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. 84 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. [ ]
(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 78229
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(Address and Zip Code of Principal Executive Office) (Zip Code)
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)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[X] on November 1, 1999, 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
<PAGE>
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PART A: INFORMATION REQUIRED IN A PROSPECTUS
- --------------------------------------------------------------------------------
U.S. GLOBAL INVESTORS FUNDS
___________________ ___________________________________________
GOLD AND NATURAL | Gold Shares Fund
RESOURCES FUNDS | World Gold Fund
| Global Resources Fund
___________________ ___________________________________________
EQUITY FUNDS | China Region Opportunity Fund
| All American Equity Fund
| Equity Income Fund
| Real Estate Fund
___________________ ___________________________________________
TAX-FREE FUNDS | Tax-Free Fund
| Near-Term Tax Free Fund
___________________ ___________________________________________
GOVERNMENT MONEY | U.S. Government Securities Savings Fund
MARKET FUNDS | U.S. Treasury Securities Cash Fund
___________________ ___________________________________________
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PROSPECTUS
NOVEMBER 1, 1999
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.
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TABLE OF CONTENTS
EQUITY FUNDS
RISK/RETURN SUMMARY..........................................................x
VOLATILITY AND PERFORMANCE INFORMATION.......................................x
GOLD AND NATURAL RESOURCES FUND
RISK/RETURN SUMMARY..........................................................x
VOLATILITY AND PERFORMANCE INFORMATION.......................................x
TAX FREE FUNDS
RISK/RETURN SUMMARY..........................................................x
VOLATILITY AND PERFORMANCE INFORMATION.......................................x
GOVERNMENT MONEY MARKET FUNDS
RISK/RETURN SUMMARY..........................................................x
VOLATILITY AND PERFORMANCE INFORMATION.......................................x
FEES AND EXPENSES............................................................x
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISK
EQUITY FUNDS ................................................................x
GOLD AND NATURAL RESOURCES FUNDS ............................................x
TAX FREE FUNDS ..............................................................x
GOVERNMENT MONEY MARKET FUNDS ...............................................x
YEAR 2000 READINESS .........................................................x
FUND MANAGEMENT..............................................................x
COMMON INVESTMENT PRACTICES AND RELATED RISKS ...............................x
HOW TO BUY SHARES............................................................x
HOW TO SELL (REDEEM) SHARES..................................................x
EXCHANGING SHARES ...........................................................x
IMPORTANT INFORMATION ABOUT PURCHASES, REDEMPTIONS AND EXCHANGES.............x
OTHER INFORMATION ABOUT YOUR ACCOUNT.........................................x
ADDITIONAL INVESTOR SERVICES ................................................x
DISTRIBUTIONS AND TAXES......................................................x
FINANCIAL HIGHLIGHTS.........................................................x
FUNDS IN THE U.S. GLOBAL INVESTORS FAMILY OF FUNDS...........................x
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RISK/RETURN SUMMARY
EQUITY FUNDS
China Region Opportunity Fund
All American Equity Fund
Real Estate Fund
Equity Income Fund
FUNDAMENTAL INVESTMENT OBJECTIVES
The China Region Opportunity ("China Region"), All American Equity ("All
American") and Real Estate Funds seek long-term capital appreciation. Current
income is a secondary consideration for the Real Estate Fund.
The trustees for the China Region and All American Funds may change each fund's
objective without shareholder vote, and each fund will notify you of any
changes. If there is a material change to a fund's objective or policies, you
should consider whether the fund remains an appropriate investment for you.
The Equity Income Fund seeks preservation of capital and, consistent with that
objective, production of current income. Long- term capital appreciation is a
secondary consideration.
MAIN INVESTMENT STRATEGIES
The China Region Fund normally invests at least 65% of its total assets in
equity securities issued by China region companies. The China region consists of
the People's Republic of China (PRC or China), Hong Kong, Taiwan, Korea,
Singapore, Thailand
and Malaysia.
The All American Fund normally invests at least 75% of its total assets in a
broadly diversified portfolio of domestic common stocks. The fund invests
primarily in large-capitalization stocks while retaining the flexibility to seek
out promising small and mid-cap stock opportunities.
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.
While the fund invests primarily in securities issued by real estate investment
trusts (REITs), it may also invest in securities issued by other companies in
the real estate industry such as homebuilders and
developers.
The Equity Income Fund normally invests at least 80% of its total net assets in
income-producing equity and debt securities. Under normal conditions, at least
65% of the fund's assets are invested in equity securities. With an emphasis on
both income generation and capital appreciation through value-oriented
investing, the fund focuses on securities of companies that have strong earnings
and dividend growth and that demonstrate attractive value.
The portfolio team for each fund applies a "top-down" and "bottom-up" approach
in selecting investments.
For more information on the funds' investment strategies, please see page xx.
MAIN RISKS
The funds are designed for long-term investors who are willing to accept the
risks of investing in a portfolio with significant stock holdings. The China
Region Fund is designed for long-term investors who can accept the special risks
of investing in the China region, which typically are not associated with
investing in other more established economies or securities
markets.
o MARKET RISK The value of a fund's shares will go up and down based on the
performance of the companies whose securities it owns and other factors
affecting the securities market generally.
o FOREIGN SECURITIES RISK The China Region Fund has significant exposure to
foreign markets. As a result, the fund's performance may be affected to a
large degree by fluctuations in currency exchange rates or political or
economic conditions in a particular country in the China Region.
o REAL ESTATE RISK Because the Real Estate Fund invests in REITs and equity
securities of real estate companies, the fund
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is more susceptible to risks associated with the direct ownership of real
estate, including real estate valuation, fluctuations in interest rates and
occupancy rates, and risks related to general and local economic
conditions.
o INCOME RISK The Equity Income Fund is subject to income risk, which is the
risk that the fund's dividends (income) will decline due to falling
interest rates or declining dividends by companies in which the fund
invests.
The funds are not intended to be a complete investment program, and there is no
assurance that their investment objective can be achieved.
Additional risks of the funds are described on page xx of the prospectus. As
with all mutual funds, loss of money is a risk of investing in any of the funds.
An investment in these funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
VOLATILITY AND PERFORMANCE INFORMATION
The following bar charts and tables show the volatility of each fund's returns,
which is one indicator of the risks of investing in the fund. The bar charts
show changes in each fund's returns from year to year during the period
indicated. The tables compare each fund's average annual returns for the last
1-, 5 and 10 year periods (or life of the fund, if shorter), to those of a
broad-based securities market index. How each fund performed in the past is not
an indication of how it will perform in the future.
CHINA REGION FUND
Annual Total Returns*
[Add Chart showing the annual total returns for the calendar years of the Fund)
* As of September 30, 1999, the fund's year-to-date return was x.xx%.
Best quarter shown in the bar chart above: x.xx% in xx quarter 199x
Worst quarter shown in bar chart above: x.xx% in xx quarter 199x
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED 1 5 SINCE INCEPTION
DECEMBER 31, 1998) YEAR YEARS (2/10/94)
---------------------------- ----- ----- ---------------
CHINA REGION FUND X.XX% X.XX% X.XX%
Index* x.xx% x.xx% x.xx%
Second Index** x.xx% x.xx% x.xx%
* Index footnote
** Second Index if needed
ALL AMERICAN FUND
Annual Total Returns*
(Add Chart showing the annual total returns for the calendar years of the Fund)
* As of September 30, 1999, the fund's year-to-date return was x.xx%.
** The Adviser has agreed to limit the fund's total operating expenses. In the
absence of this limitation, the fund's total returns would have been lower.
Best quarter shown in the bar chart above: x.xx% in xx quarter 199x
Worst quarter shown in bar chart above: x.xx% in xx quarter 199x
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AVERAGE ANNUAL TOTAL
RETURNS
(FOR THE PERIODS ENDED 1 5
DECEMBER 31, 1998) YEAR YEARS 10 YEARS
---------------------------- ----- ----- --------
ALL AMERICAN FUND* X.XX% X.XX% X.XX%
Index** x.xx% x.xx% x.xx%
Second Index*** x.xx% x.xx% x.xx%
* The Adviser has agreed to limit the fund's total operating expenses.
In the absence of this limitation, the fund's total returns would have
been lower.
** Index footnote
*** Second Index added if needed.
REAL ESTATE FUND
Annual Total Returns*
[Add Chart showing the annual total returns for the calendar years of the Fund)
*As of September 30, 1999, the fund's year-to-date return was x.xx%.
Best quarter shown in the bar chart above: x.xx% in xx quarter 199x
Worst quarter shown in bar chart above: x.xx% in xx quarter 199x
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED 1 5
DECEMBER 31, 1998) YEAR YEARS 10 YEARS
---------------------------- ----- ----- --------
REAL ESTATE FUND x.xx% x.xx% x.xx%
Index* x.xx% x.xx% x.xx%
Second Index** x.xx% x.xx% x.xx%
* Index footnote
** Second Index if needed
EQUITY INCOME FUND
Annual Total Returns*
[Add Chart showing the annual total returns for the calendar years of the Fund)
*As of September 30, 1999, the fund's year-to-date return was x.xx%.
Best quarter shown in the bar chart above: x.xx% in xx quarter 199x
Worst quarter shown in bar chart above: x.xx% in xx quarter 199x
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED 1 5
DECEMBER 31, 1998) YEAR YEARS 10 YEARS
---------------------------- ----- ----- --------
EQUITY INCOME FUND x.xx% x.xx% x.xx%
Index* x.xx% x.xx% x.xx%
Second Index** x.xx% x.xx% x.xx%
* Index footnote
** Second Index if needed
GOLD AND NATURAL RESOURCES FUNDS
Gold Shares Fund
World Gold Fund
Global Resources Fund
FUNDAMENTAL INVESTMENT OBJECTIVES
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.
MAIN INVESTMENT STRATEGIES
Under normal conditions the Gold Shares Fund will invest at least 65% of its
total assets in equity securities of companies involved in the mining and,
processing of, or dealing in, gold. The fund focuses on selecting senior
producing mines, most of
which are in North America, South Africa and Australia.
Under normal conditions the World Gold Fund will invest at least 65% of its
total assets in the securities of companies involved in the exploration for,
mining and processing of, or dealing in, gold. The fund focuses on selecting
junior and intermediate exploration and development gold companies from around
the world.
As a strategy to minimize excessive portfolio turnover, the Gold Shares Fund and
the World Gold Fund may purchase long-term equity anticipation securities
("LEAPS") which are long-term equity options.
The Global Resources Fund normally invests at least 65% of its assets in the
equity securities of companies within the natural resources industry. Consistent
with its investment objective, the Global Resources Fund may invest without
limitation in the various sectors of the natural resources industry, such as
oil, gas and basic materials.
All three funds may invest, without limitation, in issuers in any part of the
world.
The funds' portfolio team applies a "top-down" and "bottom-up" approach in
selecting investments.
For more information on the funds' investment strategies, please see page xx.
MAIN RISKS
The funds are designed for long-term investors who are willing to accept the
risks of investing in a portfolio with significant stock holdings.
o MARKET RISK The value of a fund's shares will go up and down based on the
performance of the companies whose securities it owns and other factors
affecting the securities market generally.
o FOREIGN SECURITIES RISK The funds may have significant exposure to foreign
markets. As a result, the funds' performance may be affected to a large
degree by fluctuations in currency exchange rates or political or economic
conditions in a particular country or region.
o INDUSTRY/CONCENTRATION RISK Because the funds concentrate their investments
in specific industries, the funds may be subject to greater risks and
market fluctuations than a portfolio representing a broader range of
industries.
o DIVERSIFICATION RISK The funds are non-diversified and may invest a
significant proportion of their total assets in a small number of
companies. This may cause the performance of a fund to be dependent upon
the performance of one or more selected companies, which may increase the
volatility of the fund.
o PRICE VOLATILITY RISK The value of a fund's shares may fluctuate
significantly in the short term.
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o OPTIONS RISK Investing in LEAPS and other options may increase transaction
expenses and the volatility of a fund. An option may expire without value,
resulting in a loss of a fund's initial investment and may be less liquid
and more volatile than an investment in the underlying securities.
o CASH MANAGEMENT RISK The inflow and outflow of money in the gold funds may
result in higher portfolio turnover and related transaction costs.
The funds are not intended to be a complete investment program, and there is no
assurance that its investment objective can be achieved.
As with all mutual funds, loss of money is a risk of investing in any of the
funds. Additional risks of the funds are described on page xx of the prospectus.
