REGISTRATION NO. 2-35439
REGISTRATION NO. 811-1800
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 83 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 83 [ X ]
(Check appropriate box or boxes)
U.S. GLOBAL INVESTORS FUNDS
(Exact name of registrant as specified in charter)
7900 Callaghan Road
San Antonio, Texas 78229
(Address and zip code of principal executive office)
Registrant's Telephone Number, including Area Code: (210) 308-1234
Frank E. Holmes, President
U.S. Global Investors Funds
7900 Callaghan Road
San Antonio, Texas 78229
(Name and address of agent for service)
Approximate Date of Proposed Public Offering: ________
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ X ] on November 2, 1998, pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
The Registrant hereby declares that, pursuant to Rule 24f-2 promulgated under
the Investment Company Act of 1940, an indefinite number of shares of beneficial
interest, no par value, in Gold Shares Fund, World Gold Fund, Global Resources
Fund, China Region Opportunity Fund, All American Equity Fund, Income Fund, Real
Estate Fund, Tax Free Fund, Near-Term Tax Free Fund, U.S. Government Securities
Savings Fund and U.S. Treasury Securities Cash Fund have previously been
registered. The Rule 24f-2 Notice for the most recent fiscal year of U.S. Global
Investors Funds was filed on September 18, 1998.
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PART A -- PROSPECTUS
- --------------------------------------------------------------------------------
PROSPECTUS
GOLD AND NATURAL RESOURCES FUNDS
Gold Shares Fund
World Gold Fund
Global Resources Fund
EQUITY FUNDS
China Region Opportunity Fund
All American Equity Fund
Income Fund
Real Estate Fund
TAX-FREE FUNDS
Tax Free Fund
Near-Term Tax Free Fund
GOVERNMENT MONEY MARKET FUNDS
U.S. Government Securities Savings Fund
U.S. Treasury Securities Cash Fund
<PAGE>
PROSPECTUS
November 2, 1998
This prospectus gives vital information about these no-load funds. For your own
benefit and protection, please read it before you invest, and keep it on hand
for future reference.
You can find more detailed information in the current Statement of Additional
Information (SAI). For a free copy, call 1-800-US-FUNDS. The SAI has been filed
with the Securities and Exchange Commission and is incorporated into this
prospectus by reference.
Please note that shares of these funds:
o Are not insured, guaranteed, sponsored, recommended, or approved by the
United States government or any agency thereof
o may not be able to maintain a stable $1 share price (only applicable to
government money market funds)
Like all mutual fund shares, these securities have not been approved or
disapproved by the Securities and Exchange Commission or any state securities
commission, nor has the Securities and Exchange Commission or any state
securities commission passed upon the accuracy or adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
U.S. GLOBAL INVESTORS FUNDS
P. O. Box 781234
San Antonio, Texas 78278-1234
PHONE: 1-800-US-FUNDS
INTERNET: http://www.us-global.com. The SEC also maintains a website
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference and other information that the funds file
electronically with the SEC.
GOLD AND NATURAL RESOURCES FUNDS
Gold Shares Fund
World Gold Fund
Global Resources Fund
EQUITY FUNDS
China Region Opportunity Fund
All American Equity Fund
Income Fund
Real Estate Fund
TAX-FREE FUNDS
Tax Free Fund
Near-Term Tax Free Fund
GOVERNMENT MONEY MARKET FUNDS
U.S. Government Securities Savings Fund
U.S. Treasury Securities Cash Fund
<PAGE>
CONTENTS
OVERVIEW
A LOOK AT EXPENSES AND FINANCIAL HISTORY
Investor expenses
Shareholder transaction expenses..........................................
Annual fund operating expenses ...........................................
Example...................................................................
Financial highlights......................................................
A FUND-BY-FUND REVIEW OF INVESTMENT GOALS, STRATEGIES AND RISKS
Investment objectives & policies .........................................
Common investment practices...............................................
Risk considerations ......................................................
Strategic transactions....................................................
INSTRUCTIONS AND POLICIES FOR OPENING, MAINTAINING AND CLOSING AN ACCOUNT
Your account
Buying shares.............................................................
Exchanging between funds..................................................
Selling (redeeming) shares................................................
Transaction policies............................................................
Valuation of shares
Execution of requests
Trader's fee paid to the fund
Telephone transactions
Dividends and account policies..................................................
Account statements
Dividend reinvestment
Taxability of dividends
Taxability of transactions
Performance information
Small accounts
DETAILS THAT APPLY TO THE FUNDS AS A GROUP
Fund details..............................................................
How the funds are organized
The management firm (the adviser)
The transfer agent
Other service providers
For more information......................................................
Reports to shareholders
Statement of additional information (SAI)
<PAGE>
U.S. Global Investors Funds are designed to make available to mutual fund
investors the expertise of the investment professionals at U. S. Global
Investors, Inc., the adviser. The adviser is the organization employed by the
funds to give professional advice on its investments and asset management
practices.
GOLD & NATURAL RESOURCES FUNDS
U.S. Global Investors offers three gold and natural resources funds:
Gold Shares Fund
World Gold Fund
Global Resources Fund
EQUITY FUNDS
U.S. Global Investors offers four diversified equity funds:
China Region Opportunity Fund (China Region Fund)
All American Equity Fund (All American Fund)
Income Fund
Real Estate Fund
TAX-FREE FUNDS
U.S. Global Investors offers two tax-free funds:
Tax Free Fund
Near-Term Tax Free Fund
GOVERNMENT MONEY MARKET FUNDS
U.S. Global Investors offers two money market funds that invest principally in
government securities:
U.S. Government Securities Savings Fund (Government Securities Savings Fund)
U.S. Treasury Securities Cash Fund (Treasury Securities Cash Fund)
<PAGE>
INVESTOR EXPENSES
The figures below summarize an investor's maximum transaction costs and expenses
for the most recent fiscal year. Future expenses may be greater or less.
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge..................................................None
Redemption fee (does not include wire redemption......................None
fee -- currently $10)
Deferred sales charge.................................................None
Administrative exchange fee.............................................$5
Account closing fee (does not apply to exchanges) .....................$10
Trader's fee (paid if shares are redeemed or exchanged
before a required number of calendar days):
Gold Shares Fund, World Gold Fund and Global Resources Fund
held less than 30 days...........................................0.25%
Income Fund, Real Estate Fund, All American Fund shares
held less than 30 days.......................................... 0.10%
China Region Fund shares held less than 180 days...................1.00%
ANNUAL FUND OPERATING EXPENSES
Annual fund operating expenses are based on historical expenses and calculated
as a percentage of average fund net assets. The adviser has voluntarily limited
total fund operating expenses to not exceed 1.00% for the All American Fund,
0.70% for the Tax Free and Near-Term Tax Free Funds and 0.40% for the
Government Securities Savings Fund on an annualized basis through June 30, 1999,
and until such later date as the adviser determines. Expense offset arrangements
have been made with the Funds' custodian so the custodian fees may be paid
indirectly by credits earned on the Funds' cash balances.
GOLD AND NATURAL RESOURCES FUNDS
<TABLE>
<CAPTION>
GOLD WORLD GLOBAL
SHARES GOLD RESOURCES
FUND FUND FUND
<S> <C> <C> <C>
Management fee 0.73% 0.97% 1.00%
Other expenses 1.74% 0.77% 1.38%
(after reduction)
Total fund operating expenses 2.47% 1.74% 2.38%
(after reduction)
</TABLE>
In the absence of offset arrangements, other expenses and total fund operating
expenses would have been 1.94% and 2.67% for the Gold Shares Fund, 0.77% and
1.74% for the World Gold Fund and 1.42% and 2.42% for the Global Resources Fund.
<PAGE>
EQUITY FUNDS
<TABLE>
<CAPTION>
CHINA ALL INCOME REAL
REGION AMERICAN FUND ESTATE
FUND FUND FUND
<S> <C> <C> <C> <C>
Management fee 1.22% 0.12% 0.75% 0.75%
(after reduction)
Other expenses 1.38% 0.85% 1.39% 1.22%
(after reduction)
Total fund operating expenses 2.60% 0.97% 2.14% 1.97%
(after reduction)
</TABLE>
In the absence of expense guarantees and offset arrangements, management fees,
other expenses and total fund operating expenses would have been 1.22%, 1.38%
and 2.60% for the China Region Fund, 0.75%, 0.86% and 1.61% for the All American
Fund, 0.75%, 1.39% and 2.14% for the Income Fund, and 0.75%, 1.26% and 2.01% for
the Real Estate Fund.
TAX-FREE AND GOVERNMENT MONEY MARKET FUNDS
<TABLE>
<CAPTION>
TAX NEAR-TERM GOVERNMENT TREASURY
FREE TAX FREE SECURITIES SECURITIES
FUND FUND SAVINGS CASH
FUND FUND
<S> <C> <C> <C> <C>
Management fee 0.00% 0.00% 0.06% 0.48%
(after reduction)
Other expenses 0.70% 0.70% 0.25% 0.48%
(after reduction)
Total fund operating expenses 0.70% 0.70% 0.31% 0.96%
(after reduction)
</TABLE>
In the absence of expense guarantees and offset arrangements, management fees,
other expenses and total fund operating expenses would have been 0.75%, 0.70%
and 1.45% for the Tax Free Fund, 0.50%, 1.33% and 1.83% for the Near-Term Tax
Free Fund, and 0.41%, 0.26% and 0.67% for the Government Securities Savings
Fund.
The example below shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and distributions and that the average annual return was 5%.
GOLD AND NATURAL RESOURCES FUNDS
<TABLE>
<CAPTION>
GOLD WORLD GLOBAL
SHARES GOLD RESOURCES
FUND FUND FUND
<S> <C> <C> <C>
1 year $35 $28 $34
3 years $87 $65 $84
5 years $141 $104 $137
10 years $290 $215 $282
</TABLE>
<PAGE>
EQUITY FUNDS
<TABLE>
<CAPTION>
CHINA ALL INCOME REAL
REGION AMERICAN FUND ESTATE
FUND FUND FUND
<S> <C> <C> <C> <C>
1 year $36 $32 $32 $30
3 years $91 $77 $77 $72
5 years $148 $123 $125 $116
10 years $303 $244 $257 $239
</TABLE>
TAX FREE AND GOVERNMENT MONEY MARKET FUNDS
<TABLE>
<CAPTION>
TAX NEAR-TERM GOVERNMENT TREASURY
FREE TAX FREE SECURITIES SECURITIES
FUND FUND SAVINGS CASH
FUND FUND
<S> <C> <C> <C> <C>
1 year $17 $17 $13 $20
3 years $32 $32 $20 $41
5 years $49 $49 $27 $63
10 years $97 $97 $49 $128
</TABLE>
These estimates include an account closing fee of $10 for each period. The All
American Fund also includes account maintenance fees of $12, $36, $60, and $120,
respectively, for the periods shown.
The account closing and maintenance fees are flat charges that do not vary with
the size of your investment. Therefore, for investments larger than $1,000,
total expenses will be much lower than this example implies.
In conformance with SEC regulations, the example is based on a $1,000
investment. The minimum investment, however, is $5,000 for most of the funds. In
practice, a $1,000 account would be assessed a monthly $1.00 small account
charge ($5.00 in the tax free funds and China Region Fund), which is not
reflected in the example. See Small Accounts section.
The example does not represent past or future expenses. Actual expenses may be
more or less than those shown.
<PAGE>
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FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following information has been audited by PricewaterhouseCoopers LLP,
independent accountants, whose unqualified report is included in the Annual
Report to Shareholders, which is incorporated by reference into the Statement of
Additional Information. The Financial Highlights should be read in conjunction
with the financial statements and notes included in the Annual Report.
<TABLE>
<CAPTION>
GOLD SHARES FUND 1998* 1997* 1996* 1995* 1994* 1993* 1992* 1991* 1990* 1989*
Per share for each year ended June 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $9.40 $18.40 $21.40 $24.80 $24.90 $22.10 $35.70 $38.20 $37.70 $37.40
- ------------------------------------------------------------------------------------------------------------------------------------
Investment activities
Net investment income (loss) 0.01 0.40 0.50 0.60 0.70 0.40 0.70 1.00 1.60 2.00
Net realized and unrealized gain (loss) (5.50) (8.90) (3.00) (3.30) (0.20) 2.90 (13.50) (2.50) 0.80 0.40
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total from investment activities (5.49) (8.50) (2.50) (2.70) 0.50 3.30 (12.80) (1.50) 2.40 2.40
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Distributions
From net investment income (0.11) (0.50) (0.50) (0.60) (0.60) (0.40) (0.80) (1.00) (1.90) (2.10)
In excess of net investment income (0.01) -- -- (0.10) -- (0.10) -- -- -- --
From net realized gains -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total distributions (0.12) (0.50) (0.50) (0.70) (0.60) (0.50) (0.80) (1.00) (1.90) (2.10)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $3.79 $9.40 $18.40 $21.40 $24.80 $24.90 $22.10 $35.70 $38.20 $37.70
- ------------------------------------------------------------------------------------------------------------------------------------
Total return (excluding account fees) (58.83)% (46.49)% (11.73)% (11.21)% 1.85% 16.70% (36.45)% (3.77)% 5.51% 7.03%
Ratios to average net assets (a)
Net investment income 0.53% 2.68% 1.81% 2.47% 2.61% 2.58% 2.52% 2.71% 3.80% 5.46%
Total expenses 2.67% 1.84% 1.58% 1.47% 1.52% 1.95% 1.64% 1.54% 1.46% 1.64%
Expenses reimbursed or offset (0.20)% (0.04)% (0.04) (0.05) (0.06) (0.07) (0.10)% -- -- (0.10)%
Net expenses 2.47% 1.80% 1.54% 1.42% 1.46% 1.88% 1.54% 1.54% 1.46% 1.54%
Portfolio turnover rate 220% 44% 24% 33% 29% 20% 25% 49% 13% 7%
Net assets, end of year (in thousands) $46,251 $79,523 $153,839 $211,171 $263,827 $299,808 $187,937 $343,148 $295,108 $239,111
- -----------------------------
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
* Adjusted to reflect a 1-for-10 reverse stock split as of July 1, 1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WORLD GOLD FUND 1998 1997 1996 1995 1994 1993 1992 1991* 1990* 1989*
Per share for each year ended June 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $15.95 $21.12 $15.81 $15.63 $14.59 $9.51 $10.04 $10.77 $11.57 $14.03
- ------------------------------------------------------------------------------------------------------------------------------------
Investment activities
Net investment income (loss) (0.05) (0.12) (0.08) (0.12) (0.09) (0.12) (0.13) (0.10) (0.04) 0.02
Net realized and unrealized gain (loss) (5.90) (3.94) 5.39 0.33 1.13 5.20 (0.40) (0.63) (0.66) (2.48)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total from investment activities (5.95) (4.06) 5.31 0.21 1.04 5.08 (0.53) (0.73) (0.70) (2.46)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Distributions
From net investment income -- (1.11) -- -- -- -- -- -- (0.10) --
In excess of net investment income (0.14) -- -- (0.03) -- -- -- -- -- --
From net realized gains -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Total distributions (0.14) (1.11) -- (0.03) -- -- -- -- (0.10) --
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $9.86 $15.95 $21.12 $15.81 $15.63 $14.59 $9.51 $10.04 $10.77 $11.57
- ------------------------------------------------------------------------------------------------------------------------------------
Total return (excluding account fees) (37.41)% (20.10)% 33.59% 1.36% 7.13% 53.58% (5.37)% (7.03)%(7.02)%(16.42)%
Ratios to average net assets (a)
Net investment income (0.72)% (0.60)% (0.40)% (0.66)% (0.66)% (1.15)% (1.18)% (0.95)% (0.24)% 0.13%
Total expenses 1.74% 1.54% 1.53% 1.58% 1.57% 2.06% 2.20% 2.22% 1.95% 2.00%
Expenses reimbursed or offset -- (0.02)% (0.02)% (0.03)% (0.04)% (0.06)% -- -- -- --
Net expenses 1.74% 1.52% 1.51% 1.55% 1.53% 2.00% 2.20% 2.22% 1.95% 2.00%
Portfolio turnover rate 43% 40% 26% 28% 20% 26% 47% 44% 26% 0%
Net assets, end of year (in thousands) $149,759 $187,466 $248,781 $181,473 $202,819 $109,805 $57,942 $65,423 $72,626 $85,119
- -----------------------------
(a) Expenses reimbursed or offset reflect reductions to total expenses,
as discussed in the notes to the financial statements. Such amounts would
decrease the net investment income ratio had such reductions not occurred.
* Adjusted to reflect a 1-for-10 reverse stock split as of September 30, 1990.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL RESOURCES FUND 1998 1997 1996 1995 1994 1993 1992 1991* 1990* 1989*
Per share for each year ended June 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $7.33 $6.98 $5.76 $5.74 $6.10 $5.78 $5.76 $6.31 $7.07 $7.67
- ------------------------------------------------------------------------------------------------------------------------------------
Investment activities
Net investment income (loss) (0.01) (0.05) (0.01) (0.03) (0.02) 0.01 0.00 0.03 0.12 0.13
Net realized and unrealized gain (loss) (1.95) 1.34 1.31 0.36 (0.18) 0.35 0.25 (0.12) 0.02 (0.33)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment activities (1.96) 1.29 1.30 0.33 (0.20) 0.36 0.25 (0.09) 0.14 (0.20)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From net investment income -- (0.04) -- -- -- (0.01) (0.07) (0.04) (0.50) --
In excess of net investment income -- -- (0.01) -- (0.01) (0.03) -- -- -- --
From net realized gains (0.04) (0.90) (0.07) -- (0.15) -- (0.16) (0.42) (0.40) (0.40)
In excess of net realized gains (0.86) -- -- (0.31) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions (0.90) (0.94) (0.08) (0.31) (0.16) (0.04) (0.23) (0.46) (0.90) (0.40)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $4.47 $7.33 $6.98 $5.76 $5.74 $6.10 $5.78 $5.76 $6.31 $7.07
- ------------------------------------------------------------------------------------------------------------------------------------
Total return (excluding account fees) (29.79)% 18.96% 22.80% 5.94% (3.73)% 6.46% 4.31% (1.26)% (0.47)% (2.36)%
Ratios to average net assets (a)
Net investment income (1.51)% (0.76)% (0.13)% (0.60)% (0.34)% 0.17% 0.61% 0.58% 1.37% 1.78%
Total expenses 2.42% 2.34% 2.58% 2.51% 2.44% 2.48% 2.34% 2.50% 2.94% 4.40%
Expenses reimbursed or offset (0.04)% (0.04)% (0.01)% (0.02)% (0.01)% (0.02)% (0.01)% (0.07)% (0.84)% (2.36)%
Net expenses 2.38% 2.30% 2.57% 2.49% 2.43% 2.46% 2.33% 2.43% 2.10% 2.04%
Portfolio turnover rate 192% 52% 117% 50% 58% 120% 55% 82% 70% 21%
Net assets, end of year (in thousands) $18,958 $29,983 $24,534 $21,452 $21,620 $23,939 $25,384 $28,157 $31,694 $37,064
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
* Adjusted to reflect a 1-for-10 reverse stock split as of September 30, 1990.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CHINA REGION OPPORTUNITY FUND 1998 1997 1996 1995 1994* 1994**
Per share for each year ended June 30,
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $8.60 $6.43 $6.67 $7.75 $10.00 $9.92
- ------------------------------------------------------------------------------------------------
Investment activities
Net investment income (loss) 0.03 0.05 0.08 0.10 0.04 0.04
Net realized and unrealized gain (loss) (4.49) 2.15 (0.22) (1.09) (2.25) (2.17)
------- ------- ------- ------- ------- -------
Total from investment activities (4.46) 2.20 (0.14) (0.99) (2.21) (2.13)
------- ------- ------- ------- ------- -------
Distributions
From net investment income (0.05) (0.03) (0.08) (0.09) (0.04) (0.04)
In excess of net investment income -- -- (0.02) -- -- --
From net realized gains -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Total distributions (0.05) (0.03) (0.10) (0.09) (0.04) (0.04)
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $4.09 $8.60 $6.43 $6.67 $7.75 $7.75
- ------------------------------------------------------------------------------------------------
Total return (excluding account fees) (52.06)% 34.38% (2.07)% (12.79)% (22.11)% (21.48)%
Ratios to average net assets (a)
Net investment income 0.39% 0.87% 1.24% 1.53% 1.51% 1.33%
Total expenses 2.60% 2.54% 2.60% 2.51% 3.10% 3.26%
Expenses reimbursed or offset -- (0.32)% (0.45)% (0.60)% (1.48)% (1.38)%
Net expenses 2.60% 2.22% 2.15% 1.95% 1.62% 1.88%
Portfolio turnover rate 17% 24% 37% 54% 13% 13%
Net assets, end of year (in thousands) $19,460 $42,099 $20,967 $19,022 $7,655 $7,655
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would
decrease the net investment income ratio had such reductions not occurred.
* For the period January 10, 1994, commencement of operations, through
June 30, 1994.
** For the period February 10, 1994, effective date of registration and public
offering, through June 30, 1994.
