<PAGE>
[GRAPHIC]
S I F E T r u s t F u n d
S E M I - A N N U A L R E P O R T
J u n e 3 0, 1 9 9 7
[LOGO]
<PAGE>
OFFICERS AND DIRECTORS OF THE TRUST FUND
Haig G. Markdikian
CHAIRMAN OF THE BOARD AND DIRECTOR
GENERAL PARTNER, GEORGE M. MARDIKIAN ENTERPRISES
MANAGING DIRECTOR, THE UNITED BROADCASTING CORP.
TRUSTEE, WILLIAM SAROYAN FOUNDATION
Walter S. Newman
VICE CHAIRMAN AND DIRECTOR
OWNER, WSN ENTERPRISES
PRESIDENT, SAN FRANCISCO CITY PLANNING COMMISSION (RETIRED)
PRESIDENT, SAN FRANCISCO REDEVELOPMENT AGENCY (RETIRED)
PRESIDENT, SAN FRANCISCO FINE ARTS MUSEUMS (RETIRED)
Charles W. Froehlich, Jr.
DIRECTOR
JUSTICE OF COURT OF APPEAL (RETIRED)
MEDIATOR - FROEHLICH & PETERSON DISPUTE RESOLUTION
John A. Meany
DIRECTOR
PRESIDENT, JOHN'S VALLEY FOODS, INC.
PRESIDENT, JOHN'S TOWN AND COUNTRY MARKETS, INC.
Diane Howard Belding
DIRECTOR
OWNER, HOWARD & HOWARD RANCH
Neil L. Diver
DIRECTOR
CHAIRMAN, AMERIWOOD INDUSTRIES INTERNATIONAL CORP.
DIRECTOR, FORCEON CORP.
Bruce W. Woods
PRESIDENT AND DIRECTOR
CHIEF EXECUTIVE OFFICER, SIFE
Sam A. Marchese
DIRECTOR EMERITUS
PRESIDENT, TREASURER AND CHIEF EXECUTIVE OFFICER, SIFE (RETIRED)
DIRECTOR, SCOTT COMPANY
PRESIDENT, FOUNDATION FOR BROTHERHOOD
Jack Gee
CHIEF FINANCIAL OFFICER AND TREASURER
OFFICERS AND DIRECTORS OF THE MANAGEMENT COMPANY
Bruce W. Woods
PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
Michael J. Stead
CHIEF INVESTMENT OFFICER, PORTFOLIO MANAGER AND DIRECTOR
Charles W. Froehlich, Jr.
SECRETARY AND DIRECTOR
John W. Woods
SENIOR VICE PRESIDENT (RETIRED) AND DIRECTOR
Sam A. Marchese
PRESIDENT, CHIEF EXECUTIVE OFFICER (RETIRED) AND DIRECTOR
Sharon E. Tudisco
VICE PRESIDENT (RETIRED) AND DIRECTOR
Diane Howard Belding
DIRECTOR
Jack Gee
CHIEF FINANCIAL OFFICER AND TREASURER
SIFE'S TOP TEN HOLDINGS (AS OF 6/30/97)
<TABLE>
<S> <C> <C>
1. BankBoston Corp. ............4.1%
2. Republic NY Corp.............4.0%
3. Chase Manhattan Corp. .......3.9%
4. Citicorp.....................3.9%
5. National City Corp. .........2.8%
6. First Chicago NBD Corp. .....2.3%
7. Bankers Trust NY Corp. ......2.3%
8. Barnett Banks Inc. ..........2.1%
9. State Street Corp. ..........2.0%
10. First Tennessee National.....1.9%
</TABLE>
THIS REPORT IS FOR THE INFORMATION OF SHAREHOLDERS OF SIFE TRUST FUND, BUT IT
MAY ALSO BE USED AS SALES LITERATURE WHEN PRECEDED OR ACCOMPANIED BY THE
CURRENT PROSPECTUS, WHICH GIVES DETAILS ABOUT SALES CHARGES, INVESTMENT
OBJECTIVES AND OPERATING POLICIES OF THE FUND. SUMMARY RESULTS ARE DOCUMENTED
IN THE CURRENT STATEMENT OF ADDITIONAL INFORMATION. THE RETURN AND PRINCIPAL
VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. SIFE TRUST FUND
IS NOT A BANK, AND FUND SHARES ARE NOT BACKED BY ANY BANK OR INSURED BY THE
FDIC, OR INSURED BY ANY OTHER GOVERNMENT AGENCY. SIFE IS THE DISTRIBUTOR FOR
SIFE TRUST FUND.
