SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Sife Trust Fund
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
[LOGO]
SIFE TRUST FUND
----------
NOTICE OF ANNUAL MEETING OF INVESTORS
TO BE HELD APRIL 1, 1996
NOTICE IS HEREBY GIVEN of the annual meeting of the investors (the
"Investors") in SIFE Trust Fund (the "Trust Fund"), in accordance with the
provisions of the Restated Trust Agreement. The annual meeting (the "Meeting")
will be held at The Centre Concord, 5298 Clayton Road, Concord, California (see
back cover for directions) on Monday, April 1, 1996, at 2:00 P.M., Pacific
Standard Time, to consider and act upon the following matters:
1. Election of seven (7) directors of the Trust Fund for succeeding one-
year terms, or until their successors are elected and have been qualified;
2. Ratification of the selection by a majority of the independent members
of the Board of Directors of the Trust Fund of the firm of Deloitte &
Touche LLP, as independent auditors for the Trust Fund for the
calendar year 1996;
3. Approval of the continuation of the current Investment Advisory
Agreement, as amended, which amendments are attached hereto as Exhibit
B and incorporated by reference herein, with SIFE, a California
corporation (the "Management Company"). The amendments change the
method of compensating and reimbursing the Management Company from (a)
the sum of (I) an investment advisory fee of approximately 0.60% of
the Trust Fund's average net assets (calculated on a per annum basis),
AND (II) reimbursement of expenses incurred by the Management Company
on behalf of the Trust Fund, to (b) a flat fee of 1.25% of the Trust
Fund's average net assets (calculated on a per annum basis), as
described more completely in the attached Proxy Statement. The Board
of Directors has determined that it is in the best interests of the
Trust Fund and the Investors to continue the Investment Advisory
Agreement, as amended, with the Management Company;
4. IF PROPOSAL #3 DOES NOT RECEIVE INVESTOR APPROVAL, the Investors are
asked, in the alternative, to approve continuation of the current
Investment Advisory Agreement with the Management Company, whereby the
Management Company will continue to act as the Investment Advisor to
the Trust Fund for the annual period commencing April 1, 1996. The
Board of Directors has determined that, if Proposal #3 does not pass,
it is in the best interests of the Trust Fund and the Investors to
continue the Investment Advisory Agreement with the Management
Company;
5. Approval of an amendment to each of (a) the Investment Advisory
Agreement, (b) the Underwriting Agreement and (c) the Restated Trust
Agreement to provide for the creation of a multiple class structure
whereunder outstanding investment units would be designated "Class I
Units," and a Rule 12b-1 Plan would be adopted to apply to a to-be-
created class of investment interests, to be designated "Class II
Units," as described more completely in the attached Proxy Statement.
The amendments to the Investment Advisory Agreement, the Underwriting
Agreement and the Restated Trust Agreement are attached hereto as
Exhibits B, C and D, respectively, and are incorporated by reference
herein;
6. An amendment to the Trust Fund's investment policies to permit the
Trust Fund to (a) write covered put options up to 10% of the Trust
Fund's net assets, and (b) write covered call options up to 25% of the
Trust Fund's net assets; and
7. Any other matters which may properly come before the meeting or any
adjournment thereof.
This notice is given pursuant to the direction of the Board of Directors of
the Trust Fund. Only Investors of record at the close of business on February
9, 1996, are entitled to notice of, and to vote at, the Meeting and at any
adjournment thereof.
Investors who do not expect to attend the Meeting are requested to indicate
voting instructions on the enclosed Proxy (white card), date and sign it, and
return it in the accompanying envelope. In order to avoid unnecessary expense,
we ask your cooperation in mailing in your Proxy promptly, no matter how large
or how small your holdings may be and regardless of whether you plan to attend
the meeting. The return of a Proxy will not restrict or impair the right of any
Investor to revoke the same or to attend and vote personally at the meeting.
Dated: February 26, 1996
Walnut Creek, California
By order of the Board of Directors of
SIFE Trust Fund
/s/ Charles W. Froehlich, Jr.
Charles W. Froehlich, Jr.
SECRETARY
PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY.
YOUR VOTE IS IMPORTANT
SIFE TRUST FUND
--------
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of SIFE Trust Fund (the "Trust Fund") for
use at its 1996 annual meeting of investors in the Trust Fund (the "Investors")
to be held at 2:00 P.M. on April 1, 1996, at The Centre Concord, 5298 Clayton
Road, Concord, California, or at any adjournment or postponement thereof (the
"Meeting"). This Proxy Statement and accompanying Notice of Meeting and Proxy
(white card) are first being mailed to holders of the Trust Fund's Participating
Agreements on or about February 26, 1996.
VOTING RIGHTS, SOLICITATION AND REVOCABILITY OF PROXIES
As of the close of business on February 9, 1996, there were issued and
outstanding Participating Agreements in aggregate amount of $642,342,990,
representing an aggregate equity in the Trust Fund of 134,679,470 investment
units. A majority in interest of all investment units, present in person or
represented by proxy (including for this limited purpose abstentions and broker
non-votes) and entitled to vote, shall constitute a quorum for purposes of the
Meeting.
Investors of record as of February 9, 1996 will be entitled to one vote for
each investment unit owned, EXCEPT THAT with respect to election of Directors,
an Investor may cumulate his or her votes. This means that each Investor is
permitted to cast a number of votes equal to the number of Directors proposed
for election (seven), multiplied by the number of investment units held, and may
cumulate such votes for a single nominee or distribute such votes among as many
director nominees as he or she deems appropriate. Discretionary authority of
the Proxy Holders to cumulate votes is solicited by the Board of Directors.
Such discretionary authority may be withheld by checking the box marked
"WITHHOLD ALL." If this alternative is selected by an Investor, none of the
Investor's investment units will be voted (cumulatively or otherwise) for any of
the nominees unless such Investor appears and votes in person at the Meeting.
All investment units represented at the Meeting by properly executed
proxies received prior to or at the Meeting will be voted in accordance with the
instructions thereon. If no instructions are indicated, properly executed
proxies will be voted "FOR" each of the nominees and "FOR" adoption of each of
the proposals set forth herein. With respect to the election of directors, the
seven nominees receiving the highest total number of votes at the Meeting shall
be elected as directors. In all other matters (other than the ratification of
the selection of auditors, for which a majority of votes cast by the Investors
at the Meeting is required), the Investor vote required for approval is the vote
of a majority in interest of all investment units, which is defined as the
lesser of (i) 67% or more in interest of the investment units represented at
such a meeting at which more than 50% of all outstanding investment units are
represented, either in person or by Proxy, or (ii) more than 50% in interest of
all Investors. Abstentions are treated as votes against a proposal, and broker
non-votes have no effect on the vote. A "broker non-vote" occurs when a nominee
holding investment units on behalf of a beneficial owner votes on one proposal
but does not vote on another proposal because the nominee does not have
discretionary voting power and has not received specific instructions from the
beneficial owner.
A proxy given pursuant to this solicitation may be revoked at any time
before it is voted. Proxies may be revoked by filing with the Trust Fund (at
the corporate offices of SIFE, Inc. (the "Management Company"), at the address
given below) an instrument of revocation or a duly executed proxy bearing a
later date. A proxy may also be revoked by attending the Meeting and voting in
person (although attendance at the Meeting will not by itself constitute
revocation of a proxy). Any written notice revoking a proxy should be delivered
to Sam A. Marchese, President & Chief Executive Officer, SIFE Trust Fund, 490
North Wiget Lane, Walnut Creek, California 94598.
The Trust Fund does not know of any matters, other than as described in the
Notice of Meeting, that are to come before the Meeting. If any other matters
are properly presented at the Meeting for action, the persons named in the
enclosed form of proxy and acting thereunder will have the discretion to vote on
such matters in accordance with their best judgment.
In addition to the use of the mail, solicitation of proxies may be made in
person or by telephone or otherwise by Directors and Officers of the Trust Fund.
No compensation will be paid to any person for any proxy solicitation, however
the cost of all proxy solicitation, including reimbursement of expenses incurred
by banks, brokerage firms, custodians, nominees and fiduciaries for their
reasonable expenses in forwarding proxy materials to Investors, will be borne by
the Trust Fund.
-----------
PROPOSAL ONE
ELECTION OF DIRECTORS
The Restated Trust Agreement provides that the Board of Directors of the
Trust Fund shall consist of seven members, to be elected annually by the
Investors. The proxy holders will vote for the election of each of the seven
nominees unless otherwise instructed on the proxy. If any nominee is unable to
serve, the investment units represented by such proxies will be voted for the
election of such substitute as the Board of Directors may recommend. At this
time the Board of Directors knows of no reason why any of the nominees might be
unable to serve, if elected. Each nominee has consented to be named and has
indicated his or her intent to serve, if elected. The Board of Directors,
including the non-"interested" directors, recommends a vote "FOR" the election
of each of the persons named herein.
Set forth in the following table is information about each person who is
being nominated for election as a Director for a term which will expire on April
1, 1997, or at such time as his or her successor is elected and qualified.
2
- ----------------------------------------------------------------------------------------------------
Position Held in Length of Business Experience
Name Age Trust Fund Service During Past Five Years
---- --- ---------- ------- ----------------------
- ----------------------------------------------------------------------------------------------------
David M. Sacks (1) 78 Director; Continuous Retired Vice President, American Broad-
Chairman of since casting Company; Retired General Mgr.,
the Board July 1983 KGO Television; President, DMS
Enterprises (broadcasting consultant);
Member, Board of Governors, National
Academy of Television Arts & Sciences
- ----------------------------------------------------------------------------------------------------
Diane Howard Belding 39 Nominee Nominee Management Company employee, 1992-
(2) (4) present; General Partner, Howard &
Howard Ranch (avocado ranch, Ventura
County, CA), 1983-present; Director,
Management Company (1982 - present)
- ----------------------------------------------------------------------------------------------------
Charles W. Froehlich, 67 Director & Continuous Retired Appellate Court Judge; retired
Jr. (3) (4) Secretary since Superior Court Judge; formerly Of
March 1995 Counsel to Peterson, Thelan & Price;
principal, Froehlich & Peterson Dispute
Resolution
- ----------------------------------------------------------------------------------------------------
Sam A. Marchese (4) 53 Director; Continuous President & Chief Executive Officer,
President, since Management Company (December 1994 -
Chief Executive October present); Director, Management Company
Officer and 1988 (1989 - present); Vice President,
Treasurer Management Company (1989 - 1994);
Director, Scott Co. (mechanical
contractor)
- ----------------------------------------------------------------------------------------------------
Haig G. Mardikian (1) 49 Director; Vice Continuous General Partner, George M. Mardikian
Chairman of the since Enterprises (real estate investments);
Board January Managing Director, The United Broad-
1978 casting Corporation (radio
broadcasting)
- ----------------------------------------------------------------------------------------------------
John A. Meany (1) 55 Director Continuous President, John's Valley Foods, Inc.;
since President, John's Town & Country
October Markets, Inc.; Director, Northern
1992 California Grocers Assn.; Advisory
Council, Fleming Foods
- ----------------------------------------------------------------------------------------------------
Walter S. Newman (1) 74 Director Continuous Owner, WSN Enterprises (real estate
since consultants); Retired President, San
January Francisco Planning Commission; Retired
1991 President, San Francisco Redevelopment
Agency; Retired President, San
Francisco Fine Arts Museums; Chairman
of the Board, National Brain Tumor
Foundation
- ----------------------------------------------------------------------------------------------------
3
__________________________
(1) Member of the Audit Committee.
(2) Ms. Sharon Tudisco, a Director of the Trust Fund since 1981, has determined
not to stand for re-election. The Board of Directors has nominated Ms.
Diane Howard Belding, a shareholder and director of the Management Company,
to succeed Ms. Tudisco, whose term will expire at the Meeting.
(3) On March 21, 1995, Mr. Robert W. Pohl, a Director of the Trust Fund since
1975 and its President and Chief Executive Officer since 1983, died.
Pursuant to Article VI, Section 2, of the Restated Trust Agreement, the
remaining Directors appointed Judge Froehlich to fill the remainder of Mr.
Pohl's term, and, at the 1995 Annual Meeting, the proxy holders elected
Judge Froehlich a Director.
(4) Messrs. Froehlich and Marchese, and Ms. Belding, are "interested persons,"
as that term is defined in Section 2(a)(19) of the Investment Company Act
of 1940, as amended, by virtue of their positions as directors and/or
officers of the Trust Fund and as directors, officers and/or shareholders
of the Management Company.
BOARD OF DIRECTORS MEETINGS, COMPENSATION AND COMMITTEES
Regular meetings of the Board of Directors are held bi-monthly or at such
time as the Board may determine. During 1995 the Board of Directors held six
regular meetings; in addition, from time to time the non-"interested" directors
meet with officers of the Trust Fund and/or the Management Company to discuss
various matters relating to the administration of the Trust Fund. No director
attended fewer than 75% of the total number of meetings of the Board of
Directors and the total number of meetings of all committees on which any such
director served during 1995. Each director is paid by the Trust Fund an
attendance fee of $5,000 for each Board meeting attended plus $250 per hour
(subject to a per-meeting maximum of $1,000) consultation fee for services other
than Board meetings.
