[GRAPHIC OMITTED]
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SIFE
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NINETEEN HUNDRED AND NINETY NINE
ANNUAL
1999
REPORT
<PAGE>
SIFE
SERVING INVESTORS SINCE 1962
<PAGE>
SIFE TRUST FUND 1999 ANNUAL REPORT
- --------------------------------------------------------------------------------
Letter to Investors
Dear Fellow SIFE Trust Fund Investors:
The year 1999 will be remembered for the euphoric rise of
a narrow group of technology and internet stocks, while [GRAPHIC OMITTED]
the majority of U.S. equities, particularly financial
services stocks, lagged most equity indexes. Two primary Sam A. Marchese
reasons cited for depressed prices in banking stocks were: Chairman of the
1) the perception of rising interest rates having a Board of SIFE*
possible negative impact on earnings; and, 2) a potential
Y2K disruption. While Y2K concerns have subsided, concerns
continue over rising interest rates, at least for the
short term.
SIFE Trust Fund's average annual compounded total return
for Class A-I shares as of December 31, 1999, was for one
year, -8.45%; for five years 21.62%, and for ten years
15.97%, without adjusting for a sales charge. Because of
the falloff in performance of bank and financial services
stocks starting in mid-1998, our newer investors have yet
to experience the benefits of long-term investing. We [GRAPHIC OMITTED]
encourage newer SIFE Trust Fund investors to review our
investment discipline and philosophy. John P. King
Interim President &
SIFE Trust Fund is adhering to our longstanding investment Cheif Executive
philosophy of focusing on analysis and selection of Officer of SIFE*
individual companies with outstanding fundamentals and
business prospects. We seek to avoid the common traps of
predicting the future or taking imprudent risks by
"changing course" midstream. We find some solace in the
fact that past performance (such as last year's) is not
predictive of future results. SIFE has always believed
that discipline and consistency in both our investment
philosophy and practice is largely responsible for our
success.
As we've said many times over the past 38 years, we regard the equities markets'
up and down gyrations to be analogous to an old-fashioned farmer's well pump.
The well pump analogy applied to investing works like this: When equities are
richly priced, it may be opportune to take some profits. When the equities are
bargain priced, it may be opportune to invest. Participation in the down markets
is as important as in the up markets. We take advantage of apparent
opportunities that we see between the stock market prices and our bottoms-up
evaluation of individual stocks.
Please read the commentary from our portfolio team led by Michael Stead that
follows. After you review our investment strategy, we believe you will
intuitively know what's best for your own personal needs. We remind ourselves,
and it bears repeating, that discipline and patience are virtues because it is
difficult for human nature to consistently apply them in life as well as in
investing. Thank you for your continued discipline and patience and we look
forward to continuing to serve your investment needs.
Sincerely,
/s/ Sam Marchese /s/ John P. King
Sam Marchese John P. King
Chairman of the Board of SIFE* Interim President and
Chief Executive Officer of SIFE*
Performance data quoted for Class A-I shares does not include sales charges that
range from 5% to 0% of dollars invested, but includes reinvestment of dividends
and capital gains. Average annual compounded total returns, after deducting a
maximum 5% sales charge for 1, 5, and 10 years are -13.03%, 20.38%, and 15.38%
respectively. Investment return and principal value of an investment will
fluctuate and an investor's shares may be worth more or less than their original
cost. Past performance data is not indicative of future results and may not
reflect the effect of any market volatility that has occurred since the date of
the information. Fund performance is affected by many factors including changes
in the levels of equity prices and interest rates, selection of specific
securities, and the expense ratio. The fund concentrates its investments
primarily in the financial services sector and because sectors are narrowly
focused they typically exhibit higher volatility. This report is provided for
the shareholders of SIFE Trust Fund and is not authorized to be distributed
unless preceded or accompanied by an effective prospectus. For a free prospectus
please call SIFE at (800) 231-0356.
* The Management Company
_
2|
<PAGE>
SIFE TRUST FUND 1999 ANNUAL REPORT
- --------------------------------------------------------------------------------
Chief Investment Officer's Discussion Fund Performance
January 31, 2000
Up until the third quarter of 1998, most financial
services mutual funds compared favorably to the S&P 500
index for the 1-year, 3-year, 5-year and 20-year periods.
However since then, in addition to increased global credit [GRAPHIC OMITTED]
risk, the market saw evidence that some large merger
transactions were not adding to increased efficiencies and Mike Stead
earnings per share growth as then touted by management. Portfolio Manager
First Union's acquisition of Corestates Financial, Wells and Chief Investment
Fargo's merger with First Interstate and Bank One's Officer of SIFE*
acquisition of First USA all projected higher cost savings
than could prudently be achieved and resulted in poor
customer service and reductions in earnings
expectations.**
Additionally, in 1999 bank stocks experienced the impact of the Federal
Reserve's three interest rate increases and expectations of further rate hikes
through the first half of the year 2000. These increases and the expectation of
future increases pushed many financial stocks down by over 25% or more. Due to
inflationary fears arising from the tight labor market, the Federal Reserve is
increasing interest rates in an attempt to cool off the robust growth of the
U.S. economy.