Ratios are annualized for periods of less than one year.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALL AMERICAN EQUITY FUND 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
Per share for each year ended June 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $31.34 $24.55 $20.08 $19.52 $20.60 $18.79 $17.12 $16.11 $16.67 $16.44
- ---------------------------------------------------------------------------------------------------------------------------------
Investment activities
Net investment income (loss) 0.38 0.38 0.41 0.44 0.44 0.36 0.17 0.14 0.49 0.43
Net realized and unrealized gain (loss) 8.06 7.64 4.44 2.68 (0.75) 1.91 1.62 0.97 (0.55) 0.28
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment activities 8.44 8.02 4.85 3.12 (0.31) 2.27 1.79 1.11 (0.06) 0.71
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From net investment income (0.37) (0.43) (0.38) (0.39) (0.44) (0.37) (0.12) (0.10) (0.50) (0.48)
In excess of net investment income (0.03) -- -- -- (0.02) (0.09) -- -- -- --
From net realized gains (0.58) (0.80) -- -- (0.31) -- -- -- -- --
In excess of net realized gains -- -- -- (2.17) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions (0.98) (1.23) (0.38) (2.56) (0.77) (0.46) (0.12) (0.10) (0.50) (0.48)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $38.80 $31.34 $24.55 $20.08 $19.52 $20.60 $18.79 $17.12 $16.11 $16.67
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (excluding account fees) 27.31% 33.68% 24.31% 17.98% (1.67)% 12.15% 10.51% 6.84% (0.40)% 4.45%
Ratios to average net assets (a)
Net investment income 1.03% 1.51% 1.84% 2.33% 2.11% 1.86% 0.78% 0.83% 2.63% 2.62%
Total expenses 1.61% 1.81% 1.90% 2.17% 2.08% 1.75% 2.03% 2.80% 2.10% 1.97%
Expenses reimbursed or offset (0.64)% (1.14)% (1.22)% (1.47)% (1.47)% (0.72)% -- -- -- --
Net expenses 0.97% 0.67% 0.68% 0.70% 0.61% 1.03% 2.03% 2.80% 2.10% 1.97%
Portfolio turnover rate 24% 7% 16% 97% 117% 12% 35% 209% 258% 113%
Net assets, end of year (in thousands) $34,671 $25,478 $15,220 $11,931 $10,227 $12,331 $11,825 $10,306 $9,763 $11,992
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would
decrease the net investment income ratio had such reductions not occurred.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INCOME FUND 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
Per share for each year ended June 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $14.49 $14.94 $13.35 $12.57 $14.06 $12.65 $11.32 $12.23 $11.61 $9.64
- ---------------------------------------------------------------------------------------------------------------------------------
Investment activities
Net investment income (loss) 0.23 0.31 0.35 0.35 0.31 0.30 0.29 0.36 0.43 0.48
Net realized and unrealized gain (loss) 2.84 1.77 1.84 0.79 (1.06) 2.19 1.40 (0.62) 0.61 1.96
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment activities 3.07 2.08 2.19 1.14 (0.75) 2.49 1.69 (0.26) 1.04 2.44
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From net investment income (0.28) (0.27) (0.35) (0.34) (0.31) (0.27) (0.35) (0.36) (0.42) (0.47)
In excess of net investment income -- -- -- -- (0.03) -- -- -- -- --
From net realized gains (1.96) (2.26) (0.25) (0.02) (0.01) (0.79) (0.01) (0.29) -- --
In excess of net realized gains -- -- -- -- (0.39) (0.02) -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions (2.24) (2.53) (0.60) (0.36) (0.74) (1.08) (0.36) (0.65) (0.42) (0.47)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $15.32 $14.49 $14.94 $13.35 $12.57 $14.06 $12.65 $11.32 $12.23 $11.61
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (excluding account fees) 23.92% 15.58% 16.60% 9.31% (5.83)% 20.68% 15.02% (2.07)% 8.89% 26.02%
Ratios to average net assets (a)
Net investment income 1.54% 2.18% 2.45% 2.59% 2.27% 2.34% 2.47% 2.99% 3.55% 4.61%
Total expenses 2.14% 2.20% 2.10% 2.01% 1.79% 1.88% 1.95% 2.22% 1.94% 2.30%
Expenses reimbursed or offset -- (0.01)% (0.02)% (0.03)% (0.05)% (0.05)% -- -- -- (0.30)%
Net expenses 2.14% 2.19% 2.08% 1.98% 1.74% 1.83% 1.95% 2.22% 1.94% 2.00%
Portfolio turnover rate 29% 88% 51% 7% 7% 44% 76% 110% 19% 18%
Net assets, end of year (in thousands) $11,137 $9,615 $9,698 $10,230 $11,865 $11,009 $7,845 $7,456 $8,137 $5,317
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REAL ESTATE FUND 1998* 1997 1996 1995 1994 1993 1992 1991 1990 1989
Per share for each year ended June 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $14.22 $10.97 $9.80 $9.86 $10.96 $10.17 $8.83 $8.36 $10.20 $9.29
- ---------------------------------------------------------------------------------------------------------------------------------
Investment activities
Net investment income (loss) 0.27 0.40 0.42 0.23 0.22 0.17 0.29 0.24 0.30 0.38
Net realized and unrealized gain (loss) 0.03 3.15 1.27 (0.13) (1.05) 0.79 1.38 0.47 (1.57) 0.94
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment activities 0.30 3.55 1.69 0.10 (0.83) 0.96 1.67 0.71 (1.27) 1.32
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From net investment income (0.39) (0.30) (0.39) (0.16) (0.22) (0.17) (0.33) (0.24) (0.30) (0.41)
In excess of net investment income -- -- -- -- (0.02) -- -- -- -- --
From net realized gains (0.45) -- -- -- -- -- -- -- (0.27) --
Tax return of capital -- -- (0.13) -- (0.03) -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions (0.84) (0.30) (0.52) (0.16) (0.27) (0.17) (0.33) (0.24) (0.57) (0.41)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $13.68 $14.22 $10.97 $9.80 $9.86 $10.96 $10.17 $8.83 $8.36 $10.20
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (excluding account fees) 1.39% 32.44% 17.34% 1.09% (7.70)% 9.45% 18.70% 9.23% (12.60)% 14.46%
Ratios to average net assets (a)
Net investment income 2.05% 3.19% 3.63% 2.22% 1.96% 1.55% 3.17% 2.66% 3.50% 4.70%
Total expenses 2.01% 1.82% 2.27% 1.95% 1.62% 1.42% 1.63% 2.63% 2.51% 2.87%
Expenses reimbursed or offset (0.04)% (0.02)% (0.01)% (0.03)% (0.03)% (0.02)% -- -- -- (0.73)%
Net expenses 1.97% 1.80% 2.26% 1.92% 1.59% 1.40% 1.63% 2.63% 2.51% 2.14%
Portfolio turnover rate 95% 118% 108% 48% 145% 187% 103% 133% 63% 88%
Net assets, end of year (in thousands) $11,368 $13,897 $8,220 $9,169 $14,597 $19,780 $21,514 $6,678 $6,016 $5,658
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
* Effective May 1, 1998, the Fund changed to a new sub-adviser, Goodman & Co.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX FREE FUND 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
Per share for each year ended June 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $11.89 $11.58 $11.55 $11.40 $12.16 $11.69 $11.31 $11.11 $11.27 $10.75
- ---------------------------------------------------------------------------------------------------------------------------------
Investment activities
Net investment income (loss) 0.57 0.59 0.59 0.64 0.67 0.66 0.62 0.58 0.62 0.69
Net realized and unrealized gain (loss) 0.33 0.31 0.01 0.18 (0.56) 0.47 0.59 0.20 (0.15) 0.51
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment activities 0.90 0.90 0.60 0.82 0.11 1.13 1.21 0.78 0.47 1.20
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Distributions
From net investment income (0.59) (0.59) (0.57) (0.64) (0.68) (0.63) (0.62) (0.58) (0.63) (0.68)
In excess of net investment income -- -- -- (0.03) (0.06) -- -- -- -- --
From net realized gains -- -- -- -- (0.06) (0.03) (0.21) -- -- --
In excess of net realized gains -- -- -- -- (0.07) -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions (0.59) (0.59) (0.57) (0.67) (0.87) (0.66) (0.83) (0.58) (0.63) (0.68)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $12.20 $11.89 11.58 11.55 11.40 12.16 11.69 11.31 11.11 11.27
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (excluding account fees) 7.71% 7.93% 5.25% 7.51% 0.75% 9.97% 11.02% 7.19% 4.31% 11.48%
Ratios to average net assets (a)
Net investment income 4.77% 5.00% 5.06% 5.62% 5.68% 5.48% 5.38% 5.09% 5.64% 6.38%
Total expenses 1.45% 1.46% 1.44% 1.49% 1.46% 1.53% 1.73% 1.93% 1.61% 1.74%
Expenses reimbursed or offset (0.75)% (1.06)% (1.08)% (1.27)% (1.46)% (1.21)% (0.46)% -- -- (0.51)%
Net expenses 0.70% 0.40% 0.36% 0.22% -- 0.32% 1.27% 1.93% 1.61% 1.23%
Portfolio turnover rate 49% 87% 69% 22% 51% 94% 70% 54% 82% 110%
Net assets, end of year (in thousands) $21,400 $18,327 $19,949 $18,613 $18,656 $17,192 $7,790 $7,236 $7,787 $10,365
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEAR-TERM TAX FREE FUND 1998 1997 1996 1995 1994 1993 1992 1991*
Per share for each year ended June 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $10.49 $10.38 $10.47 $10.39 $10.74 $10.42 $9.88 $10.00
- ---------------------------------------------------------------------------------------------------------------
Investment activities
Net investment income (loss) 0.43 0.48 0.47 0.45 0.43 0.61 0.62 0.27
Net realized and unrealized gain (loss) 0.19 0.12 (0.09) 0.06 (0.21) 0.31 0.56 (0.12)
------- ------- ------- ------- ------- ------- ------- -------
Total from investment activities 0.62 0.60 0.38 0.51 0.22 0.92 1.18 0.15
------- ------- ------- ------- ------- ------- ------- -------
Distributions
From net investment income (0.47) (0.49) (0.47) (0.43) (0.44) (0.59) (0.62) (0.22)
In excess of net investment income -- -- -- -- (0.07) -- -- (0.05)
From net realized gains -- -- -- -- -- (0.01) (0.02) --
In excess of net realized gains -- -- -- -- (0.06) -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total distributions (0.47) (0.49) 0.00 0.00 (0.13) (0.01) (0.02) (0.27)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $10.64 $10.49 $10.38 $10.47 $10.39 $10.74 $10.42 $9.88
- ---------------------------------------------------------------------------------------------------------------
Total return (excluding account fees) 6.02% 5.85% 3.68% 5.02% 2.03% 9.10% 12.25% 2.66%
Ratios to average net assets (a)
Net investment income 4.12% 4.67% 4.41% 4.25% 4.34% 5.73% 6.30% 6.07%
Total expenses 1.83% 1.92% 1.75% 1.62% 1.80% 2.55% 3.02% 6.98%
Expenses reimbursed or offset (1.13)% (1.52)% (1.23)% (1.42)% (1.80)% (2.55)% (3.02)% (6.98)%
Net expenses 0.70% 0.40% 0.52% 0.20% -- -- -- --
Portfolio turnover rate 39% 103% 83% 53% 69% 140% 45% 42%
Net assets, end of year (in thousands) $8,061 $7,360 $6,545 $7,128 $9,190 $1,775 $1,309 $592
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
* For the period December 1, 1990, commencement of operations, through June 30,
1991.
Ratios are annualized for periods of less than one year.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES SAVINGS FUND 1998 1997 1996 1995 1994 1993 1992 1991* 1990* 1989*
Per share for each year ended June 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.01 $1.03 $1.01
- ---------------------------------------------------------------------------------------------------------------------------------
Investment activities
Net investment income (loss) 0.05 0.05 0.05 0.05 0.03 0.04 0.05 0.08 0.07 0.08
Net realized and unrealized gain (loss) -- -- -- (0.01) -- -- -- (0.02) (0.01) 0.02
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment activities 0.05 0.05 0.05 0.04 0.03 0.04 0.05 0.06 0.06 0.10
Distributions
From net investment income (0.05) (0.05) (0.05) (0.05) (0.03) (0.04) (0.05) (0.07) (0.08) (0.08)
From net realized gains -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions (0.05) (0.05) (0.05) (0.05) (0.03) (0.04) (0.05) (0.07) (0.08) (0.08)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Capital contribution by manager -- -- -- 0.01 -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.01 $1.03
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (excluding account fees) 5.38% 5.27% 5.34% 5.09%** 3.34% 3.79% 5.30% 5.47% 6.70% 10.69%
Ratios to average net assets (a)
Net investment income 5.25% 5.13% 5.28% 5.03% 3.34% 3.61% 5.02% 6.24% 7.07% 8.15%
Total expenses 0.67% 0.70% 0.71% 0.68% 0.71% 0.81% 1.04% 1.84% 2.17% 1.95%
Expenses reimbursed or offset (0.36)% (0.41)% (0.45)% (0.45)% (0.55)% (0.62)% (1.04)% (1.37)% -- (0.82)%
Net expenses 0.31% 0.29% 0.26% 0.23% 0.16% 0.19% -- 0.47% 2.17% 1.13%
Net assets, end of year (in thousands) $761,518 $691,769 $588,409 $529,372 $610,229 $445,418 $117,092 $22,291 $4,992 $6,507
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
* Adjusted to reflect a 9.24482-for-1 stock split as of October 31, 1990. Prior
to the split the fund was not a constant $1.00 fund.
** Total return includes the effect of a voluntary capital contribution by the
Manager; otherwise the return would have been 4.19%.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. TREASURY SECURITIES CASH FUND 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
Per share for each year ended June 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment activities
Net investment income (loss) 0.04 0.04 0.04 0.04 0.02 0.02 0.04 0.06 0.08 0.08
Net realized and unrealized gain (loss) -- -- -- -- -- -- -- -- -- --
Total from investment activities 0.04 0.04 0.04 0.04 0.02 0.02 0.04 0.06 0.08 0.08
Distributions
From net investment income (0.04) (0.04) (0.04) (0.04) (0.02) (0.02) (0.04) (0.06) (0.08) (0.08)
From net realized gains -- -- -- -- -- -- -- -- -- --
Total distributions (0.04) (0.04) (0.04) (0.04) (0.02) (0.02) (0.04) (0.06) (0.08) (0.08)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (excluding account fees) 4.55% 4.35% 4.54% 4.43% 2.38% 2.46% 4.33% 6.69% 7.91% 7.94%
Ratios to average net assets (a)
Net investment income 4.37% 4.22% 4.42% 4.32% 2.38% 2.41% 4.30% 6.96% 7.67% 7.67%
Total expenses 0.96% 1.04% 1.03% 0.97% 0.96% 1.14% 1.11% 1.04% 1.00% 1.00%
Expenses reimbursed or offset -- -- -- -- (0.03)% (0.15)% (0.23)% (0.31)% (0.30)% (0.30)%
Net expenses 0.96% 1.04% 1.03% 0.97% 0.93% 0.99% 0.88% 0.73% 0.70% 0.70%
Net assets, end of year (in thousands) $149,421 $231,882 $188,844 $190,373 $164,708 $142,888 $150,192 $155,849 $162,988 $170,960
(a) Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease
the net investment income ratio had such reductions not occurred.
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES & POLICIES
As a group the funds offer a complete range of investment options. However, no
single fund can be a complete investment program, and a prospective investor
should take into account personal objectives and other investments when
considering the purchase of fund shares.
The funds' investment objectives may not be changed without shareholder
approval, except for the objectives of the China Region and All American Funds.
Shareholders will be notified in writing at least 30 days before any material
change in either fund's investment objective.
<PAGE>
GOLD AND NATURAL RESOURCES FUNDS
GOLD SHARES FUND
WORLD GOLD FUND
GLOBAL RESOURCES FUND
All three gold and natural resources funds seek long-term growth of capital plus
protection against inflation and monetary instability. The Gold Shares Fund also
pursues current income as a secondary objective. All three funds may invest,
without limitation, in issuers in any part of the world. The gold and natural
resources funds may be subject to risks not present with other mutual funds and
are highly speculative. An investment in shares of these funds should not be
considered a complete investment program.
The three funds use different strategies in pursuing their investment
objectives. The Gold Shares Fund focuses on selecting world class, senior gold
mining companies, most of which are in South Africa, Australia and North
America. The World Gold Fund includes junior and intermediate exploration and
development gold companies from around the world to give the fund added growth
potential. The Global Resources Fund invests in natural resource-related
businesses all over the globe, such as those in energy, metals, minerals and
other similar industries.
The Gold Shares Fund concentrates its investments in common stocks of
mid-capitalization and large-capitalization companies involved in mining,
processing, or dealing in gold. Normally, at least 65% of the Gold Shares Fund's
total assets will be invested in securities of companies involved in gold
operations. The Gold Shares Fund has significant investments in South African
issuers. The unstable political and social conditions in South Africa and the
unsettled political conditions in neighboring countries 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.
The World Gold Fund concentrates its investments in the equity securities of
micro-capitalization, small-capitalization, mid-capitalization and
large-capitalization companies primarily engaged in the exploration, mining,
processing, fabrication and distribution of gold or other metals, such as
silver, platinum, uranium and strategic metals. The World Gold Fund invests at
least 25% of its total assets in the securities of companies principally engaged
in natural resource operations. Under normal circumstances, at least 65% of its
total assets will be invested in the securities of companies involved in the
exploration for, mining and processing of, or dealing in, gold.
<PAGE>
The Gold Shares and World Gold Funds may invest up to 10% of each fund's
respective total assets in gold or gold bullion.
The Global Resources Fund concentrates its investments in the equity securities
of large capitalization companies primarily engaged in the exploration, mining,
processing, fabrication and distribution of natural resources of any kind,
including timber, hydrocarbons, minerals and metals such as platinum, uranium,
strategic metals, gold, silver, diamonds, coal, oil and phosphates. Consistent
with its investment objectives, the Global Resources Fund may diversify its
investments substantially among all natural resources.
PORTFOLIO MANAGER
Gil Atzmon is a gold stock analyst and leader of the portfolio team managing the
World Gold and Gold Shares Funds. Mr. Atzmon, portfolio manager for the World
Gold and Global Resources Funds from 1987 to 1990, rejoined the company in June
1998. From 1990 to 1993 he was vice president of investor relations for Dayton
Mining Corporation where he raised $50 million in equity. From 1993 to 1998 he
ran his own consulting and management firm advising money managers on investment
decisions and strategies and mining companies on financing and corporate
development. Mr. Atzmon holds a master's degree in energy and mineral resources
from The University of Texas and a bachelor's degree in geology and geography
from Columbia University.
Michael Chapman, a Chartered Financial Analyst, has led the portfolio team
managing the Global Resources Fund since September 1998. Mr. Chapman joined the
adviser as a senior research analyst in November 1995. From 1992 to 1995 he was
a petroleum engineer. Mr. Chapman has earned a master's degree in energy and
mineral resources and a bachelor's degree in petroleum engineering from The
University of Texas.
<PAGE>
EQUITY FUNDS
The investment objective of the China Region, All American, and Real Estate
Funds is long-term capital appreciation. Current income is a secondary
consideration for the Real Estate Fund. Each fund takes a different approach,
offering unique advantages, in seeking to achieve its investment objectives.
The Income Fund seeks preservation of capital and, consistent with that
objective, production of current income. Long-term capital appreciation is a
secondary consideration.
CHINA REGION FUND
The China Region Fund invests primarily in equity securities in the China
region, which consists of the People's Republic of China (PRC or China), Hong
Kong, Taiwan, Korea, Singapore, Thailand and Malaysia. At least 65% of the China
Region Fund's total assets will be invested in equity securities issued by China
region companies that (1) are organized under the laws of the countries within
the China region, or (2) have at least 50% of their assets in one or more China
region countries or derive at least 50% of their gross revenues or profits from
providing goods or services to or from one or more China region countries.
Investments by the China Region Fund in the securities of China region companies
may provide the potential for above-average capital appreciation, but are
subject to special risks. The China Region Fund is designed for long-term
investors who can accept the special risks of investing in the China region not
typically associated with investing in other more established economies or
securities markets. These risks include political, economic and legal
uncertainties, as well as currency fluctuations. Investors should carefully
consider their ability to assume these risks before making an investment in the
China Region Fund. An investment in shares of the China Region Fund should be
considered speculative and thus may not be appropriate for all investors. An
investment in shares of the fund should not be considered a complete investment
program.
The China Region Fund will invest in both new and existing enterprises
registered and operating in China and the China region. These will include
wholly Chinese-owned enterprises, wholly foreign-owned enterprises and
Sino-foreign joint ventures. While portfolio holdings may be geographically
dispersed, we anticipate that the trading activities of the fund in PRC
securities will be focused in the authorized China securities markets; in
particular, the Hong Kong, Shenzhen and Shanghai stock exchanges.
<PAGE>
PORTFOLIO MANAGER
Bin Shi manages the fund's portfolio. A native of Shanghai, China, Mr. Shi
joined the adviser in January 1994 to provide fundamental stock analysis for the
China Region Fund. Mr. Shi, a Chartered Financial Analyst, has served as
portfolio manager since January 1996. From 1991 to 1994 Mr. Shi earned a
master's degree and pursued his PhD in finance and accounting at Tulane
University. He is also a graduate of the prestigious Fudan University in
Shanghai, China.
ALL AMERICAN FUND
The All American Fund seeks to grow with the American economy, normally
investing at least 75% of its total assets in a broadly diversified portfolio of
domestic common stocks. The All American Fund invests primarily in
large-capitalization stocks while retaining the flexibility to seek out
promising individual stock opportunities.
PORTFOLIO MANAGER
The adviser uses a team approach to manage the assets of the All American Fund.
The team meets regularly to review portfolio holdings and to discuss buy and
sell activity. Bin Shi has been the team leader of the All American Fund since
July 1995. His background is described above under China Region Fund.
REAL ESTATE FUND
The Real Estate Fund normally invests at least 65% of its total assets in real
estate equity securities listed on a national securities exchange or NASDAQ.
Real estate equity securities are common and preferred stocks of companies that
have at least 50% of the value of their assets in, or derive at least 50% of
their revenues from, the ownership, construction, management or sale of
residential, commercial or industrial real estate. Historically, most of the
securities found in the Real Estate Fund are securities issued by real estate
investment trusts (REITs), but the fund also invests in securities issued by
other companies in the real estate industry such as homebuilders and developers.
The Real Estate Fund may also invest in securities of foreign issuers that are
listed on foreign securities exchanges.
PORTFOLIO MANAGER
The adviser has contracted with Goodman & Company N.Y. Ltd. to serve as sub-
adviser to the Real Estate Fund beginning May 1, 1998. It is wholly owned by
Goodman & Company Ltd., which is ultimately wholly owned by Dundee Bancorp Inc.,
an Ontario incorporated Canadian company listed on the Toronto Stock Exchange.
Mr. Ned Goodman, chairman of Goodman & Company Ltd., is the "controlling person"
of Goodman & Company N.Y. Ltd. and Goodman & Company Ltd. ("Goodman & Company").
Goodman & Company is the manager of Dynamic Mutual Funds, a Canadian family of
twenty-six mutual funds with approximately $6.5 billion (Cdn) of funds under
management, more than $500 million of which is in two real estate equity funds.
Goodman & Company uses a team approach to manage the Real Estate Fund. Mr.
Goodman and Ms. Anne MacLean lead the team. Mr. Goodman, Chartered Financial
Analyst, has more than thirty years of investment experience. Since 1979, Mr.
Goodman has served as chairman, president and chief executive officer of Goodman
& Company, an adviser to investment companies operating in Canada. Ms. MacLean,
Chartered Financial Analyst, is a Goodman & Company portfolio manager and
partner responsible for U.S., Latin American and real estate equities. Before
joining Goodman & Company in January 1995, Ms. MacLean was a portfolio manager
with Gluskin Sheff & Associates.
<PAGE>
INCOME FUND
The Income Fund invests in a broad range of equity and debt securities with at
least 80% of the fund's total net assets invested in income-producing
securities. The Income Fund invests in common stocks (including REITS),
corporate bonds, convertible securities, U.S. Treasury bills and notes, and
other obligations backed by the U.S. government and its agencies. The Income
Fund focuses on issuers that have a long-established record of paying cash
dividends, including companies that provide essentials such as electricity, gas
and telephone services.
PORTFOLIO MANAGER
The adviser uses a team approach to manage the assets of the Income Fund.
Beginning in 1997, Creston King and Michael Chapman have led the team that meets
regularly to review portfolio holdings and to discuss buy and sell activity. Mr.
King's qualifications are discussed below under Tax-Free Funds. Mr. Chapman's
experience is discussed above under World Gold and Gold Shares Funds.
TAX FREE FUNDS
U.S. Global Investors offers two tax-free funds that seek to provide a high
level of current income that is exempt from federal income taxation, and to
preserve capital.
TAX FREE FUND
NEAR-TERM TAX FREE FUND
Both tax-free funds invest primarily in securities, the interest from which is
exempt from federal income taxation. Such securities will typically be municipal
bonds -- debt obligations issued by or for states, territories and possessions
of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities; or by multi-state agencies or
authorities. Such securities include general obligation bonds, revenue bonds,
industrial development bonds, municipal lease obligations and similar
instruments.