The Board of Directors has an Audit Committee, which is responsible for (i)
the selection and review of the independent auditors of the Trust Fund and (ii)
oversight, with the auditors, of the current operating procedures of the Trust
Fund. The members of the Audit Committee are Messrs. Newman (Chair), Mardikian,
Meany and Sacks. During 1995 the Audit Committee held three meetings. The
Board of Directors has no nominating or compensation committee.
OWNERSHIP OF PARTICIPATING AGREEMENTS
As of January 31, 1996, no person (including any "group," as that term is
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended)
was known by the Trust Fund to be the beneficial holder of more than 5% of the
outstanding number of investment units of the Trust Fund. The beneficial
holdings of investment units, represented by Participating Agreements in the
Trust Fund, of the Trust Fund's directors, nominees for director and executive
officers, as of January 31, 1996, are as follows:
4
- ------------------------------------------------------------------------------------------------------
Amount and Nature of Percent of Class
Beneficial Ownership (1) ----------------
Name of Beneficial Owner Title of Class (investment units) (2)
------------------------ -------------- ------------------ ---
- ------------------------------------------------------------------------------------------------------
David M. Sacks Participating Agreements 181,678 0.14%
- ------------------------------------------------------------------------------------------------------
Diane Howard Belding (3)(4) Participating Agreements 92,465 0.07%
- ------------------------------------------------------------------------------------------------------
Charles W. Froehlich, Jr. (4) Participating Agreements 56,200 0.04%
- ------------------------------------------------------------------------------------------------------
Sam A. Marchese (4) Participating Agreements 112,926 0.08%
- ------------------------------------------------------------------------------------------------------
Haig G. Mardikian Participating Agreements 18,435 0.01%
- ------------------------------------------------------------------------------------------------------
John A. Meany Participating Agreements 65,227 0.05%
- ------------------------------------------------------------------------------------------------------
Walter S. Newman Participating Agreements 6,325 (5)
- ------------------------------------------------------------------------------------------------------
Sharon E. Tudisco (3)(4) Participating Agreements 155,093 0.12%
- ------------------------------------------------------------------------------------------------------
All Directors and Executive Participating Agreements 688,349 0.51 %
Officers as a Group (eight
persons) (4)
- ------------------------------------------------------------------------------------------------------
__________________________
(1) Each person listed above has sole voting power and sole investment power
with respect to all investment units beneficially owned by him or her (or
shares such powers with his or her spouse). None of the above persons has
any right to acquire beneficial ownership of Participating Agreements as
specified in Rule 13d-3(d)(1) under the Securities Exchange Act of 1934.
On January 31, 1996, each unit was valued at $4.67.
(2) Based on an aggregate of 134,566,388 investment units outstanding on
January 31, 1996.
(3) Ms. Sharon Tudisco, a Director of the Trust Fund since 1981, has determined
not to stand for re-election. The Board of Directors has nominated Ms.
Diane Howard Belding, a shareholder and director of the Management Company,
to succeed Ms. Tudisco.
(4) In addition to the investment units beneficially owned by the persons
identified by this footnote #4, each of such persons, by reason of his or
her ownership of shares in the Management Company, may also be deemed to be
the beneficial owner of 515,147 investment units owned on January 31, 1996
by the Management Company (see "Information About the Management Company,"
page 7.)
(5) Less than 0.01%.
5
MANAGEMENT COMPENSATION
The following table sets forth certain information regarding all
compensation paid or accrued for services rendered in all capacities to the
Trust Fund for the year ended December 31, 1995 to each of the three most highly
compensated executive officers and each of the directors of the Trust Fund:
- ----------------------------------------------------------------------------------------
Aggregate Compensation
Name of Person and Position from the Trust Fund (1)
--------------------------- -----------------------
- ----------------------------------------------------------------------------------------
David M. Sacks; Director & Chairman of the Board $41,750
- ----------------------------------------------------------------------------------------
Charles W. Froehlich, Jr.; Director & Secretary $20,000
- ----------------------------------------------------------------------------------------
Sam A. Marchese; Director, President, $186,965
Chief Executive Officer and Treasurer
- ----------------------------------------------------------------------------------------
Haig G. Mardikian; Director & Vice Chairman of the Board $30,250
- ----------------------------------------------------------------------------------------
John A. Meany; Director $30,350
- ----------------------------------------------------------------------------------------
Walter S. Newman; Director $29,750
- ----------------------------------------------------------------------------------------
Robert W. Pohl (2) $45,300
- ----------------------------------------------------------------------------------------
Sharon E. Tudisco (3) $177,350
- ---------------------------------------------------------------------------------------
- --------------------------
(1) No remuneration was paid directly by the Trust Fund to its officers and
directors. However, pursuant to Article V, Section 3 of the Trust
Agreement, and Section 3 of the Investment Advisory Agreement, officers and
directors receive indirect remuneration from the Trust Fund through
reimbursement of the Management Company for the Trust Fund's pro rata share
of certain office and other expenses, including salaries, bonuses,
commissions, Directors' fees and the benefit of a reduced sales charge.
(2) Mr. Pohl was a Director of the Trust Fund from 1975, and had been the Trust
Fund's President and Chief Executive Officer from 1983, until his death on
March 21, 1995.
(3) Ms. Tudisco has been a Director and Vice President of the Trust Fund from
1981, and had been the Trust Fund's Executive Secretary from 1983, until
her retirement on December 31, 1995.
Under special arrangement by the Trust Fund with the Management Company,
Participating Agreements currently are sold on a uniform basis at a reduced
sales charge of 1% of the offering price to directors, officers and bona fide
full-time employees and sales representatives of the Trust Fund and the
Management Company, as well as to pension and profit sharing plans for the
benefit of such persons. The amount set forth in the above table under the
caption "Aggregate Compensation from the Trust Fund" includes the spread between
the acquisition price paid by or for the benefit of the directors and officers
for investment units purchased during 1995 and the price that would have been
payable at the usual sales charge. The amount of this spread on purchases made
by Mr. Marchese was $15 and by Mr. Meany was $600. The Trust Fund has no
pension or retirement plan and pays no pension or retirement benefits to its
officers or directors.
6
INFORMATION ABOUT THE MANAGEMENT COMPANY
The names, addresses and principal occupations of each of the executive
officers and directors of SIFE, Inc. (the "Management Company"), and of each
shareholder owning beneficially or of record 10% or more of the outstanding
voting securities of the Management Company, are as follows:
- ----------------------------------------------------------------------------------------
Percentage
Ownership of
Management
Company as of
December 31,
Name and Address Principal Occupation 1995
---------------- -------------------- ----
- ----------------------------------------------------------------------------------------
Shirley A. Beaton Director, Management Company 10.0%
490 North Wiget Lane Retired; formerly Accounting Manager
Walnut Creek, CA 94598 for the Management Company
- ----------------------------------------------------------------------------------------
Diane Howard Belding Director, Management Company 20.0%
490 North Wiget Lane Director, Trust Fund
Walnut Creek, CA 94598
- ----------------------------------------------------------------------------------------
Charles W. Froehlich, Jr. (1) Director & Asst Secy, Management 14.1%
1444 Windsong Lane Company
Escondito, CA 92026 Director & Secretary, Trust Fund
Retired Appellate Court Judge; retired
Superior Court Judge; formerly Of
Counsel to Peterson, Thelan & Price;
principal, Froehlich & Peterson
Dispute Resolution
- ----------------------------------------------------------------------------------------
Sam A. Marchese Director, President & Chief Executive 20.0%
490 North Wiget Lane Officer, Management Company
Walnut Creek, CA 94598 Director, President, Chief Executive
Officer & Treasurer, Trust Fund
- ----------------------------------------------------------------------------------------
Sharon E. Tudisco Director, Management Company 10.0%
490 North Wiget Lane Director, Trust Fund
Walnut Creek, CA 94598 Retired; formerly Vice President &
Executive Secretary - Management
Company and Trust Fund
- ----------------------------------------------------------------------------------------
Bruce W. Woods Director, Executive Vice President - 4.0%
490 North Wiget Lane Management Company
Walnut Creek, CA 94598
- ----------------------------------------------------------------------------------------
John W. Woods Director, Management Company 21.9%
Box 885 Retired; formerly Senior Vice
Sparks, NV 89432 President - Management Company
- ----------------------------------------------------------------------------------------
- --------------------------
(1) As of March 21, 1995, pursuant to a previously executed contract, Mr.
Marchese purchased 50 shares (10.0%) and Judge Froehlich purchased 55
shares (11.0%) from the estate of Mr. Pohl for a cash consideration of
$5,000 per share.
7
ALLOCATION OF PORTFOLIO BROKERAGE AND 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. Neither the Trust Fund nor
the Management Company is currently a party to any "soft dollar" arrangements.
During the last calendar year, the Trust Fund paid brokerage commissions of
$990,818 and total purchases and sales of portfolio securities aggregated
$915,869,856. Portfolio turnover rates for the years 1993, 1994 and 1995 were
28.7%, 25.2% and 93.5%, respectively. The portfolio turnover rate in 1995 was
relatively high, due to the extremely active market for the stocks of financial
institutions, specifically, and equities, generally.
-----------
PROPOSAL TWO
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee (which consists of directors who are not interested
persons with respect to the Trust Fund) has recommended that the accounting firm
of Deloitte & Touche LLP ("Deloitte & Touche) be engaged as independent
accountants for the year ending December 31, 1996, replacing the Trust Fund's
current independent accounting firm, Timpson Garcia. This recommendation has
been approved by the full Board of Directors of the Trust Fund, and, subject to
the ratification of the Investors at the Meeting, will be effective as of
January 19, 1996. Representatives of neither Deloitte & Touche nor Timpson
Garcia are expected to be present at the Meeting.
Deloitte & Touche is an international accounting firm which serves as the
independent accountants of, and auditors for, many investment funds, whereas
Timpson Garcia is a local accounting firm and audits a much smaller number of
investment funds. Accordingly, the Board of Directors determined that the
engagement of Deloitte and Touche would be in the best interests of the
Investors and of the Trust Fund. Deloitte & Touche has no direct or indirect
financial interest in the Trust Fund except for services rendered as independent
accountants and except for other consulting services which may be rendered from
time to time. All compensation received by the independent accountants for
their services as such consists of auditing and tax consultation fees only. The
employment of Deloitte & Touche is conditioned upon the right of the Trust Fund
to terminate such employment at any time without any penalty by vote of a
majority of the non-"interested" directors, or a majority in interest of
Investors at any meeting called for such purpose.
On January 19, 1996, the Board of Directors notified Timpson Garcia, which
has served as the Trust Fund's independent accountants since 1964, that they
were being replaced as the Trust Fund's independent auditors and would not be
requested to audit the Trust Fund for the year ending December 31, 1996. During
the two most recent fiscal years and for the period from January 1, 1996 through
January 19, 1996, there were no disagreements with Timpson Garcia on any matter
of accounting principles or practices, financial statement disclosure, auditing
scope or procedure, or any "reportable conditions." The reports of Timpson
Garcia on the financial statements of the Trust Fund for the three years ending
December 31, 1995 have not contained an adverse opinion or disclaimer of opinion
and have not been not qualified or modified as to any uncertainty, audit scope
or accounting principle.
8
Timpson Garcia has, at the Trust Fund's request, furnished a letter addressed to
the Securities and Exchange Commission stating that Timpson Garcia agrees with
the preceding statements; a copy of such letter is attached hereto as Exhibit A.
The Board of Directors recommends a vote "FOR" the ratification of the
selection of Deloitte & Touche as independent accountants of the Trust Fund for
the year ending December 31, 1996.
-----------
PROPOSAL THREE
PROPOSAL TO CONTINUE THE INVESTMENT ADVISORY AGREEMENT,
AS AMENDED, AND TO AMEND THE RESTATED TRUST AGREEMENT,
TO PROVIDE FOR A FLAT FEE OF 1.25% OF
THE TRUST FUND'S AVERAGE NET ASSETS, PER
ANNUM, AS AN ALL-INCLUSIVE INVESTMENT MANAGEMENT FEE
The Board of Directors is proposing certain amendments to the Investment
Advisory Agreement and the Restated Trust Agreement which, if adopted, would
significantly change the manner in which SIFE, Inc. (the "Management Company")
is compensated. The Board of Directors has concluded, based upon the Trust
Fund's history of being unable to expand the number of Investors to match the
growth in the Trust Fund's assets, that the Management Company requires
additional resources to avoid spreading ever-increasing expenses over a static
or declining Investor base. Further, the Board of Directors has concluded that
the growth rates experienced by the Trust Fund in recent years may not be
sustainable without increasing both the number of investors and the amount of
Trust Fund assets. Accordingly, the Board of Directors is recommending these
changes because it has become convinced that without a substantial and
continuing investment in personnel, technology and facilities, the Management
Company may not be able to achieve the growth goals established for the Trust
Fund by the Board of Directors. While there can be no assurance that the Trust
Fund will, in fact, grow as planned, the Board of Directors believes that the
recommended changes to the compensation and reimbursement structure will provide
the Management Company with sufficient additional resources to implement the
growth plans approved by the Board of Directors and as described generally
below.
