STATEMENT OF ADDITIONAL INFORMATION
UNITED SERVICES FUNDS
U.S. Gold Shares Fund ("Gold Shares Fund")
U.S. Global Resources Fund ("Global Resources Fund")
U.S. World Gold Fund ("World Gold Fund")
U.S. Treasury Securities Cash Fund
U.S. Income Fund ("Income Fund")
U.S. Tax Free Fund ("Tax Free Fund")
U.S. Government Securities Savings Fund
U.S. Real Estate Fund ("Real Estate Fund")
United Services Intermediate Treasury Fund
("Intermediate Treasury Fund")
United Services Near-Term Tax Free Fund
("Near-Term Tax Free Fund")
(the "Funds")
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the appropriate Fund prospectus dated November 1,
1995, (the "prospectus"), which may be obtained from United Services Advisors,
Inc. (the "Advisor"), P.O. Box 29467, San Antonio, Texas 78229-0467.
The date of this Statement of Additional Information is November 1,
1995 as amended June 11, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION.......................................................... 3
INVESTMENT OBJECTIVES AND POLICIES........................................... 3
Investment Restrictions.................................................. 4
GOLD SHARES FUND................................................... 6
GLOBAL RESOURCES FUND.............................................. 7
WORLD GOLD FUND.................................................... 7
U.S. TREASURY SECURITIES CASH FUND AND U.S. GOVERNMENT
SECURITIES SAVINGS FUND......................................... 8
INCOME FUND......................................................... 8
TAX FREE FUND AND NEAR-TERM TAX FREE FUND .......................... 8
REAL ESTATE FUND................................................... 12
INTERMEDIATE TREASURY FUND......................................... 12
SPECIAL RISK CONSIDERATIONS.................................................. 12
PORTFOLIO TRANSACTIONS................................................... 16
MANAGEMENT OF THE FUNDS...................................................... 17
PRINCIPAL HOLDERS OF SECURITIES.............................................. 21
INVESTMENT ADVISORY SERVICES................................................. 21
ADVISORY FEE SCHEDULE........................................................ 22
TRANSFER AGENCY AND OTHER SERVICES........................................... 23
CERTAIN PURCHASES OF SHARES OF THE FUNDS..................................... 24
ADDITIONAL INFORMATION ON REDEMPTIONS........................................ 25
Wire Redemptions -- U.S. Treasury Securities Cash Fund and
U.S. Government Securities Savings Fund Only....................... 25
Check Redemptions -- U.S. Treasury Securities Cash Fund and
U.S. Government Securities Savings Fund Only....................... 25
Redemption in Kind...................................................... 25
Suspension of Redemption Privileges..................................... 25
CALCULATION OF PERFORMANCE DATA.............................................. 25
TAX STATUS................................................................... 28
Taxation of the Funds -- In General..................................... 28
Taxation of the Funds' Investments...................................... 29
Taxation of the Shareholder............................................. 29
CUSTODIAN.................................................................... 30
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL.................................... 31
INFORMATION ABOUT SECURITIES RATINGS......................................... 31
FINANCIAL STATEMENTS......................................................... 31
GENERAL INFORMATION
United Services Funds (the "Trust") is an open-end management
investment company and is a voluntary association of the type known as a
"business trust" organized under the laws of the Commonwealth of Massachusetts.
There are numerous series within the Trust, each of which represents a separate
diversified portfolio of securities (collectively referred to herein as the
"Portfolios" or "Funds" and individually as a "Portfolio" or "Fund").
The assets received by the Trust from the issue or sale of shares of
each of the Funds, and all income, earnings, profits and proceeds thereof,
subject only to the rights of creditors, are separately allocated to such Fund.
They constitute the underlying assets of each Fund, are required to be
segregated on the books of accounts, and are to be charged with the expenses
with respect to such Fund. Any general expenses of the Trust, not readily
identifiable as belonging to a particular Fund, shall be allocated by or under
the direction of the Board of Trustees in such manner as the Board determines to
be fair and equitable.
Each share of each of the Funds represents an equal proportionate
interest in that Fund with each other share and is entitled to such dividends
and distributions, out of the income belonging to that Fund, as are declared by
the Board. Upon liquidation of the Trust, shareholders of each Fund are entitled
to share pro rata in the net assets belonging to the Fund available for
distribution.
The Trustees have exclusive power, without the requirement of
shareholder approval, to issue series of shares without par value, each series
representing interests in a separate portfolio, or divide the shares of any
portfolio into classes, each class having such different dividend, liquidation,
voting and other rights as the Trustees may determine, and may establish and
designate the specific classes of shares of each portfolio. Before establishing
a new class of shares in an existing portfolio, the Trustees must determine that
the establishment and designation of separate classes would not adversely affect
the rights of the holders of the initial or previously established and
designated class or classes.
As described under "The Trust" in the prospectus, under the Trust's
First Amended and Restated Master Trust Agreement (the "Master Trust
Agreement"), no annual or regular meeting of shareholders is required. In
addition, after the Trustees were initially elected by the shareholders, the
Trustees became a self-perpetuating body. Thus, there will ordinarily be no
shareholder meetings unless otherwise required by the Investment Company Act of
1940.
On any matter submitted to shareholders, the holder of each share is
entitled to one vote per share (with proportionate voting for fractional
shares). On matters affecting any individual Fund, a separate vote of that Fund
would be required. Shareholders of any Fund are not entitled to vote on any
matter which does not affect their Fund but which requires a separate vote of
another Fund.
Shares do not have cumulative voting rights, which means that in
situations in which shareholders elect Trustees, holders of more than 50% of the
shares voting for the election of Trustees can elect 100% of the Trust's
Trustees, and the holders of less than 50% of the shares voting for the election
of Trustees will not be able to elect any person as a Trustee.
Shares have no preemptive or subscription rights and are fully
transferable. There are no conversion rights.
Under Massachusetts law, the shareholders of the Trust could, under
certain circumstances, be held personally liable for the obligations of the
Trust. However, the Master Trust Agreement disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Master Trust Agreement provides for
indemnification out of the Trust's property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations.
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the Funds'
investment objectives and policies discussed in the Trust's prospectuses.
INVESTMENT RESTRICTIONS
None of the Funds will change its investment objectives as set forth in
the prospectus, and none of the Funds will change any of the following
investment restrictions, without, in either case, the affirmative vote of a
majority of the outstanding voting securities of that Fund, which, as used
herein, means the lesser of (1) 67% of that Fund's outstanding shares present at
a meeting at which more than 50% of the outstanding shares of that Fund are
represented either in person or by proxy, or (2) more than 50% of that Fund's
outstanding shares.
A Fund may not:
(1) Issue senior securities.
(2) Borrow money, except that a Fund may borrow not in excess of 5%
of the total assets of that Fund from banks as a temporary
measure for extraordinary purposes. The Intermediate Treasury
Fund, Gold Shares Fund, and World Gold Fund may borrow money
only for temporary or emergency purposes (not for leveraging or
investment), and the amount of such borrowings may not exceed 33
1/3% of a Fund's total assets (including the amount borrowed)
less liabilities (other than borrowings).
(3) Underwrite the securities of other issuers, except for the GOLD
SHARES FUND, GLOBAL RESOURCES FUND AND WORLD GOLD FUND, to the
extent that these Funds may be deemed to act as an underwriter
in certain cases when disposing of restricted securities.
(4) Invest in real estate, except as may be represented by
securities for which there is an established market or, with
respect to the GOLD SHARES FUND, when such interests are an
incidental part of assets acquired through merger or
consolidation, and except that this restriction shall not
prevent the REAL ESTATE FUND from making any investment which is
otherwise consistent with its investment objectives and
policies.
(5) Engage in the purchase or sale of commodities or commodity
futures contracts, except that the Gold Shares Fund and World
Gold Fund may (i) invest not more than 10% of its total net
assets in gold and gold bullion and (ii) invest in futures
contracts, options on futures contracts and similar instruments.
(6) Lend its assets, except that any Fund may purchase money market
debt obligations and repurchase agreements secured by money
market obligations, and except for the purchase or acquisition
of bonds, debentures or other debt securities of a type
customarily purchased by institutional investors and except that
any Fund may lend portfolio securities with an aggregate market
value of not more than one-third of such Fund's total net
assets. (Accounts receivable for shares purchased by telephone
shall not be deemed loans.) The NEAR-TERM TAX FREE FUND may not
lend its assets, except that purchases of debt securities in
furtherance of the Fund's investment objectives will not
constitute lending of assets.
(7) Purchase any security on margin, except that it may obtain such
short-term credits as are necessary for clearance of securities
transactions.
(8) Make short sales.
(9) Invest in securities which are subject to legal or contractual
restrictions on resale ("restricted securities"), except that
the GOLD SHARES FUND, THE GLOBAL RESOURCES FUND and the WORLD
GOLD FUND may invest up to 10% of the value of their respective
net assets in such restricted securities. Any such investments
by the GOLD SHARES FUND will be in companies that have been in
existence for two consecutive years or more, including the
operation of predecessors, and that have not defaulted in the
payment of any debt within such two years. (This 10% restriction
includes the 2% restriction on warrants described in (12)
below.)
(10) Invest more than 25% of its total assets in securities of
companies principally engaged in any one industry, except that
the GOLD SHARES FUND will invest primarily in securities of
companies involved in the exploration for, mining of, processing
of or dealing in gold; the GLOBAL RESOURCES FUND and the WORLD
GOLD FUND will invest at least 25% of the value of their
respective total assets in securities of companies principally
engaged in natural resource operations; the U.S. TREASURY
SECURITIES CASH FUND will invest exclusively in short-term debt
obligations of the United States Treasury which are protected by
the full faith and credit of the United States Government, and
including repurchase agreements collateralized by such
Government obligations; the INTERMEDIATE TREASURY FUND will
invest exclusively in debt obligations of the United States
Government which are protected by the full faith and credit of
the United States Government and including repurchase agreements
collateralized by such government obligations; the GOVERNMENT
SECURITIES SAVINGS FUND will invest exclusively in short-term
obligations of the U.S. Government and its agencies and
instrumentalities; the TAX FREE FUND and the NEAR-TERM TAX FREE
FUND may invest more than 25% of its total assets in general
obligation bonds or in securities issued by states or
municipalities in connection with the financing of projects with
similar characteristics, such as hospital revenue bonds, housing
revenue bonds or electric power project bonds; and the REAL
ESTATE FUND will invest at least 65% of its assets in securities
of companies engaged principally in or related to the real
estate industry. The TAX FREE FUND and the NEAR-TERM TAX FREE
FUND will consider industrial revenue bonds where payment of
principal and interest is the ultimate responsibility of
companies within the same industry as securities from one
industry. For purposes of determining industry concentration,
each Fund relies on the Standard Industrial Classification as
compiled by Standard & Poor's Compustat Services, Inc., as in
effect from time to time.
(11) (a) Invest more than 5% of the value of its total assets in
securities of any one issuer, except such limitation shall not
apply to obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities, or (b) acquire
more than 10% of the voting securities of any one issuer. (These
limitations as to the GOLD SHARES FUND and the NEAR-TERM TAX
FREE FUND apply to only 75% of the value of their respective
gross assets.)
The following investment restrictions may be changed by the Board of
Trustees without a shareholder vote, except that any change in the restriction
of the GOLD SHARES FUND described in (12) does require a shareholder vote.
A Fund may not:
(12) Invest in warrants to purchase common stock, except as provided
in restriction (#23) below and, except that the GOLD SHARES FUND
may invest up to 2% of the value of its net assets in marketable
warrants to purchase common stock.
(13) Invest in companies for the purpose of exercising control or
management.
(14) Invest in securities of companies (including predecessors) that
have been in continuous operation for less than 3 years, except
that the GOLD SHARES FUND, the GLOBAL RESOURCES FUND, the WORLD
GOLD FUND and the REAL ESTATE FUND may each invest up to 5% of
their total net assets in such securities, and except that with
respect to the REAL ESTATE FUND, this limitation shall not apply
to securities of real estate investment trusts, and except that
this restriction shall not apply to the TAX FREE FUND and the
NEAR-TERM TAX FREE FUND.