An investment in these funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
VOLATILITY AND PERFORMANCE INFORMATION
The following bar charts and tables show the volatility of each fund's returns,
which is one indicator of the risks of investing in the fund. The bar charts
show changes in each fund's returns from year to year during the period
indicated. The tables compare each fund's average annual returns for the last
1-, 5 and 10 year periods (or life of the fund, if shorter), to those of a
broad-based securities market index. How each fund performed in the past is not
an indication of how it will perform in the future.
GOLD SHARES FUND
Annual Total Returns*
[Add Chart showing the annual total returns for the calendar years of the Fund)
*As of September 30, 1999, the fund's year-to-date return was x.xx%.
Best quarter shown in the bar chart above: x.xx% in xx quarter 199x
Worst quarter shown in bar chart above: x.xx% in xx quarter 199x
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED 1 5
DECEMBER 31, 1998) YEAR YEARS 10 YEARS
---------------------------- ----- ----- --------
GOLD SHARES FUND x.xx% x.xx% x.xx%
Index* x.xx% x.xx% x.xx%
Second Index** x.xx% x.xx% x.xx%
* Index footnote
** Second Index if needed
WORLD GOLD FUND
Annual Total Returns*
(Add Chart showing the annual total returns for the calendar years of the Fund)
*As of September 30, 1999, the fund's year-to-date return was x.xx%.
Best quarter shown in the bar chart above: x.xx% in xx quarter 199x
Worst quarter shown in bar chart above: x.xx% in xx quarter 199x
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<PAGE>
AVERAGE ANNUAL TOTAL
RETURNS
(FOR THE PERIODS ENDED 1 5
DECEMBER 31, 1998) YEAR YEARS 10 YEARS
---------------------------- ----- ----- --------
WORLD GOLD FUND X.XX% X.XX% X.XX%
Index* x.xx% x.xx% x.xx%
Second Index** x.xx% x.xx% x.xx%
* Index footnote
** Second Index added if needed.
GLOBAL RESOURCES FUND
Annual Total Returns*
[Add Chart showing the annual total returns for the calendar years of the Fund)
*As of September 30, 1999, the fund's year-to-date return was x.xx%.
Best quarter shown in the bar chart above: x.xx% in xx quarter 199x
Worst quarter shown in bar chart above: x.xx% in xx quarter 199x
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED 1 5
DECEMBER 31, 1998) YEAR YEARS 10 YEARS
---------------------------- ----- ----- --------
GLOBAL RESOURCES FUND X.XX% X.XX% X.XX%
Index* x.xx% x.xx% x.xx%
Second Index** x.xx% x.xx% x.xx%
* Index footnote
** Second Index if needed
TAX-FREE FUNDS
Tax Free Fund
Near-Term Tax Free Fund
FUNDAMENTAL INVESTMENT OBJECTIVE
The two tax-free funds seek to provide a high level of current income that is
exempt from federal income taxation and to preserve capital.
MAIN INVESTMENT STRATEGIES
Under normal market conditions, each of the tax-free funds invests at least 80%
of its total assets in investment grade municipal securities whose interest is
free from federal income tax.
The tax-free funds differ in the maturity of the debt securities they purchase.
While the Tax Free Fund may invest in debt securities of any maturity, the
Near-Term Tax Free Fund will maintain an average weighted portfolio maturity of
five years or less.
The funds' portfolio managers apply a two-step approach in choosing investments.
They begin by analyzing various macroeconomic factors in an attempt to forecast
interest rate movements, and then they position each fund's portfolio by
selecting investments that they believe will, in the whole, best fit that
forecast.
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<PAGE>
For more information on the funds' investment strategies, please see page xx.
MAIN RISKS
The funds are designed for investors who primarily seek current income that is
free from federal taxes.
o INTEREST RATE RISK Because the funds invest primarily in municipal
securities, there is a risk that the value of these securities will fall if
interest rates rise. Ordinarily, when interest rates go up, municipal
security prices fall. The opposite is also true: municipal security prices
usually go up when interest rates fall. The longer a fund's average
weighted maturity, the more sensitive it is to changes in interest rates.
Since the Tax Free Fund normally has a longer average weighted maturity
than the Near-Term Tax Free Fund, it is subject to greater interest rate
risks.
o CREDIT RISK There is a possibility that an issuer of a municipal security
cannot make timely interest and principal payments on its debt securities.
With municipal securities, the sources of funds for the payment of
principal and interest may be limited by state or local law.
o INCOME RISK The funds are subject to income risk, which is the risk that a
fund's dividends (income) will decline due to falling interest rates.
The funds are not intended to be a complete investment program, and there is no
assurance that its investment objective can be achieved.
As with all mutual funds, loss of money is a risk of investing in each fund.
Additional risks of the funds are described on page xx of the prospectus.
An investment in these funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.
VOLATILITY AND PERFORMANCE INFORMATION
The following bar charts and tables show the volatility of each fund's returns,
which is one indicator of the risks of investing in the fund. The bar charts
show changes in each fund's returns from year to year during the period
indicated. The tables compare each fund's average annual returns for the last
1-, 5 and 10 year periods (or life of the fund, if shorter), to those of a
broad-based securities market index. How each fund performed in the past is not
an indication of how it will perform in the future.
TAX FREE FUND
Annual Total Returns*
[Add Chart showing the annual total returns for the calendar years of the Fund)
* As of September 30, 1999, the fund's year-to-date return was x.xx%.
** The Adviser has agreed to limit the fund's total operating expenses. In the
absence of this limitation, the fund's total returns would have been lower.
Best quarter shown in the bar chart above: x.xx% in xx quarter 199x
Worst quarter shown in bar chart above: x.xx% in xx quarter 199x
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED 1 5
DECEMBER 31, 1998) YEAR YEARS 10 YEARS
---------------------------- ----- ----- --------
TAX FREE FUND* x.xx% x.xx% x.xx%
Lehman 10 Year Municipal x.xx% x.xx% x.xx%
Bond Index **
Second Index*** x.xx% x.xx% x.xx%
* The Adviser has agreed to limit the fund's total operating expenses.
In the absence of this limitation, the fund's total returns would have
been lower.
** The Lehman 10 Year Municipal Bond In
*** Second Index if needed
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NEAR-TERM TAX FREE FUND
Annual Total Returns*
Add Chart showing the annual total returns for the calendar years of the Fund)
* As of September 30, 1999, the fund's year-to-date return was x.xx%.
** The Adviser has agreed to limit the fund's total operating expenses. In the
absence of this limitation, the fund's total returns would have been lower.
Best quarter shown in the bar chart above: x.xx% in xx quarter 199x
Worst quarter shown in bar chart above: x.xx% in xx quarter 199x
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED 1 5
DECEMBER 31, 1998) YEAR YEARS 10 YEARS
NEAR-TERM TAX FREE* FUND x.xx% x.xx% x.xx%
Lehman 3 Year Municipal Bond x.xx% x.xx% x.xx%
Index**
Second Index*** x.xx% x.xx% x.xx%
* The Adviser has agreed to limit the fund's total operating expenses.
In the absence of this limitation, the fund's total returns would have
been lower.
** The Lehman 3 Year Municipal Bond Index . . .
*** Second Index added if needed.
GOVERNMENT MONEY MARKET FUNDS
U.S. Treasury Securities Cash Fund
U.S. Government Securities Savings Fund
FUNDAMENTAL INVESTMENT OBJECTIVES
The U.S. Treasury Securities Cash Fund seeks to obtain a high level of current
income while maintaining the highest degree of safety of principal and
liquidity. The U.S. Government Securities Savings Fund seeks to achieve a
consistently high yield with safety of principal.
MAIN INVESTMENT STRATEGIES
The Treasury Securities Cash Fund invests primarily in United States Treasury
debt securities, which are protected by the "full faith and credit" of the
United States government, and collateralized repurchase agreements.
The Government Securities Savings Fund invests primarily in United States
Treasury debt securities, which are protected by the "full faith and credit" of
the United States government, and obligations of agencies and instrumentalities
of the United States government. The income from these obligations may be exempt
from state and local income taxes. The fund may also invest in collateralized
repurchase agreements.
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 funds seek to provide a stable net asset value of $1 per share by investing
in securities with maturities of 397 days or less, and by maintaining an average
maturity of 90 days or less (each, as measured in accordance with SEC rules
applicable to money market funds). However, there can be no assurance that they
can always do so.
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<PAGE>
The funds' portfolio managers apply a two-step approach in choosing investments.
They begin by analyzing various macroeconomic factors in an attempt to forecast
interest rate movements, and then they position each fund's portfolio by
selecting investments that they believe will, in the whole, best fit that
forecast.
Each fund also may engage in securities lending transactions as a method of
increasing its returns. When lending securities, cash received by a fund as
collateral may be invested in various money market instruments, including
repurchase agreements
collateralized with non-government securities.
For more information on the funds' investment strategies, please see page xx.
MAIN RISKS
The funds are designed for investors who primarily seek current income.
o INCOME RISK The funds are subject to income risk, which is the risk that a
fund's dividends (income) will decline due to falling interest rates.
The funds are not intended to be a complete investment program, and there is no
assurance that their investment objectives
can be achieved.
Additional risks of the funds are described on page xx of the prospectus.
An investment in the funds is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the funds seek to
preserve the value of your investment at $1 per share, it is possible to lose
money by investing in the funds.
VOLATILITY AND PERFORMANCE INFORMATION
The following bar chart and table shows the volatility of each fund's returns,
which is one indicator of the risks of investing in the fund. The bar charts
show changes in the fund's returns from year to year during the period
indicated. The tables compare each fund's average annual returns for the last
1-, 5 and 10 year periods (or life of the fund, if shorter), to those of
unmanaged indexes. How each fund performed in the past is not a indication of
how it will perform in the future.
TREASURY SECURITIES CASH FUND
Annual Total Returns*
[Add Chart showing the annual total returns for the calendar years of the Fund)
* As of September 30, 1999, the fund's year-to-date return was x.xx%.
** The Adviser has agreed to limit the fund's total operating expenses. In the
absence of this limitation, the fund's total returns would have been lower.
Best quarter shown in the bar chart above: x.xx% in xx quarter 199x
Worst quarter shown in bar chart above: x.xx% in xx quarter 199x
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED 1 5
DECEMBER 31, 1998) YEAR YEARS 10 YEARS
---------------------------- ----- ----- --------
TREASURY SECURITIES CASH x.xx% x.xx% x.xx%
FUND*
Benchmark** x.xx% x.xx% x.xx%
Second Benchmark*** x.xx% x.xx% x.xx%
* The Adviser has agreed to limit the fund's total operating expenses.
In the absence of this limitation, the fund's total returns would have
been lower.
** Footnote Benchmark
*** Footnote Second Benchmark if needed
10
<PAGE>
The 7-day yield on December 31, 1998 was x.xx%. For the fund's current yield
call 1-800-US-FUNDS.
GOVERNMENT SECURITIES SAVINGS FUND
Annual Total Returns*
(Add Chart showing the annual total returns for the calendar years of the Fund)
*As of September 30, 1999, the fund's year-to-date return was x.xx%.
Best quarter shown in the bar chart above: x.xx% in xx quarter 199x
Worst quarter shown in bar chart above: x.xx% in xx quarter 199x
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED 1 5
DECEMBER 31, 1998) YEAR YEARS 10 YEARS
---------------------------- ----- ----- --------
GOVERNMENT SECURITIES x.xx% x.xx% x.xx%
SAVINGS FUND
Benchmark* x.xx% x.xx% x.xx%
Second Benchmark** x.xx% x.xx% x.xx%
* Footnote Benchmark
** Second Footnote Benchmark if needed
FEES AND EXPENSES
Shareholder Transaction Expenses - Direct Fees. These fees are paid directly
from your account. There are no sales charges when you buy fund shares. There
may be a small fee when you exchange shares. If you sell shares and request your
money by wire transfer, there is a $10 fee. Your bank may also charge a fee for
receiving wires.
Maximum sales charge ........................................... None
Account closing fee* ........................................... $10
Administrative exchange fee .................................... $ 5
Account Maintenance Fee (Only for the All-American Fund) ....... $12
Trader's fee
o Gold Shares Fund, World Gold Fund and Global Resources .... 0.25%**
Fund shares held less than one month
o Equity Income Fund, Real Estate Fund and All American ..... 0.10%**
Fund shares held less than one month
o China Region Fund shares held less than six months ........ 1.00%**
_____________________
* Does not apply to exchanges
** Percentage of value of shares redeemed or exchanged
ANNUAL FUND OPERATING EXPENSES - INDIRECT FEES. Fund operating expenses are paid
out of the fund's assets and indirectly affect the fund's share price and
dividends. These expenses are paid indirectly by shareholders. "Other Expenses"
include fund expenses such as custodian, accounting and transfer agent fees. The
adviser has contractually limited total fund operating expenses to not exceed
1.00% for the All American Fund, 0.70% for the Tax Free Fund and Near-Term Tax
Free Fund and 0.40% for the Government Securities Savings Fund on an annualized
basis through November 1, 2000, and until such later date as the adviser
determines.