[PHOTO]
Bruce W. Woods
PRESIDENT &
CHIEF EXECUTIVE OFFICER
[PHOTO]
Michael J. Stead
PORTFOLIO MANAGER &
CHIEF INVESTMENT OFFICER
<PAGE>
L E T T E R T O T H E
INVESTORS
Dear Fellow SIFE Investor,
As we enter the second half of 1997, the nation finds itself in one of the
most remarkable economic and investment climates in history. The economy
continues to grow at a steady pace, inflation is in check, unemployment is at
record lows, prospects for a balanced federal budget are improving, and the
world is in a relative state of peace. To top it off, interest rates have
remained low and steady. Rarely has such sustained prosperity been
accompanied by consistently low interest rates and low inflation.
These factors have fueled a remarkable rise in stock prices, and SIFE
shareholders have again benefited significantly. The Fund's return for the
first half of 1997 has been as follows: Class A-I Shares 16.80%, Class A-II
Shares 16.61%. We congratulate our portfolio team for this year-to-date
performance. We should also note that two new types of shares were introduced
on May 1st of this year, Class B and Class C shares.
Looking at the remainder of 1997, the Fund's management has some concerns
that the stocks of some companies are getting higher than they should, given
their earnings outlook and potential for growth. In response to this concern,
the Fund has sold some of these stocks and is in the process of reallocating
the dollars into other stocks which we believe are better values at this time.
This move explains the temporarily high cash position of the Fund.
Barring any significant national or international developments, we expect
the steady growth of the U.S. economy to continue throughout 1997 and perhaps
much longer.
How much longer this situation will fuel the bull market is anybody's
guess. Our strategy will be what it has always been; to buy the stock of good
companies, that are good values and have considerable upside potential. This
conservative approach has worked for the Fund in many types of market
conditions, and we intend to stick with it.
On behalf of the entire organization, I thank you for entrusting your
investments to SIFE.
We will continue our efforts to consistently build wealth for our
investors, while providing exceptional service in the process.
Sincerely,
/S/ Bruce W. Woods
Bruce W. Woods
PRESIDENT & CHIEF EXECUTIVE OFFICER
SIFE INVESTOR SINCE 1964
<PAGE>
INVESTMENT
P O R T F O L I O
<TABLE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED) NUMBER OF SHARES MARKET VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS: 76.1%
BANKS: 59.1%
Amcore Financial, Inc. 40,000 $ 1,090,000
Amsouth Bancorporation 75,000 2,835,937
Banco De A. Edwards 10,000 208,750
Banco De Galicia Y Buenos Aires 10,000 263,750
Banco Santiago 10,000 255,000
Banco Frances Del Rio De La Plata S.A. 10,000 325,000
Banco Santander - Chile 17,500 258,125
BankBoston Corp. 525,000 37,996,875
Bank of New York Co., Inc. 300,000 13,087,500
Bankers Trust New York Corp. 241,600 21,049,400
Barnett Banks, Inc. 374,500 19,661,250
Chase Manhattan Corp. 375,000 36,398,437
Chittenden Corp. 88,125 3,018,281
Citicorp 300,000 36,168,750
City National Corp. 116,283 2,798,060
Collective Bancorp, Inc. 16,000 718,000
Colonial BancGroup, Inc. 146,800 3,559,900
Comerica, Inc. 204,600 13,912,800
Community First Bankshares, Inc. 197,612 7,583,360
