<PAGE>
1997 ANNUAL REPORT
[LOGO]
1997
36 PROUD YEARS
<PAGE>
CORPORATE PHILOSOPHY
- --------------------
For the past 36 years, SIFE Trust Fund's investment strategy has focused on the
financial sector (the very foundation of our capitalistic system,) and invested
primarily in the stocks of banks, thrifts and other financial institutions. SIFE
is required to invest not less than 30% of the Fund's assets in such financial
institutions. The Fund also invests in equity securities of a diverse portfolio
composed of select service and industrial firms generally regarded as "stable
growth" companies. However the Fund may not invest 25% or more of its assets in
any one industry other than financial institutions. In addition to offering a
variety of accounts including savings, custodial, trustee and several retirement
plans, the Fund provides certain trust privileges which continue for the life of
the account.
<PAGE>
1997 RETURNS*
COAST TO COAST
$1,151,813,566
(NET ASSETS ON DECEMBER 31, 1997)
36 PROUD YEARS
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. AN INVESTOR SHOULD READ THE PROSPECTUS
CAREFULLY BEFORE INVESTING. FOR A FREE PROSPECTUS CALL (800) 524-7433. SIFE,
INC. IS THE DISTRIBUTOR OF SIFE TRUST FUND.
<PAGE>
CONTINUING THE TRADITION
- ------------------------
OVER THE PAST FEW YEARS THE SIFE TRUST FUND HAS BEEN QUIETLY UNDERGOING SOME
EXCITING AND DRAMATIC CHANGES. ACHIEVING RECORD GROWTH*, CREATING NATION-WIDE
AVAILABILITY, GROWING TO OVER ONE BILLION DOLLARS IN ASSETS AND CELEBRATING 36
YEARS OF PROUD SERVICE TO NAME JUST A FEW. IN ADDITION, SIFE HAS USHERED IN A
NEW PRESIDENT, MOVED TO A BETTER FACILITY, UPDATED KEY OPERATIONS AND IMPROVED
SERVICE QUALITY. EVEN THOUGH WE HAVE ATTAINED MANY SIGNIFICANT MILESTONES, WE
ARE NOT STANDING STILL. SIFE IS TAKING AIM WITH PLANS TO BRING YOU, THE
INVESTOR, EVEN BETTER FEATURES AND BENEFITS THAT WILL PROPEL THIS GREAT
INVESTMENT FAR INTO THE FUTURE.
UNLESS OTHERWISE NOTED, THE PERFORMANCE RESULTS DO NOT INCLUDE SALES CHARGES,
WHICH RANGE FROM 0% TO 5% OF DOLLARS INVESTED. ALL TOTALS INCLUDE REINVESTMENT
OF DIVIDENDS AND CAPITAL GAINS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT WILL FLUCTUATE AND AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. DATA QUOTED FOR CLASS A-1 ONLY;
PERFORMANCE FOR OTHER CLASSES WILL VARY DUE TO DIFFERENCES IN FEE STRUCTURES
(SEE FINANCIAL HIGHLIGHTS PAGE).
INVESTORS IN THE TRUST FUND SHOULD NOT TAKE THESE RESULTS TO BE
REPRESENTATIVE OF FUTURE RESULTS. THE FUND PERFORMANCE IS AFFECTED BY MANY
FACTORS INCLUDING: CHANGES IN THE LEVELS OF EQUITY PRICES AND INTEREST RATES,
THE MANAGEMENT COMPANY'S SELECTION OF SPECIFIC SECURITIES FOR THE PORTFOLIO,
AND THE TRUST FUND'S EXPENSE RATIO. SIFE TRUST FUND CONCENTRATES ITS
INVESTMENTS PRIMARILY IN THE FINANCIAL SERVICES SECTOR. BECAUSE SECTOR FUNDS
ARE NARROWLY FOCUSED, THEY TYPICALLY EXHIBIT HIGHER VOLATILITY. PLEASE REFER
TO THE PROSPECTUS FOR A MORE COMPLETE DESCRIPTION OF THE RISKS.
THE STANDARDS AND POOR'S 500 COMPOSITE PRICE INDEX IS A VALUE WEIGHTED PRICE
INDEX COMPOSED OF 500 LARGE CAPITALIZED U.S. STOCKS AND IS REGARDED AS A
BROAD BASED BENCHMARK FOR MARKET CONDITIONS.
<TABLE>
<CAPTION>
*SIFE PERFORMANCE
Average Annual Compounded Total Return
- ---------------------------------------------
min. load 0% max. load 5% S&P 500 years
- ---------------------------------------------
<S> <C> <C> <C>
44.79% 37.55% 33.36% 1
- ---------------------------------------------
24.38% 23.11% 20.27% 5
- ---------------------------------------------
20.74% 20.12% 18.05% 10
</TABLE>
<PAGE>
2
LETTER TO INVESTORS
-------------------
December 31, 1997
Dear Valued SIFE Investor:
Reporting on the year 1997 is both an easy and a pleasant task because SIFE's
performance numbers speak so well for themselves. As you review this annual
report, we hope you will share our pride of accomplishment and reverence for a
tradition of excellence.