The tables below show operating expenses as a percentage of each fund's net
assets during the fiscal year ended June 30, 1999.
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<TABLE>
<CAPTION>
EQUITY FUNDS
CHINA REGION FUND ALL AMERICAN FUND EQUITY INCOME FUND REAL ESTATE FUND
<S> <C>
Management Fees
Distribution (12b-1) Fees
Other Expenses
Total Annual Fund
Operating Expenses
Expense
Reimbursement
Net Expenses
GOLD AND NATURAL RESOURCES FUNDS
GLOBAL SHARES FUND WORLD GOLD FUND GLOBAL RESOURCES FUND
Management Fees
Distribution (12b-1) Fees
Other Expenses*
Total Annual Fund
Operating Expenses*
* 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
balance. With the offset arrangement, other expenses and total annual fund
operating expenses were x.xx% and x.xx% for the Gold Shares Fund, x.xx% and
x.xx% for the World Gold Fund and x.xx% and x.xx% for the Global Resources
Fund.
TAX-FREE AND GOVERNMENT MONEY MARKET FUNDS
TAX FREE FUND NEAR-TERM TAX FREE GOVERNMENT TREASURY SECURITIES
FUND SECURITIES SAVINGS CASH FUND
FUND
Management Fees
Distribution (12b-1)
Fees
Other Expenses
Total Annual Fund
Operating Expenses
Expense
Reimbursement
Net Expenses
</TABLE>
Example of Effect of the funds' Operating Expenses
This hypothetical example is intended to help you compare the cost of investing
in the funds with the cost of investing in other mutual funds. The example
assumes that:
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o You initially invest $10,000.
o Your investment has a 5% annual return. *
o The fund's operating expenses and returns remain the same. *
o All dividends and distribution are reinvested.
This example does not reflect the affect of a $10 account closing fee if you
redeem all your shares in all funds.
This example includes a quarterly $3 account maintenance fee for the All
American Fund.
You would pay the following expenses if you redeemed all of your shares at the
end of the periods shown:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
China Region Fund $xxx $xxx $xxx $xxx
All American Fund $xxx $xxx $xxx $xxx
Income Fund $xxx $xxx $xxx $xxx
Real Estate Fund $xxx $xxx $xxx $xxx
Gold Shares Fund $xxx $xxx $xxx $xxx
World Gold Fund $xxx $xxx $xxx $xxx
Global Resources Fund $xxx $xxx $xxx $xxx
Tax Free Fund $xxx $xxx $xxx $xxx
Near-Term Tax Free Fund $xxx $xxx $xxx $xxx
Government Securities Savings Fund $xxx $xxx $xxx $xxx
Treasury Securities Cash Fund $xxx $xxx $xxx $xxx
* Actual annual returns and fund operating expenses may be greater or less
than those provided for in the assumptions.
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
EQUITY FUNDS
INVESTMENT PROCESS
The Adviser for the funds is U.S. Global Investors, Inc. Goodman & Company N.Y.
Ltd. serves as sub-adviser to the Real Estate Fund. In selecting investments,
the Adviser and sub-adviser apply both a "top-down" approach to screen
macroeconomic themes and a "bottom-up" approach for stock selection. In other
words, the Adviser and sub-adviser seek out securities that fit within
macroeconomic themes.
The Adviser and sub-adviser use a top-down approach to find strengths and
weakness in countries, states, sectors, and industries and apply a bottom-up
strategy to select the leading stocks within this macroeconomic environment.
Once the Adviser and sub-adviser put these two processes together, it can select
securities that it believes meet each fund's investment objective. Each of the
Adviser and sub-adviser regularly reviews its security selection process and its
forecast to keep current with changing market conditions. The skill of the
Adviser and sub-adviser will play a significant role in each fund's ability to
achieve its investment objective.
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<PAGE>
GENERAL PORTFOLIO POLICIES
PRINCIPAL TYPES OF INVESTMENTS AND RELATED RISKS
The All American Fund may invest in long-term equity anticipation securities
(LEAPS) in order to take advantage of the long-term growth of large-cap
companies without having to make outright stock purchases. LEAPS allows the fund
to imitate a purchase or sale of a stock for a fraction of its price (premium),
and hold that option for up to three years before it expires. The underlying
stock can be purchased or sold at a predetermined price for the life of the
option. The fund will not commit more than 5% of its total assets to premiums on
options. Investing in LEAPS and other options may result in a loss of a fund's
initial investment and may be more volatile than a direct investment in the
underlying securities.
The China Region Fund will normally invest at least 65% of its total assets 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.
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, the fund anticipates that the trading activities of the fund in PRC
securities will be focused in the authorized China securities market; in
particular, the Hong Kong, Shenzhen and Shanghai stock exchanges.
Because the China Region Fund invests in foreign securities and emerging
markets, it may be subject to risks not usually associated with owning
securities of U.S. companies. The risks of investing in foreign securities is
further discussed on page xx of the prospectus.
The All American Fund may invest in long-term equity anticipation securities
LEAPS) in order to take advantage of the long-term growth of large-cap companies
without having to make outright stock purchases. LEAPS allow the fund to imitate
a purchase or sale of a stock for a fraction of its price (premium), and hold
that option for up to three years before it expires. The underlying stock can be
purchased or sold at a predetermined price for the life of the option. The fund
will not commit more than 5% of its total assets to premiums on options.
Investing in LEAPS and other options may result in a loss of a fund's initial
investment and may be more volatile than a direct investment in the underlying
securities.
The Real Estate Fund normally invests at least 65% of its total assets in real
estate related equity securities listed on a national securities exchange or
Nasdaq. These real estate related 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.
The Real Estate Fund invests primarily in REITs. A REIT is a pooled investment
vehicle which typically invests directly in real estate and/or in mortgages and
loans collateralized by real estate. The pooled vehicle, typically a trust,
issues shares whose value and investment performance are dependant upon the
returns of the underlying real estate. related investments. The fund may also
invest up to 35% of its total net assets in real estate-related securities of
foreign issuers that are listed on foreign securities exchanges.
The Real Estate Fund's investments in REITs are subject to certain risks related
to the real estate industry in general. Increases in property taxes and
operating expenses, changes in zoning laws and neighborhood values, casualty or
construction losses, and overbuilding and increased competition could have a
negative impact on the value of REITs. General and local economic conditions and
real estate values can affect REITs. Rising interest rates, which may increase
mortgage and financing costs, can restrain construction and buying and selling
activity which could negatively affect REITs. REITs are also subject to the risk
that a borrower may be unable to make interest and principal payments on a loan
made by a REIT.
Loss of status as a qualified REIT or changes in the treatment of REITs under
the Internal Revenue Code could adversely affect the value of a particular REIT
or the market for REITs as a whole and the fund's performance.
The Equity Income Fund normally invests at least 80% of its total net assets in
income-producing equity and debt securities. Equity securities include common
stocks, preferred stocks and convertible securities. While the fund tends to
invest primarily in common stocks, it may also invest in REITs, corporate bonds,
convertible securities, U.S. Treasury bills and notes, and other obligations
backed by the U.S. government and its agencies.
The Equity Income Fund focuses on large-cap companies that have a consistent
growth in earnings and dividend payout, and generally are less expensive, using
price to earnings ratios, than pure growth stocks. The majority of the stocks
meeting this criteria are in the Barra Value component of the S&P 500 Index.
Barra Value stocks comprise approximately 70% of the companies in the S&P Index.
Because each equity fund invests primarily in equity securities, the main risk
is that the value of the securities held may decrease in response to general
market, business and economic conditions. If this occurs, the fund's share price
may also decrease. The fund's performance may also be affected by risks specific
to certain types of investments, which are discussed below.
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<PAGE>
OTHER TYPE OF INVESTMENTS, RELATED RISKS AND CONSIDERATIONS
While not principal strategies, the funds may invest to a limited extent in
other type of investments. These investment practices and their related risks
are described on page xx and in the Statement of Additional Information.
GOLD AND NATURAL RESOURCES FUNDS
INVESTMENT PROCESS
The Adviser for the funds is U.S. Global Investors, Inc. In selecting
investments, the Adviser applies both a "top-down" approach to macroeconomic
themes and a "bottom-up" approach to stock selection. In other words, the
Adviser seeks out the best suited securities within macroeconomic themes.
As part of the top-down approach for the gold funds, the Adviser looks for
countries with favorable mining laws, a relatively stable currency, and liquid
securities markets. As part of its bottom-up selection strategy, the Adviser
looks for companies with robust reserve growth profiles, healthy production and
strong cash flows.
As part of the top-down approach for the Natural Resources Fund, the Adviser
evaluates the global macro-economic environment, natural resources supply and
demand fundamentals, and industry selection. For its bottom-up selection
strategy, the Adviser looks at a company's valuation parameters, its business
model, and its peer group ranking.
Once the Adviser puts these two processes together, it can select securities
that it believes meet each fund's investment objective. The Adviser regularly
reviews its security selection process and its forecast to keep current with
changing market conditions. The skill of the Adviser will play a significant
role in each fund's ability to achieve its
investment objective.
GENERAL PORTFOLIO POLICIES
PRINCIPAL TYPES OF INVESTMENTS AND RELATED RISKS
Under normal conditions the Gold Shares Fund will invest at least 65% of its
total assets in equity securities of companies involved in more established gold
operations. The fund concentrates its investments in common stocks of
intermediate and senior gold producers which may include companies involved in
mining, processing or dealing in gold. The fund focuses on selecting senior
producing mines, most of which are in North America, South Africa and Australia.
A senior mine normally produces over one million ounces of gold or precious
metals per year. The fund reserves the right to invest up to 35% of its total
assets in the securities of companies involved in the exploration for, mining
and processing of, or dealing in silver, platinum, uranium and other strategic
metals.
Under normal conditions the World Gold Fund will invest at least 65% of its
total assets in the securities of companies involved in the exploration for,
mining and processing of, or dealing in, gold. The fund may invest in junior and
intermediate exploration and development gold companies from around the world.
Securities of these companies may be more volatile since they do not have an
established history of operations. The fund may also invest in senior mine
companies. While junior exploration and development gold companies produce up to
100,000 ounces of gold or precious metals per year, intermediate companies
produce up to a million ounces of gold or precious metals. The securities of
junior and intermediate exploration and development gold companies tend to be
less liquid and more volatile in price then securities of larger companies. The
World Gold Fund may invest up to 35% of its total assets in the securities of
companies involved in the exploration for, mining and processing of, or dealing
in silver, platinum, uranium and other strategic metals.
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 selling shares of the fund.
The short-term trading fees imposed on these short-term investors have
historically generated sufficient revenue to offset many of these costs, such as
brokerage commissions. Trading activities may cause a fund to experience a high
portfolio turnover rate, which could increase your tax liability. Each fund
seeks to minimize the adverse consequences of these activities and may invest in
long-term equity options called LEAPS (long-term equity anticipation
securities). LEAPS allow a fund to imitate a purchase or sale of a stock for a
fraction of its price (premium), and hold that option for up to three years
before it expires. The underlying stock can be purchased or sold at a
predetermined price for the life of the option. LEAPS, therefore, allow a fund
to gain exposure to individual securities in the gold sector over the long-term
while allowing the fund to preserve some cash for large or unexpected
15
<PAGE>
redemptions. A fund 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. Investing in LEAPS and
other options may result in a loss of a fund's initial investment and may be
more volatile than a direct investment in the underlying securities. While
options may cause the fund to incur transaction costs, LEAPS generally have
lower transactions expenses.
Securities of gold operation companies are affected by the price of gold and
other precious metals. The price of gold and other precious metals is affected
by several factors including (1) the unpredictable monetary polices and economic
and political conditions affecting gold producing countries throughout world;
(2) increased environmental, labor or other costs in mining; and(3) changes in
laws relating to mining or gold production or sales. Furthermore, the price of
gold mining stocks tends to increase or decrease with the price of the
underlying commodities but are more volatile.
The Global Resources Fund concentrates its investments in the equity securities
of large capitalization companies within the natural resources industry, which
include the following sectors:
ENERGY SECTORS BASIC MATERIALS SECTORS
Natural Gas Aluminum
Oil Drilling Chemicals
Oil Companies International Gold And Precious Metals
Oil Exploration and Production Iron and Steel
Oil and Gas Refining Mining, Diversified
Oilfield Equip/Services Paper and Forest Products
Consistent with its investment objective, the Global Resources Fund may invest
without limitation in any sector of the natural resources industry.