Compass Bancshares, Inc. 301,600 10,141,300
Corestates Financial Corp. 155,000 8,331,250
Crestar Financial Corp. 250,000 9,718,750
CU Bancorp 151,400 2,308,850
Cullen Frost Bankers, Inc. 118,400 5,017,200
First American Corp. of Tennessee 250,000 9,593,750
First Bank System, Inc. 200,000 17,075,000
First Chicago NBD Corp. 350,000 21,175,000
First Commerce Corp. 196,000 8,624,000
First Empire State Corp. 34,100 11,491,700
First Tennessee National Corp. 371,500 17,832,000
Fleet Financial Group, Inc. 110,000 6,957,500
George Mason Bankshares, Inc. 108,585 3,148,965
Hibernia Corp. 250,000 3,484,375
Imperial Bancorp* 302,940 8,747,393
Independent Bank Corp. MA 543,000 6,991,125
Marshall & Ilsley Corp. 21,500 873,437
Mellon Bank Corp. 275,000 12,409,375
Mercantile Bancorporation, Inc. 170,000 10,327,500
Morgan, J.P. & Co., Inc. 150,000 15,656,250
National City Corp. 500,000 26,250,000
Northern Trust Corp. 151,600 7,333,650
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
I N V E S T M E N T P O R T F O L I O
<TABLE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED) NUMBER OF SHARES MARKET VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONT'D...
Norwest Corp. 127,000 $ 7,143,773
PNC Bank Corp. 220,000 9,185,000
Regions Financial Corp. 87,200 2,757,700
Republic New York Corp. 345,000 37,087,500
Starbanc Corp. 110,000 4,647,500
Sterling Bancshares, Inc. 217,500 4,078,125
Summit Bancorp 164,900 8,265,613
Summit Bancshares, Inc. Texas 150,000 4,125,000
TCF Financial Corp. 70,600 3,485,875
Union Planters Corp. 330,000 17,118,750
U.S Bancorp 100,000 6,412,500
Wachovia Corp. 189,200 11,032,725
Westamerica Bancorporation 90,000 6,840,000
----------------------
546,857,606
- -----------------------------------------------------------------------------------------
CONSUMER FINANCIAL SERVICES: 4.6%
Federal Home Loan Mortgage Co 133,300 4,665,500
Federal National Mortgage Association 300,000 13,087,500
Green Tree Financial Corp. 100,000 3,562,500
MGIC Investment Corp. 61,000 2,924,188
State Street Corp. 400,000 18,500,000
----------------------
42,739,688
- -----------------------------------------------------------------------------------------
BROKERAGES: 3.3%
Alex Brown, Inc. 75,000 5,296,875
Edwards, A.G., Inc. 43,000 1,838,250
Inter Regional Financial Group, Inc 52,300 2,193,331
Legg Mason, Inc. 45,000 2,421,563
Lehman Brothers Holding, Inc. 100,000 4,050,000
McDonald & Co. 45,000 2,064,375
Morgan Keegan, Inc. 80,000 1,590,000
Morgan Stanley, Dean Witter Discover & Co. 50,000 2,153,125
Paine Webber Group, Inc. 37,500 1,312,500
Raymond James Financial, Inc. 80,250 2,196,844
Schwab, Charles Corp. 132,000 5,346,000
----------------------
30,462,863
- -----------------------------------------------------------------------------------------
INSURANCE: 3.1%
AFLAC, Inc. 100,000 4,725,000
American Express Co. 100,000 7,450,000
American International Group, Inc. 37,000 5,526,875
Equitable of Iowa Companies 84,000 4,704,000
Fremont General Corp. 15,000 603,750
Sunamerica Inc. 90,000 4,387,500
Transatlantic Holdings Inc. 15,000 1,488,750
----------------------
28,885,875
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
I N V E S T M E N T P O R T F O L I O
<TABLE>
<CAPTION>
JUNE 30, 1997 (UNAUDITED) NUMBER OF SHARES MARKET VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONT'D...
