As filed with the Securities and Exchange Commission on March 1, 1999
File No. 2-17277
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form N-1A
REGISTRATION STATEMENT Under THE SECURITIES ACT of 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 44 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 23 [X]
(Check appropriate box or boxes)
SIFE Trust Fund
(Exact Name of Registrant as Specified in Charter)
100 North Wiget Lane (800) 231-0356
Walnut Creek, California 94598 (925) 988-2400
(Address of Principal Executive (Registrant's Telephone Number,
Offices, with Zip Code) including Area Code)
Bruce W. Woods
SIFE Trust Fund
100 North Wiget Lane
Walnut Creek, CA 94598
(Name and address of Agent for Service)
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It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on April 30, 1999 pursuant to paragraph (b)
[x] 60 days after filing pursuant to paragraph (a)(1)
[ ] on April 30, 1999 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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Please Send Copy of Communications to:
Mitchell E. Nichter, Esq.
Kelvin K. Leung, Esq.
Paul, Hastings, Janofsky Walker LLP
345 California Street, San Francisco, California 94104
(415) 835-1600
<PAGE>
SIFE Trust Fund
Contents of Post-Effective Amendment
This post-effective amendment to the registration statement of the Registrant
contains the following documents:
Facing Sheet
Contents of Post-Effective Amendment
Part A - Prospectus for Class A-I Shares, Class A-II Shares, Class B Shares and
Class C Shares of SIFE Trust Fund
Part B - Statement of Additional Information for Class A-I Shares, Class A-II
Shares, Class B Shares and Class C Shares of SIFE Trust Fund
Part C - Other Information
Signature Page
Exhibits
C-2
<PAGE>
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Part A - Prospectus for Class A-I Shares, Class A-II Shares, Class B Shares
and Class C Shares of SIFE Trust Fund
===================================
C-3
<PAGE>
[SIFE LOGO]
SIFE
TRUST FUND
Prospectus
April 30, 1999
Like all mutual fund shares, these securities have not been approved
or disapproved by the Securities and Exchange Commission or any state
securities commission, nor has the Commission or any state securities
commission passed upon the accuracy or adequacy of this prospectus.
Any representations to the contrary is a criminal offense.
<PAGE>
Contents
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The Fund 3
Past Performance 4
Fees & Expenses 5
Additional Risk Factors 7
Management 8
Your Account 9
How Sales Charges are Calculated 10
Sales Charge Reductions and Waivers 12
Opening and Contributing to An Account 14
Redeeming From an Account 15
Additional Investor Services 18
Pricing, Distribution, and Tax Information 20
Transaction and Account Policies 22
Financial Highlights 24
<PAGE>
The Fund
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Goal/Approach
The Fund seeks to conserve capital and provide capital growth
consistent with prudent investment management practices by
concentrating not less than 30% of the Trust Fund's assets in the
equity securities of financial institutions, and the remainder in the
equity securities of a diverse portfolio of enterprises regarded by
the Fund as "stable growth" companies.
Investment Strategy
The Fund's strategy is to identify well managed companies that have
capital growth potential due to factors such as undervalued assets or
earning potential, the development and demand of new products and
services, favorable operating ratios, resources for expansion,
management abilities, improved competitive position, and favorable
overall business prospects. This is accomplished, in part, by analysis
of corporate financial information, in-house financial modeling,
meetings with the management of potential investments, and use of
outside research sources.
Risk Factors
As with any mutual Fund, the value of your investment will fluctuate
in value and you may even lose money. By investing in stocks, the
Fund's share price may be volatile, particularly due to the sudden
decline in a holding's price or a general decline in the overall stock
market. Since this Fund concentrates on a single sector, its
performance is largely dependent on the financial industry sector's
performance. This performance may differ from that of the overall
stock market.
In comparison to the overall stock market, the value of shares of
financial companies owned by the Fund, and therefore, the Fund's share
value is more likely to be adversely affected by falling interest
rates and/or deteriorating economic conditions. Additionally, the
industries held by this Fund are subject to greater regulation than
the average industries in the overall stock market. Changes in
government regulation may adversely affect this Fund more than others.
3
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Past Performance
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The chart and tables below show the Fund's annual returns and
performance for the last 10 years. The chart shows how the Fund's
performance has varied from year to year. The first table shows the
Fund's best and worst quarters during that time period, while the
second table compares the Fund's performance with that of the S&P 500
Index, a widely recognized unmanaged index of stock performance.
Please remember that a fund's past performance is not necessarily an
indication of how a fund will perform in the future.
<TABLE>
Total Return (per calendar year):
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Series 1 20.2% -22.1% 47.3% 33.9% 9.3% -1.5% 49.9% 27.4% 44.8% 5.10%
</TABLE>
The Returns shown in the chart above are for Class A-I shares of the
Fund and calculated without taking into consideration the sales load.
If these amounts were reflected, the return would be less than those
shown. The returns for the other classes will be lower because of
different expenses and sales load structures.
Highest and Lowest Quarterly Return:
Quarter Ending
Highest 19.6% December 31, 1998
Lowest -22.8% September 30, 1990
Average Annual Total Returns (through December 31, 1998)
1 Year 5 Years 10 Years
Class A-I* 5.14% 23.41% 19.17%
Class A-II 4.73% N/A N/A
Class B 4.07% N/A N/A
Class C 3.57% N/A N/A
S&P 500 Index 28.58% 24.06% 19.21%
* Fund return does not assume any sales load.
4
<PAGE>
Fees & Expenses
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As an investor, you pay certain fees and expenses in connection with
an investment in the Fund. These fees are broken down in the table
below. The shareholder transaction fees are paid directly from your
account, while the annual Fund operating expenses are paid out of Fund
assets, so their effect is included in the share price.
Class Class Class Class
Shareholder Fees A-I A-II B C
(as a percentage of offering price)
Maximum Sales Charge Imposed on
Purchases(1) 5.00% 5.00% none 1.00%
(as a percentage of assets)
Maximum Deferred Sales Charge none none 5.00% none
Maximum Sales Charge Imposed on
Reinvested Dividends none none none none
(as a percentage of amount redeemed)
Redemption Fee(2) none none none 1.00%(3)
Exchange Fee none none none none
Class Class Class Class
Annual Fund Operating Expenses A-I A-II B C
Management Fees 1.25% 1.25% 1.25% 1.25%
12b-1 Distribution Fees none 0.25% 0.75% 0.75%
Shareholder Servicing Fees none none 0.25% 0.25%
Total Fund Operating Expenses 1.25% 1.50% 2.25% 2.25%
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(1) Sales charges vary, depending on the dollar amount invested.
Please see the section "How Sales Charges are Calculated" for an
explanation of reduced sales charges.
(2) Does not include any fees for wire redemptions.
(3) Only charged on amounts redeemed within one year from purchase and
on the lesser of either the current value or the original investment.
Investments redeemed more than one year after purchase will not be
subject to this redemption fee.
5
<PAGE>
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Examples of Expenses
These examples are intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
They assume that you invest $10,000 in the Fund for the time period
indicated and then redeem all of your shares at the end of those
periods. For Classes with a Deferred Sales Charge or Redemption Fee,
the cost will differ depending on whether or not a redemption is made
at the end of the period. For those Classes an example is included
with no redemption. The examples also assume that your investment has
a 5% return each year and that the Fund's operating expenses remain
the same.
1 Year 3 Years 5 Years 10 Years
Class A-1 $ 621 $ 877 $ 1152 $ 1936
Class A-II $ 645 $ 950 $ 1278 $ 2201
Class B(4)
Assuming Redemption $ 742 $ 1029 $ 1434 $ 2585
Assuming No Redemption $ 223 $ 703 $ 1205 $ 2585
Class C
Assuming Redemption $ 328 $ 696 $ 1193 $ 2559
Assuming No Redemption $ 326 $ 796 $ 1293 $ 2659
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(4) This example assumes that Class B shares convert to Class A-II on
the sixth anniversary of purchase, as they normally would.
6
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Additional Risks
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Year 2000 Issues
The Fund and its service providers depend on the smooth functioning of
its computer systems. Unfortunately, because of the way dates are
encoded and calculated, many computer systems in use today cannot
recognize the year 2000, but revert to 1900 or another incorrect date.
A computer failure due to the year 2000 problem could negatively
impact the handling of securities trades, pricing and account
services.
The Fund's software vendors and service providers have assured it that
their systems will be adapted in sufficient time to avoid serious
problems. There can be no guarantee, however, that all of these
computer systems will be adapted in time. We do not expect year 2000
conversion costs to be substantial for the Fund, because those costs
are borne by the Fund's vendors and service providers and not directly
by the Fund. Furthermore, brokers and other intermediaries that may
hold shareholder accounts may still experience incompatibility
problems. The Fund is in the process of putting in place a contingency
plan to evaluate potential vendors and service providers if the
existing vendors and service providers fail to adequately adapt their
systems in a timely manner. It is also important to keep in mind that
year 2000 issues may negatively impact the companies the Fund invests
in and by extension the value of the shares held in the Fund. Lastly,
please note that financial industry stocks may experience greater year
2000 volatility due to transactions in anticipation of year 2000 and a
greater dependence on technology than the overall stock market.
Defensive Investments
The Fund may invest up to 70% of its assets in cash for temporary
definsive purposes. By taking a defensive position, the Fund may not
achieve its goal of capital appreciation and runs the risk of reducing
potential returns from an upswing in the market.
7
<PAGE>
Management
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SIFE, a California Corporation, is the investment advisor,
underwriter, and distributor for SIFE Trust Fund. SIFE is located at
100 North Wiget Lane, Walnut Creek, CA 94598. Founded in 1960, SIFE
has managed the Fund since 1962 and is paid a flat fee of 1.25% of
average daily assets for investment advice given to the Fund. For the
year ended December 31, 1998, the Fund paid SIFE $14,504,536.
SIFE's asset management philosophy is based on the belief that
discipline and consistency are important to investment success. SIFE
seeks to establish clear guidelines for portfolio management and to be
systematic in making decisions. This approach is designed to provide
the Fund with a stable identity.
SIFE's portfolio team is composed of Michael J. Stead, Scott Edgar,
and Laurie Buntain. Michael J. Stead, the Chief Investment Officer,
has managed the Fund since January 1995. He joined SIFE after working
over 15 years in the banking industry. Scott Edgar, the Director of
Research, has been with SIFE since 1993. Previous to this Mr. Edgar
worked for an investment advisor the Director of Research. Lauri
Buntain, the Head Analyst, has been with SIFE since 1995. Prior to
this she spent 8 years working as a research analyst for various
securities firms.
8
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Choosing a Share Class
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SIFE Trust Fund offers four different classes of shares, Class A-I,
Class A-II, Class B, and Class C. Each class has its own fee
structure, as outlined below, allowing you to choose the one that best
meets your requirements. For more details please see the section
titled "How Sales Charges are Calculated." Also your financial
representative can help you decide which share class is best for you.
The minimum initial investment in the Fund is $200, and the minimum
subsequent investment is $50. If you buy shares through a broker or
investment advisor, different minimums may apply.
Class A-I
o This class is closed to new investors and is only available to:
o investors with accounts established prior to May 1, 1996, and
o directors, employees, and registered representatives of the
Fund and SIFE, their immediate family members, and any
employee benefit plan established for such people.
o This class has a front-end sales charge. There are several
ways to reduce this charge, described under "Sales Charge
reductions and waivers" following this section.
o This class has lower annual expenses than the other classes.
Class A-II
o This class is available to all investors.
o This class has a front-end sales charge. There are several
ways to reduce this charge, described under "Sales Charge
Reductions and Waivers" following this section.