BACKGROUND INFORMATION
The Management Company, which has served as the investment advisor to the
Trust Fund since the Trust Fund's inception in November 1962, is compensated
pursuant an Investment Advisory Agreement, dated April 3, 1972 and as amended on
April 3, 1995 (collectively the "Investment Advisory Agreement"). In addition
to providing investment advice and portfolio management to the Trust Fund, the
Management Company performs a broad range of administrative, regulatory and
other services for the Trust Fund and the Investors. Until 1995, the Management
Company received approximately 0.50% of the Trust Fund's average net assets, per
annum, in exchange for its investment management services; at the 1995 annual
meeting, the Investors approved an increase of 0.10% per annum in the Management
Company's investment advisory fee.
Pursuant to Section 3 of the Investment Advisory Agreement and Article V,
Section 3 of the Restated Trust Agreement, the Trust Fund reimburses the
Management Company for certain expenses relating to the operation of the Trust
Fund, including, but not limited to, the Trust Fund's legal and auditing fees,
trustee's fees, taxes, directors' fees and the printing and mailing costs of
materials sent to Investors, as well as reimbursement of the Trust Fund's pro
rata share of overhead costs, including
9
salaries, employee benefits, rent and data processing costs. The Trust Fund's
pro rata share of such expenses ranges from 50% to 90%. In 1995, the Management
Company received $3,039,425 for investment advisory services (approximately
0.60% of average net assets), and $2,283,029 for expense reimbursement
(approximately 0.43% of average net assets); accordingly, total fund management
expense in 1995 constituted approximately 1.03% of the Trust Fund's average net
assets.
At its meeting on February 9, 1996, the Board of Directors considered a
proposal from the Management Company to modify the current compensation and
reimbursement arrangement between the Trust Fund and the Management Company to
provide for (i) the elimination of the expense reimbursement component, and (ii)
the implementation of an all-inclusive management fee of 1.25% of average net
assets, per annum.
DISCUSSION OF THE FEE PROPOSAL
Since the Trust Fund's inception, the Management Company has been primarily
responsible not only for the provision of investment advice and associated
portfolio management services, but also for all of the administrative functions
associated with investor service, including the provision of transfer agency
services to the Trust Fund and its Investors. The Management Company also
provides custody and certain fund accounting services to the Trust Fund for the
benefit of the Investors and, where certain services are not provided directly
to the Trust Fund and the Investors (such as legal and accounting services), the
Management Company undertakes to ensure that the Trust Fund and the Investors
receive services of the highest quality at competitive cost.
In the past few years, the Trust Fund has experienced significant growth in
the Trust Fund's assets. In addition, the increasing sophistication of the
financial markets have required that the Management Company undertake a major
upgrading of both its data processing capabilities and its investment advisory
and portfolio management services. The Board of Directors believes, however,
that the current compensation and reimbursement structure exposes the Trust Fund
to certain risks. First, to the extent that an investment advisory fee of
approximately 0.60% of net assets is determined by the Management Company to be
non-competitive, the Management Company at some point may no longer wish to
provide investment advisory services to the Trust Fund and the Investors.
Second, to the extent that the Trust Fund has agreed to provide reimbursement
for certain expenses, the Management Company has little or no incentive to
control its costs. Although for the last ten years expenses have ranged from
0.94% to 1.10% of average net assets, there is no assurance that the Management
Company will be able to continue to keep reimbursable expenses low.
Fee and reimbursement structures such as those between the Management
Company and the Trust Fund have become increasingly less common in the mutual
fund industry, having been replaced by flat fee arrangements which require fund
managers to provide contractually set levels of service, both management and
investment advisory. The advantages to the Trust Fund and the Investors are (i)
the expectation that the Management Company will continue to provide services
to the Trust Fund and the Investors, (ii) the security of being able to predict,
in advance and with precision, substantially all costs and expenses to which the
Trust Fund will be subject, (iii) the assurance that the expenses of
administration, including transfer agent and custodial service expenses, will be
borne exclusively by the Management Company, without pass-through to the Trust
Fund, and (iv) the benefits of improved operating efficiencies at the Management
Company.
The directors, in considering the Management Company's proposal, considered
the nature, scope and quality of the services currently provided by the
Management Company to the Trust Fund, and the
10
enhanced levels of services and products projected by the Management Company to
be made available to the Investors, including the anticipated introduction of
several new investment fund opportunities in 1996 and 1997. The Board of
Directors also considered the Management Company's actual costs and cost
projections for making available additional services and fund opportunities,
including substantial ongoing investments required to upgrade the Management
Company's information systems, the need for additional professional and non-
professional personnel, registration of the Underwriter for purposes of offering
and selling the Trust Fund's investment units for sale in additional states, and
the implementation of an enhanced marketing effort. The compensation paid to
investment advisors of mutual funds with similar investment objectives, policies
and asset sizes, as well as comparative expense and performance information,
both actual and pro forma, was also considered. The directors who are not
interested persons, by vote at their meeting on February 9, 1996, have
unanimously approved the amendments as proposed, based upon their determination
that, should the Management Company implement the strategic growth plan
described above, including the hoped-for introduction of new investment fund
opportunities in 1996 and 1997, the proposed terms of the Investment Advisory
Agreement are fair and equitable, and that the fees and expenses provided
therein provide fair and reasonable compensation for services to be rendered to
the Investors and the Trust Fund. Quarterly reports will be provided by the
Management Company to the Audit Committee to ensure both that the Management
Company is implementing the strategic growth plans outlined above, and that
there is no financial condition of the Management Company that is reasonably
likely to impact the financial ability of the Management Company to fulfill its
commitment to the Trust Fund under the Investment Advisory Agreement, as
amended.
PROPOSED AMENDMENTS TO THE INVESTMENT ADVISORY AGREEMENT AND THE RESTATED
TRUST AGREEMENT
Implementation of the all-inclusive management fee described above requires
approval by the Investors of certain amendments to the Investment Advisory
Agreement and the Restated Trust Agreement. The following summary, which
describes the relevant portions of the proposed amendments, is qualified in its
entirety by reference to the text of the proposed amendments, copies of which
are attached to this Proxy Statement as Exhibits B and D.
With respect to the Investment Advisory Agreement, the proposed amendment
would eliminate the current expense reimbursement component in favor of an
arrangement whereby the Management Company would receive an annual fee equal to
1.25% of the Trust Fund's average net assets. Such annual fee would encompass
the investment advisory fee paid to the Management Company, all transfer agency
and Trustee's fees and costs, and substantially all miscellaneous costs and
expenses related to the operation of the Trust Fund paid by the Management
Company on behalf of the Trust Fund. If the actual expenses paid by the
Management Company on behalf of the Trust Fund exceed the amount of the fee,
then the Management Company would not be entitled to any further payment from
the Trust Fund. Conversely, if the actual expenses paid by the Management
Company on behalf of the Trust Fund are less than the amount of the fee, then
the Management Company would not be required to refund the difference to the
Trust Fund.
The Restated Trust Agreement is proposed to be amended to be consistent
with the proposed amendment to the Investment Advisory Agreement with respect to
the implementation of the all-inclusive management fee arrangement.
11
FEE COMPARISON
The following table compares the current fees and expenses as of December
31, 1995, including investment advisory fees, on a pro forma basis to those fees
which would have been paid by the Trust Fund if the amendments discussed above
had been approved on such date. In addition, the example following the table
illustrates the effect of the proposed all-inclusive fee arrangement for one,
three, five and ten year periods. The purpose of the table and examples is to
assist an Investor in understanding the various costs and expenses that an
Investor in the Trust Fund would bear directly or indirectly. Dollar figures
have been rounded to the nearest dollar and all percentages to the nearest
hundredth of one percent.
- ------------------------------------------------------------------------------------------------
Total Expenses for the year
ended
December 31, 1995
-----------------
Fee Rate
--------
Actual Pro Forma Actual Pro Forma
------ --------- ------ ---------
- ------------------------------------------------------------------------------------------------
INVESTOR TRANSACTION EXPENSES (1)
Maximum Sales Load on Purchases 5.0% 5.0% $1,452,138 $1,452,138
(percentage of offering price) ---------- ----------
---------- ----------
- ------------------------------------------------------------------------------------------------
ANNUAL TRUST FUND OPERATING EXPENSES (2)
(percentage of average net assets)
Management Fees 0.60% 1.25% $3,039,425 $6,449,254
- ------------------------------------------------------------------------------------------------
Other Expenses 0.43% -0- 2,283,029 -0-
- ------------------------------------------------------------------------------------------------
Total Fund Operating Expenses 1.03% 1.25% $5,322,454 $6,449,254
---------- ----------
---------- ----------
- ------------------------------------------------------------------------------------------------
- --------------------
(1) Does not include any Rule 12b-1 charges because this fee would not be
levied upon current Investors, see discussion below in Proposal Five.
(2) Fees and expenses are billed monthly, in arrears.
Example (1) 1 year 3 years 5 years 10 years
------------ ------ ------- ------- --------
You would pay the
following expenses
on a $1,000 investment,
assuming (i) 5% annual
return, and (ii) redemption $62.10 $87.67 $115.20 $193.57
at the end of each time
period (no premium or
other charge is assessed
on redemptions)
- --------------------
(1) The return of 5% and expenses should not be considered representative of
past or future performance or expenses, both of which may vary.
REQUIRED VOTE AND RECOMMENDATION OF THE BOARD OF DIRECTORS
The amendments to the Investment Advisory Agreement and the Restated Trust
Agreement require the approval of the lesser of (i) 67% or more in interest of
the Investors represented at such a
12
meeting at which more than 50% in interest of the Investors are represented,
either in person or by proxy, or (ii) more than 50% in interest of all
Investors. The Board of Directors believes that continuation of the current
Investment Advisory Agreement, as amended, is in the best interests of the
Investors and the Trust Fund; accordingly, the Board of Directors recommends a
vote "FOR" the continuation of the Investment Advisory Agreement, as amended,
with conforming amendments to the Restated Trust Agreement
-----------
PROPOSAL FOUR
ALTERNATE PROPOSAL TO APPROVE THE CONTINUATION
OF THE INVESTMENT ADVISORY AGREEMENT
If the proposed amendments to the Investment Advisory Agreement, described
in the preceding proposal, do not receive the necessary Investor approval, the
Board of Directors is recommending that the Investors approve the continuation
of the current Investment Advisory Agreement with the Management Company. Such
continuation requires only (1) the annual approval of a majority of the
Directors of the Trust Fund who are neither parties to the Investment Advisory
Agreement nor interested persons of any such party, and (2) the approval of
either (a) the full Board of Directors of the Trust Fund, or (b) the vote of a
majority in interest of the Investors at their annual meeting, which is defined
as the lesser of (i) 67% or more in interest of the Investors represented at
such a meeting at which more than 50% in interest of the Investors are
represented, either in person or by proxy, or (ii) more than 50% in interest of
all Investors. On February 9, 1996, the Board of Directors of the Trust Fund
unanimously approved the continuation of the current Investment Advisory
Agreement if the amendments discussed above are not adopted by the Investors.
Although such Board approval satisfies the previously described approval
requirement, consistent with the representation to the Investors in the 1995
Proxy Statement, continuation of the Investment Advisory Agreement is being
submitted for Investor approval at the Meeting.
If for any reason Investors at the Meeting were not to approve the
continuation of the Investment Advisory Agreement, the Trust Fund would seek
either to renegotiate such agreement with the Management Company or to obtain
investment advisory services from a competent firm at rates of compensation
within the limits provided by the Restated Trust Agreement. The Investment
Advisory Agreement is terminable prior to its automatic expiration date upon
sixty (60) days' written notice, by vote of a majority of the Directors of the
Trust Fund, or by vote of a majority in interest of the Investors. The
Investment Advisory Agreement is not assignable.
The Board of Directors believes that, if the amendments described in
Proposal Three are not adopted by the Investors, continuation of the current
Investment Advisory Agreement is in the best interests of the Investors and the
Trust Fund; accordingly, the Board of Directors recommends a vote "FOR" the
continuation of the Investment Advisory Agreement.
13
-----------
PROPOSAL FIVE
PROPOSAL TO AMEND EACH OF THE RESTATED TRUST AGREEMENT,
THE INVESTMENT ADVISORY AGREEMENT AND
THE UNDERWRITING AGREEMENT TO PERMIT THE ESTABLISHMENT OF A
MULTIPLE CLASS STRUCTURE AND, IN CONNECTION THEREWITH, TO
ADOPT A DISTRIBUTION PLAN PURSUANT TO RULE 12B-1
The Board of Directors continuously reviews the benefits and features that
the Trust Fund offers to Investors with the objective of providing, in as cost
effective a manner as possible, services and marketing strategies that are
responsive to the needs and circumstances of existing and potential Investors.