(15) Hypothecate, pledge, or mortgage any of its assets, except to
secure loans as a temporary measure for extraordinary purposes
and except as may be required to collateralize letters of credit
to secure state surety bonds.
(16) Participate on a joint or joint and several basis in any trading
account (except for a joint securities trading account with
other Funds managed by the Advisor for repurchase agreements
permitted by the Securities and Exchange Commission pursuant to
an exemptive order).
(17) In the case of the TREASURY SECURITIES CASH FUND, the GOVERNMENT
SECURITIES SAVINGS FUND, TAX FREE FUND, INTERMEDIATE TREASURY
FUND and the NEAR-TERM TAX FREE FUND only, invest in any foreign
securities. However, all Funds may invest in foreign securities
listed and traded on domestic securities exchanges to the extent
consistent with their investment objectives (although the Funds
stated herein have no present intent to do so).
(18) Invest more than 10% of its total net assets in securities that
do not have readily available market quotations or are otherwise
not readily marketable. In the case of the GLOBAL RESOURCES
FUND, included in illiquid securities are foreign securities not
listed on a domestic or foreign exchange.
(19) (Intentionally omitted)
(20) In the case of the INCOME FUND, invest less than 80% of its
total net assets in income-producing securities.
(21) In the case of all but the GOLD SHARES FUND, the GLOBAL
RESOURCES FUND and the WORLD GOLD FUND, invest in oil, gas or
other mineral exploration or development programs, but this
shall not prevent a Fund from purchasing securities of companies
in the oil, gas or mineral business if such purchase is
otherwise consistent with each Fund's investment objectives and
policies. The Funds are prohibited from any investment in oil,
gas, and other mineral leases.
(22) In the case of the GLOBAL RESOURCES FUND, the WORLD GOLD FUND,
the TREASURY SECURITIES CASH FUND, and the INTERMEDIATE TREASURY
FUND, invest more than 10% of its total net assets in repurchase
agreements of more than seven days maturity. These repurchase
agreements must be collateralized by United States Government or
United States Government Agency securities whose market values
equal 102% of the principal amount of the repurchase
obligations.
(23) In the case of the WORLD GOLD FUND and the INCOME FUND, invest
more than 5% of their respective total net assets in warrants.
The GLOBAL RESOURCES FUND may invest up to 5% of its total net
assets in warrants (which are valued at the lower of cost or
market); however, the GLOBAL RESOURCES FUND'S investments in
warrants not listed on the New York or American Stock Exchange
may not exceed 2% of its total net assets.
(24) In the case of the REAL ESTATE FUND, purchase or sell real
property (including limited partnership interests, but excluding
readily marketable interests in real estate investment trusts or
readily marketable securities of companies which invest in real
estate).
(25) In the case of the INTERMEDIATE TREASURY FUND and the NEAR-TERM
TAX FREE FUND, purchase securities of any other investment
company, except as part of a plan of merger, consolidation or
reorganization.
(26) Neither the GOLD SHARES FUND nor the WORLD GOLD FUND will
purchase any security while borrowings represent more than 5% of
their total assets outstanding.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of net assets, will not be considered a violation
of any of the foregoing restrictions.
The following discussion of the investment objectives, policies and
risks associated with each particular Fund supplements the discussions in the
prospectuses.
GOLD SHARES FUND
The Gold Shares Fund intends to concentrate its investments in common
stocks of companies involved in exploration for, mining of, processing of, or
dealing in gold, with emphasis on stock of foreign companies. The Gold Shares
Fund may also invest in the securities of issuers engaged in operations related
to silver and other precious metals. The Gold Shares Fund may also invest in the
securities of closed-end investment companies, provided its investments in these
securities do not exceed 3% of the total voting stock of such closed-end
investment company.
The Advisor believes that securities of companies engaged in gold
operations offer an opportunity to achieve long-term capital appreciation and
protection of wealth from eroding monetary values. In recent years, governments
of nations throughout the world have had increasing government deficits
accompanied by increases in their money supplies. A concomitant of this
world-wide and resurgent inflation has been increased world-wide demand for
gold. In addition, demand for gold has been stimulated by unstable political,
monetary and social conditions. As a result, when the rate of inflation
increased between 1972 and 1974, the prices of gold and gold mining stock
increased rapidly. On the other hand, in 1975 and 1976 when inflation leveled
off, gold and stock of gold mining companies declined. The years from the end of
1976 to September 1981 were years of increasing inflation and uncertain monetary
conditions. The price of gold generally rose until January 1980 and the price of
gold mining stock generally rose until September 1981. Since September 1981,
inflation has moderated and both gold and gold mining stocks have generally
declined. The prices of gold mining stocks are volatile and there can be no
assurance that they will rise in the future. See "Volatility of Gold Company
Stocks."
The investment philosophy of the Gold Shares Fund is that in times of
severe economic and monetary instability, people have historically tended to buy
gold and other precious metals as a "store of value" to the extent that they
lose confidence in the purchasing power of the currencies of their countries. As
a consequence, in times of economic and monetary instability, it is expected
that the long-term earnings and market prices of companies that mine and process
precious metals, especially gold, may perform better than certain other types of
investments. People and governments who have studied the historical role of gold
as money acquire gold in times of monetary inflation because of an increase in
the purchasing power of gold in relation to paper money. Gold can be purchased
in bullion form, in coins, in futures contracts or in the form of stock of gold
mining companies. Selected gold mining companies are the most attractive vehicle
for gold investment because of the high earnings and yields the mines provide
and because unmined gold securely held in its natural state in mines provides a
call on future earnings and dividends.
GLOBAL RESOURCES FUND
The concentration of the Global Resources Fund's investments in the
common stock of companies engaged in the exploration, mining, processing,
fabrication and distribution of natural resources of any kind is premised on the
Advisor's belief that over the long term the value of certain metals, minerals,
gold and other natural resources will increase, and that the value of securities
of companies involved in such natural resources operations will also increase.
There may be temporary periods, however, when investments in such securities
should be reduced due to unusual or adverse economic conditions in the natural
resource industries and, therefore, the Global Resources Fund may adopt a
defensive investment policy under which its assets may be temporarily invested,
without limitation other than the Global Resources Fund's investment
restriction, in short-term money market instruments such as United States
Treasury securities, if, in the opinion of the Advisor, market conditions
warrant. Such market conditions might include developments in the markets for
the natural resources produced by the issuers in which the Global Resources Fund
invests, political and economic developments in the foreign countries in which
the Global Resources Fund has purchased securities, or other developments.
The investment philosophy of the Global Resources Fund is that in times
of severe economic and monetary instability, people have historically tended to
buy natural resource metals and minerals as a "store of value" to the extent
that they lose confidence in the purchasing power of the currencies of their
countries. As a consequence, in times of economic and monetary instability it is
expected that the long-term earnings and market prices of companies that mine
and process metals and minerals, especially gold and silver, may perform better
than certain other types of investments.
WORLD GOLD FUND
The concentration of the World Gold Fund's investments in the common
stock of companies engaged in the exploration, mining, processing, fabrication
and distribution of gold is premised on the Advisor's belief that, over the long
term, the value of gold, other metals and minerals and other natural resources
will increase, and that the value of securities of companies involved in gold
and other natural resources operations will also increase. There may be
temporary periods, however, when investments in such securities should be
reduced due to unusual or adverse economic conditions in the natural resource
industries and, therefore, the World Gold Fund may adopt a defensive investment
policy under which its assets may be temporarily invested, without limitation
other than the World Gold Fund's investment restrictions, in short-term money
market instruments (other than repurchase agreements with maturities of more
than seven days) such as U.S. Treasury securities if, in the opinion of the
Advisor, market conditions warrant. Such market conditions might include
developments in the markets for the natural resources produced by the issuers in
which the World Gold Fund invests, political and economic developments in the
foreign countries in which the World Gold Fund has purchased securities, or
other developments as described under "Special Risk Considerations Affecting the
Gold Shares Fund, the Global Resources Fund and the World Gold Fund."
The investment philosophy of the World Gold Fund is that in times of
severe economic and monetary instability, people have historically tended to buy
gold and other metals and minerals as a "store of value" to the extent that they
lose confidence in the purchasing power of the currencies of their countries. As
a consequence, in times of economic and monetary instability, it is expected
that the long-term earnings and market prices of companies that mine and process
metals and minerals, especially gold and silver, may perform better than certain
other types of investments.
U.S. TREASURY SECURITIES CASH FUND AND U.S. GOVERNMENT SECURITIES SAVINGS FUND
The U.S. Treasury Securities Cash Fund and U.S. Government Securities
Savings Fund have adopted a fundamental policy requiring use of best efforts to
maintain a constant net asset value of $1.00 per share. Shareholders should
understand that, while the Trust will use its best efforts to attain this
objective, there can be no guarantee that it will do so. The U.S. Treasury
Securities Cash Fund and U.S. Government Securities Savings Fund value their
respective portfolio securities on the basis of the amortized cost method. See
"Pricing of Securities Being Offered." This requires that those Funds maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 397 days or less, and invest only in
securities determined by the Board of Trustees of the Trust to be of high
quality with minimal credit risks. See "U.S. Government Securities Savings Fund"
in the Government Money Funds prospectus.
INCOME FUND
In order to increase current income, the Income Fund may write (sell)
covered call options on common stock in its portfolio.
The covered call option activities of the Income Fund may affect its
turnover rate and the amount of brokerage commissions paid by the Income Fund.
The exercise of call options written by the Income Fund may cause the Income
Fund to sell portfolio securities, thus increasing the Income Fund's turnover
rate.
The Income Fund will pay a brokerage commission each time it writes a
covered call option. Such commissions may be higher than those that would apply
to direct purchases and sales of portfolio securities. The call activities of
the Income Fund may be restricted if options relating to the types of securities
in which the Income Fund will invest are not listed on domestic exchanges or
quoted on NASDAQ.
When the Income Fund writes a call option, it will be required to
collateralize the option transaction with the underlying securities, which
assets will not be available for use by the Income Fund.
The Income Fund may also purchase call options. The Fund will purchase
call options only in closing transactions; that is, to close out a call option
which it has written.
The Income Fund's annual rate of portfolio turnover may vary widely
from year to year depending on market conditions and prospects and may be higher
than that of other mutual funds with preservation of capital, and consistent
with that objective, production of current income as an investment objective.
For the fiscal years ended June 30, 1993, 1994 and 1995, the Income Fund's rate
of portfolio turnover equaled 44.18%, 6.91% and 7.02%, respectively. High
portfolio turnover in any given year indicates a substantial amount of
short-term trading, which will result in payment by the Income Fund from capital
of above-average amounts of brokerage commissions and could result in the
payment by shareholders of above-average amounts of taxes on realized investment
gain. Any short-term gain realized on securities will be taxed to shareholders
as ordinary income. See "Dividends and Taxes."
TAX FREE FUND AND NEAR-TERM TAX FREE FUND
As stated in the prospectus, the Tax Free Fund and the Near-Term Tax
Free Fund seek to provide a high level of current income that is exempt from
Federal income taxation and to preserve capital. To achieve that objective, the
Fund's portfolio will consist of short-term, intermediate and long-term debt
obligations issued by or on behalf of states, territories and possessions of the
United States and the District of Columbia and their political sub-divisions,
agencies or instrumentalities, or multi-state agencies or authorities. These
securities are generally known as "municipal bonds."
The Tax Free Fund will invest only in securities which are rated one of
the four highest ratings by Moody's Investors Service (Aaa, Aa, A, or Baa) or by
Standard & Poor's Corporation (AAA, AA, A, or BBB). (A description of Moody's
and Standard & Poor's rating systems is presented on page 31 of this Statement
of Additional Information.) No investments in the fourth category of bonds (Baa
and BBB) will be made if it causes the aggregate of such investments to exceed
10% of total net assets of the Fund. Investments in this fourth category may
have speculative characteristics and may involve higher risks. Even though these
investments are generally regarded as having an adequate capacity to pay
interest and repay principal, they may be more susceptible to adverse changes in
the economy.