Class B
o This Class is Available to All Investors.
o There is No Front-end Sales Charge; Allowing All of Your Money
Goes to Work for You Right Away.
o Higher Annual Expenses Than Class A-ii Shares.
o a Contingent Deferred Sales Charge That Declines From 5% to 0%
Over Six Years.
o Automatic Conversion to Class A-ii Shares On the Sixth
Anniversary of Purchase, Reducing Annual Expenses.
o This Class is Best Suited for Investors That Intend to Hold
Their Shares for At Least 6 Years.
Class C
o This Class is Available to All Investors.
o Reduced Front-end Sales Charge of 1%.
o Higher Annual Expenses Than Class A-ii Shares.
o a Redemption Charge of 1% for Shares Redeemed Less Than One
Year From Purchase.
o This Class is Best Suited for Investors Who Intend to Hold
Their Shares for a Short Time.
9
<PAGE>
How Sales Charges are Calculated
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Class A-I and Class A-II
Class A-I and Class A-II are sold at net asset value per share plus a
sales charge as set out in the table below. It should be noted that
there is no sales charge on shares acquired from dividends or
reinvestment.
Class A-I & A-II Sales Charges
As a % of As a % of
Your Investment offering price your investment
Up to $99,999 5.00% 5.26%
$100,000 - $249,999 4.00% 4.17%
$250,000 - $499,999 3.00% 3.09%
$500,000 - $999,999 2.50% 2.56%
$1,000,000 and over none none
Class B
Class B shares are offered at their net asset value per share, without
any initial sales charge. However, you may be charged a contingent
deferred sales charge (CDSC) on shares you sell within six years of
purchase. There is no CDSC on shares acquired through reinvestment of
dividends. The CDSC is based on the lessor of the original purchase
cost or the current market value of the shares being sold and is
deducted for the net asset value per share at the time of redemption.
The longer the time between the purchase and sale of shares, the lower
the rate of the CDSC. The following chart sets out how the CDSC
charges apply over time:
Class B CDSC
(as a percentage of dollar amount)
Years after purchase CDSC on shares being sold
-------------------- -------------------------
1st year 5.00%
2nd year 4.00%
3rd and 4th years 3.00%
5th year 2.00%
6th year 1.00%
after 6 years none
On the sixth anniversary after purchase class b shares will
automatically convert to class a-ii shares. This will result in the
total fund operating expenses being reduced from the 2.25% Charged on
class b accounts to the 1.50% Charged on class a-ii accounts.
To keep your CDSC as low as possible, each time you place a request to
sell shares we will first sell any shares in your account that carry
no cdsc. If there are not enough shares with no CDSC, we will sell
those shares that have the lowest CDSC first.
10
<PAGE>
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Class C
Class C shares are offered at their net asset value per share, without
any initial sales charge. However, you may be charged a CDSC of 1% on
shares that you sell within one year of purchase. There is no CDSC on
shares acquired through reinvestment or dividends. The CDSC is based
on lesser of the original purchase cost or the current market value of
shares being sold.
To keep you costs as low as possible, each time you place a request to
sell shares we will first sell any shares in your account that carry
no CDSC.
11
<PAGE>
Sales Charge Reductions and Waivers
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Reducing Your Class A-I And A-II Sales Charges
There are two ways that you can combine multiple purchases of Class
A-I or Class A-II shares to take advantage of the breakpoints in the
sales charge schedule. These two ways can be combined in any manner.
o Accumulation Privilege- This allows you to add the value of
any class of shares that you already own to the amount of your
next purchase of the same class for the purpose calculating
the sales charge.
o Letters of Intention (LOI) - This allows you to purchase
shares in a class of the Fund over a 13th month period and
receive the same sales charge as if all the shares had been
purchased at the same time. An LOI may include purchases made
up to 90 days before entering into the LOI.
o Combination Privilege - Both the Accumulation Privilege and
the LOI may be combined with purchases from other classes to
minimize the sales charge on Class A-I and Class A-II
purchases. Accounts that may be combined for this purpose
include all accounts that are:
1) identified by the same Social Security or tax
identification number,
2) owned by the Investor's spouse, minor children, or any
company 100% owned by the investors; or
3) fiduciary accounts, such as IRA or employee benefit
accounts controlled by the Investor.
Waivers for Class A-ii Purchases
Subject to approval of the Management Company sales charges do not
apply to Class A-II purchases:
(1) by a governmental agency or authority prohibited by law
from paying certain front-end sales charges
(governmental agencies or authorities prohibited by law
from paying distribution fees are entitled to purchase
Class A-I shares);
(2) in accounts which a bank, investment-advisor or
broker-dealer charges an advisory, account management
or administration fee;
(3) by registered representatives, bank trust officers, and
other employees (and their immediate families) of
investment professionals having agreements with the
Management Company, provided shares are not resold;
(4) by not for profit organizations, as defined by Section
501(c)(3) of the Internal Revenue Code, investing
$50,000 or more;
(5) by an insurance company separate account used to fund
annuity contracts purchased by employee benefit plans
which have more than 25 participants or $1,000,000 or
more invested in the Trust Fund;
(6) by a single account covering a minimum of 25
participants or $1,000,000 or more invested in the
Trust Fund and representing a defined benefit plan,
defined contribution plan, cash
12
<PAGE>
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or deferred plan qualified under 401(a) or 401(k) of
the internal revenue code;
(7) by a trust institution (including bank trust
departments) investing $250,000 or more on their own
behalf or on the behalf of others;
(8) by an account as to which a bank, broker-dealer, third
party administrator or investment adviser charges an
account management fee; or
(9) through a "wrap account" or other similar fee-based
program;
(10) by investors with accounts established prior to May 1,
1996, who have elected to stay in this class; or
(11) by directors, employees, and registered representatives
of the fund and SIFE, their immediate family members,
and any employee benefit plan established for such
persons.
Waivers for Class B Contingent Differed Sales Charge and Class C
Redemption Fees
SIFE will waive the CDSC on Class B and shares and the redemption on
Class C shares in the following cases:
(i) if the redemption is made within one year of death or
disability of the account holder,
(ii) to the extent that the redemption represents a minimum
required distribution from a retirement plan once you have
attained the age of 70(degree),
(iii) if the withdrawal is made under a systematic withdrawal
plan, provided that such a systematic withdrawal is limited
to no more than 12% of the annual beginning account value,
(iv) in the case of tax-exempt employee benefit plans, if the
Internal Revenue Service or the Department of Labor, as the
case may be, determines by rule or regulation that
continuation of the investment in such shares would be
improper, or
(v) if, in the case of Class B shares, such a withdrawal is
followed by a reinvestment in Class B shares within 60 days
of the initial redemption.
13
<PAGE>
Opening and Contributing to an Account
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Steps for opening an account with SIFE:
1) Read this prospectus carefully.
2) Determine how much and what Class of shares you wish to invest in.
The minimum initial investment amount to open an account with SIFE
is:
o $200 for a regular account
o $200 for a retirement account
o no minimum for an account opened with a systematic purchase
plan (see the section titled "Additional Services")
3) Complete the appropriate parts of the account application,
carefully following the instructions. If you have any questions,
please contract your financial representative or call SIFE's
Investor Services Division at 1-800-231-0356.
4) Complete the appropriate part of the account privileges section of
the application. By applying for privileges now, you can avoid the
delay and inconvenience of having to file an additional
application if you want to add privileges later.
5) Make your initial investment using the tables on the following
pages. You and your financial initiate any purchase, exchange, or
sale of shares.
<TABLE>
Please be aware that purchase and redemption requests received before
1:00 p.m. Pacific Time will receive the valuation of that days
closing. Purchase and redemption requests received after 1:00 p.m.
Pacific Time will receive the following day's closing price.
<CAPTION>
Opening an Account Adding to an Account
By Check
<S> <C>
o Make out a check for the investment amount, payable o Make out a check for the investment amount, payable
to "SIFE Trust Fund". to "SIFE Trust Fund".
o Deliver the check and completed application to your o Fill out the detachable slip from an account
financial representative, or mail to Boston Financial statement. If no slip is available, include a note
Data Services (address on back of Trust Fund". specifying your share class, account number and the
prospectus). name(s) in which the account is registered.
o Please note that SIFE does not accept third party o Deliver the check to your financial representative,
checks. or mail to Boston Financial Data Services (address on
back of prospectus).
By Exchange
o Call your financial representative or SIFE's Investor o Call your financial representative or SIFE's Investor
Services at 1-800-231-0356 to request an exchange. Services at 1-800-231-0356 to request an exchange.
By Wire
o Deliver the check and completed application to your o Instruct your bank to wire the amount of your
financial representative, or mail to Boston Financial investment to:
Data Services (address on back of prospectus). SIFE Trust Fund
o Obtain your account number by calling your financial Account #
representative or SIFE's Investor Services. SIFE Routing #
Trust Fund Specify the share class, account number and the
o Instruct your bank to wire the amount of your name(s) in which the Routing # account is registered.
investment to: Your bank may charge a fee to wire funds.
SIFE Trust Fund
Account #
Routing #
Specify the share class, account number and the
name(s) in which the Routing # account is registered.
Your bank may charge a fee to wire funds.
By Phone
o See "By Wire" and "By Exchange". o Verify that your bank or credit union is a member of
the Automated Clearing House (ACH) system.
o Complete the "Invest by Phone" and "Bank Information"
sections on your account application.
o Call SIFE's Investor Services to verify that these
features are in place on your account.
o Tell the Investor Services representatives the share
class, account number, and name(s) in which the
account is registered and the amount you wish to add
to your investment.
14
<PAGE>
Redeeming from an Account
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Designed for Redemptions To sell some or all of your shares
By Letter
o Sales of any amount. o Write a letter of instruction indicating the share
class, account number, and the name(s) in which the
account is registered and the dollar value or number
of shares you wish to sell.
o Include all signatures or any additional documents
that may be required (see "Additional Requirements
for Written Requests Redemptions").
o Mail the materials to SIFE's Investor Services.
o A check will be mailed to the name(s) and address in
which the account is registered, or otherwise
according to your letter of instruction.
By Phone
o Sales of up to $100,000. o Call SIFE's Investor Services between 7:30am and
5:00pm (PT) on most business days.
By Exchange
o Sales of any type. o Call your financial representative or Investor
Services to request an exchange.
15
<PAGE>
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Additional Requirements for Written Redemption Requests
Type of Seller Requirement
Owners of individual, joint, sole proprietorship, o Letter of instruction.
UGMA/CUTMAs or general partner accounts.
o On the letter, the signatures and titles of all
persons authorized to sign for the account, exactly
as the account is registered.
o Signature guarantee if applicable (see Pg 17).
Owners of Corporate or Association Accounts. o Letter of instruction.
o Corporate resolution, certified within the past
twelve months.
o On the letter and the resolution, the signature of
the person(s) authorized to sign for the account.
o Signature guarantee if applicable (see Pg 17).
Trustees of Trust Accounts. o Letter of instruction.
o On the letter, the signature(s) of the trustee(s).
o If the names of all trustees are not registered on
the account, please also provide a copy of the trust
document certified with the last twelve months.
o Signature guarantee if applicable (see Pg 17).
Joint Tenancy shareholders whose co-tenants are o Letter of instruction by surviving tenant.
deceased.
o Copy of death certificate.
o Signature guarantee if applicable (see Pg 17).
Executors of estates. o Letter of instruction signed by executor.
o Copy of order appointing executor.
o Signature guarantee if applicable (see Pg 17).
Administrators, conservators, guardians, and other o Call 1-800-231-0356 for instructions.
sellers or account types not listed above.
</TABLE>
16
<PAGE>
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Signature Guarantee
As set out above, a signature guarantee is required for the following
types of written requests for redemption:
o amounts of $100,000 or more,
o checks made payable to someone other than the account holder(s),
o to initiate or change systematic redemptions from the Fund,
o checks mailed to an address different than the address of record for
the account, or
o if the account registration has changed within the past 30 days.
