1998 SEMI-ANNUAL REPORT
SIFE
Selected Investments in Financial Equities
1998
36 PROUD YEARS
<PAGE>
THE EXECUTIVE OFFICER
[PICTURE OF BRUCE W. WOODS]
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.
[PICTURE OF MICHAEL STEAD]
Michael Stead, Portfolio Manager and CIO
As Portfolio Manager and Chief Investment Officer, Mike is responsible for the
performance and composition of the Fund. Based on the longstanding 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.
<PAGE>
1
Letters to Investors
June 30, 1998
Dear Fellow Investors,
It has certainly been an interesting few months since my last opportunity to
share a view of SIFE from the President's desk. A time when I have been doing
both "little picture and big picture" thinking and planning.
The stock market seems to be constantly restless as it bounces back and forth.
The Asian economic "flu" has brought some sneezes back home. International
relations and the domestic political situation dominate the news. As I keep a
watchful eye on these issues, I am comforted by other "bits" of important
information:
o Consolidation remains the driving force in the financial services
industry, providing excellent opportunities for short-term equity growth.
o Inflation is virtually nonexistent compared to the not so distant past.
o Financial service companies in our investment portfolio have reported
strong earnings growth, averaging 18% for the second quarter.
o While past performance does not guarantee future results, it is worth
mentioning that on average SIFE has out-performed the S&P 500 benchmark
for the twenty-year period ending June 30, 1998.
As my father always maintains, no matter what the evening news reports, some
universal truths remain constant. The American stock market is an outstanding
long-term investment vehicle. And, most importantly...the dynamics of the market
are like an old-fashioned well pump. The pump handle must go up and down to draw
that clear, fresh water.
Our pump handle is market movement. The ups and downs create buying and selling
opportunities that often translate into growth consistent with prudent
investing. This has always been our approach to serving SIFE investors. We do
our homework to identify companies we believe have potential, then purchase
their stock when we believe the value is compelling. We continue to monitor
these companies closely to ensure that they continue to meet our strict
criteria. This is SIFE's long tested investment plan.
With this plan in mind, I feel quite confident that SIFE is positioned properly
to take advantage of market movement as we have done in the past. With this
knowledge, and as a long-time fellow investor in SIFE, I embrace the prospects
and opportunities for the future.
Sincerely,
/s/ Bruce W. Woods
Bruce W. Woods
President & CEO
<PAGE>
2
<TABLE>
Statement of Assets and Liabilities
<CAPTION>
- -------------------------------------------------------------------------------------------
June 30, 1998 (unaudited)
- -------------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments in securities, at market (cost $619,933,230) ............. $1,141,218,116
Repurchase agreements ................................................ 107,033,000
Cash ................................................................. 1,523,391
Receivables for:
Fund shares sold .................................................. 2,186,467
Dividends ......................................................... 1,630,810
Interest .......................................................... 274,814
Investment securities sold ........................................ 159,495
--------------
Total assets .............................................. 1,254,026,093
--------------
Liabilities:
Open call and put options, at market
(premiums received, $1,757,315) ................................... 896,994
Payables for:
Fund shares repurchased ........................................... 6,286,318
SIFE (the "Management Company") ................................... 1,306,800
Investment securities purchased ................................... 30,250
--------------
Total liabilities ......................................... 8,520,362
--------------
Net assets ........................................................ $1,245,505,731
==============
Class A-I:
Net asset value per share ($1,096,448,369 / 158,955,365
shares outstanding) $ 6.90
==============
Maximum offering price per share (100/95 of $6.90) ................... $ 7.26
==============
Class A-II:
Net asset value per share ($111,282,936 / 16,132,899
shares outstanding) ............................................... $ 6.90