In order to meet ever-increasing competition within the mutual fund industry for
investment assets and changing trends in pricing structures for funds
distributed through broker-dealer networks, the Board of Directors has concluded
that it would be in the best interests of the Investors for the Restated Trust
Agreement to be amended to permit the issuance of different classes of
investment units (the "Multiple Class Structure"). Accordingly, on February 9,
1996, the Board of Directors authorized the creation of the Multiple Class
Structure, subject to the approval by the Investors at the Meeting of the
necessary amendments to the Investment Advisory Agreement, the Underwriting
Agreement and the Restated Trust Agreement. It is important to note, however,
that neither the adoption of the Multiple Class Structure nor the creation of
additional classes of investment interests will have any effect on the rights
and privileges of the investment interests represented by the Participating
Agreements now outstanding or those which would be outstanding at such time as
the Trust Fund begins offering different classes of interests, and that current
Investors will continue to be able to purchase additional investment units of
the same character as those now held.
DISCUSSION OF THE MULTIPLE CLASS STRUCTURE
The Board of Directors believes that the adoption of the Multiple Class
Structure will encourage investors with a broader range of investment objectives
to consider investment in the Trust Fund. The Multiple Class Structure offers
the Board of Directors the flexibility of tailoring payment for investment
interests to the needs and circumstances of different classes of investors, as
well as broker-dealers, financial institutions and other organizations, such as
pension and profit-sharing plans.
Implementation of a Multiple Class Structure is subject to a number of
conditions. These include approval by the shareholders to certain changes in
the Investment Advisory Agreement, the Underwriting Agreement and the Restated
Trust Agreement (the proposed amendments are reproduced in their entirety in
Exhibits B, C and D, respectively, attached hereto), obtaining an appropriate
ruling from the Internal Revenue Service, if necessary, that implementation of
the Multiple Class Structure will not affect the Trust Fund's status as a
regulated investment company under the applicable provisions of the Internal
Revenue Code of 1986, as amended, and the filing and effectiveness of a new
registration statement with the Securities and Exchange Commission and various
state securities authorities, which registration statement will register
interests in any new class or classes for offer and sale. While it is
anticipated that each of these conditions can and will be met there can be no
assurance that this will be the case.
PROPOSED AMENDMENTS
As stated above, implementation of the Multiple Class Structure requires
approval by the Investors of certain amendments to the Investment Advisory
Agreement, the Underwriting Agreement
14
and the Restated Trust Agreement. The following summary, which describes the
relevant portions of the proposed amendments, is qualified in its entirety by
reference to the text of the proposed amendments, copies of which are attached
to this Proxy Statement as Exhibits B, C and D, respectively.
With respect to the Restated Trust Agreement, the proposed amendment would
permit multiple classes of investment units in the Trust Fund (subject to future
approvals, if required) and specifically creates two classes of investment
units: "Class I Units" and "Class II Units." Class I Units are those investment
units of the Trust Fund created prior to the commencement of the issuance and
sale of the Class II Units, as well as similar investment units which may be
sold hereafter. Current holders of Class I Units will continue to be able to
purchase additional Class I Units.
Class II Units are similar in all respects to the Class I Units with one
exception: Class II Units will be subject to a Rule 12b-1 fee in addition to the
same front-end load as Class I Units. After the commencement of the sale of
Class II Units, new investors in the Trust Fund (excepting the limited class of
persons described in the following paragraph) will only be permitted to purchase
Class II Units. Class I Units, Class II Units and any other class of investment
units subsequently created have equal voting rights and will vote together
except in cases where a separate vote of any particular class is required under
applicable law or upon a determination by the Board of Directors that a class's
interests are not affected and that no separate vote of such class is required.
Funds attributable to Class I Units and Class II Units will be co-mingled and
co-invested in the Trust Fund's portfolio. Liabilities solely attributable to a
particular class of investment units will be charged against the assets of the
Trust Fund attributable to that class. Otherwise, liabilities are charged
against each class in the proportion that the net assets of the class bear to
the total net assets of the Trust Fund. Income, capital gains and losses and
other expenses are allocated in the proportion that the net assets of the class
bear to the total net assets of the Trust Fund. Numerous conforming changes
have been made to reflect the creation of two classes of investment units in the
Trust Fund.
In addition, the Restated Trust Agreement is proposed to be amended to make
certain conforming changes to reflect (i) the Trust Fund's reduction of its
sales charges effective April 1, 1995 (which amendment was approved by the
Investors at the 1995 annual meeting), and the elimination of sales charges for
Class I Units for a limited class of purchasers, namely directors, officers and
bona fide full time employees and sales representatives of the Trust Fund and
the Management Company, registered broker-dealers, their registered
representatives and the immediate family members of the foregoing persons. In
addition, the right of accumulation would be clarified to permit aggregation of
all accounts under an Investor's client identification number (including
retirement plans and business accounts) for purposes of meeting the sales charge
breakpoints.
The proposed amendments to the Investment Advisory Agreement make minor
clarifying changes to reflect the creation of two classes of investment units in
the Trust Fund.
The Underwriting Agreement is proposed to be amended to be consistent with
the proposed amendments to the Restated Trust Agreement with respect to the
elimination of the sales charge for a limited class of purchasers and the
clarification of the right of accumulation with respect to sales charge
breakpoints, for which Investor approval is not required.
PROPOSED DISTRIBUTION OF CLASS II UNITS SUBJECT TO RULE 12B-1 CHARGES
It is anticipated that the Trust Fund initially will offer two classes of
units: (1) Participating Agreements of the same character as are now outstanding
(the "Class I Units"), and (2) Participating
15
Agreements which will be subject to a sales and distribution charge assessed
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended
("Class II Units"). Rule 12b-1 permits the Trust Fund, as a registered open-end
investment company, to bear expenses relating to the distribution of its shares
only pursuant to a written plan that has been approved by the Trust Fund's Board
of Directors and its Investors. The Rule 12b-1 plan attached to this Proxy
Statement as Exhibit E (the "Rule 12b-1 Plan"), was approved by a majority of
the non-"interested" directors of the Board of Directors on February 9, 1996,
and is being proposed for adoption by the Investors.
Given the reluctance among many in the broker-dealer community to continue
to make available to their customers for sale mutual fund interests that are not
priced in such a way as to provide ongoing compensation to such broker-dealers
for the distribution of fund interests, the Board of Directors believes that the
adoption of the Rule 12b-1 Plan will enhance the selling of Trust Fund interests
by providing ongoing compensation to dealers, and thereby providing an added
incentive to continue to sell investment units and maintain investments in the
Trust Fund.
CONSIDERATION BY THE BOARD OF DIRECTORS
In connection with its consideration of the proposed Rule 12b-1 Plan, the
Board of Directors of the Trust Fund was furnished with drafts of the Plan and
related materials, including information relating to the advantages and
disadvantages of Rule 12b-1 plans currently being used in the mutual fund
industry. Legal counsel for the Trust Fund provided additional information,
summarized the provisions of the proposed Rule 12b-1 Plan and have informed the
Board of Directors of the legal and regulatory considerations in adopting the
Rule 12b-1 Plan.
The Board of Directors realizes that there can be no assurance that the
expenditure of Trust Fund assets to finance the distribution of Class II Units
will have the anticipated results; however, based upon its review of the
available information and the factors discussed above, and in light of its
fiduciary duties under relevant state law and the Investment Company Act of
1940, as amended, the Board of Directors has determined, in the exercise of its
business judgment, that the Rule 12b-1 Plan is reasonably likely to benefit the
Trust Fund and the Investors. As noted above, because distributors of units in
the Trust Fund have little or no incentive to incur promotional expenses on
behalf of the Trust Fund if a Rule 12b-1 plan were not in place, the Board of
Directors believes that adoption of the Rule 12b-1 Plan is important to the
long-term viability of the Trust Fund. In addition, the adoption of the Rule
12b-1 Plan may lead to an increase in net assets under management, given the
enhanced marketing efforts of distributors that may be expected to result from
the availability of such additional compensation.
DESCRIPTION OF THE PROPOSED RULE 12B-1 PLAN
The proposed Rule 12b-1 Plan provides that the Trust Fund shall reimburse
the Management Company, in its capacity as the principal underwriter of the
Trust Fund's investment interests, for its distribution costs in an amount equal
to 0.25% per annum of the average daily net assets of the Trust Fund's Class II
Units. Under the terms of the Rule 12b-1 Plan, the Management Company is
authorized and intends to pay all or a portion of this fee to any securities
dealer, financial institution or any other person who renders assistance in
distributing or promoting the sale of the Class II Units. To the extent that
such fee is not paid to such persons, the Management Company may retain such fee
as reimbursement for its own distribution expenses incurred in connection with
the sale of the Class II Units. In each case where the Management Company
agrees to pay a distribution fee to a person, such payment shall only be
pursuant to a written agreement between the Management Company and such person
(the "Rule 12b-1 Plan Agreement"), the form of which is attached as Appendix A
to Exhibit E.
16
The form of the Rule 12b-1 Plan Agreement has been approved by a majority of the
non-"interested" directors of the Trust Fund's Board of Directors in connection
with their approval of the Rule 12b-1 Plan. If the Rule 12b-1 Plan is approved,
the Management Company may enter into Rule 12b-1 Plan Agreements with such
persons without further approval.
Payment of the distribution fee is to be made quarterly, as soon as
practicable following the preparation of a written report from the Management
Company to the Board of Directors of the Trust Fund of all amounts expensed
pursuant to the Rule 12b-1 Plan; provided, however, that the aggregate payments
by the Trust Fund under the Rule 12b-1 Plan in any month shall not exceed
0.020833% (0.25% on an annualized basis) of the average daily net assets of the
Class II Interests for the prior month; thus, the Rule 12b-1 Plan does not
provide for the payment of distribution fees in subsequent periods that relate
to expenses incurred in prior periods.
The Rule 12b-1 Plan and any related Rule 12b-1 Plan Agreement will continue
in effect for so long as its continuance is specifically approved at least
annually by majority of the non-"interested" directors of the Board of Directors
of the Trust Fund. The Rule 12b-1 Plan is terminable at any time, without
penalty, by vote of a majority of the non-"interested" directors of the Board of
Directors of the Trust Fund, or by vote of a majority of the outstanding voting
securities of the Trust Fund.
REQUIRED VOTE & RECOMMENDATION OF THE BOARD OF DIRECTORS
Adoption of the Multiple Class Structure and creation of Class II Units,
with associated adoption of the proposed Rule 12b-1 Plan, requires the
affirmative vote of a majority in interest of the Investors at the Meeting,
which is defined as the lesser of (i) 67% or more in interest of the Investors
represented at such a meeting at which more than 50% in interest of the
Investors are represented, either in person or by proxy, or (ii) more than 50%
in interest of all Investors. If the proposal is approved, it will go into
effect, and Class II Units may be offered for sale, on or after May 1, 1996.
The Board of Directors recommends a vote "FOR" the adoption of the Multiple
Class Structure and the adoption of the Rule 12b-1 Plan, as presented.
-----------
PROPOSAL SIX
PROPOSAL TO AMEND THE TRUST FUND'S INVESTMENT POLICIES
TO PERMIT THE TRUST FUND TO WRITE COVERED PUT OPTIONS IN AN
AMOUNT UP TO 10% OF THE TRUST FUND'S NET ASSETS, AND TO WRITE
COVERED CALL OPTIONS IN AN AMOUNT UP TO 25% OF THE
TRUST FUND'S NET ASSETS
The Board of Directors is also seeking Investor approval for an amendment
to the Trust Fund's fundamental investment policies with respect to the Trust
Fund's ability to write covered 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 to sell specific securities held in the
Trust Fund's investment portfolio.
17
The Trust Fund's investment policies require that the Trust Fund, so long
as it remains obligated as a writer of an option, maintain in a segregated
account, 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 put
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. It is also a fundamental investment policy that the Trust Fund will
not write options where (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) will not at any time exceed 10% of the value of the
net assets of the Trust Fund, and (ii) the nominal value of the Trust Fund's
unexpired call options together with the obligations underlying all unexpired
put options, will not at any time exceed 25% of the value of the net assets of
the Trust Fund.
The Trust Fund's portfolio managers have recommended to the Board of
Directors that the Trust Fund be empowered (i) to sell covered put options in an
amount up to 10% of the value of its net assets, and (ii) to sell covered call
options in an amount up to 25% of the value of its net assets. Thus, the effect
of the change, if adopted, would be to permit the Trust Fund's portfolio
managers to unlink the current limitation on the Trust Fund's put and call
option positions, provided that the total amount of such positions would, at no
time, exceed 35% of the Trust Fund's net assets.
