NINETEEN HUNDRED NINETY NINE
SEMI-ANNUAL REPORT
SIFE
<PAGE>
SIFE Trust Fund
page
1
Letter to Investors
June 30, 1999
Dear Fellow SIFE Investors:
In the first half of 1999, the market was dominated by large-cap and
internet-related stocks. The financial services sector fluctuated despite easing
of the Asian crisis and continuation of bank merger activity. I encourage you to
carefully read the analysis in this report by our Chief Investment Officer to
gain insight into these and other recent developments.
What has not changed is our abiding confidence that a mutual fund specializing
in financial services presents a unique potential for our customers to benefit
from investments in banks, an industry in which they have direct personal
experience.
Many SIFE customers have expressed interest in additional investment
opportunities through SIFE. While SIFE Trust Fund will always remain our
flagship fund, we are exploring the creation of additional funds with
investments complementary to SIFE and in harmony with our distinctive
competency. These new funds will be designed to enhance our overall capacity to
provide the potential for sustained performance, while retaining the same
prudent philosophy that we have built our reputation on for the past 37 years.
Sincerely,
/s/ Bruce. W. Woods
- -------------------
Bruce W. Woods
President & Chief Executive Officer
[PHOTO]
1999 SEMI-ANNUAL REPORT
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<PAGE>
SIFE Trust Fund
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2
June 30, 1999
[PHOTO]
Mike Stead
Portfolio Manager
and CIO
Chief Investment Officer's Discussion of Fund Performance
For the first half of 1999, SIFE Trust Fund's Class A-I shares posted a 3.65%
return*. Our underperformance relative to the market resulted from the continued
dominance of very large-cap stocks as well as the strong performance of
internet-related stocks. In our sector, the most widely-watched KBW Bank Index,
(BKX), proved to be very difficult to match. The BKX, which consists of the
largest 24 banks, posted an 11% return over the same period. However, only 6
stocks in the BKX outperformed the index average, while 13 had negative returns.
This is further evidence that lately most of the stock market's positive
performance has come from a relatively small group of stocks.
In spite of, or perhaps because of the recent underperformance of banks, SIFE
still believes that the financial services sector has better long-term prospects
than the overall stock market. The Price/Earnings ratio of the S&P 500 is
currently more than 26 times earnings, when compared with earnings expectations
of only 15% for 1999. We believe the risk/reward relationship for bank stocks is
more favorable. Banks are projected to grow per-share earnings about 14%, yet
sell at relatively lower P/E ratios, currently about 17 times earnings, or 65%
of S&P 500's P/E ratio.
Consolidation in the banking industry slowed notably in the first half of the
year and results have been mixed. To date, only six announced mergers have been
greater than $2 billion in transaction value. While this year's merger and
acquisition activity isn't as substantial as last year's activity, there were
some important announcements: most notable was Fleet's announcement to buy its
cross-town rival, BankBoston, for $16 billion. The year's second largest was
Firstar Corp.'s acquisition of St. Louis-based Mercantile Bank for $10.6
billion. Also HSB Group announced a purchase of Republic New York for $10.3
billion.
While we expected a temporary pause in merger and acquisition activity due to
the "Year 2000" bug, we believe that merger activity will continue for many
years. In addition, merger activity may be rekindled by a change in accounting
rules. Next year the "pooling of interests" accounting method will no longer be
available as an option to acquirers. This may speed merger and acquisition
activity, as some sellers may wish to sell using this more favorable accounting
method for mergers and acquisitions. Also, we expect that in the near future
Congress may pass new bank reform regulations, which could lower the barriers
between banks, brokerages, and insurance companies even further. If this occurs,
merger activity between these types of firms may accelerate.
Of course, the Federal Reserve Board's posture toward inflation and the economy
will continue to influence much of the market's performance. The direction of
interest rates are likely to have an impact on the short-term performance of
bank stocks, particularly until the market receives a clear indication that
Federal Reserve Board rate increases are less likely in the near future.