Despite the aforementioned, some very large mergers continued to perform
exceptionally well: notable are the Citigroup/Traveler's, Chase/Chemical and
Wells Fargo/Norwest mergers. Furthermore, financial services companies (viewed
apart from stock prices) continued to enjoy the benefits of the growing U.S.
economy. Revenues and earnings in 1999 expanded due to greater fee income that
countered the effect of narrower net interest margins, and banks' loan
portfolios remained reasonably free from credit concerns. Bank capital ratios
and loan loss reserve levels of those companies held in SIFE's portfolio
continue to be more than adequate.**
Going forward, we believe that the companies that make up SIFE's portfolio are
well positioned to take advantage of continued strong economic growth. Further
consolidation in the financial services industry should promote share prices as
both domestic and foreign global competitors seek to obtain or increase their
share of the lucrative domestic financial services market and cross sell broader
product ranges from the brokerage, asset management, insurance and traditional
banking sectors.
Often there is no obvious correlation between a company's business success and
the appreciation of its stock over the short term. However, over the long term,
discerning and taking advantage of disparities that may exist between a
company's true value and stock price are key ingredients to investment success.
Nevertheless when investing over the long term, there is more to investing than
identifying successful companies that are well managed, profitable, and
strategically positioned in their core businesses: you must also be disciplined
and persevering.
I believe that we have an opportunity to continue to profit over the long term
as we patiently stay the course and hold to our discipline of fundamental
analysis, including interviewing management, evaluating competitive strategy,
analyzing financial statements and projecting financial results.
* The Management Company.
** For a list of SIFE's top ten holdings as of December 31, 1999, please see
page 16.
_
|3
<PAGE>
SIFE TRUST FUND 1999 ANNUAL REPORT
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
December 31, 1999
- --------------------------------------------------------------------------------
Assets:
Investments in securities, at market (cost $584,714,086) ... $863,217,825
Repurchase agreements ...................................... 17,154,000
Cash ....................................................... 1,523,450
Receivables for:
Investment securities sold ............................ 16,318,329
Dividends ............................................. 1,633,090
Fund shares sold ...................................... 505,031
Interest .............................................. 1,191
------------
Total assets ..................................... 900,352,916
------------
Liabilities:
Payables for:
Fund shares repurchased ............................... 1,618,585
SIFE (the "Management Company") ....................... 1,032,121
Dividends ............................................. 715,702
------------
Total liabilities ................................ 3,366,408
------------
Net assets ................................................. $896,986,508
============
Class A-I:
Net asset value per share
($775,392,956/148,856,624 shares outstanding) ......... $ 5.21
============
Maximum offering price per share (100/95 of $5.21) ......... $ 5.48
============
Class A-II:
Net asset value per share
($87,146,119/16,723,712 shares outstanding) ........... $ 5.21
============
Maximum offering price per share (100/95 of $5.21) ......... $ 5.48
============
Class B:
Net asset value and offering price per share
($31,250,495/5,996,640 shares outstanding) ............ $ 5.21
============
Class C:
Net asset value per share
($3,196,938/615,204 shares outstanding) ............... $ 5.20
============
Maximum offering price per share (100/99 of $5.20) ......... $ 5.25
============
_
4| See Notes To Financial Statements
<PAGE>
SIFE TRUST FUND 1999 ANNUAL REPORT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Portfolio
- ---------------------------------------------------------------------------------------------
December 31, 1999 Number of Shares Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks: 96.2%
Financial Institutions: 87.0%
AmSouth Bancorporation ............................. 1,188,950 $22,961,597
Banknorth Group Inc. ............................... 15,000 401,250
Bank of New York Company, Inc. ..................... 950,000 38,000,000
BB&T Corporation ................................... 300,096 8,215,128
CCB Financial Corp. ................................ 24,300 1,058,569
Centura Banks, Inc. ................................ 27,500 1,213,438
Charter One Financial, Inc. ........................ 766,070 14,651,089
Chase Manhattan Corp. .............................. 700,000 54,381,250
Chittenden Corporation ............................. 107,700 3,190,612
Citigroup Inc. ..................................... 600,000 33,337,500
City National Corporation .......................... 360,000 11,857,500
Colonial BancGroup, Inc. ........................... 40,000 415,000
Comerica Incorporated .............................. 616,550 28,785,178
Community First Bankshares, Inc. ................... 338,024 5,323,878
Compass Bancshares, Inc. ........................... 504,900 11,265,581
Cullen/Frost Bankers, Inc. ......................... 331,800 8,543,850
Federal Home Loan Mortgage Co. ..................... 133,300 6,273,431
Federal National Mortgage Asscociation.............. 300,000 18,731,250
Fifth Third Bancorp ................................ 50,000 3,668,750
First Tennessee National Corporation ............... 782,000 22,287,000
First Union Corporation ............................ 300,000 9,843,750
Firstar Corporation ................................ 1,061,100 22,415,738
FleetBoston Financial Corp. ........................ 1,273,760 44,342,770
Golden State Bancorp Inc.* ......................... 311,000 5,364,750
Imperial Bancorp* .................................. 457,000 11,025,125
Independent Bank Corp. ............................. 541,000 6,762,500
KeyCorp ............................................ 1,225,000 27,103,125
M & T Bank Corp. ................................... 39,100 16,197,175
MBNA Corporation ................................... 97,500 2,656,875
