SHAREHOLDER REPORT
Published for the shareholders of United Services
[GRAPHIC: UNITED SERVICES FUNDS LOGO]
1st Quarter 1996
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A PASSAGE TO INDIA
By Frank Holmes, President and CEO
[GRAPHIC IN MIDDLE OF PAGE: TAJ MAHAL]
I recently travelled to India with our Chief Investment Officer, Victor
Flores. We journeyed on this fact-finding mission to learn more about the forces
of change which are moving this age-old civilization toward modernization. We
were curious to discover why and how India has become the world's largest
consumer of gold.
India is a constant challenge to the mind and body. Our trip was
exhilarating, exhausting and, at times, frustrating. But most importantly, it
was extremely promising. India gained political independence from Britain in
1947, yet real economic reform came just four years ago after decades of
self-destructive socialism brought on a financial crisis. Since then, the
economic climate has changed quickly and dramatically. In 1991, India was almost
bankrupt; today its foreign reserves have surged to $20 billion, according to
the Wall Street Journal.
Just as China did in 1978, India looked to capitalism to turn its economy
around. And though India is rallying from a late start, it is quickly catching
up with China. Today, India's annual growth rates approach 5%. Its investment
infrastructure provides established capital markets, common accounting standards
and a strong legal tradition. Labor is abundant and inexpensive; strikes are on
the decline. A large part of the work force is English-speaking and
university-educated. Labor costs average just $0.50 an hour. India's huge
domestic market, the second largest in the world, offers promising sales
opportunities.
India is home to more than 7,000 public companies of which only 300 have
market capitalizations greater than $50 million. There are 23 stock exchanges
with a total market capitalization of $160 billion.
Direct foreign investment has totaled less than $2.5 billion. To attract
more foreign capital, India is introducing additional economic reforms and
modernizing its securities systems.
To learn more about India's emerging economy and ancient culture, we
visited high technology companies, manufacturers and banks, splendid marble
palaces, fortresses and mausoleums of the emperors and maharajahs. In Bombay and
Banglalore we saw phenomenal advances in computer technology and
telecommunications. We learned that the hardware and software for Citicorp's
computer systems were designed and are maintained in India. The technology
behind Morgan Stanley's trading desk was designed by a company based in
Banglalore.
Growing involvement in electronics, telecommunications, space centers and
nuclear power is intended to take the country, as one government official said,
directly from the 19th century into the 21st century. To accelerate and achieve
this, the Indian government is cutting through bureaucracy to break political
corruption and to find some kind of basic modus operandi for communal and
regional interests.
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For a free Fact Kit containing more complete information, including charges and
expenses, call 1-800-US-FUNDS. Read the prospectus carefully before investing.
<PAGE>
INDIA
continued
Former U.S. Ambassador John Kenneth Galbraith called India a functioning
anarchy, and said the miracle of how it functions is well worth watching.
It was important, though sometimes difficult, to refrain from applying my
Western values to everything I saw. The most striking image left with was that
of masses of people. I have never seen so many people. The teeming millions
living in Bombay are legendary. They crowd each other into roadways, bulge out
of tiny rickshaws and perch themselves on top of buses and trains. India's
poverty is foremost, yet it does not create the sense of shame it does for
people who live in the Western world. Indians living in poverty seem to bear
their plight with dignity and even with a cheerfulness that I found
inexplicable.
As India's population swells to over a billion by the year 2000, it will
require hundreds of billions in capital to lift itself out of poverty. The path
to prosperity will be long and difficult but India is heading in the right
direction.
INDIA: A KEY GOLD MARKET
As the leading gold consuming country of the world, India is a major player
in the gold market. As the GDP of India rises, consumption of gold will
increase, creating a catalyst for higher gold prices.
In India, you can buy beautifully designed 22-karat gold jewelry at only a
20% markup to the price at which gold is trading that day.
In America, gold jewelry is typically 14-karat and is sold with a 400%
markup to the metal's price. There are approximately 20 million marriages a year
in India, many of which are still arranged with carefully negotiated dowries.
These 20 million families will buy one ounce of gold for the wedding.