In summary, while our performance during the first half of 1999 fell below that
of relevant market indexes, we continue to believe that financial service
companies with proven business strategies and strong management teams will excel
in the long term.
- -------------------------------------------------
years min. load 0% max. load 5%
- -------------------------------------------------
1 1.47% -3.60%
- -------------------------------------------------
5 22.57% 21.32%
- -------------------------------------------------
10 17.60% 17.06%
- -------------------------------------------------
*Unless otherwise noted, the performance results do not include sales charges,
which range from 5% to 0% 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.
Performance data quoted represents past performance and is not indicative of
future results. The Fund performance is affected by many factors including:
changes in the levels of equity prices and interest rates generally, the
Management Company's selection of specific securities for the portfolio, the
Trust Fund's expense ratio, and others. Performance data quoted does not reflect
the effect of any market volatility that has occurred since the date of the
information. As a result, more recent returns may be substantially more or less
than those shown. SIFE Trust Fund concentrates its investments primarily in the
financial service 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.
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 Trust
Fund's 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.
The Standards and Poor's 500 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.
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1999 SEMI-ANNUAL REPORT
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SIFE Trust Fund
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3
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
June 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
Assets:
Investments in securities, at market (cost $602,947,058) ... $1,034,475,042
Repurchase agreements ...................................... 87,133,000
Cash ....................................................... 1,523,293
Receivables for:
Investment securities sold .............................. 16,003,009
Fund shares sold ........................................ 7,145,058
Dividends ............................................... 1,422,624
Interest ................................................ 12,411
--------------
Total assets ....................................... 1,147,714,437
--------------
Liabilities:
Open put options, at market (premiums received, $104,246) .. 118,750
Payables for:
Fund shares repurchased ................................. 1,260,326
SIFE (the "Management Company") ......................... 1,198,915
--------------
Total liabilities .................................. 2,577,991
--------------
Net assets .............................................. $1,145,136,446
==============
Class A-I:
Net asset value per share
($977,095,446 divided by 151,179,721 shares outstanding) $ 6.46
==============
Maximum offering price per share (100/95 of $6.46) ......... $ 6.80
==============
Class A-II:
Net asset value per share
($125,059,531 divided by 19,345,369 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
($39,058,328 divided by 6,046,319 shares outstanding) ... $ 6.46
==============
Class C:
Net asset value per share
($3,923,141 divided by 608,916 shares outstanding) ...... $ 6.44
==============
Maximum offering price per share (100/99 of $6.44) ......... $ 6.51
==============
See Notes To Financial Statements
1999 SEMI-ANNUAL REPORT
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<PAGE>
SIFE Trust Fund
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4
Investment Portfolio
- --------------------------------------------------------------------------------
June 30, 1999 (unaudited) Number of Shares Market Value
- --------------------------------------------------------------------------------
Common Stocks: 90.3%
Banks: 78.1%
AmSouth Bancorporation 975,000 $ 22,607,813
BankBoston Corp. 400,000 20,450,000
Banknorth Group Inc. 15,000 495,000
Bank of New York Company, Inc. 1,070,000 39,255,625
BB&T Corporation 300,096 11,009,772
Centura Banks, Inc. 27,500 1,550,312
Chase Manhattan Corp. 769,000 66,614,625
Chittenden Corporation 110,156 3,442,375
Citigroup Inc. 900,000 42,750,000
City National Corporation 360,000 13,477,500
Colonial BancGroup, Inc. 40,000 557,500
Comerica Incorporated 591,550 35,160,253
Community First Bankshares, Inc. 376,724 8,994,285
Compass Bancshares, Inc. 534,900 14,576,025
Cullen/Frost Bankers, Inc. 331,800 9,145,238
EVEREN Capital Corporation 25,500 760,219
Fifth Third Bancorp 40,000 2,662,500