==============
Maximum offering price per share (100/95 of $6.90) ................... $ 7.26
==============
Class B:
Net asset value and offering price per share
($34,635,118 / 5,029,410 shares outstanding) ...................... $ 6.89
==============
Class C:
Net asset value per share ($3,139,308 / 455,376 shares outstanding) .. $ 6.89
==============
Maximum offering price per share (100/99 of $6.89) ................... $ 6.96
==============
- -------------------------------------------------------------------------------------------
<FN>
See Notes To Financial Statements SIFE Trust Fund
</FN>
</TABLE>
<PAGE>
3
Investment Portfolio
- --------------------------------------------------------------------------------
June 30, 1998 (unaudited) Number of Shares Market Value
- --------------------------------------------------------------------------------
Common Stocks: 91.6%
Banks: 79.2%
Amsouth Bancorporation 686,400 $ 26,984,100
Banc One Corp. ** 327,968 18,304,714
BankAmerica Corp. 690,000 59,641,875
BankBoston Corp. ** 1,000,000 55,625,000
Bank of New York Co., Inc. 400,000 24,275,000
Bankers Trust New York Corp. ** 200,000 23,212,500
BankNorth Group Inc. 15,000 555,000
BB&T Corp. 100,048 6,765,746
Centura Banks Inc. 100,000 6,250,000
Charter One Financial Inc. 574,554 19,355,288
Chase Manhattan Corp. 669,000 50,509,500
Chittenden Corp. 110,156 3,855,460
Citicorp ** 300,000 44,775,000
City National Corp. 116,283 4,295,203
Colonial BancGroup, Inc. 150,000 4,837,500
Comerica, Inc. 400,550 26,536,438
Community First Bankshares, Inc. 400,024 10,475,628
Compass Bancshares, Inc. 321,600 14,512,200
Crestar Financial Corp. 250,000 13,640,625
Cullen Frost Bankers, Inc. 118,400 6,423,200
D & N Financial Corp. 11,000 294,938
Fifth Third Bancorp 50,000 3,150,000
First American Corp. 431,350 20,758,719
First Chicago NBD Corp. 350,000 31,018,750
First Tennessee National Corp. 782,000 24,681,875
First Union Corp. 162,000 9,436,500
Firstar Corp. 70,000 2,660,000
Fleet Financial Group, Inc. ** 730,000 60,955,000
Hibernia Corp. ** 250,000 5,046,875
Huntington Bancshares Inc. 25,000 837,500
Imperial Bancorp * 571,610 17,148,300
Independent Bank Corp. 541,000 10,481,875
- --------------------------------------------------------------------------------
See Notes To Financial Statements SIFE Trust Fund
<PAGE>
4
Investment Portfolio
- --------------------------------------------------------------------------------
June 30, 1998 (unaudited) Number of Shares Market Value
- --------------------------------------------------------------------------------
Common Stocks, continued
Banks, continued
J.P. Morgan & Co., Inc. 15,000 $ 1,756,875
KeyCorp 400,000 14,250,000
M & T Bank Corp. 34,100 18,891,400
Mellon Bank Corp. ** 356,900 24,849,162
Mercantile Bancorporation, Inc. 135,000 6,800,625
Mercantile BankShares Corp. 60,000 2,088,750
National City Corp. 530,000 37,630,000
Northern Trust Corp. 151,600 11,559,500
North Fork Bancorp, Inc. 1,047,000 25,586,063
Norwest Corp. 200,000 7,475,030
Peoples Heritage Financial Group 310,270 7,330,129
PNC Bank Corp. 265,000 14,260,313
Provident Financial Group Inc. 55,637 2,538,438
Regions Financial Corp. 87,200 3,580,650
Silicon Valley Bancshares * 32,100 1,142,559
Sovereign Bancorp 145,000 2,369,844
Star Banc Corp. 300,500 19,194,438
Sterling Bancshares, Inc. 300,000 4,725,000
SouthTrust Corp. 15,000 652,500
Summit Bancorp 307,830 14,621,925
Summit Bancshares, Inc. (Texas) 300,000 6,375,000
TCF Financial Corp. 253,200 7,469,400
Union Planters Corp. 355,000 20,878,437
United Bankshares Inc. 184,595 6,299,287
U.S. Bancorp 814,000 35,002,000
UST Corp. 42,000 1,113,000
Wachovia Corp. 689,200 58,237,400
Webster Financial Corp. 105,000 3,491,250
Wells Fargo & Co. ** 25,000 9,225,000
Westamerica Bancorporation 329,000 10,569,125
------------
987,263,409
------------
- --------------------------------------------------------------------------------
See Notes To Financial Statements SIFE Trust Fund
<PAGE>
5
Investment Portfolio
- --------------------------------------------------------------------------------
June 30, 1998 (unaudited) Number of Shares Market Value
- --------------------------------------------------------------------------------
Common Stocks, continued
Consumer Financial Services: 6.5%
American Express Co. ** 100,000 $11,400,000
Federal Home Loan Mortgage Co. 133,300 6,273,431
Federal National Mortgage Association 300,000 18,225,000
Household International Inc. 105,000 5,223,750
MBNA Corp. 65,000 2,145,000
MGIC Investment Corp. 61,000 3,480,813
State Street Corp. ** 500,000 34,750,000
-------------
81,497,994
-------------