Because each fund invests primarily in common stocks of foreign and domestic
companies, the main risk is that the value of the stocks held may decrease in
response to general foreign or domestic market, business and economic
conditions. If this occurs, the fund's share price may also decrease. The fund's
performance may also be affected by risks specific to certain types of
investments, which are discussed below.
The value of the Global Resources Fund's shares is particularly vulnerable to
factors affecting the natural resources industry, such as increasing regulation
of the environment by both U.S. and foreign governments. Increased environmental
regulations may, among other things, increase compliance costs and affect
business opportunities for the companies in which the fund invests. The value is
also affected by changing commodity prices, which can be highly volatile and are
subject to risks of oversupply and reduced demand.
Because the Global Resources Fund's portfolio focuses its investments in the
natural resources industry, the value of your fund shares may rise and fall more
than the value of shares of a fund that invests more broadly.
OTHER TYPE OF INVESTMENTS, RELATED RISKS AND CONSIDERATIONS
While not principal strategies, the funds may invest to a limited extent in
other type of investments. These investment practices and their related risks
are described on page xx and in the Statement of Additional Information.
THE TAX-FREE FUNDS
INVESTMENT PROCESS
The Adviser for the funds is U.S. Global Investors, Inc. In selecting
investments, the Adviser seeks out securities that fit within macroeconomic
themes.
The Adviser's analysis encompasses an interest rate forecast that considers such
factors as Gross Domestic Product, current inflation outlook, and the prevailing
unemployment rate. After establishing an interest rate outlook, the Adviser
applies a
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<PAGE>
process of selecting bonds for the funds' portfolios. The criteria for this
process includes yield, maturity, and bond rating. Once the Adviser puts these
two processes together, it can select securities that it believes meet each
fund's investment objective. The Adviser regularly reviews its security
selection process and its forecast to keep current with changing market
conditions. The skill of the Adviser will play a significant role in each fund's
ability to achieve its investment objective.
GENERAL PORTFOLIO POLICIES
PRINCIPAL TYPES OF INVESTMENTS AND RELATED RISKS
Under normal market conditions, the tax-free funds invest primarily in
investment grade municipal securities whose interest is free from federal income
tax. Municipal securities are issued by state and local governments, their
agencies and authorities, as well as by the District of Columbia and U.S.
territories and possessions, to borrow money for various public and private
projects. These debt securities generally include general obligation bonds,
revenue bonds, industrial development bonds, municipal lease obligations and
similar instruments.
General obligation bonds are backed by the issuer's authority to levy taxes.
Since revenue bonds are issued to finance public works such as bridges or
tunnels, they are supported by the revenues of the projects. Industrial
development bonds are typically issued by municipal issuers on behalf of private
companies. Because these bonds are backed only by income from a certain source
and may not be an obligation of the issuer itself, they may be less creditworthy
than general obligation bonds. Municipal lease obligations generally are issued
to finance the purchase of public property. The property is leased to a state or
local government and the lease payments are used to pay the interest on the
obligations. These differ from other municipal securities because the money to
make the lease payments must be set aside each year or the lease can be canceled
without penalty. If this happens, investors who own the obligations may not be
paid.
Although the fund tries to invest all of its assets in tax-free securities, it
is possible, although not anticipated, that up to 20% of its assets may be in
securities that pay taxable interest.
The tax-free funds invest only in debt securities that, at the time of
acquisition one of the four highest ratings by Moody's Investors Services (Aaa,
Aa, A, Baa) or by Standard & Poor's Corporation (AAA, AA, A, BBB)(or, if not
rated by Moody's or S&P, are determined by the Adviser to be of comparable
quality). The tax-free funds will not invest more than 10% of their total assets
in the fourth rating category. Investments in the fourth category may have
speculative characteristics and, therefore, may involve higher risks.
The tax-free funds differ in the maturity of the debt securities they purchase.
While the Tax Free Fund may have an average weighted maturity that varies
widely, it tends to keep an average weighted maturity of more than five years.
The Near-Term Tax Free Fund will maintain an average weighted portfolio maturity
of five years or less. An average weighted maturity of a fund is the average of
the remaining maturities of all the debt securities the fund owns, with each
maturity weighted by the relative value of the security.
The funds are subject to income rate risk, which is the chance that the funds'
dividends (income) will decline due to falling interest rates. Income risk is
generally the greater for the Near-Term Tax Free Fund and less for the Tax-Free
Fund.
There is a possibility that an issuer of any bond could be unable to make
interest payments or repay principal. Changes in an issuer's financial strength
or in a security's credit rating may affect a security's value.
The funds' performance may be affected by political and economic conditions at
the state, regional and federal level. These may include budgetary problems,
declines in the tax base and other factors that may cause rating agencies to
downgrade the credit ratings on certain issues. As on the state and federal
level, events in U.S. Territories where the fund is invested may affect a fund's
investments in that territory and their performance.
A municipal security may be prepaid (called) before its maturity. An issuer is
more likely to call its securities when interest rates are falling, because the
issuer can issue new securities with lower interest payments. If a security is
called, the funds may have to replace it with a lower-yielding security.
OTHER TYPES OF INVESTMENTS, RELATED RISKS AND CONSIDERATIONS
While not principal strategies, the funds may invest, to a limited extent, in
other type of investments. These investment practices and their related risks
are described on page xx and in the Statement of Additional Information.
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<PAGE>
THE GOVERNMENT MONEY MARKET FUNDS
INVESTMENT PROCESS
The Adviser for the funds is U.S. Global Investors, Inc. In selecting
investments, the Adviser seeks out securities that fit within macroeconomic
themes.
The Adviser's analysis encompasses an interest rate forecast that considers such
factors as Gross Domestic Product, current inflation outlook, and the prevailing
unemployment rate. After establishing a reasonable interest rate outlook, the
Adviser applies a process of selecting bonds for the funds' portfolios. The
criteria for this process includes yield, maturity, and bond structure. Once the
Adviser puts these two processes together, it can select securities that it
believes meet each fund's investment objective. The Adviser regularly reviews
its security selection process and its forecast to keep current with changing
market conditions. The skill of the Adviser will play a significant role in each
fund's ability to achieve its investment objective.
GENERAL PORTFOLIO POLICIES
PRINCIPAL TYPES OF INVESTMENTS AND RELATED RISKS
Under federal law, the income received 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 allow
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 primarily in
obligations that qualify for the exemption from state taxation in those states
that offer such exemption.
The Government Securities Savings Fund may invest in fixed-rate and
floating-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. While fixed-rate
securities have a set interest rate, floating-rate securities have a variable
interest rate that is closely tied to a money-market index such as Treasury Bill
rates. Floating rate securities provide holders with protection against rises in
interest rates, but pay lower yields than fixed-rate securities of the same
maturity.
Because the funds may invest substantially all of their assets in short-term
debt securities, the main risk is that the funds' dividends (income) may decline
because of falling interest rates. The funds' performance may also be affected
by risks specific to certain types of investments, which are discussed below.
The funds' yields will vary as the short-term securities in their portfolios
mature and the proceeds are reinvested in securities with different interest
rates. Over time, the real value of a fund's yield may be eroded by inflation.
There is a possibility that an issuer of a security could be unable to make
interest payments or repay principal. Changes in an issuer's financial strength
or in a security's credit rating may affect a security's value.
OTHER TYPE OF INVESTMENTS, RELATED RISKS AND CONSIDERATIONS
While not principal strategies, the funds may invest, to a limited extent, in
other type of investments. These investment practices and their related risks
are described on page xx and in the Statement of Additional Information.
YEAR 2000 READINESS
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, sub-adviser
and the funds' transfer agent believe that they have taken steps reasonably
designed to address any potential material Year 2000 Problem for the computer
programs used by the Adviser, sub-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, the sub-adviser and the transfer agent
are also taking steps reasonably designed to address material Year 2000 Problems
with respect to their computer systems. At this time, there can be no assurance
that these steps will be sufficient to avoid any material 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.
18
<PAGE>
FUND MANAGEMENT
INVESTMENT ADVISER
U.S. Global Investors, Inc., 7900 Callaghan Road, San Antonio, Texas 78229,
furnishes investment advice and manages the funds' business affairs. The Adviser
was organized in 1968 and also serves as investment adviser to U.S. Accolade
Funds, a family of mutual funds with approximately $x.x million in assets. For
the fiscal year ended June 30,1999, each fund paid the following percentages of
its average net assets to the Adviser:
China Region Fund x.x%
All American Fund x.x%
Real Estate Fund x.x%
Equity Income Fund x.x%
Gold Shares Fund x.x%
World Gold Fund x.x%
Global Resources Fund x.x%
Tax Free Fund x.x%
Near-Term Tax Free Fund x.x%
Government Securities Savings Fund x.x%
Treasury Securities Cash Fund x.x%
SUB-ADVISER
U.S. Global Investors, Inc., the Adviser, has retained Goodman & Company N.Y.
Ltd., 40 King Street West, Toronto, Ontario MSH 4A9, Canada, to serve as
sub-adviser to the Real Estate Fund. 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 (Cdn) of
which is in two real estate equity funds. In consideration for investment
management services rendered to the fund, the Adviser shares the management fee
(net of all expense reimbursements and waivers) with the Sub- Adviser. The Real
Estate Fund is not responsible for paying any portion of the Sub-Adviser's fees.
PORTFOLIO MANAGEMENT TEAM
The Adviser uses a team approach to manage the assets of each fund. The
portfolio manager team is jointly and primarily responsible for the day to day
management of the fund's portfolio. The sub-adviser uses a team approach to
manage the Real Estate Fund. Mr. Goodman and Ms. Anne MacLean lead the team.
COMMON INVESTMENT PRACTICES AND RELATED RISKS
ILLIQUID AND RESTRICTED SECURITIES The Gold Shares, World Shares and Global
Resources Funds may invest up to 10% of its net assets (15% in the case of China
Region Fund) in illiquid securities. Illiquid securities are those securities
which cannot be disposed of in seven days or less at approximately the value at
which a fund carries them in its balance sheet.
The gold and natural resources 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. These securities could decline significantly in value before a fund can
liquidate these 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.
REPURCHASE AGREEMENTS Each fund may enter into repurchase agreements. A
repurchase agreement is a transaction in which
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<PAGE>
a fund purchases a security from a commercial bank or recognized securities
dealer and has a simultaneous commitment to sell it back at an agreed upon price
on an agreed upon date. This date is usually not more than seven days from the
date of purchase. The resale price reflects the original purchase price plus an
agreed upon market rate of interest, which is unrelated to the coupon rate or
maturity of the purchased security.
In effect, a repurchase agreement is a loan by a fund collateralized with
securities, usually securities issued by the U.S. Treasury or a government
agency. The repurchase agreements entered into by each government money market
fund are collateralized with cash and securities of the type in which that fund
may otherwise invest, except in the case of repurchase agreements purchased in
securities lending transactions as described below.
Repurchase agreements carry several risks, including the risk that the
counterparty defaults on its obligations. For example, if the seller of the
securities underlying a repurchase agreement fails to pay the agreed resale
price on the agreed delivery date, a fund may incur costs in disposing of the
collateral and may experience losses if there is any delay in its ability
to do so.
SECURITIES LENDING Each fund may lend its portfolio securities to qualified
securities dealers or other institutional investors. When lending securities, a
fund will receive cash or high quality liquid securities as collateral for the
loan. Each fund may invest cash collateral in repurchase agreements, including
repurchase agreements collateralized with non-governmental securities. Under the
terms of the funds' current securities lending agreements, the funds' lending
agent has guaranteed performance of the obligation of each borrower and each
counterparty to each repurchase agreement in which cash collateral is invested.
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. This means the fund purchases
securities for delivery at a later date and at a stated price or yield. There is
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.
TEMPORARY INVESTMENTS The Adviser may take a temporary defensive position when
the securities trading markets or the economy are experiencing excessive
volatility or a prolong general decline, or other adverse conditions exist.
Under these circumstances, each fund may invest 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 denominated
in U.S. dollars, or any other freely convertible currency; or
o repurchase agreements.
In addition, the China Region Fund may invest in money market investments,
deposits or other investment grade short-term investments in the local China
region currencies as may be appropriate at the time.
When the funds are in a defensive investment position, they may not achieve
their investment objective.
BORROWING As a fundamental policy, each fund may borrow up to 5% of its total
assets from a bank for temporary or emergency purposes. The Gold Shares Fund,
the World Gold Fund, China Region Fund and All American Fund may borrow up to 33
1/3 % of their total assets (including the amount borrowed) less liabilities
(other than borrowings). This borrowing is intended to be only a temporary
solution until securities can be sold in an orderly way. To the extent that a
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.