THRIFTS: 2.2%
Charter One Financial, Inc. 130,550 $ 7,033,381
North Fork Bancorp, Inc. 464,488 9,928,431
Virginia First Financial Corp. 162,500 3,656,250
----------------------
20,618,062
- -----------------------------------------------------------------------------------------
CONSUMER NON-DURABLE PRODUCTS: 2.2%
Carlisle Companies, Inc. 34,200 1,192,725
Clayton Homes, Inc. 100,000 1,437,500
Dollar General Corp. 100,000 3,762,500
Idex Corp. 5,000 165,000
Lancaster Colony Corp. 11,200 541,800
Lowes Companies Inc. 148,500 5,513,062
Sealed Air Corp.* 165,000 7,837,500
----------------------
20,450,087
- -----------------------------------------------------------------------------------------
PHARMACEUTICALS AND HEALTHCARE: 1.2%
Abbott Laboratories 100,000 6,675,000
Healthcare Compare CP Com* 8,700 455,662
Johnson & Johnson 50,000 3,218,750
Rotech Medical* 11,100 222,694
----------------------
10,572,106
- -----------------------------------------------------------------------------------------
TECHNOLOGY: 0.4%
Intel Corp. 27,000 3,844,969
- -----------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $398,094,805) 704,431,256
----------------------
REPURCHASE AGREEMENTS: 23.8%
State Street Bank and Trust Company, 5.15%, due 07/01/97
Collateral: U.S. government obligations, market value of $180,429,800 176,889,000
State Street Bank and Trust Company, 5.15%, due 07/20/97
Collateral: U.S. government obligations, market value of $44,693,500 42,732,000
----------------------
TOTAL REPURCHASE AGREEMENTS (COST $219,621,000) 219,621,000
----------------------
TOTAL INVESTMENTS (cost $617,715,805): 99.9% 924,052,256
OTHER ASSETS AND LIABILITIES, NET: 0.1% 903,576
----------------------
NET ASSETS: 100.0% $ 924,955,832
----------------------
----------------------
</TABLE>
*Non-income producing
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
I N V E S T M E N T P O R T F O L I O
OPEN CALL OPTIONS AT JUNE 30, 1997:
<TABLE>
<CAPTION>
EXPIRATION STRIKE SHARES MARKET
DATE PRICE OPTIONED VALUE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BANKS:
Bank of New York Co., Inc. Aug, 97 45 50,000 $ 50,000
BankBoston Corp. Jul, 97 80 33,000 6,188
Comerica, Inc. Jul, 97 65 35,000 109,375
Comerica, Inc. Jul, 97 70 30,000 9,375
Crestar Financial Corp. Jul, 97 45 180,000 22,500
Mellon Bank Corp. Jul, 97 47.5 71,000 26,625
Mercantile Bancorporation, Inc. Jul, 97 65 55,000 13,750
Northern Trust Corp. Jul, 97 55 59,000 --
Norwest Corp. Jul, 97 60 46,000 14,375
PNC Bank Corp. Jul, 97 45 50,000 --
Summit Bancorp Jul, 97 55 74,000 --
-----------
252,188
-----------
THRIFTS:
North Fork Bancorp, Inc. Jul, 97 22.5 157,000 19,625
-----------
TOTAL CALL OPTIONS (PREMIUMS RECEIVED $720,093) 271,813
-----------
</TABLE>
OPEN PUT OPTIONS AT JUNE 30, 1997:
<TABLE>
<CAPTION>
MARKET VALUE
EXPIRATION STRIKE NUMBER OF COVERED BY
DATE PRICE CONTRACTS CONTRACTS
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BANKS:
BankAmerica Corp. Jul, 97 57.5 4,000 --
Bankers Trust New York Corp. Jul, 97 85 1,730 129,750
First Chicago NBD Corp. Jul, 97 60 1,500 196,875