A signature guarantee may be obtained from most commercial banks,
trust companies, savings and loan associations, federal savings banks,
broker/dealers or other eligible financial institutions. Please note
that a notary public may not provide a signature guarantee. Additional
documentation may be required for redemptions made by corporations,
executors, administrators, trustees, guardians and qualified plan
administrators.
17
<PAGE>
Additional Investor Services
----------------------------------------------------------------------
Systematic Purchase Plan
The Systematic Purchase Plan lets you make regular investments from
your bank account (minimum of $50) automatically on a monthly or
quarterly basis. Systematic Purchase Plans will take effect the month
following the completion of an application to participate in the plan.
To establish a Systematic Purchase Plan:
o Complete the appropriate section of your account application.
o If you are using this Plan to open an account, please attach a check
($50 minimum) made to "SIFE Trust Fund." This check will be used to
open your account with SIFE. The automatic purchases will begin the
month following the completion of the application to participate.
o You may terminate your participation in the Plan at any time by
calling or writing SIFE.
Systematic Withdrawal Plan
The Fund offers a Systematic Withdrawal Plan which permits you to
receive (either by check or by electronic funds transfer) periodic
payments of $100 or more from your account on a monthly or a quarterly
basis.
o In order to establish a Systematic Withdrawal Plan, for new a
account please fill out the relevant portion of the application.
o To establish a Plan on an existing account call SIFE's Investor
Service Department and you will be sent a service option form to
complete.
o Class B and C shares may be eligible for CDSC waivers under this
type of withdrawal plan. Please see the section titled "Sales Charge
Waivers and Reductions" for information on these waivers.
o Purchases on Class A-I and Class A-II shares is disadvantageous for
you during a period of systematic withdrawal because sales charges
will be charged on new purchases.
Retirement Plans
In addition to retirement accounts, SIFE offers a range or retirement
plans, including Traditional and Roth IRAs, Simple IRAs, Education
IRAs, SEPs, and 403(b) plans.
Investor Information Meetings
SIFE periodically holds information meetings for investors. During
these meetings we attempt to explain recent market performance,
investing philosophy, our investment planning and to answer questions
that investors may have. Please call your sales representative or
SIFE's Investor Services to find out when these meetings will occur.
Walk-in Transactions
If you wish, you may purchase shares or redeem all or part of your
SIFE account in person at SIFE's offices in Walnut Creek, California.
In order to receive that day's closing price for redemptions, you must
complete your redemption request at SIFE by 1:00 p.m. Pacific time.
18
<PAGE>
----------------------------------------------------------------------
Money Market Fund
SIFE offers the SSGA Money Market Fund for investors wishing to
exchange funds from their Class A-I and Class A-II shares into a money
market fund. Money that is transferred from SIFE shares to the SSGA
Money Market Fund may be moved back into the same class of SIFE shares
with no sales charge. Please note that when moving money into the
money market, you must leave at least $200 in SIFE shares. Also,
exchanges between the fund and the SSGA Money Market Fund are taxable
events.
Characteristics of a Investment in the Trust Fund
When opening your account you may specify a beneficiary potentially
providing for post-mortem transfers outside of the probate process.
You should be aware that probate processes and beneficiary
designations vary by jurisdiction which may affect the characteristics
of the treatement of the distributions or transfers. Please consult a
qualified estate planning professional for advice on how Fund's Trust
characteristics may be affected by the laws of your jurisdiction. Be
aware that Class A-II shares will be issued to beneficiaries of Class
A-I.
19
<PAGE>
Pricing, Distribution and Tax Information
----------------------------------------------------------------------
Calculation of Net Asset Value
The net asset value ("NAV") per share of the Fund is normally computed
at the close of trading (typically 1:00 p.m. Pacific time) of each day
that the New York Stock Exchange is open. This value is determined for
each class by dividing that class's net assets by the number of shares
outstanding. The value of the assets is based on either the closing
price on the exchange on which they are primarily traded, or the last
available sale price. If either of these prices are unavailable the
closing bid price is used for valuation.
Please be aware that purchase and redemption requests received before
1:00 p.m. Pacific time will receive that day's closing NAV. Purchase
and redemption requests received after 1:00 p.m. Pacific time will
receive the following day's NAV.
Distributions Of Income And Capital Gains
Normally any net investment income will be distributed to you on the
last day of February, May, August, and December. Short-term capital
gains are normally allocated to your account on the last business day
of December and long-term capital gains are normally allocated to your
account on last business day of November.
Please be aware that unless SIFE receives instructions otherwise, we
will automatically reinvest all dividends in additional shares of the
same class. Also, as explained in the section "How Sales Charges are
Calculated," there is no sales charge on reinvested dividends.
Tax Matters
Taxation of Dividends
The fund has qualified as, and intends to continue to qualify as, a
regulated investment company under the Internal Revenue Code. This
means that the Fund does not pay any federal income tax on earnings
which are distributed to you. As a consequence, earnings you receive
from the Fund, whether they are reinvested or received as cash, are
generally considered taxable to you. Earnings from income and
short-term capital gains are generally taxable to you as ordinary
income, while earnings from long-term capital gains are taxable as
capital gains (which may be taxable at different rates depending on
the length of time the fund holds its assets).
A Form 1099 is mailed to you every January that details your short and
long-term capital gains for the previous year and their federal tax
category. You should verify this form with your tax professional to
see how these earnings apply to your specific tax situation.
Taxation of Sales and Exchanges
Any time that you sell or exchange shares in the Fund, it is
considered a taxable event. Depending on the purchase price, earnings
while you own the shares, and the price of the shares when you sell or
exchange them, you may have either a gain or a loss from the
transaction. You are responsible for any tax liabilities that occur as
a result of your transactions.
20
<PAGE>
----------------------------------------------------------------------
Due to the complexity of determining any gains or losses that result
from selling or exchanging shares in the fund, SIFE strongly
recommends that you consult a tax professional to help you establish
any tax liability that may result.
Sales Compensation
Class A-II, Class B, and Class C shares of the Fund have each adopted
a plan under Rule 12b-1 ("12b-1" refers to the federal securities law
authorizing this type of fee") that allows the Fund to pay
distribution and other fees for the distribution of its shares and for
services provided to shareholders. Because these fees are paid out of
the Fund's assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
Compensation payments originate from two sources, sales charges and
annual 12b-1 fees. Presently SIFE charges 12b-1 fees on Class A-II,
Class B, and Class C shares. These fees vary by class according to the
12b-1 plans adopted by the Fund's independent Trustees. The amount of
the 12b-1 fees is set out in the "Expenses" section of this
prospectus.
21
<PAGE>
Transaction and Account Policies
----------------------------------------------------------------------
Purchase and Sell Prices
When you purchase shares of the Fund, you pay NAV plus any applicable
sales charges, as described earlier. When you sell shares, you receive
the NAV minus any applicable deferred sales charges or redemption
fees. Please be aware the certain broker dealers may charge
transaction fees in addition to the fees listed in this Prospectus.
Execution of Requests
SIFE is open, from 8:00 a.m. to 5:00 p.m. Pacific time, each day that
the New York Stock Exchange is open. Buy and sell requests received
before 1:00 p.m. Pacific time will normally be processed at that day's
closing price. Requests received after 1:00 p.m. Pacific time will
normally be processed at the following day's closing price.
In unusual circumstances, the Fund may temporarily suspend the
processing of sell requests, or postpone payments of proceeds for up
to five business days, as permitted by federal securities laws.
Redemption proceeds are normally sent no later than next business day
following the redemption request. However, in certain circumstances,
proceeds may take up to five business days to be sent.
Receipt of Proceeds by Wire Transfer
If you wish, redemptions in amounts greater than $5,000 may be sent by
wire transfer to any bank previously designated by you on your account
application. Wire transfers normally will be sent the next business
day following the processing of a redemption, however, in certain
circumstances they may take up to five days to be sent.
SIFE does not presently charge a fee for redemptions sent by wire
transfer, but reserves the right to impose such a fee in the future.
Please be aware that your bank may charge you a fee for wire services.
Telephone Transactions
Telephone redemption and exchange privileges are automatically
provided when you open your account. If you do not wish to have these
privileges please either indicate that on your account application or
complete an Account Service Option Agreement Form and return it to
SIFE. For your protection, telephone requests may be recorded in order
to verify their accuracy. In addition, SIFE will take measures to
verify the identity of the caller, such as asking for name, account
number, Social Security or other Taxpayer ID number, and other
information as may be reasonable or necessary to verify identity.
However, SIFE may still refuse a telephone redemption if SIFE feels it
is appropriate to do so.
If reasonable measures have been taken, SIFE is not responsible for
any losses that may occur to any account due to an unauthorized
telephone call. Also for your protection, telephone transactions are
not permitted on accounts whose name or address information has
changed within the past 30 days. Proceeds from telephone transactions
will only be mailed to the address of record. SIFE reserves the right
to change these policies after 30 days written notice.
22
<PAGE>
----------------------------------------------------------------------
No Sales Charge Repayment Privilege
If you are invested in Class A-I or Class A-II shares you have the
privilege of repurchasing shares previously redeemed with no sales
charge, up to the dollar amount of shares previously redeemed. Any
repurchases made under this privilege must be noted on the check as a
"repayment." Please be aware that not all brokers reconize this
repayment privilage and that SIFE may terminate this right with
respect to new redemptions upon 90 days notice to shareholders.
Sales in Advance of Purchase Payments
When you place a request to sell shares for which the purchase money
has not yet been collected, SIFE will execute the request, but will
not release the proceeds of the sale until the purchase payment
clears. This process may take up to 20 business days after the
purchase.
Small Accounts
If you draw down a non-retirement account so that its total value is
less than $200, you may be asked to purchase more shares within 30
days. If you do not take action, your account may be closed and the
proceeds sent to you. You will not be charged a CDSC if your account
is closed for this reason, and your account will not be closed if its
drop in value is due to Fund performance or the effects of sales
charges.
23
<PAGE>
Financial Highlights
----------------------------------------------------------------------
The financial highlights table is intended to help you understand the
Fund's financial performance for the past five years. Certain
information reflects results for a single Fund share. The total
returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the Fund (assuming reinvestment
of all dividends and distributions.) The information for 1996 through
1998 was audited by_____________ LLP, whose report along with the
Fund's financial statement, is included in the annual report, which is
available upon request.