FOREIGN SECURITIES Since the gold and natural resources funds and the equity
funds may invest in foreign securities, they may be subject to greater risks
than when investing in U.S. securities. The risks of investing in foreign
securities are generally greater when they involve emerging markets. These risks
include:
CURRENCY RISK The value of a foreign security will be affected by the value of
the local currency relative to the U.S. dollar. When the fund sells a foreign
denominated security, its value may be worth less in U.S. dollars even if the
security increases in value in its home country. U.S. dollar-denominated
securities of foreign companies may also be affected by currency risk;
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POLITICAL, SOCIAL AND ECONOMIC RISK Foreign investments may be subject to
heightened political, social and economic risks, particularly in emerging
markets, which may have relatively unstable governments, immature economic
structures, national policies restricting investments by foreigners, different
legal systems and economies based on only a few industries. In some countries, a
risk may exist that the government may take over the assets or operations of a
company or that the government may impose taxes or limits on the removal of the
fund's assets from that country;
REGULATORY RISK There may be less government supervision of foreign securities
markets. As a result, foreign companies may not be subject to the uniform
accounting, auditing and financial reporting standards and practices applicable
to domestic companies, and there may be less publicly available information
about foreign companies;
MARKET RISK Foreign securities markets, particularly those of emerging markets,
may be less liquid and more volatile than domestic markets. Certain markets may
require payment for securities before delivery and delays may be encountered in
settling securities transactions. In some foreign markets, there may not be
protection against failure by other parties to complete transactions; and
TRANSACTION COSTS Cost of buying, selling and holding foreign securities,
including brokerage, tax and custody costs, may be higher than those involved in
domestic transactions.
The Gold Shares Fund may have 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 gold and natural resources funds and the equity funds may invest in
sponsored or unsponsored American Depositary Receipts (ADRs) or Global
Depositary Receipts (GDRs) representing shares of companies in foreign
countries. ADRs are depositary 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.
CONVERTIBLE SECURITIES The gold and natural resources funds and the equity funds
may invest in convertible securities. A convertible security is generally a debt
obligation or preferred stock that may be converted within a specified period of
time into a certain amount of common stock of the same or a different issuer. As
with a straight fixed-income security, a convertible security tends to increase
in market value when interest rates decline and decrease in value when interest
rates rise. Like a common stock, the value of a convertible security also tends
to increase as the market value of the underlying stock rises, and it tends to
decrease as the market value of the underlying stock declines. Because its value
can be influenced by both interest rate and market movements, a convertible
security is not as sensitive to interest rates as a similar fixed-income
security, nor is it as sensitive to changes in share price as its underlying
stock.
SMALL COMPANIES 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.
STRATEGIC TRANSACTIONS The gold and natural resources funds and the equity funds
may, but are not required to, engage in strategic transactions, which include
purchasing and selling exchange-listed and over-the-counter put and call options
on securities, equity and fixed-income indexes and other financial instruments,
including LEAPS. 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, or options on currencies or currency futures. The funds may, but are
not required to, engage in strategic transactions for hedging, risk management
or portfolio management purposes. 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. The ability of the funds to use these
strategic 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. For more information on strategic transaction and specific fund
limitations, please see the SAI.
CURRENCY HEDGING The World Gold, Gold Shares, All American and China Region
Funds may, but are not required to, engage in strategic transactions in an
attempt to hedge a particular fund's foreign securities investments back to the
U.S. dollar when, in
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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.
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.
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 the
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.
SECURITIES RATINGS. The Adviser will use the ratings provided by independent
rating agencies in evaluating the credit quality of a debt security and in
determining whether a security qualifies as eligible for purchase under a fund's
investment policies. If a security is unrated, the Adviser may determine that
the security is comparable in quality to a rated security for purposes of
determining eligibility. In the event that an agency downgrades the rating of a
security below the quality eligible for purchase by a fund, the fund reserves
the right to continue holding the security if the Adviser believes such action
is in the best interest of shareholders.
HOW TO BUY SHARES
MINIMUMS
----------------------------------------------------------------
INITIAL SUBSEQUENT
INVESTMENT INVESTMENT
---------- ----------
o Regular Account $5000 $50
o Regular Money Market Accounts $1000 $50
o ABC Investment Plan(R) $ 100 $30
o Custodial accounts for minors $ 50 $50
o Retirement account None None
SEND NEW ACCOUNT APPLICATIONS TO:
Shareholder Services
U.S. Global Investors Funds
P.O. Box 781234
San Antonio, TX 78278-1234
BY MAIL
o Read this prospectus.
o Fill out the application if you are opening a new account.
o Write your check for the amount you want to invest. Make it payable to the
fund you are buying.
o Send the completed application and check in the envelope provided.
o To add to an existing account, be sure to include your account number on
your check and mail it with the investment slip found on your confirmation
statement.
BY TELEPHONE
o We automatically grant all shareholders telephone exchange privileges
unless they decline them explicitly in writing.
o If you have a U.S. Global Investors Funds account, you may purchase
additional shares by telephone order.
o You must pay for them within seven business days.
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o Telephone purchases are not available for money market funds or U.S. Global
retirement accounts.
BY WIRE
o Call 1-800-US FUNDS for current wire instructions and a confirmation
number.
BY AUTOMATIC INVESTMENT
o To purchase more shares automatically each month, fill out the ABC
Investment Plan(R) form.
o U.S. Global Investor Funds automatically withdraws monies from your bank
account monthly.
o See details on the application.
BY DIRECT DEPOSIT
o You may buy shares of the money market funds through direct deposit. For
more information, call 1-800-US-FUNDS.
IMPORTANT NOTES ABOUT PAYING FOR YOUR SHARES
Your check must be made payable to the fund you are buying.
You may not purchase shares by credit card.
Telephone purchase orders may not exceed ten times the value of the collected
balance of all like-registered accounts on the date the order is placed.
You may not exchange shares purchased by telephone until the fund has received
and accepted payment and has posted it to your account.
Checks drawn on foreign banks will not be invested until the collection process
is complete.
The funds will cancel unpaid telephone orders, and any decline in price of the
shares will be collected from shares of any affiliated funds you own.
If a check or ACH investment is returned unpaid due to nonsufficient funds, stop
payment or other reasons, the funds will charge you $20, and you will be
responsible for any loss incurred by the fund. To recover any such loss or
charge, the funds reserve the right to redeem shares of any affiliated funds you
own, and you could be prohibited from placing further orders unless full payment
by wire or cashier's check accompanies the investment request.
EFFECTIVE TIME FOR PURCHASE OR REDEMPTION ORDERS
Purchases of shares in the funds require payment by check or wire at the time
the order is received except for telephone purchases which require payment
within seven business days after the order is received and accepted.
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. The fund reserves
the right to refuse to honor redemptions if your check has not cleared.
Orders to purchase shares of the Gold Shares Fund and World Gold Fund (including
orders to exchange into these funds) received after 3:00 p.m. Eastern time or
the close of the New York Stock Exchange (NYSE), whichever is earlier, will not
become effective until the next business day.
Any expenses charged to the funds for collection procedures will be deducted
from the amount invested.
An order to establish a new account will become effective, if accepted, at the
time the fund next determines its net asset value (NAV) per share after the
fund's transfer agent or sub-agent has received:
o a completed and signed application, and
o a check or wire transfer for the full amount
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If you already have an account with a fund, your order to purchase shares will
become effective at the time the fund next determines NAV after the transfer
agent or sub-agent receives and accepts your written request or telephone order
or, in the case a money market fund, after the transfer agent or sub-agent
receives and accepts you check or wire transfer.
In all cases, the shares purchased will be priced at the NAV per share next
determined after the time of effectiveness.
All purchases of shares are subject to acceptance by the funds and are not
binding until accepted.
HOW TO SELL (REDEEM) SHARES
BY MAIL
o Send a written request showing your account number and the dollar amount or
number of shares you are redeeming to the address shown under "How to Buy
Shares."
o Each registered shareholder must sign your request, with the signature(s)
appearing exactly as it does on your account registration.
o Redemptions of more than $15,000 require a signature guarantee.
o A signature guarantee may be required for other circumstances. See
"Signature Guarantee/Other Documentation" section.
o Call 1-800-US-FUNDS for additional requirements.
BY TELEPHONE
o Call 1-800-US-FUNDS.
o If you have an identically registered account in a U.S. Global Investors
money market fund with checkwriting, you may call the fund and direct an
exchange of your fund shares into your existing money market fund account.
You may then write a check against your money market fund account.
o For telephone redemptions, see "Signature Guarantee/Other Documentation"
for limitations.
o Telephone redemptions are available through our money market funds.
BY CHECK
You may write 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.
IMPORTANT NOTES ABOUT REDEEMING YOUR SHARES
Generally, we will send payment for your redeemed shares to you within two
business days after your redemption request has been received and accepted by a
fund.
You may receive payment for redeemed shares via wire. To elect these services,
send the fund a written request giving your bank information with signature
guarantee for all registered owners. (See "Signature Guarantee/Other
Documentation.")
You will be charged $10 for a wire transfer. International wire charges will be
higher.
We will usually send a wire transfer the next business day after receipt of your
order.
Proceeds from the redemption of shares purchased by check may be delayed until
full payment for the shares has been received and cleared, which may take up to
seven business days from the purchase date.
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To protect shareholders from the expense burden of excessive trading, the funds
charge a trader's fee which is described in the Fees and Expenses table on page
xx.
Upon closing your account, you will be charged a $10 account closing fee.
EXCHANGING SHARES
When exchanging shares into other funds in the U.S. Global Investors family of
funds:
o Each account must be registered identically; each must have the same
signatures and addresses.
o You will be charged $5 by the transfer agent for each exchange out of any
fund account.
o Retirement accounts administered by the Adviser or its agents may exchange
up to three times per quarter at no charge. (Short-term trading fees may
apply.)
o You may exchange shares using the automated telephone system, speaking to
an investment representative, or by mail. Certain restriction apply to the
automated telephone system, please call 1-800-US-FUNDS for more details.
o You are responsible for obtaining and reading the prospectus for the fund
into which you are exchanging.
o Exchanges result in the sale of one fund's shares and the purchase of
another fund's shares, which is usually a taxable event to you.
o Exchanges into any new fund are subject to that fund's initial and
subsequent investment minimums.
o Exchanges out of a fund may be subject to a trader's fee. See page xx for
details.
o 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 or the close of
the NYSE, whichever is earlier. Any exchange order into or out of the Gold
Shares and/or World Gold Funds after 3:00 p.m. Eastern time will be
effective on the next business day. A shareholder of the Gold Shares Fund
or the World Gold Fund, however, may redeem shares at any time until 4:00
p.m. Eastern time (or the close of the NYSE, if earlier.
o Exchanges into a money market fund may be delayed until such time as the
proceeds from the sale of the fund of which you wish to exchange out is
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.
IMPORTANT INFORMATION ABOUT PURCHASES, REDEMPTIONS AND EXCHANGES
THE FUND RESERVES THE FOLLOWING RIGHTS
o To hold redemption proceeds for up to seven days, or longer if permitted by
the SEC.
o To waive investment minimums or account minimum fees.
o To refuse any application, investment or exchange.
o To require a signature guarantee or any other documentation.
o To freeze any account and suspend account services when notice is
received that there is a dispute between registered or beneficial owners
or there is reason to believe a fraudulent or illegal transaction has or
may occur.
ACCOUNT MINIMUMS
To reduce its expenses, each fund may redeem the shares in your account if your
balance drops below $5000 (or $1000 for the money market funds) for any reason
other than share value decline. The fund also may deduct a monthly $5 minimum
balance
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<PAGE>
fee (or the value of the account if less than $5) from such accounts. Active ABC
Investment Plan(R) accounts, retirement accounts and custodial accounts for
minors are not subject to these involuntary redemptions and balance fee
policies.
You will receive a 30-day written notice before the fund undertakes any
involuntary redemption. During that time, you may buy more shares to bring your
account above the minimum.
NET ASSET VALUE (NAV) CALCULATION
The price at which you buy, sell or exchange fund shares is the NAV. The NAV of
a fund is calculated at the close of regular trading of the NYSE, which is
usually 4:00 Eastern time, each day that the NYSE is open. NAV is determined by
adding the value of the fund's investments, cash and other assets, deducting
liabilities, and dividing that value by the total number of fund shares
outstanding.
For a purchase, redemption or exchange of fund shares, your price is the NAV
next calculated after your request is received in good order and accepted by the
fund, its agent or designee. To receive a specific day's price, your request
must be received before the close of the NYSE on that day.