[GRAPHIC: TOPOGRAPHICAL MAP OF INDIA]
Area: 1.2 million square miles
Population: 896 million
Capital: Delhi
Other major cities: Calcutta, Bombay, Madras,
Banglalore, Hyderabad
Languages: 16 official languages including Hindi
(national) and English
Currency: Rupee
Per capita GDP: $350
Main exports: Textiles, jewelry, chemicals, tea, coffee
Resources: Coal, iron, ore,
manganese, gas, oil
Source: The Larousse Desk Reference
[GRAPHIC: TABLE SHOWING THE LARGEST CONSUMER MARKETS FOR GOLD]
-----------------------------------------
THE LARGEST CONSUMER MARKETS FOR GOLD
-----------------------------------------
DEMAND
------
ITALY 115
THAILAND 116
INDONESIA 119
SOUTH KOREA 121
TURKEY 139
TAIWAN 160
SAUDI ARABIA 193
CHINA 224
JAPAN 289
USA 327
INDIA 474
Tonnes
Source: World Gold Council
-----------------------------------------
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For a free Fact Kit containing more complete information, including charges and
expenses, call 1-800-US-FUNDS. Read the prospectus carefully before investing.
<PAGE>
NEWS FROM SHAREHOLDER SERVICES
EMPLOYEE PROFILE
Eli Suarez [GRAPHIC: PHOTOGRAPH
Assistant Vice President, OF ELI SUAREZ AT HIS
United Shareholder DESK]
Services, Inc.
As the unmistakable voice of United Services, Eli manages the Shareholder
Education and Service, Shareholder Correspondence and Institutional Service
departments. In addition, he successfully coordinates and actively participates
in our company's investment conferences. If you've ever spoken with Eli on the
telephone or met him at one of our events, you'll remember his baritone voice.
Prior to joining the United Services family, Eli was an assistant manager
at World Finance, where he managed accounts for personal loans. His extensive
knowledge of the financial industry stems from his experience and education. He
graduated with a Bachelor of Business Administration and Finance degree from
Texas A&M University, Corpus Christi, Texas.
Eli enjoys spending time with his wife and eight-month-old daughter. He
also enjoys playing the guitar and participating in a good tennis match.
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IMPORTANT TAX INFORMATION
* To assist you in calculating your gains and losses, we provide average cost
basis on most redemptions reported on IRS Form 1099-B. Where applicable, we
also highlight the amount of interest from federal government obligations
paid to you that may be exempt from your state's income taxes. We hope
these changes help you in the preparation of your annual tax returns.
* If you have not received your 1995 tax documents, please contact an
Investor Representative at 1-800-873-8637.
* If you made 1995 contributions to your IRA after January 1, 1996, you will
receive a replacement IRS Form 5498 that reflects these contributions. The
replacement forms will by mailed in May.
* It is not too late to give yourself a tax break! You have until APRIL 15,
1996, to make your 1995 contribution to a new or existing IRA account.
* If you make a custodian transfer or rollover of $10,000 or more to a United
Services IRA account, you will never pay another annual fee for the life of
your account. If you do not have $10,000 to transfer or rollover, you can
still receive an annual fee waiver for each year you contribute $2,000 to
your United Services IRA account.
* Effective JULY 1, 1996, United Services' P.O. Box 659 will no longer be
used. Please check to be sure you are using the following address when
submitting investments or other correspondence: P.O. Box 781234, San
Antonio, Texas, 78278-1234.
* United Services is now online! Internet users can access our home page
through the World Wide Web - http://www.usfunds.com/ Using this new
service, you can easily access daily share prices, fund prospectuses,
Shareholder Reports and the weekly Investor Alert.
* If you are planning to relocate, please notify us of your new address in
writing within 30 days of your move so that you will continue to receive
your account statements in a timely manner.
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REMINDER
Your account information is available 24 hours a day, 7 days a week by calling
1-800- 873-8637. Investor representatives are available Monday through Friday
between 7:30 a.m and 5:00 p.m., Central Time. Our busiest time is between noon
and 2:00 p.m. If you call to make an exchange and are put on hold, please wait
for the next available representative as we cannot act upon any exchange
instructions left on voice mail.
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UPCOMING INVESTMENT CONFERENCES
April 18-20 Atlanta Investment Conference
May 29-30 New York Gold Show
July 25-28 ISI San Francisco Money Show Call
1-800-873-8637 for more information.
For a free Fact Kit containing more complete information, including charges and
expenses, call 1-800-US-FUNDS. Read the prospectus carefully before investing.
<PAGE>
FUND NOTES
U.S. INCOME FUND
The Fund has recently diversified its holdings to include a wide spectrum
of industries, including electric and natural gas utilities, telephone and
telecommunications, energy, real estate investment trusts and financial
services. This represents a strategic transition from being predominantly a
utilities fund to a well- diversified income-producing fund with potential for
capital appreciation.