<TABLE>
SELECTED PER SHARE DATA
(For one share outstanding during the period):
<CAPTION>
Class A-I Class A-II Class B(1) Class C(1)
--------------------------------- ------------------- ------------ ------------
Years Ended December 31 1998 1997 1996 1995 1994 1998 1997 1996(2) 1998 1997 1998 1997
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $6.45 $4.86 $4.58 $3.55 $3.83 $6.46 $4.86 $4.73 $6.45 $5.41 $6.46 $5.41
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment income 0.07 0.08 0.09 0.10 0.09 0.05 0.07 0.07 -- 0.01 -- 0.01
Net realized and unrealized
gain (loss) on investments 0.24 2.07 1.16 1.68 (0.13) 0.23 2.07 1.01 0.24 1.53 0.21 1.54
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations 0.31 2.15 1.25 1.78 (0.04) 0.28 2.14 1.08 0.24 1.54 0.21 1.55
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions to investors:
Dividends from net investment
income (0.07) (0.08) (0.09) (0.10) (0.09) (0.05) (0.06) (0.07) -- (0.02) -- (0.02)
Distributions from capital gains (0.43) (0.48) (0.88) (0.65) (0.15) (0.43) (0.48) (0.88) (0.43) (0.48) (0.43) (0.48)
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions (0.05) (0.56) (0.97) (0.75) (0.24) (0.48) (0.54) (0.95) (0.43) (0.50) (0.43) (0.50)
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period $6.26 $6.45 $4.86 $4.58 $3.55 $6.26 $6.46 $4.86 $6.26 $6.45 $6.24 $6.46
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return(3): 5.1% 44.8% 27.4% 49.9% (1.5%) 4.7% 44.6% 22.8% 4.1% 28.9% 3.6% 29.1%
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
RATIOS AND SUPPLEMENTAL DATA:
Class A-I Class A-II Class B(1) Class C(1)
--------------------------------- ------------------- ------------ ------------
Years Ended December 31 1998 1997 1996 1995 1994 1998 1997 1996(2) 1998 1997 1998 1997
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net assets, end of period
(in millions) $1,015 $1,049 $769 $614 $410 $117 $85 $18 $39 $16 $4 $1
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Ratios to average net assets:
Expenses(4) 1.25% 1.25 % 1.20% 1.03% 0.94% 1.50% 1.50% 1.48% 2.25% 2.22% 2.25% 2.25%
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Net investment income 1.04% 1.38 % 1.82% 2.25% 2.27% 0.74% 1.11% 1.77% 0.00% 0.30% 0.00% 0.30%
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Portfolio turnover rate 31.0% 63.0% 140.2% 93.5% 25.2% 31.0% 63.0% 140.2% 31.0% 63.0% 31.0% 63.0%
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
<FN>
---------------
(1) No Class B or C shares were sold prior to May 1, 1997. For the
period May 1, 1997, (commencement of operations) to December 31, 1997.
(2) For the period May 1, 1996, (commencement of operations) to
December 31, 1996.
(3) Sales loads are not reflected in total return.
(4) Subsequent to April 1, 1996, the Fund is responsible for all of
the Fund's operating expenses, without limitation and in exchange, is
paid a fee equal to 1.25% of the Fund's average daily net assets, per
annum, without further compensation or reimbursement for any cost or
expense attributable to the operation of the Fund. Prior to April 1,
1996, the Management Company received an investment advisory fee of
0.60% per annum of the Fund's net assets plus reimbursement of certain
expenses attributable to the operation of the Fund.
</FN>
</TABLE>
24
<PAGE>
For More Information
----------------------------------------------------------------------
Two free documents are available that offer further information about
SIFE Trust Fund:
1) The Annual and Semi-Annual Report to Shareholders
In the annual report you will find a discussion of the market
conditions and investment strategies that significantly affected
the Fund's performance during the last year.
2) Statement of Additional Information (the "SAI")
The SAI contains more detailed information on all aspects of the
Fund.
A current copy of the SAI has been filed with the Securities and
Exchange Commission and is incorporated by reference (it is
legally part of this prospectus). Reports and other information
about the Fund is available on the Commission's Internet site at
www.sec.gov and copies of this information may be obtained upon
payment of a duplicating fee, by writing the Public Reference
Section of the Commission, Washington, D.C. 20549-6009.
Information about the Fund (including its SAI) can also be
reviewed and copied at the Commission's Public Reference Room in
Washington D.C.. To obtain information about the operation of the
public reference room, please contact the Commission at
1-800-SEC-0330.
To Contact SIFE
To request a free copy of the current annual/semi-annual report,
prospectus, SAI, or ask any questions please call or write to
SIFE at:
100 North Wiget Lane
Walnut Creek, CA 94598
800-231-0356
925-988-2400
www.sife.com
SEC File No. 811-987
<PAGE>
===================================
Part B - Statement of Additional Information for
Class A-I Shares, Class A-II Shares, Class B
Shares and Class C Shares of SIFE Trust Fund
===================================
C-4
<PAGE>
SIFE TRUST FUND
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1999
------------------------------
Managed by SIFE (A California Corporation)
100 North Wiget Lane
Walnut Creek, California 94598
Telephone: (800) 231-0356 / (925) 988-2400
Internet: www.sife.com
------------------------------
This Statement of Additional Information, which may be amended from
time to time, concerning SIFE Trust Fund (the "Trust Fund") is not a prospectus
and is only authorized for distribution when preceded or accompanied by the
Trust Fund's Prospectus, dated April 30, 1999, as may be amended from time to
time (the "Prospectus"). This Statement of Additional Information (the "SAI")
contains additional and, in some cases, more detailed information than in the
Prospectus and should be read in conjunction with the Prospectus. Additional
copies of the Prospectus may be obtained without charge by writing or calling
your investment adviser, broker/dealer or financial planner, or the Trust Fund
at the address and telephone number set forth above.
TABLE OF CONTENTS
Page
General Information & History B-
Investment Objectives, Policies & Practices B-
Fundamental Investment Policies B-
Investment Practices B-
American Depositary Receipts B-
Repurchase Agreements B-
Lending Portfolio Securities B-
Options Policies B-
Risk Considerations B-
Management of the Trust Fund B-
Compensation of Trustees and Officers B-
Control Persons and Principal Holders of Securities B-
Investment Advisory & Other Services B-
Investment Advisory Services B-
Management and Administration B-
Custody Services B-
Brokerage Allocation & Portfolio Turnover Rates B-
Capital Stock and Other Securities B-
Calculation of Net Asset Value B-
Federal Income Tax Information B-
Underwriting of the Trust Fund's Securities B-
Underwriting Services B-
Distribution Plans B-
Performance Information B-
Financial Statements B-
<PAGE>
GENERAL INFORMATION & HISTORY
The Trust Fund was organized as a Delaware business trust on February
28, 1997, and is the successor-in-interest to SIFE Trust Fund, a California
trust organized on September 26, 1960 (the "California Trust"). The Trust Fund,
through its predecessor, the California Trust, has offered its securities to the
public on a continuous basis, and conducting operations as a mutual fund, since
July 2, 1962. The Trust Fund is registered with the Securities and Exchange
Commission as an open-end diversified management investment company. All
information, including, but not limited to, historical business and financial
information, presented in this Statement of Additional Information and/or the
Prospectus relates to the California Trust as its business has been continued by
the Trust Fund. SIFE, a California corporation, (the "Management Company") is
the Trust Fund's investment advisor, and also functions as the principal
underwriter of the Trust Fund's securities.
INVESTMENT POLICIES & PRACTICES
The Trust Fund's investment objectives and policies are described in
the Prospectus, which should be read in conjunction with the additional
information provided below, which describes in further details the Fund's
investment policies.
Fundamental Investment Policies
The Trust Fund has identified the policies described below as
"fundamental investment policies." Such policies may not be changed without a
vote of a majority in interest of the holders of the Trust Fund's shares.
1. The Trust Fund may not invest less than 30% of its assets in
the equity securities of "financial institutions" (companies
which derive a significant portion of their income from
dealing in money, credit, loans and insurance) and the
remainder in the equity securities (including securities
convertible into common or preferred stocks) of a diverse
portfolio of domestic and certain international service and
industrial enterprises generally regarded by the Management
Company as "stable growth" companies. See "American Depository
Receipts," below.
2. The Trust Fund may not invest 25% or more of its assets in any
one industry other than financial institutions. The Trust Fund
may not acquire more than 10% of the outstanding voting
securities of any company. With respect to 80% of the Trust
Fund's investment portfolio, in order for the shares of a
company to be eligible for investment, the company must have
been in existence for at least five years, must have assets of
more than $7,000,000 and must have paid dividends in each of
the five years immediately preceding investment.
Investment Practices
The following investment practices are described in the prospectus and include
writing covered put and covered call options, lending portfolio securities and
entering into repurchase agreements. These practices are not fundamental and may
be changed from time to time by the Trust Fund's Board of Trustees without
shareholder approval.
<PAGE>
1. The Trust Fund maintains cash reserves in order to make such
payments as may be required of it. Pending application or
investment, the Trust Fund's cash reserves are invested in
repurchase agreements and other cash equivalents, such as
securities issued by the United States and state governments
or their agencies, certificates of deposit or other
interest-bearing accounts and high-grade commercial paper. See
"Repurchase Agreements" and "Lending Portfolio Securities,"
below.
2. The Trust Fund may not: (i) borrow money or make loans
(provided, however, that this restriction shall not prevent
the Trust Fund from purchasing certain publicly issued debt
securities or commercial paper or lending its portfolio
securities in accordance with applicable regulatory
requirements); (ii) underwrite the securities of other
issuers; (iii) purchase or sell real estate; (iv) purchase or
sell commodities or commodity contracts; (v) invest in the
securities of other investment companies; (vi) invest in
companies for the purpose of exercising control or management;
(vii) issue senior securities; or (viii) make short sales or
purchases on margin.
3. The Trust Fund may write covered call options with respect to
its portfolio securities, may write covered put options with
respect to securities and may enter into closing purchase
transactions with respect to such options in accordance with
applicable regulatory requirements. So long as the Trust Fund
remains obligated as a writer of an option, it must (i) in the
case of a put option, designate cash, U.S. Treasury securities
or high-grade, short-term debt securities in a segregated
account in an amount equal to or greater than the nominal
value of the option, and (ii) in the case of a call option,
collateralize the option with actual securities held in the
Trust Fund's investment portfolio. The Trust Fund does not
write "naked" or "uncovered" options. See "Options Policies,"
below.
American Depositary Receipts
American Depositary Receipts ("ADRs") are created when a foreign
company deposits its securities into a trust account administered by a domestic
financial institution (generally, a large, commercial bank). The trust account
may be located in the United States or at a foreign branch of the receiving
financial institution. The receiving financial institution then issues ADRs,
which represent an undivided fractional interest in the pool of securities so
deposited.
The Management Company believes that certain large, international
non-domestic corporations may represent attractive investment opportunities, as
well as providing a certain degree of economic and geographic diversification.
Historically, the Trust Fund has invested less than 1.0% of its assets in ADRs.
Repurchase Agreements
The Trust Fund may enter into repurchase agreements with banks and
member firms of the New York Stock Exchange determined by the Management Company
to present minimal credit risk. A repurchase agreement is a contract under which
one party acquires certain securities held by another party pursuant to an
agreement whereby the selling party agrees to repurchase from the acquiring
party the subject securities at a fixed time and price. Repurchase agreements
are generally short-term (usually not more than one week) with the acquiring
party profiting to the extent that the repurchase obligation exceeds the
acquiring party's cost. Under the terms of a typical repurchase agreement, the
Trust Fund acquires United States Government securities for a
3
<PAGE>
relatively short period of time, subject to the seller's obligation to
repurchase and the Trust Fund's obligation to resell the securities. The Trust
Fund bears a risk of loss in the event that the other party to a repurchase
agreement defaults on its obligations and the Trust Fund is delayed or prevented
from exercising its rights to dispose of the subject securities, including the
risk that the market value of the subject securities might decline prior to the
Trust Fund being able to dispose of them. The Management Company reviews, on an
ongoing basis to evaluate potential risks, the creditworthiness of the
counterparties as well as the market values of collateral securities.
Under the relevant terms of the Investment Company Act of 1940, as
amended (the "1940 Act"), a repurchase agreement is considered to be a loan
collateralized by the underlying securities.
Options Policies
The Trust Fund may write (i.e., sell) "covered" put and call options
for non-speculative purposes. In a "covered" option position the Trust Fund
holds the underlying securities (in the case of call options) or cash (in the
case of put options), as distinct from "naked" or unsecured options, which are
generally bought or sold for speculative purposes. The Trust Fund uses options
sales to hedge specific portfolio positions and does not purchase (or write)
"naked" options.