When the fund calculates NAV, it values the securities it holds at market value.
When market quotes are not available or do not fairly represent market value, or
if a security's value has been materially affected by events occurring after the
close of a foreign market on which the security principally trades, the
securities may be valued at fair value. Fair value will be determined in good
faith using consistently applied procedures that have been approved by the
trustees. Money market instruments maturing within 60 days are valued at
amortized cost, which approximates market value. Assets and liabilities
expressed in foreign currencies are converted into U.S. dollars at the
prevailing market rates quoted by one or more banks or dealers at 12:00 noon
Eastern Time each day.
Certain funds invest in portfolio securities that primarily listed on foreign
exchanges or other markets that trade on weekends and other days when the funds
do not price their shares. As a result, the NAV of these funds may change on
days when you will not be able to purchase or redeem shares.
SIGNATURE GUARANTEE/OTHER DOCUMENTATION
The funds require signature guarantees to protect you and the funds from
attempted fraudulent requests for redeemed shares. Your redemption request must
therefore be in writing and accompanied by a signature guarantee if:
o Your redemption request exceeds $15,000.
o You request that payment be made to a name other than the one on your
account registration. o You request that payment be mailed to an
address other than the one of record with the fund. o You change or
add information relating to your designated bank. o You have changed
your address of record within the last 30 days.
You may obtain a signature guarantee from most banks, credit unions,
broker/dealers, savings and loans, and other eligible
institutions. You cannot obtain a signature guarantee from a notary public.
The guarantor must use a stamp "SIGNATURE GUARANTEED" and the name of the
financial institution. An officer of the institution must sign the guarantee. If
residing outside the United States, a Consular's seal will be accepted in lieu
of a signature guarantee. Military personnel may acknowledge their signatures
before officers authorized to take acknowledgments, e.g. legal officers and
adjutants.
The signature guarantee must appear together with the signature(s) of all
registered owner(s) of the redeemed shares on the written redemption request.
Each signature must have a signature guarantee stamp.
Additional documents are required for redemptions by corporations, executors,
administrators, trustees, and guardians. For instructions call 1-800-US-FUNDS.
OTHER INFORMATION ABOUT YOUR ACCOUNT
The funds take precautions to ensure that telephone transactions are genuine,
including recording the transactions, testing
26
<PAGE>
shareholder identity and sending written confirmations to shareholders of
record. The funds and its service providers are not liable for acting upon
instructions that they believe to be genuine if these procedures are followed.
CONFIRMATIONS
After any transaction, you will receive written confirmation including the per
share price and the dollar amount and number of shares bought or redeemed.
PURCHASES THROUGH BROKER/DEALERS
You may buy fund shares through financial intermediaries such as broker/dealers
or banks, who may charge you a fee or have different account minimums which are
not applicable if you buy shares directly from the funds.
ADDITIONAL INVESTOR SERVICES
RETIREMENT PLANS
The funds offer a range of qualified retirement plans, including IRAs, SEPs,
401(k) plans, 403(b) plans and other pension and profit-sharing plans. Each
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
The funds offer many other services, such as payroll deductions, custodial
accounts and systematic withdrawals.
Please call 1-800-US-FUNDS for more information.
DISTRIBUTIONS AND TAXES
Unless you elect to have your distributions in cash, they will automatically be
reinvested in fund shares. The funds generally distribute capital gains, if any,
annually in December. The funds generally declare and pay income dividends, if
any, as follows:
o Gold and natural resources funds and the China Region Fund - dividends
are declared and paid annually, usually in December.
o All American and Equity Income Funds - dividends are distributed
quarterly.
o Real Estate Fund - dividends are declared and paid semi-annually.
o Tax-free funds - dividends are declared and paid monthly.
o Money market funds - all net income is declared and accrued as a daily
dividend and paid 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.
TAXES TO YOU
You will generally owe taxes on amounts paid or distributed to you by a fund,
whether you reinvest the distributions in additional shares or receive them in
cash.
Distributions of gains from the sale of assets held by a fund for more than a
year generally are taxable to you at the long-term capital gains rate,
regardless of how long you have held fund shares. Distributions from other
sources generally are taxed as ordinary income.
Each year the fund will send you a statement that will detail the tax status of
distributions made to you for that year.
If you redeem fund shares that have gone up in value, you will have a taxable
gain when you redeem unless you hold your
27
<PAGE>
shares in a tax-deferred accounts, such as an IRA. Exchanges are treated as a
redemption and purchase for tax purposes. Therefore, you will also have a
taxable gain upon exchange if the shares redeemed have gone up in value.
FINANCIAL HIGHLIGHTS
The tables below are intended to show you each fund's financial performance for
the past five years. Some of the information reflects financial results for a
single fund share. The total returns represent the rate that an investor would
have earned (or lost) money on an investment in each fund. It assumes that all
dividends and capital gains have been reinvested.
PricewaterhouseCoopers LLP has audited this information. PricewaterhouseCoopers'
report and the fund's financial statements are included in the annual report,
which is available by request.
More information on the funds is available at no charge, upon request:
ANNUAL/SEMI-ANNUAL REPORT
This report describes each fund's performance, lists holdings, and describes
recent market conditions, fund strategies, and other factors that had a
significant impact on the fund's performance during the last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
More information about the funds, their investment strategies and related risks
is provided in the SAI. There can be no guarantee that the funds will achieve
their objectives. The current SAI is on file with the SEC and is legally
considered a part of this prospectus.
TO REQUEST INFORMATION:
BY PHONE 1-800-US-FUNDS
BY MAIL Shareholder Services
U.S. Global Investors Funds
P.O. Box 781234
San Antonio, TX 78278-1234
BY INTERNET HTTP://WWW.US-GLOBAL.COM.
The SEC also maintains a website at 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. You may also
visit the SEC's Public Reference Room in Washington, DC (1-800-SEC-0330) or send
a request plus a duplicating fee to the SEC, Public
Reference Section, Washington, DC 20549-6009.
U.S. GLOBAL INVESTORS, INC.
SEC Investment Company Act File No. 02-35439
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- --------------------------------------------------------------------------------
PART B:INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
U.S. GLOBAL INVESTORS FUNDS
STATEMENT OF ADDITIONAL INFORMATION
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 dated November 1, 1999, 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).
The date of this Statement of Additional Information is November 1, 1999.
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION.........................................................3
FUND POLICIES...............................................................4
INVESTMENT STRATEGIES AND RISKS.............................................6
PORTFOLIO TRANSACTIONS.....................................................21
MANAGEMENT OF THE FUND.....................................................22
PRINCIPAL HOLDERS OF SECURITIES............................................24
CERTAIN PURCHASES OF SHARES OF THE FUND....................................28
CALCULATION OF PERFORMANCE DATA............................................30
TAX STATUS.................................................................33
CUSTODIAN, FUND ACCOUNTANT, AND ADMINISTRATOR..............................36
DISTRIBUTOR................................................................37
INDEPENDENT ACCOUNTANTS AND LEGAL COUNSEL..................................37
- --------------------------------------------------------------------------------
Statement of Additional Information U.S. Global Investors Funds
Page 2 of 37
<PAGE>
GENERAL INFORMATION
The Gold Shares, World Gold and Global Resources Funds are non-diversified
series, and each of the other funds is a diversified series of U.S. Global
Investors Funds (the "Trust"), an open-end management investment company. The
Trust was originally incorporated in Texas in 1969 as United Services Funds,
Inc. and reorganized as a Massachusetts business trust on July 31, 1984. The
Trust changed its name to U.S. Global Investors Funds on February 24, 1997.
On July 1, 1998 the following funds changed their names by deleting the letters
U.S. from the beginning of their names: Gold Shares Fund, World Gold Fund,
Global Resources Fund, Real Estate Fund, All American Fund, Income Fund and Tax
Free Fund. Also on July 1, 1998 United Services Near-Term Tax Free Fund changed
its name to Near-Term Tax Free Fund.
The assets received by the Trust from the issue or sale of shares of each of the
funds, and all income, earnings, profits and proceeds thereof, subject only to
the rights of creditors, are separately allocated to 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.
The Trust's first amended and restated 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 that 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.
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<PAGE>
FUND POLICIES
The following information supplements the discussion of each fund's policies
discussed in the funds' prospectus.
INVESTMENT RESTRICTIONS. If a percentage investment 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 following restrictions.
FUNDAMENTAL INVESTMENT RESTRICTIONS. Each fund will not change any of the
following investment restrictions, without the affirmative vote of a majority of
the outstanding voting securities of the fund, which, as used herein, means the
lesser of (1) 67% of the fund's outstanding shares present at a meeting at which
more than 50% of the outstanding shares of the fund are represented either in
person or by proxy, or (2) more than 50% of the 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 Opportunity 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
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<PAGE>
two consecutive years or more, including the operation of predecessors, and
that have not defaulted in the payment of any debt within such two years.
(This 10% restriction includes the 2% restriction on warrants described in
(12)
below.)
10. Invest more than 25% of its total assets in securities of companies
principally engaged in any one industry (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 Near-Term Tax Free Fund and
China Region Fund apply to only 75% of the value of their respective gross
assets.) These limitations do not apply to the World Gold, Gold Shares and
Global Resources Funds, which are non-diversified funds.
12. The Gold Shares Fund may not invest more than 2% of the value of its net
assets in marketable warrants.
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 noon
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 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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<PAGE>
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.
INVESTMENT STRATEGIES AND RISKS
The following information supplements the discussion of each fund's investment
strategies and risks 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 may be
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 may have 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 specific securities or
the China markets in general. Such securities could decline significantly in
value prior to the
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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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. 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.
COMMON INVESTMENT STRATEGIES AND RELATED RISKS
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 fund will fluctuate.
FOREIGN SECURITIES. The gold and natural resources funds and the equity funds
may invest in foreign securities. 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 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 the 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.
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<PAGE>
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.
AMERICAN DEPOSITORY RECEIPTS. American Depositary Receipts ("ADRs") represent
shares of foreign issuers. ADRs are typically issued by a U.S. bank or trust
company and evidence ownership of underlying securities issued by a foreign
corporation. Generally, ADRs in registered form are intended for use in the U.S.
securities market, and ADRs in bearer form are intended for use in securities
markets outside the United States. ADRs 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 ADRs are not
obligated to disclose material information in the United States; therefore,
there may be less information available regarding such issuers. There may not be
a correlation between such information and the market value of the ADRs. For
purposes of the fund's investment policies, the fund's investment in ADRs will
be deemed to be investments in the underlying securities.
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 the fund. Investing in
emerging markets is considered speculative and
involves the risk of total loss.
Risks of investing in emerging markets include:
(1) the risk that the fund's assets may be exposed to nationalization,
expropriation, 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 market place, 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;
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<PAGE>
(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;
(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 sub-custodians 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 the
fund's 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
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<PAGE>
(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 the
fund will not invest more than 15% of its net assets in illiquid
securities.
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.
SECURITIES LENDING. 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, a fund could experience delays and costs in
recovering the securities lent. A 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. A 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.
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.
LOWER-RATED SECURITIES. The gold and natural resources funds and the equity
funds may invest in lower-rated debt securities (commonly called "junk bonds")
which may be subject to certain risk factors to which other securities are not
subject to the same degree. An economic downturn tends to disrupt the market for
lower-rated bonds and adversely affect their values. Such an economic downturn
may be expected to result in increased price volatility of lower-rated bonds and
of the value of a fund's shares, and an increase in issuers' defaults on such
bonds.
Also, many issuers of lower-rated bonds are substantially leveraged, which may
impair their ability to meet their obligations. In some cases, the securities in
which a fund invests are subordinated to the prior payment of senior
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<PAGE>
indebtedness, thus potentially limiting the fund's ability to recover full
principal or to receive payments when senior securities are in default.
The credit rating of a security does no necessarily address its market value
risk. Also, ratings may, from time to time, be changed to reflect developments
in the issuer's financial condition. Lower-rated securities held by a fund have
speculative characteristics that are apt to increase in number and significance
with each lower rating category.
When the secondary market for lower-rated bonds becomes increasingly illiquid,
or in the absence of readily available market quotations for lower-rated bonds,
the relative lack of reliable, objective data makes the responsibility of the
Trustees to value such securities mor difficult, and judgment plays a greater
role in the valuation of portfolio
securities.
Also, increased illiquidity of the market for lower-rated bonds may affect a
fund's ability to dispose of portfolio securities at a desirable price.
