of the Plan, agreement or report.
Section 9. MEANINGS OF CERTAIN TERMS
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have in light of this Plan under the 1940 Act and the rules and
regulations under the 1940 Act, subject to any exemption, interpretation or "no
action" position that may be granted to the Fund under the 1940 Act by the
Securities and Exchange Commission or its staff.
<PAGE>
APPENDIX A
TO PLAN OF DISTRIBUTION (CLASS C SHARES)
SIFE
100 North Wiget Lane
Walnut Creek, CA 94596
_______________, 199__
[Recipient's Address]
- ---------------------
- ---------------------
Ladies and Gentlemen:
This letter will confirm our understanding and agreement with respect to
payments to be made to you pursuant to a plan of distribution (the "Plan")
adopted by SIFE Trust Fund (the "Trust Fund") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended with respect to the sale of Class C
Shares of the Trust Fund. The Plan and this related agreement (the "Rule 12b-1
Agreement") have been approved by a majority of the Board of Directors of the
Trust Fund, including a majority of the Board of Directors who are not
"interested persons" of the Trust Fund, as defined in the Act, and who have no
direct or indirect financial interest in the operation of the Plan or in this or
any other Rule 12b-1 Agreement (the "Disinterested Directors"), cast in person
at a meeting called for the purpose of voting thereon. Such approval included a
determination by the Board of Directors of the Trust Fund that, in the exercise
of reasonable business judgment and in light of their fiduciary duties, there is
a reasonable likelihood that the Plan will benefit the Trust Fund and its
Investors. The Plan has also been approved by a vote of at least a majority of
the outstanding voting securities, as defined in the Act, of the Trust Fund.
To the extent you provide distribution and marketing services and
shareholder account servicing assistance in the promotion of Class C Shares of
the Trust Fund, including furnishing services and assistance to your customers
who invest in and own shares of the Trust Fund, and including but not limited to
answering routine inquiries regarding the Trust Fund and assisting in changing
distribution options, account designations and addresses, we shall pay you a fee
of up to 1.00%, on an annual basis, of the net asset value of the Trust Fund's
Class C Shares which are owned of record by your firm as nominee for your
customers or which are owned by those customers of your firm whose records, as
maintained by the Trust Fund or any agent of the Trust Fund, designate your firm
as the customer's dealer of record. We reserve the right to increase, decrease
or discontinue the fee at any time in our sole discretion upon written notice to
you.
We shall make the determination of the net asset value of Trust Fund Class
C Shares, which determination shall be made in the manner specified in the Trust
Fund's current prospectus, on or about the 45th day of each quarter and pay to
you quarterly, on the basis of such determination, the fee specified above. No
such quarterly fee will be paid to you with respect to any Class I Shares sold
by or through you, or any Class C Shares purchased by you and redeemed or
repurchased by the Trust Fund or by us as agent within seven (7) business days
after the date of our confirmation of such purchase. In addition, no such
quarterly fee will be paid to you with respect to any of your customers if the
amount of such fee based upon the value of such customer's Class C Shares will
be less than $1.00. Payment of such quarterly fee shall be made within 45 days
after the close of each quarter for which such fee is payable.
<PAGE>
You shall furnish us with such information as shall reasonably be requested
by the Trust Fund with respect to the fees paid to you pursuant to this Rule
12b-1 Related Agreement.
If this letter correctly sets for our mutual understandings with respect to
the provision and payment of a quarterly fee based on Rule 12b-1, please
evidence your agreement by countersigning the enclosed copy of this letter and
returning it to the undersigned in the accompanying self-addressed envelope.
Very truly yours,
SIFE
Agreed and Accepted:
- --------------------
[Recipient]
<PAGE>
Exhibit 16
SCHEDULE FOR COMPUTATION OF EACH PERFORMANCE
QUOTATION PROVIDED IN THE REGISTRATION STATEMENT
All performance data in the Registration Statement is for Class A-I shares.
Class A-II shares were not offered for sale prior to May 1, 1996, and Class B
and Class C shares were not offered for sale prior to May 1, 1997.