Mellon Financial Corporation ....................... 1,113,800 37,938,812
MGIC Investment Corp. .............................. 40,000 2,407,500
National City Corporation .......................... 1,060,000 25,108,750
<FN>
_
See Notes To Financial Statements 5|
</FN>
</TABLE>
<PAGE>
SIFE TRUST FUND 1999 ANNUAL REPORT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Portfolio
- ---------------------------------------------------------------------------------------------
December 31, 1999 Number of Shares Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks, continued
Financial Institutions, continued
National Commerce Bancorporation ................... 126,000 $ 2,858,625
Northern Trust Corp. ............................... 229,200 12,147,600
North Fork Bancorp Inc. ............................ 779,232 13,636,560
Pacific Century Financial Corp. .................... 40,000 747,500
Peoples Heritage Financial Group, Inc............... 355,270 5,351,254
PNC Bank Corporation ............................... 330,000 14,685,000
Provident Financial Group .......................... 50,000 1,793,750
Regions Financial Corp. ............................ 97,200 2,442,150
SouthTrust Corporation ............................. 135,000 5,104,688
Sovereign Bancorp, Inc. ............................ 596,000 4,442,063
State Street Corporation ........................... 350,000 25,571,875
Sterling Bancshares, Inc. .......................... 400,000 4,475,000
Summit Bancorp ..................................... 579,530 17,748,106
Summit Bancshares, Inc. ............................ 290,000 5,365,000
SunTrust Banks, Inc. ............................... 410,700 28,261,294
TCF Financial Corporation .......................... 181,200 4,507,350
UnionBanCal Corp. .................................. 251,000 9,898,813
Union Planters Corp. ............................... 120,000 4,732,500
U.S. Bancorp ....................................... 1,140,500 27,158,156
UST Corp. .......................................... 77,000 2,444,750
Wachovia Corporation ............................... 374,100 25,438,800
Washington Mutual, Inc. ............................ 20,000 520,000
Webster Financial Corporation ...................... 163,600 3,854,825
Wells Fargo & Company .............................. 830,000 33,563,125
Westamerica Bancorporation ......................... 350,000 9,778,125
Zions Bancorporation ............................... 134,700 7,972,556
-------------
780,228,186
Insurance: 1.9%
American International Group, Inc. ................. 144,281 15,600,383
Transatlantic Holdings, Inc. ....................... 22,500 1,756,406
-------------
17,356,789
<FN>
_
6| See Notes To Financial Statements
</FN>
</TABLE>
<PAGE>
SIFE TRUST FUND 1999 ANNUAL REPORT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Portfolio
- ---------------------------------------------------------------------------------------------
December 31, 1999 Number of Shares Market Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks, continued
Brokerages: 1.7%
Alliance Capital Management L.P. ................... 162,400 $ 4,861,850
Merrill Lynch & Co., Inc. .......................... 60,000 5,010,000
Morgan Stanley Dean Witter & Co. ................... 20,000 2,855,000
The Charles Schwab Corporation ..................... 73,000 2,801,375
-------------
15,528,225
Miscellaneous: 5.6%
Applied Power Inc. ................................. 68,300 2,510,025
AutoZone Inc.* ..................................... 77,000 2,488,063
Clayton Homes, Inc. ................................ 342,000 3,142,125
Donaldson Company, Inc. ............................ 25,000 601,562
Helen of Troy Limited* ............................. 169,000 1,225,250
Hewlett-Packard Company ............................ 21,000 2,392,688
Honeywell International, Inc. ...................... 57,600 3,322,800
Illinois Tool Works Inc. ........................... 50,900 3,438,931
Ingersoll-Rand Company ............................. 50,000 2,753,125
Invacare Corporation ............................... 176,900 3,549,056
Jacobs Engineering Group Inc.* ..................... 49,600 1,612,000
Johnson Controls, Inc. ............................. 23,500 1,336,562
Leggett & Platt Inc. ............................... 93,300 2,000,119
National Data Corporation. ......................... 35,500 1,204,781
Papa John's International, Inc.* ................... 94,000 2,449,875
Pentair, Inc. ...................................... 127,100 4,893,350
Reynolds and Reynolds Company ...................... 33,500 753,750
Ryan's Family Steak Houses, Inc.* .................. 50,000 425,000
The Sherwin-Williams Company ....................... 116,500 2,446,500
Teleflex Incorporated .............................. 77,000 2,411,063
United Technologies Corp. .......................... 79,200 5,148,000
-------------
50,104,625
-------------
Total Common Stocks (cost $584,714,086) ...................... 863,217,825
-------------
Repurchase agreements: 1.9%
State Street Bank and Trust Company, 2.50%,
due 01/03/2000
Collateral: U.S. government obligations,
market value of $17,503,200 .............. 17,154,000
-------------
Total Investments (cost $601,868,086): 98.1% ................. 880,371,825
-------------
Other Assets and Liabilities, net: 1.9% ...................... 16,614,683
-------------
Net Assets: 100.0% ........................................... $896,986,508
=============
<FN>
*Non-income producing
_
See Notes To Financial Statements 7|
</FN>
</TABLE>
<PAGE>
SIFE TRUST FUND 1999 ANNUAL REPORT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Operations
- ---------------------------------------------------------------------------------------------
Year Ended December 31, 1999
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Investment income:
Income:
Dividends .......................................... $ 21,287,182
Interest ........................................... 3,684,023
-------------
Total investment income .................. $ 24,971,205
Expenses:
Management fees .................................... 13,497,674
Service and distribution expenses
Class A-II .................................... 265,610
Class B ....................................... 373,806
Class C ....................................... 36,368
-------------
Total expenses ........................... 14,173,458
------------
Net investment income .................... 10,797,747