In addition, if a fund experiences unexpected net redemptions, it could be
forced to sell all or some of its lower-rated bonds without regard to their
investment merits, thereby decreasing the asset base upon which the fund's
expenses can be spread and possibly reducing the fund's rate of return. Prices
of lower-rated bonds have been found to be less sensitive to interest rate
changes and more sensitive to adverse economic changes and individual corporate
developments than more highly rated investments. Certain laws or regulations may
have a material effect on the fund's investments in lower-rated bonds.
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.
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.
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.
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
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<PAGE>
"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 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
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<PAGE>
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.
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.
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<PAGE>
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.
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
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U.S. Global Investors Funds Statement of Additional Information
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<PAGE>
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 "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.
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
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.
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
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Statement of Additional Information U.S. Global Investors Funds
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<PAGE>
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.
TEMPORARY DEFENSIVE INVESTMENTS. For temporary defensive purposes during periods
that, in the Adviser's opinion, present the funds with adverse changes in the
economic, political or securities markets, the funds may seek to protect the
capital value of its assets by temporarily investing up to 100% of its assets
in: U.S. Government securities, short-term indebtedness, money market
instruments, or other investment grade cash equivalents, each denominated in
U.S. dollars or any other freely convertible currency; or repurchase agreements.
When a fund is in a defensive investment position, it may not achieve its
investment objective.
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 of the prospectus. 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.
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
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U.S. Global Investors Funds Statement of Additional Information
Page 21 of 37
<PAGE>
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:
1997 1998 1999
---- ---- ----
Gold Shares Fund $xxx $xxx $xxx
World Gold Fund $xxx $xxx $xxx
Global Resources Fund $xxx $xxx $xxx
China Region Fund $xxx $xxx $xxx
All American Fund $xxx $xxx $xxx
Income Fund $xxx $xxx $xxx
Real Estate Fund $xxx $xxx $xxx
MANAGEMENT OF THE FUND
The Trust's Board of Trustees manages the business affairs of the Trust. The
Trustees establish policies and review and approve contracts and their
continuance. Trustees also elect the officers and select the Trustees to serve
as executive and audit committee members. 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 AGE POSITION PRINCIPAL OCCUPATION
- ------------------------- --- --------- ---------------------------------
John P. Allen 69 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 64 Chairman Chief Executive Officer of
7702 Fondren of the Houston Baptist University.
Houston, Texas 77074 Board Formerly Dean and Professor of
Economics and Finance, College of
Business, University of Texas at
San Antonio.
Clark R. Mandigo 56 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
computers and telecommunications
systems and equipment. Prior to
1985, President of BHP Petroleum
(Americas), Ltd., an oil and gas
exploration and development
company. Director of Palmer
Wireless, Inc., Lone Star
Steakhouse & Saloon, Inc. and
Physician Corporation of America.
Formerly a Director of Datapoint
Corporation. Trustee for
Pauze/Swanson United Services
Funds from November 1993 to
February 1996.
Charles Z. Mann 75 Trustee Business consultant since January
13 Knapton Estates Rd. 1, 1993. Chairman, Bermuda
Turning Point Monetary Authority from 1986 to
Smiths Parish 1992. Executive Vice President of
Bermuda FLBX International Median Limited, a
private investment holding
company, from 1979 to 1985 and
previously general manager of
Bank of N.T. Butterfield & Son,
Ltd., a Bermuda-based bank.
Currently a Director of Bermuda
Electric Light Company, Ltd.;
Overseas Imports, Ltd.; Tyndall
International (Bermuda) Ltd.; Old
Court International Reserves
Ltd.; XL Investments Limited,
Glaxo (Bermuda) Limited.
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Statement of Additional Information U.S. Global Investors Funds
Page 22 of 37
<PAGE>
TRUST
NAME AND ADDRESS AGE POSITION PRINCIPAL OCCUPATION
- ------------------------- --- --------- ---------------------------------
W. W. McAllister, III 57 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 78247 of Bomac Sports Limited d.b.a. SA
Sports Unlimited from 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
W.C.J. van Rensburg 60 Trustee
Professor of Geological Science
and Petroleum Engineering,
Antonio Savings Association and
its successor 6010 Sierra Arbor
Court University of Texas at
Austin. Former Associate
Director, Bureau companies from
1976 to 1982 and Chairman of the
Board from Austin, Texas 78759 of
Economic Geology, University of
Texas. Former 1982 to 1992.
Chairman, Department of
Geosciences, West Texas State
University. Former technical
director of South African
Minerals Bureau and British
Petroleum Professor of Energy
Economics at the Ran Afrikaans
University, Johannesburg, South
Africa.
Frank E. Holmes 1 44 Trustee, Chairman of the Board of
President, Directors and Chief Executive
Chief Officer of the Adviser. Since
Executive October 1989 Mr. Holmes has
Officer, served and continues to serve in
Chief various positions with the
Investment Adviser, its subsidiaries and the
Officer 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 40 Executive President, Corporate Secretary
Vice and General Counsel of the
President, Adviser. Since September 1992 Ms.
Secretary, McGee has served and continues to
General serve in various positions with
Counsel the Adviser, its subsidiaries,
and the investment companies it
sponsors. Before September 1992,
Ms. McGee was a student at St.
Mary's Law School.
David J. Clark 38 Treasurer Chief Financial Officer, Chief
Operating Officer of the Adviser.
Since May 1997 Mr. Clark has
served and continues to serve in
various positions with the
Adviser and the investment
companies 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
University 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.
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U.S. Global Investors Funds Statement of Additional Information
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<PAGE>
COMPENSATION TABLE
TOTAL COMPENSATION FROM TOTAL COMPENSATION FROM
U.S. INVESTORS FUNDS U.S. GLOBAL FUND COMPLEX1
NAME TO BOARD MEMBERS TO BOARD MEMBERS
- ---------------------- ----------------------- -------------------------
E. Douglas Hodo $xxx $xxx
John P. Allen $xxx $xxx
Charles Z. Mann $xxx $xxx
W.C.J. van Rensburg $xxx $xxx
Clark R. Mandigo $xxx $xxx
- -----------------
1 Total compensation paid by U.S. Global Fund Complex for period ended June
30, 1999. As of this date there were fifteen funds in the complex. Messrs.
Holmes and Mandigo serve on all fifteen funds.
PRINCIPAL HOLDERS OF SECURITIES
As of _______, 1999, the officers and Trustees of the Trust, as a group, owned
less than 1% of the outstanding shares of each fund. The Trust is aware of the
following person(s) owning of record, or beneficially, more than 5% of the
outstanding shares of any fund as of ______, 1999.
FUND SHAREHOLDERS PERCENTAGE OWNED TYPE OF OWNERSHIP
---- ------------ ---------------- -----------------
xxxx xxxxx xxxxx xxxxx
xxxx xxxxx xxxxx xxxxx
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.
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Statement of Additional Information U.S. Global Investors Funds
Page 24 of 37
<PAGE>
MANAGEMENT FEES
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. The Adviser has
contractually limited total Fund operating expenses to not exceed 1.00% for the
All American Fund, 0.70% for the Tax Free Fund and Near-Term Tax Free Fund and
0.40% for the Government Securities Savings Fund on an annualized basis through
June 30, 2000, and until such later date as the Adviser determines. For the last
three fiscal years ended June 30, 1999, the funds paid the following management
fees (net of expenses paid by the adviser or voluntary fee waivers):
FUND 1997 1998 1999
----------------------------------- ---- ---- ----
Gold Shares Fund xxxx xxxx xxxx
World Gold Fund xxxx xxxx xxxx
Global Resources Fund xxxx xxxx xxxx
China Region Fund xxxx xxxx xxxx
All American Fund xxxx xxxx xxxx
Income Fund xxxx xxxx xxxx
Real Estate Fund xxxx xxxx xxxx
Tax Free Fund xxxx xxxx xxxx
Near-Term Tax Free Fund xxxx xxxx xxxx
Government Securities Savings Fund xxxx xxxx xxxx
Treasury Securities Cash Fund xxxx xxxx xxxx
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 specified.
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
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U.S. Global Investors Funds Statement of Additional Information
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<PAGE>
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.
ADVISORY FEE SCHEDULE
ANNUAL PERCENTAGE OF AVERAGE DAILY
NAME OF FUND NET ASSETS
------------------------------ ----------------------------------
Gold Shares, 0.75% of the first $250,000,000
All American Equity, and 0.50% of the excess
Income, Tax Free,
and Real Estate Funds
Treasury Securities Cash, 0.50% of the first $250,000,000
and Government Securities and 0.375% of the excess
Savings Funds
World Gold 1.00% of the first $250,000,000
and Global Resources Funds 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
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Statement of Additional Information U.S. Global Investors Funds
Page 26 of 37
<PAGE>
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.
DISTRIBUTION, TRANSFER AGENCY AND OTHER SERVICES
U.S. Global Brokerage, Inc., 7900 Callaghan Road, San Antonio, Texas 78229, a
subsidiary of the Adviser ("U.S. Global Brokerage"), is the principal
underwriter and [exclusive] agent for distribution of the fund's shares. U.S.
Global Brokerage is obligated to use all reasonable efforts, consistent with its
other business, to secure purchasers for the fund's shares, which are offered on
a continuous basis.
Beginning September 3, 1998, U.S. Global Brokerage commenced marketing the fund
and distributing the fund's shares pursuant to a Distribution Agreement between
the Trust and U.S. Global Brokerage (the "Distribution Agreement"). Under the
Distribution Agreement, U.S. Global Brokerage may enter into agreements with
selling brokers, financial planners and other financial representatives for the
sale of the fund's shares. Following such sales, a fund will receive the net
asset value per share and U.S. Global Brokerage will retain the applicable sales
charge, if any, subject to any reallowance obligations of U.S. Global Brokerage
in its selling agreements and/or as set forth in the Prospectus and/or Statement
of Additional Information of the funds with respect to the funds' shares.
Pursuant to the Distribution Agreement, the Trust is responsible for the payment
of all fees and expenses (i) in connection with the preparation, setting in type
and filing of any registration statement under the 1933 Act, and any amendments
thereto, for the issuance of the fund's shares; (ii) in connection with the
registration and qualification of the fund's shares for sale in states in which
the Board of Trustees shall determine it advisable to qualify such shares for
sale; (iii) of preparing, setting in type, printing and mailing any report or
other communication to holders of the fund's shares in their capacity as such;
and (iv) of preparing, setting in type, printing and mailing Prospectuses,
Statements of Additional Information, and any supplements thereto, sent to
existing holders of the fund's shares. To the extent not covered by any
Distribution Plan of the Trust pursuant to Rule 12b-1 of the 1940 Act and/or
agreements between the Trust and investment advisers providing services to the
Trust, U.S. Global Brokerage is responsible for paying the cost of (i) printing
and distributing Prospectuses, Statements of Additional Information and reports
prepared for its use in connection with the offering of the fund's shares for
sale to the public; (ii) any other literature used in connection with such
offering; (iii) advertising in connection with such offering; and (iv) any
additional out-of-pocket expenses incurred in connection with these costs.
The Distribution Agreement continues in effect from year to year, provided
continuance is approved at least annually by either (i) the vote of a majority
of the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Trust, and (ii) the vote of a majority of the Trustees
of the Trust who are not interested persons of the Trust and who are not parties
to the Distribution Agreement or interested persons of any party to the
Distribution Agreement; however, the Distribution Agreement may be terminated at
any time by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust, or by vote of a majority of the outstanding
voting securities of the Trust, on not more than sixty (60) days' written notice
by the Trust. For these purposes, the term "vote of a majority of the
outstanding voting securities" is deemed to have the meaning specified in the
1940 Act and the rules enacted thereunder.
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, 1999, the funds paid the following amounts for transfer
agency fees and expenses:
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U.S. Global Investors Funds Statement of Additional Information
Page 27 of 37
<PAGE>
Gold Shares Fund $xxx
World Gold Fund $xxx
Global Resources Fund $xxx
China Region Fund $xxx
All American Fund $xxx
Income Fund $xxx
Real Estate Fund $xxx
Tax Free Fund $xxx
Government Securities Savings Fund $xxx
Treasury Securities Cash Fund $xxx
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
determined the daily net asset value for each of the funds. For the fiscal
period ended June 30, 1999, the funds paid the following amounts for bookkeeping
and accounting services:
Gold Shares Fund $xxx
World Gold Fund $xxx
Global Resources Fund $xxx
China Region Fund $xxx
All American Fund $xxx
Income Fund $xxx
Real Estate Fund $xxx
Tax Free Fund $xxx
Near-Term Tax Free Fund $xxx
Government Securities Savings Fund $xxx
Treasury Securities Cash Fund $xxx
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 February, 1999. For the three fiscal years ended June 30, 1997, 1998 and
1999, the Trust paid USSI total transfer agency fees and expenses of $xxx, $xxx,
and $xxx, respectively, for all funds.