The year 1997 was an unusually strong one for the U.S. stock market,
particularly for the financial services industry. The domestic economic
environment of low inflation, low interest rates, and low unemployment was
stable and showed little stress until the fourth quarter. SIFE's portfolio
management team had begun to reduce our weighting of several money center
banks with Asian exposure in mid-1997 and replaced them with other holdings
better situated to profit from the long-range growth of the U.S. and European
economies.
The SIFE Management Company has been able to improve the scope of support
services without increasing annual fees, including the offering of: multiple
share classes, faster processing of distributions, enhanced telephone
privileges, and the relocation of offices to a more accessible structure.
For 36 years, SIFE has maintained the same investment and service philosophy,
and this past year has once again demonstrated its success. That very
success, however, dictates our number one priority for the future...insuring
consistency of management.
You can be confident that, at this very moment, we are examining creative
alternatives to insure that the SIFE management team and the SIFE philosophy
remain unchanged in these challenging times. And when I say "we," I want each
and every one of you to know that no new major initiatives will be undertaken
without full disclosure to and input from our shareholders.
After all, our tremendous growth has only occurred because of the trust invested
in us by you, our loyal shareholders. Please be aware that we reflect upon that
fact every day with appreciation and humility.
Sincerely,
/s/ Bruce W. Woods
Bruce W. Woods
President and CEO
<PAGE>
3
THE FUTURE
----------
As we approach the new millennium my prescription for keeping our Fund in
excellent condition is three-fold; maintain the success of our long standing
investment philosophy, keep our management and portfolio team focused, and
continually look for new and better ways to serve you.
The success of the SIFE Trust Fund has its roots firmly planted in the past.
Thirty-six years ago our fund was founded on a "fundamentalist" investment
philosophy; that same long-term "value" investment strategy is employed by our
company today. My job is to adapt this philosophy to the rapidly changing
business world.
Our current management and portfolio team have perfected the SIFE investment
style. Mike Stead and his team have consistently outperformed the S & P 500
Index average for each of the past three years. The team's ability to analyze
and choose "value" investments within the SIFE strategy continues to prove
successful.
This year we have many new SIFE services planned for your benefit. MY GOAL IS TO
OFFER YOU THE MOST COMPREHENSIVE LEVEL OF SERVICE WHILE CONTINUING TO KEEP COSTS
WELL BELOW THE INDUSTRY AVERAGE. In 1997 we added our automated telephone
purchase, redemption, and transfer system and future plans include even easier
fund access. We also have plans to expand our highly-rated customer service by
adding more telephone representatives and accelerating their training.
At SIFE we are always looking for new investment opportunities within the SIFE
family. A recent survey showed that many of you are interested in new and
different investment alternatives. Currently we are examining the best ways to
bring you quality SIFE investment options that meet your diverse financial
needs.
---------------------------------------------
As we travel together into the future, I want
to assure you of one very important thing, we
are here for you. The decisions we make and
the directions we choose to follow are, as
they have always been, based upon your needs
and well being.
---------------------------------------------
"Investors' needs guide our actions."
Bruce W. Woods, President
<PAGE>
4
THE EXECUTIVE OFFICERS
----------------------
Bruce W. Woods, President and CEO
- --------------------------------------------------------------------------------
When Bruce Woods took the position of President and Chief Executive Officer of
the SIFE Fund in 1996, he brought a great deal of experience and strong
commitment to the SIFE family. Bruce is the touchstone of the SIFE Fund and its
36 year philosophy of "Value" investing. Bruce constantly reviews the overall
direction of SIFE in order to assure the satisfaction of investors' needs.
Mike Stead, Portfolio Manager & CIO
- --------------------------------------------------------------------------------
As Portfolio Manager and Chief Investment Officer, Mike is responsible for the
performance and composition of the Fund. Based on the long standing SIFE
investment philosophy, Mike sets the investment goals and designs the strategies
to meet them. Staying focused under turbulent market conditions, analyzing
industry trends, meeting with the heads of corporations, and continually
adapting to market changes, are all part of Mike's job.
Paula Pearlstein, COO
- --------------------------------------------------------------------------------
As Chief Operating Officer, Paula focuses on continuously improving the quality
of service provided to our clients. With the help of the management team, Paula
oversees the areas of client services, technology, sales and marketing,
broker-dealer services, operations and accounting. Paula is committed to
"Redefining Service Excellence" in the mutual fund industry.