First American Corp. 250,000 10,390,625
First Security Corporation 75,000 2,043,750
First Tennessee National Corporation 782,000 29,960,375
First Union Corporation 362,000 17,014,000
Firstar Corporation 1,061,100 29,710,800
Fleet Financial Group, Inc. 900,000 39,937,500
Golden State Bancorp Inc.* 300,000 6,600,000
Imperial Bancorp* 665,800 13,191,163
Independent Bank Corp. 541,000 8,520,750
KeyCorp 1,125,000 36,140,625
M & T Bank Corp. 39,100 21,505,000
Mellon Bank Corp. 1,113,800 40,514,475
Mercantile Bankshares Corp. 60,000 2,122,500
National City Corporation 530,000 34,715,000
See Notes To Financial Statements
-----------------------
1999 SEMI-ANNUAL REPORT
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SIFE Trust Fund
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5
Investment Portfolio
- --------------------------------------------------------------------------------
June 30, 1999 (unaudited) Number of Shares Market Value
- --------------------------------------------------------------------------------
Common Stocks, continued
Banks, continued
National Commerce Bancorporation 126,000 $ 2,756,250
Northern Trust Corp. 139,600 13,541,200
North Fork Bancorp Inc. 1,119,300 23,855,081
PNC Bank Corporation 365,000 21,033,125
Provident Financial Group 65,000 2,843,750
Regions Financial Corp. 190,000 7,303,125
Republic Bancorp, Inc. 14,500 168,563
SouthTrust Corporation 120,000 4,605,000
Sterling Bancshares, Inc. 400,000 5,350,000
Summit Bancorp 579,530 24,231,598
Summit Bancshares, Inc. 290,000 5,038,750
SunTrust Banks, Inc. 440,000 30,552,500
TCF Financial Corporation 253,200 7,057,950
UnionBanCal Corp. 251,000 9,067,375
Union Planters Corp. 143,800 6,426,062
U.S. Bancorp 1,350,500 45,917,000
UST Corp. 77,000 2,329,250
Wachovia Corporation 425,100 36,372,619
Webster Financial Corporation 163,600 4,437,650
Wells Fargo & Company 800,000 34,200,000
Westamerica Bancorporation 350,000 12,775,000
Zions Bancorporation 134,700 8,553,450
------------
894,290,903
Consumer Financial Services: 5.6%
Federal Home Loan Mortgage Co. 133,300 7,731,400
Federal National Mortgage Association 300,000 20,512,500
MBNA Corporation 97,500 2,985,938
MGIC Investment Corp. 40,000 1,945,000
State Street Corporation 361,500 30,863,062
------------
64,037,900
See Notes To Financial Statements
1999 SEMI-ANNUAL REPORT
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<PAGE>
SIFE Trust Fund
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6
<TABLE>
Investment Portfolio
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
June 30, 1999 (unaudited) Number of Shares Market Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks, continued
Thrifts: 2.9%
Charter One Financial, Inc. .......................................... 648,281 $ 18,030,315
FirstFed Financial Corp.* ............................................ 313,700 6,038,725
Peoples Heritage Financial Group, Inc. ............................... 355,270 6,683,517
Sovereign Bancorp, Inc. .............................................. 220,000 2,667,500
--------------
33,420,057
Insurance: 2.0%
American Express Company ............................................. 50,000 6,506,250
American International Group, Inc. ................................... 115,425 13,511,939
Fremont General Corp. ................................................ 44,000 830,500
Transatlantic Holdings, Inc. ......................................... 35,000 2,622,812
--------------
23,471,501
Brokerages: 1.7%
Alliance Capital Management L.P. ..................................... 89,700 2,898,431
Goldman Sachs Group, Inc. ............................................ 160,000 11,560,000
Merrill Lynch & Co., Inc. ............................................ 60,000 4,796,250
--------------
19,254,681
--------------
Total Common Stocks (cost $602,947,058) ................................... 1,034,475,042
--------------
Repurchase agreements: 7.6%
State Street Bank and Trust Company, 4.25%, due 07/01/99
Collateral: U.S. government obligations, market value of $86,235,700 84,133,000
State Street Bank and Trust Company, 4.25%, due 09/20/99
Collateral: U.S. government obligations, market value of $3,190,000 3,000,000
--------------
Total Repurchase Agreements ............................................... 87,133,000
--------------
Total Investments (cost $690,080,058): 97.9% .............................. 1,121,608,042
--------------
Other Assets and Liabilities, net: 2.1% ................................... 23,528,404
--------------
Net Assets: 100.0% ........................................................ $1,145,136,446
==============
Open Put Options At June 30, 1999:** (unaudited)
Expiration Strike Shares Market
Date Price Optioned Value