The Tax Free Fund's annual rate of portfolio turnover may vary widely
from year to year depending on market conditions and prospects and may be higher
than that of other mutual funds with an investment objective of providing a high
level of current income that is exempt from Federal income taxation. For the
fiscal years ended June 30, 1993, 1994, and 1995, the Tax Free Fund's rate of
portfolio turnover equaled 93.96%, 50.87% and 21.52%, respectively. For the
fiscal years ended June 30, 1993, 1994 and 1995, the Near-Term Tax Free Fund's
rate of portfolio turnover equalled 139.56%, 69.13% and 52.63%, respectively
(the Fund was restructured due to a change in objectives during fiscal year
1993). High portfolio turnover in any given year indicates a substantial amount
of short-term trading, which will result in payment by the Tax Free Fund from
capital of above-average amounts of brokerage commissions and could result in
the payment by shareholders of above-average amounts of taxes on realized
investment gain. Any short-term gain realized on securities will be taxed to
shareholders as ordinary income. See "Dividends and Taxes."
Subsequent to a purchase by the Tax Free Fund, an issue of municipal
bonds may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Tax Free Fund. Neither event will require sale of
such municipal bonds by the Tax Free Fund, but the Advisor will consider such
event in its determination of whether the Tax Free Fund should continue to hold
the municipal bonds. To the extent that the rating given by Moody's or Standard
& Poor's for municipal bonds may change as a result of changes in such
organizations or their rating systems, the Tax Free Fund will attempt to use
comparable ratings as standards for its investments in accordance with the
investment policies contained in the prospectus and in this Statement of
Additional Information.
United Services Funds' Management buys and sells securities for the
Funds to accomplish investment objectives. The Funds' investment policies may
lead to frequent changes in investments, particularly in periods of rapidly
fluctuating interest rates. The Funds' investments may also be traded to take
advantage of perceived short-term disparities in market values or yields among
securities of comparable quality and maturity.
GENERAL INFORMATION ON MUNICIPAL BONDS. Municipal bonds are generally
understood to include debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as airports, bridges, highways, housing, hospitals, mass transportation,
schools, streets, and water and sewer works. Other public purposes for which
municipal bonds may be issued include the refunding of outstanding obligations,
obtaining funds for general operating expenses and lending such funds to other
public institutions and facilities. In addition, certain types of private
activity bonds are issued by or on behalf of public authorities to obtain funds
to provide privately operated hazardous waste-treatment facilities; certain
redevelopment projects; airports, docks, and wharves (other than lodging,
retail, and office facilities); mass commuting facilities; multifamily
residential rental property; sewage and solid waste disposal property;
facilities for the furnishing of water; and local furnishing of electric energy
or gas or district heating and cooling facilities. Such obligations are
considered to be municipal bonds provided that the interest paid thereon
qualifies as exempt from Federal income tax, in the opinion of bond counsel, to
the issuer. In addition, if the proceeds from private activity bonds are used
for the construction, equipment, repair or improvement of privately operated
industrial or commercial facilities, the interest paid on such bonds may be
exempt from Federal income tax, although current Federal tax laws place
substantial limitations on the size of such issues.
In order to be classified as a "diversified" investment company under
the 1940 Act, a Fund may not, with respect to 75% of its total assets, invest
more than 5% of its total assets in the securities of any one issuer (except
U.S. government obligations) or own more than 10% of the outstanding voting
securities of any one issuer. For the purpose of diversification under the 1940
Act, the identification of the issuer of municipal bonds depends on the terms
and conditions of the security. When the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate from
those of the government creating the issuing entity and the security is backed
only by the assets and revenues of such entity, such entity would be deemed to
be the sole issuer. Similarly, in the case of a private activity bond, if that
bond is backed only by the assets and revenues of the non-governmental user,
then such non-governmental user would be deemed to be the sole issuer. If,
however, in either case the creating government or some other entity guarantees
a security, such a guarantee may be considered a separate security and is to be
treated as an issue of such government or other entity.
The yields on municipal bonds are dependent on a variety of factors,
including general economic and monetary conditions, money market factors,
conditions of the municipal bond market, size of a particular offering, maturity
of the obligation, and rating of the issue. The imposition of a Fund's
management fees, as well as other operating expenses, will have the effect of
reducing the yield to investors.
Municipal bonds are also subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Code, and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations or upon municipalities by levying taxes. There is also the
possibility that, as a result of litigation or other conditions, the power or
ability of any one or more issuers to pay, when due, principal of and interest
on its, or their, municipal bonds may be materially affected. The Tax Reform Act
of 1986 enlarged the scope of the alternative minimum tax. As a result, interest
on private activity bonds issued after August 7, 1986 will be a preference item
for alternative minimum tax purposes.
From time to time, proposals to restrict or eliminate the Federal
income tax exemption for interest on municipal bonds have been introduced before
Congress. Similar proposals may be introduced in the future. If such a proposal
were enacted, the availability of municipal bonds for investment by the Funds
would be adversely affected. In such event, the Funds would re-evaluate their
investment objective and policies.
MUNICIPAL NOTES. Municipal notes are generally used to provide for
short-term capital needs and generally have maturities of one year or less.
Municipal notes include:
1. Tax Anticipation Notes. Tax anticipation notes are issued to finance
working capital needs of state and local governments. Generally, they are issued
in anticipation of various seasonal tax revenues, such as ad valorem property,
income sales, use and business taxes, and are payable from these specific future
taxes. Tax anticipation notes are usually general obligations of the issuer.
General obligations are secured by the issuer's pledge of its full faith, credit
and taxing power for the payment of principal and interest.
2. Revenue Anticipation Notes. Revenue anticipation notes are issued by
state and local governments or governmental bodies with the expectation that
receipt of future revenues, such as Federal revenue sharing or state aid
payments, will be used to repay the notes. Typically, they also constitute
general obligations of the issuer.
3. Bond Anticipation Notes. Bond anticipation notes are issued
to provide interim financing for state and local governments until long-term
financing can be arranged. In most cases, the long-term bonds then provide the
money for the repayment of the notes.
4. Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a
short-term obligation with a stated maturity of 365 days or less. It is issued
and backed by agencies of state and local governments to finance seasonal
working capital needs or as short-term financing in anticipation of longer-term
financing.
VARIABLE RATE DEMAND OBLIGATIONS. Variable rate obligations have a
yield which is adjusted periodically based upon changes in the level of
prevailing interest rates. Such adjustments are generally made on a daily,
weekly or monthly basis. Variable rate obligations lessen the capital
fluctuations usually inherent in fixed income investments.
Unlike securities with fixed rate coupons, variable rate instrument
coupons are not fixed for the full term of the instrument. Rather, they are
adjusted periodically based upon changes in prevailing interest rates. The more
frequently such instruments are adjusted, the less such instruments are affected
by interest rate changes. The value of a variable rate instrument, however, may
fluctuate in response to market factors and changes in the creditworthiness of
the issuer. By investing in variable rate obligations the Funds seek to take
advantage of the normal yield curve pattern that usually results in higher
yields on longer-term investments. This policy also means that should interest
rates decline, a Fund's yield will decline and that Fund and its shareholders
will forego the opportunity for capital appreciation of that Fund's investments
and of their shares to the extent a portfolio is invested in variable rate
obligations. Should interest rates increase, a Fund's yield will increase and
that Fund and its shareholders will be subject to lessened risks of capital
depreciation of its portfolio investments and of their shares to the extent a
portfolio is invested in variable rate obligations. There is no limitation on
the percentage of the Funds' assets which may be invested in variable rate
obligations. For purposes of determining a Fund's weighted average portfolio
maturity, the term of a variable rate obligation is defined as the longer of the
length of time until the next rate adjustment or the time of demand.
Floating rate demand notes have an interest rate fixed to a known
lending rate (such as the prime rate) and are automatically adjusted when the
known rate changes. Variable rate demand notes have an interest rate which is
adjusted at specified intervals to a known rate. Demand notes provide that the
holder may demand payment of the note at its par value plus accrued interest by
giving notice to the issuer. To ensure that ability of the issuer to make
payment upon such demand, the note may be supported by an unconditional bank
letter of credit.
The Trustees have approved investments in floating and variable rate
demand notes upon the following conditions: the Funds have an unconditional
right of demand, upon notice to exceed thirty days, against the issuer to
receive payment; the Advisor determines the financial condition of the issuer
and continues to monitor it in order to be satisfied that the issuer will be
able to make payment upon such demand, either from its own resources or through
an unqualified commitment from a third party; and the rate of interest payable
is calculated to ensure that the market value of such notes will approximate par
value on the adjustment dates.
OBLIGATIONS WITH TERM PUTS ATTACHED. The Funds may purchase municipal
securities together with the right that it may resell the securities to the
seller at an agreed-upon price or yield within a specified period prior to the
maturity date of the securities. Although it is not a put option in the usual
sense, such a right to resell is commonly known as a "term put." The Funds may
purchase obligations with puts attached from banks and broker-dealers.
The price which the Funds expect to pay for municipal securities with
puts generally is higher than the price which otherwise would be paid for the
municipal securities alone. The Funds will use puts for liquidity purposes in
order to permit it to remain more fully invested in municipal securities than
would otherwise be the case by providing a ready market for certain municipal
securities in its portfolio at an acceptable price. The put generally is for a
shorter term than the maturity of the municipal security and does not restrict
in any way the Funds' ability to dispose of (or retain) the municipal security.
In order to ensure that the interest on municipal securities subject to
puts is tax-exempt to the Fund, it will limit its use of puts in accordance with
applicable interpretations and rulings of the Internal Revenue Service.
Since it is difficult to evaluate the likelihood of exercise of the
potential benefit of a put, it is expected that puts will be determined to have
a "value" of zero, regardless of whether any direct or indirect consideration
was paid. Accordingly, puts as separate securities are expected not to affect
the calculation of the weighted average portfolio maturity. Where a Fund has
paid for a put, the cost will be reflected as unrealized depreciation in the
underlying security for the period during which the commitment is held, and
therefore would reduce any potential gain on the sale of the underlying security
by the cost of the put. There is a risk that the seller of the put may not be
able to repurchase the security upon exercise of the put by that Fund. To
minimize such risks, the Funds will only purchase obligations with puts attached
from sellers whom the Advisor believes to be creditworthy.
WHEN-ISSUED SECURITIES AND FIRM COMMITMENTS. In order to secure what
the Advisor considers to be an advantageous price or yield, a Fund may purchase
securities on a "when-issued" or "firm commitment" basis or may purchase or sell
securities for delayed delivery, that is payment for and delivery of the
securities (the "settlement date") normally takes place 15 to 45 days after the
date the offer is accepted. A Fund will enter into such purchase transactions
for the purpose of acquiring portfolio securities and not for the purpose of
leverage. Delivery of the securities, in such cases, occurs beyond the normal
settlement periods, but no payment or delivery is made by that Fund prior to the
reciprocal delivery or payment by the other party to the transaction. The Funds
rely on the other party to consummate the transaction, and may be disadvantaged
if the other party fails to do so.
These municipal securities are normally subject to changes in value
based upon changes, real or anticipated, in the level of interest rates and, to
a lesser extent, the public's perception of the creditworthiness of the issuers.
In general, municipal securities tend to appreciate when interest rates decline
and depreciate when interest rates rise. Purchasing municipal securities on a
when-issued basis or delayed delivery basis, therefore, can involve the risk
that the yields available in the market, when the delivery takes place, may
actually be higher than those obtained in the transaction itself.
At all times the Funds will restrict cash (which may be invested in
repurchase obligations) or liquid securities equal to the amount of a Fund's
when-issued or delayed delivery commitments. The restricted cash or liquid
securities will either be identified as being restricted in the Fund's
accounting records or physically segregated in a separate account at Bankers
Trust Company, the Funds' custodian. For the purpose of determining the adequacy
of the securities in the account, the deposited securities will be valued at
market or fair value. If the market or fair value of such securities declines,
additional cash or securities will be restricted on a daily basis so that the
value of the account will equal the amount of such commitments by that Fund. On
the settlement date, that Fund will meet its obligations from then-available
cash flow, the sale of securities held in the separate account, the sale of
other securities, or, although it would not normally expect to do so, from the
sale of the when-issued or delayed delivery securities themselves (which may
have a greater or lesser value than a Fund's payment obligations).
REAL ESTATE FUND
The Real Estate Fund is designed to provide investors the advantages of
real estate investment with the convenience and liquidity provided by a
professionally managed fund.