<PAGE>
5
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments in securities, at market (cost $588,536,157) $ 1,086,754,194
Repurchase agreements 61,658,000
Cash 1,523,656
Receivables for:
Dividends 2,135,850
Fund shares sold 3,399,365
---------------
Total assets 1,155,471,065
---------------
LIABILITIES:
Open call and put options, at market (premiums received, $54,248) -
Payables for:
SIFE (the "Management Company") 1,226,942
Dividends 2,156,055
Fund shares repurchased 274,502
---------------
Total liabilities 3,657,499
---------------
Net assets $ 1,151,813,566
---------------
---------------
CLASS A-I:
Net asset value per share ($1,049,450,929 DIVIDED BY 162,597,714
shares outstanding) $ 6.45
---------------
---------------
Maximum offering price per share (100/95 of $6.45) $ 6.79
---------------
---------------
CLASS A-II:
Net asset value per share ($84,927,293 DIVIDED BY 13,152,710
shares outstanding) $ 6.46
---------------
---------------
Maximum offering price per share (100/95 of $6.46) $ 6.80
---------------
---------------
CLASS B:
Net asset value and offering price per share ($16,115,291
DIVIDED BY 2,496,982 shares outstanding $ 6.45
---------------
---------------
CLASS C:
Net asset value per share ($1,320,053 DIVIDED BY 204,388 shares outstanding) $ 6.46
---------------
---------------
Maximum offering price per share (100/99 of $6.46) $ 6.53
---------------
---------------
</TABLE>
See Notes To Financial Statements SIFE Trust Fund
<PAGE>
6
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER 31, 1997 NUMBER OF SHARES MARKET VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS: 94.4%
BANKS: 79.8%
Amsouth Bancorporation 197,200 $ 10,710,425
Banc One Corp. 30,000 1,629,375
BankAmerica Corp. 615,000 44,895,000
BankBoston Corp. 500,000 46,968,750
Bank of New York Co., Inc. 300,000 17,343,750
Bankers Trust New York Corp. (See Note 8) 421,031 47,339,673
Barnett Banks, Inc. 274,500 19,729,688
BB&T Corp. 53,048 3,398,396
Centura Banks Inc. 100,000 6,900,000
CFX Corp. 7,700 235,812
Chase Manhattan Corp. 490,000 53,655,000
Chittenden Corp. 110,156 3,855,469
Citicorp 250,000 31,546,875
City National Corp. 116,283 4,295,203
Colonial BancGroup, Inc. 146,800 5,055,425
Comerica, Inc. 174,600 15,757,650
Community First Bankshares, Inc. 172,512 9,186,264
Compass Bancshares, Inc. 301,600 13,195,000
Corestates Financial Corp. 100,000 8,050,000
Crestar Financial Corp. 250,000 14,250,000
Cullen Frost Bankers, Inc. 118,400 7,185,400
Deposit Guaranty Corp. 155,000 8,815,625
First American Corp. 250,000 12,437,500
First Chicago NBD Corp. 415,000 34,652,500
First Commerce Corp. 196,000 13,181,000
First Empire State Corp. 34,100 15,856,500
First of America Bank Corp. 25,000 1,928,125
First Tennessee National Corp. 383,500 25,598,625
</TABLE>
See Notes To Financial Statements SIFE Trust Fund
<PAGE>
7
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER 31, 1997 NUMBER OF SHARES MARKET VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED
BANKS, CONTINUED
First Union Corp. 250,000 $ 12,812,500
Firstar Corp. 50,000 2,121,875
Fleet Financial Group, Inc. 730,000 54,841,250
George Mason Bankshares, Inc. 108,585 4,261,961
Hibernia Corp. 250,000 4,718,750
Imperial Bancorp * 302,940 14,938,729
Independent Bank Corp. 541,000 9,940,875
J.P. Morgan & Co., Inc. 250,000 28,218,750
KeyCorp 160,000 11,330,000
Mellon Bank Corp. 306,900 18,605,813
Mercantile Bancorporation, Inc. 135,000 8,302,500
National City Corp. 500,000 32,875,000
Northern Trust Corp. 151,600 10,574,100
North Fork Bancorp Inc. 698,000 23,557,500
Norwest Corp. 254,000 9,842,531
PNC Bank Corp. 230,000 13,095,625
Regions Financial Corp. 87,200 3,678,750
Republic New York Corp. 295,000 33,685,313
Sovereign Bancorp 50,000 1,037,500
Star Banc Corp. 295,500 16,954,312
Sterling Bancshares, Inc. 217,500 4,404,375
Summit Bancorp 307,830 16,430,426
Summit Bancshares, Inc. 300,000 6,300,000
TCF Financial Corp. 181,200 6,149,475
Union Planters Corp. 355,000 24,117,812
U.S. Bancorp 238,000 26,641,125
UST Corp. 42,000 1,165,500
Wachovia Corp. 389,200 31,573,850
Westamerica Bancorporation 90,000 9,202,500
------------
919,031,727
------------
</TABLE>
See Notes To Financial Statements SIFE Trust Fund
<PAGE>
8
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER 31, 1997 NUMBER OF SHARES MARKET VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED
CONSUMER FINANCIAL SERVICES: 4.9%
Federal Home Loan Mortgage Co. 133,300 5,590,269
Federal National Mortgage Association 300,000 17,118,750
MGIC Investment Corp. 61,000 4,056,500
State Street Corp. 500,000 29,093,750
------------
55,859,269
------------
BROKERAGES: 3.3%
Dain Rauscher Corp. 52,300 3,608,700
Edwards, A.G., Inc. 64,500 2,563,875
Legg Mason, Inc. 60,000 3,356,250
Lehman Brothers Holding, Inc. 100,000 5,100,000
McDonald & Co. 90,000 2,553,750
Merrill Lynch & Co., Inc. 15,000 1,094,062
Morgan Keegan, Inc. 120,000 3,037,500
Morgan Stanley, Dean Witter Discover & Co. 50,000 2,956,250
Paine Webber Group, Inc. 56,250 1,944,141
Raymond James Financial, Inc. 80,250 3,184,922