-----------------------------------------------------------
Banks:
Keycorp September 99 30 100,000 $118,750
--------
Total Put Options (premiums received $104,246) ..... $118,750
========
<FN>
*Non-income producing **See note 7 to financial statements
See Notes To Financial Statements
</FN>
</TABLE>
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1999 SEMI-ANNUAL REPORT
<PAGE>
SIFE Trust Fund
page
7
Statement of Operations
- --------------------------------------------------------------------------------
For the Six-Month Period Ended June 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
Investment income:
Income:
Dividends .................................. $10,623,805
Interest ................................... 2,059,223
-----------
Total investment income ............... $12,683,028
Expenses:
Management fees ............................ 7,109,347
Service and distribution expenses
Class A-II .............................. 141,792
Class B ................................. 194,785
Class C ................................. 18,609
-----------
Total expenses ........................ 7,464,533
-----------
Net investment income ................. 5,218,495
-----------
Realized and unrealized gain/(loss) on investments:
Net realized gain .......................... 75,649,019
Net decrease in unrealized appreciation
of investments during the period ...... (39,775,890)
-----------
-----------
Net gain on investments ............... 35,873,129
-----------
Net increase in net assets resulting from operations $41,091,624
===========
See Notes To Financial Statements
1999 SEMI-ANNUAL REPORT
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<PAGE>
SIFE Trust Fund
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8
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
- ------------------------------------------------------------------------------------------------------
For the Six-Month Period Ended June 30, 1999 (unaudited) and the Year Ended December 31, 1998
- ------------------------------------------------------------------------------------------------------
June 30, 1999 December 31, 1998
<S> <C> <C>
Increase in net assets:
Operations:
Net investment income ...................................... $ 5,218,495 $ 11,432,604
Net realized gain from investment transactions ............. 75,649,019 70,883,571
Net decrease in unrealized appreciation of investments ..... (39,775,890) (26,982,915)
----------------------------------
Net increase in net assets resulting from operations .. 41,091,624 55,333,260
Distributions paid to investors:
From net investment income:
Class A-I .................................................. (4,307,291) (10,625,303)
Class A-II ................................................. (377,758) (801,182)
Class B .................................................... -- (15,045)
Class C .................................................... -- (995)
From net realized gain on investments:
Class A-I .................................................. -- (66,062,653)
Class A-II ................................................. -- (7,169,547)
Class B .................................................... -- (2,512,490)
Class C .................................................... -- (190,198)
----------------------------------
Total distributions ................................... (4,685,049) (87,377,413)
Capital share transactions:
Increase from capital shares sold and reinvested ........... 385,740,895 441,334,161
Decrease from capital shares repurchased ................... (451,897,556) (386,217,042)
----------------------------------
Net (decrease)/increase from capital share transactions (66,156,661) 55,117,119
Total (decrease)/increase in net assets ............... (29,750,086) 23,072,966
Net assets:
Beginning of period ........................................ 1,174,886,532 1,151,813,566
----------------------------------
End of period .............................................. $ 1,145,136,446 $ 1,174,886,532
==================================
Net assets consist of:
Shares of beneficial interests ............................. $ 637,718,952 $ 704,211,971
Undistributed net investment income ........................ 555,218 31,622
Undistributed net realized gain/(loss) on sale of
investment securities and option contracts ............... 75,348,796 (646,431)
Unrealized appreciation of investment securities ........... 431,513,480 471,289,370
----------------------------------
$ 1,145,136,446 $ 1,174,886,532
==================================
<FN>
See Notes To Financial Statements
</FN>
</TABLE>
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1999 SEMI-ANNUAL REPORT
<PAGE>
SIFE Trust Fund
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, as amended, (the "1940 Act").