The tax-free funds invest only in debt securities earning one of the four
highest ratings by Moody's Investor's Services (Aaa, Aa, A, Baa) or by Standard
& Poor's Corporation (AAA, AA, A, BBB). Not more than 10% of either of the
tax-free funds' total assets will be invested in the fourth rating category.
Investments in the fourth category may have speculative characteristics and,
therefore, may involve higher risks.
The Tax Free Fund is expected to offer the higher yield, and its net asset value
will be subject to greater volatility because it will normally have a longer
average maturity than the Near-Term Tax Free Fund. The Near-Term Tax Free Fund
will maintain an average weighted portfolio maturity of five years or less.
PORTFOLIO MANAGER
Creston King leads the team managing the assets of the tax-free funds. Mr. King,
a Chartered Financial Analyst, joined the adviser in September 1993 and has
managed both tax-free funds since January 1995. Prior to joining the adviser Mr.
King was an account executive with a regional broker/dealer. He has been in the
investment business since 1985 and holds a bachelor's degree in economics from
Duke University.
<PAGE>
GOVERNMENT MONEY MARKET FUNDS
U.S. Global Investors offers two money market funds that invest exclusively in
government securities and in repurchase agreements collateralized with
government securities. The two government money market funds work together to
meet all of a shareholder's savings and checkwriting needs. They are designed to
safeguard principal while earning daily dividend income. Each fund maintains an
average weighted portfolio maturity of 90 days or less and limits its
investments to instruments that mature (or reset as to interest rate) not more
than 397 days from the date of purchase. Both government money market funds
attempt to maintain a constant net asset value of $1.00 per share, although
there can be no assurance that either can always do so.
TREASURY SECURITIES CASH FUND
The Treasury Securities Cash Fund offers free unlimited checkwriting privileges,
and there is no minimum dollar amount requirement. The Treasury Securities Cash
Fund's investment objective is to obtain a high level of current income while
maintaining the highest degree of safety of principal and liquidity. The
Treasury Securities Cash Fund invests in United States Treasury debt securities
which are obligations backed by the "full faith and credit" of the United States
government. It also invests in repurchase agreements collateralized with such
obligations.
GOVERNMENT SECURITIES SAVINGS FUND
The objective of the Government Securities Savings Fund is to achieve a
consistently high yield with safety of principal. The Government Securities
Savings Fund invests exclusively in United States Treasury obligations and
obligations of agencies and instrumentalities of the United States government,
the income from which may be exempt from state income taxes, and repurchase
agreements collateralized by such obligations. The Government Securities Savings
Fund is designed to provide a higher yield than the Treasury Securities Cash
Fund, but with somewhat less safety of principal and liquidity. The Government
Securities Savings Fund may invest in fixed-rate, floating-rate and
adjustable-rate securities issued by the United States Treasury and various
United States government agencies, including the Federal Home Loan Bank, the
Federal Farm Credit Bank and the Student Loan Marketing Association.
<PAGE>
Under federal law, the income derived from obligations issued by the United
States government and some of its agencies and instrumentalities may be exempt
from state and local income taxes. Many states that tax personal income permit
mutual funds to pass this tax exemption through to shareholders. To maximize the
taxable equivalent yield for shareholders under normal circumstances, the
Government Securities Savings Fund will attempt to invest only in obligations
that qualify for the exemption from state taxation in those states that offer
such exemption.
PORTFOLIO MANAGER
Creston King leads the team managing the assets of the government money market
funds. Mr. King's background is described above under Tax-Free Funds.
<PAGE>
COMMON INVESTMENT PRACTICES
TEMPORARY DEFENSIVE INVESTMENT
For temporary defensive purposes during periods that, in the adviser's opinion,
present a fund with adverse changes in the economic, political or securities
markets, each fund may seek to protect the capital value of its assets by
temporarily investing up to 100% of its assets in:
o U.S. Government securities, short-term indebtedness, money market
instruments, or other investment grade cash equivalents, each de-
nominated in U.S. dollars or any other freely convertible currency; or
o repurchase agreements as described below.
In addition, the China Region Fund may invest in money market instruments,
deposits or other investment grade short-term investments in the local China
region currencies as may be appropriate at the time.
REPURCHASE AGREEMENTS
Each fund may invest part of its assets in repurchase agreements with United
States broker-dealers, banks and other financial institutions that the adviser
believes present minimal credit risks. A repurchase agreement involves a
purchase of securities (usually U.S. government securities) by a fund and an
undertaking by the fund to resell the securities back to the seller for a
specified price at a later date. In substance, a repurchase agreement is a loan,
with the purchased securities serving as collateral. In all repurchase agreement
transactions, the fund's custodian will take possession of the purchased
securities that serve as collateral, which collateral will initially have a
value at least equal to the repurchase price. The risk in a repurchase agreement
is that the seller will fail to repurchase the securities at the term of the
agreement and that the value of the collateral will be less than the amount owed
by the seller at the term.
PORTFOLIO CONCENTRATION AND DIVERSIFICATION
As a fundamental policy, which cannot be changed without a vote of shareholders,
no fund (other than the Gold Shares, World Gold and Real Estate Funds) will
invest more than 25% of its total assets in securities of issuers in any single
industry or government (other than obligations issued or guaranteed by the
United States government or any of its agencies or instrumentalities). The Gold
Shares Fund, World Gold Fund and Real Estate Fund have policies of concentrating
their investments in companies in a small number of industries or sectors.
Investors should understand that an investment in these three 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.
<PAGE>
As a fundamental policy, no fund will: (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 the issuer. (These limitations as to the Gold Shares, Near-Term
Tax Free and China Region Funds apply only to 75% of the value of their
respective total assets.)
PORTFOLIO TURNOVER
The length of time a fund has held a particular security is not generally a
consideration in investment decisions. It is the policy of each fund to effect
portfolio transactions without regard to holding period if, in the judgment of
the adviser, such transactions are advisable. Portfolio turnover generally
involves some expense, including brokerage commissions, dealer mark-ups or other
transaction costs on the sale of securities and reinvestment in other
securities. Such sales may result in realization of taxable capital gains for
shareholders. Portfolio turnover rates for the funds are described in the
Financial Highlights section. From time to time, a substantial portion of the
shares of the Gold Shares Fund and the World Gold Fund may be held by "market
timers" and similar investors that seek to realize profits by frequently
purchasing and redeeming (or exchanging) shares of the fund. Such activities may
cause the fund to experience a high portfolio turnover rate. Each fund seeks to
minimize the adverse consequences of these activities by imposing a trading fee
on such investors and by engaging in various types of strategic transactions (as
described below).
BORROWING
As a fundamental policy, each fund may borrow up to 5% of its total assets from
a bank for temporary or emergency purposes. In addition, each of the Gold Shares
Fund, the World Gold Fund, China Region Fund and All American Fund may borrow up
to 33 1/3% of its total assets (including the amount borrowed) less liabilities
(other than borrowings) for temporary or emergency purposes, such as satisfying
redemptions. This borrowing is intended to be only a temporary solution until
securities can be sold in an orderly way. To the extent that the fund borrows
money before selling securities, the fund may be leveraged. At such times, the
fund may appreciate or depreciate more rapidly than an unleveraged portfolio.
Each fund will repay any money borrowed in excess of 5% of the value of its
total assets before purchasing additional portfolio securities.
<PAGE>
LENDING OF PORTFOLIO SECURITIES
Each fund may lend securities to broker-dealers or institutional investors for
their use in connection with short sales, arbitrages and other securities
transactions. When lending securities, a fund will receive cash or high quality
liquid securities as collateral for the loan. A failure by a borrower to return
the loaned securities when due could result in a loss to the fund if the value
of the collateral is less than the value of the loaned securities at the time of
the default. In addition, a fund could incur liability to the borrower if the
value of any securities purchased with cash collateral decreases during the term
of the loan.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES
Each fund may purchase securities on a when-issued or delayed-delivery basis.
Securities purchased on a when-issued or delayed-delivery basis are purchased
for delivery beyond the normal settlement date at a stated price and/or yield.
No income accrues to the purchaser of a security on a when-issued or
delayed-delivery basis before the dated date (interest accrual date). These
securities are recorded as an asset and are subject to changes in value based on
changes in the general level of interest rates or market prices. Purchasing a
security on a when-issued or delayed-delivery basis can involve a risk that the
market price at the time of delivery may be lower than the agreed upon purchase
price. In that case the fund could suffer an unrealized loss at the time of
delivery. The fund will only make commitments to purchase securities on a
when-issued or delayed-delivery basis when intending to purchase the securities,
but may sell them before the settlement date if it is deemed advisable. The fund
will restrict its liquid securities in an amount at least equal in value to the
fund's commitments to purchase when-issued or delayed-delivery securities. If
the value of these restricted assets declines, the fund will restrict sufficient
liquid assets on a daily basis so that the value of the restricted assets is
equal to the amount of such commitments.
<PAGE>
RISK CONSIDERATIONS
MARKET RISK
Investments in equity and debt securities are subject to inherent market risks
and fluctuations in value due to earnings, economic conditions, quality ratings
and other factors beyond the adviser's control. Therefore, the return and net
asset value of the funds will fluctuate.
Debt securities are also subject to price fluctuations based on changes in
interest rates, which will generally result in these securities changing in
price in the opposite direction. That is, the value of these securities will
increase when interest rates decline and will decrease when interest rates rise.
FOREIGN SECURITIES
The gold and natural resources funds and the equity funds may invest in foreign
securities. Investments in foreign securities, whether in emerging or more
developed countries, are subject to risks and uncertainties not typically
associated with investments in domestic securities. These risks and
uncertainties include currency exchange rates and exchange control regulations,
less publicly available information, different accounting and reporting
standards, less liquid markets, more volatile markets, higher brokerage
commissions and other fees, the possibility of nationalization or expropriation,
confiscatory taxation, political instability, risks associated with foreign
custody and settlement practices, and less protection provided by the judicial
system.
Investing in foreign securities may also subject shareholders to the risk of
dilution that results from the procedures used to price many foreign securities.
For example, each fund prices its foreign securities at the close of the regular
trading session of the NYSE (normally 4:00 p.m. Eastern time) based upon the
closing prices for the securities in the primary foreign markets in which the
securities trade. In some circumstances, the price used for a particular
security may not reflect the impact of events that have occurred since the close
of trading in the foreign market. As a result, the purchase and redemption of
shares of a fund may cause economic dilution to existing shareholders. Each fund
reserves the right to adjust the value of its foreign securities to "fair value"
in accordance with Board approved procedures if such action is believed to be in
the best interests of shareholders.
EMERGING MARKETS
The gold and natural resources funds and the equity funds may invest in emerging
markets. Political and economic structures in emerging markets are in their
infancy and developing rapidly, and may lack the social, political and economic
stability characteristic of more developed countries. In the past some emerging
markets, especially those formerly governed by communist regimes, have failed to
recognize private property rights and have, at times, nationalized or
expropriated the assets of private companies. As a result, the risks normally
associated with investing in any foreign country may be heightened in emerging
markets. In addition, unanticipated political or social developments may affect
the value of a fund's investments in emerging markets. The small size and
inexperience of the securities markets in emerging markets and the limited
volume of trading in securities in those markets may make a fund's investments
in these securities illiquid and more volatile than investments in the
securities of companies in more developed countries.
<PAGE>
Little financial or accounting information may be available with respect to
companies in emerging markets, and assessing the value or prospects of an
investment in such companies may also be difficult.
ADRs AND GDRs
The gold and natural resources funds and the equity funds may invest in
sponsored or unsponsored American Depository Receipts (ADRs) or Global
Depository Receipts (GDRs) representing shares of companies in foreign
countries. ADRs are depository receipts typically issued by a U.S. bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. Foreign banks or trust companies typically issue GDRs, although
U.S. banks or trust companies may issue them also. They evidence ownership of
underlying securities issued by a foreign or a United States corporation.
Generally, depository receipts in registered form are designed for use in the
U.S. securities market, and depository receipts in bearer form are designed for
use in securities markets outside the United States. Depository receipts may not
necessarily be denominated in the same currency as the underlying securities
into which they may be converted. In addition, the issuers of the securities
underlying unsponsored depository receipts are not obligated to reveal material
information in the United States. Therefore, less information may be available
regarding such issuers. There may also be no correlation between such
information and the market value of the depository receipts. For purposes of a
fund's investment policies, the fund's investments in depository receipts will
be deemed to be investments in the underlying securities.
INVESTMENTS IN SMALL ISSUERS
The gold and natural resources funds and the equity funds may invest in small
companies for which it is difficult to obtain reliable information and financial
data. The securities of these smaller companies may not be readily marketable,
making it difficult to dispose of shares when it may otherwise be advisable. In
addition, certain issuers in which a fund may invest may face difficulties in
obtaining the capital necessary to continue in operation and may become
insolvent, which may result in a complete loss of the fund's investment in such
issuers.
<PAGE>
ILLIQUID SECURITIES
None of the funds will invest more than 10% of its net assets (15% in the case
of China Region Fund) in illiquid securities. Securities may be illiquid because
they are unlisted, subject to legal restrictions on resale or due to other
factors which, in the adviser's opinion, raise a question concerning a fund's
ability to liquidate the securities in a timely and orderly way without
substantial loss.
VOLATILITY OF GOLD COMPANY STOCKS
The volatility of securities of companies involved in gold operations will
affect the net asset value of the Gold Shares Fund and, to a lesser extent, the
Global Resources and World Gold Funds.
UTILITY SECURITIES
The Income Fund has traditionally invested a portion of its assets (not to
exceed 25% of its total assets) in utility securities because such securities
have historically earned above-average dividend income. Gas and electric public
utilities industries may be subject to broad risks resulting from government
regulation, financing difficulties, supply and demand for services or fuel, and
special risks associated with energy and atmosphere conservation.
REAL ESTATE SECURITIES
The Real Estate Fund may be subject to the risks associated with the direct
ownership of real estate, including real estate valuation, risks related to
general and local economic conditions, and other risks.
ENERGY SECURITIES
The Global Resources Fund may invest a substantial part of its assets in energy
and energy-related firms. The securities of such firms are subject to changes
which depend largely on the price and supply of energy fuels, which may
fluctuate sharply.
DIRECT EQUITY INVESTMENTS
The gold and natural resources funds and the equity funds may make direct equity
investments. These investments may involve a high degree of business and
financial risk. Because of the absence of any trading markets for these
investments, a fund may be unable to timely liquidate its securities, especially
if there is negative news regarding the specific securities or the markets
overall. Such securities could decline significantly in value before a fund can
liquidate such securities. In addition to financial and business risks, issuers
whose securities are not listed will not be subject to the same disclosure
requirements applicable to issuers whose securities are listed.
<PAGE>
INVESTMENTS IN CLOSED-END INVESTMENT COMPANIES
The gold and natural resources funds and the equity funds may invest in the
securities of closed-end investment companies with investment policies similar
to those of the fund, provided its investments in these securities do not exceed
3% of the total voting stock of any such closed-end investment company and do
not, in total, exceed 10% of the fund's total assets. The fund will indirectly
bear its proportionate share of any management fees paid by investment companies
it owns in addition to the advisory fee paid by the fund.
STRATEGIC TRANSACTIONS
The gold and natural resources funds and the equity funds may, but are not
required to, use various other investment strategies as described below. These
strategies are generally accepted as modern portfolio management techniques and
are regularly used by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur. While pursuing these
investment strategies, the funds may purchase and sell exchange-listed and
over-the-counter put and call options on securities, equity and fixed-income
indexes and other financial instruments. In addition, the Gold Shares, World
Gold, China Region and All American Funds may purchase and sell financial
futures contracts and options thereon and enter into various currency
transactions such as currency forward contracts, currency futures contracts, or
options on currencies or currency futures. Collectively, all of the above
transactions and other underlying derivative instruments are called strategic
transactions. The funds will not sell put options except in closing
transactions.
Each fund may engage in strategic transactions for hedging, risk management, or
portfolio management purposes and not for speculation. Strategic transactions
may be used to attempt to protect against possible changes in the market value
of securities held in, or to be purchased for, the portfolio. Such changes may
result from securities markets or currency exchange rate fluctuations. Strategic
transactions may also be used to attempt to protect unrealized gains or prevent
losses in the value of portfolio securities, or to establish a position using
strategic transactions as a temporary substitute for purchasing or selling
particular securities. The ability of the funds to use these strategic
<PAGE>
transactions successfully will depend upon the adviser's ability to predict
pertinent market movements, which cannot be assured. Engaging in strategic
transactions will increase transaction expenses and may result in a loss that
exceeds the principal invested in the transaction. The funds will comply with
applicable regulatory requirements when engaging in strategic transactions.
SPECIFIC FUND LIMITATIONS ON STRATEGIC TRANSACTIONS
The gold and natural resources funds will limit their strategic transactions to
purchasing and selling call options and purchasing put options on stock indexes,
selling covered calls on portfolio securities, buying call options on securities
the funds intend to purchase, purchasing put options on securities (whether or
not held in its portfolio), and engaging in closing transactions for an
identical option. Not more than 2% of a particular gold and natural resources
fund's total assets may be invested in premiums on put options, and not more
than 25% of a fund's total assets may be subject to put options. The gold and
natural resources funds will not purchase any option, if immediately afterwards,
the aggregate market value of all outstanding options purchased and written by
the fund would exceed 5% of the fund's total assets. The gold and natural
resources funds will not write any call option if, immediately afterwards, the
aggregate value of a fund's securities subject to outstanding call options would
exceed 25% of the value of its total assets. The gold and natural resources
funds will only deal in options that are either listed on an exchange or quoted
on NASDAQ.
The China Region Fund will limit its options transactions to exchange-listed
options. It will not buy any option if, immediately afterwards, the aggregate
market value of all outstanding options purchased and written would exceed 5% of
the fund's total assets. The China Region Fund will not write any call options
if, immediately afterwards, the aggregate value of the fund's securities subject
to outstanding call options would exceed 25% of the value of its assets.
The All American Fund will limit its strategic transactions to purchasing stock
index futures contracts or purchasing options thereon, purchasing and selling
call options and purchasing put options on stock indexes, selling
<PAGE>
covered call options on portfolio securities, buying call options on securities
the fund intends to purchase, buying put options on portfolio securities, and
engaging in closing transactions for an identical option. The underlying value
of all futures contracts shares may not exceed 35% of the All American Fund's
total assets. Furthermore, the fund will not commit more than 5% of its total
assets to premiums on options and initial margin on futures contracts. The All
American Fund will not borrow money to purchase futures contracts or options.
The Real Estate and Income Funds will limit their strategic transactions to
purchasing and selling call options and purchasing put options on stock indexes,
selling covered call options on portfolio securities, buying call options on
securities the fund intends to purchase, buying put options on portfolio
securities, and engaging in closing transactions for an identical option.
CURRENCY HEDGING
The World Gold, Gold Shares, All American and China Region Funds may engage in
strategic transactions in an attempt to hedge a particular fund's foreign
securities investments back to the U.S. dollar when, in their judgment, currency
movements affecting particular investments are likely to harm performance.
Possible losses from changes in currency exchange rates are a primary risk of
unhedged investing in foreign securities. While a security may perform well in a
foreign market, if the local currency declines against the U.S. dollar, gains
from the investment can decline or become losses. Typically, currency
fluctuations are more extreme than stock market fluctuations. Accordingly, the
strength or weakness of the U.S. dollar against foreign currencies may account
for part of a fund's performance even when the adviser attempts to reduce
currency risk through hedging activities. While currency hedging may reduce
portfolio volatility, there are costs associated with such hedging, including
the loss of potential profits, losses on strategic transactions and increased
transaction expenses.
YEAR 2000 PROBLEM
Like other organizations around the world, the funds could be adversely affected
if the computer systems used by the funds or their service providers do not
properly process and calculate date-related information beginning January 1,
2000, commonly referred to as the "Year 2000 Problem." The adviser and the
funds' transfer agent believe that they have taken steps reasonably designed to
address any potential Year 2000 Problem for the computer programs used by the
adviser and the transfer agent. In addition, management is in the process of
confirming that the third-party service providers used by the funds, the adviser
and the transfer agent are also taking steps reasonably designed to address the
Year 2000 Problem with respect to their computer systems. At this time, there
can be no assurance that these steps will be sufficient to avoid any adverse
impact to the funds. Furthermore, there can be no assurances that the companies
in which these funds invest will not be adversely affected by the Year 2000
Problem.
<PAGE>
YOUR ACCOUNT
BUYING SHARES
First, read this prospectus carefully. Then decide how much you want to invest.
The minimum initial investments are:
o regular account:...................................$5,000
o regular money market accounts: ....................$1,000
o custodial accounts for minors
(UGMA/UTMA):......................................$50
o retirement account:............................no minimum
o ABC Investment Plan(R):
to open account .................................$100
monthly minimum .................................$ 30
Minimum investments may be waived for purchases made through qualifying
broker-dealers or certain institutional programs.
IF YOU ARE OPENING A NEW ACCOUNT
o Complete the appropriate parts of the account application.
o Write your check for the amount you want to invest. Make it payable to
the fund you are buying,
o Deliver your check and application to Shareholder Services (address
below).
o If you have questions, call 1-800-873-8637 to talk to one of our
investor representatives.
-------------------------------------
| Shareholders Services |
| U.S. Global Investors Funds |
| P.O. Box 781234 |
| San Antonio, Texas 78278-1234 |
| |
| Phone: 1-800-873-8637 |
| Open 7:30 a.m. - 7:00 p.m. |
| Central time |
-------------------------------------
IF YOU ARE ADDING TO YOUR ACCOUNT
o Write out a check for the investment amount($50 minimum), payable to the
fund you are buying.
o Fill out the detachable investment slip from your account statement. Use
the investment slip from the account you want to invest in so that your
money will be credited to the right fund (investment slips are pre-
coded). If you do not have an investment slip, include a note specifying
the fund name, your account number and your address.
o Deliver your check and investment slip or note to Shareholder Services.
If you are investing in more than one fund, make out separate checks for each
fund.
<PAGE>
IF YOU ARE BUYING SHARES BY PHONE
Call 1-800-US-FUNDS. Tell the Shareholder Services representative the fund name,
your account number, the name(s) in which the account is registered and the
amount of your investment. You may purchase up to ten times the value of your
shares in that account. Payment is due seven business days after you call.
(Investments by phone are not available in money market funds or retirement
accounts managed by the adviser.)
IF YOU ARE BUYING SHARES BY WIRE
Call Shareholder Services at 1-800-873-8637 for a confirmation number and wiring
instructions.
IF YOU ARE BUYING SHARES WITH THE ABC INVESTMENT PLAN(R)
The ABC Investment Plan(R) is offered as a special service allowing you to build
a position in the fund(s) of your choice without having to try to outguess the
market and to give you the opportunity to open an account with a lower minimum
investment. By automatically investing the same amount at regular intervals, you
avoid the extremes in the market. When the market is undervalued, you
automatically buy more shares, and when it is overvalued, you buy fewer. Of
course, using the ABC Investment Plan(R) does not guarantee a profit. If you
sell at the bottom, no system will give you a gain.
If you open an account under the ABC Investment Plan(R), your initial investment
is only $100 -- not $5,000 as it is for regular accounts -- and only $30 a month
afterwards. Of course, you can invest any higher amount you choose. You may also
change the date or amount of your investment or discontinue the plan anytime by
sending us a letter that we receive two weeks before you want the change to be
effective.