The Fund's portfolio will consist primarily of securities of companies
in the real estate industry or securities of companies related to the real
estate industry. Because the Fund's portfolio will be concentrated in one
industry, this would not be a suitable investment for a person seeking a more
diversified portfolio.
The Fund's investments will include the common and preferred stock of
companies, including real estate investment trusts ("REITS"), listed on national
securities exchanges or on NASDAQ which have at least 50% of the value of their
assets in, or which derive at least 50% of their revenue from, the ownership,
construction, management or sale of residential, commercial or industrial real
estate.
INTERMEDIATE TREASURY FUND
The Intermediate Treasury Fund's investment objective is to seek a high
current income and preservation of capital by investing in United States
Treasury securities. The Fund will invest 100% of its portfolio in United States
Treasury securities and will invest at least 65% of its portfolio in United
States Treasury securities that have a remaining maturity from one to ten years.
The weighted average maturity of the portfolio will range between three and ten
years.
United Services Funds' Management buys and sells securities for the
Intermediate Treasury Fund to accomplish investment objectives. The Fund's
investment policies may lead to frequent changes in investments, particularly in
periods of rapidly fluctuating interest rates. The Fund's investments may also
be traded to take advantage of perceived short-term disparities in market values
or yields among securities of comparable quality and maturity.
SPECIAL RISK CONSIDERATIONS
The following are among the most significant risks associated with an
investment in the Funds.
U.S. GOLD SHARES FUND, U.S. GLOBAL RESOURCES FUND,
U.S. WORLD GOLD FUND, U.S. INCOME FUND,
AND U.S. REAL ESTATE
INVESTMENT IN FOREIGN SECURITIES. Investment in securities of foreign
issuers may involve special considerations and additional risks not present in
domestic investments. These include fluctuating exchange rates, the fact that
foreign securities, and the markets therefore, may not be as liquid as their
domestic issuers, the risk of adverse changes in foreign investment or exchange
control regulations, expropriation or confiscatory taxation, political or
financial instability, or other developments which can affect investments. As a
result, the selection of investments in foreign issuers may be more difficult
and subject to greater risks than investment in domestic issuers. The Gold
Shares Fund, the Global Resources Fund, the World Gold Fund, the Income Fund and
the Real Estate Fund will invest in the securities of foreign issuers that are
listed on a domestic exchange, quoted on NASDAQ, or traded in the domestic
over-the-counter market. In addition, when available, the Funds will invest in
American Depository Receipts ("ADRs") or other securities which can be sold for
United States dollars and for which market quotations are readily available in
New York, so that some of these risks may be minimized. (ADRs are certificates
issued by United States banks representing the right to receive securities of a
foreign issuer deposited in that bank or a correspondent bank.) The Gold Shares
Fund, the Global Resources Fund, the World Gold Fund, and the Real Estate Fund
may also invest in securities of foreign issuers that are listed on foreign
securities exchanges or, except for the Real Estate Fund, traded in the foreign
over-the-counter market.
GOLD SHARES FUND, GLOBAL RESOURCES FUND,
WORLD GOLD FUND, AND REAL ESTATE FUND
CONCENTRATION. Because the investment alternatives of the Gold Shares
Fund are restricted by its policy of normally maintaining 65% of its total
assets in securities of companies involved in gold operations, the Global
Resources Fund's and the World Gold Fund's policy of concentrating its
investments in companies involved in natural resources (including gold and
silver), the Real Estate Fund's policy of concentrating at least 65% of the
Fund's total assets in companies in the real estate industry, investors should
understand that investment in these four Funds may be subject to greater risk
and market fluctuation than an investment in a portfolio of securities
representing a broader range of investment alternatives.
GOLD SHARES FUND, GLOBAL RESOURCES FUND AND WORLD GOLD FUND
VOLATILITY OF GOLD COMPANY STOCKS. The net asset value of Gold Shares
Fund, Global Resources Fund and the World Gold Fund will be affected by the
volatility of securities of companies involved in gold operations. The
volatility of securities of companies involved in gold operations is reflected
by the performance of the Gold Shares Fund's net asset value for the last ten
years.
<TABLE>
CALENDAR
YEAR 1995(1) 1994 1993 1992 1991 1990 1988 1988 1987 1986
- -------- ----- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High $2.65 $3.05 $2.49 $3.84 $4.75 $6.44 $4.02 $7.98 $7.91 $5.09
Low $2.02 $1.85 $1.25 $2.17 $2.94 $3.55 $3.00 $3.74 $4.41 $2.96
<FN>
- ----------
(1)Through June 30, 1995
</FN>
</TABLE>
It is not possible to predict, with assurance, the timing or extent of
future changes in the market price of gold or the extent to which changes in the
market price of gold will continue to affect the value of shares of companies
involved in gold operations.
Approximately 30% of the world's output of gold is produced in the
Republic of South Africa. As of June 30, 1995, approximately 86.64% of the Gold
Shares Fund's net assets were invested in securities of South African issuers
engaged in mining of, exploration for, processing of, or dealing in gold because
such securities generally offer a higher rate of return than securities of
domestic issuers involved in gold operations.
The production and marketing of gold may be affected by the actions of
the International Monetary Fund and certain governments, or by changes in
existing governments. In the current order of magnitude of production of gold
bullion, the four largest producers of gold are the Republic of South Africa,
the United States, Australia and Russia. Economic and political conditions
prevailing in these countries may have direct effects on the production and
marketing of newly-produced gold and sales of central bank gold holdings. In
South Africa, the activities of companies engaged in gold mining are subject to
the policies adopted by the Ministry of Mines. The Reserve Bank of South Africa,
as the sole authorized sales agent for South African gold, has an influence on
the price and timing of sales of South African gold. The Gold Shares Fund has
significant investments in South African issuers. The unsettled political and
social conditions in South Africa may have disruptive effects on the market
prices of the investments of the Gold Shares Fund and may impair its ability to
hold investments in South African issuers.
GOLD SHARES FUND AND WORLD GOLD FUND
INVESTMENT IN GOLD AND GOLD BULLION. Because gold and gold bullion do
not generate investment income, the return to a Fund from such investments will
be derived solely from the gains and losses realized by the Fund upon the sale
of the gold and gold bullion. The Funds may also incur storage and other costs
relating to their investments in gold and gold bullion. Under certain
circumstances, these costs may exceed the custodial and brokerage costs
associated with investments in portfolio securities.
The Gold Shares Fund and the World Gold Fund have qualified in the
past, and expect to qualify in the future, as regulated investment companies
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). By qualifying under Subchapter M of the Code, neither Fund is required
to pay Federal income tax on net investment income or capital gains that are
distributed to shareholders. To qualify as a regulated investment company under
Subchapter M of the Code, at least ninety percent (90%) of a Fund's gross income
for any taxable year must be derived from dividends, interest, gains from the
disposition of securities, and gains from certain other specified transactions
(the "Gross Income Test"). Gains from the disposition of gold and gold bullion
will not qualify for purposes of satisfying the Gross Income Test. Additionally,
to qualify under Subchapter M of the Code, at the close of each quarter of each
Fund's taxable year, at least fifty percent (50%) of the value of the Fund's
total assets must be represented by cash, Government securities and certain
other specified assets (the "Asset Value Test"). Investments in gold and gold
bullion will not qualify for purposes of satisfying the Asset Value Test. To
maintain each Fund's qualification as a regulated investment company under the
Code, each Fund will establish procedures to monitor its investments in gold and
gold bullion for purposes of satisfying the Gross Income Test and the Asset
Value Test.
GLOBAL RESOURCES FUND AND WORLD GOLD FUND
INVESTMENT IN SMALL ISSUERS. Many companies involved in the exploration
for and mining, processing, fabrication and distribution of gold, silver and
other natural resources are small and unseasoned, and investments in their
securities by a Fund involves certain risks not present with investments in
larger companies. For example, such securities may not have readily available
market quotations, or may not otherwise be readily marketable, making it
difficult for a Fund to dispose of such securities when it is deemed advisable
to do so. However, each of the Global Resources Fund and the World Gold Fund has
adopted investment restrictions limiting its investment in securities which have
legal or contractual limitations, are not readily marketable, or do not have
readily available market quotations to 10% of its net assets. The Global
Resources Fund and the World Gold Fund are also limited with respect to
investments in unseasoned issuers, i.e., issuers with a record of less than
three years' continuous operation (including predecessors), to 5% of their
respective total net assets.
The Funds may invest in companies for which it is difficult to obtain
reliable information and financial data. There may be little or no information
available regarding these companies relative to geological data, mining or
engineering information, extent of proved and probable reserves, appraisals, and
other relevant data. As a consequence, investments will often be made based upon
the reputation and experience of the management of a company rather than upon
information concerning its fundamental investment characteristics.
Certain of the issuers in which a Fund may invest may face difficulties
in obtaining the capital necessary to continue in operation and may go into
bankruptcy, which may result in a complete loss of a Fund's investment.
GOLD SHARES FUND, GLOBAL RESOURCES FUND AND WORLD GOLD FUND
INVESTMENTS IN GOLD AND SILVER SECURITIES. While investment in
securities of issuers involved in gold and silver mining and in natural
resources operations generally involves risks not present with most investment
companies, investment in such securities may offer a greater return than shares
of industrial issuers. Since the market action of such securities has tended to
move against, or independently of, the market trend of industrial stock, the
addition of stock of companies involved in gold, silver and other natural
resources operations to an investor's portfolio may increase the return and
reduce overall fluctuations in the value of the portfolio. An investment in the
Gold Shares Fund, the Global Resources Fund or the World Gold Fund should be
considered part of an overall investment program, which may include investments
in the other Funds managed by the Advisor, rather than as a complete investment
program.
U.S. GOLD SHARES FUND, U.S. GLOBAL RESOURCES FUND,
U.S. WORLD GOLD FUND, U.S. INCOME FUND,
AND U.S. REAL ESTATE
EQUITY PRICE FLUCTUATIONS. Equity securities are subject to price
fluctuations depending on a variety of factors, including market, business and
economic conditions. Particularly, the equity securities of companies involved
in natural resources may be subject to greater than average price fluctuations
because of the scarcity or surplus of the natural resources in which such
companies are engaged, governmental policies in the countries in which such
natural resources are located, technological changes and speculation by traders
in such resources. Furthermore, extreme fluctuations in the prices of such
natural resources may limit the marketability of the securities in which the
Gold Shares Fund, the Global Resources Fund and the World Gold Fund may invest.
GOLD SHARES FUND, GLOBAL RESOURCES FUND AND WORLD GOLD FUND
PURCHASING PUT OPTIONS. World Gold Fund, Global Resources Fund and Gold
Shares Fund may purchase put options that are listed on domestic or foreign
securities exchanges or quoted on NASDAQ. A put option gives the holder the
right to sell a security to the seller of the put option at a fixed price within
a specified time period. The initial purchaser of an option pays the seller a
premium for undertaking the obligation to purchase, which premium is retained by
the seller whether or not the option is exercised.
Each of these Funds may purchase puts on securities it owns
("protective puts") or on securities it does not own ("non-protective puts").
Buying a protective put permits each of these Funds to protect itself against a
decline in the value of the underlying securities, during the put period, below
the exercise price by selling the securities (or other securities which it may
purchase) on the exercise of the put. Buying a non-protective put permits the
World Gold Fund, Global Resources Fund and Gold Shares Fund if the market price
of the underlying securities is below the put price during the put period,
either to resell the put or to buy the underlying securities and sell them at
the exercise price. If the market price of the underlying securities is not
below the exercise price and the put is not exercised or resold (whether or not
at a profit), the put will become worthless at its expiration date.
A put option purchased by the World Gold Fund, Global Resources Fund or
Gold Shares Fund, other than in a closing transaction, exposes the Fund to loss
of the amount paid for the option if the market price of the underlying security
is above the exercise price of the put option at the option's expiration date.
For the purchase of an option to become profitable, the price change of the
underlying stock must be sufficient to cover the premium paid (including
commissions). There can be no assurance that such a price change will result in
a profit for the option purchaser; profit will depend on the market price of the
underlying stock when the option was purchased, the remaining life of the option
and other factors.
A put option position may be closed out only on an exchange (or NASDAQ)
that provides a secondary market for options on the same series, and there is no
assurance that a liquid secondary market will exist for any particular option.