Covered "put" options are defined as contracts entered into between the
Trust Fund, as seller, and the Options Clearing Corporation, as agent for
unaffiliated third parties, as purchaser, whereby the Trust Fund grants to the
purchaser the right, for a defined period of time and at a set price, to sell
specific securities to the Trust Fund. Similarly, covered "call" options written
by the Trust Fund enable the purchaser of the option to obligate the Trust Fund,
for a defined period of time and at a set price, to sell specific securities
held in the Trust Fund's investment portfolio. It should be noted that, so long
as its obligation as a call option writer continues the Trust Fund in return for
the premium, has given up the opportunity to profit from a price increase in the
underlying security above the exercise price and has retained the risk of loss
should the price of the security decline. As a call option writer, the Trust
Fund has no control over when it may be required to sell the underlying
securities.
It is an investment policy of the Trust Fund that, so long as the Trust
Fund remains obligated as a writer of a put option, it will designate cash, U.S.
Treasury securities, or high-grade short term debt securities in an amount equal
to or greater than the nominal value of the option (call options are backed by
actual securities held in the Trust Fund's investment portfolio). The Trust Fund
does not write "naked" or uncovered options. Also, it is an investment policy
that the Trust Fund will not write options if (i) the aggregate value of the
purchase obligations underlying all unexpired put options written by the Trust
Fund (which positions are marked-to-market daily) exceeds 10% of the net asset
value of the Trust Fund, and (ii) the nominal value of the Trust Fund's
unexpired call options exceeds 25% of the net assets value of the Trust Fund,
provided that the total amount of such positions at no time may exceed 35% of
the Trust Fund's net asset value.
When the Trust Fund writes a put option, the Trust Fund assumes for a
defined period of time an obligation to purchase the underlying security at a
set price from the purchaser of the option and receives as consideration for its
undertaking the option obligation an option premium equal to the difference
between the market price of the underlying security at the time the option is
written. The exercise, or "strike," price is adjusted for certain economic
factors reflecting, among other things, the relationship of the exercise price
to the market price, the volatility of the
4
<PAGE>
underlying security, the remaining term of the option, supply, demand and
interest rates. If the market price of the underlying security rises above the
strike price, the option will expire unexercised and the Trust Fund will profit
to the full extent of the premium. However, if the market price falls below the
strike price and the option is exercised, the Trust Fund will be forced to
acquire securities at an above-market price and may suffer a loss (however, the
amount of any loss is reduced by the premium received). All put options written
by the Trust Fund are covered with cash, United States Treasury securities or
other, high-grade short-term debt securities in an amount equal to or greater
than the nominal value of the option (i.e., the amount which the Trust Fund
would have to pay in order to close out the option position).
When the Trust Fund writes a call option, it assumes for a defined
period of time an obligation to sell the underlying security at a set price to
the purchaser of the option. The option premium is equal to the difference
between the market price of the underlying security at the time the option is
written and the exercise, or "strike," price, adjusted for the market factors
described above. If the market price of the underlying security falls below the
strike price, the option will expire unexercised and the Trust Fund will profit
to the full extent of the premium. However, if the market price rises above the
strike price and the option is exercised, the Trust Fund will be forced to
deliver securities which it may not wish to sell. All call options written by
the Trust Fund are covered with securities held in the Trust Fund's investment
portfolio.
The Trust Fund may write call or put options only if the underlying
securities are listed on a national securities exchange or the NASDAQ National
Market System and the options are issued by The Options Clearing Corporation. As
of the date of this SAI, such options are traded on the following exchanges:
Chicago Board Options Exchange, Incorporated, American Stock Exchange, Inc., New
York Stock Exchange, Inc., Philadelphia Stock Exchange, Inc., and The Pacific
Stock Exchange, Inc.
If an option expires unexercised, the Trust Fund realizes a gain in the
amount of the premium. However, such a gain, in the case of a call option may be
offset by a decline in the market value of the underlying security during the
option period. In the case of a put option, the gain in the amount of the
premium may be offset by the additional amount of income, if any, that would
have been generated had the funds used to cover the potential exercise of the
put option not been maintained in the form of cash or cash-equivalents.
If a call option is exercised, the transaction may result in a loss to
the Trust Fund equal to the difference between the market price of the
underlying security at exercise and the sum of the exercise price of the call
plus the premium received from the sale of the call. If a put option is
exercised, there may be a loss to the Trust Fund equal to the difference between
(i) the exercise price of the put less the premium received from the sale of the
put, and (ii) the market price of the underlying security at exercise.
If the Trust Fund has written a call or put option and wishes to
terminate its obligation, it may effect a "closing purchase transaction" by
buying an option of the same series as the option previously written. The effect
of this purchase is that the Trust Fund's position as a writer of that option
will be canceled by The Options Clearing Corporation. However, the Trust Fund
may not effect a closing purchase transaction on a particular option after it
has been notified of the exercise of that option. If the Trust Fund wishes to
sell a security on which a call has been written, it may effect a closing
purchase transaction simultaneously with or before selling the security.
5
<PAGE>
A closing purchase transaction is effected on an exchange which
provides a secondary market for an option of the same series. If the Trust Fund
is unable to effect a closing purchase transaction with respect to a call option
it has written, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise.
Accordingly, the Trust Fund may run the risk of either foregoing the opportunity
to sell the underlying security at a profit or being unable to sell the
underlying security as its price declines. If the Trust Fund is unable to effect
a closing purchase transaction with respect to a put option it has written, it
will not be able to remove funds from the segregated account maintained by the
Custodian which are being held to cover the potential exercise of the put
option.
If a closing purchase transaction is effected, a profit or loss may be
realized depending on whether the cost of making the closing purchase
transaction is less or greater than the premium received upon writing the
original option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from a closing purchase transaction will often be offset in whole
or in part by appreciation of the underlying security owned by the Trust Fund.
If a closing purchase transaction results in a gain, that gain may be partially
or entirely offset by depreciation of the underlying security.
Lending Portfolio Securities
The Trust Fund may lend its portfolio securities in accordance with
applicable regulatory requirements. Such loans may be made only to banks and
member firms of the New York Stock Exchange determined by the Management Company
to present minimal credit risk, and must be secured by collateral at least equal
to the market value of the securities loaned. If the market value of the loaned
securities increases over the value of the collateral, the borrower must
promptly put up additional collateral; if the market value declines, the
borrower is entitled to a return of the excess collateral. The types of
collateral currently permitted are cash, debt securities issued or guaranteed by
the United States Government or its agencies, irrevocable standby letters of
credit issued by banks determined by the Management Company to present minimal
credit risk stocks, or any combination thereof. It is a fundamental investment
policy of the Trust Fund to limit the quantity of loaned portfolio securities so
that the aggregate market value, at the time the loan is made, of all portfolio
securities on loan will not exceed one third of the value of the Trust Fund's
net assets.
During the existence of a loan, the Trust Fund will continue to be
entitled to receive the equivalent of the interest or dividends paid by the
issuer on the securities loaned. In addition, the Trust Fund will be entitled to
receive a negotiated loan fee or premium from the borrower or, in the case of
loans collateralized by cash or government securities, will retain part or all
of the income realized from the investment of cash collateral or the interest on
the government securities. Under the terms of its securities loans, the Trust
Fund has the right to call the loan and obtain the securities loaned at any time
from the borrower within three trading days notice. Voting rights may pass with
the lending of securities. However, the Trust Fund will be obligated either to
call the loan in time to vote or consent or otherwise obtain rights to vote or
consent, if a material event affecting the investment is expected to occur. The
Trust Fund may pay reasonable finder's, custodian and administrative fees in
connection with the securities loaned. As with other extensions of credit there
are risks of delay in recovery or even loss of rights in the collateral should
the borrower of the securities fail financially. Loans of portfolio securities
will be made only when, in the judgment of the Management Company, the income to
be generated by the transaction justifies the attendant risks.
6
<PAGE>
Risk Considerations
Diversification of the character discussed above does not necessarily
reduce or eliminate the risk inherent in an investment in a portfolio containing
the securities of a substantial number of financial institutions. Financial
services are subject to greater governmental regulation than many other
industries, as well as capital risk (i.e., the risk that, in periods of tight
money or high inflation, the cost to attract deposits will rise substantially),
term and rate risk (i.e., the risks attendant to lending money for long periods
of time at fixed or only partially adjustable interest rates against the
security of assets, the valuations of which may fluctuate with economic
conditions) and credit risk (i.e., the risk of lending money to borrowers who
may or may not be able to pay), all of which may, from time to time, require
substantial reserves against actual or anticipated losses. Further, industry
consolidation and the erosion of the distinctions between banks and other less
traditional financial institutions has resulted in increased competition.
Increased competition, with attendant pressure on financial institution
profitability, may also result from legislative initiatives which would reduce
the separation between the commercial and investment banking business and which,
if enacted, could significantly impact the industry and the Trust Fund. In
addition, institutions such as insurance companies that hold large portions of
their capital in marketable securities are subject to the risks of the
securities market.
Since the Trust Fund's assets consist primarily of common stocks, it
must be emphasized that the value of an investment in the Trust Fund will
fluctuate as the market value of such stocks rises or falls. Accordingly, in a
declining market, the net asset value of the Trust Fund's shares will decline
just as, in a rising market, the net asset value of the Trust Fund's shares will
rise. These fluctuations in the net asset value of each class of shares may make
the Trust Fund more suitable for long-term investors who can bear the risk of
such short-term fluctuations.
MANAGEMENT OF THE TRUST FUND
The business affairs of the Trust Fund are overseen by a Board of
Trustees currently composed of seven members, four of who are not "interested
persons" as that term is defined in Section 2(a)(19) of the 1940 Act.
Compensation of Trustees and Officers
<TABLE>
Each trustee is paid a fee of $5,000 for each Board meeting attended
(the Board of Trustees meets not less than quarterly). In addition, members of
the Audit Committee receive a per-meeting fee of $1,000. Like all other expenses
of the Trust Fund, trustee fees are paid by the Management Company as part of
the comprehensive fee structure. As of January 1, 1998, the officers and
trustees of the Trust Fund and their families, as a group, owned beneficially or
of record less than 1% of the outstanding shares. The following table sets forth
the names, ages and business backgrounds of each officer and trustee of the
Trust Fund. The address of each Trustee is c/o SIFE Trust Fund, 100 North Wiget
Lane, Walnut Creek, California 94598. Trustees who are "interested persons" of
the Trust Fund are identified by an asterisk following their names.
7
<PAGE>
<CAPTION>
Name, Address, Age and Position Held Principal Occupation During Past Five Years
- ------------------------------------ -------------------------------------------
<S> <C>
Haig G. Mardikian (51) General Partner, George M. Mardikian Enterprises (real estate
Trustee; Chairman of the Board investments); Managing Director, The United Broadcasting Corporation
(radio broadcasting).
Walter S. Newman (77) Owner, WSN Enterprises (real estate consultants); Retired President,
Trustee; Vice-Chairman of the Board San Francisco Planning Commission; Retired President, San Francisco
Redevelopment Agency; Chairman of the Board, National Brain Tumor
Foundation.
Diane Howard Belding (42) * Management Company employee, 1992-1998; General Partner, Howard &
Trustee Howard Ranch (avocado and lemon ranch), 1983-present; Director,
Management Company (1982 - present).
Neil L. Diver (61) Chairman, Systems Integrators, Inc., 1995-present; Chairman,
Trustee Ameriwood Industries International Corporation, 1990-present;
Chairman/President & Co-Founder, Cryopharm Corporation, 1987-1996;
President & Co-Founder, Exogene Corporation, 1987-1992.
Charles W. Froehlich, Jr. (70) * Retired Appellate Court Judge; retired Superior Court Judge;
Trustee; Secretary formerly Of Counsel to Peterson, Thelan & Price; principal,
Froehlich & Peterson Dispute Resolution.
John A. Meany (58) President, John's Valley Foods, Inc.; President, John's Town &
Trustee Country Markets, Inc.; Director, Northern California Grocers
Association.