To set up the ABC Investment Plan(R):
o Complete the ABC Investment Plan(R) form allowing the fund to draw on
your money market or bank account every month.
o Send your application and a voided check to Shareholder Services (address
in box).
IF YOU ARE BUYING SHARES THROUGH DIRECT DEPOSIT
If you are buying shares through direct deposit, call 1-800-US-FUNDS for more
information.
ADDITIONAL INFORMATION ABOUT BUYING SHARES
Purchases of shares in the money market funds require payment by check or wire
at the time the order is received. For purchases of shares in the other funds,
payment is due within seven business days after the order is received.
If you purchase shares by check, you can sell (redeem) those shares beginning
seven calendar days after your check is received by Shareholder Services -- you
can exchange into other U.S. Global Investors funds anytime.
Orders to purchase shares of the Gold Shares Fund and World Gold Fund received
after 3:00 p.m. Eastern time will not become effective until the next business
day.
All orders to purchase shares are subject to acceptance by the funds and become
effective at the time specified under "Transaction Policies" at page 41. In no
event will an order to purchase shares for a new account become effective prior
to the time that payment by check or wire transfer is received by the funds. The
funds reserve the right to reject any application or order to purchase shares,
in whole or in part, at any time.
<PAGE>
If your telephone order to purchase shares is canceled due to nonpayment or late
payments (whether or not your check has been processed by the Fund), you will be
responsible for any loss incurred by the Funds because of such cancellation.
If a check is returned unpaid due to nonsufficient funds, stop payment or other
reasons, the funds will charge $20, and you will be responsible for any loss
incurred by the funds with respect to canceling the purchase.
To recover any such loss or charge, the funds reserve the right, without further
notice, to redeem shares of any affiliated funds already owned by any purchaser
whose order is canceled, for whatever reason. Such a purchaser may be prohibited
from placing additional orders unless investments are accompanied by full
payment by wire or cashier's check.
<PAGE>
EXCHANGES BETWEEN FUNDS
You may exchange into any other identically registered fund(s) in the U.S.
Global Investors family of funds. When you exchange, you, in effect, sell shares
of one fund and buy shares of another fund at the net asset value of each fund
next determined after the effective time of the exchange order. An exchange
order is effective when the exchange request is received by the funds, except
that exchanges into and out of the Gold Shares and/or World Gold Funds are not
permitted after 3:00 p.m. Eastern time. Any exchange order into or out of the
Gold Shares and/or World Gold Funds after 3:00 p.m. Eastern time is not
effective as to either the purchase or sale portion of the exchange until the
next business day.
o Write or call Shareholder Services (1-800-US-FUNDS) to request an exchange.
ADDITIONAL INFORMATION ABOUT EXCHANGES
Shareholder Services charges $5 for each exchange to cover the administrative
cost of handling exchanges.
An exchange involves the sale of shares of one fund and the purchase of shares
of another fund. Ordinarily, both the sale and the purchase will be effective at
the time each fund next determines its NAV per share after the effective time of
the exchange. However, if the transaction involves an exchange into a money
market fund, the purchase may be delayed until such time as the proceeds from
the sale are available to the money market fund, which could take up to seven
days. In general, the funds expect to exercise this right to delay the
effectiveness of the purchase only on exchanges of $50,000 or more. If your
purchase will be delayed, you will be notified immediately.
A fund may change or cancel its exchange policies at any time, upon 60-day
notice to its shareholders.
Exchanges may be subject to trader's fees. (See the Trader's Fee Paid to the
Fund section on page 41.)
<PAGE>
SELLING (REDEEMING) SHARES
IF YOU ARE SELLING SHARES BY LETTER
o Write a letter of instruction or complete a stock power showing the
fund name, your account number, the name(s) in which the account is
registered and the dollar value or number of shares you wish to sell.
o Include signatures of each owner signing exactly as the shares are
registered and any additional documents that may be required. See
Additional Information About Selling Shares section below.
o Mail the materials to Shareholder Services (address in box below).
o A check will be mailed to the name(s) and address in which the account
is registered, or otherwise according to your letter of instruction
(see Signature Guarantee section on page 39).
IF YOU ARE SELLING SHARES BY CHECK
You may write an unlimited number of checks of any amount out of your Treasury
Securities Cash Fund, and you may write an unlimited number of checks for $500
or more out of your Government Securities Savings Fund. All checks are subject
to the terms and conditions for checkwriting of the bank identified on the face
of the check.
IF YOU ARE SELLING SHARES BY PHONE
Telephone redemptions are available through our money market funds: the
Treasury Securities Cash Fund and the Government Securities Savings Fund.
o Call Shareholder Services and request an exchange into your identically
registered money market fund.
o Then write a check for any amount if you are in the Treasury Securities
Cash Fund, or $500 or more if you are in the Government Securities
Savings Fund. (This service is unavailable in retirement accounts.)
See the Exchanging Between Funds section for a description of exchanges,
including the $5 exchange fee.
-------------------------------------
| Shareholders Services |
| U.S. Global Investors Funds |
| P.O. Box 781234 |
| San Antonio, Texas 78278-1234 |
| |
| Phone: 1-800-873-8637 |
| Open 7:30 a.m. - 7:00 p.m. |
| Central time |
-------------------------------------
<PAGE>
SIGNATURE GUARANTEE
For your protection, you will need a signature guarantee if:
o your address of record has changed within the past 30 days
o you are selling more than $15,000 worth of shares
o you are requesting payment other than by a check mailed to the address
of record and payable to the registered owner(s)
You can generally obtain a signature guarantee from the following sources:
o a federal savings, cooperative or other type of bank
o a savings and loan or other thrift institution
o a credit union
o a broker or securities dealer
o a securities exchange or clearing agency
A notary public CANNOT provide a signature guarantee.
ADDITIONAL INFORMATION ABOUT SELLING SHARES
Orders to sell or redeem shares become effective at the time specified under
"Transaction Policies" at page 41.
If you are selling (redeeming) shares in an IRA or similar retirement account,
submit IRS Form W4-P and the reason you are withdrawing. Proceeds from the
redemption of shares in a retirement account may be subject to withholding tax.
If you are in one of the groups described below, you must submit:
OWNERS OF INDIVIDUAL, JOINT, SOLE PROPRIETORSHIP, UGMA/UTMA (CUSTODIAL ACCOUNTS
FOR MINORS) OR GENERAL PARTNERSHIP ACCOUNTS
o Letter of instruction.
o On the letter, the signature of the registered owners or the person
authorized to sign for the account,exactly as the account is registered.
o Signature guarantee if applicable (see Signature Guarantee section
above).
OWNERS OF CORPORATE OR ASSOCIATION ACCOUNTS
o Letter of instruction.
o Corporate resolution.
o On the letter and the resolution, the signature of the person(s)
authorized to sign for the account.
o Signature guarantee if applicable (see Signature Guarantee section
above).
<PAGE>
TRUSTEES, OR THEIR DESIGNATED REPRESENTATIVE, OF TRUST ACCOUNTS
o Letter of instruction.
o On the letter, the signature(s) of the trustee(s).
o Signature guarantee if applicable (see Signature Guarantee section on
page 39).
o Copy of the trust document.
JOINT TENANCY SHAREHOLDERS WHOSE CO-TENANTS ARE DECEASED
o Letter of instruction signed by surviving tenant.
o Certified copy of death certificate.
o Signature guarantee if applicable (see Signature Guarantee Section on
page 39).
EXECUTORS OF SHAREHOLDER ESTATES
o Letter of instruction with guaranteed executor's signature.
o Copy of order appointing executor, dated within 60 days of transaction.
ADMINISTRATORS, CONSERVATORS, GUARDIANS AND OTHER SELLERS OR ACCOUNT TYPES NOT
LISTED ABOVE.
o Call 1-800-US-FUNDS for instructions.
Usually redemption checks are mailed in 48 hours although the funds have the
right to hold checks up to seven days.
Checks may be delayed if you have changed your address in the last thirty days.
Checks can be mailed only when the purchasing check has cleared, although you
may avoid this possible delay by investing by bank wire.
WIRE TRANSACTIONS
You may authorize wire transfers of proceeds if you send written wiring
instructions with a signature guarantee. Proceeds, less $10 for wire fees, will
usually be transmitted on the first business day after you direct us to sell
shares (international wires may cost more).
CLOSING FEE
The transfer agent charges a $10 closing fee if all shares in the account are
redeemed. The fee allocates to redeeming shareholders an equitable part of the
transfer agent's fee, including the cost of tax reporting, which is based on the
number of shareholder accounts. No closing fee is charged for exchanges between
funds in the U.S. Global Investors family of funds.
<PAGE>
TRANSACTION POLICIES
EFFECTIVE TIME FOR ORDERS TO PURCHASE OR SELL SHARES
PURCHASES -- You may request a purchase or sale of shares anytime, without a
sales charge. All share purchases are subject to acceptance and are not valid
unless accepted. U.S. Global Investors Funds reserves the right to reject any
application or order to purchase shares. Orders to purchase Gold Shares Fund
and/or World Gold Fund shares received after 3:00 p.m. Eastern time will not
become effective until the next business day.
An order to establish a new account and purchase shares of a fund will become
effective, if accepted, at the time the fund next determines its net asset value
(NAV) after the last of the following conditions has been satisfied:
o a completed and signed application has been received by the fund's
transfer agent or sub-agent, and
o a check or wire transfer has been received by the fund's transfer agent
or sub-agent.
An order to purchase shares of a fund for an existing account, if accepted, will
become effective at the time the fund next determines its NAV after the last of
the following conditions has been satisfied:
o a written request or telephone order has been received by the fund's
transfer agent or sub-agent, and
o in the case of a money market fund, a check or wire transfer has been
received by the fund's transfer agent or sub-agent.
In all cases, the shares purchased will be priced at the NAV per share
next determined after the time of effectiveness.
SALES (REDEMPTIONS) -- You may sell or redeem shares on any day that the NAV is
calculated. Your redemption will be effective at the time the fund next
determines its NAV after the order to sell or redeem has been received by the
fund's transfer agent or sub-agent (see Selling (Redeeming) Shares section). If
your instructions are received after the NAV has been determined for that day,
your redemption will be effective on the next business day.
HOW AND WHEN NAV IS DETERMINED
NAV is determined for each fund at the close of the regular trading session of
the NYSE (normally, 4:00 p.m. Eastern time) Monday through Friday (exclusive of
business holidays) that the NYSE is open for business. NAV per share is
determined for each fund at that time by dividing the net assets in the fund by
its number of outstanding shares. The funds value the portfolios of securities
using market quotations, where available. If current market quotations are not
readily available, they value securities at fair value as determined in good
faith by the board of trustees. Foreign securities are generally priced using
the current market quotations of the local market on which the securities
principally trade. The fund reserves the right to value these securities at
"fair value" if it is determined that the local prices do not reflect current
market values at the time the NAV is determined. Short-term investments maturing
in sixty days or less and all of the securities in the government money market
funds are valued at amortized cost. The government money market funds try to
maintain a constant per-share value of $1.00 although there can be no guarantee
that they will do so.
TRADER'S FEE PAID TO THE FUND
To protect the interests of other investors in the fund, a trader's fee is paid
by shareholders who redeem or exchange shares held less than a minimum number of
days. (See Shareholder Transaction Expenses section on page 3 for the amount and
the minimum holding period.) A fund may also refuse investments from
shareholders who engage in short-term trading.
ACCOUNT MAINTENANCE FEE
The All American Fund assesses an account maintenance fee of $3 per quarter. The
purpose of the fee is to allocate part of the cost of maintaining shareholder
accounts equally to all accounts.
<PAGE>
SMALL ACCOUNTS
If you draw down an account so that its total value is less than $5,000 (or
$1000 in government money market funds), you will be charged a small monthly fee
as follows:
o $1 a month for All American, Income and Real Estate Funds.
o $5 a month for Treasury Securities Cash, Tax Free, Government Securities
Savings, Near-Term Tax Free and China Region Funds.
Active ABC Investment Plan(R) accounts, custodial accounts for minors and
retirement plan accounts are exempt from this provision.
TELEPHONE TRANSACTIONS
For your protection, telephone requests may be recorded to verify their
accuracy. In addition, Shareholder Services will take measures to verify the
identity of the caller, such as asking for name, account number, Social Security
or other taxpayer ID number and other relevant information. If appropriate
measures are taken, Shareholder Services is not responsible for any losses that
may occur in any account due to an unauthorized telephone call. Telephone
transactions are not permitted on accounts whose names or addresses have changed
within the past 30 days -- although you may still exchange between funds.
Proceeds from telephone transactions can only be mailed to the address of record
after the 30 days.
CONFIRMATION STATEMENTS AND CERTIFICATES
All fund shares are electronically recorded. Your confirmation statement is your
proof that you have purchased shares. Share certificates are not issued.
ELIGIBILITY BY STATE
You may only invest in, or exchange into, fund shares legally available in your
state. At this time, all funds are registered in all states.
<PAGE>
DIVIDENDS AND ACCOUNT POLICIES
ACCOUNT STATEMENTS
In general, you will receive account statements as follows:
o Whenever there is activity in your account, other than when checks you
write are deducted.
o If there is no activity, once a year.
Every year you will also receive, if applicable, a Form 1099 tax information
statement, mailed no later than January 31.
DIVIDENDS
The funds generally pay income dividends and distribute capital gains, if any,
as follows:
o Gold and natural resources funds and the China Region Fund -- dividends
and capital gains are distributed annually, usually in December.
o All American and Income Funds -- dividends are distributed quarterly;
capital gains are distributed annually.
o Real Estate Fund -- dividends are distributed semi-annually; capital
gains are distributed annually.
o Tax-free funds -- dividends are distributed monthly; capital gains are
distributed annually.
o Money market funds -- all net income is declared and accrued as a daily
dividend and distributed monthly. Shares of the money market funds are
eligible to receive dividends beginning on the first business day after
the effective date of the purchase. Shares of the money market funds
receive dividends on the day shares are redeemed. However, redemptions by
checkwriting draft do not earn dividends on the day shares are redeemed.
DIVIDEND REINVESTMENT
Most investors have their dividends and distributions reinvested in additional
shares of the same fund. If you choose this option, or if you do not indicate
any choice, your dividends will be reinvested on the dividend payable date.
Alternatively, you can choose to have a check for your dividends mailed to you.
However, if the check is not deliverable, your dividends will be reinvested.
TAXABILITY OF DIVIDENDS AND DISTRIBUTIONS
As long as a fund meets the requirements for being a qualified regulated
investment company, which each fund has done in the past and intends to do in
the future, it pays no federal income tax on the earnings it distributes to
shareholders. Consequently, dividends and distributions you receive from a fund,
whether reinvested or taken as cash, are generally considered taxable to you.
Distributions from a fund's long-term capital gains are taxable to you as
capital gains regardless of the time you have held the shares. Dividends and
distributions from other sources, including short-term capital gains, are
generally taxable as ordinary income.
<PAGE>
For federal income tax purposes, the tax-free funds will exclude distributions
of net tax-exempt interest income from your gross income.
When you buy your shares, the price may reflect undistributed income, capital
gains, or unrealized appreciation of securities. A dividend or capital gain
distribution paid to you shortly after you purchase shares will reduce the net
asset value of your shares by the amount of the distribution. Although, in
effect, a return of capital, these payments are fully taxable.
Some dividends paid in January may be taxable as if they had been paid the
previous December.
Corporations may be entitled to take a dividends-received deduction for part of
certain dividends they receive.
The Form 1099-DIV that is mailed to you every January details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.
TAXABILITY OF TRANSACTIONS
Any time you sell or exchange shares, it is considered a taxable event for you.
Depending on the purchase price and the sale price of the shares you sell or
exchange, you may have a gain or a loss on the transaction. You are responsible
for any tax liabilities generated by your transactions.
<PAGE>
ADDITIONAL INVESTOR SERVICES
PERFORMANCE INFORMATION
From time to time, in advertisements or reports, a fund may compare its
performance to that of other mutual funds with similar investment objectives or
to stock, bond or other indexes, as reported in various periodicals. Comparisons
may be made in terms of yield, total return, or yield and total return. You
should not think of these performance comparisons as representing the fund's
future performance.
Definitions:
o YIELD is a measure or net interest and dividend income.
o AVERAGE ANNUAL TOTAL RETURN is a hypothetical measure of past dividend
income plus capital appreciation. It is the sum of all of the parts of a
fund's investment return for periods of one year or more.
o TOTAL RETURN is the sum of all or the parts of a funds investment return.
RETIREMENT PLANS
U.S. Global Investors Funds offers a range of qualified retirement plans,
including IRAs, SEPs, 401(k) plans, 403(b) plans and other pension and
profit-sharing plans. Each financing account will be charged an annual
maintenance fee as follows:
o Regular IRA $10
o Roth IRA $10
o Education IRA $10
o SEP IRA $15
o Simple IRA $25
o Profit sharing plan $15
U.S. Global Investors Funds offers many other services, such as payroll
deductions, custodial accounts and systematic withdrawals.
Please call 1-800-US-FUNDS for more information.
<PAGE>
FUND DETAILS
HOW THE FUNDS ARE ORGANIZED
U.S. Global Investors Funds is an open-end management investment company.
The funds are supervised by a board of trustees, an independent body that has
ultimate responsibility for fund activities. The board retains various companies
to carry out fund operations, including the investment adviser, custodian,
transfer agent and others. The board has the right to terminate the funds'
relationship with any of these companies and to retain a different company if
the board believes it is in the shareholders' best interests.
At a mutual fund's inception, the initial shareholder (typically the adviser)
appoints the board of trustees. Afterwards, the board and the shareholders
determine the board's membership. The board of U.S. Global Investors Funds
includes individuals who are affiliated with the investment adviser. However,
the majority of the board members are independent.
The funds do not hold annual shareholder meetings, but may hold special meetings
for purposes such as electing or removing board members, changing fundamental
policies, or approving a management contract.
THE MANAGEMENT FIRM (THE ADVISER)
U.S. Global Investors, Inc., founded in 1968, gives investment advice and
manages the funds. Frank E. Holmes, chief executive officer and chairman of the
adviser's board of directors as well as president and trustee for the funds,
owns more than 25% of the voting stock of the adviser and is its controlling
shareholder.
The adviser makes investment decisions for U.S. Global Investors Funds
independently of those made for other investment companies it advises. Each fund
pays the adviser a fee based on its average net assets. Management fee rates
paid to adviser after reductions are as follows: Gold Shares Fund .73%, World
Gold Fund .97%, Global Resources Fund 1.00%, China Region Fund 1.22%, All
American Fund .12%, Income Fund .75%, Real Estate Fund .75%, Tax Free Fund .00%,
Near-Term Tax Free Fund .00%, Government Securities Savings Fund .06%, Treasury
Securities Cash Fund .48%. In addition, the adviser is responsible for paying
the subadvisory fees of Goodman & Company, the sub-adviser of the Real Estate
Fund (which fee is 50% of the fee paid to adviser, net of all fee waivers and
reimbursements).
THE PRINCIPAL DISTRIBUTOR
U.S. Global Brokerage, Inc., a wholly owned subsidiary of the adviser, has
agreed to market the fund and distribute shares through selling brokers,
financial planners and other financial representatives beginning September 3,
1998. The distributor may make payments to third-party broker-dealers and other
service providers in connection with the sale of shares of the funds.
<PAGE>
FOR MORE INFORMATION
Three documents are available that offer further information on U.S. Global
Investors Funds.
ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports include financial statements, detailed
performance information, portfolio holdings, a statement from management and the
auditor's report.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains more detailed information on all aspects of the funds. The
current annual/semi-annual report is included in the SAI.
A current SAI has been filed with the Securities and Exchange Commission and is
incorporated by reference (that is, it is a legal part of this prospectus).
To request a free copy of the current annual/semi-annual report or SAI, please
write or call:
ADDRESS TELEPHONE
U.S. Global Investors Funds 1-800-US-FUNDS (800-873-8637)
P.O. Box 781234
San Antonio, Texas 78278-1234 INTERNET
http://www.us-global.com
- --------------------------------- -----------------------------------------
INVESTMENT ADVISER LEGAL COUNSEL
U.S. Global Investors, Inc. Goodwin, Procter & Hoar LLP
7900 Callaghan Road Exchange Place
San Antonio, TX 78229 Boston, MA 02109
INVESTMENT SUB-ADVISER INDEPENDENT ACCOUNTANTS
Goodman & Company N.Y. Ltd. PricewaterhouseCoopers LLP
55th Floor, Scotia Plaza 160 Federal Street
40 King Street West Boston, MA 02110
Toronto, Ontario M5H 4A9
CANADA CUSTODIAN, FUND ACCOUNTANT, ADMINISTRATOR
TRANSFER AGENT Brown Brothers Harriman & Co.
40 Water Street
United Shareholder Services, Inc. Boston, MA 02109
P.O. Box 781234
San Antonio, TX 78278-1234
DISTRIBUTOR
U.S. Global Brokerage, Inc.
7900 Callaghan Road
San Antonio, TX 78229
- --------------------------------------------------------------------------------
PART B -- STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
U.S. GLOBAL INVESTORS FUNDS
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 2, 1998
GOLD SHARES FUND
WORLD GOLD FUND
GLOBAL RESOURCES FUND
CHINA REGION OPPORTUNITY FUND ("CHINA REGION FUND")
ALL AMERICAN EQUITY FUND ("ALL AMERICAN FUND")
INCOME FUND
REAL ESTATE FUND
TAX-FREE FUND
NEAR-TERM TAX FREE FUND
U.S. GOVERNMENT SECURITIES SAVINGS FUND
U.S. TREASURY SECURITIES CASH FUND
U.S. Global Investors Funds ("Trust") is an open-end series investment company.
This Statement of Additional Information is not a prospectus. You should read it
in conjunction with the prospectus issued November 2, 1998, which you may
request from U. S. Global Investors, Inc. ("Adviser"), 7900 Callaghan Road, San
Antonio, Texas 78229, or 1-800-US-FUNDS (1-800-873-8637).
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION............................................................3
INVESTMENT OBJECTIVES AND POLICIES.............................................3
Investment Restrictions...............................................4
Valuation of Shares...................................................5
Gold and Natural Resources Funds......................................6
China Region Fund.....................................................6
Real Estate Fund......................................................8
Tax-Free Funds........................................................9
Government Money Market Funds........................................12
RISK FACTORS..................................................................12
Repurchase Agreements................................................15
Lending of Portfolio Securities......................................15
Borrowing............................................................16
STRATEGIC TRANSACTIONS........................................................16
PORTFOLIO TRANSACTIONS........................................................20
MANAGEMENT OF THE FUNDS.......................................................21
PRINCIPAL HOLDERS OF SECURITIES...............................................22
INVESTMENT ADVISORY SERVICES..................................................23
Sub-Advisers.........................................................24
Advisory Fee Schedule................................................24
TRANSFER AGENCY AND OTHER SERVICES............................................25
CERTAIN PURCHASES OF SHARES OF THE FUNDS......................................26
ADDITIONAL INFORMATION ON REDEMPTIONS.........................................27
CALCULATION OF PERFORMANCE DATA...............................................28
Total Return.........................................................29
Yield ............................................................30
Tax Equivalent Yield.................................................30
Nonstandardized Total Return.........................................30
Distribution Rates...................................................30
Effect of Fee Waiver And Expense Reimbursement.......................31
TAX STATUS....................................................................31
Taxation of the Funds -- In General..................................31
Taxation of the Funds' Investments...................................31
Taxation of the Shareholder..........................................33
Currency Fluctuations -- "Section 988" Gains or Losses...............34
Foreign Taxes........................................................34
CUSTODIAN, FUND ACCOUNTANT, AND ADMINISTRATOR.................................35
DISTRIBUTOR...................................................................35
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL.....................................35
FINANCIAL STATEMENTS..........................................................35
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Statement of Additional Information U.S. Global Investors Funds
Page 2 of 35
<PAGE>
GENERAL INFORMATION
U. S. Global Investors Funds is an open-end management investment company, 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.