The Board of Directors believes that the risks associated with the increase
in the Trust Fund's ability to write covered put and call options from 25% to
35%, as limited by the applicable regulatory requirements and by the Board's own
restrictions and oversight of the portfolio managers' performance, are
acceptable in light of the potential to generate additional investment income
for the Trust Fund from option premiums. Accordingly, the Board of Directors
recommends a vote "FOR" the adoption of the proposed modification to the Trust
Fund's fundamental investment policies to permit the Trust Fund to write covered
put options in an amount up to 10% of the Trust Fund's net assets, and to permit
the Trust Fund to write covered call options in an amount up to 25% of the Trust
Fund's net assets.
-----------
GENERAL INFORMATION
The Board of Directors of the Trust Fund knows of no other matters which
may come before the meeting. However, if any matters other than those referred
to above shall properly come before the meeting, it is the intention of the
persons named in the enclosed Proxy to vote the Proxy in accordance with their
judgment. Investors' proposals intended to be presented at next year's annual
meeting of Investors must be received by the Trust Fund by October 25, 1996 to
be eligible for inclusion in the Trust Fund's proxy materials relating to such
meeting. Submission of a proposal does not guarantee its inclusion in a proxy
statement or its presentation at an Investor's meeting. A copy of the annual
report for the fiscal year ended December 31, 1995 is enclosed. The annual
report will also be furnished without charge to any Investor upon request by
calling the Management Company at 1-800-231-0356.
By order of the Board of Directors of
SIFE Trust Fund
Charles W. Froehlich, Jr.
SECRETARY
TIMPSON GARCIA
CERTIFIED PUBLIC ACCOUNTANTS
[Letterhead]
EXHIBIT A
January 22, 1996
Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D. C. 20549
RE: CHANGE IN AUDITORS - SIFE Trust Fund
Dear Sirs:
We have received a letter from SIFE Management Company for SIFE Trust Fund,
dated January 19, 1996, terminating our services effictive for the annual audit
for the 1996 calendar year. We are in agreement with the statements that no
problem existed during the two most recent fiscal years and for the period from
January 1, 1996 through January 19, 1996 preceding the termination relating to
any matter of accounting priciples or practices, financial statement disclosure,
auditing scope or procedure, or compliance with applicable rules of the
Commission, nor were any accountant's reports on their financial statements for
the past two years contained an adverse opinion or a disclaimer of opinion or
was qualified as to uncertainties, audit scope or accounting priciples. We are
currently auditing the financial statements for the 1995 calendar year and have
not experienced any problems of the above mentioned nature nor do we anticipate
any.
Please accept this as our response to the above mentioned letter pursuant to
Rule 17a-5(f)(4).
If there are any questions, please contact Mr. Dennis S. Kaneshiro.
Sincerely,
/s/Timpson Garcia
Timpson Garcia
cc: Mr. Robert Linderman, General Counsel
SIFE, Inc.
EXHIBIT B
AMENDMENT TO INVESTMENT ADVISORY AGREEMENT
THIS AMENDMENT TO INVESTMENT ADVISORY AGREEMENT ("Amendment") is made and
entered into as of the first day of April, 1996, by and between SIFE TRUST FUND,
a trust established under the laws of the State of California (the "Fund") and
SIFE, a California corporation (the "Company"), as approved by BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association duly
organized and existing under and by virtue of the laws of the United States
(the "Trustee"), and by the holders of a majority in interest of Participating
Agreements representing beneficial interests in the Fund, at a regular annual
meeting of Investors duly called and held on April 1, 1996, at which a quorum
was at all times present.
WITNESSETH:
WHEREAS, the parties (including the Trustee's predecessors-in-interest)
have previously entered into an Investment Advisory Agreement dated April 3,
1972 and amended on April 3, 1995 (the "Advisory Agreement") under which the
Company acts as investment adviser of the Fund;
WHEREAS, the Fund, pursuant to an Amendment to Restated Trust Agreement of
even date herewith, has created two classes of investment units in the Fund
designated as "Class I Units" and "Class II Units" and may create additional
classes of investment units in the future;
WHEREAS, the parties agree that it is in the best interests of the Fund and
its Investors to clarify and confirm the Advisory Agreement in light of the new
classifications of Class I Units and Class II Units;
WHEREAS, the parties agree that it is in the best interests of the Fund and
its Investors to adopt a flat fee to be paid to the Company as reimbursement for
costs and expenses incurred by the Company in its capacity as the Fund's
investment adviser; and
WHEREAS, it is necessary to amend the Advisory Agreement to accomplish the
foregoing.
NOW, THEREFORE, the parties hereby agree as follows:
1. Subsection (c) of Section 1 of the Advisory Agreement shall be amended
to read as follows:
"1. APPOINTMENT OF THE COMPANY AS INVESTMENT ADVISER.
(c) PORTFOLIO SERVICING. The Company shall perform those services
which are reasonably necessary to the continued management of the portfolio
of the Fund, including the receipt and filing of notices and reports from
portfolio companies; the exercise or other proper disposition of proxies,
rights and options; the accounting for receipts and disbursements
occasioned by the purchase and sales of securities; the daily pricing of
the net asset value of the Fund's total portfolio attributable to each and
every type of investment unit in the Fund."
2. Sections 2 and 3 of the Advisory Agreement shall be deleted in their
entirety, and a new Section 2A shall be inserted to read in its entirety as
follows:
B-1
"2A. MANAGEMENT FEE
The Company will receive a fee for its services as business manager
of, and investment adviser to, the Fund equal to 1.25% of the average net
assets of the Fund, per annum (hereinafter the "Management Fee"). On the
first business day of each calendar month, the Company will make a good-
faith estimate of the Fund's average net assets for the preceding month,
and shall present such estimate to the Fund, which shall promptly pay such
amount to the Company; PROVIDED, however, that in no event may the total of
all amounts paid to the Company pursuant to this Section 2A attributable to
any calendar year exceed 1.25% of the Fund's average net assets for such
calendar year. The Management Fee set forth in this Section 2A shall
constitute the Company's sole and exclusive compensation for all investment
advisory services rendered pursuant to this Investment Advisory Agreement,
including (i) all fees payable to the Trustee for its services, and (ii)
all other costs and expenses of the Fund, as described in Article V,
Section 3 of the Trust Agreement, which may be paid on behalf of the Fund
by the Company. In the event the Fund pays the Company more than it is
obligated to pursuant to this Section 2A or pays the Company less than it
is obligated to pursuant to this Section 2A, the Company shall be paid or
shall refund the difference, as the case may be, in the calculation
performed for the following month.
3. All other provisions of the Advisory Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have duly executed and approved this
Amendment to the Advisory Agreement as of the date first above written.
SIFE TRUST FUND SIFE
By By
----------------------------------- -------------------------------------
Chairman of the Board President
By By
----------------------------------- -------------------------------------
Secretary Secretary
Approved by Investors:
Approved by Trustee:
BANK OF AMERICA, N.T. & S.A. I hereby certify that the holders of a
majority in interest of Participating
By Agreements representing beneficial
---------------------------------- interests in SIFE Trust Fund, at a
Vice President regular annual meeting of Investors
duly called and held on April 1, 1996,
at which a quorum was at all times
present in person or by proxy, approved
the above amendment.
By By
---------------------------------- -------------------------------------
Trust Officer Secretary, SIFE Trust Fund
B-2
EXHIBIT C
AMENDMENT TO RESTATED UNDERWRITING AGREEMENT
THIS AMENDMENT TO RESTATED UNDERWRITING AGREEMENT ("Amendment") is made and
entered into as of this first day of April, 1996, by and between SIFE TRUST
FUND, a trust established under the laws of the State of California (the "Fund")
and SIFE, a California corporation (the "Company"), as approved by BANK OF
AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association
duly organized and existing under and by virtue of the laws of the United States
(the "Trustee") and by the holders of a majority in interest of Participating
Agreements representing beneficial interests in the Fund at a regular annual
meeting of Investors duly called and held on April 1, 1996, at which a quorum
was at all times present.
WITNESSETH:
WHEREAS, the parties have previously entered into an Underwriting Agreement
dated April 3, 1972 and amended April 1, 1974, April 1, 1976, April 1, 1985,
April 2, 1990, February 24, 1993, April 1, 1993, April 4, 1994, February 1, 1995
and February 9, 1996 (the "Underwriting Agreement") under which the Company acts
as the principal underwriter and distributor of the securities of the Fund;
WHEREAS, the Fund, pursuant to an Amendment to Restated Trust Agreement of
even date herewith, has created a new class of investment "units" in the Fund
designated as "Class II Units";
WHEREAS, the parties agree that it is in the best interests of the Fund and
its Investors to clarify and confirm that the Sales Charge applies to
Participating Agreements for Class II Units;
WHEREAS, the parties agree that it is in the best interests of the Fund and
its Investors to eliminate the Sales Charge applicable to (i) directors,
officers, employees and sales representatives of the Fund and the Company (and
their immediate family members) and (ii) registered broker-dealers (and their
registered representatives) (and the immediate family members of such broker-
dealers and representatives) purchasing Class I Units; and
WHEREAS, it is necessary to amend the Underwriting Agreement to accomplish
all of the foregoing.
NOW, THEREFORE, the parties hereby agree as follows:
l. Article 2 of the Underwriting Agreement shall be amended to read in
its entirety as follows:
2. COMPENSATION. The percentage of the offering price of each
Participating Agreement for Class I Units and Class II Units to be paid to
the Company hereunder as a sales and creation fee (the "Sales Charge")
shall be as follows: (1) 5.0% of the offering price on purchases up to
$99,999, (2) 4.0% of the offering price on purchases of $100,000 to
$249,999, (3) 3.0% of the offering price on purchases of $250,000 to
$499,999, (4) 2.5% of the offering price on purchases of $500,000 to
$999,999, and no Sales Charge for purchases of $1,000,000 or more; provided
that in computing the amount of the purchase made by an Investor for the
purpose of determining the Sales Charge applicable to his purchase, there
shall be included the aggregate value of all investment units previously
purchased or acquired and then owned by such
C-1
Investor in addition to the investment units being purchased and on which
the Sales Charge is to be calculated. For purposes of this paragraph only,
the term "Investor" shall include (i) the spouse and natural children or
legally adopted children under the age of 21 of such Investor, and (ii)
Keogh plans, retirement plans, IRAs, SEP IRAs, and trust and business
accounts owned by such Investor, provided that (x) such Investor can
provide satisfactory documentation that no persons other than the
individuals listed in (i) above have an ownership right in the subject
Investor account, and (y) the subject Investor account tax identification
number is consistent with the above provisions. The value of the
investment units previously purchased or acquired shall, for the purposes
of this Article, be computed at the actual offering price at which such
units were purchased.
The entire Sales Charge, as computed above, shall be paid to and
retained by the Company as its sales commission and as compensation to the
Company for its functions as Sales Agent. The Company shall make such
compensation arrangements with its sales agents, whether employees or
independent contractors, as it may deem appropriate, under the terms of
which a portion or all of the Sales Charge shall be paid to the sales agent
as his commission. The Fund shall not be concerned with the nature of such
compensation arrangements. Class I Units shall be sold on a uniform basis
at no Sales Charge (instead of the regular Sales Charges described above)
to (i) directors, officers, bona fide full-time employees and sales
representatives of the Trust Fund and the Company (and their immediate
family members) and (ii) registered broker-dealers (and their registered
representatives) who have entered into distribution agreements with the
Company (and the immediate family members of such broker-dealers); provided
such purchaser has acted in such capacity at least ninety (90) days prior
to the purchase. Such purchases shall be made only upon the written
assurance of the purchaser that the purchase is made for investment
purposes and that the Participating Agreement so acquired will not be
resold except through redemption by the Trust Fund.
The Sales Charge may be, but need not be, reduced from time to time.
Notwithstanding anything to the contrary in this Agreement, any reduction
of the Sales Charge shall not require Investor approval. Any reduction of
the Sales Charge must be approved by a majority of the directors of the
Fund who are not interested persons and by the Company. Immediately upon
such approval, this Article shall be amended to reflect the reduced Sales
Charge.
C-2
2. Every other provision of the Underwriting Agreement which makes
reference to Article 2 shall be deemed to be amended so as to make reference to
Article 2 as so amended. Capitalized terms used herein which are not defined
shall have the meanings ascribed to them in the Underwriting Agreement.
IN WITNESS WHEREOF, the parties have duly executed and approved this
Amendment to Underwriting Agreement as of the date first above written.
SIFE TRUST FUND SIFE
By By
------------------------------- -------------------------------
Chairman of the Board President
By By
------------------------------- -------------------------------
Secretary Secretary
Approved by Investors:
Approved by Trustee:
BANK OF AMERICA, N.T. & S.A. I hereby certify that the holders of a
majority in interest of Participating
By Agreements representing beneficial
------------------------------ interests in SIFE Trust Fund, at a regular
Vice President annual meeting of Investors duly called
and held on April 1, 1996, at which a
quorum was at all times present in person
or by proxy, approved the above amendment.