Bruce W. Woods (46)* President & Chief Executive Officer and Director of Management
Trustee; President & Chief Executive Officer Company & Trustee of Trust Fund, July 1996-present; Management
Company employee, June 1986-present.
Gary A. Isaacson (39) Chief Financial Officer of the Management Company, November
Treasurer 97-present; Controller of Hal Porter Homes, 1989-1997.
</TABLE>
8
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 18, 1999, officers and directors of the Trust Fund in
aggregate do not own more than 1% of the outstanding shares of the Trust Fund.
As of the same date, to the knowledge of the Trust Fund, no shareholder owned of
record 5% or more of the outstanding Class A-I or Class A-II shares of the Trust
Fund and the following shareholders owned of record 5% or more of the
outstanding Class B and Class C shares as indicated:
CLASS B SHARES SHARES PERCENT
- -------------- ------ -------
MLPF&S Inc. 488,497 7.75%
For the Sole Benefit of its Customers
Attn: Service Team
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6484
CLASS C SHARES SHARES PERCENT
- -------------- ------ -------
MLPF&S Inc. 96,585 17.15%
For the Sole Benefit of its Customers
Attn: Service Team
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6484
Evangeline C. Winkler Trust 69,987 12.43%
3234 Rossmoor Pkway Apt 1
Walnut Creek, CA 94595
Winkler Family Trust B 28,448 5.05%
3234 Rossmoor Pkway Apt 1
Walnut Creek, CA 94595
INVESTMENT ADVISORY & OTHER SERVICES
Investment Advisory Services
The Management Company acts as the investment adviser to the Trust
Fund, subject to policies established by the Board of Trustees. As investment
adviser to the Trust Fund, the Management Company is responsible for the
management of the Trust Fund's investment portfolio, as well as the
administration of its operations. Basic policy is set and determined by the
Board of Trustees of the Trust Fund and carried out by the Management Company
pursuant to an Investment Advisory Agreement dated as of April 30, 1997 (the
"Investment Advisory Agreement"). The Advisory Agreement was last approved by
the Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust Fund or the Management Company, as that term
is defined in the 1940 Act, at a meeting on March 4, 1999. The Management
Company does not act in a similar capacity for any other person or entity.
The Advisory Agreement is for an initial term of one year and may be
renewed from year to year provided that any such renewal has been approved
annually by (i) the majority of the outstanding voting securities of the Trust
Fund, or (ii) a majority of the trustees and separately a
9
<PAGE>
majority of those who are neither parties to the Advisory Agreement, nor
"interested persons" with respect to the Management Company at a meeting called
for the purpose of voting on such matter. The Advisory Agreement also provides
that either party has the right to terminate the Advisory Agreement without
penalty upon 60 days written notice to the other party, and that the Advisory
Agreement automatically terminates in the event of its assignment.
Under the advisory agreement, the Management Company receives 1.25% of
average net assets, per annum, without any additional reimbursement of expenses.
Investment advisory fees are accrued daily and computed and paid monthly on the
last business day of each month at the rate of 1/12th of 1.25% of the average
net assets of the Trust Fund. This fee is deducted from the Trust Fund on the
first business day of the following month. During the past three years the
Management Company was paid investment advisory fees of, $7,607,105 (1996),
$11,960,037 (1997), and $14,504,536 (1998) respectively.
Management and Administration
The Management Company manages the Trust Fund's operations, and is
solely responsible for all of the costs and expenses of the Trust Fund's
operation, including, without limitation, all fees for custodial and transfer
agency services, Trustees' fees, legal and auditing fees, tax matters, dividend
disbursements, bookkeeping, maintenance of office and equipment, brokerage,
expenses of preparing, printing and mailing prospectuses to Investors and all
expenses in connection with reporting to Investors and compliance with
governmental agencies. The Management Company has contracted with Boston
Financial Data Services for the performance of certain shareholder accounting
and transfer agency functions, and is solely responsible for all fees, costs and
expenses associated with the performance by Boston Financial Data Services of
such functions.
Custody Services
State Street Bank & Trust Company, 225 Franklin Street, Boston, MA
02110 ("State Street Bank") acts as the custodian for the assets of the Trust
Fund. As such, State Street Bank holds all Trust Fund securities in safekeeping,
receives and pays for portfolio securities purchased, delivers and receives
payment for portfolio securities sold, and collects all Trust Fund income.
Independent Accountants
________________, 50 Fremont Street, San Francisco, California 94105,
provided auditing services as the Trust Fund's independent certified public
accountants for the 1998 fiscal year.
BROKERAGE ALLOCATION & PORTFOLIO TURNOVER RATES
In executing portfolio transactions for securities traded on national
securities exchanges or in the over-the-counter market, the Trust Fund endeavors
always to obtain the most favorable terms and conditions, taking into account
the price of the security and any commissions or discounts applicable to the
transaction. The Management Company is responsible for carrying out this policy
in its placement of the Trust Fund's investments.
During the 1998 calendar year, the Trust Fund paid brokerage
commissions of $601,341 and total purchases and sales of portfolio securities
aggregated $780,635,406. Portfolio turnover rates for the years 1996, 1997 and
1998 were 140.2%, 63.0%, and 31%, respectively. The portfolio turnover rate in
1996 was relatively high, due to the extremely active market for financial
institutions stocks specifically and equities in general.
10
<PAGE>
During the last three fiscal years, the Trust Fund has not paid any
brokerage commissions to any broker which is an affiliated person of the Trust
Fund or the Management Company. Listed below is certain information regarding
the Trust Fund's payment of brokerage commissions in portfolio transactions
during the last three years:
Total Securities
Number of Total Amount of Purchased and
Year Brokers Brokerage Paid Sold
---- ------- -------------- ----
1996 57 $1,598,407 $1,900,773,494
1997 30 $ 966,121 $1,242,328,896
1998 32 $ 601,341 $ 780,635,406
CAPITAL STOCK AND OTHER SECURITIES
CALCULATION OF NET ASSET VALUE
All funds received by the Trust Fund for investment and all funds
reinvested from net investment income and realized capital gains, if any, are
accounted for in terms of shares, with the per-share value determined daily by
dividing (i) the difference between (a) the total value of the net assets
attributable to each class of the Trust Fund's shares on that day and (b) all
charges, such as distribution fees, shareholder servicing fees and management
fees (each of which is calculated and charged daily), for that class as well as
any other appropriate costs or expenses, by (ii) the total number of shares of
that class then outstanding.
Equity securities held by the Trust Fund are valued at the last sale
price on the exchange or in the over-the-counter market in which such securities
are primarily traded as of the close of business on the day the securities are
being valued. Securities for which a closing sale price is not readily available
are valued at the closing bid price. Short-term debt securities (held for
liquidity purposes) are amortized to maturity based on their cost, and
marked-to-market daily. Option positions are marked-to-market based on their
nominal, as quoted value. See "Calculation of Net Asset Value" in the Prospectus
for additional information concerning the timing and manner of valuation of each
class of shares.
FEDERAL INCOME TAX INFORMATION
The Trust Fund has qualified and elected, and intends to continue to
qualify, to be treated as a regulated investment company (a "RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), for
each taxable year by complying with all applicable requirements regarding the
source of its income, the diversification of its assets and the timing of its
distributions. The Trust Fund's policy is to distribute to its Investors all of
its investment company taxable income and any net realized capital gains for
each year in a manner that complies with the distribution requirements of the
Code, so that the Trust Fund will not be subject to any federal income or excise
taxes based on net income. However, the Board of Trustees may elect to pay such
excise taxes if it determines that payment is, under the circumstances, in the
best interests of the Trust Fund.
To qualify as a RIC, the Trust Fund must among other things, (a) derive
at least 90% of its gross income each year from dividends, interest, payments
with respect to loans of stock and securities, gains from the sale or other
disposition of stock or securities or foreign currency gains related to
investments in stock or securities, or other income (generally including gains
from options) derived with respect to the business of investing in stock,
securities or currency, and (b) diversify its holdings
11
<PAGE>
so that, at the end of each fiscal quarter, (i) at least 50% of the market value
of its assets is represented by cash, cash items, U.S. Government securities,
securities of other RICs and other securities limited, for purposes of this
calculation, in the case of other securities of any one issuer to an amount not
greater than 5% of the Fund's assets or 10% of the voting securities of the
issuer, and (ii) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than U.S. Government securities or
securities of other RICs), or in two or more issuers which the Trust Fund
controls and which are engaged in the same or similar trades or businesses or
related trades or businesses. By complying with the applicable provisions of the
Code, the Trust Fund will not be subject to federal income tax on taxable income
(including realized capital gains) that is distributed to shareholders in
accordance with the timing requirements of the Code. If the Trust Fund is unable
to meet certain requirements of the Code, it may be subject to taxation as a
corporation.
Distributions of net investment income and net realized capital gains
by the Trust Fund will be taxable to Investors whether made in cash or
reinvested by the Trust Fund in shares. In determining amounts of net realized
capital gains to be distributed, any available capital loss carryovers from
prior years will be applied against capital gains. Investors receiving
distributions in the form of additional shares will have a cost basis for
federal income tax purposes in each share so received equal to the net asset
value of a share of the Trust Fund on the reinvestment date. Trust Fund
distributions also will be included in individual and corporate shareholders'
income on which the alternative minimum tax may be imposed.
The Trust Fund or the securities dealer effecting a redemption of the
Trust Fund's shares by an Investor generally will be required to file
information reports with the Internal Revenue Service (the "IRS") with respect
to distributions and payments made to the Investor. In addition, the Trust Fund
will be required to withhold federal income tax at the rate of 31% on taxable
dividends, redemptions and other payments made to accounts of individual or
other non-exempt Investors who have not furnished their correct taxpayer
identification numbers and certain required certifications on the Account
Application Form or with respect to which the Trust Fund or the securities
dealer has been notified by the IRS that the number furnished is incorrect or
that the account is otherwise subject to withholding.
The Trust Fund intends to declare and pay dividends and other
distributions, as stated in the Prospectus. In order to avoid the payment of a
4% nondeductible federal excise tax based on net income, the Trust Fund must
declare on or before December 31 of each year and pay on or before January 31 of
the following year, distributions at least equal to 98% of its ordinary income
for that calendar year and at least 98% of the excess of any capital gains over
any capital losses realized in the one-year period ending October 31 of that
year, together with any undistributed amounts of ordinary income and capital
gains (in excess of capital losses) from previous calendar years.
The Trust Fund will receive dividend distributions from U.S.
corporations. To the extent that the Trust Fund receives such dividends and
distributes them to Investors and meets certain other requirements of the Code,
corporate Investors in the Trust Fund may be entitled to the "dividends
received" deduction. Availability of the deduction is subject to certain holding
period and debt-financing limitations.
The Trust Fund may be subject to foreign withholding taxes on dividends
and interest earned with respect to securities of foreign corporations. Foreign
corporations in which the Trust Fund invests may be treated as "passive foreign
investment companies" ("PFICs") under the Code. Part of the income and gains
that the Trust Fund derives from PFIC stock may be subject to a non-deductible
federal income tax at the Trust Fund level. In some cases, the Trust Fund may be
able to
12
<PAGE>
avoid this tax by electing to be taxed currently on its share of the PFIC's
income, whether or not such income is actually distributed by the PFIC. The
Trust Fund will endeavor to limit its exposure to the PFIC tax by investing in
PFICs only where the election to be taxed currently will be made. Because it is
not always possible to identify a foreign issuer as a PFIC in advance of making
the investment, the Trust Fund may incur the PFIC tax in some instances.
Investing in options contracts involves complex rules that will
determine the character and timing of recognition of the income received in
connection therewith by the Trust Fund. Income from transactions in options
derived by the Trust Fund with respect to its business of investing in
securities will qualify as permissible income under Subchapter M of the Code.