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 each 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 "How the Funds Are Organized" in the prospectus, the Trust's
First Amended and Restated Master Trust Agreement ("Master Trust Agreement"),
requires no annual or regular meeting of shareholders. 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 ("1940 Act").
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 investment objectives and policies of the funds are described in detail in
the prospectus. The following discussion provides supplemental information
concerning certain investment limitations and techniques in which one or more
- --------------------------------------------------------------------------------
U.S. Global Investors Funds Statement of Additional Information
Page 3 of 35
<PAGE>
of the funds may engage, and certain of the risks they may entail. Certain of
the investment techniques may not be available to all of the funds. All of the
funds are managed by U.S. Global Investors, Inc.
INVESTMENT RESTRICTIONS
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 (i) 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, and (ii) the Gold Shares Fund, World Gold Fund,
China Region Fund, and All American Fund may borrow money only for
temporary or emergency purposes (not for leveraging or investment),
provided that 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 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 invest
not more than 10% of its total net assets in gold and gold bullion, and
except that the Gold Shares Fund, World Gold Fund, China Region Fund, and
All American Fund may 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 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 that are subject to legal or contractual restrictions
on resale ("restricted securities"), except that (i) the China Region Fund
may invest up to 15% of net assets in illiquid securities, including
securities which are subject to legal or contractual restrictions on
resale, and (ii) 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.)
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Statement of Additional Information U.S. Global Investors Funds
Page 4 of 35
<PAGE>
10. Invest more than 25% of its total assets in securities of companies
principally engaged in any one industry (other than obligations issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities), 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 Tax Free Fund and the Near-Term Tax Free Fund may invest
more than 25% of their 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. The China Region Fund will consider a foreign government to be an
"industry". For purposes of determining industry concentration, each fund
relies on the Standard Industrial Classification as compiled by an
independent source, 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 U.S. 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, Near-Term
Tax Free Fund, and China Region Fund apply to only 75% of the value of
their respective gross assets.)
12. The Gold Shares Fund may not invest more than 2% of the value of its net
assets in marketable warrants.
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.
VALUATION OF SHARES
Share value is calculated in U.S. dollars. A security quoted in another currency
is converted to U.S. dollars using the exchange rate in effect at 12:00 p.m.
Eastern time in the principal market where the security is traded. A portfolio
security listed or traded in domestic or international markets, either on an
exchange or over-the-counter, is valued at the last reported sales price before
the time when a fund values assets. Lacking any sales on that day, the security
is valued at the mean between the last reported bid and ask prices.
If market quotations are not readily available, or restricted securities or
similar assets are being valued, a fund values the assets at fair value using
procedures established by the board of trustees. The trustees have delegated
pricing authority to the fair valuation committee of the adviser, for
non-material pricing issues, as defined in the fair valuation committee
procedures. The trustees retain authority to accept or reject any alternative
valuation proposed by the fair valuation committee.
Securities traded on more than one market are valued according to the broadest
and most representative market. Prices used to value portfolio securities are
monitored to ensure that they represent current market values. Calculation of
net asset value may not take place at the same time as the determination of the
prices of a portfolio used in such calculations. Events affecting the value of
securities that occur between the time prices are established and the New York
Stock Exchange closes are not reflected in the calculation of net asset value
unless the board of trustees decides that the event would materially affect the
net asset value. In that case, the fund will make an adjustment. If the price of
a portfolio security is materially different from its current market value, the
security will be valued at fair value.
Debt securities with maturities of sixty days or less at the time of purchase
are valued based on the amortized cost. This involves valuing an instrument at
its cost initially and assuming, after that, a constant amortization to maturity
of any discount or premium, despite the impact of fluctuating interest rates on
the market value of the instrument.
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To maintain a constant per share price of $1.00 for the government securities
money market funds, portfolio investments are valued at cost, and any discount
or premium created by market movements is amortized to maturity despite the
effect of fluctuating interest rates on the market value of the security.
The following discussion of the investment objectives, policies and risks
associated with each particular fund supplements the discussions in the
prospectus.
GOLD AND NATURAL RESOURCES FUNDS
The Gold Shares Fund and World Gold Fund intend to concentrate their investments
in common stocks of companies involved in exploration for, mining of, processing
of, or dealing in, gold. The Gold Shares Fund may also invest in the securities
of issuers engaged in operations related to silver and other precious metals.
Approximately 20% of the world's output of gold is produced in the Republic of
South Africa. A substantial portion of the Gold Shares Fund's net assets are
invested in securities of South African issuers engaged in mining of,
exploration for, processing of, or dealing in, gold.
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 Canada. 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.
Because gold and gold bullion do not generate investment income, the return 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. 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 ("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 ("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.
CHINA REGION FUND
The China Region Fund will invest primarily in securities which are listed or
otherwise traded by authorized brokers and other entities and will focus its
investments on equities and quasi-equity securities. Quasi-equity securities may
include, for example: warrants or similar rights or other financial instruments
with substantial equity characteristics, such as debt securities convertible
into equity securities. Although the China Region Fund expects to invest
primarily in listed securities of established companies, it may, subject to
local investment limitations, invest in unlisted securities of China companies
and companies that have business associations in China, including investments in
new and early stage companies. This may include direct equity investments. Such
investments may involve a high degree of business and financial risk. Because of
the absence of any trading markets for these investments, the China Region Fund
may find itself unable to liquidate such securities in a timely fashion,
especially in the event of negative news regarding the
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specific securities or the China markets in general. Such securities could
decline significantly in value prior to the China Region Fund's being able to
liquidate such securities. In addition to financial and business risks, issues
whose securities are not listed will not be subject to the same disclosure
requirements applicable to issuers whose securities are listed.
PEOPLE'S REPUBLIC OF CHINA. The People's Bank of China is officially responsible
for managing stock markets in the People's Republic of China ("PRC"), regulating
all trading and settlement and approving all issues of new securities. The
Shanghai and Shenzhen Stock Exchanges are highly automated with trading and
settlement executed electronically. Considerable autonomy has been given to
local offices of the State Commission of Economic System Reform in developing
securities markets. They are charged with identifying suitable companies for
listing.
There are currently two officially recognized securities exchanges in China --
the Shanghai Stock Exchange which opened in December 1990 and the Shenzhen Stock
Exchange which opened in July 1991. Shares traded on these Exchanges are of two
types -- "A" shares which can be traded only by Chinese investors and "B" shares
which can be traded only by individuals and corporations not residents of China.
The settlement period for "B" share trades is the same in Shenzhen and Shanghai.
Settlements are effected on the third business day after the transaction. As of
June 1996, seventeen companies were authorized to issue what are called "H"
shares which trade in Hong Kong and may be purchased by anyone.
The China Region Fund will invest in both new and existing enterprises
registered and operating in China. These will include wholly Chinese-owned
enterprises, wholly foreign-owned enterprises and Sino-foreign joint ventures.
It is not the intention of the China Region Fund to limit its investments to
Shenzhen and Shanghai alone.
HONG KONG. Sovereignty over Hong Kong was transferred from Great Britain to the
PRC on July 1, 1997, at which time Hong Kong became a Special Administrative
Region ("SAR") of the PRC. Under the agreement providing for such transfer
(known as the "Joint Declaration") and the PRC law implementing its commitments
thereunder ("Basic Law"), the current social and economic systems in Hong Kong
are to remain unchanged for at least 50 years, and Hong Kong is to enjoy a high
degree of autonomy except in foreign and defense affairs. The SAR will be vested
with executive, legislative and judicial power. Laws currently in force, as they
may be amended by the SAR Legislature, are to remain in force except to the
extent they contravene the Basic Law. The PRC may not levy taxes on the SAR, the
Hong Kong dollar is to remain fully convertible, and Hong Kong is to remain a
free port. Under the terms of the Basic Law, Hong Kong's current social
freedoms, including freedoms of speech, press, assembly, travel, and religion,
are not to be affected. It is not clear how future developments in Hong Kong and
China may affect the implementation of the Basic Law after the transfer of
sovereignty in 1997.
It is to be expected that the Hong Kong stock market will remain volatile in
response to prevailing perceptions of political developments in China. Foreign
enterprises are treated virtually the same as domestic enterprises and there are
no restrictions on exchange of foreign currencies or on the repatriation of
profits. Import and export licenses are easy to obtain. There are no exchange
controls, investment restrictions or dividend withholding taxes. However,
currently there are no laws in Hong Kong which specifically protect foreign
investors against expropriation.
TAIWAN. The Taiwan Stock Exchange ("TSE"), the sole stock exchange in Taiwan, is
owned by government-controlled enterprises and private banks. In 1968, the
Securities and Exchange Law was passed and, since that time, the Taiwan
securities market has been regulated by the Taiwan Securities and Exchange
Commission ("TSEC") which, in turn, is supervised by the Ministry of Finance
("MOF"). The Central Bank of China ("CBC") is also responsible for supervising
certain aspects of the Taiwan securities market.
While, historically, foreign individual investors have not been permitted to
invest directly in securities listed on the TSE, since 1990 certain foreign
institutional investors have been permitted access to the Taiwan securities
market. Currently, foreign institutional investors which meet certain guidelines
promulgated by the TSEC and which are also approved by the TSEC, the MOF and the
CBC, will be permitted to invest in TSE listed securities. However, qualifying
foreign institutional investors (such as the China Region Fund) may not own more
than 5% of the shares of a company listed on the TSE, and the total foreign
ownership of any listed company may not exceed 10%. In addition, the Taiwanese
government prohibits foreign investment in certain industries including
transportation and energy companies. Furthermore, Taiwan imposes an overall
country limit on investment and requires a long-term
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commitment. The China Region Fund's management believes that over time
restrictions on investments in Taiwan may ease to permit greater and more
flexible investment in Taiwanese securities.
The political reunification of China and Taiwan is a highly problematic issue
that may not be settled in the near future. Taiwan's economic interaction with
China can take place only through indirect channels (generally via Hong Kong)
due to the official prohibitions on direct trade between the PRC and Taiwan.
Nevertheless, in fewer than four years, Taiwan has become a significant investor
in China and China has become one of the largest markets for Taiwanese goods.
EXCHANGE CONTROL. PRC currency, the Renminbi ("RNB"), is not freely convertible.
The exchange rate of RNB against foreign currencies is regulated and published
daily by the State Administration of Exchange Control ("SAEC"). In 1986, to help
solve the foreign exchange problems of foreign investors, China established
Foreign Exchange Adjustment Centers, commonly referred to as "swap centers," in
various cities. These swap centers provide an official forum where foreign
invested enterprises may, under the supervision and control of SAEC and its
branch offices, engage in mutual adjustment of their foreign exchange surpluses
and shortfalls. More recently, regulations have been relaxed to allow Chinese
state enterprises and individuals to participate in foreign exchange swap
transactions. Trading of RNB and foreign currencies at the swap centers is
conducted at a rate determined by supply and demand rather than at the official
exchange rate. Such market exchange rates can be highly volatile and are subject
to sharp fluctuations depending on market conditions.
The China Region Fund may use official or market rates of exchange in connection
with portfolio transactions and net asset value determinations consistent with
prevailing practices in the relevant markets or locations, except that the China
Region Fund will not use any exchange rate if the effect of such use would be to
restrict repatriation of assets.
No exchange control approval is required for the China Region Fund to acquire
"B" shares listed on stock exchanges. Dividends and/or proceeds from the sale of
securities purchased by the China Region Fund in listed China companies may be
remitted outside China, subject to payment of any relevant taxes and completion
of the requisite formalities.
Shanghai securities are now being quoted in U.S. dollars and Shenzhen securities
are now being quoted in Hong Kong dollars.
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 Real Estate 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 Real Estate 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 Real Estate 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.
The Real Estate Fund may be subject to the risks associated with the direct
ownership of real estate because of its policy to concentrate investments in the
securities of companies owning, constructing, managing or selling residential,
commercial or industrial real estate. Additional risks include declines in the
value of real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
limitations on rents, changes in neighborhood values, the appeal of properties
to tenants, and increase in interest rates. Such risks may also affect the value
of securities of companies that serve the real estate industry.
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TAX-FREE FUNDS
The two tax-free funds invest primarily in municipal bonds. Municipal securities
are generally of two principal types -- notes and bonds. Municipal notes
generally have maturities of one year or less and provide for short-term capital
needs. Municipal bonds normally have maturities of more than one year, and meet
longer-term needs. Municipal bonds are classified into two principal categories
- -- general obligation bonds and revenue bonds. General obligation bonds are
backed by the taxing power of the issuer and are considered the safest type of
municipal bond. Revenue bonds are backed by the revenues derived from a project
or facility.
The tax-free funds invest only in debt securities earning one of the four
highest ratings by Moody's Investor's Services ("Moody's") (Aaa, Aa, A, Baa) or
by Standard & Poors Corporation ("S&P") (AAA, AA, A, BBB). Not more than 10% of
either of the tax-free fund's total assets will be invested in the fourth rating
category. Investments in the fourth category may have speculative
characteristics and therefore, may involve higher risks. Investments in the
fourth rating category of bonds are generally regarded as having an adequate
capacity to pay interest and repay principal. However, these investments may be
more susceptible to adverse changes in the economy. Municipal notes (including
variable rate demand obligations) must be rated MIG1/VMIG2 or MIG2/VMIG2 by
Moody's or SP-1 or SP-2 by S&P. Tax- exempt commercial paper must be rated P-1
or P-2 by Moody's or A-1 or A-2 by S&P.
The tax-free funds may purchase variable and floating rate obligations from
issuers or may acquire participation interest in pools of these obligations from
banks or other financial institutions. Variable and floating rate obligations
are municipal securities whose interest rates change periodically. They normally
have a stated maturity greater than one year, but permit the holder to demand
payment of principal and interest anytime or at specified intervals.
The tax-free funds may purchase obligations with term puts attached. "Put" bonds
are tax-exempt securities that may be sold back to the issuer or a third party
at face value before the stated maturity. The put feature may increase the cost
of the security, consequently reducing the yield of the security.
The tax-free funds may purchase municipal lease obligations or certificates of
participation in municipal lease obligations. A municipal lease obligation is
not a general obligation of the municipality for which the municipality pledges
its taxing power. Ordinarily, a lease obligation will contain a
"nonappropriation" clause if the municipality has no obligation to make lease
payments in future years unless money is appropriated for that purpose annually.
Because of the risk of nonappropriation, some lease obligations are issued with
third-party credit enhancements, such as insurance or a letter of credit.
Municipal lease obligations are subject to different revenue streams than those
associated with more conventional municipal securities. For this reason, before
investing in a municipal lease obligation, the adviser will consider, among
other things, whether (1) the leased property is essential to a governmental
function of the municipality, (2) the municipality is prohibited from
substituting or purchasing similar equipment if lease payments are not
appropriated, and (3) the municipality has maintained good market acceptability
for its lease obligations in the past.
While the tax-free funds primarily invest in municipal bonds the income of which
is free from federal income taxes, they may also invest in repurchase agreements
and other securities which may earn taxable income. Moreover, the tax-free funds
may sell portfolio securities at a gain, which if long term may be taxed to
shareholders as long term capital gains and if short term may be taxed to
shareholders as ordinary income.
Subsequent to a purchase by either 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 that fund. Neither event will require sale of such municipal
bonds by either tax-free fund, but the Adviser will consider such event in its
determination of whether either 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 funds will attempt to use
comparable ratings as standards for their investments in accordance with their
investment policies.
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.
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Municipal bonds may also be issued to refund outstanding obligations. 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 mutual 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 mutual 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 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 tax-free
funds would be adversely affected. In such event, the tax-free 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.
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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 may 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 tax-free 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 tax-free fund's yield will decline and that tax-free fund and
its shareholders will forego the opportunity for capital appreciation of that
tax-free fund's investments and of their shares to the extent a portfolio is
invested in variable rate obligations. Should interest rates increase, a
tax-free fund's yield will increase and that tax-free 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
tax-free funds' assets which may be invested in variable rate obligations. For
purposes of determining a tax-free 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 tax-free funds have an unconditional
right of demand, upon notice to exceed thirty days, against the issuer to
receive payment; the Adviser 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 tax-free 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 tax-free
funds may purchase obligations with puts attached from banks and broker-dealers.
The price the tax-free 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 tax-free funds will use puts for liquidity
purposes in order to permit them to remain more fully invested in municipal
securities than would otherwise be the case by providing a ready market for
certain municipal securities in their 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 tax-free 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 either tax-free fund, each will limit its use of puts in
accordance with applicable interpretations and rulings of the Internal Revenue
Service.
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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 tax-free 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 tax-free fund.
To minimize such risks, the tax-free funds will only purchase obligations with
puts attached from sellers whom the Adviser believes to be creditworthy.
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.
GOVERNMENT MONEY MARKET FUNDS
The Treasury Securities Cash Fund and 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 Treasury Securities Cash Fund and
Government Securities Savings Fund value their respective portfolio securities
on the basis of the amortized cost method, in accordance with Rule 2(a)-7 of the
1940 Act, as amended. This requires that those funds maintain a dollar-weighted
average portfolio maturity of 90 days or less, generally 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.
RISK FACTORS
The following information supplements the discussion of the funds' risk factors
discussed in the funds' prospectus. The following are among the most significant
risks associated with an investment in a particular fund.
EQUITY PRICE FLUCTUATION. Equity securities are subject to price fluctuations
depending on a variety of factors, including market, business, and economic
conditions.
FOREIGN INVESTMENTS. Investing in securities issued by companies whose principal
business activities are outside the United States may involve significant risks
not present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those not
subject to the disclosure and reporting requirements of the United States
securities laws. Foreign issuers are generally not bound by uniform accounting,
auditing, and financial reporting requirements and standards of practice
comparable to those applicable to domestic issuers. Investments in foreign
securities will typically be denominated in foreign currency. If the foreign
currency
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<PAGE>
declines in value against the U.S. dollar, the value of the foreign security
will be worth less to a U.S. shareholder. Investments in foreign securities also
involve the risk of possible adverse changes in investment or exchange control
regulations, expropriation or confiscatory taxation, limitation of the removal
of funds or other assets of a particular fund, political or financial
instability or diplomatic and other developments that could affect such
investment. In addition, economies of particular countries or areas of the world
may differ favorably or unfavorably from the economy of the United States. It is
anticipated that in most cases the best available market for foreign securities
will be on exchanges or in over-the-counter markets located outside of the
United States. Foreign stock markets, while growing in volume and
sophistication, are generally not as developed as those in the United States,
and securities of some foreign issuers (particularly those in developing
countries) may be less liquid and more volatile than securities of comparable
United States companies. In addition, foreign brokerage commissions are
generally higher than commissions on securities traded in the United States and
may be non-negotiable. In general, there is less overall governmental
supervision and regulation of foreign securities markets, broker/dealers, and
issuers than in the United States.
EMERGING MARKETS. The gold and natural resources funds and the equity funds
(especially the China Region Fund) may invest in countries considered by the
Adviser to represent emerging markets. The Adviser determines which countries
are emerging market countries by considering various factors, including
development of securities laws and market regulation, total number of issuers,
total market capitalization, and perceptions of the investment community.
Generally, emerging markets are those other than North America, Western Europe,
and Japan.
Investing in emerging markets involves risks and special considerations not
typically associated with investing in other more established economies or
securities markets. Investors should carefully consider their ability to assume
the below listed risks before making an investment in a fund. Investing in
emerging markets is considered speculative and involves an increased risk of
total loss.
Risks of investing in emerging markets include:
1. the risk that the fund's assets may be exposed to nationalization, ex-
propriation, or confiscatory taxation;
2. the fact that emerging market securities markets are substantially smaller,
less liquid and more volatile than the securities markets of more developed
nations The relatively small market capitalization and trading volume of
emerging market securities may cause the fund's investments to be
comparatively less liquid and subject to greater price volatility than
investments in the securities markets of developed nations. Many emerging
markets are in their infancy and have yet to be exposed to a major
correction. In the event of such an occurrence, the absence of various
market mechanisms that are inherent in the markets of more developed
nations may lead to turmoil in the marketplace, as well as the inability of
the fund to liquidate its investments;
3. greater social, economic and political uncertainty (including the risk of
war);
4. greater price volatility, substantially less liquidity and significantly
smaller market capitalization of securities markets;
5. currency exchange rate fluctuations and the lack of available currency
hedging instruments;
6. higher rates of inflation;
7. controls on foreign investment and limitations on repatriation of invested
capital and on the fund's ability to exchange local currencies for U.S.
dollars;
8. greater governmental involvement in and control over the economy;
9. the fact that emerging market companies may be smaller, less seasoned and
newly organized;
10. the difference in, or lack of, auditing and financial reporting standards
which may result in unavailability of material information about issuers;
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<PAGE>
11. the fact that the securities of many companies may trade at prices
substantially above book value, at high price/earnings ratios, or at prices
that do not reflect traditional measures of value;
12. the fact that statistical information regarding the economy of many
emerging market countries may be inaccurate or not comparable to
statistical information regarding the United States or other economies;
13. less extensive regulation of the securities markets;
14. certain considerations regarding the maintenance of fund portfolio
securities and cash with foreign subcustodians and securities depositories;
15. the risk that it may be more difficult, or impossible, to obtain and/or
enforce a judgment than in other countries;
16. the risk that the fund may be subject to income or withholding taxes
imposed by emerging market counties or other foreign governments. The fund
intends to elect, when eligible, to "pass through" to the fund's
shareholders the amount of foreign income tax and similar taxes paid by the
fund. The foreign taxes passed through to a shareholder would be included
in the shareholder's income and may be claimed as a deduction or credit.
Other taxes, such as transfer taxes, may be imposed on the fund, but would
not give rise to a credit or be eligible to be passed through to the
shareholders;
17. the fact that the fund also is permitted to engage in foreign currency
hedging transactions and to enter into stock options on stock index futures
transactions, each of which may involve special risks, although these
strategies cannot at the present time be used to a significant extent by
the fund in the markets in which the fund will principally invest;
18. enterprises in which the fund invests may be or become subject to unduly
burdensome and restrictive regulation affecting the commercial freedom of
the invested company and thereby diminishing the value of the fund's
investment in it. Restrictive or over regulation may therefore be a form of
indirect nationalization;
19. businesses in emerging markets only have a very recent history of operating
within a market-oriented economy. Overall, relative to companies operating
in western economies, companies in emerging markets are characterized by a
lack of (i) experienced management, (ii) modern technology and (iii) a
sufficient capital base with which to develop and expand their operations.