The option activities of the World Gold Fund, Global Resources Fund and
Gold Shares Fund may affect their turnover rate and the amount of brokerage
commission paid by the Fund. The exercise of options may cause these Funds to
sell portfolio securities, thus increasing the Funds' turnover rates. Holding a
protective put may cause the Funds to sell the underlying securities for reasons
that may not exist in the absence of the put. Holding a non-protective put may
cause the Funds to purchase the underlying securities to permit the Funds to
exercise the put.
The Funds will pay a brokerage commission each time they buy an option
or buy or sell a security in connection with the exercise of an option. Such
commission may be higher than the commission that would apply to direct
purchases or sales of portfolio securities.
The trading of put options will not constitute a dominant investment
practice of the above-listed Funds. Accordingly, it is not anticipated that any
decrease in potential capital appreciation that may result from this activity
will be inconsistent to any material extent with the overall realization of any
Fund's primary investment objective.
Not more than 2% of the total net assets of World Gold Fund, Global
Resources Fund or Gold Shares Fund may be invested in premiums on such put
options and not more than 25% of each of such Fund's total net assets may be
subject to options.
GOLD SHARES FUND, GLOBAL RESOURCES FUND, WORLD GOLD FUND
REAL ESTATE FUND AND INCOME FUND
OPTIONS ON STOCK INDEXES. Options on stock indexes are based on indexes
of stock prices that change in value according to the market values of the
underlying stock. Some stock index options are based on a broad market index
such as the New York Stock Exchange composite index of Standard & Poor's
Corporation. Other index options are based on a market segment or on stocks in a
single industry. Stock index options are traded primarily on securities
exchanges. Options on stock indexes differ from options on securities in that
the exercise of an option on a stock index does not involve delivery of the
actual underlying security. Index options are settled in cash only. The
purchaser of an option receives a cash settlement amount and the writer of an
option is required, in return for the premium received, to make delivery of a
certain amount if the option is exercised. A position in a stock index option
may be offset by either the purchaser or writer by entering into a closing
transaction, or the purchaser may terminate the option by exercising it or
allowing it to expire. A Fund will write (sell) call options, write put options,
purchase put options, and purchase call options on stock indexes when
appropriate to hedge investments against a decline in value, or to reduce the
risk of missing a broad market advance or an advance in an industry or market
segment.
The risks associated with the purchase and sale of options on stock
indexes is generally the same as those relating to options on securities.
However, the value of a stock index option depends primarily on movements in the
value of an index rather than in the price of a single security. Accordingly,
the Fund will realize a gain or loss from purchasing or writing an option on a
stock index as a result of movements in the level of stock prices in the stock
market generally, or in the case of certain indexes, in an industry or market
segment, rather than changes in the price for a particular security. Therefore,
successful use of stock index options by the Fund will depend on the Advisor's
ability to predict movements in the direction of the stock market generally, or
in a particular industry. The ability to predict these movements requires
different skills and techniques than predicting changes in the value of
individual securities.
Because index options are settled in cash, the Fund cannot be assured
of covering its potential settlement obligations under call options it writes on
indexes by acquiring and holding the underlying securities. Unless the Fund has
cash on hand that is sufficient to cover the cash settlement amount, it would be
required to sell securities owned in order to satisfy the exercise of the
option.
The Funds will adhere to the following non-fundamental limitations with
respect to investments in options on stock indexes: (1) the Funds will purchase
or write only those options on stock indexes that are traded on U.S. securities
exchanges or quoted on NASDAQ; and (2) the Funds will not invest more than 5% of
their total net assets in options on stock indexes.
PORTFOLIO TRANSACTIONS
The Advisory Agreement between the Trust and the Advisor requires that
the Advisor, in executing portfolio transactions and selecting brokers or
dealers, seek the best overall terms available. In assessing the terms of a
transaction, consideration may be given to various factors, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer (for a specified
transaction and on a continuing basis), the reasonableness of the commission, if
any, and the brokerage and research services provided to the Trust and/or other
accounts over which the Advisor or an affiliate of the Advisor exercises
investment discretion. Under the Advisory Agreement, the Advisor is permitted,
in certain circumstances, to pay a higher commission than might otherwise be
obtained in order to acquire brokerage and research services. The Advisor must
determine in good faith, however, that such commission is reasonable in relation
to the value of the brokerage and research services provided -- viewed in terms
of that particular transaction or in terms of all the accounts over which
investment discretion is exercised. In such case, the Board of Trustees will
review the commissions paid by each Fund of the Trust to determine if the
commissions paid over representative periods of time were reasonable in relation
to the benefits obtained. The advisory fee of the Advisor would not be reduced
by reason of its receipt of such brokerage and research services. To the extent
that research services of value are provided by broker/dealers through or with
whom the Trust places portfolio transactions the Advisor may be relieved of
expenses which it might otherwise bear.
The Trust may, in some instances, purchase securities that are not
listed on a national securities exchange or quoted on NASDAQ, but rather are
traded in the over-the-counter market. When the transactions are executed in the
over-the-counter market, it is intended generally to seek first to deal with the
primary market makers. However, the services of brokers will be utilized if it
is anticipated that the best overall terms can thereby be obtained. Purchases of
newly issued securities for the Tax Free Fund, Near-Term Tax Free Fund and the
Intermediate Treasury Fund usually are placed with those dealers from which it
appears that the best price or execution will be obtained. Those dealers may be
acting as either agents or principals.
The brokerage fees paid by the following Funds for the three fiscal
periods ended June 30, 1995, were as follows:
<TABLE>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Gold Shares Fund $228,675 $271,782 $456,685
Global Resources Fund $184,545 $ 69,952 $ 66,061
World Gold Fund $158,321 $349,091 $408,918
Income Fund $ 27,510 $ 5,580 $ 5,600
Real Estate Fund $131,325 $158,335 $ 60,630
</TABLE>
In seeking its primary investment objective of capital appreciation,
each of the Gold Shares Fund, Global Resources Fund and World Gold Fund expects
that it generally will hold investments for at least six months. However, if the
Advisor concludes that economic, market or industry conditions warrant major
adjustments in any Fund's investment positions or if unusual market conditions
or developments of the type discussed under the heading "Special Risk
Considerations" dictate the taking of a temporary defensive position in
short-term money market instruments, changes may be made without regard to the
length of time an investment has been held, or whether a sale results in profit
or loss, or a purchase results in the reacquisition of an investment which may
have only recently been sold by the Fund.
MANAGEMENT OF THE FUNDS
The Trustees and Officers of the Trust and their principal occupations
during the past five years are set forth below. Except as otherwise indicated,
the business address of each is 7900 Callaghan Road, San Antonio, Texas 78229.
TRUST
NAME AND ADDRESS POSITION PRINCIPAL OCCUPATION
- --------------------- -------- ---------------------------------------------
JOHN P. ALLEN Trustee President, Deposit Development Associates
5600 San Pedro Inc., a bank marketing firm. President,
San Antonio, TX Paragon Press. Partner, Rio Cibolo Ranch,
Inc.
WILLIAM A. FAGAN, JR. Chairman Chairman of the Board of Trustees since
P.O. Box 17903 of the January 1, 1989. Business consultant since
San Antonio, TX Board of 1976.
Trustees
E. DOUGLAS HODO Trustee Chief Executive Officer of Houston Baptist
7706 Fondren University. Formerly Dean and Professor of
Houston, TX Economics and Finance, College of Business,
University of Texas at San Antonio.
CHARLES Z. MANN Trustee Business consultant since January 1, 1993.
Turning Point Chairman, Bermuda Monetary Authority 1986 to
13 Knapton Estates Rd. 1992. Executive Vice President of
Smiths, Bermuda International Median Limited, a private
HS01 investment holding company, from 1979 to 1985
and previously general manager of Bank of
N.T. Butterfield & Son, Ltd., A Bermuda-based
bank. Currently a Director of Bermuda
Electric Light Company, Ltd.; Overseas
Imports, Ltd.; Tyndall International
(Bermuda) Ltd.; Old Court International
Reserves Ltd.; XL Investments Limited, Glaxo
(Bermuda) Limited.
W.C.J. VAN RENSBURG Trustee Professor of Geological Science and Petroleum
6010 Sierra Arbor Court Engineering, University of Texas at Austin.
Austin, TX Former Associate Director, Bureau of Economic
Geology, University of Texas. Former
Chairman, Department of Geosciences, West
Texas State University. Former technical
director of South African Minerals Bureau and
British Petroleum Professor of Energy
Economics at the Ran Afrikaans University,
Johannesburg, South Africa.
FRANK E. HOLMES* Trustee, Chairman of the Board of Directors, and Chief
President Executive Officer of the Advisor since
and Chief October 27, 1989. President from October 1989
Executive to September 1995. Director of Security Trust
Officer & Financial Company ("ST&FC"), a wholly-owned
subsidiary of Advisor, since November 1991.
President, Chief Executive Officer and
Trustee of Accolade Funds, a Massachusetts
business trust consisting of no-load mutual
funds, since April 1993. Director of U.S.
Advisors (Guernsey) Limited, a wholly-owned
subsidiary of the Advisor, and of the
Guernsey Funds managed by that Company since
August 1993. Director of Marleau, Lemire Inc.
since January 1995. Director of Franc-Or
Resources Corp since November 1994. Director
of United Services Advisors Wealth Management
Corp. since February 1995 and Chief Executive
Officer from February to August 1995. Trustee
of Pauze/Swanson United Services Funds since
November 1993. Independent business
consultant and financial adviser from July
1978 to October 1989. From July 1978 to
October 1989, held various positions with
Merit Investment Corporation, a Canadian
investment dealer, including the latest
position as Executive Vice
President-Corporate Finance. Formerly a
member of the Toronto Stock Exchange Listing
Committee, Registered Portfolio Manager with
the Toronto Stock Exchange, and former
President and Chairman of the Toronto Society
of Investment Dealers Association. Formerly a
Director of Merit Investment Corporation.
----------
* This Trustee may be deemed an "interested
person" of the Trust as defined in the
Investment Company Act of 1940.
BOBBY D. DUNCAN Executive President of the Advisor since September
Vice 1995. Executive Vice President and Chief
President Financial Officer of the Advisor from
and Chief October 27, 1989 to September 1995. Chief
Operating Operating Officer since November 1, 1993.
Officer President, Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer
and Treasurer of the Advisor from January 1,
1989 to October 27, 1989. Prior to January
1990 held various positions with the Trust,
including Executive Vice President,
Treasurer, Chief Operating Officer and Chief
Financial Officer. Served as sole Director
and Chief Executive Officer of USSI from
September 1988 to November 1989. Director of
A&B Mailers, Inc. since February 1988 and
Chairman since July 1991. Chief Executive
Officer, President, Chief Operating Officer,
Chief Financial Officer, and a Director of
USSI. Director of the Advisor since 1986.
Director, Executive Vice President, and Chief
Financial Officer of ST&FC from November 1991
to March 1994. Executive Vice President,
Chief Financial Officer of Accolade Funds
since April 1993. Vice President, Chief
Financial Officer, and Trustee of
Pauze/Swanson United Services Funds since
November 1, 1993. President, Chief Executive
Officer and Trustee of United Services
Insurance Fund since July 22, 1994. Director
and Chief Financial Officer of United
Services Advisors Wealth Management Corp.
since February, 1995.
VICTOR FLORES Executive Executive Vice President, Chief Investment
Vice Officer of the Funds since February 1994.
President, Portfolio Manager U.S. Gold Shares Fund since
Chief November 1992 and U.S. World Gold Fund since
Investment January 1990. Portfolio Manager, U.S. Global
Officer Resources Fund, from January 1990 to November
1992. Vice President, Chief Investment
Officer and Director of United Services
Advisors, Inc. since February 1994. Formerly
Vice President, Portfolio Manager of United
Services Advisors, Inc, (July 1993-February
1994). Served as Resource Analyst for United
Services Funds and United Services Advisors,
Inc. from January 1988 to December 1989.
SUSAN B. MCGEE Vice Vice President and Secretary of the Trust
President, from September 1995. Vice President and
Secretary Secretary of the Advisor since September
1995. Vice President and Secretary of USSI
since September 1995. Vice President and
Assistant Secretary of Accolade Funds since
September 1995. Vice President, Secretary and
Associate Counsel of ST&FC since September
1992 to present; Vice President-Operations of
ST&FC from May 1993 to December 1994.