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-distribution 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 normally
distributed annually as of the last business day in November. Realized gains,
net of losses, from securities held for less than one year are normally
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
1999 SEMI-ANNUAL REPORT
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<PAGE>
SIFE Trust Fund
page
10
Notes to Financial Statements (unaudited)
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. 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, 1999, management fees incurred by the Trust Fund totaled $7,109,347.
Distribution plan and underwriting agreement:
Pursuant to Rule 12b-1 under the 1940 Act, the Trust Fund's Board of Trustees
has adopted separate distribution plans with respect to the Trust Fund's Class
A-II, Class B and Class C shares, pursuant to which the Trust Fund reimburses
the Management Company for a portion of its shareholder servicing and
distribution expenses.
Under the Class A-II Plan, the Trust Fund may pay the Management Company a
distribution fee at the annualized rate of 0.25% of the average daily net assets
of the Trust Fund's Class A-II shares for expenditures incurred by the
Management Company in providing services as principal underwriter to the Trust
Fund for such shares. Under each of the Class B and Class C Plans, 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 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, 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 $28,312 for the six-month
period ended June 30, 1999.
Certain officers and directors of the Trust Fund are also officers and
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1999 SEMI-ANNUAL REPORT
<PAGE>
SIFE Trust Fund
page
11
Notes to Financial Statements (unaudited)
directors of the Management Company. On June 30, 1999, the Management Company
owned 469,682 Class A-I shares of the Trust Fund.
Note 3.
Unrealized Appreciation of Investments
On June 30, 1999, 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 .............. $433,403,017
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value .............. (1,875,033)
------------
Net unrealized appreciation ..................................... $431,527,984
============
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, 1999 (unaudited) and the year ended December 31, 1998:
<CAPTION>
1999 1998
--------------------------------------------------------------
Class A-I Shares Amount Shares Amount
- --------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold .................... 2,400,765 $ 15,086,369 10,264,524 $ 65,303,921
Shares issued in connection with
reinvestment of distributions 618,502 3,878,000 11,734,641 71,066,418
--------------------------------------------------------------
3,019,267 18,964,369 21,999,165 136,370,339
Shares repurchased ............. (13,996,697) (88,607,072) (22,439,728) (142,308,295)
--------------------------------------------------------------
Net decrease ................... (10,977,430) $ (69,642,703) (440,563) $ (5,937,956)
==============================================================
1999 1998
--------------------------------------------------------------
Class A-II Shares Amount Shares Amount
- ---------- ------ ------ ------ ------
Shares sold .................... 56,884,205 $ 362,272,724 41,331,298 $ 266,163,815
Shares issued in connection with
reinvestment of distributions 54,034 338,783 1,269,378 7,751,784
--------------------------------------------------------------
56,938,239 362,611,507 42,600,676 273,915,599
Shares repurchased ............. (56,221,443) (357,919,277) (37,124,813) (239,844,067)
--------------------------------------------------------------
Net increase ................... 716,796 $ 4,692,230 5,475,863 $ 34,071,532
==============================================================
1999 1998
--------------------------------------------------------------
Class B Shares Amount Shares Amount
- ------- ------ ------ ------ ------
Shares sold .................... 544,269 $ 3,433,095 3,922,688 $ 25,579,740
Shares issued in connection with
reinvestment of distributions (603) 3 366,593 2,218,133
--------------------------------------------------------------
543,666 3,433,098 4,289,281 27,797,873
Shares repurchased ............. (772,483) (4,888,821) (511,127) (3,220,808)
--------------------------------------------------------------
Net (decrease)/increase ........ (228,817) $ (1,455,723) 3,778,154 $ 24,577,065
==============================================================
1999 1998
--------------------------------------------------------------
Class C Shares Amount Shares Amount
- ------- ------ ------ ------ ------
Shares sold .................... 120,046 $ 756,921 479,012 $ 3,083,299
Shares issued in connection with
reinvestment of distributions (4,006) (25,000) 27,638 167,051
--------------------------------------------------------------
116,040 731,921 506,650 3,250,350
Shares repurchased ............. (75,955) (482,386) (142,207) (843,872)
--------------------------------------------------------------
Net increase ................... 40,085 $ 249,535 364,443 $ 2,406,478
==============================================================
</TABLE>
Note 5.