Brokerages: 4.9%
Alliance Capital Management L.P. 53,600 1,356,750
Bear Stearns & Co. 20,000 1,137,500
Dain Rauscher Corp. 52,300 2,863,425
Edwards, A.G., Inc. 64,500 2,753,343
Legg Mason, Inc. 60,000 3,453,750
Lehman Brothers Holding, Inc. 100,000 7,756,250
McDonald & Co. 90,000 2,953,125
Merrill Lynch & Co., Inc. 150,000 13,837,500
Morgan Keegan, Inc. 120,000 3,105,000
Morgan Stanley, Dean Witter Discover & Co. 100,000 9,137,500
Paine Webber Group, Inc. 56,250 2,411,719
Raymond James Financial, Inc. 120,375 3,603,726
The Charles Schwab Corp. 198,000 6,435,000
-------------
60,804,588
-------------
Insurance: 1.0%
Fremont General Corp. 22,000 1,192,125
Sunamerica Inc. 135,000 7,754,062
Transatlantic Holdings Inc. 35,000 2,705,938
-------------
11,652,125
-------------
Total Common Stocks (cost $619,933,230) 1,141,218,116
-------------
- --------------------------------------------------------------------------------
See Notes To Financial Statements SIFE Trust Fund
<PAGE>
6
<TABLE>
Investment Portfolio
<CAPTION>
- --------------------------------------------------------------------------------------------------
June 30, 1998 (unaudited) Market Value
- --------------------------------------------------------------------------------------------------
<S> <C>
Repurchase Agreements: 8.6%
State Street Bank and Trust Company, 5.15%, due 07/01/98
Collateral: U.S. government obligations, market value of $40,636,400 $ 40,033,000
State Street Bank and Trust Company, 5.15%, due 07/20/98
Collateral: U.S. government obligations, market value of $65,211,754 ** 63,500,000
State Street Bank and Trust Company, 5.15%, due 08/24/98
Collateral: U.S. government obligations, market value of $3,577,466 ** 3,500,000
--------------
Total Repurchase Agreements 107,033,000
--------------
Total Investments (cost $726,966,230): 100.2% 1,248,251,116
--------------
Other Assets and Liabilities, net: (0.2%) (2,745,385)
--------------
Net Assets: 100.0% $1,245,505,731
==============
<FN>
*Non-income producing, **See note 8 to financial statements
</FN>
</TABLE>
<TABLE>
Open Call Options at June 30, 1998: (unaudited) (see note 8 to financial statements)
<CAPTION>
Expiration Strike Shares Market
Date Price Optioned Value
-----------------------------------------------------
<S> <C> <C> <C> <C>
Banks:
Banc One Corp. August 98 65 100,000 $ 18,750
BankBoston Corp. August 98 60 200,000 125,000
Bankers Trust New York Corp. July 98 130 100,000 6,250
Citicorp July 98 165 100,000 37,500
Fleet Financial Group, Inc. July 98 90 100,000 25,000
Hibernia Corp. July 98 22.5 100,000 12,500
Mellon Bank Corp. July 98 80 150,000 75,000
Wells Fargo & Co. July 98 380 25,000 50,000
--------
350,000
--------
Consumer Financial Services:
American Express Co. July 98 115 50,000 100,000
State Street Corp. July 98 75 100,000 31,250
--------
131,250
--------
Total Call Options (premiums received $781,098)........................... 481,250
--------
Open Put Options at June 30, 1998: (unaudited) (see note 8 to financial statements)
Banks:
Ahmanson H F and Co. July 98 70 50,000 68,750
City National Corp. August 98 35 100,000 93,750
First Chicago NBD Corp. August 98 85 100,000 159,494
Mellon Bank Corp. July 98 60 100,000 6,250
Mellon Bank Corp. July 98 65 100,000 62,500
Wells Fargo & Co. July 98 330 50,000 12,500
Wells Fargo & Co. July 98 310 100,000 12,500
--------
Total Put Options (premiums received $976,217) 415,744
--------
Total Call and Put Options Written (premiums received $1,757,315) $896,994
========
- ----------------------------------------------------------------------------------------------
<FN>
See Notes To Financial Statements SIFE Trust Fund
</FN>
</TABLE>
<PAGE>
7
Statements of Operations
- --------------------------------------------------------------------------------
For the Six-Month Period Ended June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
Investment income:
Income:
Dividends .................................. $ 9,620,724
Interest ................................... 3,424,046
----------- --------------
Total investment income $ 13,044,770
--------------
Expenses:
Management fees ............................ 7,440,881
Service and distribution expenses
Class A-II ......................... 122,102
Class B ............................ 127,607
Class C ............................ 11,453
----------- --------------
Total expenses 7,702,043
--------------
--------------
Net investment income 5,342,727
--------------
Realized and unrealized gain on investments:
Net realized gain .......................... 53,734,015
Gain on expiration of option contracts ..... 1,814,998