At present, approximately 70% of the total assets of the Fund are invested
in more than 40 utility companies. For near to mid-term, we like investments in
utilities for several reasons. First, utilities generally do well in a low
inflation and low interest rate environment. Second, U.S. electricity production
grew about 3.4% and consumption of natural gas grew about 5% in 1995. This
increase in energy consumption, which we expect to continue, combined with cost
reduction propels utility companies' earnings and growth. Third, major U.S.
telephone and telecommunications companies are actively pursuing global
investments, providing excellent opportunity for growth and income.
U.S. GLOBAL RESOURCES FUND
[GRAPHIC: AERIAL VIEW OF THE GLOBE]
Looking for a fund to capitalize on world economic growth? Then you may
want to include the U.S. Global Resources Fund in your portfolio. As developing
countries improve their standard of living, consumption of basic materials and
energy will remain strong. The U.S. Global Resources Fund is a diversified
natural re-source fund which offers investors exposure to the industrial sector
of the world's economy. Growth in the world industrial production is the leading
factor which will determine future returns on resource stocks.
The U.S. Global Resources Fund invests predominantly in large international
resource companies and currently has a 60/40 mix between energy and basic
materials. In the energy sector, the fund's portfolio includes companies that
produce oil, natural gas, electricity and coal. Companies engaged in the
production of basic materials such as chemicals, fertilizers, metals, forest
products, railroads and steel round out the portfolio.
U.S. REAL ESTATE FUND
[GRAPHIC: PHOTOGRAPH OF TIM REYNOLDS, PORTFOLIO MANAGER]
Investment legend Sir John Templeton recently said, "There is one area in
America that is unusually attractive, and that is Real Estate Investment Trusts
(REITs)." High dividend yields, liquidity, ease of ownership and diversification
are the obvious and often quoted benefits of real estate ownership through
REITs. In addition, there are other macroeconomic considerations that should
drive their emergence in 1996.
Property markets continue to recover and both rents (prices) and occupancy
rates (volume) are rising. Any industry which is experiencing rising sales
prices and an increase in sales volume is in a position to do well. REITs' cash
flow will grow from the properties they already own. And even more growth will
come from the acquisition of properties. There is little new construction and
interest rates are low. Commercial real estate is a $3 trillion market of which
REITs represent approximately 3%. So, REITs have a lot of room to grow.
Though REITs have been around since 1960, their "modern" era really began
in 1993, when the number of companies and the capitalization of REITs exploded.
Quality REITs now number more than 100 and have a market capitalization of $60
billion.
Under the direction of new portfolio manager Tim Reynolds, who joined
United Services in June 1995, the U.S. Real Estate Fund's performance has
significantly improved. The Fund is up 18.86% for the one-year period ended
February 29, 1996.* Tim's favorite REIT sectors are suburban offices, high-end
hotels, self-storage facilities and selected apartments. Though the interest
rate environment continues to be positive for homebuilders, Tim is unlikely to
make additional allocations to this volatile stock group.
* 5-YEAR AVERAGE ANNUAL TOTAL RETURN: 7.92%, AVERAGE ANNUAL TOTAL SINCE
INCEPTION: 4.34%
CHINA REGION OPPORTUNITY FUND
[GRAPHIC: CHINESE CALENDAR SCREENED IN BACKGROUND]
Happy Chinese New Year! February 19, 1996, marked the beginning of the Year
of the Rat. In China, the Rat is associated with money. When the Rat's
scrambling feet are heard at night, it is said to be counting money. The Year of
the Rat has thus far been profitable for the China Region Opportunity Fund. The
Fund is up 9.51% since January 1, 1996, when Bin Shi assumed the
responsibilities of portfolio manager. Bin, a native of Shanghai, has an innate
understanding of the Chinese business culture and has excellent contacts in
China. Bin will travel to the China Region throughout the year to personally
perform due diligence on the many investment opportunities he sees. A research
analyst based in our Shanghai office will assist Bin in evaluating stocks and
monitoring the Fund.
* 1-YEAR AVERAGE ANNUAL TOTAL RETURN: 0.46%, AVERAGE ANNUAL TOTAL RETURN
SINCE INCEPTION: -16.99%. AS OF 2/29/96.
U.S. WORLD GOLD FUND
[GRAPHIC: STACK OF GOLD COINS AND GOLD BARS]
A new record for gold demand was set during 1995. With mine production
falling-albeit slightly-for the second year in a row, the market had to rely yet
again on above-ground stocks to maintain the supply and demand balance. While
gold traded in a narrow range during 1995, the shares of gold mining companies
behaved very differently.