THOMAS D. TAYS Vice Vice President - Special Counsel, Securities
President, Specialist, Director of Compliance, Assistant
Securities Secretary of the Advisor from September 1995
Specialist, to present; Associate Counsel, Assistant
Director of Secretary of the Advisor from September 1993
Compliance to September 1995. Vice President, Securities
Specialist, Director of Compliance and
Assistant Secretary of USF since September
1995. Vice President and Secretary of
Accolade Funds since September 1995, was
Assistant Secretary from September 1994 to
September 1995. Vice President, Secretary of
United Services Insurance Funds from June
1994 to present. Private practice of law from
1990 to August 1993.
TERESA G. ROWAN Vice Vice President, Mutual Fund Accounting of the
President, Advisor since February 1995. Vice President,
Chief Chief Financial Officer and Chief Accounting
Financial Officer of USF since September 1995. Served
Officer as Vice President, Chief Accounting Officer,
and Chief Treasurer,and Controller of USF from March 3,
Accounting 1995 to September 1995. Vice President,
Officer Mutual Fund Accounting of USSI since
March 13, 1995. Vice President and Treasurer
of Pauze/Swanson United Services Funds since
March 8, 1995, Chief Financial Officer since
September 1995, Chief Accounting Officer from
March 1995 to September 1995. Vice President,
Chief Financial Officer, Chief Accounting
Officer, Treasurer of Accolade Funds since
September 1995. Employee of the Company from
October 1986 to present.
PRINCIPAL HOLDERS OF SECURITIES
As of October 16, 1995, the officers and Trustees of the Funds as a
group owned less than 1% of the outstanding shares of each Fund. The Trust is
aware of the following persons who owned of record, or beneficially, more than
5% of the outstanding shares of any Fund at October 16, 1995:
U.S. GOLD SHARES FUND Charles Schwab & Co., Inc. 9.12% Record(1)
San Francisco, CA 94104-4175
U.S. GLOBAL RESOURCES FUND Charles Schwab & Co., Inc. 6.30% Record(1)
San Francisco, CA 94104-4175
U.S. REAL ESTATE FUND Charles Schwab & Co., Inc. 27.38% Record(1)
San Francisco, CA 94104-4175
First Southwest Co. 6.37% Record(2)
Dallas, TX 75201-4627
U.S. INCOME FUND Charles Schwab & Co., Inc. 17.94% Record(1)
San Francisco, CA 94104-4175
U.S. WORLD GOLD FUND Charles Schwab & Co., Inc. 22.43% Record(1)
San Francisco, CA 94104-4175
UNITED SERVICES INTER- NationsBank of Texas 12.96% Record(3)
MEDIATE TREASURY FUND
- ----------
(1) Charles Schwab & Co., Inc., a broker-dealer, has advised that no individual
client owns more than 5% of the Fund.
(2) First Southwest Co., a broker-dealer, has advised that no individual client
owns more than 5% of the Fund.
(3) NationsBank of Texas, a broker-dealer, has advised that no individual
client owns more than 5% of the Fund.
INVESTMENT ADVISORY SERVICES
The investment adviser to the Funds is United Services Advisors, Inc.
(the "Advisor"), a Texas corporation, pursuant to an Advisory Agreement dated as
of October 27, 1989. Frank E. Holmes, Chief Executive Officer and a Director of
the Advisor, as well as a Trustee, President and Chief Executive Officer of the
Trust, beneficially owns more than 25% of the outstanding voting stock of the
Advisor and may be deemed to be a controlling person of the Advisor.
In addition to the services described in each Fund's prospectus, the
Advisor will provide the Trust with office space, facilities and simple business
equipment, and will provide the services of executive and clerical personnel for
administering the affairs of the Trust. It will compensate all personnel,
Officers and Trustees of the Trust if such persons are employees of the Advisor
or its affiliates, except that the Trust will reimburse the Advisor for a
portion of the compensation of the Advisor's employees who perform certain legal
services for the Trust, including state securities law regulatory compliance
work, based upon the time spent on such matters for the Trust. The Advisor pays
the expense of printing and mailing prospectuses and sales materials used for
promotional purposes.
The Trust pays all other expenses for its operations and activities.
Each of the Funds of the Trust pays its allocable portion of these expenses. The
expenses borne by the Trust include the charges and expenses of any transfer
agents and dividend disbursing agents, custodian fees, legal and auditors'
expenses, bookkeeping and accounting expenses, brokerage commissions for
portfolio transactions, taxes, if any, the advisory fee, extraordinary expenses,
expenses of issuing and redeeming shares, expenses of shareholder and trustee
meetings, and of preparing, printing and mailing proxy statements, reports and
other communications to shareholders, expenses of registering and qualifying
shares for sale, fees of Trustees who are not "interested persons" of the
Advisor, expenses of attendance by Officers and Trustees at professional
meetings of the Investment Company Institute, the No-Load Mutual Fund
Association or similar organizations, and membership or organization dues of
such organizations, expenses of preparing and setting in type prospectuses and
periodic reports and expenses of mailing them to current shareholders, fidelity
bond premiums, cost of maintaining the books and records of the Trust, and any
other charges and fees not specifically enumerated.
For the services and facilities provided to each of the Funds by the
Advisor, each Fund may pay to the Advisor a monthly fee at the rate set forth
below based upon the monthly average daily net assets of such Fund for such
calendar month. Some of these fees have been voluntarily reduced or waived until
further notice. See the prospectus section - "The Investment Advisor."
ADVISORY FEE SCHEDULE
MONTHLY
NAME OF FUND MONTHLY NET ASSETS RATE
- --------------------- -------------------------------- -------------
GOLD SHARES FUND Up to and including $250 million 1/12 of .75%
Over $250 million 1/12 of .50%
GLOBAL Up to and including $250 million 1/12 of 1%
RESOURCES FUND Over $250 million 1/12 of .50%
WORLD GOLD FUND Up to and including $250 million 1/12 of 1%
Over $250 million 1/12 of .50%
U.S. TREASURY Up to and including $250 million 1/12 of .50%
SECURITIES Over $250 million 1/12 of .375%
CASH FUND
TAX FREE FUND Up to and including $250 million 1/12 of .75%
Over $250 million 1/12 of .50%
INCOME FUND Up to and including $250 million 1/12 of .75%
Over $250 million 1/12 of .50%
U.S. GOVERNMENT Up to and including $250 million 1/12 of .50%
SECURITIES Over $250 million 1/12 of .375%
SAVINGS FUND
REAL ESTATE FUND Up to and including $250 million 1/12 of .75%
Over $250 million 1/12 of .50%
UNITED SERVICES 1/12 of .50%
INTERMEDIATE
TREASURY FUND
UNITED SERVICES NEAR- 1/12 of .50%
TERM TAX FREE FUND
The Advisor may, out of profits derived from its management fee, pay
certain financial institutions (which may include banks, securities dealers and
other industry professionals) a "servicing fee" for performing certain
administrative servicing functions for Fund shareholders to the extent these
institutions are allowed to do so by applicable statute, rule or regulation.
These fees will be paid periodically and will generally be based on a percentage
of the value of the institutions' client Fund shares. The Glass-Steagall Act
prohibits banks from engaging in the business of underwriting, selling or
distributing securities. However, in the Advisor's opinion, such laws should not
preclude a bank from performing shareholder administrative and servicing
functions as contemplated herein.
The securities laws of certain states in which shares of the Trust may,
from time to time, be qualified for sale require that the Advisor reimburse the
Trust for any excess of a Fund's expenses over prescribed percentages of the
Fund's average net assets. Thus, the Advisor's compensation under the Advisory
Agreement is subject to reduction in any fiscal year to the extent that total
expenses of the Fund for such year (including the Advisor's compensation but
exclusive of taxes, brokerage commission, extraordinary expenses, and other
permissible expenses) exceed the most restrictive applicable expense limitation
prescribed by any state in which the Trust's shares are qualified for sale. The
Advisor may obtain waivers of these state expense limitations from time to time.
Such limitation is currently 2.5% of the first $30 million of average net
assets, 2% of the next $70 million of average net assets and 1.5% of the
remaining average net assets.
The Board of Trustees of the Trust (including a majority of the
"disinterested Trustees") recently approved continuation of the October 27, 1989
Advisory Agreement through October 1996. The Advisory Agreement provides that it
will continue initially for two years, and from year to year thereafter, with
respect to each Fund, as long as it is approved at least annually both (i) by a
vote of a majority of the outstanding voting securities of such Fund (as defined
in the Investment Company Act of 1940 [the "Act"]) or by the Board of Trustees
of the Trust, and (ii) by a vote of a majority of the Trustees who are not
parties to the Advisory Agreement or "interested persons" of any party thereto,
cast in person at a meeting called for the purpose of voting on such approval.
The Advisory Agreement may be terminated on 60 days' written notice by either
party and will terminate automatically if it is assigned.
The Trust pays the Advisor a separate management fee for each Portfolio
in the Trust. Such fee is based on varying percentages of average net assets.
For the three fiscal periods ended June 30, 1993, June 30, 1994 and June 30,
1995, the Trust incurred advisory fees (net of expenses paid by the Advisor or
voluntary fee waivers) of $3,012,845, $5,021,807 and $5,233,507, respectively,
for all funds. For the three fiscal periods ended June 30, 1993, June 30, 1994
and June 30, 1995, the Funds paid the Advisor the following advisory fees (net
of expenses paid by the Advisor or voluntary fee waivers):
1993 1994 1995
---------- ---------- -----------
GOLD SHARES FUND $1,290,607 $2,011,687 $1,969,645
GLOBAL RESOURCES FUND 237,977 240,719 218,438
WORLD GOLD FUND 661,882 1,753,641 1,900,764
U.S. TREASURY SECURITIES
CASH FUND 492,909 760,423 894,643
INCOME FUND 65,758 99,688 80,223
TAX FREE FUND 30,418 -0- -0-
U.S. GOVERNMENT SECURITIES
SAVINGS FUND -0- -0- -0-
REAL ESTATE FUND 168,181 140,661 85,225
INTERMEDIATE TREASURY FUND -0- -0- -0-
NEAR-TERM TAX FREE FUND -0- -0- -0-
TRANSFER AGENCY AND OTHER SERVICES
In addition to the services performed for the Funds and the Trust under
the Advisory Agreement, the Advisor, through its subsidiary USSI, provides
transfer agent and dividend disbursement agent services pursuant to the Transfer
Agency Agreement as described in the Funds' prospectuses under "Management of
the Funds -- The Investment Advisor." In addition, lockbox and statement
printing services are provided by USSI. The Board of Trustees recently approved
the Transfer Agency and related agreements through October 1996. For the three
fiscal years ended June 30, 1993, 1994 and 1995, the Trust paid USSI total
transfer agency, lockbox and printing fees of $2,147,447, $2,313,933 and
USSI also maintains the books and records of the Trust and of each Fund
of the Trust and calculates their daily net asset value as described in the
Funds' prospectuses under "Management of the Funds -- The Investment Advisor."
Total fees for such services for the fiscal years ending June 30, 1993, 1994 and
1995 were $517,152, $354,278 and $502,994, respectively, for all funds.
All fees paid to the Advisor during the fiscal year ended June 30,
1995, (including management, transfer agency, lockbox, printing and accounting
fees but net of reimbursements) totaled $8,294,347.
A & B Mailers, Inc., a wholly-owned corporation of the Advisor,
provides the Trust with certain mail handling services. The charges for such
services have been negotiated by the Audit Committee and A & B Mailers, Inc.
Each service is priced separately.