Net increase in unrealized appreciation
of investments during the period ... 23,872,922
----------- --------------
Net gain on investments ............ 79,421,935
--------------
--------------
Net increase in net assets resulting from operations $ 84,764,662
==============
- --------------------------------------------------------------------------------
See Notes To Financial Statements SIFE Trust Fund
<PAGE>
8
<TABLE>
Statements of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------
For the Six-Month Period Ended June 30, 1998 (unaudited) and the Year Ended December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Increase in Net Assets: June 30, 1998 December 31, 1997
--------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................... $ 5,342,727 $ 12,980,870
Net realized gain from investment transactions ...................... 55,549,013 64,683,150
Net increase in unrealized appreciation of investments .............. 23,872,922 277,075,662
--------------------------------------
Net increase in net assets resulting from operations ..... 84,764,662 354,739,682
--------------------------------------
Distributions paid to investors:
From net investment income:
Class A-I ................................................... (4,198,809) (12,317,564)
Class A-II .................................................. (280,174) (616,821)
Class B ..................................................... -- (49,266)
Class C ..................................................... -- (3,982)
From net realized gain on investments:
Class A-I ................................................... -- (74,370,251)
Class A-II .................................................. -- (5,742,617)
Class B ..................................................... -- (1,018,791)
Class C ..................................................... -- (85,524)
--------------------------------------
Total distributions ...................................... (4,478,983) (94,204,816)
--------------------------------------
Capital share transactions:
Increase from capital shares sold and reinvested .................... 166,473,975 275,018,698
Decrease from capital shares repurchased ............................ (153,067,489) (171,123,189)
--------------------------------------
Net increase from capital share transactions ........................ 13,406,486 103,895,509
--------------------------------------
Total increase in net assets ............................. 93,692,165 364,430,375
--------------------------------------
Net assets:
Beginning of period ................................................. 1,151,813,566 787,383,191
--------------------------------------
End of period ....................................................... $1,245,505,731 $1,151,813,566
--------------------------------------
Net assets consist of:
Shares of beneficial interests ...................................... $ 662,501,338 $ 649,094,852
Undistributed net investment income ................................. 905,287 41,543
Undistributed net realized gain on sale of
investment securities and option contracts .................... 59,953,899 4,404,886
Unrealized appreciation of investment securities .................... 522,145,207 498,272,285
--------------------------------------
$1,245,505,731 $1,151,813,566
======================================
<FN>
See Notes To Financial Statements SIFE Trust Fund
</FN>
</TABLE>
<PAGE>
9
Notes to Financial Statements (unaudited)
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.
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 six-month period
ended June 30, 1998, management fees incurred by the Trust Fund totaled
$7,440,881.
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>
10
Notes to Financial Statements (unaudited)
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 for such shares. 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 for such
shares, 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 Funds Class
A-I and Class A-II shares. No sales charge is assessed on purchases of
$1,000,000 or more, purchases by directors, trustees, employees and registered
representatives of the Management Company and the Trust Fund, and their
immediate family members, as well as broker-dealers and certain other
institutional purchasers.
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 $358,410 for the
six-month period ended June 30, 1998.
Certain officers and directors of the Trust Fund are also officers and
directors of the Management Company. On June 30, 1998, the Management Company
owned 453,809 Class A-I shares of the Trust Fund.
Note 3.