------------
Realized and unrealized gain/(loss) on investments:
Net realized gain .................................. 95,269,313
Net decrease in unrealized appreciation
of investments during the period .............. (192,785,631)
-------------
Net loss on investments ....................... (97,516,318)
------------
Net decrease in net assets resulting from operations .... $(86,718,571)
============
<FN>
_
8| See Notes To Financial Statements
</FN>
</TABLE>
<PAGE>
SIFE TRUST FUND 1999 ANNUAL REPORT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
- ---------------------------------------------------------------------------------------------
Year Ended December 31, 1999 December 31, 1988
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ................................ $ 10,797,747 $ 11,432,604
Net realized gain from investment transactions ....... 95,269,313 70,883,571
Net decrease in unrealized appreciation of investments (192,785,631) (26,982,915)
----------------------------------------
Net (decrease)/increase in net assets
resulting from operations ............. (86,718,571) 55,333,260
Distributions paid to investors:
From net investment income:
Class A-I ....................................... (9,902,948) (10,625,303)
Class A-II ...................................... (859,708) (801,182)
Class B ......................................... (23,388) (15,045)
Class C ......................................... (2,338) (995)
From net realized gain on investments:
Class A-I ....................................... (69,722,826) (66,062,653)
Class A-II ...................................... (7,712,259) (7,169,547)
Class B ......................................... (2,833,576) (2,512,490)
Class C ......................................... (287,041) (190,198)
----------------------------------------
Total distributions ........................ (91,344,084) (87,377,413)
Capital share transactions:
Increase from capital shares sold and reinvested ..... 619,054,512 441,334,161
Decrease from capital shares repurchased ............. (718,891,881) (386,217,042)
----------------------------------------
Net (decrease)/increase from capital
share transactions .................... (99,837,369) 55,117,119
----------------------------------------
Total (decrease)/increase in net assets .... (277,900,024) 23,072,966
Net assets:
Beginning of year .................................... 1,174,886,532 1,151,813,566
----------------------------------------
End of year .......................................... $ 896,986,508 $1,174,886,532
========================================
Net assets consist of:
Shares of beneficial interests ....................... $ 604,374,600 $ 704,211,971
Undistributed net investment income .................. 40,989 31,622
Undistributed net realized gain/(loss) on sale of
investment securities and option contracts ....... 14,067,180 (646,431)
Unrealized appreciation of investment securities ..... 278,503,739 471,289,370
----------------------------------------
$896,986,508 $1,174,886,532
========================================
<FN>
_
See Notes To Financial Statements 9|
</FN>
</TABLE>
<PAGE>
SIFE TRUST FUND 1999 ANNUAL REPORT
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 1.
Significant Accounting Policies
SIFE Trust Fund (the "Trust Fund") is an open-end diversified management
investment company offering its shares on a continuous basis to the public. The
Trust Fund was organized as a business trust under the laws of the State of
Delaware on February 28, 1997. The Trust Fund is the successor-in-interest to
SIFE Trust Fund, a California trust organized on September 26, 1960 which had
operated as a mutual fund since July 2, 1962. The Trust Fund is registered under
the Investment Company Act of 1940, as amended, (the "1940 Act").
The Trust Fund offers four classes of shares: Class A-I, Class A-II, Class B and
Class C. Class A-I shares are available for purchase only by (i) a Trust Fund
account which was established on or prior to April 30, 1996; (ii) directors,
employees and registered representatives of SIFE (the "Management Company") and
the Trust Fund, and their immediate family members; and (iii) broker/dealers and
certain other institutional purchasers. The offering of Class A-II shares began
May 1, 1996 and the offering of Class B and C shares began May 1, 1997. Realized
and unrealized gains or losses and investment income, net of management fees,
are allocated daily to each class of shares based upon the relative proportion
of net assets of each class. Each class of shares differs in its respective
distribution expenses and certain other class-specific fees and expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the fund in the
preparation of their financial statements.
Portfolio valuation:
Portfolio securities which are listed on a national stock exchange are valued at
the closing price on the stock exchange on which they are primarily traded. If
there has been no daily trading in a listed security, that security is valued at
the last available closing price. Securities which are traded over-the-counter
and for which closing prices are readily available (such as NASDAQ) are valued
at the closing price. Other securities which are traded over-the-counter but for
which closing prices are not readily available are valued at the closing bid
price. Short-term obligations having 60 days or less to maturity are valued at
amortized cost, which approximates market value. Temporary investments in
repurchase agreements are valued at cost.
Security transactions and related investment income:
Security transactions are accounted for on the trade date (the date the order to
buy or sell is executed). Realized gains or losses on security transactions are
recorded on the specific identified cost basis. Dividend income is recorded on
the ex-dividend date. Interest income is recorded on the accrual basis.
Distributions to investors:
Distributions paid to investors are recorded on the ex-distribution date. Net
investment income is distributed proportionately to each investor's account as
of the last business day in February, May, August and December. Realized gains,
net of losses, from securities held for more than one year are distributed
annually as of the last business day in November. Realized gains, net of losses,
from securities held for less than one year are distributed annually as of the
last business day in December.