(1) ENDING REDEEMABLE VALUE AND TOTAL RETURNS
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
SHARE PRICE AT BEGINNING OF PERIOD equals
NUMBER OF SHARES INITIALLY PURCHASED
(B) NUMBER OF SHARES INITIALLY PURCHASED plus
NUMBER OF SHARES ACQUIRED AT NET ASSET
VALUE THROUGH REINVESTMENT OF DIVIDENDS
AND CAPITAL GAINS DISTRIBUTIONS DURING
THE PERIOD equals
NUMBER OF SHARES PURCHASED DURING PERIOD
(C) NUMBER OF SHARES PURCHASED DURING PERIOD multiplied by
NET ASSET VALUE OF ONE SHARE 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 one, three, five and ten-year
periods ended on the date of the most recent balance sheet are computed
according to the formula set forth below:
n
P(1+T) = 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 one, three, five and
ten-year periods (computed in accordance with the
formula shown in (1) above)
Thus:
Applying the actual return figures for the Trust Fund for the one, three,
five and ten-year periods ending December 31, 1996, the calculation is as
follows:
<TABLE>
<CAPTION>
WITH THE 5.0% MAXIMUM WITH NO SALES CHARGE
SALES CHARGE
<S> <C> <C>
1 1
1 Year Total Return $10,000(1+T) = $12,099 $10,000(1+T) = $12,736
T = 20.99% T = 27.36%
3 3
3 Year Total Return $10,000(1+T) = $17,864 $10,000(1+T) = $18,805
T = 21.34% T = 23.43%
5 5
5 Year Total Return $10,000(1+T) = $26,157 $10,000(1+T) = $27,529
T = 21.20% T = 22.45%
10 10
10 Year Total Return $10,000(1+T) = $39,661 $10,000(1+T) = $41,740
T = 14.77% T = 15.36%
</TABLE>
* The initial investment for the fee-adjusted figures is $9,500 after
deducting the maximum sales charge of 5.0%.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a Director of SIFE
Trust Fund, a California Trust (the "California Trust") and a Trustee of SIFE
Trust Fund, a Delaware business trust (the "Delaware Trust") (collectively, as
the context may require, the "Trust Funds"), does hereby make, constitute and
appoint each of BRUCE W. WOODS and ROBERT LINDERMAN, as his true and lawful
attorney, for him, and in his name, place and stead to sign any and all
documents or other instruments that he, in his exclusive discretion, may deem
necessary or appropriate in connection with (i) the registration of the Trust
Funds' securities on any filing, or post-effective amendment to any filing,
submitted to the Securities and Exchange Commission or any state securities
agency or authority, and (ii) the reorganization of the California Trust's place
and form of business, into the Delaware Trust, giving and granting to such
attorney power and authority to do and perform all and every act and thing
whatsoever, requisite, necessary and proper to be done to carry into effect the
performance by the Trust Funds of their obligations and responsibilities under
the Agreement and Plan of Reorganization, as fully to all intents and purposes
as he might do, with full power of substitution and revocation, hereby ratifying
and confirming all that said attorney-in-fact or his substitute shall lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on
this ____ day of April, 1997.
---------------------------------
[insert name of Director/Trustee]
<PAGE>
RESTATED
RULE 18f3 MULTI-CLASS PLAN
I. Introduction
Pursuant to Rule 18f-3 under the Investment Company Act of 1940, as amended
(the "1940 Act"), as such rule may be amended from time to time ("Rule 18f-3"),
the following sets forth the method for allocating management company fees and
expenses among each class of securities issued and to be issued by SIFE Trust
Fund, a California trust, as its business has been, and will be, continued by
SIFE Trust Fund, a Delaware business trust (collectively, the "Trust Fund")
(collectively, the "Shares"). This Rule 18f-3 Multi-Class Plan (the "Plan")
sets forth the maximum sales loads, contingent deferred sales charges ("CSDCs"),
Rule 12b-1 distribution fees, shareholder servicing fees, conversion features,
exchange privileges and other investor services applicable to each particular
class of Shares.
The Trust Fund is an open-end investment company registered under the 1940
Act, with Shares registered on Form N-1A under the Securities Act of 1933, as
amended. The Trust Fund hereby elects to offer multiple classes of Shares
pursuant to the provisions of Rule 18f-3 and the Plan.
The Trust Fund currently offers only one series of Shares, and is
authorized to issue Class I Units and Class II Units, which are hereby re-
designated "Class A-I Shares" and "Class A-II Shares." It is the intention of
this Plan to set forth the attributes of two additional classes of investment
units, designated "Class B Shares" and "Class C Shares," respectively, in
anticipation of those classes being created, issued and sold by the Trust Fund.
Upon the creation, issuance and sale of any Class B Shares or Class C Shares,
the relevant provisions of this Plan shall become effective without further
action by the Board of Trustees or the Trust Fund.
II. Allocations.
Pursuant to Rule 18f-3, the Trust Fund may allocate to each class of Shares
(a) any and all fees and expenses incurred by the Trust Fund in connection with
the distribution of such class of investment units under a distribution plan
adopted for such class pursuant to Rule 12b-1, (b) any and all fees and expenses
incurred by the Trust Fund in connection with the servicing of shareholder
accounts, and (c) to each Share outstanding, without regard to class
designation, a pro rata portion of the management fee of 1.25% of net assets,
per annum. All distribution, shareholder servicing and management fees are
calculated and charged daily, based upon the average net asset values of each
Class of Shares.
In addition, pursuant to Rule 18f-3, the Trust Fund may allocate the
following fees and expenses to a particular class of Shares; provided that,
nothing in this Plan shall prohibit the Board of Trustees from requiring some or
all of the fees and expenses listed below to be borne by an investment manager
as part of any Investment Advisory Agreement:
<PAGE>
1. transfer agent fees attributable to such class of Shares;
2. printing and postage expenses related to preparing and distributing
materials such as investor reports, notices and prospectuses, reports
and proxies to current investors of such class or to regulatory
agencies with respect to such class;
3. blue sky registration or qualification fees incurred by such class;
4. Securities and Exchange Commission registration fees incurred by such
class;
5. the expense of administrative personnel and services as required to
support the investors of such class;
6. any shareholder servicing fee associated with such class;
7. litigation and other legal expenses relating solely to such class; and
8. fees of the Trust Fund's Trustees incurred with respect to such class.