It is unclear what will be the effect on companies in emerging markets, if
any, of attempts to move towards a more market-oriented economy;
20. investments in equity securities are subject to inherent market risks and
fluctuations in value due to earnings, economic conditions, quality ratings
and other factors beyond the control of the Adviser. As a result, the
return and net asset value of the fund will fluctuate;
21. the Adviser may engage in hedging transactions in an attempt to hedge
selected funds' foreign securities investments back to the U.S. dollar
when, in its judgment, currency movements affecting particular investments
are likely to harm the performance of the fund. Possible losses from
changes in currency exchange rates are primarily a risk of unhedged
investing in foreign securities. While a security may perform well in a
foreign market, if the local currency declines against the U.S. dollar,
gains from the investment can disappear or become losses. Typically,
currency fluctuations are more extreme than stock market fluctuations.
Accordingly, the strength or weakness of the U.S. dollar against foreign
currencies may account for part of the fund's performance even when the
Adviser attempts to minimize currency risk through hedging activities.
While currency hedging may reduce portfolio volatility, there are costs
associated with such hedging, including the loss of potential profits,
losses on hedging transactions, and increased transaction expenses; and
22. disposition of illiquid securities often takes more time than for more
liquid securities, may result in higher selling expenses and may not be
able to be made at desirable prices or at the prices at which such
securities have been valued by the fund. As a non-fundamental policy, a
fund will not invest more than 15% of its net assets in illiquid
securities.
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<PAGE>
RESTRICTED SECURITIES. The gold and natural resources funds and the China Region
Fund may, from time to time, purchase securities that are subject to
restrictions on resale. While such purchases may be made at an advantageous
price and offer attractive opportunities for investment not otherwise available
on the open market, the Fund may not have the same freedom to dispose of such
securities as in the case of the purchase of securities in the open market or in
a public distribution. These securities may often be resold in a liquid dealer
or institutional trading market, but the Fund may experience delays in its
attempts to dispose of such securities. If adverse market conditions develop,
the Fund may not be able to obtain as favorable a price as that prevailing at
the time the decision is made to sell. In any case, where a thin market exists
for a particular security, public knowledge of a proposed sale of a large block
may depress the market price of such securities.
CONVERTIBLE SECURITIES. The gold and natural resources funds and the equity
funds may invest in convertible securities, that is, bonds, notes, debentures,
preferred stocks and other securities that are convertible into or exchangeable
for another security, usually common stock. Convertible debt securities and
convertible preferred stocks, until converted, have general characteristics
similar to both debt and equity securities. Although to a lesser extent than
with debt securities generally, the market value of convertible securities tends
to decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion or exchange
feature, the market value of convertible securities typically increases or
declines as the market value of the underlying common stock increases or
declines, although usually not to the same extent. Convertible securities
generally offer lower yields than non-convertible fixed income securities of
similar quality because of their conversion or exchange features. Convertible
bonds and convertible preferred stock typically have lower credit ratings than
similar non-convertible securities because they are generally subordinated to
other similar but non-convertible fixed income securities of the same issuer.
OTHER RIGHTS TO ACQUIRE SECURITIES. The gold and natural resources funds and the
equity funds may also invest in other rights to acquire securities, such as
options and warrants. These securities represent the right to acquire a fixed or
variable amount of a particular issue of securities at a fixed or formula price
either during specified periods or only immediately before termination. These
securities are generally exercisable at premiums above the value of the
underlying securities at the time the right is issued. These rights are more
volatile than the underlying stock and will result in a total loss of the Fund's
investment if they expire without being exercised because the value of the
underlying security does not exceed the exercise price of the right.
REPURCHASE AGREEMENTS
In a repurchase agreement, a fund purchases securities subject to the seller's
agreement to repurchase such securities at a specified time (normally one day)
and price. The repurchase price reflects an agreed upon interest rate during the
time of investment. All repurchase agreements must be collateralized by United
States government or government agency securities, the market values of which
equal or exceed 102% of the principal amount of the repurchase obligation. If an
institution enters an insolvency proceeding, the resulting delay in liquidation
of securities serving as collateral could cause a fund some loss if the value of
the securities declined before liquidation. To reduce the risk of loss, funds
will enter into repurchase agreements only with institutions and dealers the
board of trustees considers creditworthy.
LENDING OF PORTFOLIO SECURITIES
The funds will not lend portfolio securities unless collateral secures the loan
(consisting of any combination of cash, United States government securities or
irrevocable letters of credit) in an amount at least equal (on a daily
marked-to-market basis) to the current market value of the securities lent. In
case of bankruptcy or breach of agreement by the borrower of the securities, the
fund could experience delays and costs in recovering the securities lent. The
fund will not enter into securities lending agreements unless its custodian
bank/lending agent will fully indemnify the fund against loss due to borrower
default. The fund may not lend securities with an aggregate market value of more
than one-third of the fund's total net assets. For the China Region Fund only,
this is a fundamental policy that cannot be changed without a vote by
shareholders.
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<PAGE>
BORROWING
The funds may have to deal with unpredictable cashflows as shareholders purchase
and redeem shares. Under adverse conditions, the funds might have to sell
portfolio securities to raise cash to pay for redemptions at a time when
investment considerations would not favor such sales. In addition, frequent
purchases and sales of portfolio securities tend to decrease fund performance by
increasing transaction expenses.
The Gold Shares Fund, World Gold Fund, China Region Fund, and All American Fund
may deal with unpredictable cashflows by borrowing money. Through such
borrowings these funds may avoid selling portfolio securities to raise cash to
pay for redemptions at a time when investment considerations would not favor
such sales. In addition, the funds' performance may be improved due to a
decrease in the number of portfolio transactions. After borrowing money, if
subsequent shareholder purchases do not provide sufficient cash to repay the
borrowed monies, a fund will liquidate portfolio securities in an orderly manner
to repay the borrowed monies.
To the extent that a fund borrows money prior to selling securities, the fund
would be leveraged such that the fund's net assets may appreciate or depreciate
in value more than an unleveraged portfolio of similar securities. Since
substantially all of a fund's assets will fluctuate in value and whereas the
interest obligations on borrowings may be fixed, the net asset value per share
of the fund will increase more when the fund's portfolio assets increase in
value and decrease more when the fund's portfolio assets decrease in value than
would otherwise be the case. Moreover, interest costs on borrowings may
fluctuate with changing market rates of interest and may partially offset or
exceed the returns which the funds earn on portfolio securities. Under adverse
conditions, the funds might be forced to sell portfolio securities to meet
interest or principal payments at a time when market conditions would not be
conducive to favorable selling prices for the securities.
The funds will not purchase any security while borrowings represent more than 5%
of their total assets outstanding.
STRATEGIC TRANSACTIONS
The gold and natural resources funds and equity funds may purchase and sell
exchange-listed and over-the-counter put and call options on securities, equity
and fixed-income indices and other financial instruments. In addition, the Gold
Shares, World Gold, China Region and All American Funds may purchase and sell
financial futures contracts and options thereon, and enter into various currency
transactions such as currency forward contracts, currency futures contracts,
options on currencies or currency futures (collectively, all the above are
called "Strategic Transactions"). The gold and natural resources funds and
equity funds may engage in Strategic Transactions for hedging, risk management,
or portfolio management purposes, but not for speculation, and they will comply
with applicable regulatory requirements when implementing these strategies,
techniques and instruments.
Strategic Transactions may be used to attempt (1) to protect against possible
changes in the market value of securities held in or to be purchased for a
fund's portfolio resulting from securities markets or currency exchange rate
fluctuations, (2) to protect a fund's unrealized gains in the value of its
portfolio securities, (3) to facilitate the sale of such securities for
investment purposes, (4) to manage the effective maturity or duration of a
fund's portfolio, or (5) to establish a position in the derivatives markets as a
temporary substitute for purchasing or selling particular securities. The gold
and natural resources funds' and equity funds' ability to successfully use these
Strategic Transactions will depend upon the Adviser's ability to predict
pertinent market movements, and cannot be assured. Engaging in Strategic
Transactions will increase transaction expenses and may result in a loss that
exceeds the principal invested in the transactions.
Strategic Transactions have risk associated with them including possible default
by the other party to the transaction, illiquidity and, to the extent the
Adviser's view as to certain market movements is incorrect, the risk that the
use of such Strategic Transactions could result in losses greater than if they
had not been used. Use of put and call options may result in losses to a fund.
For example, selling call options may force the sale of portfolio securities at
inopportune times or for lower prices than current market values. Selling call
options may also limit the amount of appreciation a fund can realize on its
investments or cause a fund to hold a security it might otherwise sell. The use
of currency transactions can result in a fund incurring losses as a result of a
number of factors including the imposition of exchange
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<PAGE>
controls, suspension of settlements, or the inability to deliver or receive a
specified currency. The use of options and futures transactions entails certain
other risks. In particular, the variable degree of correlation between price
movements of futures contracts and price movements in the related portfolio
position of a fund creates the possibility that losses on the hedging instrument
may be greater than gains in the value of a fund's position. In addition,
futures and options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets, a
fund might not be able to close out a transaction, and substantial losses might
be incurred. However, the use of futures and options transactions for hedging
should tend to minimize the risk of loss due to a decline in the value of a
hedged position. At the same time they tend to limit any potential gain that
might result from an increase in value of such position. Finally, the daily
variation margin requirement for futures contracts would create a greater
ongoing potential financial risk than would purchases of options, where the
exposure is limited to the cost of the initial premium. Losses resulting from
the use of Strategic Transactions would reduce net asset value, and possibly
income, and such losses can be greater than if the Strategic Transactions had
not been used.
The gold and natural resources funds' and equity funds' activities involving
Strategic Transactions may be limited by the requirements of Subchapter M of the
Internal Revenue Code for qualification as a regulated investment company.
PUT AND CALL OPTIONS. The gold and natural resources funds and equity funds may
purchase and sell (issue) both put and call options. The funds may also enter
into transactions to close out their investment in any put or call options.
A put option gives the purchaser of the option, upon payment of a premium, the
right to sell, and the issuer of the option the obligation to buy the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, a fund's purchase of a put option on a security might be designed
to protect its holdings in the underlying instrument (or, in some cases, a
similar instrument) against a substantial decline in the market value by giving
a fund the right to sell such instrument at the option exercise price. A call
option, upon payment of a premium, gives the purchaser of the option the right
to buy, and the issuer the obligation to sell, the underling instrument at the
exercise price. A fund's purchase of a call option on a security, financial
future, index currency or other instrument might be intended to protect a fund
against an increase in the price of the underlying instrument that it intends to
purchase in the future by fixing the price at which it may purchase such
instrument. An "American style" put or call option may be exercised at any time
during the option period while a "European style" put or call option may be
exercised only upon expiration or during a fixed period prior thereto.
The gold and natural resources funds and equity funds are authorized to purchase
and sell both exchange listed options and over-the-counter options ("OTC
options"). Exchange listed options are issued by a regulated intermediary such
as the Options Clearing Corporation ("OCC"), which guarantees the performance of
the obligations of the parties to such options. OTC options are purchased from
or sold to securities dealers, financial institutions or other parties
["Counterparty(ies)"] through direct bilateral agreement with the Counterparty.
In contrast to exchange listed options, which generally have standardized terms
and performance mechanics, all the terms of an OTC option are set by negotiation
of the parties. Unless the parties provide for it, there is no central clearing
or guaranty function in an OTC option.
The gold and natural resources funds' and equity funds' ability to close out
their position as a purchaser or seller of a put or call option is dependent, in
part, upon the liquidity of the market for that particular option. Exchange
listed options, because they are standardized and not subject to Counterparty
credit risk, are generally more liquid than OTC options. There can be no
guarantee that a fund will be able to close out an option position, whether in
exchange listed options or OTC options, when desired. An inability to close out
its options positions may reduce a fund's anticipated profits or increase its
losses.
If the Counterparty to an OTC option fails to make or take delivery of the
security, currency or other instrument underlying an OTC option it has entered
into with a fund, or fails to make a cash settlement payment due in accordance
with the terms of that option, a fund may lose any premium it paid for the
option as well as any anticipated benefit of the transaction. Accordingly, the
Adviser must assess the creditworthiness of each such Counterparty or any
guarantor or credit enhancement of the Counterparty's credit to determine the
likelihood that the terms of the OTC option will be satisfied.
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The gold and natural resources funds and equity funds will realize a loss equal
to all or a part of the premium paid for an option if the price of the
underlying security, commodity, index, currency or other instrument security
decreases or does not increase by more than the premium (in the case of a call
option), or if the price of the underlying security, commodity, index, currency
or other instrument increases or does not decrease by more than the premium (in
the case of a put option). A fund will not purchase any option if, immediately
thereafter, the aggregate market value of all outstanding options purchased by
that fund would exceed 5% of that fund's total assets.
If the gold and natural resources funds and equity funds sell (i.e., issue) a
call option, the premium received may serve as a partial hedge, to the extent of
the option premium, against a decrease in the value of the underlying securities
or instruments in a portfolio, or may increase a fund's income. If a fund sells
(i.e., issues) a put option, the premium that it receives may serve to reduce
the cost of purchasing the underlying security, to the extent of the option
premium, or may increase a fund's capital gains. All options sold by a fund must
be "covered" (i.e., the fund must either be long when selling a call option or
short when selling a put option. The securities or futures contract subject to
the calls or must meet the asset segregation requirements described below as
long as the option is outstanding. Even though a fund will receive the option
premium to help protect it against loss or reduce its cost basis, an option sold
by a fund exposes the fund during the term of the option to possible loss. When
selling a call, a fund is exposed to the loss of opportunity to realize
appreciation in the market price of the underlying security or instrument, and
the transaction may require the fund to hold a security or instrument that it
might otherwise have sold. When selling a put, a fund is exposed to the
possibility of being required to pay greater than current market value to
purchase the underlying security, and the transaction may require the fund to
maintain a short position in a security or instrument it might otherwise not
have maintained. The gold and natural resources funds and equity funds will not
write any call or put options if, immediately afterwards, the aggregate value of
a fund's securities subject to outstanding call or put options would exceed 25%
of the value of a fund's total assets.
FUTURES CONTRACTS. The gold and natural resources funds and equity funds may
enter into financial futures contracts or purchase or sell put and call options
on such futures as a hedge against anticipated interest rate, currency or equity
market changes, for duration management and for risk management purposes.
Futures are generally bought and sold on the commodities exchange where they are
listed with payment of an initial variation margin as described below. The sale
of a futures contract creates a firm obligation by a fund, as seller, to deliver
to the buyer the specific type of financial instrument called for in the
contract at a specific future time for a specified price (or, with respect to
index futures and Eurodollar instruments, the net cash amount). Options on
futures contracts are similar to options on securities except that an option on
a futures contract gives the purchaser the right in return for the premium paid
to assume a position in a futures contract and obligates the seller to deliver
such position.
The gold and natural resources funds' and equity funds' use of financial futures
and options thereon will in all cases be consistent with applicable regulatory
requirements and in particular the rules and regulations of the CFTC and will be
entered into only for bonafide hedging, risk management (including duration
management) or other portfolio management purposes. Typically, maintaining a
futures contract or selling an option thereon requires a fund to deposit with a
financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) that initially is typically 1% to 10% of
the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the marked- to-market value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further obligation on the part of the
purchaser. If a fund exercises an option on a futures contract, it will be
obligated to post initial margin (and potentially subsequent variation margin)
for the resulting futures position just as it would for any futures position.
Futures contracts and options thereon are generally settled by entering into an
offsetting transaction, but there can be no assurance that the position can be
offset, before settlement, at an advantageous price, nor that delivery will
occur.
The gold and natural resources funds and equity funds will not enter into a
futures contract or related option (except for closing transactions) if,
immediately afterwards, the sum of the amount of its initial margin and premiums
on open futures contracts and options thereon would exceed 5% of the fund's
total assets (taken at current value). However, in the case of an option that is
in-the-money at the time of the purchase, the in-the-money amount may be
excluded in calculating the 5% limitation. The segregation requirements with
respect to futures contracts and options thereon are described below.
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FOREIGN CURRENCY TRANSACTIONS. The gold and natural resources funds and equity
funds may engage in currency transactions with Counterparties in an attempt to
hedge an investment in an issuer incorporated or operating in a foreign country
or in a security denominated in the currency of a foreign country against a
devaluation of that country's currency. Currency transactions include forward
currency contracts, exchange listed currency futures, and exchange listed and
OTC options on currencies. A fund's dealing in forward currency contracts and
other currency transactions such as futures, options, and options on futures
generally will be limited to hedging involving either specific transactions or
portfolio positions. Transaction hedging is entering into a currency transaction
with respect to specific assets or liabilities of a fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
The gold and natural resources funds and equity funds may cross-hedge currencies
by entering into transactions to purchase or sell one or more currencies that
are expected to decline in value relative to other currencies in which a fund
has (or expects to have) portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings or portfolio securities, the gold and natural resources
funds and equity funds may engage in proxy hedging. Proxy hedging may be used
when the currency to which a fund's portfolio is exposed is difficult to hedge.
Proxy hedging entails entering into a forward contract to sell a currency whose
changes in value are generally considered to be linked to a currency in which
some or all of a fund's portfolio securities are, or are expected to be
denominated, and to buy U.S. dollars.
To hedge against a devaluation of a foreign currency, the gold and natural
resources funds and equity funds may enter into a forward market contract to
sell to banks a set amount of such currency at a fixed price and at a fixed time
in the future. If, in foreign currency transactions, the foreign currency sold
forward by a fund is devalued below the price of the forward market contract and
more than any devaluation of the U.S. dollar during the period of the contract,
a fund will realize a gain as a result of the currency transaction. In this way,
a fund might reduce the impact of any decline in the market value of its foreign
investments attributable to devaluation of foreign currencies.
The gold and natural resources funds and equity funds may sell foreign currency
forward only as a means of protecting their foreign investments or to hedge in
connection with the purchase and sale of foreign securities, and may not
otherwise trade in the currencies of foreign countries. Accordingly, a fund may
not sell forward the currency of a particular country to an extent greater than
the aggregate market value (at the time of making such sale) of the securities
held in its portfolio denominated in that particular foreign currency (or issued
by companies incorporated or operating in that particular foreign country) plus
an amount equal to the value of securities it anticipates purchasing less the
value of securities it anticipates selling, denominated in that particular
currency.
As a result of hedging through selling foreign currencies forward, in the event
of a devaluation, it is possible that the value of a fund's portfolio would not
depreciate as much as the portfolio of a fund holding similar investments that
did not sell foreign currencies forward. Even so, the forward market contract is
not a perfect hedge against devaluation because the value of a fund's portfolio
securities may decrease more than the amount realized by reason of the foreign
currency transaction. To the extent that a fund sells forward currencies that
are thereafter revalued upward, the value of that fund's portfolio would
appreciate to a lesser extent than the comparable portfolio of a fund that did
not sell those foreign currencies forward. If, in anticipation of a devaluation
of a foreign currency, a fund sells the currency forward at a price lower than
the price of that currency on the expiration date of the contract, that fund
will suffer a loss on the contract if the currency is not devalued, during the
contract period, below the contract price. Moreover, it will not be possible for
a fund to hedge against a devaluation that is so generally anticipated that the
fund is not able to contract to sell the currency in the future at a price above
the devaluation level it anticipates. It is possible that, under certain
circumstances, a fund may have to limit its currency transactions to permit that
fund to qualify as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended ("Code"). Foreign currency transactions would involve a
cost to the funds, which would vary with such factors as the currency involved,
the length of the contact period and the market conditions then prevailing.
The gold and natural resources funds and equity funds will not attempt to hedge
all their foreign investments by selling foreign currencies forward and will do
so only to the extent deemed appropriate by the Adviser.
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U.S. Global Investors Funds Statement of Additional Information
Page 19 of 35
<PAGE>
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS. Many Strategic Transactions, in
addition to other requirements, require that the gold and natural resources
funds and equity funds segregate liquid high grade assets with their custodian
to the extent that the fund's obligations are not otherwise "covered" through
ownership of the underlying security, financial instrument or currency. In
general, either the full amount of any obligation of a fund to pay or deliver
securities or assets must be covered at all times by the securities, instruments
or currency required to be delivered, or subject to any regulatory restrictions,
an amount of cash or liquid high grade debt securities at least equal to the
current amount of the obligation must either be identified as being restricted
in a fund's accounting records or physically segregated in a separate account at
that fund's custodian. The segregated assets cannot be sold or transferred
unless equivalent assets are substituted in their place or it is no longer
necessary to segregate them. For the purpose of determining the adequacy of the
liquid securities that have been restricted, the securities will be valued at
market or fair value. If the market or fair value of such securities declines,
additional cash or liquid securities will be restricted on a daily basis so that
the value of the restricted cash or liquid securities, when added to the amount
deposited with the broker as margin, equals the amount of such commitments by a
fund.
PORTFOLIO TRANSACTIONS
The Advisory Agreement between the Trust and the Adviser requires that the
Adviser, 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 Adviser or an affiliate of the Adviser exercises investment
discretion. Under the Advisory Agreement, the Adviser is permitted, in certain
circumstances, to pay a higher commission than might otherwise be obtained in
order to acquire brokerage and research services. The Adviser 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 Adviser 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 Adviser 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 and Near-Term Tax Free 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 were as follows:
1996 1997 1998
---------- ---------- ----------
Gold Shares Fund $261,378 $481,476 $1,042,190
World Gold Fund $383,831 $704,381 $420,285
Global Resources Fund $130,955 $90,646 $34,487
China Region Fund $78,718 $115,788 $51,295
All American Fund $9,800 $8,080 $17,647
Income Fund $30,965 $50,565 $7,782
Real Estate Fund $75,940 $97,602 $59,003
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Statement of Additional Information U.S. Global Investors Funds
Page 20 of 35
<PAGE>
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
P.O. Box 160323 Associates Inc.,a bank marketing
San Antonio, Texas firm. President, Paragon Press.
78280 Partner, Rio Cibolo Ranch, Inc.
E. Douglas Hodo Chairman of the Chief Executive Officer of
7702 Fondren Board Houston Baptist University.
Houston, Texas 77074 Formerly Dean and Professor of
Economics and Finance, College
of Business, University of Texas
at San Antonio.
Clark R. Mandigo Trustee Business consultant since 1991.
15050 Jones Maltsberger From 1985 to 1991, President,
San Antonio, Texas Chief Executive Officer, and
78247 Director of Intelogic Trace,
Inc., a nationwide company which
sells, leases and maintains com-
puters and telecom munications
systems and equipment. Prior to
1985, President of BHP Petroleum
(Americas), Ltd., an oil and gas
exploration and development com-
pany. Director of Palmer Wire-
less, Inc., Lone Star Steakhouse
& Saloon, Inc. and Physician
Corporation of America. Formerly
a Director of Datapoint Corp-
oration. Trustee for Pauze/
Swanson United Services Funds
from November 1993 to February
1996.
Charles Z. Mann Trustee Business consultant since
13 Knapton Estates Rd. January 1, 1993. Chairman,
Turning Point Bermuda Monetary Authority from
Smiths Parish 1986 to 1992. Executive Vice
Bermuda FLBX President of International
Median Limited, a private in-
vestment 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 Interna-
tional (Bermuda) Ltd.; Old Court
International Reserves Ltd.; XL
Investments Limited, Glaxo
(Bermuda) Limited.
W. W. McAllister, III Trustee Chairman of the Board of Texas
7550 IH-10 West Insurance Agency, Inc. from 1981
Suite 700 to present.Chairman of the Board
San Antonio, Texas of Bomac Sports Limited d.b.a.