Income taxes:
The Trust Fund's policy is to comply with the requirements of the Internal
Revenue Code and regulations thereunder applicable to regulated investment
companies and to distribute all of its taxable income to its investors.
Therefore, no provision for federal income taxes is recorded in the financial
statements.
Covered call and put options:
The Trust Fund may write covered call options on securities held by the Trust
Fund for non-speculative or hedging purposes, may write covered put options on
securities for the same purposes, and may enter into closing purchase
transactions with respect to such options. Options written by the Trust Fund
normally will have expiration dates between three and nine months from the date
written.
All call and put options written by the Trust Fund must be "covered." A call
option will be considered covered if the Trust Fund, so long as it remains
obligated as a writer, owns the securities underlying the options. A put option
will be covered if the Trust Fund, so long as it remains obligated as a writer,
maintains in a segregated account held by State Street Bank and Trust Company
("State Street Bank") as custodian of the Trust Fund, cash, U.S. Treasury Bills
or high-grade short-term debt securities in an amount equal to or greater than
the exercise price of the put option.
The exercise price of an option may be below, equal to or above the current
market value of the underlying security at the time the option is written. When
the Trust Fund writes an option, an amount equal to the premium received by the
Trust Fund is recorded as an asset and equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market value
of the option written. The current market value of a written option is the last
sale price or in the absence of a sale, the last bid price on that day. If a
written option expires on the stipulated expiration date or if the Trust Fund
enters into a closing purchase transaction, the Trust Fund realizes a gain (or
__
10|
<PAGE>
SIFE TRUST FUND 1999 ANNUAL REPORT
- --------------------------------------------------------------------------------
Notes to Financial Statements
a loss if the closing purchase transaction exceeds the premium received when the
option was written) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option is extinguished.
If a written call option is exercised, the Trust Fund realizes a gain or a loss
from the sale of the underlying security and the proceeds of the sale are
increased by the premium originally received. If a written put option is
exercised, the cost basis of the underlying security is reduced by the premium
originally received.
Repurchase agreements:
The Trust Fund may invest in repurchase agreements secured by U.S. Government
obligations or by other securities. Securities pledged as collateral for
repurchase agreements are held by the Trust Fund's custodian bank until maturity
of the repurchase agreements. Provisions of the agreements are intended to
ensure that the market value of the collateral is sufficient in the event of
default; however, in the event of default or bankruptcy by the other party to
the agreements, realization and/or retention of the collateral may be subject to
legal proceedings and other uncertainties and expenses.
Note 2.
Affiliated Party Transactions - Agreements
with SIFE (the "Management Company")
The Management Company is the investment advisor, administrator, transfer agent,
and underwriter for the Trust Fund and has acted in such capacities since the
formation of the Trust Fund. State Street Bank serves as custodian, sub-transfer
agent and service provider to existing Trust Fund investors.
Transfer agency agreement and administrative services agreement:
Pursuant to a transfer agency agreement, the Management Company acts as the
Trust Fund's transfer agent, as well as providing fund accounting services.
Effective March 24,1997 the Management Company, in turn, engaged State Street
Bank to provide certain transfer agency functions for the Trust Fund. Effective
April 1, 1996, all expenses related to the operation of the Trust Fund are the
responsibility of the Management Company (see "Investment Advisory Agreement"
below). Under the terms of a prior investment advisory agreement, certain Trust
Fund expenses were paid by the Management Company and reimbursed by the Trust
Fund monthly.
Investment advisory agreement:
The Trust Fund has entered into an investment advisory agreement with the
Management Company. Under the terms of the current investment advisory
agreement, the Management Company provides investment advice, a broad range of
administrative, regulatory and other services for the Trust Fund and the
investors, and receives an all-inclusive management fee of 1.25% of the Trust
Fund's average daily net assets, per annum. During the year ended December 31,
1999, management fees incurred by the Trust Fund totaled $13,497,674.
Distribution plan and underwriting agreement:
Pursuant to Rule 12b-1 under the 1940 Act, the Trust Fund's Board of Trustees
has adopted separate distribution plans with respect to the Trust Fund's Class
A-II, Class B and Class C shares, pursuant to which the Trust Fund reimburses
the Management Company for a portion of its shareholder servicing and
distribution expenses.
Under the Class A-II Plan, the Trust Fund may pay the Management Company a
distribution fee at the annualized rate of up to 0.25% of the average daily net
assets of the Trust Fund's Class A-II shares for expenditures incurred by the
Management Company in providing services as principal underwriter to the Trust
Fund for such shares. Under each of the Class B and Class C Plans, the Trust
Fund may pay the Management Company a distribution fee at the annualized rate of
up to 0.75% of the average daily net assets of the Trust Fund's Class B and
Class C shares for its expenditures incurred in providing services as principal
underwriter for such shares, and may pay the Management Company a service fee at
the annualized rate of up to 0.25% of the average daily net assets of the Trust
Fund's Class B and Class C shares, for the Management Company's expenditures
incurred in servicing and maintaining shareholder accounts.
In its capacity as principal underwriter for the Trust Fund, the Management
Company receives commissions of 2.5% to 5.0% on sales of the Trust Fund's Class
A-I and Class A-II shares. No sales charge is assessed on purchases of
$1,000,000 or more, purchases by directors, trustees, employees and registered
representatives of the Management Company and the Trust Fund, and their
immediate family members, as well as broker-dealers and certain other
institutional purchasers.