The initial allocation of class expenses has been reviewed and approved by the
Board of Trustees of the Trust Fund, including a majority of the Trustees who
are not interested persons of the Trust Fund, and any subsequent changes thereto
will be effective only upon approval by a vote of the Trustees of the Trust
Fund, including a majority of the Trustees who are not interested persons of the
Trust Fund.
Income, realized and unrealized capital gains and losses, and any expenses
of a multi-class structure not allocable to a particular class of the Trust Fund
pursuant to this Plan shall be allocated to each class of the Trust Fund based
upon the relative net asset value of such class in relation to the aggregate net
asset value of the Trust Fund. In certain cases, SIFE, Inc. may waive or
reimburse all or a portion of the expenses of a specific class, if consistent
with applicable requirements of the Securities and Exchange Commission and/or
the Internal Revenue Service; the Board of Trustees will monitor any such waiver
or reimbursement to ensure that it does not provide a means for cross-
subsidization between classes.
III. Class Arrangements.
The following summarizes the terms and conditions, including the maximum
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 each particular class of Shares.
Additional details and restrictions regarding such fees and services are set
forth in the Trust Fund's current Prospectus and Statement of Additional
Information.
<PAGE>
<TABLE>
<CAPTION>
A. CLASS A SHARES
- --------------------------------------------------------------------------------------------------
CLASS A-I CLASS A-II
SHARES SHARES
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
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 none none
distributions
- --------------------------------------------------------------------------------------------------
3. Contingent deferred sales charges none none
- --------------------------------------------------------------------------------------------------
4. Rule 12b-1 distribution fees 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 services1 none none
- --------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------------------
(1) Class A-I and Class A-II Shares may enter into a Letter of Intention, for
purposes of reducing commissions payable on purchases, and have certain rights
of accumulation, repayment and beneficiary designation not available to Class B
and Class C shares. There is not charge associated with these additional
features.
B. CLASS B SHARES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
CLASS B SHARES
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Maximum sales load imposed on purchases none
(as a percentage of offering price)
- -------------------------------------------------------------------------------------------------------------------------------
2. Maximum sales load imposed on reinvestment of No CSDC will be imposed on Class B
distributions Shares purchased through reinvestment of
dividends or capital gains.
- -------------------------------------------------------------------------------------------------------------------------------
3. Contingent deferred sales charges Class B Shares which are redeemed within one,
two, three, four, five or six years from the receipt
of a purchase order will be subject to a CSCD of
5.0%, 4.0%, 3.0%, 3.0%, 2.0% and 1.0%, respectively,
of the dollar amount at the time of purchase.
- -------------------------------------------------------------------------------------------------------------------------------
4. Rule 12b-1 distribution fees 0.75%
- -------------------------------------------------------------------------------------------------------------------------------
5. Redemption fees [see Item #3, above]
- -------------------------------------------------------------------------------------------------------------------------------
6. Investor servicing fees 0.25%
- -------------------------------------------------------------------------------------------------------------------------------
7. Conversion features Class B Shares automatically convert to Class A-II Shares
on the sixth anniversary of purchase on the basis of
net asset values, without any charge
- -------------------------------------------------------------------------------------------------------------------------------
8. Management fees 1.25%
- -------------------------------------------------------------------------------------------------------------------------------
9. Other class-specific Investor services none
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
C. CLASS C SHARES
<TABLE>
<CAPTION>
CLASS C SHARES
<S> <C>
1. Maximum sales load imposed on purchases 1.0%
(as a percentage of offering price)
2. Maximum sales load imposed on reinvestment of none
distributions
3. Contingent deferred sales charges Class C Shares redeemed prior to one year
from the date of purchase are subject to a
CDSC of 1.0% of the original purchase amount
4. Rule 12b-1 distribution fees 0.75%
5. Redemption fees [see Item #3, above]
6. Investor servicing fees 0.25%
7. Conversion features Class C Shares are not convertible to any
other class of shares
8. Management fees 1.25%
9. Other class-specific Investor services none
</TABLE>
IV. Board Review.
The Board of Trustees of the Trust Fund shall review the Plan as it deems
necessary. Prior to any material amendment(s) to the Plan, the Trust Fund's
Board of Trustees, including a majority of the Trustees that are not interested
persons of the Trust 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
Trust Fund, individually, and the Trust Fund as a whole. In considering whether
to approve any proposed amendment(s) to the Plan, the Trustees of the Trust Fund
shall request and evaluate such information as they may consider reasonably
necessary or appropriate.
Date:
-------------------
By:
---------------------
Robert Linderman
Assistant Secretary