The shares of North American and Australian gold producers held by the U.S.
World Gold Fund performed extremely well, easily outperforming the lackluster
showing of the metal itself. The general strength of the equity market spilled
over into the gold sector, as portfolio managers wary of the general market's
advance sought to diversify into industry groups which had not advanced as
quickly. The gold stocks were also buoyed by a number of important discoveries
and an active market for mergers and acquisitions. The industry also experienced
continued growth as new, emerging producers successfully brought new mines into
production. The excitement caused by these events drew money to the sector and
provided support for gold stocks of all sizes. Portfolio manager Victor Flores
focuses on finding gold stocks with growth potential. These types of companies
have the management expertise plus the geological and financial resources
necessary for building reserves and future cash flow.
BONNEL GROWTH FUND
Election years tend to be good market years. But that doesn't mean the
market will go straight up. Portfolio manager Art Bonnel believes it would be
best for the market to consolidate around the Dow 5,000 to 5,200 level. That
would give the market a base from which a new bull run could be launched to new
highs. During 1995, technology stocks were the best investment bets, according
to Art. In 1996, different industries will more likely lead the way. He says
health care stocks seem to be coming back into favor, along with oil and
retailers.
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1995 WAS A RECORD SETTING YEAR - "MOSTS" SET IN THE BUSINESS WORLD:
Most new highs in Dow Jones Industrial Average - 69
Most mutual funds - 7,560
Most money in mutual funds - $2.64 trillion
Most mergers/acquisitions - 8,773
Most average shares traded daily on NYSE - 347 million
Most name changes by NYSE-listed companies - 60
Source: USA Today, Associated Press
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For a free Fact Kit containing more complete information, including charges and
expenses, call 1-800-US-FUNDS. Read the prospectus carefully before investing.
Investment returns and principal value will fluctuate. You may have a gain or a
loss when you sell shares. "U.S." stands for United Services. Past performance
is no guarantee of future results.
<PAGE>
FUND FEATURE
UNITED SERVICES
TAX-FREE FUNDS
Do you want to keep Uncle Sam from taxing all of the dividend income you
made in 1995? Do you want to take advantage of one of the last great tax
shelters in America? Then look to tax-free municipal bond funds for tax relief.
During last year's stock market euphoria, equity funds were the media's
darlings while tax-free funds went virtually ignored. Now that tax season is
upon us, these funds deserve attention.
Creston King, portfolio manager of United Services' tax-free funds shares
his thoughts on how you can increase your current income without raising your
taxes.
SR: Creston, please tell us about the benefits of investing in tax-free funds.
CK: Tax-free funds invest in municipal bonds which are debt
securities issued by state and local governments to finance public projects like
roads and schools. The income earned on these types of bonds is exempt from
federal income taxation. This means you get to keep the income you earn and pay
less to the IRS.
United Services' tax-free funds invest only in investment-grade municipal
bonds and provide monthly tax-free dividends.
SR: What type of investor could benefit most from an investment in tax-free
funds?
CK: If you're in a high tax bracket, chances are you'll earn extra income in a
tax-free fund. To see how much more, compare the after-tax yield on a taxable
fund with the tax-free yield of a municipal bond fund. As you can see from the
chart below, if you are in the 36% tax bracket, you would have to find a taxable
fund yielding 9.38% to match a tax-free fund yielding 6%.
SR: What should I look for when I choose a tax-free fund?
CK: First, look to see that the credit ratings of the fund's investments fit
your risk profile. All the bonds held in United Services' tax-free funds hold a
credit rating of BBB or higher.
Secondly, check the maturity of the holdings in the fund's portfolio.
Maturity is the length of time before the principal on a bond must be repaid.
Bonds with longer maturities usually offer higher yields. However, they are also
more sensitive to changes in interest rates, so their value may fluctuate
dramatically. Bond mutual funds are managed to maintain an average portfolio
maturity.
Next, see how many securities and different locales the fund invests in.
Diversification is the best way to decrease investment risk in any fund.
SR: Are there additional ways that I can ease the tax bite?
CK: Maximize your contribution to your IRA and take full advantage of your
employer's 401(k) or 403(b) retirement plan. If you are self-employed, look into
a SEP-IRA. Remember, you have until April 15, 1996 to make an IRA contribution
for 1995.