Class B shares are offered at net asset value per share, without the imposition
of a sales charge, but are subject to a contingent deferred sales charge
("CDSC") of up to 5.0% if redeemed within six years of purchase. Class B shares
automatically convert into Class A-II shares, based on relative net asset
values, on the sixth anniversary of their purchase. The Management Company will
pay to the selling dealer, out of its own resources, a sales commission of 4.0%
of the Class B shares purchased.
Class C shares are subject to an initial sales charge of 1.0%. Any shares
redeemed prior to one year following the initial purchase are subject to a 1.0%
CDSC.
Commissions are deducted from the gross proceeds received from the sale of
investment shares, and as such are not expenses of the Trust Fund.
__
|11
<PAGE>
SIFE TRUST FUND 1999 ANNUAL REPORT
- --------------------------------------------------------------------------------
Notes to Financial Statements
Commissions retained by the Management Company totaled $62,414 for the year
ended December 31,1999.
Certain officers and directors of the Trust Fund are also officers and directors
of the Management Company. On December 31, 1999, the Management Company owned
469,682 Class A-I shares of the Trust Fund.
Note 3.
Unrealized Appreciation of Investments
On December 31, 1999, the net unrealized appreciation for all securities was as
follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost ......$298,799,364
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value ...... (20,295,625)
------------
Net unrealized appreciation .......................................$278,503,739
============
The tax cost basis used in the above calculation is the same as that used for
financial statement purposes.
Note 4.
Capital Share Transactions
<TABLE>
The following is a summary of share transactions for the years ended December
31,1999 and December 31, 1998:
<CAPTION>
1999 1998
----------------------------------------------------------------------
Class A-I Shares Amount Shares Amount
- --------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold .............................. 4,440,235 $ 26,929,517 10,264,524 $ 65,303,921
Shares issued in connection with
reinvestment of distributions .......... 12,729,786 72,114,581 11,734,641 71,066,418
----------------------------------------------------------------------
17,170,021 99,044,098 21,999,165 136,370,339
Shares repurchased ....................... (30,470,548) (185,254,096) (22,439,728) (142,308,295)
----------------------------------------------------------------------
Net decrease ............................. (13,300,527) $ (86,209,998) (440,563) $ (5,937,956)
======================================================================
1999 1998
----------------------------------------------------------------------
Class A-II Shares Amount Shares Amount
- ---------- ------ ------ ------ ------
Shares sold .............................. 79,872,303 $ 502,078,483 41,331,298 $ 266,163,815
Shares issued in connection with
reinvestment of distributions .......... 1,467,098 8,303,473 1,269,378 7,751,784
----------------------------------------------------------------------
81,339,401 510,381,956 42,600,676 273,915,599
Shares repurchased ....................... (83,244,262) (522,459,422) (37,124,813) (239,844,067)
----------------------------------------------------------------------
Net (decrease)/increase .................. (1,904,861) $ (12,077,466) 5,475,863 $ 34,071,532
======================================================================
1999 1998
----------------------------------------------------------------------
Class B Shares Amount Shares Amount
- ------- ------ ------ ------ ------
Shares sold .............................. 920,240 $ 5,691,528 3,922,688 $ 25,579,740
Shares issued in connection with
reinvestment of distributions .......... 460,054 2,594,233 366,593 2,218,133
----------------------------------------------------------------------
1,380,294 8,285,761 4,289,281 27,797,873
Shares repurchased ....................... (1,658,790) (10,117,214) (511,127) (3,220,808)
----------------------------------------------------------------------
Net (decrease)/increase .................. (278,496) $ (1,831,453) 3,778,154 $ 24,577,065
======================================================================
1999 1998
----------------------------------------------------------------------
Class C Shares Amount Shares Amount
- ------- ------ ------ ------ ------
Shares sold .............................. 180,699 $ 1,116,707 479,012 $ 3,083,299
Shares issued in connection with
reinvestment of distributions .......... 40,643 225,990 27,638 167,051
----------------------------------------------------------------------
221,342 1,342,697 506,650 3,250,350
Shares repurchased ....................... (174,969) (1,061,149) (142,207) (843,872)
----------------------------------------------------------------------
Net increase ............................. 46,373 $ 281,548 364,443 $ 2,406,478
======================================================================
</TABLE>
Note 5.
Purchases and Sales of Securities
Purchases and sales of investment securities were $244,035,716 and $338,984,198,
respectively for the year ended December 31, 1999.
Note 6.
Concentration of Credit Risk
On December 31, 1999, approximately $780,228,186 (87.0% of net assets) of the
Trust Fund's investments were in equities of financial institutions.
Note 7.
Financial Instruments
The Trust Fund may trade in financial instruments with off-balance sheet risk
during the normal course of investing activities to assist in managing exposure
to various market risks. These financial instruments include written covered
call and put options and may involve, to a varying degree, elements of risk in
excess of the amounts recognized for financial statement purposes. As of
December 31,1999 there were no covered call or put options outstanding.