TCF Financial Corp. Jul, 97 45 270 --
Union Planters Corp. Jul, 97 50 2,000 87,500
------------
414,125
------------
BROKERAGES:
Schwab, Charles Corp Jul, 97 37.5 2,000 62,500
INSURANCE:
American Express Co. Jul, 97 70 1,000 50,000
OTHER:
Dow Jones & Co. Jul, 97 40 500 43,750
------------
TOTAL PUT OPTIONS (PREMIUMS RECEIVED $867,178) 570,375
------------
TOTAL CALL AND PUT OPTIONS WRITTEN $ 842,188
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
S T A T E M E N T O F
ASSETS & LIABILITIES
June 30, 1997 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at market (cost $398,094,805) $ 704,431,256
Repurchase agreements 219,621,000
Cash 1,132,662
Receivables for:
Dividends 1,663,243
Sale of fund shares 431,847
Investment securities sold 313,960
-------------
TOTAL ASSETS 927,593,968
-------------
LIABILITIES:
Open call and put options, at market
(premiums received, $1,587,271) 842,188
Payables for:
SIFE (the "Management Company") 992,548
Investment securities purchased 803,400
-------------
TOTAL LIABILITIES 2,638,136
-------------
NET ASSETS $ 924,955,832
-------------
-------------
CLASS A-I:
Net asset value per share
($873,476,879 divided by 154,632,238 shares outstanding) $ 5.65
-------------
-------------
Maximum offering price per share (100/95 of $5.65) $ 5.95
-------------
-------------
CLASS A-II:
Net asset value per share
($49,357,141 divided by 8,737,730 shares outstanding) $ 5.65
-------------
-------------
Maximum offering price per share (100/95 of $5.65) $ 5.95
-------------
-------------
CLASS B:
Net asset value and offering price per share
($1,939,426 divided by 343,338 shares outstanding) $ 5.65
-------------
-------------
CLASS C:
Net asset value per share
($182,386 divided by 32,288 shares outstanding) $ 5.65
-------------
-------------
Maximum offering price per share (100/99 of $5.65) $ 5.71
-------------
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
S T A T E M E N T O F
OPERATIONS
For the six month period ended June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends $ 8,909,514
Interest 2,620,347
Other income 85,493
------------
TOTAL INVESTMENT INCOME $ 11,615,354
EXPENSES:
Management fees 5,364,303
Service and distribution expenses 45,437
------------
TOTAL EXPENSES 5,409,740
-------------
NET INVESTMENT INCOME 6,205,614
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain 42,378,809
Loss on expiration of option contracts (2,719,787)
Net increase in unrealized appreciation
of investments during the period 85,884,912
------------
NET GAIN ON INVESTMENTS 125,543,934
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 131,749,548
-------------
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- -------------------------------------------------------------------------------
10-YEAR COMPARISON WITH S&P 500
(June 30, 1987 - June 30, 1997)
[GRAPHIC]
This chart represents what would have happened with an investment of $9,500
on June 30, 1987 to June 30, 1997 ($9,500 represents the maximum sales charge
deducted from a $10,000 investment). Past results are no indication of future
performance.