Purchases and Sales of Securities
Purchases and sales of investment securities were $134,430,266 and $191,524,327,
respectively for the six-month period ended June 30, 1999.
Note 6.
Concentration of Credit Risk
On June 30, 1999, approximately $1,034,475,042 (90.3% of net assets) of the
Trust Fund's investments were in equities of financial institutions.
Note 7.
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
30,1999 repurchase agreements valued at $3,000,000 were held in escrow by the
custodian in connection with a put option written by the Trust Fund.
1999 SEMI-ANNUAL REPORT
- -----------------------
<PAGE>
SIFE Trust Fund
page
12
<TABLE>
Financial Highlights
<CAPTION>
Class A-I
-------------------------------------------------------------
Years Ended, December 31 1999* 1998 1997 1996 1995 1994
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Selected Per Share Data
(For one share outstanding throughout
each period):
Net asset value, beginning of period ............. $6.26 $6.45 $4.86 $4.58 $3.55 $3.83
-------------------------------------------------------------
Income from investment operations:
Net investment income .......................... 0.03 0.07 0.08 0.09 0.10 0.09
Net realized and unrealized
gain (loss) on investments ................... 0.20 0.24 2.07 1.16 1.68 (0.13)
-------------------------------------------------------------
Total from investment operations ........... 0.23 0.31 2.15 1.25 1.78 (0.04)
-------------------------------------------------------------
Less distributions to investors:
Distributions from net investment income ....... (0.03) (0.07) (0.08) (0.09) (0.10) (0.09)
Distributions from capital gains ............... -- (0.43) (0.48) (0.88) (0.65) (0.15)
-------------------------------------------------------------
Total distributions ........................ (0.03) (0.50) (0.56) (0.97) (0.75) (0.24)
-------------------------------------------------------------
Net asset value, end of period .................. $6.46 $6.26 $6.45 $4.86 $4.58 $3.55
=============================================================
Total Return++ ..................................... 3.7% 5.1% 44.8% 27.4% 49.9% (1.5%)
=============================================================
Ratios and Supplemental Data
Net assets, end of period (in millions) .......... $977 $1,015 $1,049 $769 $614 $410
=============================================================
Ratios to average net assets:
Expenses*** .................................. 1.25% 1.25% 1.25% 1.20% 1.03% 0.94%
=============================================================
Net investment income*** ..................... 0.98% 1.04% 1.38% 1.82% 2.25% 2.27%
=============================================================
Portfolio turnover rate*** ....................... 22.0% 31.0% 63.0% 140.2% 93.5% 25.2%
=============================================================
</TABLE>
<TABLE>
<CAPTION>
Class A-II Class B Class C
------------------------------------------------------------------------------------
Years Ended, December 31 1999* 1998 1997 1996+ 1999* 1998 1997** 1999* 1998 1997**
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per Share Data
(For one share outstanding throughout
each period):
Net asset value, beginning of period ..... $6.26 $6.46 $4.86 $4.73 $6.26 $6.45 $5.41 $6.24 $6.46 $5.41
------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ................. 0.02 0.05 0.07 0.07 -- -- 0.01 -- -- 0.01
Net realized and unrealized
gain (loss) on investments .......... 0.20 0.23 2.07 1.01 0.20 0.24 1.53 0.20 0.21 1.54
------------------------------------------------------------------------------------