The Charles Schwab Corporation 198,000 8,303,625
------------
37,703,075
------------
INSURANCE: 2.5%
AFLAC, Inc. 100,000 5,112,500
American Express Co. 100,000 8,925,000
Fremont General Corp. 22,000 1,204,500
Peoples Heritage Financial Group 121,500 5,589,000
Sunamerica Inc. 135,000 5,771,250
Transatlantic Holdings Inc. 35,000 2,502,500
------------
29,104,750
------------
</TABLE>
See Notes To Financial Statements SIFE Trust Fund
<PAGE>
9
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER 31, 1997 NUMBER OF SHARES MARKET VALUE
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED
CONSUMER NON-DURABLES: 2.3%
Carlisle Companies Inc. 34,200 $ 1,462,050
Clayton Homes Inc. 185,000 3,330,000
Lancaster Colony Corp. 31,200 1,758,900
Lowes Companies Inc. 213,500 10,181,281
Sealed Air * 165,000 10,188,750
--------------
26,920,981
--------------
THRIFTS: 1.6%
Charter One Financial, Inc. 287,278 18,134,392
18,134,392
--------------
TOTAL COMMON STOCKS (COST $588,536,157) 1,086,754,194
--------------
REPURCHASE AGREEMENTS: 5.3%
State Street Bank and Trust Company, 5.15%, due 01/02/98
Collateral: U.S. government obligations, market value of $62,896,150 61,658,000
--------------
TOTAL INVESTMENTS (COST $650,194,157): 99.7% 1,148,412,194
--------------
OTHER ASSETS AND LIABILITIES, NET: 0.3% 3,401,372
--------------
NET ASSETS: 100.0% $1,151,813,566
--------------
--------------
</TABLE>
* Non-income producing
OPEN CALL OPTIONS AT DECEMBER 31, 1997:
<TABLE>
<CAPTION>
EXPIRATION STRIKE SHARES MARKET
DATE PRICE OPTIONED VALUE
----------------------------------------------
<S> <C> <C> <C> <C>
BANKS:
Bankers Trust New York Corp. January 1998 135 100,000 $ -
-------
TOTAL CALL OPTIONS (PREMIUMS RECEIVED $54,248) -
</TABLE>
See Notes To Financial Statements SIFE Trust Fund
<PAGE>
10
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
INCOME:
Dividends $ 18,019,467
Interest 7,000,509
Other Income 96,512
--------------
TOTAL INVESTMENT INCOME $ 25,116,488
--------------
EXPENSES:
Management fees 11,960,037
Service and distribution expenses
Class A-II 128,155
Class B 43,678
Class C 3,748
--------------
TOTAL EXPENSES 12,135,618
--------------
NET INVESTMENT INCOME 12,980,870
--------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain 66,170,750
Loss on expiration of option contracts (1,487,600)
Net increase in unrealized appreciation
of investments during the year 277,075,662
--------------
NET GAIN ON INVESTMENTS 341,758,812
--------------
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 354,739,682
--------------
--------------
</TABLE>
See Notes To Financial Statements SIFE Trust Fund
<PAGE>
11
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED December 31, 1997 December 31, 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income $ 12,980,870 $ 12,807,869
Net realized gain from investment transactions 64,683,150 116,774,912
Net increase in unrealized appreciation of
investments 277,075,662 39,853,498
-------------- --------------
Net increase in net assets resulting
from operations 354,739,682 169,436,279
-------------- --------------
DISTRIBUTIONS PAID TO INVESTORS:
From net investment income:
Class A-I (12,317,564) (12,534,678)
Class A-II (616,821) (139,373)
Class B (49,266) -
Class C (3,982) -
From net realized gain on investments:
Class A-I (74,370,251) (122,196,058)
Class A-II (5,742,617) (2,364,853)
Class B (1,018,791) -
Class C (85,524) -
-------------- --------------
Total distributions (94,204,816) (137,234,962)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Increase from capital shares sold and reinvested 275,018,698 209,992,227
Decrease from capital shares repurchased (171,123,189) (68,957,955)
-------------- --------------
Net increase from capital share transactions 103,895,509 141,034,272
-------------- --------------
Total increase in net assets 364,430,375 173,235,589
NET ASSETS:
Beginning of year 787,383,191 614,147,602
-------------- --------------
End of year $1,151,813,566 $ 787,383,191
-------------- --------------
-------------- --------------
NET ASSETS CONSIST OF:
Shares of beneficial interests $ 649,094,852 $ 545,199,343
Undistributed net investment income 41,543 48,306
Undistributed net realized gain on sale of
investment securities and option contracts 4,404,886 20,938,919
Unrealized appreciation of investment securities 498,272,285 221,196,623
-------------- --------------
$1,151,813,566 $ 787,383,191
-------------- --------------
-------------- --------------
</TABLE>
See Notes To Financial Statements SIFE Trust Fund
<PAGE>
12
NOTES TO FINANCIAL 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 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 which
had operated as a mutual fund since July 2, 1962. The Trust Fund is
registered under the Investment Company Act of 1940 ("the 1940 Act"), 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 SIFE (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 following is a summary of 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 registered investment companies.