By By
------------------------------- -------------------------------
Trust Officer Secretary, SIFE Trust Fund
C-3
EXHIBIT D
AMENDMENT TO RESTATED TRUST AGREEMENT
THIS AMENDMENT TO RESTATED TRUST AGREEMENT ("Amendment") is made and
entered into as of the first day of April, 1996, by and between SIFE, a
California corporation (the "Company"), and BANK OF AMERICA, NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking association duly organized and existing
under and by virtue of the laws of the United States (the "Trustee"), as
approved by the holders of a majority in interest of Participating Agreements
representing beneficial interests in SIFE TRUST FUND, a trust established under
the laws of the State of California (the "Fund"), at a regular annual meeting of
Investors duly called and held on April 1, 1996, at which a quorum was at all
times present.
WITNESSETH:
WHEREAS, the parties (including the Trustee's predecessors-in-interest)
have previously entered into a Trust Agreement dated November 13, 1962, which
was recompiled and restated on May 2, 1986 to incorporate all previous
amendments and amended on April 1, 1987, April 2, 1990, April 1, 1991, February
24, 1993, April 1, 1993, April 4, 1994 and April 3, 1995 (the "Trust Agreement")
and under which the Trustee acts as trustee of the Fund;
WHEREAS, the parties agree that it is in the best interests of the Fund and
its Investors to authorize the Board of Directors to create from time to time a
new class or classes of investment "units" in the Fund, such class or classes to
have such terms as may be authorized by the Board of Directors from time to
time, subject to and in accordance with the Trust Agreement and the Investment
Company Act of 1940, the rules and regulations thereunder, and the
interpretations thereof, in each case as from time to time amended, modified or
superseded;
WHEREAS, the parties agree that it is in the best interests of the Fund and
its Investors to authorize the Board of Directors to designate the class of
investment units in the Fund presently outstanding as "Class I Units" and to
create a second class of investment units to be designated as "Class II Units;"
WHEREAS, the parties agree that it is in the best interests of the Fund and
its Investors to eliminate the Sales Charge applicable to (i) directors,
officers, employees and sales representatives of the Fund and the Company (and
their immediate family members) and (ii) registered broker-dealers (and their
registered representatives) (and the immediate family members of such broker-
dealers and representatives) purchasing Class I Units; and
WHEREAS, it is necessary to amend the Trust Agreement to accomplish all of
the foregoing.
NOW, THEREFORE, the parties hereby agree as follows:
D-1
1. Article I, Section 7 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article I, Section 7: PARTICIPATING AGREEMENT
The term "Participating Agreement" shall mean the individual agreement
made with each Investor under the terms of which the Investor's funds are
contributed to the Trust Fund and the Investor becomes a party to this
Trust Agreement. The term "Participating Agreement" shall collectively
refer to Participating Agreements for each and every class of investment
unit in the Fund, whether presently existing or hereafter created, unless
specifically stated otherwise."
2. Article I of the Trust Agreement shall be amended to add a new Section
11 which will read in its entirety as follows:
"Article I, Section 11: CLASS I UNITS
The term "Class I Units" shall mean the initial class of investment
units of the Fund arising under or in connection with Participating
Agreements purchased by Investors prior to May 1, 1996 (or such later date
as the Board of Directors of the Fund may determine to commence the sale
and distribution of Class II Units) (the "Class II Unit Commencement
Date"), together with investment units, which are designated as Class I
Units, purchased after the Class II Commencement Date by persons, firms or
corporations who were Investors immediately prior to the Class II
Commencement Date, or by the beneficiaries, transferees, successors and
assigns of such Investor's Class I Units, or by (i) directors, officers and
bona fide full time employees and sales representatives of the Fund and of
the Company (and their immediate family members) and (ii) registered
broker-dealers (and their registered representatives) who have entered into
distribution agreements with the Company (and the immediate family members
of such broker-dealers and registered representatives), provided such
purchaser has acted in such capacity at least ninety (90) days prior to the
purchase. For purposes of this paragraph only, "immediate family members"
shall mean the spouse (as determined in accordance with the laws of the
State of California from time to time), parents and natural children or
legally adopted children under the age of 21 of the individuals set forth
in (i) and (ii) of this Article I, Section 11."
3. Article I of the Trust Agreement shall be amended to add a new Section
12 which will read in its entirety as follows:
"Article I, Section 12: CLASS II UNITS
The term "Class II Units" shall mean the second class of investment
units of the Fund arising under or in connection with all Participating
Agreements purchased by Investors which class is being created by this
Amendment and which investment units are designated as Class II Units."
D-2
4. Article II, Section 1 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article II, Section 1: EXECUTION OF AGREEMENTS
An Investor may become a party to the Agreement and obtain the
benefits and burdens of all of its terms and conditions by executing a
Subscription for Participating Agreement for an investment unit in the Fund
and delivering the same to the Fund or an authorized agent thereof. The
Subscription for Participating Agreement shall thereupon be accepted by the
Fund and delivered to the Trustee for authentication and registration.
Upon receipt of such Subscription for Participating Agreement, the Trustee
shall issue a Certificate of Participating Agreement in respect of the
applicable class of investment unit in such form as may be adopted from
time to time by the Fund and the Trustee and shall thereupon send the
original Certificate of Participating Agreement to the Investor. Before
any Certificate of Participating Agreement shall be issued, the full amount
subscribed for in the Subscription for Participating Agreement shall have
been received by the Fund. Said amount shall be a minimum of $200.00 and
may be a sum equal to any even dollar amount above the sum of $200.00.
Subsequent contributions to a Participating Agreement may be made by an
Investor at any time in a sum equal to or above the sum of $50.00."
5. Article III, Section 3 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article III, Section 3: ACCOUNT FOR EACH INVESTOR
All securities purchased for the Trust Fund shall be held in the name
of the Trustee or its nominee. The Trustee shall keep an account for each
Investor, indicating and accounting for the undivided interest of each
Investor in respect of his investment units in the total securities of the
Fund. All credits to the account of the Investor shall conclusively be
deemed to be, and upon deposit shall become, additions to the Trust
principal. Such account shall be open for inspection to any Investor
during regular business hours of the Trustee."
6. Article IV of the Trust Agreement shall be amended to add a new
Section 1 which will read in its entirety as follows:
"Article IV, Section 1: UNIT CHARACTERISTICS
(a) Except as specified to the contrary herein, each investment
unit of the Fund shall represent the same interest in the Fund and shall
have the same preferences, privileges, voting powers and other rights and
obligations, limitations, restrictions and terms and conditions of
redemption and partial withdrawal, except that: (I) expenses related to the
distribution of any class of investment units or an arrangement for
shareholder services for any class of investment units shall be borne
solely by such class; (ii) the Class I Units shall be subject to a front-
end sales load as provided herein from time to time; (iii) the Class II
Units shall be subject to a front-end sales load as provided herein from
time to time and a Rule 12b-1 service, administrative or distribution fee
as adopted, amended and continued from time to time; and (iv) any
subsequently created class of investment units of the Fund shall be subject
to such front-end
D-3
sales loads, such 12b-1 service, administrative or distribution fees and/or
such contingent deferred sales charges or other charges as the Board of
Directors in its sole discretion may fix pursuant to Article VI, Section 1.
All units of a particular class shall represent an equal proportionate
interest in that class, and each unit of any particular class shall be
equal to each other unit of that class.
(b) On each matter submitted to a vote of the Investors, all
issued and outstanding investment units of each class of investment units
in the Fund shall vote together as a single class; PROVIDED, HOWEVER, that
(i) as to any matter with respect to which a separate vote of any class is
required by the Investment Company Act of 1940, the rules and regulations
thereunder, and the interpretations thereof, in each case as from time to
time amended, modified or superseded, including (without limitation)
matters related solely to a class' arrangement for services or the
distribution of units of such class or both and matters in which the
interests of one class differ from the interests of any other class, or by
the laws of the State of California, such requirement as to a separate vote
by that class shall apply in lieu of a combined vote of all classes as
described above; (ii) in the event that the separate vote requirements
referred to in subsection (b)(i) above apply with respect to one or more
classes, then subject to subsection (b)(iii) below, the units of all other
classes not entitled to a separate vote shall vote together as a single
class; and (iii) as to any matter which in the judgment of the Board of
Directors (which shall be conclusive) does not affect the interest of a
particular class, such class shall not be entitled to any vote and only the
holders of units of the one or more affected classes shall be entitled to
vote."
7. Sections 1, 2, 3, 4, 5, 6, 7 and 8 of Article IV of the Trust
Agreement are hereby renumbered as Sections 2, 3, 4, 5, 6, 7, 8 and 9,
respectively, and all references in the Trust Agreement to such Sections 1, 2,
3, 4, 5, 6, 7 and 8 are hereby amended to reflect such renumbering.
8. As renumbered pursuant to Paragraph 7 above, Article IV, Section 2 of
the Trust Agreement shall be amended to read in its entirety as follows:
"Article IV, Section 2: LIQUIDITY
The Investor may terminate or redeem his Participating Agreement
at any time without penalty or fee of any kind for such termination or
redemption. The value of the Investor's Participating Agreement at
termination will be his pro rata share (based on his investment units) of
the value of the net assets of the Trust Fund at that time as detailed
hereunder in Section 4 of this Article IV."
9. As renumbered pursuant to Paragraph 7 above, Article IV, Section 3 of
the Trust Agreement shall be amended to read in its entirety as follows:
"Article IV, Section 3: VALUATION OF TRUST FUND
The Trust Fund shall be evaluated by the Directors for all
purposes for which a total value of the Fund or an Investor's pro rata
share thereof, based on his investment units, is required, on each business
day. The time of evaluation for all assets shall be the time of closing
D-4
of the New York Stock Exchange. The basis for evaluation of the Trust Fund
assets shall be as follows: for securities which are listed, the closing
price on the Stock Exchange; for securities which are traded over the
counter and for which over-the-counter quotations are readily available,
the closing bid price; for securities for which market quotations are not
readily available, the Directors' good faith appraisal. The total value of
the Trust Fund assets shall be determined by taking the sum of the value of
the securities held by the Trust Fund and adding the actual value of all
other assets of the Trust Fund. From such total value of assets all
liabilities and necessary reserves shall be deducted and the balance
resulting shall be the total net asset value of the Fund. Mechanical
computation of the daily Fund value will be made by the Trustee upon
specific instructions, including instructions as to pricing, furnished by
the Directors. The Trustee shall not be responsible for the method of
pricing selected by the Directors, and shall incur no liability or
responsibility for errors or omissions in pricing or evaluation, provided
it acts in accordance with instructions from the Fund."
10. As renumbered pursuant to Paragraph 7 above, Article IV, Section 4 of
the Trust Agreement shall be amended to read in its entirety as follows:
"Article IV, Section 4: THE INVESTMENT UNIT - VALUATION OF ACCOUNTS
(a) All funds received by the Trustee for the issue or sale of
any investment unit in the Fund, together with all funds derived from any
investment and reinvestment thereof, shall irrevocably remain attributable
to that class of units for all purposes, subject only to the rights of
creditors, and shall be so recorded upon the books of the Fund. Such funds
and any funds derived from any investment and reinvestment are herein
referred to as "assets belonging to" that class. The assets belonging to
all classes of investment units in the Fund shall be invested in the same
investment portfolio of the Fund.
(b) Subject to Section 1 of this Article IV, the assets
belonging to any class of units shall be charged with the liabilities of
the Fund with respect to that class of units, if any, and with that class'
share of the liabilities of the Fund not attributable to any particular
class of units, if any, in the latter case in the proportion that the net
asset value of that class (determined without regard to such liabilities)
bears to the net asset value of all classes of the Fund's units (determined
without regard to such liabilities). The determination of the Board of
Directors shall be conclusive as to the allocation of liabilities,
including accrued expenses and reserves, and assets to a particular class
or classes.
(c) The allocation of income and capital gains and losses and
expenses (not allocated to a particular class of units pursuant to Article
IV, Section 1) of the Fund among all classes of the Fund's units shall be
determined by the Board of Directors in a manner that is consistent with
the Investment Company Act of 1940, the rules and regulations thereunder,
and the interpretations thereof, in each case as from time to time amended,
modified or superseded and in the proportion that the net asset value of
each class bears to the net asset value of all classes of the Fund's units.
The determination of the Board of Directors shall be conclusive as to the
allocation of income or capital gains and losses and expenses and assets to
a particular class or classes.