__
12|
<PAGE>
SIFE TRUST FUND 1999 ANNUAL REPORT
- --------------------------------------------------------------------------------
<TABLE>
Financial Highlights
<CAPTION>
Class A-I
----------------------------------------------------
Years Ended, December 31 1999 1998 1997 1996 1995
----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Selected Per Share Data
(For one share outstanding throughout each period):
Net asset value, beginning of period ................... $6.26 $6.45 $4.86 $4.58 $3.55
----------------------------------------------------
Income from investment operations:
Net investment income ............................. 0.07 0.07 0.08 0.09 0.10
Net realized and unrealized
gain (loss) on investments ................... (0.56) 0.24 2.07 1.16 1.68
----------------------------------------------------
Total from investment operations ........ (0.49) 0.31 2.15 1.25 1.78
----------------------------------------------------
Less distributions to investors:
Distributions from net investment income .......... (0.07) (0.07) (0.08) (0.09) (0.10)
Distributions from capital gains .................. (0.49) (0.43) (0.48) (0.88) (0.65)
----------------------------------------------------
Total distributions ..................... (0.56) (0.50) (0.56) (0.97) (0.75)
----------------------------------------------------
Net asset value, end of period ......................... $5.21 $6.26 $6.45 $4.86 $4.58
====================================================
Total Return*** ............................................. (8.5%) 5.1% 44.8% 27.4% 49.9%
====================================================
Ratios and Supplemental Data
Net assets, end of period (in millions) ................ $775 $1,015 $1,049 $769 $614
====================================================
Ratios to average net assets:
Expenses .......................................... 1.25% 1.25% 1.25% 1.20% 1.03%
====================================================
Net investment income ............................. 1.07% 1.04% 1.38% 1.82% 2.25%
====================================================
Portfolio turnover rate ................................ 25.0% 31.0% 63.0% 140.2% 93.5%
====================================================
</TABLE>
<TABLE>
<CAPTION>
Class A-II Class B Class C
---------------------------------------------------------------------------------------
Years Ended, December 31 1999 1998 1997 1996* 1999 1998 1997** 1999 1998 1997**
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Selected Per Share Data
(For one share outstanding
throughout each period):
Net asset value, beginning of period ... $6.26 $6.46 $4.86 $4.73 $6.26 $6.45 $5.41 $6.24 $6.46 $5.41
---------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .................. 0.05 0.05 0.07 0.07 -- -- 0.01 -- -- 0.01
Net realized and unrealized
gain (loss) on investments ........ (0.56) 0.23 2.07 1.01 (0.56) 0.24 1.53 (0.55) 0.21 1.54
---------------------------------------------------------------------------------------
Total from investment
operations .............. (0.51) 0.28 2.14 1.08 (0.56) 0.24 1.54 (0.55) 0.21 1.55
---------------------------------------------------------------------------------------
Less distributions to investors:
Distributions from net
investment income ................. (0.05) (0.05) (0.06) (0.07) -- -- (0.02) -- -- (0.02)
Distributions from capital gains ....... (0.49) (0.43) (0.48) (0.88) (0.49) (0.43) (0.48) (0.49) (0.43) (0.48)
---------------------------------------------------------------------------------------
Total distributions .......... (0.54) (0.48) (0.54) (0.95) (0.49) (0.43) (0.50) (0.49) (0.43) (0.50)
---------------------------------------------------------------------------------------
Net asset value, end of period ........... $5.21 $6.26 $6.46 $4.86 $5.21 $6.26 $6.45 $5.20 $6.24 $6.46
=======================================================================================
Total Return*** ........................... (8.7%) 4.7% 44.6% 22.8% (9.4%) 4.1% 28.9% (9.3%) 3.6% 29.1%
=======================================================================================
Ratios and Supplemental Data
Net assets, end of period (in millions) ... $87 $117 $85 $18 $31 $39 $16 $3 $4 $1
=======================================================================================
Ratios to average net assets:
Expenses ............................... 1.50% 1.50% 1.50% 1.48% 2.25% 2.25% 2.22% 2.25% 2.25% 2.25%
=======================================================================================
Net investment income .................. 0.81% 0.79% 1.11% 1.77% 0.06% 0.00% 0.30% 0.06% 0.00% 0.30%
=======================================================================================
Portfolio turnover rate ................... 25.0% 31.0% 63.0% 140.2% 25.0% 31.0% 63.0% 25.0% 31.0% 63.0%
=======================================================================================
<FN>
* For the period May 1, 1996 (commencement of operations) to December 31, 1996.
** For the period May 1, 1997 (commencement of operations) to December 31, 1997.
*** Sales loads are not reflected in total return.
__
See Notes to Financial Statements |13
</FN>
</TABLE>
<PAGE>
SIFE TRUST FUND 1999 ANNUAL REPORT
- --------------------------------------------------------------------------------
Independent Auditors' Report
To the Investors and Board of Trustees of SIFE Trust Fund:
We have audited the accompanying statement of assets and liabilities of
SIFE Trust Fund (the "Fund"), including the investment portfolio, as of December
31, 1999, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the four years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights of the Class A-I units for the year ended
December 31, 1995 were audited by other auditors whose report dated January 30,
1996 expressed an unqualified opinion on such financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of SIFE Trust Fund as of December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the four years in the period then ended, in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
San Francisco, California
January 31, 2000
__
14|
<PAGE>
SIFE TRUST FUND 1999 ANNUAL REPORT
- --------------------------------------------------------------------------------
SIFE Trust Fund Performance
[GRAPH OMITTED]
SIFE Trust Fund's Investment Portfolio
[GRAPH OMITTED]
Comparison to the S & P 500 Index
[GRAPH OMITTED]
The above chart represents a hypothetical illustration comparing a $9,500
investment and a $10,000 investment made in SIFE Trust Fund on December 31, 1989
to a $10,000 investment made in the Standard and Poor's 500 Composite Price
Index and includes reinvestments of dividends and capital gains.