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 (the 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:
Distributions paid to investors are recorded on the ex-dividend date. Net
investment income is 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 State Street Bank and
Trust Company ("State Street Bank") as custodian of the Trust Fund, 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 last
bid price 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 are
intended to 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 and other uncertainties and expenses.
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 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.
NOTE 2.
AFFILIATED PARTY TRANSACTIONS - AGREEMENTS WITH
SIFE (THE "MANAGEMENT COMPANY"):
The Management Company is the investment advisor, administrator, transfer
agent, and underwriter for the Trust Fund and has acted in such capacities
since the formation of the Trust Fund. State Street Bank serves as custodian,
sub-transfer agent and service provider to existing Trust Fund investors.
TRANSFER AGENCY AGREEMENT AND
ADMINISTRATIVE SERVICES AGREEMENT:
Pursuant to a transfer agency agreement, the Management Company acts as the
Trust Fund's transfer agent, as well as providing fund accounting services.
Effective March 24, 1997 the Management Company, in turn, engaged State
Street Bank to provide certain transfer agency functions for the Trust Fund.
Effective April 1, 1996, all expenses related to the operation of the Trust
Fund are the responsibility of the Management Company (see "Investment
Advisory Agreement" below). Under the terms of a prior investment advisory
agreement, certain Trust Fund expenses were paid by the Management Company
and reimbursed by the Trust Fund monthly.
INVESTMENT ADVISORY AGREEMENT:
The Trust Fund has entered into an investment advisory agreement with the
Management Company, dated April 30, 1997. The current investment advisory
agreement was approved by the Trust Fund's investors at the investors' annual
meeting held on April 4, 1997. Under the terms of the current investment
advisory agreement, 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 the Trust Fund's average daily net assets, per annum. During the year
ended December 31, 1997, management fees incurred by the Trust Fund totaled
$11,960,037.
DISTRIBUTION PLAN AND UNDERWRITING AGREEMENT:
Pursuant to Rule 12b-1 under the 1940 Act, the Management 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.
SIFE Trust Fund
<PAGE>
13
NOTES TO FINANCIAL STATEMENTS
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-II shares for expenditures incurred by the
Management Company in providing services as principal underwriter to the Trust
Fund. Under the Class B and Class C Plan, the Trust Fund may pay the Management
Company a distribution fee at the annualized 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 principal underwriter, and may pay the
Management Company a service fee at the annualized rate of 0.25% of the average
daily net assets of the Trust Fund's Class B and Class C shares, for the
Management Company's 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.
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.
Commissions retained by the management company totaled $2,369,710 for the year
ended December 31, 1997.
Certain officers and directors of the Trust Fund are also officers and directors
of the Management Company. On December 31, 1997, the Management Company owned
453,809 Class A-I shares of the Trust Fund.
NOTE 3.
UNREALIZED APPRECIATION OF INVESTMENTS
On December 31, 1997, the net unrealized appreciation for all
securities was as follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost. . . . . . . .$498,913,380
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value. . . . . . . . . .(641,095)
------------
Net unrealized appreciation . . . . . . . . . . . . . . . . . . . .$498,272,285
------------
------------
</TABLE>
The tax cost basis used in the above calculation is the same as that used for
financial statement purposes.
NOTE 4.