CERTAIN PURCHASES OF SHARES OF THE FUNDS
Shares of all the Funds are continuously offered by the Trust at their
net asset value next determined after an order is accepted. The methods
available for purchasing shares of the Funds are described in the Prospectus. In
addition, shares of each Fund, except the U.S. Treasury Securities Cash Fund,
the Tax Free Fund, the U.S. Government Securities Savings Fund, may be purchased
using stock, so long as the securities delivered to the Trust meet the
investment objectives and concentration policies of the appropriate Fund, and
are otherwise acceptable to the Advisor, which reserves the right to reject all
or any part of the securities offered in exchange for shares of such Funds. On
any such "in kind" purchase, the following conditions will apply:
(1) the securities offered by the investor in exchange for shares of
the Fund must not be in any way restricted as to resale or
otherwise be illiquid;
(2) securities of the same issuer must already exist in the Fund's
portfolio;
(3) the securities must have a value which is readily ascertainable
(and not established only by evaluation procedures) as evidenced
by a listing on the AMEX and the NYSE, or NASDAQ;
(4) any securities so acquired by any Fund shall not comprise over 5%
of that Fund's net assets at the time of such exchange;
(5) no over-the-counter securities will be accepted unless the
principal over-the-counter market is in the United States; and
(6) the securities are acquired for investment and not for resale.
The Trust believes that this ability to purchase shares of each Fund,
except the U.S. Treasury Securities Cash Fund, the Tax Free Fund, and the U.S.
Government Securities Savings Fund using securities provides a means by which
holders of certain securities may obtain diversification and continuous
professional management of their investments without the expense of selling
those securities in the public market.
An investor who wishes to make an "in kind" purchase should furnish
(either in writing or by telephone) to the Trust a list with a full and exact
description of all of the securities which he or she proposes to deliver. The
Trust will advise him or her as to those securities which it is prepared to
accept and will provide the investor with the necessary forms to be completed
and signed by the investor. The investor should then send the securities, in
proper form for transfer, with the necessary forms to the Trust and certify that
there are no legal or contractual restrictions on the free transfer and sale of
the securities. The securities will be valued as of the close of business on the
day of receipt by the Trust in the same manner as portfolio securities of the
Gold Shares, Global Resources, World Gold, Income, and Real Estate Funds are
valued. See the section entitled "How Shares Are Valued" in the prospectus. The
number of shares of the appropriate Fund, having a net asset value as of the
close of business on the day of receipt equal to the value of the securities
delivered by the investor, will be issued to the investor, less applicable stock
transfer taxes, if any.
The exchange of securities by the investor pursuant to this offer will
constitute a taxable transaction and may result in a gain or loss for Federal
income tax purposes. Each investor should consult his or her tax adviser to
determine the tax consequences under Federal and state law of making such an "in
kind" purchase.
ADDITIONAL INFORMATION ON REDEMPTIONS
WIRE REDEMPTIONS - U.S. TREASURY SECURITIES CASH FUND AND U.S.
GOVERNMENT SECURITIES SAVINGS FUND ONLY. When shares of the U.S. Treasury
Securities Cash Fund are redeemed by wire, proceeds will normally be wired on
the next business day after receipt of the telephone instruction. To place a
request for a wire redemption, the shareholder may instruct USSI by telephone
(if this option was elected on the application accompanying the prospectus), or
by mailing instructions to United Services Funds, P.O. Box 781234, San Antonio,
Texas 78278-1234. A bank processing fee for each bank wire will be charged to
the shareholder's account. The shareholder may change the account which has been
designated to receive amounts withdrawn under this procedure at any time by
writing to USSI with signature(s) guaranteed as described in the prospectus.
Further documentation will be required to change the designated account when
shares are held by a corporation or other organization, fiduciary or
institutional investor.
CHECK REDEMPTIONS - U.S. TREASURY SECURITIES CASH FUND AND U.S.
GOVERNMENT SECURITIES SAVINGS FUND ONLY. Upon receipt of a completed application
indicating election of the check writing feature, shareholders will be provided
with a free supply of temporary checks. A shareholder may order additional
checks for a nominal charge.
The checkwriting withdrawal procedure enables a shareholder to receive
dividends declared on the shares to be redeemed until such time as the check is
processed. For this reason, checks should never be used to close an account,
since the shareholder cannot know what the exact balance in the account will be
on the date that the check clears. If there are not sufficient shares to cover a
check, the check will be returned to the payee and marked "insufficient funds."
Checks written against shares which have been in the account less than 7 days
and were purchased by check will be returned as uncollected funds. A shareholder
may avoid this 7-day requirement by purchasing by bank wire or cashiers check.
The Trust reserves the right to terminate generally, or alter
generally, the checkwriting service or to impose a service charge upon 30 days'
prior notice to shareholders.
REDEMPTION IN KIND. The Trust reserves the right to redeem shares of
the Gold Shares Fund in cash or in kind. However, the Trust has elected to be
governed by Rule 18f-1 under the Investment Company Act of 1940, pursuant to
which the Trust is obligated to redeem shares of the Gold Shares Fund solely in
cash up to the lesser of $250,000 or one percent of the net asset value of the
Trust during any 90-day period for any one shareholder. Any shareholder of the
Gold Shares Fund receiving a redemption in kind would then have to pay brokerage
fees in order to convert his Fund investment into cash.
All redemptions in kind will be made in marketable securities of the Fund.
SUSPENSION OF REDEMPTION PRIVILEGES. The Trust may suspend redemption
privileges or postpone the date of payment for up to seven days, but cannot do
so for more than seven days after the redemption order is received except during
any period (1) when the NYSE is closed, other than customary weekend and holiday
closings, or trading on the Exchange is restricted as determined by the
Securities and Exchange Commission ("SEC"), (2) when an emergency exists, as
defined by the SEC, which makes it not reasonably practicable for the Trust to
dispose of securities owned by it or fairly to determine the value of its
assets, or (3) as the SEC may otherwise permit.
CALCULATION OF PERFORMANCE DATA
U.S. Treasury Securities Cash Fund and U.S. Government Securities
Savings Fund shareholders and prospective investors in these Funds will be
interested in learning, from time to time, the current yield of the Funds, based
on dividends declared daily from net investment income. To obtain a current
yield quotation, call the Advisor toll free at 1-800-873-8637 (local residents
call 308-1222). The yield of that Fund is calculated by determining the net
change in the value of a hypothetical pre-existing account in the Fund having a
balance of one share at the beginning of a historical seven-calendar-day period,
dividing the net change by the value of the account at the beginning of the
period to obtain the base period return, and multiplying the base period return
by 365/7. The net change in the value of an account in the Fund reflects the
value of additional shares purchased with dividends from the original share and
any such additional shares, and all fees charged to all shareholder accounts in
proportion to the length of the base period and the Fund's average account size,
but does not include realized gains and losses, or unrealized appreciation and
depreciation. The Funds may also calculate their effective annualized yield (in
effect, a compound yield) by dividing the base period return (calculated as
above) by seven, adding one, raising the sum to the 365th power and subtracting
one.
The U.S. Treasury Securities Cash Fund's and the U.S. Government
Securities Savings Fund's net income, from the time of the immediately preceding
dividend declaration, consists of interest accrued or discount earned during
such period (including both original issue and market discount) on the Fund's
securities, less amortization of premium and the estimated expenses of the Fund
applicable to that dividend period. The yield quoted at any time represents the
amount being earned on a current basis and is a function of the types of
instruments in the Fund's portfolio, their quality and length of maturity, their
relative values, and the Fund's operating expenses. The length of maturity for
the portfolio is the average dollar-weighted maturity of the portfolio. This
means that the portfolio has an average maturity of a stated number of days for
all of its issues.
The yield fluctuates daily as the income earned on the investments of
the U.S. Treasury Securities Cash Fund and the U.S. Government Securities
Savings Fund fluctuates. Accordingly, there is no assurance that the yield
quoted on any given occasion will remain in effect for any period of time, nor
is there any guarantee that the net asset value or any stated rate of return
will remain constant. A shareholder's investment in the U.S. Treasury Securities
Cash Fund and the U.S. Government Savings Fund is not insured, although the
underlying portfolio securities are, of course, backed by the United States
Government or, in the case of the U.S. Government Securities Savings Fund, by a
government agency. Investors comparing results of the U.S. Treasury Securities
Cash Fund and U.S. Government Securities Savings Fund with investment results
and yields from other sources, such as banks or savings and loan associations,
should understand this distinction.
The seven-day yield and effective yield for the U.S. Treasury
Securities Cash Fund and the U.S. Government Securities Savings Fund at June 30,
1995 were 2.99% and 3.03%, and 3.93% and 4.01%, respectively, with an average
weighted maturity of investments on that date of 21 and 27 days, respectively.
TOTAL RETURN
The Gold Shares Fund, Global Resources Fund, World Gold Fund, Income
Fund, Tax Free Fund, the Real Estate Fund, the Near-Term Tax Free Fund and the
Intermediate Treasury Fund may each advertise performance in terms of average
annual total return for 1-, 5- and 10-year periods, or for such lesser periods
as any of such Funds have been in existence. Average annual total return is
computed by finding the average annual compounded rates of return over the
periods that would equate the initial amount invested to the ending redeemable
value, according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10
year periods at the end of the year or period.
The calculation assumes all charges are deducted from the initial
$1,000 payment and assumes all dividends and distributions by each Fund are
reinvested at the price stated in the prospectus on the reinvestment dates
during the period, and includes all recurring fees that are charged to all
shareholder accounts.
The average annual compounded rate of return for each Fund for the
following years ended as of June 30, 1995 is as follows:
1 Year 5 Years 10 Years
------- ------- --------
Gold Shares Fund -11.21% -8.38% -4.49%
Global Resources Fund 5.94% 2.26% 5.33%
Income Fund (since 11/1/83) 9.31% 6.95% 8.66%
Tax Free Fund (since 11/1/84) 7.51% 7.23% 8.03%
Total Period
1 Year 5 Years In Existence
------ ------- ------------
World Gold Fund (since 11/29/85) 1.36% 7.96% 6.73%
Total Period
1 Year 5 Years In Existence
------ ------- ------------
Real Estate Fund (since 7/2/87) 1.09% 5.77% 3.18%
Near-Term Tax Free Fund 5.02% N/A 6.47%
(since 12/1/90)
Intermediate Treasury Fund 9.62% N/A 7.74%
(since 5/8/92)
YIELD
The Gold Shares Fund, Global Resources Fund, World Gold Fund, Income
Fund, Tax Free Fund, Real Estate Fund, Near-Term Tax Free Fund and the
Intermediate Treasury Fund each may advertise performance in terms of a 30-day
yield quotation. The 30-day yield quotation is computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period, according to the following
formula:
A - B
------
YIELD = 2 [( CD + 1)6 - 1]
Where: A = dividends and interest earned during the period
B = expenses accrued for the period (net of reimbursement)
C = the average daily number of shares outstanding during
the period that were entitled to receive dividends
D = the maximum offering price per share on the last day of
the period
The 30-day yield for the 30 days ended June 30, 1995 for each Fund was as
follows:
Income Fund 3.04%
Tax Free Fund 5.62%
Real Estate Fund 3.40%
Near-Term Tax Free Fund 4.60%
Intermediate Treasury Fund 9.80%
TAX EQUIVALENT YIELD
The Tax Free Fund's tax equivalent yield for the 30 days ended June 30,
1995 was 9.30% based on a Federal income tax rate of 39.6%.
The Near-Term Tax Free Fund's tax equivalent yield for the 30 days
ended June 30, 1995 was 7.61% based on a Federal income tax rate of 39.6%.
The tax equivalent yield is computed by dividing that portion of the
yield of the Tax Free Fund (computed as described under "Yield" above) which is
tax-exempt, by one minus the Federal income tax rate of 28% (or other relevant
rate) and adding the result to that portion, if any, of the yield of the Fund
that is not tax-exempt. The compliment, for example, of a tax rate of 39.6% is
60.4%, that is [1.00 - .396 = .604].
NONSTANDARDIZED TOTAL RETURN
Each Fund may provide the above described standard total return results
for a period which ends as of not earlier than the most recent calendar quarter
end and which begins either twelve months before or at the time of commencement
of each Fund's operations. In addition, each Fund may provide nonstandardized
total return results for differing periods, such as for the most recent six
months. Such nonstandardized total return is computed as otherwise described
under "Total Return" except that no annualization is made.
DISTRIBUTION RATES
In its sales literature, each Fund, except for the money market funds,
may also quote its distribution rate along with the above described standard
total return and yield information. The distribution rate is calculated by
annualizing the latest distribution and dividing the result by the offering
price per share as of the end of the period to which the distribution relates. A
distribution can include gross investment income from debt obligations purchased
at a premium and in effect include a portion of the premium paid. A distribution
can also include gross short-term capital gains without recognition of any
unrealized capital losses. Further, a distribution can include income from the
sale of options by each Fund even though such option income is not considered
investment income under generally accepted accounting principals.