Any security, option or other position entered into or held by the Trust Fund
that substantially diminishes the Trust Fund's risk of loss from any other
position held by the Trust Fund may constitute a "straddle" for federal income
tax purposes. In general, straddles are subject to certain rules that may affect
the amount, character and timing of the Trust Fund's gains and losses with
respect to straddle positions (including rules that may result in gain being
treated as short-term capital gain rather than long-term capital gain).
Redemptions and exchanges of shares of the Trust Fund will result in
gains or losses for tax purposes to the extent of the difference between the
proceeds and the Investor's adjusted tax basis for the shares. Any loss realized
upon the redemption or exchange of shares within six months from their date of
purchase will be treated as a long-term capital loss to the extent of
distributions of long-term capital gain dividends during such six-month period.
All or a portion of a loss realized upon the redemption of shares may be
disallowed to the extent shares are purchased (including shares acquired by
means of reinvested dividends) within 30 days before or after such redemption.
In addition, the sales charge savings that may be available for reinvesting
amounts from previous redemptions will, in certain circumstances, increase the
amount of the gain (or reduce the amount of the loss) from those redemptions.
Distributions and redemptions may be subject to state and local income taxes,
and the treatment thereof may differ from the federal income tax treatment.
Nonresident aliens and foreign persons are subject to different tax rules and
may be subject to withholding of up to 30% on certain payments received from the
Fund.
The foregoing and the related discussion in the Prospectus are only a
summary of some of the important federal income tax considerations generally
affecting the Trust Fund and its Investors and is only accurate as of the date
of this Statement of Additional Information. The law firm of Paul, Hastings,
Janofsky & Walker LLP has expressed no opinion in respect thereof. No attempt is
made to present a detailed explanation of the federal income tax treatment of
the Trust Fund or its Investors, and this discussion is not intended as a
substitute for careful tax planning. Accordingly, potential investors in the
Trust Fund are urged to consult their tax advisers concerning the application of
foreign, federal, state and local taxes to an investment in the Fund , and with
specific reference to their own tax situation.
UNDERWRITING OF THE TRUST FUND'S SECURITIES
Underwriting Services
The Management Company acts as principal underwriter for the Trust Fund
pursuant to an Underwriting Agreement. The Underwriting Agreement is for an
initial term of one year, and may be renewed from year to year provided that any
such renewal has been approved annually by (i) the majority of the outstanding
voting securities of the Trust Fund, or (ii) a majority of the trustees and
separately by a majority of those who are neither parties to the Underwriting
Agreement or "interested persons" with respect to the Management Company at a
meeting called
13
<PAGE>
for the purpose of voting on such matter. The Underwriting Agreement also
provides that either party has the right to terminate the Underwriting Agreement
without penalty upon 60 days written notice to the other party and that the
Underwriting Agreement automatically terminates in the event of its assignment.
The Underwriting Agreement was last approved by the Board of Trustees, including
a majority of the Trustees who are not "interested persons," as that term is
defined in the 1940 Act, at a meeting on March 4, 1999.
<TABLE>
During the past three years the Management Company has earned sales
commissions for its services as principal underwriter as set forth below.
<CAPTION>
Total Sales Paid to Independent Paid to its Own Net Commissions to the
Year Commissions Agents Salespersons Management Company
---- ----------- ------ ------------ ------------------
<S> <C> <C> <C> <C>
1996 $2,178,040 $538,437 $1,628,368 $11,235
1997 $2,405,671 $969,688 $2,098,423 $(662,440)
1998 $820,213 $1,063,223 $294,000 $(537,010)
</TABLE>
The directors of the Management Company, the business addresses for all
of whom c/o SIFE, 100 North Wiget Lane, Walnut Creek, California 94598 are:
Diane H. Belding; Charles W. Froehlich, Jr.; Sam A. Marchese; Michael J. Stead;
Sharon E. Tudisco; Bruce W. Woods; and John W. Woods. The directors have the
following positions with the Management Company: Mr. Bruce W. Woods is Chief
Executive Officer and President; Mr. Stead is Portfolio Manager; and Mr.
Froehlich is Secretary; Mrs. Tudisco and Mr. John W. Woods are retired. Ms.
Belding, Mr. Froehlich and Mr. Bruce W. Woods are also officers and/or Trustees
of the Trust Fund; their other business affiliations are set forth above in
"Trustees and Officers." As of February 18, 1999, Mr. John W. Woods owned 10.98%
of the outstanding shares of the Management Company, Mr. Marchese owned 21.11%,
Mrs. Tudisco owned 10.55%, Mrs. Belding owned 21.11%, Mr. Froehlich owned
14.89%, Mr. Bruce W. Woods owned 8.26%, the J. Bradley Woods Irrevocable Trust
owned 4.05%, the William B. Woods Irrevocable Trust owned 4.05%, and Mr. Stead
owned 5.00% of the outstanding shares of the Management Company.
<TABLE>
The following table sets forth all commissions and other compensation
received during the Trust Fund's last fiscal year by the Management Company, as
principal underwriter for the Trust Fund's securities.
<CAPTION>
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation on
Principal Discounts and Redemption and Brokerage Other
Underwriter Commissions Repurchases Commissions Compensation
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
SIFE $104,072 $101,857 -0- -0-
</TABLE>
Distribution Plans
As described in the Prospectus, the Trust Fund has adopted a separate
Plan of Distribution pursuant to Section 12(b) of the 1940 Act and Rule 12b-1
thereunder (individually, a "Plan") for each of the Class A-II, Class B and
Class C shares. The terms and conditions of each such Plan provide that each
such Class is authorized to spend certain sums (0.25% of average daily net
assets in the case of the Class A-I and Class A-II shares and 0.75% of average
daily net assets, in the case each of the Class B and Class C shares) on
activities primarily intended to support the distribution and sale of such
shares. The Class B Plan and Class C Plan also provide that each
14
<PAGE>
such Class is authorized to spend an additional 0.25% of average daily net
assets for services relating to the servicing of shareholders' accounts.
Under each Plan, the distribution (and, in the case of the Class B and
Class C shares, the servicing) fees are designed to compensate the Management
Company for expenses incurred, services rendered and facilities provided in
connection with the distribution of shares and the servicing of shareholder
accounts. Such expenses and services include, but are not necessarily limited
to, the payment of trail commissions and other payments to broker/dealers,
financial institutions and others who sell shares and/or service shareholder
accounts. It should be noted that the distribution and servicing fees are
payable to the Management Company even if the amount paid exceeds the Management
Company's actual expenses of providing such services.
As required by Rule 12b-1, each Plan has been approved by the Board of
Trustees, and separately by a majority of the Trustees who are not "interested
persons" of the Trust Fund and who have no direct or indirect financial interest
in the operation of the Plan, in each case pursuant to a finding that the Plan
was in the best interests of the shareholders of the respective class of shares.
The officers and Trustees who are "interested persons" of the Trust Fund may be
considered to have a direct or indirect financial interest in the operation of
the Plans due to present or past affiliations with the Management Company.
Potential benefits of each Plan to the Trust Fund include improved investor
services, benefits to the investment process from growth or stability of assets
and maintenance of a financially healthy management and investment advisor
organization. Payments under each Plan are reviewed at least quarterly and each
Plan must be renewed annually by the Board of Trustees.
Each Plan requires that, at least quarterly, the Audit Committee of the
Board of Trustees must review a written report prepared by the Treasurer of the
Trust Fund enumerating the amounts spent by each class pursuant to its Plan and
the purposes therefor. Each Plan further requires that, for so long as each such
Plan is in effect, the nomination and selection of those Trustees who are not
"interested persons" of the Trust Fund is committed to the exclusive discretion
of the other Trustees who are not "interested persons" of the Trust Fund.
PERFORMANCE INFORMATION(1)
Annual, non-compounded performance information relating to a
hypothetical investment of $10,000 (adjusted for maximum sales charges) in Class
A-I shares for the ten-year period ended December 31, 1998, is set forth below.
Such information assumes that all net investment income and realized capital
gains were reinvested (at no sales charge). No adjustment has been made for
possible tax liabilities. Also shown is comparable performance information for
the unmanaged Standard & Poor's 500 Stock Index (assuming the reinvestment of
all dividends), a widely used indicator of general stock market activity
(source: Standard & Poor's Corporation).
<TABLE>
For the year ended December 31, 1998, a $9,500 net investment in Class
A-I and Class A-II shares of the Trust Fund (calculated based on a $10,000
investment less the current maximum 5.0% sales charge, assuming re-investment of
all distributions for the entire period of January 1,
- ----------------
(1) Information given for Class A-I and Class A-II shares only. Class A-II
shares are identical in all respects to Class A-I shares except that Class A-II
shares bear a 0.25% 12b-1 distribution fee. Class B and C shares were first
offered for sale on May 1, 1997. Class B and C share sales fees differ from the
Class A-I shares and bear a 0.75% 12b-1 distribution fee and a 0.25% servicing
fee.
15
<PAGE>
1998 through December 31, 1998) would have decreased to $9,988 and $9,949
respectively. For the same year end date, For the five-year and ten year periods
ended on the same date, and using the same assumptions, a $9,500 net investment
in Class A-I shares of the Trust Fund would have increased to $27,194 and
$62,552, respectively. Since Class A-II shares were first offered May 1, 1996,
performance history for Class A-II shares is not applicable for three, five, and
ten year periods.
<CAPTION>
Class A-I Shares
--------------------------------
Average Annual Average Annual
Total Return Total Return
Results of Including Including
$10,000 Invested Maximum Minimum Sales
Investment with 5.0% Sales Sales Charge Charge Total Return: Total Return:
Term Charge of 5.0% of 0.0% SIFE Trust Fund S&P 500 Stock Index
---- ------ ------- ------- --------------- -------------------
<S> <C> <C> <C> <C> <C>
1 year $ 9,988 -0.12% 5.14% 5.14% 28.58%
3 years $18,419 22.58% 24.69% 93.89% 110.85%
5 years $27,194 22.15% 23.41% 186.25% 193.91%
10 years $54,888 18.56% 19.17% 477.77% 479.63%
Class A-II Shares
--------------------------------
Average Annual Average Annual
Total Return Total Return
Results of Including Including
$10,000 Invested Maximum Minimum Sales
Investment with 5.0% Sales Sales Charge Charge Total Return: Total Return:
Term Charge of 5.0% of 0.0% SIFE Trust Fund S&P 500 Stock Index
---- ------ ------- ------- --------------- -------------------
1 year $9,949 -0.51% 4.73% 4.73% 28.58%
</TABLE>
The Trust Fund calculates average annual total return according to the
following formula, as required by the Securities and Exchange Commission:
"P(1+T)n = ERV", where the average annual total return ("T") is
computed by using the value at the end of the period ("ERV") of a
hypothetical initial investment of $10,000 ("P") over a period of years
("n"). Accordingly, to calculate total return, an initial investment is
divided by the per-unit offering price (which includes the sales
charge) as of the first day of the period in order to determine the
initial number of units purchased. Subsequent dividends and capital
gain distributions are then reinvested at net asset value on the
reinvestment date determined by the Board of Trustees. The sum of the
initial shares purchased and additional shares acquired through
reinvestment is then multiplied by the net asset value per share as of
the end of the period in order to determine ending value. The
difference between the ending value and the initial investment, divided
by the initial investment and converted to a percentage, equals total
return. The resulting percentage indicates the positive or negative
investment results that an investor would have experienced from
reinvested dividends and capital gain distributions and changes in unit
price during the period. Total return may be calculated for one year,
five years, ten
16
<PAGE>
years and for other periods. The average annual total return over
periods greater than one year also may be computed by utilizing ending
values as determined above.