<PAGE>
S T A T E M E N T S O F C H A N G E S I N
NET ASSETS
For the six months ended June 30, 1997 (unaudited)
and the year ended December 31, 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
(Unaudited)
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income $ 6,205,614 $ 12,807,869
Net realized gain from
investment transactions 39,659,022 116,774,912
Net increase in unrealized
appreciation of investments 85,884,912 39,853,498
------------- -------------
Net increase in net assets
resulting from operations 131,749,548 169,436,279
------------- -------------
DISTRIBUTIONS PAID TO INVESTORS:
From net investment income:
Class A-I (4,563,745) (12,534,678)
Class A-II (151,623) (139,373)
From net realized gain on investments:
Class A-I -- (122,196,058)
Class A-II -- (2,364,853)
------------- -------------
Total distributions (4,715,368) (137,234,962)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Increase from capital shares
sold and reinvested 65,053,285 209,992,227)
Decrease from capital shares
repurchased (54,514,824) (68,957,955)
------------- -------------
Net increase from capital share transactions 10,538,461 141,034,272
------------- -------------
Total increase in net assets 137,572,641 173,235,589
NET ASSETS:
Beginning of period 787,383,191 614,147,602
------------- -------------
End of period $ 924,955,832 $ 787,383,191
------------- -------------
------------- -------------
NET ASSETS CONSIST OF:
Units of beneficial interests $ 556,482,888 $ 545,199,343
Undistributed net investment income 1,538,552 48,306
Undistributed net realized gain on sale of
investment securities and option contracts 60,597,941 20,938,919
Unrealized appreciation of
investment securities 306,336,451 221,196,623
------------- -------------
$ 924,955,832 $ 787,383,191
------------- -------------
------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
FINANCIAL
H I G H L I G H T S
<TABLE>
<CAPTION>
Class A-I Class A-II Class B Class C
-------------------------------------------- ------------------ ---------- ----------
Years Ended
---------------------------------
1997* 1996 1995 1994 1993 1992 1997* 1996** 1997*** 1997***
----- ---- ---- ---- ---- ---- ----- ------ ------- -------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
FOR THE YEAR OR PERIOD ENDED:
Net asset value,
beginning of period $ 4.86 $ 4.58 $ 3.55 $ 3.83 $ 3.68 $ 2.90 $ 4.86 $ 4.73 $ 5.41 $ 5.41
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.02 0.09 0.10 0.09 0.07 0.06 0.01 0.07 0.01 0.01
Net realized and unrealized
gains (losses) on securities 0.80 1.16 1.68 (0.13) 0.29 0.92 0.80 1.01 0.23 0.23
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment operations 0.82 1.25 1.78 (0.04) 0.36 0.98 0.81 1.08 0.24 0.24
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS TO INVESTORS:
Dividends from net
investment income (0.03) (0.09) (0.10) (0.09) (0.07) (0.06) (0.02) (0.07) -- --
Distributions from
capital gains -- (0.88) (0.65) (0.15) (0.14) (0.14) -- (0.88) -- --
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.03) (0.97) (0.75) (0.24) (0.21) (0.20) (0.02) (0.95) -- --
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $ 5.65 $ 4.86 $ 4.58 $ 3.55 $ 3.83 $ 3.68 $ 5.65 $ 4.86 $ 5.65 $ 5.65
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN**** 16.8% 27.4% 49.9% (1.5%) 9.3% 33.9% 16.6% 22.8% 4.4% 4.4%
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $ 873 $ 769 $ 614 $ 410 $ 414 $ 345 $ 49 $ 18 $ 2 $ --
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Ratios to average net assets:
Expenses+ 1.26% 1.20% 1.03% 0.94% 1.02% 0.99% 1.52% 1.48% 1.93% 1.73%
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Net investment income+ 1.47% 1.82% 2.25% 2.27% 1.69% 1.73% 1.25% 1.77% 0.64% 0.85%
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Portfolio turnover rate 43.7% 140.2% 93.5% 25.2% 28.7% 33.4% 43.7% 95.8% 6.9% 6.9%
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Average commission rate 0.04% 0.03% n/a n/a n/a n/a 0.04% 0.03% 0.04% 0.04%
------ ------- ------ ------ ------ ------
------ ------- ------ ------ ------ ------
* For the six months ended June 30, 1997.