78247 SA Sports Unlimitedfrom December
1995 to present. Currently a
director of Alamo Title Holding
Co. and Alamo Title Insurance of
Texas. General Partner of Bomac
Transportation Limited Company
from January 1994 through
August 1995. Consultant to
River Valley Bank from
September 1992 through
September 1994. President of
San Antonio Savings Association
and its successor companies
from 1976 to 1982 and Chairman
of the Board from 1982 to 1992.
W.C.J. van Rensburg Trustee Professor of Geological Science
6010 Sierra Arbor Court and Petroleum Engineering, Uni-
Austin, Texas 78759 versity of Texas at Austin.
Former Associate Director,
Bureau of Economic Geology, Uni-
versity of Texas. Former Chair-
man, 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, Johannes-
burg, South Africa.
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U.S. Global Investors Funds Statement of Additional Information
Page 21 of 35
<PAGE>
TRUST
NAME AND ADDRESS POSITION PRINCIPAL OCCUPATION
- ---------------------- ------------------ --------------------------------
Frank E. Holmes 1 Trustee, Chairman of the Board of Direc-
President, tors and Chief Executive Officer
Chief Executive of the Adviser. Since October
Officer 1989 Mr. Holmes has served and
continues to serve in various
positions with the Adviser, its
subsidiaries and the investment
companies it sponsors. Director
of Franc-Or Resource Corp. from
November 1994 to November 1996.
Director of Adventure Capital
Limited from January 1996 to
July 1997 and Director of Vedron
Gold, Inc. from August 1996 to
March 1997. Director of 71316
Ontario, Inc. since April 1987
and of F.E. Holmes Organization,
Inc. since July 1978. Director
of Marleau, Lemire Inc. from
January 1995 to January 1996.
Director of United Services
Canada, Inc. since February 1995
and Chief Executive Officer from
February to August 1995.
Susan B. McGee Executive Vice President, Corporate Secretary
President, and General Counsel of the
Secretary, Adviser. Since September 1992
General Ms. McGee has served and con-
Counsel tinues to serve in various posi-
tions with the Adviser, its sub-
sidiaries, and the investment
companies it sponsors. Before
September 1992, Ms. McGee was a
student at St Mary's Law School.
David J. Clark Treasurer Chief Financial Officer, Chief
Operating Officer ofthe Adviser.
Since May 1997 Mr. Clark has
served and continues to serve in
various positions with the
Adviser and the investment com-
panies it sponsors. Foreign
Service Officer with U.S. Agency
for International Development in
the U.S. Embassy, Bonn, West
Germany from May 1992 to May
1997. Audit Supervisor for Uni-
versity of Texas Health Science
Center from April 1991 to April
1992. Auditor-in-Charge for
Texaco, Inc. from August 1987 to
June 1990.
- ------------------------------------
1 This Trustee may be deemed an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
COMPENSATION TABLE
TOTAL COMPENSATION FROM U.S. GLOBAL
NAME FUND COMPLEX(1) TO BOARD MEMBERS
- ------------------------------------ --------------------------------------
E. Douglas Hodo $38,000
John P. Allen $25,500
Charles Z. Mann $24,000
W.C.J. van Rensburg $25,500
Clark R. Mandigo $16,000
Frank E. Holmes $0
- ------------------------------------
(1) Total compensation paid by U.S. Global Fund Complex for period ended
June 30, 1998. As of this date there were 15 funds in the complex. Messrs.
Holmes and Mandigo serve on all 15 funds.
- --------------------------------------------------------------------------------
Statement of Additional Information U.S. Global Investors Funds
Page 22 of 35
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
As of September 30, 1998, 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 10, 1998:
PERCENTAGE OF RECORD/
FUND SHAREHOLDERS OWNED BENEFICIAL
Real Estate Fund Charles Schwab & Co. Inc. 23.85% Record(1)
National Financial Services Corp. 6.96% Record(2)
China Region Opportunity Charles Schwab & Co. Inc. 22.45% Record(1)
Fund
World Fold Fund Charles Schwab & Co. Inc. 18.12% Record(1)
Income Fund Charles Schwab & Co. Inc. 14.90% Record(1)
All American Equity Fund Charles Schwab & Co. Inc. 14.44% Record(1)
Near-Term Tax Free Fund Stewart D. Fordham 13.23% Beneficial
Los Angeles, CA 90025-6325
Donald W. and Jewell D. Reid 6.41% Beneficial
Albuquerque, NM 87110-7706
Global Resources Fund Charles Schwab & Co. Inc. 7.21% Record(1)
Gold Shares Fund Charles Schwab & Co. Inc. 6.62% Record(1)
- ---------------------------
(1) Charles Schwab & Co., Inc., a broker/dealer located at 101 Montgomery
Street, San Francisco, CA 94104-4122, has advised that no individual
client owns more than 5% of the fund.
(2) National Financial Services Corp., a broker/dealer located at Church
Street Station, New York, NY 10008-3908, has advised that no individual
client owns more than 5% of the fund.
INVESTMENT ADVISORY SERVICES
The investment adviser to the funds is U.S. Global Investors, Inc., 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 Adviser, 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 Adviser and may be
deemed to be a controlling person of the Adviser.
In addition to the services described in the funds' prospectus, the Adviser 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 Adviser
or its affiliates, except that the Trust will reimburse the Adviser for a
portion of the compensation of the Adviser'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 Adviser pays
the expense of printing and mailing the prospectus and sales materials used for
promotional purposes.
- --------------------------------------------------------------------------------
U.S. Global Investors Funds Statement of Additional Information
Page 23 of 35
<PAGE>
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 Adviser,
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 the prospectus 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 Adviser,
each fund may pay to the Adviser 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 "The Management Firm" section in the prospectus.
SUB-ADVISERS
The advisory agreement between the Adviser and the Trust permits the Adviser
from time to time to engage one or more sub-advisers to assist in the
performance of its services. Pursuant to the advisory agreement, the Adviser has
engaged Goodman & Company N.Y. Ltd. as Sub-Adviser to the Real Estate Fund, as
approved by shareholders on January 26, 1998. It is wholly owned by Goodman &
Company Ltd., which is ultimately wholly owned by Dundee Bancorp Inc., an
Ontario incorporated Canadian company listed on the Toronto Stock Exchange. Mr.
Nathan Edward "Ned" Goodman, Chairman of Goodman & Company N.Y. Ltd., is the
"controlling person" of Goodman & Company N.Y. Ltd. and Goodman & Company Ltd.
("Goodman & Company").
Under the terms of the sub-advisory agreement, the Sub-Adviser is required to
furnish the Adviser information and advice, including advice on the allocation
of investments among real estate related securities, relating to that portion of
the Fund's assets as the Adviser shall from time to time designate; furnish
continuously an investment program with respect to such assets; and to otherwise
manage the Fund's investments in accordance with the investment objectives and
policies as stated in the Fund's Prospectus and Statement of Additional
Information. Goodman & Company bears all expenses in connection with the
performance of the services under the sub-advisory agreement. Goodman & Company
manages the Fund's entire portfolio, with the exception of daily cash management
services, which services are provided by the Adviser.
The sub-advisory agreement remains in effect pursuant to its terms for two years
from the date of shareholder approval and from year to year thereafter so long
as such continuation is specifically approved at least annually (i) by either
the Trustees of the Trust or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund, and (ii) in either event by
the vote of a majority of the Trustees of the Trust who are not parties to this
agreement or "interested persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. The sub-advisory agreement is terminable, without penalty, by the
Board, by a Majority Vote of the Fund's shareholders, by the Adviser or by
Goodman & Company, in each case on not more than sixty nor less than thirty
days' written notice to the other party and to the Fund. The sub-advisory
agreement terminates automatically in the event of its assignment (as defined in
the 1940 Act).
For the sub-advisory services, the Adviser pays Goodman & Company 50 percent of
the Management Fee (as defined in the advisory agreement) paid by the Fund to
the Adviser, net of all mutually agreed upon fee waivers and reimbursements and
reimbursements required by applicable law. The fee paid to Goodman & Company is
paid by the Adviser out of its management fee and does not increase the expenses
of the Fund.
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Statement of Additional Information U.S. Global Investors Funds
Page 24 of 35
<PAGE>
ADVISORY FEE SCHEDULE
ANNUAL PERCENTAGE OF AVERAGE DAILY NET
NAME OF FUND ASSETS
- --------------------------------------- --------------------------------------
Gold Shares, All American Equity, 0.75% of the first $250,000,000 and
Income, Tax Free, and Real Estate Funds 0.50% of the excess
Treasury Securities Cash, and 0.50% of the first $250,000,000 and
Government Securities Savings Funds 0.375% of the excess
World Gold and Global Resources Funds 1.00% of the first $250,000,000 and
0.50% of the excess
Near-Term Tax Free Fund 0.50%
China Region Opportunity Fund 1.25%
The Adviser 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 adviser's opinion, such laws should not preclude a
bank from performing shareholder administrative and servicing functions as
contemplated herein.
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 February 1999. 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
1940 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 adviser a separate management fee for each fund in the Trust.
Such fee is based on varying percentages of average net assets. For the three
fiscal periods ended June 30, 1996, June 30, 1997 and June 30, 1998, the Trust
incurred advisory fees (net of expenses paid by the adviser or voluntary fee
waivers) of $5,216,589, $5,195,746, and $4,362,788, respectively, for all funds.
For the three fiscal periods ended June 30, 1996, June 30, 1997 and June 30,
1998, the funds paid the adviser the following advisory fees (net of expenses
paid by the adviser or voluntary fee waivers):
1996 1997 1998
-------- -------- --------
Gold Shares Fund $1,727,462 $1,173,225 $616,410
World Gold Fund $2,238,255 $2,380,969 $1,521,454
Global Resources Fund $219,018 $281,264 $295,610
China Region Fund $58,700 $270,994 $385,682
All American Fund $0 $0 $33,254
Income Fund $73,521 $70,067 $77,558
Real Estate Fund $64,381 $101,214 $108,227
Tax Free Fund $0 $0 $0
Near-Term Tax Free Fund $0 $0 $0
Government Securities Savings Fund $0 $91,782 $418,522
Treasury Securities Cash Fund $835,252 $826,231 $906,071
- --------------------------------------------------------------------------------
U.S. Global Investors Funds Statement of Additional Information
Page 25 of 35
<PAGE>
TRANSFER AGENCY AND OTHER SERVICES
The Transfer Agency Agreement with the Trust provides for each fund to pay
United Shareholder Services, Inc. ("USSI") an annual fee of $23.00 per account
(1/12 of $23.00 monthly). In connection with obtaining and/or providing
administrative services to the beneficial owners of Trust shares through
broker-dealers, banks, trust companies and similar institutions which provide
such services and maintain an omnibus account with the Transfer Agent, each fund
shall pay to the Transfer Agent a monthly fee equal to one-twelfth (1/12) of
12.5 basis points (.00125) of the value of the shares of the funds held in
accounts at the institutions, which payment shall not exceed $1.92 multiplied by
the average daily number of accounts holding Trust shares at the institution.
These fees cover the usual transfer agency functions. In addition, the funds
bear certain other Transfer Agent expenses such as the costs of record retention
and postage, plus the telephone and line charges (including the toll-free 800
service) used by shareholders to contact the Transfer Agent. For the fiscal
period ended June 30, 1998, the funds paid the following amounts for transfer
agency fees and expenses:
Gold Shares Fund $1,015,249
World Gold Fund $647,285
Global Resources Fund $207,617
China Region Fund $181,088
All American Fund $83,096
Income Fund $ 39,911
Real Estate Fund $ 55,825
Tax Free Fund $ 30,953
Government Securities Savings Fund $786,760
Treasury Securities Cash Fund $373,440
The Near-Term Tax Free Fund paid $0 due to the Adviser's
expense limit guarantees.
Prior to November 1997, USSI performed bookkeeping and accounting services, and
determined the daily net asset value for each of the funds. Bookkeeping and
accounting services were provided to the funds at a sliding scale fee based upon
average net assets and subject to an annual minimum fee. Beginning November
1997, Brown Brothers Harriman & Co., an independent service provider, began
providing the funds with bookkeeping, accounting and custody services and deter-
mined the daily net asset value for each of the funds. For the fiscal period
ended June 30, 1998, the funds paid the following amounts for bookkeeping and
accounting services:
USSI BBH
------- --------
Gold Shares Fund $34,685 $51,883
World Gold Fund $63,407 $102,787
Global Resources Fund $28,563 $35,107
China Region Fund $28,951 $46,608
All American Fund $13,854 $31,847
Income Fund $13,854 $30,220
Real Estate Fund $13,854 $27,234
Tax Free Fund $13,854 $27,641
Near-Term Tax Free Fund $0 $24,741
Government Securities Savings Fund $83,632 $77,874
Treasury Securities Cash Fund $45,287 $38,017
In addition to the services performed for the funds and the Trust under the
Advisory Agreement, the Adviser, through its subsidiary USSI, provides transfer
agent and dividend disbursement agent services pursuant to the Transfer Agency
Agreement as described in the funds' prospectus under "Fund Details." 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 1998. For the three fiscal years ended June 30, 1996, 1997 and
1998, the Trust paid USSI total transfer agency fees and expenses of $2,617,240,
$3,789,333, and $3,421,224, respectively, for all funds.
All fees paid to the Adviser during the fiscal year ended June 30, 1998,
(including management, transfer agency and accounting fees but net of
reimbursements) totaled $8,123,953.
- --------------------------------------------------------------------------------
Statement of Additional Information U.S. Global Investors Funds
Page 26 of 35
<PAGE>
A & B Mailers, Inc., a wholly-owned corporation of the Adviser, 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. For the fiscal years ended June 30, 1996, 1997 and 1998, the
Trust paid A&B Mailers $90,053, $591,339, and $439,812, respectively, for all
funds.
Beginning September 3, 1998, U.S. Global Brokerage, Inc., a wholly owned
subsidiary of the adviser, began marketing the funds and distributing shares
through selling brokers, financial planners and other financial representatives.
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 Treasury Securities Cash Fund, the Tax Free Fund
and the Government Securities Savings Fund, may be purchased using securities,
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 Adviser, 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 a 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 a 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
Treasury Securities Cash Fund, the Tax Free Fund, and the 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
applicable fund are valued. See the"Valuation of Shares" section 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.
- --------------------------------------------------------------------------------
U.S. Global Investors Funds Statement of Additional Information
Page 27 of 35
<PAGE>
ADDITIONAL INFORMATION ON REDEMPTIONS
WIRE REDEMPTIONS -- TREASURY SECURITIES CASH FUND AND GOVERNMENT SECURITIES
SAVINGS FUND ONLY. When shares of the Treasury Securities Cash Fund and
Government Securities Savings 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 U.S. Global Investors 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 -- TREASURY SECURITIES CASH FUND AND 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.
If a check for the balance of the account is presented for payment, the
dividends will close out and generate a dividend check and close the account. 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
check writing 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 or the China Region 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 or China Region 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 or China Region Fund
receiving a redemption in kind would then have to pay brokerage fees in order to
convert the investment into cash. All redemptions in kind will be made in
marketable securities of the particular 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
Treasury Securities Cash Fund and 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 Adviser 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
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Statement of Additional Information U.S. Global Investors Funds
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<PAGE>
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 Treasury Securities Cash and Government Securities Savings Funds' 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
Treasury Securities Cash Fund and the 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 Treasury Securities Cash Fund and
the 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 Government Securities Savings Fund, by a government agency.
Investors comparing results of the Treasury Securities Cash Fund and 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 Treasury Securities Cash Fund
and the Government Securities Savings Fund at June 30, 1998 were 4.39% and
4.48%, and 5.23% and 5.36%, respectively, with an average weighted maturity of
investments on that date of 45 and 63 days, respectively.
TOTAL RETURN
The Gold Shares Fund, Global Resources Fund, World Gold Fund, Income Fund, Tax
Free Fund, the Real Estate Fund, and the Near-Term Tax Free 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, 1998, is as follows:
1 Year 5 Years 10 Years
------ ------- --------
Gold Shares Fund (58.8)% (29.4)% (17.8)%
World Gold Fund (37.4)% (6.2)% (2.7)%
Global Resources Fund (29.8)% 0.9% 1.1%
China Region Fund (52.1)% (17.4)% * n/a
All American Fund 27.3% 19.7% 13.0%
Income Fund 23.9% 11.4% 12.4%
Real Estate Fund 1.4% 8.0% 7.6%
Tax Free Fund 7.7% 5.8% 7.3%
Near-Term Tax Free Fund 6.0% 4.5% 5.9% **
------------------------
* (02/10/94 inception)
** (12/01/90 inception)
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U.S. Global Investors Funds Statement of Additional Information
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<PAGE>
YIELD
The Tax Free and Near-Term Tax Free Funds 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:
YIELD=2[({{A-B} OVER CD}+1) SUP 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, 1998, for each fund was as
follows:
Tax Free Fund 4.35%
Near-Term Tax Free Fund 3.81%
TAX EQUIVALENT YIELD
The Tax Free Fund's tax equivalent yield for the 30 days ended June 30, 1998,
was 7.20% 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, 1998, was 6.30% 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 39.6% (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
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<PAGE>
fund even though such option income is not considered investment income under
generally accepted accounting principal.
Because a distribution can include such premiums, capital gains and option
income, the amount of the distribution may be susceptible to control by the
Adviser 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 Adviser's fee
waivers or reimbursement of a portion of the fund's expenses, as the case may
be.
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 ("Code"). Accordingly, no fund will 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 ("90% test"); and (b) 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.
Mutual funds are potentially subject to a nondeductible 4% excise tax calculated
as a percentage of certain undistributed amounts of taxable ordinary income and
capital gains net of capital losses. The funds intend to make such distributions
as may be necessary to avoid this excise tax.
A possibility exists that exchange control regulations imposed by foreign
governments may restrict or limit the ability of a fund to distribute net
investment income or the proceeds from the sale of its investments to its
shareholders.
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 and the distribution requirements of the
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<PAGE>
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
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.
If a fund owns shares in a foreign corporation that is a "passive foreign
investment company" for U.S. Federal income tax purposes and that fund does not
elect to treat the foreign corporation as a "qualified electing fund" within the
meaning of the Code, that fund may be subject to U.S. Federal income tax on part
of any "excess distribution" it receives from the foreign corporation or any
gain it derives from the disposition of such shares, even if the fund
distributes such income as a taxable dividend to its U.S. shareholders. The fund
may also be subject to additional tax similar to an interest charge with respect
to deferred taxes arising from such distributions or gains. Any tax paid by the
fund because of its ownership of shares in a "passive foreign investment
company" will not lead to any deduction or credit to the fund or any
shareholder. If the fund owns shares in a "passive foreign investment company"
and the fund does elect to treat the foreign corporation as a "qualified
electing fund" under the Code, the fund may be required to include part of the
ordinary income and net capital gains in its income each year, even if this
income is not
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Statement of Additional Information U.S. Global Investors Funds
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<PAGE>
distributed to the fund. Any such income would be subject to the distribution
requirements described above even if the fund did not receive any income to
distribute.
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 Treasury
Securities Cash Fund, the Government Securities Savings 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 Treasury Securities Cash Fund and the
Government Securities Savings Fund, will result in a reduction in the fair
market value of fund 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 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 and Near-Term Tax Free Funds' dividends
distributed to shareholders are derived from interest income exempt from Federal
income tax and are designated as "exempt-interest dividends" by the funds, 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 funds 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 U.S. Global Investors 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 mid-term or long-term capital gain, as applicable,
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 mid-term or long-term capital loss to the extent of the mid-term or
long-term capital gain, as applicable, 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.
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U.S. Global Investors Funds Statement of Additional Information
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<PAGE>
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 Adviser's nor the Trust's counsel makes any review
of proceedings relating to the issuance of tax-exempt securities or the basis of
such opinions.
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time a fund accrues interest or other receivables, or
accrues expenses or other liabilities denominated in a foreign currency and the
time a fund actually collects such receivables or pays such liabilities are
treated as ordinary income or ordinary loss. Similarly, gains or losses from the
disposition of foreign currencies or from the disposition of debt securities
denominated in a foreign currency attributable to fluctuations in the value of
the foreign currency between the date of acquisition of the currency or security
and the date of disposition also are treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of a fund's net investment income (which
includes, among other things, dividends, interest and net short-term capital
gains in excess of net long-term capital losses, net of expenses) available to
be distributed to its shareholders as ordinary income, rather than increasing or
decreasing the amount of the fund's net capital gain. If section 988 losses
exceed such other net investment income during a taxable year, any distributions
made by the fund could be recharacterized as a return of capital to
shareholders, rather than as an ordinary dividend, reducing each shareholder's
basis in his fund shares. To the extent that such distributions exceed such
shareholder's basis, they will be treated as a gain from the sale of shares. As
discussed below, certain gains or losses with respect to forward foreign
currency contracts, over-the-counter options or foreign currencies and certain
options graded on foreign exchanges will also be treated as section 988 gains or
losses.
Forward currency contracts and certain options entered into by the fund may
create "straddles" for U.S. Federal income tax purposes and this may affect the
character of gains or losses realized by the fund on forward currency contracts
or on the underlying securities and cause losses to be deferred. The fund may
also be required to "mark-to-market" certain positions in its portfolio (i.e.,
treat them as if they were sold at year end). This could cause the fund to
recognize income without having the cash to meet the distribution requirements.
FOREIGN TAXES
Income received by a fund from sources within any countries outside the United
States in which the issuers of securities purchased by the fund are located may
be subject to withholding and other taxes imposed by such countries.
If a fund is liable for foreign income and withholding taxes that can be treated
as income taxes under U.S. Federal income tax principles, the fund expects to
meet the requirements of the Code for "passing-through" to its shareholders such
foreign taxes paid, but there can be no assurance that the fund will be able to
do so. Under the Code, if more than 50% of the value of the fund's total assets
at the close of its taxable year consists of stocks or securities of foreign
corporations, the fund will be eligible for, and intends to file, an election
with the Internal Revenue Service to "pass-through" to the fund's shareholders
the amount of such foreign income and withholding taxes paid by the fund.
Pursuant to this election a shareholder will be required to: (1) include in
gross income (in addition to taxable dividends actually received) his pro rata
share of such foreign taxes paid by the fund; (2) treat his pro rata share of
such foreign taxes as having been paid by him; and (3) either deduct his pro
rata share of such foreign taxes in computing his taxable income or use it as a
foreign tax credit against his U.S. Federal income taxes. No deduction for such
foreign taxes may be claimed by a shareholder who does not itemize deductions.
Each shareholder will be notified within 60 days after the close of the fund's
taxable year whether the foreign taxes paid by the fund will "pass-through" for
that year and, if so, such notification will designate (a) the shareholder's
portion of the foreign taxes paid to each such country; and (b) the portion of
dividends that represents income derived from sources within each such country.
The amount of foreign taxes for which a shareholder may claim a credit in any
year will be subject to an overall limitation which is applied separately to
"passive income," which includes, among other types of income, dividends and
interest.
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<PAGE>
The foregoing is only a general description of the foreign tax credit under
current law. Because applicability of the credit depends on the particular
circumstances of each shareholder, shareholders are advised to consult their own
tax advisers.
The foregoing discussion relates only to generally applicable Federal income tax
provisions in effect as of the date of the prospectus and Statement of
Additional Information. Shareholders should consult their tax advisers about the
status of distributions from the fund in their own states and localities.