U.S. TAX FREE FUND [GRAPHIC: FULL-LENGTH
as of 2/29/96 PHOTOGRAPH OF CRESTON
---------------------------- KING, PORTFOLIO
Average Maturity 7.36 years MANAGER]
30-day SEC Yield 4.96%
Tax-equivalent Yield 8.21%
Average Annual Total Returns
1-Year 9.72%
5-Year 7.21%
10-Year 7.18%
UNITED SERVICES NEAR-TERM TAX FREE FUND
as of 2/29/96
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Average Maturity 4.34 years
30-day SEC Yield 3.92%
Tax-equivalent Yield 6.50%
Average Annual Total Returns
1-Year 5.98%
5-Year 6.65%
Since inception 6.32%
================================================================================
WITHIN THESE TAX BRACKETS
----------------------------------------------------------------
TO MATCH 28% 31% 36% 39.6%
A TAX-FREE ----------------------------------------------------------------
YIELD OF YOU NEED AN EQUIVALENT TAXABLE YIELD OF:
========== ================================================================
3% 4.17% 4.34% 4.69% 4.97%
4% 5.56% 5.80% 6.25% 6.62%
5% 6.94% 7.25% 7.81% 8.28%
6% 8.33% 8.70% 9.38% 9.93%
7% 9.72% 10.14% 10.94% 11.59%
THE TAX-FREE YIELDS SHOWN ARE HYPOTHETICAL AND DO NOT ASSURE PERFORMANCE.
================================================================================
For a free Fact Kit containing more complete information, including charges and
expenses, call 1-800-US-FUNDS. Read the prospectus carefully before investing.
Investment returns and principal value will fluctuate. You may have a gain or a
loss when you sell shares. "U.S." stands for United Services. Past performance
is no guarantee of future results. Some income may be subject to state, federal
or AMT taxes for certain investors.
<PAGE>
GUEST COMMENTARY [GRAPHIC: PHOTOGRAPH OF
Dow 6000 or $600 Gold DON ROWE SITTING AT DESK]
This quarter's featured guest columnist is Don Rowe, publisher of The
Mutual Fund Advisor and the award-winning Wall Street Digest.
At this moment, it is not possible to forecast the outcome of the 1996
elections. The end results, however, will help show us where to position our
money for extraordinary profits in the years ahead.
President Clinton has skillfully positioned himself as the only person who
will protect Americans from the Republicans who plan to cut entitlements. In a
poll conducted after the 1994 election, 88% of those polled supported a balanced
budget. However, support drops to only 22% if various entitlement programs are
cut to balance the budget. No wonder President Clinton is well ahead of the
nearest Republican candidate.
With consumer credit at record levels, the consumer has begun to payoff
debt as "layoff" headlines occur with increasing frequency. The Fed must lower
interest rates to produce faster economic growth. The housing industry will
benefit first from falling interest rates. The sale of existing homes and new
homes should accelerate in 1996 as mortgage rates fall. Then the sales of
carpeting, tile, furniture, etc. will help push the economy into a faster growth
mode. By election day in November, consumer confidence should be better than it
is today. Will America care about Whitewater or Travelgate as long as Mr.
Clinton stops the Republicans from cutting entitlements? Probably not. Means
testing will have to rise to unconscionable levels to keep all of the current
programs solvent unless cuts in the growth rate of these programs are made by
some brave politicians. Net result: Money is flowing into Southeast Asia for the
first time since the fall of 1993. China and Southeast Asia apparently look like
better investments to global investors who move $25 trillion in cash around the
globe in search of low risk investments. Gold is testing $400 an ounce at a time
when inflation is decelerating, copper prices are weakening and the U.S. dollar
is strengthening.
Is the smart money purchasing gold instead of common stocks because a
balanced budget is not possible with President Clinton in the White House? Is
the smart money expecting the voters to throw out the Republicans in the House
and return leadership to the Democrats to protect their entitlements? Anything,
of course, is possible. If the growth rate of medicare is not cut to 5% from the
current 10% growth rate along with reductions in other entitlement program
rates, the price of gold could move dramatically higher over the next few years.
If Congress and the White House responsibly balance the budget over the next 7
to 9 years, and if the Fed cuts interest rates and allows economic growth to
expand, then the Dow at 10,000 by the year 2,000 still looks promising.
However, if President Clinton wins re-election and blocks cuts in
entitlement spending growth rates, income tax rates will eventually rise and
stop economic growth and produce a bear market. The Fed will have to print money
to pay for entitlement obligations and the price of the gold mining shares could
reach levels that would make you very wealthy.