Unrealized Appreciation of Investments
On June 30, 1998, 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 ............ $523,181,626
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value ............ (1,036,419)
------------
Net unrealized appreciation ..................................... $522,145,207
============
The tax cost basis used in the above calculation is the same as that used
for financial statement purposes.
Note 4.
Capital Share Transactions
<TABLE>
The following is a summary of share transactions for the six-month period
ended June 30, 1998 (unaudited) and the year ended December 31, 1997:
<CAPTION>
1998 1997
---- ----
Class A-I Shares Amount Shares Amount
-------------------------- ---------------------------
<S> <C> <C> <C> <C>
Shares sold ............... 4,402,565 $ 29,350,852 9,188,773 $ 52,531,297
Shares issued in
connection with
reinvestment
of distributions .......... 583,000 3,891,052 12,831,281 80,769,497
----------- ------------- ----------- -------------
4,985,565 33,241,904 22,020,054 133,300,794
Shares repurchased ........ (8,627,914) (57,929,497) (17,565,092) (100,565,902)
----------- ------------- ----------- -------------
Net increase (decrease) ... (3,642,349) $ (24,687,593) 4,454,962 $ 32,734,892
=========== ============= =========== =============
1998 1997
---- ----
Class A-II Shares Amount Shares Amount
-------------------------- ---------------------------
Shares sold ............... 17,071,249 $ 113,518,646 19,597,918 $ 118,440,103
Shares issued in connection
with reinvestment
of distributions .......... 40,638 271,377 985,802 6,240,462
----------- ------------- ----------- -------------
17,111,887 113,790,023 20,583,720 124,680,565
Shares repurchased ........ (14,131,698) (94,288,256) (11,185,753) (70,366,119)
----------- ------------- ----------- -------------
Net increase .............. 2,980,189 $ 19,501,767 9,397,967 $ 54,314,446
=========== ============= =========== =============
The following is a summary of share transactions for the six-month period
ended June 30, 1998 (unaudited) and for the period May 1, 1997 (commencement of
operations) to December 31, 1997:
1998 1997
---- ----
Class B Shares Amount Shares Amount
-------------------------- ---------------------------
Shares sold ............... 2,637,143 $ 17,606,934 2,376,117 $ 14,801,210
Shares issued in connection
with reinvestment
of distributions .......... -- -- 146,092 928,642
----------- ------------- ----------- -------------
2,637,143 17,606,934 2,522,209 15,729,852
Shares repurchased ........ (104,715) (696,038) (25,227) (158,546)
----------- ------------- ----------- -------------
Net increase .............. 2,532,428 $ 16,910,896 2,496,982 $ 15,571,306
=========== ============= =========== =============
1998 1997
---- ----
Class C Shares Amount Shares Amount
-------------------------- ---------------------------
Shares sold ............... 274,680 $ 1,835,114 198,347 $ 1,237,034
Shares issued in connection
with reinvestment
of distributions .......... -- -- 11,059 70,453
----------- ------------- ----------- -------------
274,680 1,835,114 209,406 1,307,487
Shares repurchased ........ (23,692) (153,698) (5,018) (32,622)
----------- ------------- ----------- -------------
Net increase .............. 250,988 $ 1,681,416 204,388 $ 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. This agreement was terminated on January 20, 1997.
The Trust Fund received collateral against loaned securities in an amount
at least equal to 102% of the market value of the loaned securities at the
inception of the securities lending agreement.
Note 6.
Purchases and Sales of Securities
Purchases and sales of investment securities were $202,564,361 and
$224,901,311, respectively for the six-month period ended June 30, 1998.
Note 7.
Concentration of Credit Risk
On June 30, 1998, approximately $1,141,218,116 (91.6% 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
June 30, 1998, securities valued at $85,925,000, and repurchase agreements
valued at $67,000,000, respectively, were held in escrow by the Custodian in
connection with covered call and put options written by the Trust Fund.