** Commencing May 1, 1996, the Fund began offering Class A-II shares
*** Commencing May 1, 1997, the Fund began offering Class B and C shares
**** Sales loads are not reflected in total return.
+ Annualized.
</TABLE>
<PAGE>
N O T E S T O F I N A N C I A L
STATEMENTS
NOTE 1.
SIGNIFICANT ACCOUNTING POLICIES
SIFE Trust Fund (the "Trust Fund") is an open-end diversified management
investment company offering its shares on a continuous basis to the public.
The Trust Fund was organized as a business trust on February 28, 1997 under
the laws of the State of Delaware, with State Street Bank and Trust Company
(the "Trustee") as Trustee. 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 Trust Fund is registered under the Investment Company Act
of 1940, as amended.
The Trust Fund offers four classes of shares: Class A-I, Class A-II, Class B
and Class C. 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. The offering of
Class A-II shares began May 1, 1996 and the offering of Class B and C shares
began May 1, 1997. Realized and unrealized gains or losses and investment
income, net of management fees, are allocated daily to each class of shares
based upon the relative proportion of net assets of each class. Each class of
shares differs in its respective distribution expenses and certain other
class-specific fees and expenses.
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosure in the financial
statements. Actual results could differ from those estimates.
The following is a summary of significant account policies.
PORTFOLIO VALUATION:
Portfolio 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 trade date (date the order to
buy or sell is executed). Realized gains or losses on security transactions
are recorded on the specific identified cost basis. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the accrual
basis.
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.
<PAGE>
N O T E S T O F I N A N C I A L S T A T E M E N T S
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 Trust Fund's custodian
bank until maturity of the repurchase agreements. Provisions of the
agreements ensure that the market value of the collateral is sufficient in
the event of default; however, in the event of default or bankruptcy by the
other party to the agreements, realization and/or retention of the collateral
may be subject to legal proceedings.
NOTE 2.
AFFILIATED PARTY TRANSACTIONS - AGREEMENTS
WITH SIFE (THE "MANAGEMENT COMPANY")
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. 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, the 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.
<PAGE>
N O T E S T O F I N A N C I A L S T A T E M E N T S
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.
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 six
month period ended June 30, 1997, management fees paid by the Trust Fund
totaled $5,364,303.
DISTRIBUTION PLAN AND UNDERWRITING AGREEMENT:
Pursuant to Rule 12b-1 under the 1940 Act, the Company's Board of Directors
has adopted separate distribution plans with respect to the Trust Fund's
Class A-II, Class B and Class C shares, pursuant to which the Trust Fund
reimburses the Management Company for a portion of its shareholder servicing
and distribution expenses.
Under the Class A-II Plan, the Trust Fund may pay the Management Company a
distribution fee at the annualized rate of 0.25% of the average daily net
assets of the Trust Fund's Class A-IIshares for its expenditures incurred in
providing services as a distributor. Under the Class B and Class C Plan, the
Trust Fund may pay the Management Company a distribution fee at the annulized
rate of 0.75% of the average daily net assets of the Trust Fund's Class B and
Class C shares for its expenditures incurred in providing services as
distributor, and may pay the Management Company a service fee at the
annualized rate of up to 0.25% of the average daily net assets of the Trust
Fund's Class B and Class C shares for its expenditures incurred in servicing
and maintaining shareholder accounts.
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 A-I and Class A-II shares. 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.
Commissions retained by the Management Company totaled $1,557,971 for the six
months ended June 30, 1997.
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 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 subject to an initial sales charge of 1%. Any shares
redeemed prior to one year following the initial purchase are subject to a 1%
CDSC. Commissions are deducted from the gross proceeds received from the sale
of investment shares, and as such are not expenses of the Trust Fund.
Certain officers and directors of the Trust Fund are also officers and
directors of the Management Company. On June 30, 1997, the Management Company
owned 453,809 Class A-I shares of the Trust Fund.
NOTE 3.