CAPITAL SHARE TRANSACTIONS
The following is a summary of share transactions for the years ended
December 31, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
Class A-I Shares Amount Shares Amount
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold . . . . . . 9,188,773 $52,531,297 11,408,711 $55,568,657
Shares issued in
connection with
reinvestment
of distributions. . . . 12,831,281 80,769,497 26,405,051 134,730,736
----------- ------------ ----------- ------------
22,020,054 133,300,794 37,813,762 190,299,393
Shares repurchased. . . (17,565,092) (100,565,902) (13,793,626) (68,443,396)
----------- ------------ ----------- ------------
Net increase. . . . . . 4,454,962 $32,734,892 24,020,136 $121,855,997
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
The following is a summary of share transactions for the year ended December 31,
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 . . . . . . 19,597,918 $118,440,103 3,363,648 $17,188,608
Shares issued in
connection with
reinvestment
of distributions. . . . 985,802 6,240,462 491,508 2,504,226
---------- ------------ --------- -----------
20,583,720 124,680,565 3,855,156 19,692,834
Shares repurchased. . . (11,185,753) (70,366,119) (100,413) (514,559)
---------- ------------ --------- -----------
Net increase. . . . . . 9,397,967 $54,314,446 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 December 31, 1997:
<TABLE>
<CAPTION>
1997
Class B Shares Amount
-----------------------------
<S> <C> <C>
Shares sold . . . . . . . . . . . . 2,376,117 $14,801,210
Shares issued in connection with
reinvestment of distributions . . . 146,092 928,642
--------- -----------
2,522,209 15,729,852
Shares repurchased. . . . . . . . . (25,227) (158,546)
--------- -----------
Net increase. . . . . . . . . . . . 2,496,982 $15,571,306
--------- -----------
--------- -----------
</TABLE>
<TABLE>
<CAPTION>
1997
Class C Shares Amount
-----------------------------
<S> <C> <C>
Shares sold . . . . . . . . . . . . 198,347 $ 1,237,034
Shares issued in connection with
reinvestment of distributions . . . 11,059 70,453
--------- -----------
209,406 1,307,487
Shares repurchased. . . . . . . . . (5,018) (32,622)
--------- -----------
Net increase. . . . . . . . . . . . 204,388 $ 1,274,865
--------- -----------
--------- -----------
</TABLE>
NOTE 5.
LENDING OF SECURITIES
The Trust Fund, pursuant to an agency agreement with State Street Bank (the
"Custodian"), authorized the Custodian to lend securities to certain brokers
for a negotiated lenders' fee. These fees amounted to $15,279 for the year
ended December 31, 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 December 31, 1997, there were no
securities on loan.
NOTE 6.
PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities were $653,311,428 and
$589,017,468, respectively for the year ended December 31, 1997.
NOTE 7.
CONCENTRATION OF CREDIT RISK
On December 31, 1997, approximately $1,059,833,213 (92.1% of
net assets) of the Trust Fund's 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. As of December 31,1997, Bankers Trust New York Corp. securities valued
at $11,243,750 were held in escrow by the Custodian in connection with covered
call options written by the Trust Fund.
SIFE Trust Fund
<PAGE>
14
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A-I
Years Ended, December 31 1997 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
(For one unit outstanding throughout each period):
Net asset value, beginning of period $4.86 $4.58 $3.55 $3.83 $3.68 $2.90
----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.08 0.09 0.10 0.09 0.07 0.06
Net realized and unrealized
gain (loss) on investments 2.07 1.16 1.68 (0.13) 0.29 0.92
----------------------------------------------------------------------
Total from investment operations 2.15 1.25 1.78 (0.04) 0.36 0.98
----------------------------------------------------------------------
LESS DISTRIBUTIONS TO INVESTORS:
Distributions from net investment income (0.08) (0.09) (0.10) (0.09) (0.07) (0.06)
Distributions from capital gains (0.48) (0.88) (0.65) (0.15) (0.14) (0.14)
----------------------------------------------------------------------
Total distributions (0.56) (0.97) (0.75) (0.24) (0.21) (0.20)
----------------------------------------------------------------------
Net asset value, end of period $6.45 $4.86 $4.58 $3.55 $3.83 $3.68
----------------------------------------------------------------------
----------------------------------------------------------------------
TOTAL RETURN*** 44.8% 27.4% 49.9% (1.5%) 9.3% 33.9%
----------------------------------------------------------------------
----------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $1,049 $769 $614 $410 $414 $345
----------------------------------------------------------------------
----------------------------------------------------------------------
Ratios to average net assets:
Expenses 1.25% 1.20% 1.03% 0.94% 1.02% 0.99%
----------------------------------------------------------------------
----------------------------------------------------------------------
Net investment income 1.38% 1.82% 2.25% 2.27% 1.69% 1.73%
----------------------------------------------------------------------
----------------------------------------------------------------------
Portfolio turnover rate 63.0% 140.2% 93.5% 25.2% 28.7% 33.4%
----------------------------------------------------------------------
----------------------------------------------------------------------
Average commission rate**** $0.07 $0.03 - - - -
----------------------------------------------------------------------
----------------------------------------------------------------------
<CAPTION>
Class A-II Class B Class C
------------------- ------- -------
Years Ended, December 31 1997 1996* 1997** 1997**
------------------- ------- -------
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA
(For one unit outstanding throughout each period):
Net asset value, beginning of period $4.86 $4.73 $5.41 $5.41
------------------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.07 0.07 0.01 0.01
Net realized and unrealized gain (loss) on investments 2.07 1.01 1.53 1.54
------------------- ------- -------
Total from investment operations 2.14 1.08 1.54 1.55
------------------- ------- -------
LESS DISTRIBUTIONS TO INVESTORS:
Distributions from net investment income (0.06) (0.07) (0.02) (0.02)
Distributions from capital gains (0.48) (0.88) (0.48) (0.48)
------------------- ------- -------
Total distributions (0.54) (0.95) (0.50) (0.50)
------------------- ------- -------
Net asset value, end of period $6.46 $4.86 $6.45 $6.46
------------------- ------- -------
------------------- ------- -------
TOTAL RETURN*** 44.6% 22.8% 28.9% 29.1%
------------------- ------- -------
------------------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $85 $18 $16 $1
------------------- ------- -------
------------------- ------- -------
Ratios to average net assets:
Expenses 1.50% 1.48% 2.22% 2.25%
------------------- ------- -------
------------------- ------- -------
Net investment income 1.11% 1.77% 0.30% 0.30%
------------------- ------- -------
------------------- ------- -------
Portfolio turnover rate 63.0% 95.8% 63.0% 63.0%
------------------- ------- -------
------------------- ------- -------
Average commission rate**** $0.07 $ 0.03 $ 0.07 $ 0.07
------------------- ------- -------
------------------- ------- -------
</TABLE>
* For the period May 1, 1996 (commencement of operations) to December
31, 1996.