SIFE Trust Fund
<PAGE>
11
<TABLE>
Financial Highlights
<CAPTION>
Class A-I
----------------------------------------------
Years Ended, December 31 1998(e) 1997 1996 1995 1994 1993
----------------------------------------------
Selected Per Share Data (unaudited)
<S> <C> <C> <C> <C> <C> <C>
(For one share outstanding throughout each period):
Net asset value, beginning of period ............................. $6.45 $4.86 $4.58 $3.55 $3.83 $3.68
----------------------------------------------
Income from investment operations:
Net investment income .................................... 0.03 0.08 0.09 0.10 0.09 0.07
Net realized and unrealized
gain (loss) on investments ....................... 0.45 2.07 1.16 1.68 (0.13) 0.29
-----------------------------------------------
Total from investment operations ......... 0.48 2.15 1.25 1.78 (0.04) 0.36
-----------------------------------------------
Less distributions to investors:
Distributions from net investment income ................. (0.03) (0.08) (0.09) (0.10) (0.09) (0.07)
Distributions from capital gains ......................... -- (0.48) (0.88) (0.65) (0.15) (0.14)
-----------------------------------------------
Total distributions ...................... (0.03) (0.56) (0.97) (0.75) (0.24) (0.21)
-----------------------------------------------
Net asset value, end of period .................................. $6.90 $6.45 $4.86 $4.58 $3.55 $3.83
===============================================
Total Return (c) ................................................. 7.4% 44.8% 27.4% 49.9% (1.5%) 9.3%
===============================================
Ratios and Supplemental Data
Net assets, end of period (in millions) .......................... $1,096 $1,049 $769 $614 $410 $414
===============================================
Ratios to average net assets:
Expenses (f) ..................................... 1.25% 1.25% 1.20% 1.03% 0.94% 1.02%
===============================================
Net investment income (f) ........................ 0.94% 1.38% 1.82% 2.25% 2.27% 1.69%
===============================================
Portfolio turnover rate (f) ...................................... 31.0% 63.0% 140.2% 93.5% 25.2% 28.7%
===============================================
Average commission rate (d) ...................................... $0.07 $0.07 $0.03 -- -- --
===============================================
</TABLE>
<TABLE>
<CAPTION>
Class A-II Class B Class C
------------------------------------------------------
Years Ended, December 31 1998(e) 1997 1996(a) 1998(e) 1997(b) 1998(e) 1997(b)
------------------------------------------------------
Selected Per Share Data (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
(For one share outstanding throughout each period):
Net asset value, beginning of period ............................. $6.46 $4.86 $4.73 $6.45 $5.41 $6.46 $5.41
------------------------------------------------------
Income from investment operations:
Net investment income .................................... 0.02 0.07 0.07 -- 0.01 -- 0.01
Net realized and unrealized
gain (loss) on investments ....................... 0.44 2.07 1.01 0.44 1.53 0.43 1.54
------------------------------------------------------
Total from investment operations ......... 0.46 2.14 1.08 0.44 1.54 0.43 1.55
------------------------------------------------------
Less distributions to investors:
Distributions from net investment income ................. (0.02) (0.06) (0.07) -- (0.02) -- (0.02)
Distributions from capital gains ......................... - (0.48) (0.88) -- (0.48) -- (0.48)
------------------------------------------------------
Total distributions ...................... (0.02) (0.54) (0.95) -- (0.50) -- (0.50)
------------------------------------------------------
Net asset value, end of period .................................. $6.90 $6.46 $4.86 $6.89 $6.45 $6.89 $6.46
======================================================
Total Return (c) ................................................. 7.1% 44.6% 22.8% 6.8% 28.9% 6.7% 29.1%
======================================================
Ratios and Supplemental Data
Net assets, end of period (in millions) .......................... $111 $85 $18 $35 $16 $3 $1
======================================================
Ratios to average net assets:
Expenses (f) ..................................... 1.50% 1.50% 1.48% 2.25% 2.22% 2.25% 2.25%
======================================================
Net investment income (f) ........................ 0.70% 1.11% 1.77% (0.10%) 0.30% (0.10%) 0.30%
======================================================
Portfolio turnover rate (f) ...................................... 31.0% 63.0% 95.8% 31.0% 63.0% 31.0% 63.0%
======================================================
Average commission rate (d) ...................................... $0.07 $0.07 $0.03 $0.07 $0.07 $0.07 $0.07
======================================================
<FN>
(a) For the period May 1, 1996 (commencement of operations) to December 31,
1996.
(b) For the period May 1, 1997 (commencement of operations) to December
31, 1997.
(c) Sales loads are not reflected in total return.
(d) The Trust Fund is required to disclose its average commission rate paid per
share for years beginning on or after January 1, 1996.