UNREALIZED APPRECIATION OF INVESTMENTS
On June 30, 1997, 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 $306,632,625
Aggregate gross unrealized depreciation
for all investments in which there is an
excess of tax cost over value (296,174)
------------
Net unrealized appreciation $306,336,451
------------
------------
The tax cost basis used in the above calculation is the same as that used for
financial statement purposes.
<PAGE>
N O T E S T O F I N A N C I A L S T A T E M E N T S
NOTE 4.
CAPITAL SHARE TRANSACTIONS
The following is a summary of share transactions for the periods ended June 30,
1997 and December 31, 1996:
<TABLE>
<CAPTION>
1997 1996
---------------------- ---------------------------
CLASS A-I SHARES AMOUNT SHARES AMOUNT
- --------- --------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 5,475,922 $ 26,708,464 11,408,711 $ 55,568,657
Shares issued in connection
with reinvestment of
distributions 840,263 4,563,745 26,405,051 134,730,736
--------- ------------ ---------- ------------
6,316,185 31,272,209 37,813,762 190,299,393
Shares repurchased (9,826,699) (49,215,582) (13,793,626) (68,443,396)
--------- ------------ ---------- ------------
Net (decrease) increase (3,510,514) $(17,943,373) 24,020,136 $121,855,997
--------- ------------ ---------- ------------
--------- ------------ ---------- ------------
</TABLE>
The following is a summary of share transactions for the periods ended
June 30, 1997 and the period May 1, 1996 (commencement of operations) to
December 31, 1996:
<TABLE>
<CAPTION>
1997 1996
---------------------- ---------------------------
CLASS A-II SHARES AMOUNT SHARES AMOUNT
- --------- --------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Shares sold 5,979,218 $ 31,533,294 3,363,648 $ 17,188,608
Shares issued in connection
with reinvestment of
distributions 27,890 151,623 491,508 2,504,226
--------- ------------ ---------- -------------
6,007,108 31,684,917 3,855,156 19,692,834
Shares repurchased (1,024,121) (5,275,081) (100,413) (514,559)
--------- ------------ ---------- -------------
Net increase 4,982,987 $ 26,409,836 3,754,743 $ 19,178,275
--------- ------------ ---------- -------------
--------- ------------ ---------- -------------
</TABLE>
The following is a summary of share transactions for the period May 1, 1997
(commencement of operations) to June 30, 1997:
1997
------------------------
CLASS B SHARES AMOUNT
- --------- ---------- -----------
Shares sold 347,723 $ 1,920,608
Shares repurchased (4,385) (24,161)
---------- -----------
Net increase 343,338 $ 1,896,477
---------- -----------
---------- -----------
1997
------------------------
CLASS C SHARES AMOUNT
- --------- ---------- -----------
Shares sold 32,288 $ 175,551
---------- -----------
---------- -----------
NOTE 5.
LENDING OF SECURITIES
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 $15,279 for the
six months ended June 30, 1997.
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 June 30, 1997, there were no
securities on loan.
NOTE 6.
PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, other than U.S. government
obligations and short-term investments were $371,317,614 and $473,890,733,
respectively for the six months ended June 30, 1997. There were no purchases
or sales of U.S. goverment obligations by the Trust Fund during the period.
NOTE 7.
CONCENTRATION OF CREDIT RISK
On June 30, 1997, approximately $610,215,356 (65.9% of net assets) of the
Trust Funds investments were in equities of financial institutions.
NOTE 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.
[LOGO]
100 N. Wiget Lane, Walnut Creek, CA 94598
Toll-free 800-231-0356 Telephone 510-988-2400 Fax 510-943-1783
WEB SITE www.sife.com E-MAIL [email protected]
DAILY PRICE INFORMATION 800-553-7433
<PAGE>
[ L O G O ]
P.O. BOX 9007
100 N. Wiget Lane
Walnut Creek, CA
94598-0907