(d) All funds received by the Trustee for investment and all
funds reinvested from dividends and gains are accounted for by the Trustee
in terms of investment units, which
D-5
are designated as Class I Units, Class II Units or such other class of
investment units as may be subsequently created in accordance with this
Trust Agreement, as the case may be. The investment unit offering price
shall originally be equal to one dollar of capital invested by original
Investors in the initial offering. The unit value for investment units in
any class of the Fund's investment units shall be determined by dividing
the net asset value of the Fund allocable to that class by the total number
of investment units of that class outstanding. The initial unit value will
therefore be equal to the initial unit offering price less the creation fee
and such other expenses and charges as may be applicable upon the initial
contribution of assets to the Fund. The unit value will vary after the
initial investment of capital depending upon changes in the total value of
the Trust Assets belonging to each class of investment units, and the unit
offering price for each class, being the applicable unit value plus the
creation and initiation charges, will vary accordingly. As to each class
of units, amounts contributed by Investors subsequent to the initial
investment capital will be accounted for in units of investment at the per
unit offering price prevailing on the day of investment. The Trustee's
records will at all times reflect the units of investment held by an
Investor in each class of units, and the value of the Investor's total
account for each class of investment units at any time can be computed by
multiplying, for each such class of units held by the Investor, the total
number of such units held by an Investor by the then prevailing unit
value."
11. As renumbered pursuant to Paragraph 7 above, Article IV, Section 5 of
the Trust Agreement shall be amended to read in its entirety as follows:
"Article IV, Section 5: PARTIAL WITHDRAWAL
The Investor may withdraw in cash a portion of the value of his
Participating Agreement (determined in the manner set forth in Sections 3
and 4 above) by giving written notice to the Trustee of the amount so
desired to be withdrawn. Withdrawal may be made of any amount provided
that a minimum of $200.00 in the then present value of the account remains
for each Plan. Amounts so withdrawn from Participating Agreements may be
replaced without charge of Sales Charge, provided that the total amount
withdrawn is replaced in lump sums of not less than $50.00 each, and
further provided that said replacement payments are clearly identified as
replacements of capital previously withdrawn. An Investor may allocate any
replacement payment among any or all accounts listed for such Investor
under the client identification number maintained by the Company for such
Investor so long as such portion of any replacement payment allocated to
any particular account is in a lump sum of not less than $50.00. The
Trustee shall be empowered, however, to charge such fees upon partial
withdrawal and repayment as may be necessary and reasonable to cover the
actual bookkeeping and processing costs.
Payment of amounts withdrawn by Investors shall be made in cash within
three (3) days from the date or receipt by the Trustee of notice of partial
withdrawal, subject, however, to such postponements as are provided for in
Section 22(e) of the Investment Company Act of 1940.
The right of repayment of amounts withdrawn from an account in a
partial withdrawal, without charge of a Sales Charge upon such repayment,
may be terminated by resolution of the Directors of the Fund. Such
termination of the right of reinvestment of partial withdrawals without
Sales Charge shall not be effective, however, until after the expiration of
ninety days from the date of notice to all Investors of the resolution of
the Directors so terminating the right
D-6
of repaying of partial withdrawals without Sales Charge. Further, such
right shall not be terminated by the Directors except upon the
determination by the Directors that continuation of such right is in
contravention to requirements of the Investment Company Act of 1940 or
rules promulgated under the authority thereof."
12. Article V, Section 1 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article V, Section 1: CHARGES AND EXPENSES
To cover the costs of creation of the Investor's account, a Sales
Charge, as set forth below, shall be charged for both Class I Units and
Class II Units. A Sales Charge shall be payable from each payment for
Class I Units and Class II Units by the Investor into the Fund.
The Sales Charge shall be as follows: (1) 5.0% of the offering price
on purchases up to $99,999; (2) 4.0% of the offering price on purchases of
$100,000 to $249,999; (3) 3.0% of the offering price on purchases of
$250,000 to $499,999; (4) 2.5% of the offering price on purchases of
$500,000 to $999,999; and (5) no Sales Charge for purchases of $1,000,000
or more; provided that in computing the amount of the purchase made by an
Investor for the purpose of determining the Sales Charge applicable to its
purchase, there shall be included the aggregate value of all investment
units previously purchased or acquired and then owned by such Investor in
addition to the investment units being purchased and on which the Sales
Charge is to be calculated. For purposes of this paragraph only, the term
"Investor" shall include (i) the spouse (as determined in accordance with
the laws of the State of California from time to time) and natural children
or legally adopted children under the age of 21 of such Investor, and (ii)
Keogh plans, retirement plans, IRAs, SEP IRAs, and trust and business
accounts owned by such Investor, provided that (x) such Investor can
provide satisfactory documentation that no persons other than the
individuals listed in (i) above have an ownership right in the subject
Investor account, and (y) the subject Investor account tax identification
number is consistent with the above provisions. The value of the
investment units previously purchased or acquired shall, for the purposes
of this Article, be computed at the actual offering price at which such
units were purchased.
In addition to the Sales Charge set forth above, Class II Units shall
be subject to such other charges as may be imposed thereon in connection
with any Rule 12b-1 plan with respect to such Class II Units adopted,
amended and continued in accordance with and pursuant to the Investment
Company Act of 1940, the rules and regulations thereunder, and the
interpretations thereof, in each case as from time to time amended,
modified or superseded.
The Sales Charge and Rule 12b-1 fees may be, but need not be, reduced
from time to time. Notwithstanding anything to the contrary in Article IX,
any reduction of the Sales Charge or Rule 12b-1 fees shall not require
Investor approval. Any reduction of the Sales Charge must be approved by a
majority of the Directors who are not interested persons and by the Company
and shall be incorporated herein by this reference to Article 2 of the
Underwriting Agreement as the same may be amended from time to time. Any
reduction of the Rule 12b-1 fees must be approved in accordance with the
terms of the Rule 12b-1 plan and shall be incorporated herein by this
reference to the Rule 12b-1 plan, as amended from time to time.
D-7
No Sales Charge shall be imposed for sales of Class I Units made to
(i) directors, officers and bona fide full time employees and sales
representatives of the Fund and of the Company (and their immediate family
members) and (ii) registered broker-dealers (and their registered
representatives) who have entered into distribution agreements with the
Company (and the immediate family members of such broker-dealers and
registered representatives); provided such purchaser has acted in such
capacity for at least ninety days prior to the purchase, the purchase is
made for investment and not for resale, and the purchaser agrees that the
Participating Agreement so purchased will not be resold except through
redemption by the Fund. For purposes of this paragraph only, "immediate
family members" shall mean the spouse (as determined in accordance with the
laws of the State of California from time to time), parents and natural
children or legally adopted children under the age of 21 of the individuals
set forth at the beginning of this paragraph.
The Sales Charge shall be reduced for volume purchases of
Participating Agreements by the following organizations: Corporations,
foundations, associations and other organizations exempt from Federal
Income Tax as the same are defined by Internal Revenue Code section
501(c)(3); and employees' trust, pension, profit-sharing and other employee
benefit plans qualified for tax exempt status under Internal Revenue Code
Section 401, Individual Retirement Accounts, Custodial Accounts and
Simplified Employee Pensions (all as defined in Internal Revenue Code
Section 408; custodial accounts for annuities purchased under Internal
Revenue Code 403(b) and eligible Deferred Compensation Plans as defined in
Internal Revenue Code Section 457.
The Directors of the Trust Fund shall adopt regulations, as part of
the Trust Fund Regulations of this Fund, and shall amend the same from time
to time as the Directors deem appropriate, which regulations shall provide
a uniform schedule of rate reductions based upon increased volume
purchases, and shall further define the terms and conditions upon which
sales to such tax exempt organizations at reduced Sales Charge shall be
made."
13. Article V, Section 3 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article V, Section 3: TRUSTEE'S FEES AND FUND EXPENSES
The Trustee's fees shall be charged to the Trust Fund, which will pay
such fees periodically. The fees charged by the Trustee shall be in
accordance with actual services performed by the Trustee, at a rate
prevailing in the Trustee's business operations for similar services
performed for other entities. In addition, costs and expenses will be
incurred by the Company for requirements and services other than the
underwriting and investment advisory services provided by the Company, such
as the compensation of Directors and Officers of the Fund; legal and
auditing fees; its taxes; transfer and dividend disbursing fees; costs
incurred in the issuance and redemption of shares; its bookkeeping costs;
its allocable share of office rent and other expenses related to
maintenance of an office; data processing and computer expense; brokerage;
and all expenses in connection with reporting to investors and governmental
agencies. All of these amounts will be paid on behalf of the Fund by the
Company for which the Company shall receive from the Fund assets an
aggregate amount such that the sum of (i) the amounts paid to the Company
as an investment advisory fee pursuant to the preceding Article V, Section
2
D-8
plus (ii) the Trustee's fees pursuant to this Article V, Section 3 plus
(iii) the amounts paid pursuant to this sentence shall equal (on an annual
basis) one and twenty-five one hundredths percent (1.25%) of the Trust
Fund's average net assets. The Fund shall make a good faith estimate of
the amount due to the Company for the preceding month and shall pay such
amount to the Company promptly. In the event the Fund pays the Company
more than it is obligated to pursuant to the preceding sentence or pays the
Company less than it is obligated to pursuant to the preceding sentence,
the Company shall be paid or shall refund the difference, as the case may
be. In the event that the expenses paid by the Company on behalf of the
Fund exceed the amounts received by the Company pursuant to this Article V,
Section 3, the Company shall not be entitled to and shall not receive any
additional payment from the Fund. In the event that the expenses paid by
the Company on behalf of the Fund are less than the amounts received by the
Company pursuant to this Article V, Section 3, the Company shall not be
obligated to refund nor shall the Company pay the difference to the Fund."
14. Article V, Section 5 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article V, Section 5: MANNER OF PAYMENT OF FEES AND COSTS
Fees for special services as set forth in Section 4 above shall be
collected by the Trustee from the Investor prior to performance of the
requested services. Management Fees, Trustee's Fees, Rule 12b-1 fees and
operational costs of the Fund, as set forth in Sections 2 and 3 above shall
be deducted by the Trustee from general Fund assets. The Sales Charge
shall be deducted by the Trustee upon investment of the amounts paid by
Investors. Accounting for the deduction of all such fees and costs shall
be reflected in each Investor's account by virtue of his respective
undivided interest in the Fund asset values, rather than by the individual
itemization in the Investor's account. All fees and charges made to the
Fund by the Trustee shall be allocated and disbursed by the Trustee in
accordance with instructions from the Fund."
15. Article VI, Section 1 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article VI, Section 1: GENERAL CONTROL OF THE FUND
The business and affairs of the Fund shall be managed by a Board of
Directors, except insofar as specified functions are delegated to the
Trustee under the terms of this Agreement. It shall be the responsibility
of the Directors to administer and assure administration of all of the
rights and privileges of Investors as the same are set forth in this
Agreement, to designate and retain agents and employees to aid in the
administration of the Fund, and to maintain working relations with the
Trustee and the Company for the purpose of carrying out the duties of all
parties to this Trust Agreement.
Subject to Article IX of this Trust Agreement and to the Investment
Company Act of 1940, the rules and regulations thereunder, and the
interpretations thereof, in each case as from time to time amended,
modified or superseded, the Board of Directors may create from time to time
any new class of investment units of the Fund and set such front-end sales
loads, such 12b-1
D-9
service, administrative or distribution fees and/or such contingent
deferred sales charges or other charges as the Board of Directors in its
sole discretion may determine."
16. Article VI, Section 3 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article VI, Section 3: MEETINGS OF INVESTORS
Annual meetings of the Investors for the purpose of electing Directors
and conducting such other business as may be brought before the Investors
shall be held on the first business day in April of each year. Special
meetings of the Investors may also be called by resolution of the Directors
of the Trust Fund or by notice executed by holders of at least 10% in
interest of beneficial interests in the Trust Fund. At least fifteen (15)
days prior to each annual or special meeting the Directors shall cause to
be sent to each Investor a notice of meeting which shall indicate the time
and place of meeting. The notice shall also provide the Investor with a
form for voting by proxy. Any action taken by the Investors at a meeting
at which a majority in interest of Investors is present, either in person
or by proxy, shall be effective and binding, regardless of failure to give
notice of the meeting, if all of the Investors consent in writing to the
holding of the meeting and the taking of the said action, the said written
consents being executed either before or after the meeting. All meetings
of the Investors shall be conducted by the President or the Chairman of the
Board of the Trust Fund, and voting by Investors may be in person or by
proxy. Investors' voting interest shall be tabulated upon the basis of
investment units, as set forth in Article IV, Section 4. Subject to
Article IV, Section 1(b), investors shall have the right to vote upon the
following matters:
(a) Election of Directors (at annual meetings);
(b) Ratification of agreements made by the Directors for continued
management and investment advisory services;
(c) Approve the selection of the Trust Fund auditor;
(d) Approve any changes in fundamental policy of the Trust Fund which
may be proposed by the Directors;
(e) Vote upon any other matter or proposal in connection with which
the vote of the Investors is required by the Investment Company Act of 1940
or any other Federal or State Law governing the Trust Fund."
17. Article IX, Section 1 of the Trust Agreement shall be amended to read
in its entirety as follows:
"Article IX, Section 1: AMENDMENTS ADOPTED BY PARTIES TO THE
AGREEMENT
The Trust Agreement may be amended by the affirmative vote of a
majority of Investors present in person or by proxy, and constituting a
quorum, at an annual or special meeting of
D-10
Investors; provided, that the proposed amendments shall first have been
recommended to the Investors by a resolution adopted by the Board of
Directors, and notice of the annual or special meeting of Investors at
which the amendment is to be considered shall have contained the complete
terms of the proposed amendment; and provided further, that Investor
approval shall not be required to amend the Trust Agreement to create a new
class of investment units in accordance with Article IV, Section 1(a) and
Article VI, Section 1."