** For the period May 1, 1997 (commencement of operations) to December
31, 1997.
*** Sales loads are not reflected in total return.
**** The Trust Fund is required to disclose its average commission rate
paid per share for years beginning on or after January 1, 1996.
See Notes To Financial Statements SIFE Trust Fund
<PAGE>
15
INDEPENDENT AUDITORS' REPORT
To the Investors and Board of Directors of SIFE Trust Fund:
We have audited the accompanying statement of assets and liabilities of SIFE
Trust Fund (the "Fund"), including the schedule of portfolio investments, as of
December 31, 1997, the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods in the two
years ended December 31, 1997. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The 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
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of SIFE Trust Fund
at December 31, 1997, 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 13, 1998
SIFE Trust Fund
<PAGE>
16
OFFICERS AND TRUSTEES OF THE SIFE Trust Fund
Haig G. Mardikian
Chairman of the Board and Trustee
General Partner, George M. Mardikian Enterprises
Managing Director, The United Broadcasting Corp.
Trustee, William Saroyan Foundation
Walter S. Newman
Vice Chairman and Trustee
Owner, WSN Enterprises
President, San Francisco City Planning Commission (Retired)
President, San Francisco Redevelopment Agency (Retired)
President, San Francisco Fine Arts Museums (Retired)
Bruce W. Woods
President and Trustee
Chief Executive Officer, SIFE
Charles W. Froehlich, Jr.
Trustee
Justice of Court of Appeal (Retired)
Mediator - Froehlich & Peterson Dispute Resolution
John A. Meany
Trustee
President, John's Valley Foods, Inc.
President, John's Town and Country Markets, Inc.
Neil L. Diver
Trustee
Chairman, Ameriwood Industries International Corp.
Director, Forceon Corp.
Sam A. Marchese
Trustee
President, Treasurer and Chief Executive Officer, SIFE (Retired)
Director, Scott Company
President, Foundation for Brotherhood
Diane Howard Belding
Trustee
Owner, Howard & Howard Ranch
Paula J. Pearlstein
Chief Operating Officer
OFFICERS AND DIRECTORS OF SIFE (THE "MANAGEMENT COMPANY")
BRUCE W. WOODS
President, Chief Executive Officer and Chairman
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
PAULA J. PEARLSTEIN
Chief Operating Officer
ADDITIONAL SIFE SERVICES
SIFE Trust Fund provides continuing individual services to the Investor,
including consultation and assistance for changes of beneficiary, assignments,
collateral bank loans, redemptions and the purchase of additional Fund shares.
SIFE representatives are prepared to assist you in establishing
retirement accounts, including IRA's, IRA-SEP's, SIMPLE IRA's and Section
403(b)(7) accounts.
Inquiries concerning any of SIFE's services may be directed to your
representative or the home office. For the convenience of Investors, you may
call toll free (800) 231-0356 or (510) 988-2430 if you have a need for
information or service. For current unit price, SIFE has a 24 hour toll-free
number: (800) 553-7433.
SIFE Trust Fund
<PAGE>
17
THE PORTFOLIO TEAM
------------------
At SIFE our primary investment strategy is "value" investing, or more
specifically, "value" investing within the financial sector, a SIFE hallmark.
We make investment decisions based upon a fundamental analysis of select
businesses and industries. Our objective is to hold securities for the long
term, reinvest the dividends and let our investments appreciate over time. We
continuously review company performance and industry trends in order to
provide our investors with the best possible returns within a conservatively
structured portfolio.
"TEAMWORK IS THE KEY TO SUCCESS."