CUSTODIAN, FUND ACCOUNTANT, AND ADMINISTRATOR
Brown Brothers Harriman & Co. serves as custodian, fund accountant and
administrator for all funds of the Trust described in this Statement of
Additional Information. With respect to the funds that own foreign securities
Brown Brothers Harriman & Co. may hold securities of the funds outside the
United States pursuant to sub-custody arrangements separately approved by the
Trust. Prior to November 1997 Bankers Trust provided custody services and USSI
provided fund accounting and administrative services. 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 Adviser.
DISTRIBUTOR
U.S. Global Brokerage, Inc., 7900 Callaghan Road, San Antonio, Texas 78229, is
the exclusive agent for distribution of shares of the funds. The distributor is
obligated to sell the shares of the funds on a best-efforts basis only against
purchase orders for the shares. Shares of the funds are offered on a continuous
basis.
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL
PricewaterhouseCoopers LLP, 160 Federal Street, Boston, MA 02110, serves as
independent accountants for the Trust.
Goodwin, Procter & Hoar LLP, Exchange Place, Boston, Massachusetts 02109, serves
as legal counsel to the Trust.
FINANCIAL STATEMENTS
The financial statements for year ended June 30, 1998, 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 that case, the Trust will promptly provide another copy, free of
charge, upon request to: U.S. Global Investors, Inc., P.O. Box 781234, San
Antonio, Texas 78278-1234, 1-800-873-8637 or (210) 308-1234.
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U.S. Global Investors Funds Statement of Additional Information
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<PAGE>
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PART C
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PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements included in Part B (Statement of Additional
Information) of this Registration Statement.
(1) The Financial Statements for the year ended June 30, 1998, of U.S.
Global Investors Funds, as examined by PricewaterhouseCoopers LLP, are
incorporated by reference from the Annual Report to Shareholders of
U.S. Global Investors Funds (Gold Shares Fund, World Gold Fund, Global
Resources Fund, China Region Opportunity Fund, All American Equity
Fund, Income Fund, Real Estate Fund, Tax Free Fund, Near-Term Tax Free
Fund, U.S. Government Securities Savings Fund and U.S. Treasury
Securities Cash Fund) of that date.
(b) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------------------------------------------------------
(1) (a) First Amended and Restated Master Trust Agreement, dated May 19, 1995,
incorporated by reference from Post- Effective Amendment No. 78 to
Registration Statement.
(b) Amendment No. 1, dated January 31, 1997, to the First Amended and
Restated Master Trust Agreement changing the name of the trust to U.S.
Global Investors Funds, incorporated by reference from Post-Effective
Amendment No. 80 filed September 2, 1997 (EDGAR Accession No.
0000101507-97-000095).
(c) Amendment No. 2, dated June 9, 1998, to the First Amended and Restated
Master Trust Agreement changing the names of selected funds
incorporated by reference from Post-Effective Amendment No. 82 filed
September 2, 1998 (EDGAR Accession No. 0000101507-98-000031).
(2) By-laws, incorporated by reference from Post-Effective Amendment No. 44 to
Registration Statement.
(3) Not applicable
(4) Not applicable
(5) (a) Advisory Agreement with U.S. Global Investors, Inc., dated October
1989 incorporated by reference from Post-Effective Amendment No. 62.
(6) (a) Form of Distribution Agreement between Registrant and U.S. Global
Brokerage, Inc. dated September 3, 1998, incorporated by reference
from Post-Effective Amendment No. 82 filed September 2, 1998 (EDGAR
Accession No. 0000101507-98-000031).
(b) Specimen Selling Group Agreement between principal underwriter and
dealers incorporated by reference from Post-Effective Amendment No. 82
filed September 2, 1998 (EDGAR Accession No. 0000101507-98-000031).
(7) Not applicable
(8) (a) Custodian Agreement with Bankers Trust Company, incorporated by
reference from Post- Effective Amendment No. 61.
(b) Global Custodian Agreement between United Services Funds and Bankers
Trust Company incorporated by reference from United Services Funds
Report on FORM SE, Exhibit 77 Q 3(b) for six month period ended June
30, 1992.
(c) Custodian Agreement Registrant and Brown Brothers Harriman & Co. dated
November 1, 1997, incorporated by reference from Post-Effective
Amendment No. 82 filed September 2, 1998 (EDGAR Accession No.
0000101507-98-000031).
(9) (a) Transfer Agency Agreement, as amended, with United Shareholder
Services, Inc. dated as of November 1, 1988, incorporated by reference
to Post Effective Amendment No. 79.
(b) Bookkeeping and Accounting Agreement, dated February 1, 1992, between
United Shareholder Services, Inc. and United Services Funds
incorporated by reference from United Services Funds Report on Form
N-SAR for six months ended December 31, 1991.
(c) Lockbox Agreement between United Services Funds and United Shareholder
Services, Inc. incorporated by reference from Post-Effective Amendment
No. 71.
(d) Printing Agreement between United Services Funds and United
Shareholder Services, Inc. incorporated by reference from
Post-Effective Amendment No. 71.
(10) (a) Opinion of Goodwin, Procter & Hoar incorporated by reference from
Post-Effective-Amendment No. 59.
(b) Opinion of Goodwin Procter & Hoar incorporated by reference from
Post-Effective amendment No. 74.
(11) (a)* Consent of independent accountants, PricewaterhouseCoopers LLP, dated
October 21, 1998.
(b)* Consent of Goodwin Procter & Hoar LLP, dated November 2, 1998.
(12) Not applicable
(13) Not applicable
(14) (a) Individual Retirement Accounts, Disclosure Statement & Custodian
Agreement incorporated by reference to Post-Effective Amendment No.
67.
(b) Prototype Defined Contribution and Trust/Custodial Account Sponsored
by Securities Trust and Financial Company (Basic Plan Document #01)
incorporated by reference from Post-Effective Amendment No. 67.
(c) Prototype Cash or Deferred Profit-Sharing Plan and Trust/Custodial
Account Sponsored by Securities Trust and Financial Company (Basic
Plan Document #04) incorporated by reference from Post-Effective
Amendment No. 67. (15) Not applicable
(16) Schedule for computation of each performance quotation provided in the
Registration Statement in response to Item 22, incorporated by reference
from Post-Effective Amendment No. 57.
(17) Powers of Attorney, incorporated by reference from Post-Effective Amendment
No. 78.
* Filed Herein
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Information pertaining to persons controlled by or under common control
with Registrant is incorporated by reference to the Statement of Additional
Information contained in Part B of this Registration Statement at the
section entitled "Principal Holders of Securities."
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The number of record holders, as of August 28, 1998, of each class of
securities of the Registrant.
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
--------------------------------------- --------------
Gold Shares Fund 32,687
Global Resources Fund 6,194
All American Equity Fund 4,483
U.S. Treasury Securities Cash Fund 10,989
Tax Free Fund 918
Income Fund 1,197
World Gold Fund 18,679
U.S. Government Securities Savings Fund 24,740
Real Estate Fund 1,403
Near-Term Tax Free Fund 287
China Region Opportunity Fund 4,943
ITEM 27. INDEMNIFICATION
Under Article VI of the Registrant's Master Trust Agreement, each of its
Trustees and officers or person serving in such capacity with another
entity at the request of the Registrant (a "Covered Person") shall be
indemnified (from the assets of the Sub-Trust or Sub-Trusts in question)
against all liabilities, including, but not limited to, amounts paid in
satisfaction of judgments, in compromises or as fines or penalties, and
expenses, including reasonable legal and accounting fees, incurred by the
Covered Person in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal before any court or
administrative or legislative body, in which such Covered Person may be or
may have been involved as a party or otherwise or with which such person
may be or may have been threatened, while in office or thereafter, by
reason of being or having been such a Trustee or officer, director or
trustee, except with respect to any matter as to which it has been
determined that such Covered Person (i) did not act in good faith in the
reasonable belief that such Covered Person's action was in or not opposed
to the best interests of the Trust or (ii) had acted with wilful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office (either and
both of the conduct described in (i) and (ii) being referred to hereafter
as "Disabling Conduct"). A determination that the Covered Person is not
entitled to indemnification may be made by (i) a final decision on the
merits by a court or other body before whom the proceeding was brought that
the person to be indemnified was not liable by reason of Disabling Conduct,
(ii) dismissal of a court action or an administrative proceeding against a
Covered Person for insufficiency of evidence of Disabling Conduct, or (iii)
a reasonable determination, based upon a review of the facts, that the
indemnitee was not liable by reason of Disabling Conduct by (a) a vote of
the majority of a quorum of Trustees who are neither "interested persons"
of the Trust as defined in Section 1(a)(19) of the 1940 Act nor parties to
the proceeding, or (b) as independent legal counsel in a written opinion.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
Information pertaining to business and other connections of Registrant's
investment adviser is incorporated by reference to the Prospectus and
Statement of Additional Information contained in Parts A and B of this
Registration Statement at the sections entitled "Management of the Funds"
in the Prospectus and "Investment Advisory Services" in the Statement of
Additional Information.
ITEM 29. PRINCIPAL UNDERWRITERS
U.S. Global Brokerage, Inc. ("USGBI") is the Registrant's principal
underwriter. USGBI also acts as principal underwriter for the U.S. Global
Accolade Funds. U.S. Global Investors, Inc., 7900 Callaghan Road, San
Antonio, Texas 78229 owns 100% of the firm. Mr. Frank E. Holmes is
President and Chief Executive Officer of the Registrant.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records maintained by the Registrant are kept at the
Registrant's office located at 7900 Callaghan Road, San Antonio, Texas. All
accounts and records maintained by Brown Brothers Harriman & Co. as
custodian are maintained in Boston, Massachusetts.
ITEM 31. NOT APPLICABLE
ITEM 32. NOT APPLICABLE
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------------------------------------------------------
(11) (a) Consent of independent public accountants, PricewaterhouseCoopers LLP,
dated October 21, 1998
(11) (b) Consent of Goodwin, Procter & Hoar LLP, dated November 2, 1998.
- --------------------------------------------------------------------------------
SIGNATURE PAGE
- --------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(a) under the Securities Act of 1933 and that it has duly caused this
Amendment to the Registration Statement on Form N-1A to be signed on its behalf
by the undersigned, thereunto duly authorized in the city of San Antonio, State
of Texas, on the .
U.S. GLOBAL INVESTORS FUNDS
By: /s/ SUSAN B. MC GEE
-----------------------------------
Susan B. McGee
Date: November 2, 1998 Executive Vice President, Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- --------------------------- ------------------------- ---------------
*/s/ John P. Allen Trustee November 2, 1998
- ----------------------------
John P. Allen
*/s/ Edward D. Hodo Trustee November 2, 1998
- ----------------------------
Edward D. Hodo
*/s/ Frank E. Holmes Trustee, President, November 2, 1998
- ---------------------------- Chief Executive Officer
Frank E. Holmes
/s/ Clark R. Mandigo
- ---------------------------- Trustee November 2, 1998
Clark R. Mandigo
*/s/ Charles Z. Mann Trustee November 2, 1998
- ----------------------------
Charles Z. Mann
/s/ W. W. McAllister, III
- ---------------------------- Trustee November 2, 1998
Walter W. McAllister, III
*/s/ W.C.J. van Rensburg Trustee November 2, 1998
- ----------------------------
W.C.J. van Rensburg
/s/ Susan B. McGee
- ---------------------------- Executive Vice President November 2, 1998
Susan B. McGee Secretary
General Counsel
*BY: /s/ Susan McGee
----------------------------
Susan B. McGee
Executive Vice President
Secretary
General Counsel
Power of Attorney
GOODWIN, PROCTER & HOAR LLP
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
TELEPHONE (617) 570-1000
TELECOPIER (617) 523-1231
November 2, 1998
U.S. Global Investors Funds
7900 Callaghan Road
San Antonio, Texas 78229
Ladies and Gentlemen:
We hereby consent to the incorporation by reference in Post-Effective
Amendment No. 83 (the "Amendment") to Registration Statement 2-35439 on Form
N-1A (the "Registration Statement") of U.S. Global Investors Funds (the "Trust")
of our opinion with respect to the legality of the shares of the Trust
representing interests in (i) the Gold Shares Fund, Global Resources Fund, World
Gold Fund, All American Equity Fund, Income Fund, Tax Free Fund, U.S. Treasury
Securities Cash Fund, U.S. Government Securities Savings Fund, Real Estate Fund
and Near-Term Tax Free Fund (formerly, U.S. California Double Tax Free Fund),
which opinion was filed with Post-Effective Amendment No. 59 to the Registration
Statement, and (ii) the China Region Opportunity Fund, which opinion was filed
with Post-Effective Amendment No. 74 to the Registration Statement. We also
hereby consent to the reference to this firm in the Prospectus under the heading
"Legal Counsel" and in the Statement of Additional Information under the heading
"Independent Accountants and Legal Counsel" which is included in Part A and Part
B of the Amendment.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
GOODWIN, PROCTER & HOAR LLP
DOCSC\683848.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 83 to the Registration Statement on Form N-1A (the "registration
statement") of our report dated August 21, 1997, relating to the financial
statements and financial highlights appearing in the June 30, 1998 Annual Report
to Shareholders of U.S. Global Investors Funds, which financial statements and
financial highlights are also incorporated by reference into the Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights" and "Independent Accountants" in the Prospectus and under the
headings "Independent Accountants" and "Financial Statements" in the Statement
of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Antonio, Texas
October 30, 1997
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE ANNUAL REPORT FILED ON FORM N-SAR AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCES TO SUCH ANNUAL REPORT ON FORM N-SAR.
</LEGEND>
<SERIES>
<NUMBER> 7
<NAME> TAX FREE FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 20338470
<INVESTMENTS-AT-VALUE> 21093207
<RECEIVABLES> 341492
<ASSETS-OTHER> 6156
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 21440855
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 41212
<TOTAL-LIABILITIES> 41212
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20707842
<SHARES-COMMON-STOCK> 1753631
<SHARES-COMMON-PRIOR> 1541633
<ACCUMULATED-NII-CURRENT> 4095
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (67031)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 754737
<NET-ASSETS> 21399643
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1104891
<OTHER-INCOME> 0
<EXPENSES-NET> 140709
<NET-INVESTMENT-INCOME> 946182
<REALIZED-GAINS-CURRENT> 117574
<APPREC-INCREASE-CURRENT> 407090
<NET-CHANGE-FROM-OPS> 1488846
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (997172)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9840352
<NUMBER-OF-SHARES-REDEEMED> (8044567)
<SHARES-REINVESTED> 784777
<NET-CHANGE-IN-ASSETS> 3072236
<ACCUMULATED-NII-PRIOR> 37085
<ACCUMULATED-GAINS-PRIOR> (184605)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 151408
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 293685
<AVERAGE-NET-ASSETS> 20226740
<PER-SHARE-NAV-BEGIN> 11.89
<PER-SHARE-NII> .57
<PER-SHARE-GAIN-APPREC> .33
<PER-SHARE-DIVIDEND> (.59)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.20
<EXPENSE-RATIO> .70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT FILED ON FORM N-SAR AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
ANNUAL REPORT FILED ON FORM N-SAR.
</LEGEND>
<SERIES>
<NUMBER> 9
<NAME> WORLD GOLD FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 141910465
<INVESTMENTS-AT-VALUE> 118554584
<RECEIVABLES> 31415846
<ASSETS-OTHER> 73926
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 150044356
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 285042
<TOTAL-LIABILITIES> 285042
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 223942885
<SHARES-COMMON-STOCK> 15184144
<SHARES-COMMON-PRIOR> 11750258
<ACCUMULATED-NII-CURRENT> (168331)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (50658507)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (23356733)
<NET-ASSETS> 149759314
<DIVIDEND-INCOME> 1167577
<INTEREST-INCOME> 427577
<OTHER-INCOME> 0
<EXPENSES-NET> 2721406
<NET-INVESTMENT-INCOME> (1126252)
<REALIZED-GAINS-CURRENT> (5618417)
<APPREC-INCREASE-CURRENT> (60561663)
<NET-CHANGE-FROM-OPS> (67306332)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1637556)
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<NUMBER-OF-SHARES-SOLD> 736945226
<NUMBER-OF-SHARES-REDEEMED> (707189284)
<SHARES-REINVESTED> 1481375
<NET-CHANGE-IN-ASSETS> (56154453)
<ACCUMULATED-NII-PRIOR> 500641
<ACCUMULATED-GAINS-PRIOR> (45137574)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1521454
<INTEREST-EXPENSE> 3523
<GROSS-EXPENSE> 2728415
<AVERAGE-NET-ASSETS> 156779393
<PER-SHARE-NAV-BEGIN> 15.95
<PER-SHARE-NII> (.05)
<PER-SHARE-GAIN-APPREC> (5.90)
<PER-SHARE-DIVIDEND> (.14)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.86
<EXPENSE-RATIO> 1.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE ANNUAL REPORT FILED ON FORM N-SAR AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCES TO SUCH ANNUAL REPORT ON FORM N-SAR.
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> U.S. GOVERNMENT SECURITIES SAVINGS FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 756012969
<INVESTMENTS-AT-VALUE> 756012969
<RECEIVABLES> 10669092
<ASSETS-OTHER> 73903
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 766755964
<PAYABLE-FOR-SECURITIES> 4999219
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 239167
<TOTAL-LIABILITIES> 5238386
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 761637061
<SHARES-COMMON-STOCK> 761615664
<SHARES-COMMON-PRIOR> 691820860
<ACCUMULATED-NII-CURRENT> 1650857
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1770340)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 761517578
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 40541839
<OTHER-INCOME> 0
<EXPENSES-NET> 2270378
<NET-INVESTMENT-INCOME> 38271461
<REALIZED-GAINS-CURRENT> 2317
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 38273778
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (38322248)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 714492554
<NUMBER-OF-SHARES-REDEEMED> (682460358)
<SHARES-REINVESTED> 37764547
<NET-CHANGE-IN-ASSETS> 69748273
<ACCUMULATED-NII-PRIOR> 1667229
<ACCUMULATED-GAINS-PRIOR> (1772657)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3021408
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4895266
<AVERAGE-NET-ASSETS> 728590856
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> .00
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE ANNUAL REPORT FILED ON FORM N-SAR AND IS QUALIFIED IN ITS ENTIRETY.
</LEGEND>
<SERIES>
<NUMBER> 11
<NAME> REAL ESTATE FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 11155310
<INVESTMENTS-AT-VALUE> 10955807
<RECEIVABLES> 49837
<ASSETS-OTHER> 550019
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11555663
<PAYABLE-FOR-SECURITIES> 155626
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31742
<TOTAL-LIABILITIES> 187368
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9503826
<SHARES-COMMON-STOCK> 831027
<SHARES-COMMON-PRIOR> 977184
<ACCUMULATED-NII-CURRENT> (10555)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2074643
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (199619)
<NET-ASSETS> 11368295
<DIVIDEND-INCOME> 540113
<INTEREST-INCOME> 40269
<OTHER-INCOME> 0
<EXPENSES-NET> 284209
<NET-INVESTMENT-INCOME> 296173
<REALIZED-GAINS-CURRENT> 2410511
<APPREC-INCREASE-CURRENT> (2358454)
<NET-CHANGE-FROM-OPS> 348230
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (407325)
<DISTRIBUTIONS-OF-GAINS> (368775)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10993948
<NUMBER-OF-SHARES-REDEEMED> (13833733)
<SHARES-REINVESTED> 739094
<NET-CHANGE-IN-ASSETS> (2528561)
<ACCUMULATED-NII-PRIOR> 105364
<ACCUMULATED-GAINS-PRIOR> 25965
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 108227
<INTEREST-EXPENSE> 3493
<GROSS-EXPENSE> 289912
<AVERAGE-NET-ASSETS> 14457369
<PER-SHARE-NAV-BEGIN> 14.22
<PER-SHARE-NII> .27
<PER-SHARE-GAIN-APPREC> .03
<PER-SHARE-DIVIDEND> (.39)
<PER-SHARE-DISTRIBUTIONS> (.45)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.68
<EXPENSE-RATIO> 1.97
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE ANNUAL REPORT FILED ON FORM N-SAR AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ANNUAL REPORT ON FORM N-SAR.
</LEGEND>
<SERIES>
<NUMBER> 12
<NAME> NEAR-TERM TAX FREE FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 7793768
<INVESTMENTS-AT-VALUE> 7924377
<RECEIVABLES> 149159
<ASSETS-OTHER> 5939
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8079475
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 18016
<TOTAL-LIABILITIES> 18016
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8135353
<SHARES-COMMON-STOCK> 757416
<SHARES-COMMON-PRIOR> 701606
<ACCUMULATED-NII-CURRENT> 5774
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (210277)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 130609
<NET-ASSETS> 8061459
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 374262
<OTHER-INCOME> 0
<EXPENSES-NET> 54107
<NET-INVESTMENT-INCOME> 320155
<REALIZED-GAINS-CURRENT> 19843
<APPREC-INCREASE-CURRENT> 111972
<NET-CHANGE-FROM-OPS> 451970
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (347902)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3145125
<NUMBER-OF-SHARES-REDEEMED> (2831915)
<SHARES-REINVESTED> 284226
<NET-CHANGE-IN-ASSETS> 701504
<ACCUMULATED-NII-PRIOR> 33511
<ACCUMULATED-GAINS-PRIOR> (230120)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 38905
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 142227
<AVERAGE-NET-ASSETS> 7766916
<PER-SHARE-NAV-BEGIN> 10.49
<PER-SHARE-NII> .43
<PER-SHARE-GAIN-APPREC> .19
<PER-SHARE-DIVIDEND> (.47)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.64
<EXPENSE-RATIO> .70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE ANNUAL REPORT FILED ON FORM N-SAR AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ANNUAL REPORT ON FORM N-SAR.
</LEGEND>
<SERIES>
<NUMBER> 16
<NAME> CHINA REGION OPPORTUNITY FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 31688326
<INVESTMENTS-AT-VALUE> 17742409
<RECEIVABLES> 1751375
<ASSETS-OTHER> 206158
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19699942
<PAYABLE-FOR-SECURITIES> 188635
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51462
<TOTAL-LIABILITIES> 240097
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38328159
<SHARES-COMMON-STOCK> 4753747
<SHARES-COMMON-PRIOR> 4897397
<ACCUMULATED-NII-CURRENT> 119508
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5041984)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (13945838)
<NET-ASSETS> 19459845
<DIVIDEND-INCOME> 799214
<INTEREST-INCOME> 144912
<OTHER-INCOME> 0
<EXPENSES-NET> 821525
<NET-INVESTMENT-INCOME> 122601
<REALIZED-GAINS-CURRENT> (357192)
<APPREC-INCREASE-CURRENT> (19946443)
<NET-CHANGE-FROM-OPS> (20181034)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (207619)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36303613
<NUMBER-OF-SHARES-REDEEMED> (38753107)
<SHARES-REINVESTED> 198979
<NET-CHANGE-IN-ASSETS> (22639168)
<ACCUMULATED-NII-PRIOR> 204822
<ACCUMULATED-GAINS-PRIOR> (4685088)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 385682
<INTEREST-EXPENSE> 240
<GROSS-EXPENSE> 822326
<AVERAGE-NET-ASSETS> 31597315
<PER-SHARE-NAV-BEGIN> 8.60
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> (4.49)
<PER-SHARE-DIVIDEND> (.05)
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<PER-SHARE-NAV-END> 4.09
<EXPENSE-RATIO> 2.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