The most important strategy for mutual fund investors now is to diversify
your investments. Make sure to include an aggressive growth fund. This type of
fund should outperform the market if we achieve something close to a balanced
budget. However, if Mr. Clinton blocks entitlement spending cuts, it will be
important to invest in precious metal mining shares. The third opportunity over
the next few years is China and Southeast Asia. This region is the fastest
growing area on the globe. Fully half of the world's population lives in China
and Southeast Asia. You must have investment access to this region.
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THE WALL STREET DIGEST IS OFFERING A FREE SAMPLE ISSUE EXCLUSIVELY TO UNITED
SERVICES SHAREHOLDERS. CALL 1-800-873-8637 TO ORDER YOUR COPY NOW.
- --------------------------------------------------------------------------------
For a free Fact Kit containing more complete information, including charges and
expenses, call 1-800-US-FUNDS. Read the prospectus carefully before investing.
<PAGE>
RETIREMENT FOCUS
Lisa Kottler [GRAPHIC: PHOTOGRAPH
Retirement Specialist OF LISA KOTTLER]
Vice President
Security Trust & Financial Co.
Some of your favorite investments are secretly losing money. Unless you act
now, your retirement dreams may not become a reality. Because "real return" is a
subject that few are discussing, you may not realize that your retirement nest
egg could be dwindling. Real return is not exactly the buzzword of late, but it
should be.
Almost everyone knows that inflation whittles away at investments, and
everyone grumbles about taxes. But hardly anyone has calculated just what
inflation and taxes really take out of your wallet over the long run. As it
turns out, when the taxman and inflation join forces, they can relentlessly
devastate your investments. For example, the following chart shows that if you
are in the 28% tax bracket and inflation is at a "low" level of 3%, you would
need a return of 6.9% to realize a real return of 2%. As a retirement investor,
you must carefully consider the long-term detrimental effect of inflation and
taxes. How can you combat their attack?
HERE ARE THREE WAYS:
1. MAXIMIZE YOUR INVESTMENTS.
Many people play a conservative game when it comes to investing. Fearful of the
ups and downs of the stock market, some investors keep the bulk of their money
in money market and bond funds. Overly concerned with losing money in the short
run, they ignore the fact that long-term investing in common stock mutual funds
can substantially reduce risk. In fact, stocks are the only investment that have
beaten the bite of inflation and taxes over time.
2. DEFER TAXES.
Another way to combat the double whammy of inflation and taxes is to invest in a
tax-deferred account, such as an IRA, 401k, 403b, SEP-IRA, profit sharing or
money purchase plan. In a tax-deferred account, since you do not pay taxes year
to year on investment earnings, your investment is able to grow much more
quickly. For example, let's say you opened a savings account at your local bank
and earned $100 in dividends for the year. You know that you must report those
earnings on your tax return. If you are in the 28% bracket, you have really only
earned $72 for the year because you had to give the government $28 ($100 x 28% =
$28). Imagine that you had invested that same money in your company's 401(k)
plan or an IRA. Had you earned $100 in dividend income in a retirement account,
you would pay nothing to Uncle Sam until retirement. Therefore the entire $100
goes to work for you now.
3. INVEST TAX FREE.
Lastly, to fight the ravages of taxes and to plan for your retirement, consider
investing in tax-free funds. You can protect your hard-earned dollars by
investing in either the United Services Near-Term Tax Free Fund or the U.S. Tax
Free Fund. Both our highly rated tax-free funds offer the opportunity to earn
monthly, tax-free dividends. See our Fund Feature on page 6.
============================================================
THE CHALLENGE OF EARNING A "REAL" 2 PERCENT
------------------------------------------------------------
YOU MUST EARN THIS MUCH TO
IF INFLATION REALIZE A "REAL" 2% GAIN
IS THIS -------------------------------------------
MUCH... INCOME TAX RATE
------------ -------------------------------------------
15% 28% 36%
3% 5.9% 6.9% 7.8%
4% 7.1% 8.3% 9.4%
5% 8.2% 9.7% 10.9%
6% 9.4% 11.1% 12.5%
7% 10.6% 12.5% 14.1%
8% 11.8% 13.9% 15.6%
9% 12.9% 15.3% 17.2%
============================================================
For a free Fact Kit containing more complete information, including charges and
expenses, call 1-800-US-FUNDS. Read the prospectus carefully before investing.
Past performance is no guarantee of future results.