(e) For the six-month period ended June 30, 1998
(f) Annualized
</FN>
</TABLE>
SIFE Trust Fund
<PAGE>
12
Graphical Analysis
Comparison to Standard & Poors 500 Index
(as of June 30, 1998)(unaudited)
[GRAPHIC OMITTED]
SIFE S&P 500
------ ------
June 88 9,500 10,000
June 89 11,214 12,055
June 90 10,580 14,042
June 91 11,140 15,081
June 92 15,368 17,104
June 93 18,850 19,435
June 94 20,619 19,708
June 95 23,871 24,846
June 96 30,404 31,306
June 97 42,225 42,169
June 98 56,217 54,888
*Average Annual Compounded Total Return
Top Ten Holdings
(as of June 30, 1998)(unaudited)
- ----------------------------------------------------------------
Fleet Financial Group, Inc. 4.9%
- ----------------------------------------------------------------
BankAmerica Corp. 4.8%
- ----------------------------------------------------------------
Wachovia Corp. 4.7%
- ----------------------------------------------------------------
BankBoston Corp. 4.5%
- ----------------------------------------------------------------
Chase Manhattan Corp. 4.1%
- ----------------------------------------------------------------
Citicorp 3.6%
- ----------------------------------------------------------------
National City Corp. 3.0%
- ----------------------------------------------------------------
U.S. Bancorp 2.8%
- ----------------------------------------------------------------
State Street Corp. 2.8%
- ----------------------------------------------------------------
First Chicago NBD Corp. 2.5%
- ----------------------------------------------------------------
This graph is a hypothetical illustration comparing a $9,500 investment
made in SIFE Trust Fund on June 30, 1988 ($9,500 represents a $10,000 investment
with the maximum sales charge deducted) to a $10,000 investment made in the
Standard and Poor's 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-I 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
and Poor's 500 Composite Price Index does not. The Standard and Poor's 500
Composite Price 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 services
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.
SIFE Trust Fund
<PAGE>
OFFICERS AND TRUSTEES OF THE SIFE TRUST FUND
Haig G. Mardikian* Neil L. Diver*
Chairman of the Board and Trustee Trustee
Walter S. Newman* Sam A. Marchese
Vice Chairman and Trustee Trustee emeritus
Bruce W. Woods Diane Howard Belding
President and Trustee Trustee
Charles W. Froehlich, Jr. Gary A. Isaacson
Secretary and Trustee Treasurer
John A. Meany* *Independent Trustees
Trustee
OFFICERS AND DIRECTORS OF SIFE (THE "MANAGEMENT COMPANY")
Bruce W. Woods John W. Woods
President, Chief Executive Officer and Chairman Director
Michael J. Stead Sam A. Marchese
Chief Investment Officer and Director Director
Paula J. Pearlstein Sharon E. Tudisco
Chief Operating Officer Director
Gary A. Isaacson Diane Howard Belding
Chief Financial Officer Director
Charles W. Froehlich, Jr.
Secretary and Director
CUSTODIAN TRANSFER AGENT
State Street Bank and Trust Company Boston Financial Data Services
225 Franklin Street P.O. Box 8244
Boston, MA 02110 Boston, MA 02266
LEGAL COUNSEL INDEPENDENT AUDITORS
Paul, Hastings, Janofsky & Walker LLP Deloitte & Touche LLP
345 California Street, 29th Floor 50 Fremont Street
San Francisco, CA 94104 San Francisco, CA 94105
ADDITONAL SIFE SERVICES
SIFE Trust Fund provides continuing individual services to the Investor,
including 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, Roth IRA's, Education 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 (925) 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.
This report and the financial statements contained herein are provided for the
general information of the shareholders of SIFE. This report is not authorized
for distribution to prospective investors in SIFE unless preceded or accompanied
by an effective prospectus.
<PAGE>
------------------------------------------------------------------------
SIFE ---------------
------------------------------------------ Presorted
Selected Investments in Financial Equities First Class
U.S. Postage
100 North Wiget Lane, P.O. Box 9007 PAID
Walnut Creek, CA 94598-0907 GMS
---------------
------------------------------------------------------------------------
SIFE
------------------------------------------
Selected Investments in Financial Equities
100 North Wiget Lane, P.O. Box 9007
Walnut Creek, CA 94598-0907
phone (800) 524-7433 / fax 9925) 943-1783
Ticker Symbol: SIFEX
(c) 1998 SIFE Trust Fund