Total from investment operations .. 0.22 0.28 2.14 1.08 0.20 0.24 1.54 0.20 0.21 1.55
------------------------------------------------------------------------------------
Less distributions to investors:
Distributions from net investment income (0.02) (0.05) (0.06) (0.07) -- -- (0.02) -- -- (0.02)
Distributions from capital gains ....... -- (0.43) (0.48) (0.88) -- (0.43) (0.48) -- (0.43) (0.48)
------------------------------------------------------------------------------------
Total distributions ............... (0.02) (0.48) (0.54) (0.95) -- (0.43) (0.50) -- (0.43) (0.50)
------------------------------------------------------------------------------------
Net asset value, end of period .......... $6.46 $6.26 $6.46 $4.86 $6.46 $6.26 $6.45 $6.44 $6.24 $6.46
====================================================================================
Total Return++ ........................... 3.6% 4.7% 44.6% 22.8% 3.2% 4.1% 28.9% 3.2% 3.6% 29.1%
====================================================================================
Ratios and Supplemental Data
Net assets, end of period (in millions) .. $125 $117 $85 $18 $39 $39 $16 $4 $4 $1
====================================================================================
Ratios to average net assets:
Expenses*** ....................... 1.50% 1.50% 1.50% 1.48% 2.25% 2.25% 2.22% 2.25% 2.25% 2.25%
====================================================================================
Net investment income*** .......... 0.70% 0.79% 1.11% 1.77% 0.00% 0.00% 0.30% 0.00% 0.00% 0.30%
====================================================================================
Portfolio turnover rate*** ............... 22.0% 31.0% 63.0% 140.2% 22.0% 31.0% 63.0% 22.0% 31.0% 63.0%
====================================================================================
<FN>
* For the six-month period ended June 30, 1999 (unaudited)
+ 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
*** Annualized
See Notes To Financial Statements
</FN>
</TABLE>
-----------------------
1999 SEMI-ANNUAL REPORT
<PAGE>
SIFE Trust Fund
page
13
Graphical Analysis (unaudited)
SIFE Performance
- ------------------------------------------------------------------
Average Annual Compounded Total Return
- ------------------------------------------------------------------
years min. load 0% max. load 5% S & P 500 Index
- ------------------------------------------------------------------
1 1.47% -3.60% 22.76%
- ------------------------------------------------------------------
5 22.37% 21.32% 27.87%
- ------------------------------------------------------------------
10 17.60% 17.06% 18.78%
- ------------------------------------------------------------------
SIFE's Investment Portfolio
(as of June 30, 1999)
Banks 78.1%
Repurchase Agreements 7.6%
Consumer Financial Services 5.6%
Thrifts 2.9%
Insurance 2.0%
Bokerages 1.7%
Comparison to the S & P 500 Index
(as of June 30, 1999)
***[CUSTOMER TO SUPPLY PLOT POINTS]***
* Average Annual Compounded Total Return
The above graph represents a hypothetical illustration comparing a $9,500
investment made in SIFE Trust Fund on June 30, 1989 ($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 and includes reinvestments
of dividends and capital gains. The Standard and Poor's 500 Index is an
unmanaged value-weighted price index composed of 500 large capitalized U.S.
stocks and is regarded as a broad based benchmark for market conditions.
The above chart represents a hypothetical illustration comparing a $9,500
investment and a $10,000 investment made in SIFE Trust Fund on June 30, 1989 to
a $10,000 investment made in the Standard and Poor's 500 Composite Price Index
and includes reinvestments of dividends and capital gains.