Because a distribution can include such premiums, capital gains and
option income, the amount of the distribution may be susceptible to control by
the Advisor through transactions designed to increase the amount of such items.
Also, because the distribution rate is calculated in part by dividing the latest
distribution by net asset value, the distribution rate will increase as the net
asset value declines. A distribution rate can be greater than the yield rate
calculated as described above.
EFFECT OF FEE WAIVER AND EXPENSE REIMBURSEMENT
All calculations of performance data in this section reflect the
Advisor's fee waivers or reimbursement of a portion of the Fund's expenses, as
the case may be. See "MANAGEMENT OF THE FUNDS" in the prospectus.
TAX STATUS
TAXATION OF THE FUNDS -- IN GENERAL
As stated in its Prospectus, each Fund intends to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). Accordingly, each Fund will not be liable for
Federal income taxes on its taxable net investment income and capital gain net
income that are distributed to shareholders, provided that a Fund distributes at
least 90% of its net investment income and net short-term capital gain for the
taxable year.
To qualify as a regulated investment company, each Fund must, among
other things, (a) derive in each taxable year at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies, or
other income derived with respect to its business of investing in such stock,
securities or currencies (the "90% test"); (b) derive in each taxable year less
than 30% of its gross income from the sale or other disposition of stock,
securities or certain options, futures or foreign currencies held less than
three months (the "30% test"), and (c) satisfy certain diversification
requirements at the close of each quarter of the Fund's taxable year.
Furthermore, in order to be entitled to pay tax-exempt interest income dividends
to shareholders, the Tax Free Fund and Near-Term Tax Free Fund must satisfy the
requirement that, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets consists of obligations the interest of which
is exempt from Federal income tax. The Tax Free and Near-Term Tax Free Funds
intend to satisfy this requirement.
The Code imposes a non-deductible 4% excise tax on a regulated
investment company that fails to distribute during each calendar year an amount
equal to the sum of (1) at least 98% of its ordinary income for the calendar
year, (2) at least 98% of its capital gain net income for the twelve-month
period ending on October 31 of the calendar year and (3) any portion not taxable
to the Fund of the respective balance from the preceding calendar year. Because
the excise tax is based upon undistributed taxable income, it will not apply to
tax exempt income received by the Tax Free and Near-Term Tax Free Funds. The
Funds intend to make such distributions as are necessary to avoid imposition of
this excise tax.
TAXATION OF THE FUNDS' INVESTMENTS
A Fund's ability to make certain investments may be limited by
provisions of the Code that require inclusion of certain unrealized gains or
losses in the Fund's income for purposes of the 90% test, the 30% test and the
distribution requirements of the Code, and by provisions of the Code that
characterize certain income or loss as ordinary income or loss rather than
capital gain or loss. Such recognition, characterization and timing rules
generally apply to investments in certain forward currency contracts, foreign
currencies and debt securities denominated in foreign currencies.
For Federal income tax purposes, debt securities purchased by a Fund
may be treated as having original issue discount. Original issue discount can
generally be defined as the excess of the stated redemption price at maturity of
a debt obligation over the issue price. Original issue discount is treated as
interest for Federal income tax purposes as earned by a Fund, whether or not any
income is actually received, and therefore, is subject to the distribution
requirements of the Code. However, original issue discount with respect to
tax-exempt obligations generally will be excluded from a Fund's taxable income,
although such discount will be included in gross income for purposes of the 90%
test and the 30% test described above. Original issue discount with respect to
tax-exempt securities is accrued and added to the adjusted tax basis of such
securities for purposes of determining gain or loss upon sale or at maturity.
Generally, the amount of original issue discount is determined on the basis of a
constant yield to maturity which takes into account the compounding of accrued
interest. Under section 1286 of the Code, an investment in a stripped bond or
stripped coupon will result in original issue discount.
Debt securities may be purchased by a Fund at a discount which exceeds
the original issue price plus previously accrued original issue discount
remaining on the securities, if any, at the time a Fund purchases the
securities. This additional discount represents market discount for income tax
purposes. To the extent that a Fund purchases municipal bonds at a market
discount, the accounting accretion of such discount may generate taxable income
for the Fund and its shareholders. In the case of any debt security issued after
July 18, 1984, having a fixed maturity date of more than one year from the date
of issue and having market discount, the gain realized on disposition will be
treated as interest income for purposes of the 90% test to the extent it does
not exceed the accrued market discount on the security (unless the Fund elects
to include such accrued market discount in income in the tax year to which it is
attributable). Generally, market discount is accrued on a daily basis.
A Fund whose portfolio is subject to the market discount rules may be
required to capitalize, rather than deduct currently, part or all of any direct
interest expense incurred to purchase or carry any debt security having market
discount, unless the Fund makes the election to include market discount
currently. Because a Fund must take into account all original issue discount for
purposes of satisfying various requirements for qualifying as a regulated
investment company under Subchapter M of the Code, it will be more difficult for
a Fund to make the distributions required under Subchapter M of the Code and to
avoid the 4% excise tax described above. To the extent that a Fund holds zero
coupon or deferred interest bonds in its portfolio, or bonds paying interest in
the form of additional debt obligations, the Fund would recognize income
currently even though the Fund received no cash payment of interest, and would
need to raise cash to satisfy the obligations to distribute such income to
shareholders from sales of portfolio securities.
The Funds may purchase debt securities at a premium, i.e., at a
purchase price in excess of face amount. With respect to tax-exempt securities,
the premium must be amortized to the maturity date but no deduction is allowed
for the premium amortization. Instead, the amortized bond premium will reduce
the Fund's adjusted tax basis in the securities. For taxable securities, the
premium may be amortized if the Fund so elects. The amortized premium on taxable
securities is allowed as a deduction, and, generally for securities issued after
September 27, 1985, must be amortized under an economic accrual method.
TAXATION OF THE SHAREHOLDER
Taxable distributions generally are included in a shareholder's gross
income for the taxable year in which they are received. However, dividends
declared in October, November or December and made payable to shareholders of
record in such a month will be deemed to have been received on December 31, if a
Fund pays the dividends during the following January. Since none of the net
investment income of the Tax Free Fund, the U.S. Treasury Securities Cash Fund,
the U.S. Government Securities Savings Fund, the Intermediate Treasury Fund or
the Near-Term Tax Free Fund is expected to arise from dividends on domestic
common or preferred stock, none of these Funds' distributions will qualify for
the 70% corporate dividends-received deduction.
Distributions by a Fund, other than the U.S. Treasury Securities Cash
Fund and the U.S. Government Securities Savings Fund, will result in a reduction
in the fair market value of the Fund's shares. Should a distribution reduce the
fair market value below a shareholder's cost basis, such distribution
nevertheless would be taxable to the shareholder as ordinary income or long-term
capital gain, even though, from an investment standpoint, it may constitute a
partial return of capital. In particular, investors should be careful to
consider the tax implications of buying shares of such Funds just prior to a
distribution. The price of such shares purchased at that time includes the
amount of any forthcoming distribution. Those investors purchasing the Fund's
shares just prior to a distribution may receive a return of investment upon
distribution which will nevertheless be taxable to them.
To the extent that the Tax Free Fund's and the Near-Term Tax Free
Fund's dividends distributed to shareholders are derived from interest income
exempt from Federal income tax and are designated as "exempt-interest dividends"
by the Fund, they will be excludable from a shareholder's gross income for
Federal income tax purposes. Shareholders who are recipients of Social Security
benefits should be aware that exempt-interest dividends received from the Fund
are includible in their "modified adjusted gross income" for purposes of
determining the amount of such Social Security benefits, if any, that are
required to be included in their gross income.
All distributions of investment income during the year will have the
same percentage designated as tax exempt. This method is called the "average
annual method." Since the Tax Free Fund and the Near-Term Tax Free Fund invest
primarily in tax-exempt securities, the percentage is expected to be
substantially the same as the amount actually earned during any particular
distribution period.
A shareholder of a Fund should be aware that a redemption of shares
(including any exchange into another United Services Fund) is a taxable event
and, accordingly, a capital gain or loss may be recognized. If a shareholder of
the Tax Free Fund or the Near-Term Tax Free Fund receives an exempt-interest
dividend with respect to any share and such share has been held for six months
or less, any loss on the redemption or exchange will be disallowed to the extent
of such exempt-interest dividend. Similarly, if a shareholder of a Fund receives
a distribution taxable as long-term capital gain with respect to shares of the
Fund and redeems or exchanges shares before he has held them for more than six
months, any loss on the redemption or exchange (not otherwise disallowed as
attributable to an exempt-interest dividend) will be treated as long-term
capital loss to the extent of the long-term capital gain recognized.
The Tax Free Fund and the Near-Term Tax Free Fund may invest in private
activity bonds. Interest on private activity bonds issued after August 7, 1986,
is subject to the Federal alternative minimum tax ("AMT"), although the interest
continues to be excludable from gross income for other purposes. AMT is a
supplemental tax designed to ensure that taxpayers pay at least a minimum amount
of tax on their income, even if they make substantial use of certain tax
deductions and exclusions (referred to as "tax preference items"). Interest from
private activity bonds is one of the tax preference items that is added into
income from other sources for the purposes of determining whether a taxpayer is
subject to the AMT and the amount of any tax to be paid. Prospective investors
should consult their own tax advisors with respect to the possible application
of the AMT to their tax situation.
Opinions relating to the validity of tax-exempt securities and the
exemption of interest thereon from Federal income tax are rendered by recognized
bond counsel to the issuers. Neither the Advisor's nor the Fund's counsel makes
any review of proceedings relating to the issuance of tax-exempt securities or
the basis of such opinions.
CUSTODIAN
Bankers Trust Company acts as Custodian for all Funds of the Trust
described in this Statement of Additional Information. With respect to the Gold
Shares Fund, Global Resources Fund, World Gold Fund and European Income Fund,
Bankers Trust Company may hold securities of the funds outside the United States
pursuant to sub-custody arrangements separately approved by the Trust. Services
with respect to the retirement accounts will be provided by Security Trust and
Financial Company of San Antonio, Texas, a wholly-owned subsidiary of the
Advisor.
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL
Price Waterhouse LLP, One Riverwalk Place, Suite 900, San Antonio,
Texas 78205 serves as the independent accountants for the Trust.
Goodwin, Procter & Hoar, Exchange Place, Boston, Massachusetts 02109,
are legal counsel to the Trust.
INFORMATION ABOUT SECURITIES RATINGS
Debt Security Ratings, Including Municipal Bonds
MOODY'S INVESTORS SERVICE, INC. Aaa--the "best quality." Aa--"high
quality by all standards," but margins of protection or other elements make
long-term risks appear somewhat larger than Aaa rated municipal bonds. A--
"upper medium grade obligation." Security for principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future. Baa--"medium grade obligations." Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable over
any great length of time. Such bonds lack outstanding investment characteristics
and have speculative characteristics as well.
STANDARD & POOR'S CORPORATION. AAA--"obligation of the highest
quality." AA--issues with investment characteristics "only slightly less marked
than those of the prime quality issues." A--"the third strongest capacity for
payment of debt service." Principal and interest payments on the bonds in this
category are considered safe. It differs from the two higher ratings, because
with respect to general obligation bonds, there is some weakness which, under
certain adverse circumstances, might impair the ability of the issuer to meet
debt obligations at some future date. With respect to revenue bonds, debt
service coverage is good but not exceptional, and stability of the pledged
revenues could show some variations because of increased competition or economic
influences on revenues. BBB--"regarded as having adequate capacity to pay
interest and repay principal." Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal.
FINANCIAL STATEMENTS
The financial statements for year ended June 30, 1995, are hereby
incorporated by reference from the Annual Report to Shareholders of that date
which has been delivered with this Statement of Additional Information [unless
previously provided, in which event the Trust will promptly provide another
copy, free of charge, upon request to: United Services Advisors, Inc., P.O. Box
29467, San Antonio, Texas 78229-0467, 1-800-873-8637 or (210) 308-1234].