IN WITNESS WHEREOF, the parties have duly executed and approved this
Amendment to the Trust Agreement as of the date first above written.
SIFE Approved by Trustee:
By BANK OF AMERICA, N.T. & S.A.
-------------------------------
President
By
-------------------------------
Vice President
By By
------------------------------- -------------------------------
Secretary Trust Officer
Approved by Investors:
I herby certify that the holders of a majority in interest of Participating
Agreements representing beneficial interests in SIFE Trust Fund, at a regular
meeting of Investors duly called and held on April 1, 1996, at which a quorum
was at all times present in person or by proxy, approved the above amendment.
By
---------------------------------------
Secretary, SIFE Trust Fund
D-11
EXHIBIT E
PLAN OF DISTRIBUTION
February 9, 1996
This Plan of Distribution (the "Plan") is adopted in accordance with Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, as amended (the
"1940 Act"), by SIFE TRUST FUND, a trust established under the laws of the State
of California (the "Fund"), with respect to the Class II Units (the "Class II
Units") of the Fund which are proposed to be created, subject to the following
terms and conditions:
Section 1. ANNUAL FEE
The Fund will reimburse the distributor of its Units, SIFE, a California
corporation (the "Distributor"), or any entity that may in the future act as a
distributor for the Fund, for certain expenses incurred by the Distributor in
connection with the offering and sale of the Fund's Class II Units, provided
that payment shall be made in any month only to the extent that such payment,
together with any other payments for such expenses made by the Fund, shall not
exceed .020833% (.25% on an annualized basis) of the average daily net assets of
the Fund attributable to Class II Units of the Fund, for the prior month. The
expense reimbursement to the Distributor will be calculated monthly and paid on
a quarterly basis. Distribution expenses which benefit only the Class II Units
of the Fund will be borne solely by that class. Distribution expenses which
benefit more than one class of units of the Fund will be allocated in accordance
with the aggregate average daily net assets of the Fund attributable to each
such class of units.
Section 2. EXPENSES COVERED BY PLAN
Reimbursable distribution expenses incurred by the Distributor under
Section 1 of this Plan shall be all expenditures borne by the Distributor or by
any other person with which the Distributor has an agreement approved by the
Fund, which expenditures represent payment for activities primarily intended to
result in the sale of Class II Units, including, but not limited to, the
following: (i) payments to securities dealers and others engaged in the sale of
Class II Units; (ii) expenditures for support services such as telephone
facilities and expenses and Class II Unitholder services as the Fund may
reasonably request; (iii) formulation and implementation of marketing and
promotional activities, including but not limited to direct mail promotions and
television, radio, newspaper, magazine and other mass media advertising; (iv)
preparation, printing and distribution of sales literature; (v) preparation,
printing and distribution of Prospectuses of the Fund and reports for recipients
other than existing Class II Unitholders of the Fund; and (vi) provision to the
Fund of such information, analyses and opinions with respect to marketing and
promotional activities as the Fund may, from time to time, reasonably request;
except that distribution expenditures shall not include overhead costs of the
Distributor or any expenditures in connection with services which the
Distributor, any of its affiliates, or any other person have agreed to bear
without reimbursement. To the extent any activity covered by this Section 2 is
also an activity which the Company may pay for without regard to the existence
or terms and conditions of a plan of distribution under Rule 12b-1 of the 1940
Act, this Plan shall not be construed to prevent or restrict the Company from
paying such amounts outside of this Plan and without limitation hereby and
without such payments being included in the calculation in Section 1 of the
maximum amount of reimbursable payments under this Plan.
E-1
Section 3. APPROVAL BY INVESTORS
The Plan will not take effect, and no fee will be payable in accordance
with Section 1 of the Plan, until the Plan has been approved by a vote of at
least a majority of the outstanding voting securities of the Fund; provided,
however, that (even if so approved) the Plan will not take effect if the
creation of the Class II Units of the Fund is not concurrently approved by a
vote of at least a majority of the outstanding voting securities of the Fund.
Section 4. APPROVAL BY DIRECTORS
Neither the Plan nor any related agreements will take effect until approved
by a majority vote of both (a) the full Board of Directors of the Fund, and (b)
those directors who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to it (the "Independent Directors"), cast in person at a
meeting or meetings called for the purpose of voting on the Plan and the related
agreements, as the case may be.
Section 5. CONTINUANCE OF THE PLAN
The Plan will continue in effect for so long as its continuance is
specifically approved at least annually by the Fund's Board of Directors in the
manner described in Section 4 above.
Section 6. TERMINATION
The Plan may be terminated at any time with respect to the Fund by a
majority vote of the Independent Directors or by vote of a majority of the
outstanding voting securities of the Fund.
The Plan may not be amended with respect to the Fund so as to increase
materially the amount of the fee described in Section 1 above with respect to
the Fund, unless the amendment is approved by a vote of at least a majority of
the outstanding voting securities of the Fund affected by such fee. Amendments
to the Plan to reduce the amount of the fee described in Section 1 above shall
not require the approval of the outstanding voting securities of the Fund
affected by such fee. In addition, no material amendment to the Plan may be
made unless approved by the Fund's Board of Directors in the manner described in
Section 4 above.
Section 8. SELECTION OF CERTAIN DIRECTORS
While the Plan is in effect, the selection and nomination of the Fund's
directors who are not interested persons of the Fund will be committed to the
discretion of the directors then in office who are not interested persons of the
Fund.
Section 9. WRITTEN REPORTS
In each year during which the Plan remains in effect, any person authorized
to direct the disposition of monies paid or payable by the Fund pursuant to the
Plan or any related agreement will prepare and furnish to the Fund's Board of
Directors, and the Board will review, at least quarterly, written reports,
complying with the requirements of the Rule, which set out the amounts expended
under the Plan and the purposes for which those expenditures were made.
E-2
Section 10. PRESERVATION OF MATERIALS
The Fund will preserve copies of the Plan, any agreement relating to the
Plan and any report made pursuant to Section 9 above, for a period of not less
than six years (the first two years in an easily accessible place) from the date
of the Plan, agreement or report.
Section 11. MEANINGS OF CERTAIN TERMS
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have in light of this Plan under the Act and the rules and
regulations under the Act, subject to any exemption that may be granted to the
Fund under the Act by the Securities and Exchange Commission.
E-3
APPENDIX A
TO PLAN OF DISTRIBUTION
SIFE
490 North Wiget Lane
Walnut Creek, CA 94596
, 1996
--------------------
[Recipient's Address]
- -----------------
- -----------------
Ladies and Gentlemen:
This letter will confirm our understanding and agreement with respect to
payments to be made to you pursuant to a plan of distribution (the "Plan")
adopted by SIFE Trust Fund (the "Trust Fund") pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "Act") with respect to the sale
of Class II Units of the Trust Fund. The Plan and this related agreement (the
"Rule 12b-1 Agreement") have been approved by a majority of the Board of
Directors of the Trust Fund, including a majority of the Board of Directors who
are not "interested persons" of the Trust Fund, as defined in the Act, and who
have no direct or indirect financial interest in the operation of the Plan or in
this or any other Rule 12b-1 Agreement (the "Disinterested Directors"), cast in
person at a meeting called for the purpose of voting thereon. Such approval
included a determination by the Board of Directors of the Trust Fund that, in
the exercise of reasonable business judgment and in light of their fiduciary
duties, there is a reasonable likelihood that the Plan will benefit the Trust
Fund and its Investors. The Plan has also been approved by a vote of at least a
majority of the outstanding voting securities, as defined in the Act, of the
Trust Fund.
To the extent you provide distribution and marketing services in the
promotion of Class II Units of the Trust Fund, including furnishing services and
assistance to your customers who invest in and own shares of the Trust Fund, and
including but not limited to answering routine inquiries regarding the Trust
Fund and assisting in changing distribution options, account designations and
addresses, we shall pay you a fee of up to 0.25%, on an annual basis, of the net
asset value of the Trust Fund's Class II Units which are owned of record by your
firm as nominee for your customers or which are owned by those customers of your
firm whose records, as maintained by the Trust Fund or any agent of the Trust
Fund, designate your firm as the customer's dealer of record. We reserve the
right to increase, decrease or discontinue the fee at any time in our sole
discretion upon written notice to you.
We shall make the determination of the net asset value of Trust Fund Class
II Units, which determination shall be made in the manner specified in the Trust
Fund's current prospectus, on or about the 45th day of each quarter and pay to
you quarterly, on the basis of such determination, the fee specified above. No
such quarterly fee will be paid to you with respect to any Class I Units sold by
or through you, or any Class II Units purchased by you and redeemed or
repurchased by the Trust Fund or by us as agent within seven (7) business days
after the date of our confirmation of such purchase. In addition, no such
quarterly fee will be paid to you with respect to any of your customers if the
amount of such fee based upon the value of such customer's Class II Units will
be less than $1.00. Payment of such quarterly fee shall be made within 30 days
after the close of each quarter for which such fee is payable.
E-4
You shall furnish us with such information as shall reasonably be requested
by the Trust Fund with respect to the fees paid to you pursuant to this Rule
12b-1 Related Agreement.
If this letter correctly sets for our mutual understandings with respect to
the provision and payment of a quarterly fee based on Rule 12b-1, please
evidence your agreement by countersigning the enclosed copy of this letter and
returning it to the undersigned in the accompanying self-addressed envelope.
Very truly yours,
SIFE
Agreed and Accepted:
- -----------------
[Recipient]
E-5
SIFE TRUST FUND
PROXY FOR ANNUAL MEETING OF INVESTORS TO BE HELD
APRIL 1, 1996
The undersigned hereby acknowledges receipt of
the Proxy Statement and appoints Sam A. Marchese
and Charles W. Froehlich, Jr. and each of them
his or her proxies, with power of substitution,
to vote that number of votes (based on units of
investment held) which the undersigned is
entitled to vote pursuant to all Participating
SIFE TRUST FUND Agreements owned by the undersigned at the
PROXY SERVICES ANNUAL MEETING INVESTORS OF SIFE TRUST FUND to
POST OFFICE BOX 9148 be held April 1, 1996, and at any adjournments
FARMINGDALE, NY 11735-9815 or postponements thereof, on any business that
may properly come before the meeting, including
but not limited to the items shown below which
are referred to by the same Item No. in the
Notice of Annual Meeting set forth in the Proxy
Statement.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF THE TRUST FUND.
UNLESS OTHERWISE SPECIFIED BELOW, THE UNITS OF
INVESTMENT REPRESENTED BY THIS PROXY SHALL BE
VOTED FOR ITEMS 1, 2, 3, 4, 5 AND 6.
This Proxy will cover all investment units
attributable to All Participating Agreements
owned by the undersigned. Joint owners must each
sign. Please sign the Proxy exactly as name
appears. Executors, Administrators, Trustees,
Attorneys, etc. should so indicate, when signing.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS /X/
SIFE KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
SIFE TRUST FUND
FOR WITHHOLD FOR ALL 1. Election of Directors: 01) David M. Sacks,
ALL ALL EXCEPT 02) Diane Howard Belding, 03) Charles W.
/ / / / / / Froehlich, Jr., 04) Sam A. Marchese, 05) Haig G.
Mardikian, 06) John A. Meany, 07) Walter S.
Newman
TO WITHHOLD AUTHORITY TO VOTE FOR ANY
NOMINEE(S), WRITE THE NUMBER(S) ON THE LINE
PROVIDED BELOW
________________________________________________
FOR AGAINST ABSTAIN 2. Ratification of the selection of Deloitte &
/ / / / / / Touche LLP as independent auditors for the Trust
Fund for the year ending December 31, 1996
FOR AGAINST ABSTAIN
/ / / / / / 3. Approval of the continuation of the current
Investment Advisory Agreement, as amended, which
amendments change the method of compensating and
reimbursing SIFE, a California corporation.
FOR AGAINST ABSTAIN
/ / / / / / 4. If proposal number three does not pass, approval
of continuation of the current Investment
Advisory Agreement.
FOR AGAINST ABSTAIN
/ / / / / / 5. Approval of certain amendments to each of the
Investment Advisory Agreement, the Underwriting
Agreement and the Restated Trust Agreement to
provide for the creation of a multiple-class
structure and the adoption of a Rule 12b-1 Plan
for a to-be-created class of investment
interests.
FOR AGAINST ABSTAIN
/ / / / / / 6. Approval of an amendment to the Trust Fund's
investment policies to permit the Trust Fund to
write covered put options up to 10% of the Trust
Fund's net assets, and write covered call options
up to 25% of the Trust Fund's net assets.
- ---------------------- ------------------------------- -----------
SIGNATURE SIGNATURE (JOINT OWNER) DATE