The data quoted represents past performance. Past performance is no
guarantee of future performance. Effective April 1, 1995, the Trust Fund reduced
the maximum sales charge on Class A-I shares from 6.25% to 5.0% and the minimum
sales charge was reduced from 1.0% (on purchases of $2,000,000 or more) to zero
(on purchases of $1,000,000 or more). The Trust Fund's performance is affected
by many factors including: changes in the levels of equity prices and interest
rates generally, the Trust Fund's selection of specific securities for the
portfolio, the Trust Fund's expense ratio, and other factors. The investment
return and principal value of the investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
Financial Statements
Audited Financial Statements for the relevant periods ending December
31, 1998, for SIFE Trust Fund, as contained in the Annual Report to shareholders
of the Trust Fund for the Fiscal Year ended December 31, 1998 ("report"), are
incorporated herein by reference to the report.
17
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) Exhibits filed in Part C of the Registration Statement:
Exhibit
Number
------
1. Copy of Registrant's Trust Agreement as currently in effect:
a. Copy of Trust Agreement recompiled as of May 1, 1976(1)
b. Copy of Appointment of Successor Trustee(2)
c. Copy of Certificate of Successor Trustee(2)
d. Copy of Restated Trust Agreement recompiled as of May 2, 1986(4)
e. Copy of Amendment to Restated Trust Agreement dated April 1,
1987(4)
f. Copy of Amendment to Restated Trust Agreement dated April 2,
1990(5)
g. Copy of Amendment to Restated Trust Agreement dated April 1,
1991(6)
h. Copy of Amendment to Restated Trust Agreement dated February 24,
1993(7)
i. Copy of Amendment to Restated Trust Agreement dated April 1,
1993(7)
j. Copy of Amendment to Restated Trust Agreement dated April 4,
1994(8)
k. Copy of Amendment to Restated Trust Agreement dated April 3,
1995(9)
l. Copy of Amendment to Restated Trust Agreement dated April 1,
1996(10)
m. Copy of Agreement between SIFE, Inc. and State Street Bank and
Trust Company re appointment of successor trustee (11)
n. Copy of Agreement and Declaration of Trust, dated February 28,
1997(14)
o. Copy of Certificate of Trust(14)
2. By-laws of SIFE Trust Fund, a Delaware Business Trust(14)
3. Instruments defining rights of securities holders - Not Applicable
4. Copy of Investment Advisory Agreement dated April 3, 1972(1)
a. Copy of Amendment to Investment Advisory Agreement dated April
3, 1995(9)
b. Copy of Amendment to Investment Advisory Agreement dated April
1, 1996(10)
c. Copy of Investment Advisory Agreement, dated as of April 30,
1997
5. Copy of Underwriting Agreement dated April 3, 1972(1)
a. Copy of Amendment to Underwriting Agreement dated April 1,
1974(1)
b. Copy of Amendment to Underwriting Agreement dated April 1,
1976(1)
c. Copy of Amendment to Underwriting Agreement dated April 1,
1985(3)
d. Copy of Amendment to Underwriting Agreement dated April 2,
1990(5)
e. Copy of Amendment to Underwriting Agreement dated February 24,
1993(7)
f. Copy of Amendment to Underwriting Agreement dated April 1,
1993(7)
g. Copy of Amendment to Underwriting Agreement dated April 4,
1994(8)
h. Copy of Amendment to Underwriting Agreement dated as of February
1, 1995, effective April 1, 1995(9)
i. Copy of Amendment to Underwriting Agreement dated April 1,
1996(10)
j. Copy of Underwriting Agreement, dated as of April 30, 1997(14)
6. Bonus or Profit Sharing Contracts - Not Applicable
7. a. Custodian Contract between SIFE Trust Fund and State Street Bank
& Trust Co. (11)
b. Retirement Plans Service Contract among SIFE, Inc., SIFE Trust
Fund and State Street Bank & Trust Co. (11)
c. Assignment & Assumption Agreement(14)
8. Other Material Contracts - Not Applicable
9. Opinion and Consent of Counsel(14)
10. Consent of Independent Accountants to be filed in Post-Effective
Amendment
11. Omitted Financial Statements - Not Applicable
C-5
<PAGE>
12. Initial Capital Agreements - Not Applicable
13. Copies of Rule 12b-1 Plans
a. Rule 12b-1 Plan of Distribution and Rule 12b-1 Agreement for
Class A-II Shares (10)
b. Rule 12b-1 Plan of Distribution and Rule 12b-1 Agreement for
Class B Shares(14)
c. Rule 12b-1 Plan of Distribution and Rule 12b-1 Agreement for
Class C Shares(14)
14. Financial Data Schedules(12)
15. Rule 18f-3 Plan:
a. Rule 18f-3 Plan (11)
b. Restated Rule 18f-3 Plan(14)
- ------------------------------
(1) Filed March 31, 1980, as an exhibit to Form N-1 Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 23 and
Registration Statement under Investment Company Act of 1940 Post-Effective
Amendment No. 2, File No. 2-17277, and incorporated herein by reference.
(2) Filed April 27, 1981, as an exhibit to Form N-1 Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 24 and
Registration Statement under Investment Company Act of 1940 Post-Effective
Amendment No. 3, File No. 2-17277, and incorporated herein by reference.
(3) Filed February 28, 1986, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 29 and
Registration Statement under Investment Company Act of 1940 Post-Effective
Amendment No. 8, File No. 2-17277, and incorporated herein by reference.
(4) Filed April 17, 1987, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 30 and
Registration Statement under Investment Company Act of 1940 Post-Effective
Amendment No. 9, File No. 2-17277, and incorporated herein by reference.
(5) Filed February 26, 1990, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 33 and
Registration Statement under Investment Company Act of 1940 Post-Effective
Amendment No. 12, File No. 2-17277, and incorporated herein by reference.
(6) Filed February 26, 1991, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 34 and
Registration Statement under Investment Company Act of 1940 Post-Effective
Amendment No. 13, File No. 2-17277, and incorporated herein by reference.
(7) Filed February 26, 1993, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 36 and
Registration Statement under Investment Company Act of 1940 Post-Effective
Amendment No. 15, File No. 2-17277, and incorporated herein by reference.
(8) Filed February 25, 1994, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 37 and
Registration Statement under Investment Company Act of 1940 Post-Effective
Amendment No. 16, File No. 2-17277, and incorporated herein by reference.
(9) Filed February 24, 1995, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 38 and
Registration Statement under Investment Company Act of 1940 Post-Effective
Amendment No. 17, File No. 2-17277, and incorporated herein by reference.
(10) Filed February 23, 1996, as an exhibit to Registrant's Definitive Proxy
Statement under Section 14(a) of the Securities Exchange Act of 1934, as
amended, and incorporated herein by reference.
(11) Filed April 19, 1996, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 39 and
Registration Statement under Investment Company Act of 1940 Post-Effective
Amendment No. 18, File No. 2-17277, and incorporated herein by reference.
(12) Filed April 30, 1997, as an exhibit to Registrant's Form NSAR for the
period ended December 31, 1996, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, and incorporated herein by
reference.
(13) Filed February 28, 1997, as Exhibit A to Registrant's Definitive Proxy
Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934,
as amended, and incorporated herein by reference.
(14) Filed April 17, 1997, as an exhibit to Form N-1A Registration Statement
under the Securities Act of 1933 Post-Effective Amendment No. 41 and
Registration Statement under Investment Company Act of 1940 Post Effective
Amendment No. 20, File No. 2-17277, and incorporated here in by reference.
C-6
<PAGE>
Item 24. Persons Controlled by or Under Common Control with Registrant
No person is directly or indirectly controlling, controlled by, or
under common control with the Registrant.
Item 25. Indemnification
Reference is made to Article VI, Section 5 of Registrant's Trust
Agreement, as amended, filed as Exhibit 1 under Part C, Item 24(b) (the "Trust
Agreement"), which generally provides that no director or officer shall be
liable to the Registrant or to its Investors or to any other person for any
action which such director or officer may in good faith take or refrain from
taking as a director or officer; provided, however, that no officer or director
of the Registrant shall be protected against any liability to the Registrant or
its Investors caused by such officer's or director's willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office, nor shall anything in Section 5 protect any
officer or director against any liability arising under any provision of the
Securities Act of 1933 (the "Securities Act").
Reference is also made to Article VI, Section 6 of Registrant's Trust
Agreement, which generally provides that an officer or director shall be
indemnified by the Registrant to the maximum extent permitted by applicable law
against all expenses, judgments, fines, settlements and other amounts reasonably
incurred or suffered by such person in connection with any threatened, pending
or completed legal proceeding brought by a third party in which he or she is
involved by reason of his or her relationship to the Registrant. No
indemnification shall be provided, however, with respect to any liability
arising by reason of the "Disabling Conduct" of the person seeking indemnity.
"Disabling Conduct" generally means willful misfeasance, bad faith, gross
negligence, reckless disregard of duties, or any conduct that amounts to a
violation of the Securities Act.
Any officer or director who is a party to an action which is brought by
the Registrant shall also be indemnified, provided that if such person is
adjudged by a court to be liable to the Registrant in the performance of his or
her duty, indemnification shall be made only to the extent a court determines
that there has been no Disabling Conduct and that such person is fairly and
reasonably entitled to indemnity.
Expenses incurred in connection with a legal proceeding shall be
advanced by the Registrant to an officer or director prior to the proceeding's
final disposition, provided such officer or director agrees to repay all
advanced amounts unless it is ultimately determined that he or she is entitled
to indemnification, and such officer or director meets certain other conditions
to the advance.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant understands that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser
Registrant's response to Part B, Item 14 contained in "Management of
the Trust Fund," is hereby incorporated herein by reference.
Item 27. Principal Underwriter
a. The underwriter of the Registrant is SIFE. SIFE acts as
underwriter and investment adviser only for the Registrant.
C-7
<PAGE>
b. Registrant's response to Part B, Item 14, contained in
"Management of the Trust Fund," is hereby incorporated herein
by reference.
Item 28. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 are kept at the offices of
SIFE, 100 North Wiget Lane, Walnut Creek, CA 94598.
Item 29. Management Services
Inapplicable.
Item 30. Undertakings
Inapplicable.
C-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to
Registration Statement pursuant to Rule 485(a) under the Securities Act of 1933,
and has duly caused this Post-Effective Amendment to Registration Statement to
be signed on its behalf by the undersigned, thereto duly authorized, in this
City of Walnut Creek and State of California, on the 24th day of February, 1999.
SIFE Trust Fund
By: /s/ Bruce W. Woods
-------------------------------
Bruce W. Woods
President & Chief Executive
Officer
<TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
BRUCE W. WOODS /s/ Director; President & Chief Executive Officer February 24,
- ----------------------------------- of the Trust Fund (Principal Executive Officer 1999
(Bruce W. Woods) & Principal Accounting Officer)
GARY ISAACSON /s/ Chief Financial Officer of the Trust Fund February 24,
- ----------------------------------- (Principal Accounting Officer) 1999
(Gary Isaacson)
HAIG G. MARDIKIAN /s/ Director; Chairman of the Board *
- -----------------------------------
(Haig G. Mardikian)
WALTER S. NEWMAN /s/ Director; Vice-Chairman of the Board *
- -----------------------------------
(Walter S. Newman)
CHARLES W. FROEHLICH, JR. /s/ Director; Secretary *
- -----------------------------------
(Charles W. Froehlich, Jr.)
NEIL L. DIVER /s/ Director *
- -----------------------------------
(Neil L. Diver)
DIANE HOWARD BELDING /s/ Director *
- -----------------------------------
(Diane Howard Belding)
JOHN A. MEANY /s/ Director *
- -----------------------------------
(John A. Meany)
<FN>
* By: BRUCE W. WOODS/s/ Dated: FEBRUARY 24, 1999
----------------------------- -----------------------
Bruce W. Woods, Attorney-in-Fact
</FN>
</TABLE>
C-9