Please be aware that the return information in the chart and graph for SIFE
includes operating expenses (such as management fees) that reduce returns, while
the return for the Standard and Poor's 500 Composite Price Index does not.
Performance data quoted represents past performance and does not predict future
results. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. Data is quoted for Class A-I only
(performance for other classes will vary due to differences in fee structures)
and does not reflect the effect of any market volatility that has occurred since
the date of the information. As a result, returns after the date of this report
may be substantially more or less than those shown.
SIFE Trust Fund is a sector fund and as such may exhibit higher volatility than
the overall stock market. Please refer to the prospectus for a complete
disclosure of the risks associated with the financial services sector, as well
as the expenses, investment objectives, and operating policies of the Fund. You
should read the prospectus carefully before investing in any fund. For a free
copy of the SIFE prospectus, please call (800) 524-7433.
1999 SEMI-ANNUAL REPORT
- -----------------------
<PAGE>
SIFE Trust Fund
page
14
SIFE's Top Ten Holdings (as of June 30, 1999) (unaudited)
Chase Manhattan Corp. 5.8%
U.S. Bancorp 4.0%
Citigroup Inc. 3.7%
Mellon Bank Corp. 3.5%
Fleet Financial Group, Inc. 3.5%
Bank of New York Company, Inc. 3.4%
Wachovia Corporation 3.2%
KeyCorp 3.2%
Comerica Incorporated 3.1%
National City Corporation 3.0%
Officers And Trustees of the SIFE Tust Fund
- --------------------------------------------------------------------------------
Haig G. Mardikian*
Chairman of the Board and Trustee
Walter S. Newman*
Vice Chairman of the Board and Trustee
Bruce W. Woods
President and Trustee
Charles W. Froehlich, Jr.
Secretary and Trustee
John A. Meany*
Trustee
Neil L. Diver*
Trustee
Sam A. Marchese
Trustee Emeritus
Diane Howard Belding
Trustee
Gary A. Isaacson
Treasurer
*Independent Trustees
Officers And Directors of SIFE (the "Management Company")
- --------------------------------------------------------------------------------
Bruce W. Woods
President, Chief Executive Officer and
Chairman
Michael J. Stead
Chief Investment Officer and Director
Gary A. Isaacson
Chief Financial Officer
Charles W. Froehlich, Jr.
Secretary and Director
John W. Woods
Director
Sam A. Marchese
Director
Sharon E. Tudisco
Director
Diane Howard Belding
Director
Custodian
- --------------------------------------------------------------------------------
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Transfer Agent
- --------------------------------------------------------------------------------
Boston Financial Data Services
P.O. Box 8244
Boston, MA 02266
Legal Counsel
- --------------------------------------------------------------------------------
Paul, Hastings, Janofsky & Walker LLP
345 California Street, 29th Floor
San Francisco, CA 94104
Independent Auditors
- --------------------------------------------------------------------------------
Deloitte & Touche LLP
50 Fremont Street
San Francisco, CA 94105
Additional SIFE Services
- --------------------------------------------------------------------------------
SIFE Trust Fund provides continuing individual services to the Investor,
including assistance for changes of beneficiary, assignments, 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 Trust Fund. This report is not
authorized for distribution to prospective investors in SIFE Trust Fund unless
preceded or accompanied by an effective prospectus.
-----------------------
1999 SEMI-ANNUAL REPORT
<PAGE>
[SIFE LOGO]
100 North Wiget Lane, P.O. Box 9007
Walnut Creek, CA 94598-0907
SIFE
100 North Wiget Lane, P.O. Box 9007
Walnut Creek, CA 94598-0907
Phone (800) 231-0356 / fax (925) 943-1783
Website: www.sife.com
Ticker Symbol: SIFEX
(C) 1998 SIFE Trust Fund