Mike Stead, Portfolio Manager & CIO.
CHOOSING THE RIGHT COMPANIES AND INVESTMENT VEHICLES IS AS MUCH AN ART AS IT
IS A SCIENCE. At SIFE, we have developed our own recipe for success. We rely
on both cutting-edge technology and personal interviews to choose the
strongest investments. Armed with the latest information systems, we start by
locating the most promising investments. Then, we meet face-to-face with the
firm's management to fully examine the company's investment potential. Only
after a great deal of comprehensive and exhaustive research does a
prospective investment eventually reach the SIFE portfolio.
Scott Edgar,
Director of Research
Analyzing potential investments, studying market trends, and developing risk
strategies truly requires a "team" effort. Over the past few years, the SIFE
portfolio team has really come together and made good things happen. Our goal is
to continue this tradition and create quality investments for the next 36 years.
Laurie Buntain,
Analyst/Trader
Liz Riley,
Trading Assistant
<PAGE>
18
SERVICE EXCELLENCE
------------------
Betty Slaker,
Client Services Processor
SIFE prides itself on customer service being the edge that makes SIFE
successful. Customer service expectations have increased. We can compete by
having superior products, however many other firms have this same competitive
edge. Therefore, we must look for a different edge. When SIFE is faced with new
challenges, we reflect on our past experience to resolve new issues and
anticipate change, as we look toward the future.
We begin by getting out in front of the situation and then anticipate what our
customers want and how we can supply it. We have mastered change better than the
competition. At SIFE, the product we have to work on is our service to the
client. Specifically, through our management team, we can improve the efficiency
and effectiveness of the operational tasks to provide a better service to our
shareholders and brokers. OUR CUSTOMERS' REQUESTS ARE GOLDEN OPPORTUNITIES FOR
DEMONSTRATING A COMPETITIVE SERVICE EDGE. As we continue to migrate to new
systems and procedures, we will ensure that we are using the best practices
available to make the most of those opportunities.
We will not try to change everything at once. By planning and implementing
change, we are saving time in the future and providing a better service to
you. By adapting this philosophy, we can evaluate our systems and procedures
to see if what worked best in the past needs to be changed to effectively
service clients' needs in the future.
- ------------------------------------
SIFE: Redefining Service Excellence!
- ------------------------------------
Sandra Taylor, (left)
Director of Service
Roxann Harrison,
Client Services Representative
<PAGE>
19
GRAPHICAL ANALYSIS
------------------
[CHART]
<TABLE>
<CAPTION>
SIFE'S PORTFOLIO
- ----------------------------------------
(as of December 31, 1997)
<S> <C>
Banks 79.8%
Repurchase Agreements 5.3%
Consumer Financial Services 4.9%
Brokerages 3.3%
Insurance 2.5%
Consumer Non-Durables 2.3%
Thrifts 1.6%
</TABLE>
COMPARISON TO THE S & P 500
- ---------------------------
(as of December 31, 1997)
[GRAPH]
This graph is a hypothetical illustration comparing a
$9,500 investment made in SIFE Trust Fund on December 31, 1987 ($9,500
represents a $10,000 investment with the maximum sales charge deducted) to a
$10,000 investment made in the Standard & Poors 500 Composite Price Index on
that date and includes reinvestment of dividends and capital gains.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate, and redemption value may be more or less than
original cost. Data quoted for Class A-1 only; performance for other classes
will vary due to differences in fee structures (see Financial Highlights page).
The line representing SIFE's total return includes operating expenses (such as
management fees) that reduce returns, while the total return for the Standard &
Poors 500 Composite Price Index does not. The Standard and Poors 500 Composite
Index is an unmanaged value-weighted price index composed of 500 large U.S.
stocks and is regarded as a broad based benchmark for equity market conditions.
SIFE Trust Fund concentrates its investments in the financial service sector,
and because it is more narrowly focused, may typically exhibit higher
volatility. Please refer to the prospectus for a more complete description of
the risks. For a free prospectus call (800) 524-7433. An investor should read
the prospectus carefully before investing.
<PAGE>
20
<TABLE>
<CAPTION>
TOP TEN HOLDINGS
--------------------------------------------
<S> <C>
Fleet Financial Group, Inc. 4.8%
Chase Manhattan Corp. 4.7%
Bankers Trust New York Corp. 4.1%
BankBoston Corp. 4.1%
BankAmerica Corp. 3.9%
First Chicago NBD Corp. 3.0%
Republic New York Corp. 2.9%
National City Corp. 2.9%
Wachovia Corp. 2.7%
Citicorp 2.7%
--------------------------------------------
(as of 12/31/97)
</TABLE>
<PAGE>
BACK COVER
[LOGO]
100 NORTH WIGET LANE, P.O. BOX 9007
WALNUT CREEK, CA 94598-0907
PHONE (800) 524-7433/FAX (510) 943-1783
TICKER SYMBOL: SIFEX
1997 SIFE TRUST FUND-C-