The above graph represents a hypothetical illustration comparing a $9,500
investment made in SIFE Trust Fund on December 31, 1989 ($9,500 represents a
$10,000 investment with the maximum sales charge deducted) to a $10,000
investment made in the Standard and Poor's 500 Composite Price Index and
includes reinvestments of dividends and capital gains. The Standard and Poor's
500 Index is an unmanaged value-weighted price index composed of 500 large
capitalized U.S. stocks and is regarded as a broad based benchmark for market
conditions.
Please be aware that the return information in the chart and graph for SIFE
includes operating expenses (such as management fees) that reduce returns, while
the return for the Standard and Poor's 500 Composite Price Index does not.
Performance data quoted represents past performance and does not predict future
results. Investment return and principal value will fluctuate, and redemption
value may be more or less than original cost. Data is quoted for Class A-I only
(performance for other classes will vary due to differences in fee structures)
and does not reflect the effect of any market volatility that has occurred since
the date of the information. As a result, returns after the date of this report
may be substantially more or less than those shown.
SIFE Trust Fund is a sector fund and as such may exhibit higher volatility than
the overall stock market. Please refer to the prospectus for a complete
disclosure of the risks associated with the financial services sector, as well
as the expenses, investment objectives, and operating policies of the Fund. You
should read the prospectus carefully before investing in any fund. For a free
copy of the SIFE Trust Fund's prospectus, please call (800) 231-0356.
<PAGE>
<TABLE>
SIFE TRUST FUND 1999 ANNUAL REPORT
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
SIFE Trust Fund's Top Ten Holdings (as a percentage of net assets) (as of December 31 1999)
- ---------------------------------------------------------------------------------------------------
Chase Manhattan Corp. 6.1% Citigroup Inc. 3.7%
- ---------------------------------------------------------------------------------------------------
FleetBoston Financial Corp. 4.9% Comerica Incorporated 3.2%
- ---------------------------------------------------------------------------------------------------
Bank of New York Company, Inc 4.2% SunTrust Banks, Inc. 3.2%
- ---------------------------------------------------------------------------------------------------
Mellon Financial Corporation 4.2% U.S. Bancorp 3.0%
- ---------------------------------------------------------------------------------------------------
Wells Fargo & Company 3.7% KeyCorp 3.0%
- ---------------------------------------------------------------------------------------------------
Officers And Trustee of the SIFE Trust Fund
- ---------------------------------------------------------------------------------------------------
Haig G. Mardikian* Charles W. Froehlich, Jr. Diane Howard Belding
Chariman of the Board and Trustee Secretary and Trustee Trustee
Walter S. Newman* John A. Meany* Bruce W. Woods
Vice Chairman of the Board and Trustee Trustee Trustee
Sam A. Marchese Neil L. Diver* Gary A. Isaacson
President and Trustee Emeritus Trustee Treasurer
*Independent Trustee
Officers And Directors of SIFE (the "Management Company")
- ---------------------------------------------------------------------------------------------------
Sam A. Marchese Gary A. Isaacson Sharon E. Tudisco
Chairman of the Board and Directors Chief Financial Officer Director
John P. King Charles W. Froehlich, Jr. Diane Howard Belding
Interim President and Chief Executive Secretary and Director Director
Officer
Michael J. Stead
Chief Investment Officer and Director
Custodian SIFE Trust Fund Services
- ------------------------------------- ------------------------------------------------------
State Street Bank and Trust Company SIFE Trust Fund provides continuing individual
225 Franklin Street services to the Investor, including assistance for
Boston, MA 02110 changes of beneficiary, assignments, collateral bank
loans, redemptions and the purchase of additonal fund
shares. SIFE service representatives are prepared to
Transfer Agent assist you in establishing retirement accounts,
- ------------------------------------- including IRA's IRA-SEP's, SIMPLE IRA's, Roth IRA's
Education IRA's and Section 403(b)(7) accounts.
Boston Financial Data Services
P.O. Box 8244 Inquiries concerning any of SIFE Trust Fund's services
Boston, MA 02266 may be directed to your representative or the home
office. For the convenience of Investors, you may call
a toll free (800) 231-0356 or (925) 988-2400 if you
Legal Counsel have a need for information or service. For the
- ------------------------------------- current share price, SIFE Trust Fund has a 24 hour
toll-free number: (800) 553-7433.
Paul, Hastings, Janofsky & Walker LLP
345 California Street, 29th Floor This report and the financial statements contained
San Francisco, CA 94104 herein are provided for the general information of the
shareholders of SIFE Trust Fund. This report is not
authorized for distribution to prospective investors
Independent Auditors in SIFE Trust Fund unless preceded or accoumpanied by
- ------------------------------------- an effective prospectus.
Deloitte & Touch LLP
50 Fremont Street
San Francisco, CA 94105
</TABLE>
__
16|
<PAGE>
- ----
SIFE
- ----
100 North Widget Lane, P.O. Box 9007
Walnut Creek, CA 94598-0907
Phone (800) 231-0356 / fax (925) 943-1783
Website: www.sife.com
Ticker Symbol: SIFEX
(c) 1999 SIFE Trust Fund