All fees paid to the Adviser during the fiscal year ended June 30, 1999,
(including management, transfer agency and
accounting fees but net of reimbursements) totaled $xxx.
USSI maintained the books and records of the Trust and of each fund of the Trust
until November 1, 1997, at which
time Brown Brothers Harriman and Co. Assumed such responsibility.
A & B Mailers, Inc., a corporation wholly owned by the Adviser, provides the
Trust with certain mail handling services. The charges for such services have
been negotiated by the Audit Committee of the Trust and A & B Mailers, Inc. Each
service is priced separately. For the fiscal year ended June 30, 1999, the funds
paid A&B Mailers, Inc. $x,xxx for mail handling services.
CERTAIN PURCHASES OF SHARES OF THE FUND
The following information supplements the discussion of how to buy fund shares
as discussed in the prospectus.
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Statement of Additional Information U.S. Global Investors Funds
Page 28 of 37
<PAGE>
Shares of each fund 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 fund are described in the Prospectus. In addition,
shares of the fund may be purchased using stock, so long as the securities
delivered to the Trust meet the investment objectives and concentration policies
of the 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 the fund. On any such "in kind" purchase, the following conditions will
apply:
(1) the securities offered by the investor in exchange for shares of the fund
must not be in any way restricted as to resale or otherwise be illiquid;
(2) securities of the same issuer must already exist in the fund's portfolio;
(3) the securities must have a value that is readily ascertainable (and not
established only by evaluation procedures) as evidenced by a listing on the
NYSE, or Nasdaq-AMEX;
(4) any securities so acquired by the fund shall not comprise over 5% of the
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 the 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 a list
(either in writing or by telephone) to the Trust with a full and exact
description of all of the securities he or she proposes to deliver. The Trust
will advise him or her as to those securities 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 fund
are valued. See the section entitled NET ASSET VALUE in the prospectus. The
number of shares of the 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 is a taxable
transaction and may result in a gain or loss for Federal income tax purposes.
Each investor should consult his or her tax adviser to determine the tax
consequences under Federal and state law of making such an "in kind" purchase.
ADDITIONAL INFORMATION ON REDEMPTIONS
WIRE REDEMPTIONS -- 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 and bank wire instructions are established), or by mailing
instructions with a signature guarantee 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.
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U.S. Global Investors Funds Statement of Additional Information
Page 29 of 37
<PAGE>
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 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.
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Statement of Additional Information U.S. Global Investors Funds
Page 30 of 37
<PAGE>
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, 1999 were x.xx% and
x.xx%, and x.xx% and x.xx%, respectively, with an average weighted maturity
of investments on that date of xx and xx 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) SUP 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 x.xx% x.xx% x.xx%
World Gold Fund x.xx% x.xx% x.xx%
Global Resources Fund x.xx% x.xx% x.xx%
China Region Fund x.xx% x.xx% * n/a
All American Fund x.xx% x.xx% x.xx%
Income Fund x.xx% x.xx% x.xx%
Real Estate Fund x.xx% x.xx% x.xx%
Tax Free Fund x.xx% x.xx% x.xx%
Near-Term Tax Free Fund x.xx% x.xx% x.xx% **
------------------------
* (02/10/94 inception)
** (12/01/90 inception)
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:
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U.S. Global Investors Funds Statement of Additional Information
Page 31 of 37
<PAGE>
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 onthe last day
of the period
The 30-day yield for the 30 days ended June 30, 1999, for each fund was as
follows:
Tax Free Fund x.xx%
Near-Term Tax Free Fund x.xx%
TAX EQUIVALENT YIELD
The Tax Free Fund's tax equivalent yield for the 30 days ended June 30, 1999,
was x.xx% 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, 1999, was x.xx% 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 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.
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Statement of Additional Information U.S. Global Investors Funds
Page 32 of 37
<PAGE>
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, the 30% test and the distribution
requirements of the Code, and by provisions of the Code that characterize
certain income or loss as ordinary income or loss rather than capital gain or
loss. Such recognition, characterization and timing rules generally apply to
investments in certain forward currency contracts, foreign currencies and debt
securities denominated in foreign currencies.
For Federal income tax purposes, debt securities purchased by a fund may be
treated as having original issue discount. Original issue discount can generally
be defined as the excess of the stated redemption price at maturity of a debt
obligation over the issue price. Original issue discount is treated as interest
for Federal income tax purposes as earned by a fund, whether or not any income
is actually received, and therefore, is subject to the distribution requirements
of the Code. However, original issue discount with respect to tax-exempt
obligations generally will be excluded from a fund's taxable income, although
such discount will be included in gross income for purposes of the 90% test and
the 30% test described above. Original issue discount with respect to tax-exempt
securities is accrued and added to the adjusted tax basis of such securities for
purposes of determining gain or loss upon sale or at maturity. Generally, the
amount of original issue discount is determined on the basis of a constant yield
to maturity which takes into account
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U.S. Global Investors Funds Statement of Additional Information
Page 33 of 37
<PAGE>
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 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.
- --------------------------------------------------------------------------------
Statement of Additional Information U.S. Global Investors Funds
Page 34 of 37
<PAGE>
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 includable 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.
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
- --------------------------------------------------------------------------------
U.S. Global Investors Funds Statement of Additional Information
Page 35 of 37
<PAGE>
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. Transactions in
forward currency contracts may also result in the loss of the holding period of
underlying securities for purposes of the 30% of gross income test. 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.
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.
- --------------------------------------------------------------------------------
Statement of Additional Information U.S. Global Investors Funds
Page 36 of 37
<PAGE>
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, 1201 Louisiana, Suite 2900, Houston, Texas
77002-5678, serves as the independent accountants for the Trust.
Goodwin, Procter & Hoar LLP, Exchange Place, Boston, Massachusetts 02109, serves
as legal counsel to the Trust.
- --------------------------------------------------------------------------------
U.S. Global Investors Funds Statement of Additional Information
Page 37 of 37
- --------------------------------------------------------------------------------
PART C: OTHER INFORMATION
- --------------------------------------------------------------------------------
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS
The following exhibits are incorporated by reference to the previously filed
documents indicated below, except as noted.
(a) First Amended and Restated Master Trust Agreement, dated May 19, 1995,
incorporated by reference from Post- Effective Amendment No. 78 to
Registration Statement, included herein for purposes of entering into EDGAR
date base.
1. 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).
2. 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).
(b) By-laws, incorporated by reference from Post-Effective Amendment No. 44 to
Registration Statement, included
herein for purposes of entering into EDGAR date base.
(c) Instruments Defining Rights of Security Holders. Not applicable
(d) Advisory Agreement with U.S. Global Investors, Inc., dated October 1989
incorporated by reference from Post- Effective Amendment No. 62, included
herein for purposes of entering into EDGAR date base.
1. Sub-Advisory Agreement between Registrant, U.S. Global Investors, Inc.,
and Goodman & Co., dated April 24, 1998, incorporated by reference from
N-SAR filed August 26, 1998 (EDGAR Accession No.
0000101507-98-000031).
(e) Distribution Agreement between Registrant and U.S. Global Brokerage, Inc.
dated September 3, 1998, included herein.
1. 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).
(f) Bonus or Profit Sharing Contracts. Not applicable
(g) Custodian Agreement between 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).
(h) Transfer Agency Agreement, as amended, between Registrant and United
Shareholder Services, Inc. dated November 1, 1988, incorporated by
reference to Post Effective Amendment No. 79 filed September 3, 1996 (EDGAR
Accession No. 0000101507-96-000065).
(i) Opinion of Goodwin, Procter & Hoar incorporated by reference from
Post-Effective-Amendment No. 59.
1. Opinion of Goodwin Procter & Hoar incorporated by reference from
Post-Effective amendment No. 74.
2. Opinion of Goodwin Procter & Hoar LLP, dated ___________________, 1999,
to be included with definitive
filing.
(j) Consent of independent accountants, PricewaterhouseCoopers LLP, dated
_________________, 1999, to be included with definitive filing.
<PAGE>
(k) Omitted Financial Statements. Not applicable
(l) Initial Capital Agreements. Not applicable.
(m) Rule 12b-1 Plan. Not applicable
(n) Rule 18f-3 Plan. Not applicable.
(o) Power of Attorney dated August 13, 1999, included herein.
ITEM 24. 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 25. 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 pindemnitee 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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
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 "Fund Management" in the Prospectus and
"Investment Advisory Services" in the Statement of Additional Information.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) U.S. Global Brokerage, Inc., a wholly owned subsidiary of U.S. Global
Investors, Inc., is registered as a limited- purpose broker/dealer for the
purpose of distributing U.S. Global Investors Funds and U.S. Global
Accolade Funds shares, effective September 3, 1998.
<PAGE>
(b) The following table lists, for each director and officer of U.S. Global
Investors Funds, the information indicated.
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
--------------------- ----------------------- ---------------------
Anthony A. Rabago Director Vice President
7900 Callaghan Road President
San Antonio, TX 78229
David J. Clark Chief Financial Officer Treasurer
7900 Callaghan Road
San Antonio, TX 78229
Elias Suarez Vice President Vice President,
7900 Callaghan Road Institutional Sales
San Antonio, TX 78229
Patrick J. Klumpyan Secretary Vice President,
7900 Callaghan Road Shareholder Services
San Antonio, TX 78229
(c) Not applicable
ITEM 28. 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,
fund accountant, and administrator for U.S. Global Accolade Funds are maintained
at 40 Water Street, Boston, Massachusetts 02109.
ITEM 29. MANAGEMENT SERVICES
Not applicable
ITEM 30. UNDERTAKINGS
Not applicable
<PAGE>
SIGNATURES
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(b) 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, thereto duly authorized in the city of San Antonio, State of
Texas, on the 27th day of August, 1999
U.S. GLOBAL INVESTORS FUNDS
By: /s/ Frank E. Holmes
----------------------------------
Frank E. Holmes
President, Chief Executive Officer
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 August 27, 1999
- -----------------------------------
John P. Allen
*/S/ EDWARD D. HODO Trustee August 27, 1999
- -----------------------------------
Edward D. Hodo
*/S/ FRANK E. HOLMES Trustee, President, August 27, 1999
- ----------------------------------- Chief Executive Officer
Frank E. Holmes
*/S/ CLARK R. MANDIGO Trustee August 27, 1999
- -----------------------------------
Clark R. Mandigo
*/S/ CHARLES Z. MANN Trustee August 27, 1999
- -----------------------------------
Charles Z. Mann
*/S/ WALTER "BO" W. MCALLISTER, III Trustee August 27, 1999
- -----------------------------------
Walter "Bo" W. McAllister, III
*/S/ W.C.J. VAN RENSBURG Trustee August 27, 1999
- -----------------------------------
W.C.J. van Rensburg
/S/ SUSAN B. MC GEE
- ----------------------------------- Executive Vice President August 27, 1999
Susan B. McGee Secretary,
General Counsel
*BY: /S/ SUSAN B. MC GEE
- -----------------------------------
Susan B. McGee
Attorney-in-Fact under
Power of Attorney
dated August 13, 1999
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
(a) First Amended and Restated Master Trust Agreement, dated May
19, 1995, incorporated by reference from Post- Effective
Amendment No. 78 to Registration Statement, included herein
for purposes of entering into EDGAR date base.
(b) By-laws, incorporated by reference from Post-Effective
Amendment No. 44 to Registration Statement, included herein
for purposes of entering into EDGAR date base.
(d) Advisory Agreement with U.S. Global Investors, Inc., dated
October 1989 incorporated by reference from Post-Effective
Amendment No. 62, included herein for purposes of entering
into EDGAR date base.
(e) Distribution Agreement between Registrant and U.S. Global
Brokerage, Inc. dated September 3, 1998, included herein.
(o) Power of Attorney dated August 13, 1999, included herein.
UNITED SERVICES FUNDS
FIRST AMENDED AND RESTATED
MASTER TRUST AGREEMENT
May 19, 1995
(C) 1995 Goodwin, Procter & Hoar
All Rights Reserved
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - NAME AND DEFINITIONS
Section 1.1 Name and Principal Office.........................1
Section 1.2 Definitions.......................................2
(a) The "Trust".................................................2
(b) "Trustees"..................................................2
(c) "Shares"....................................................2
(d) "Series" ..................................................2
(e) "Shareholder"...............................................2
(f) The "1940 Act"..............................................2
(g) The term "Commission".......................................2
(h) "Declaration of Trust"......................................2
(i) "By-Laws"...................................................2
(j) "class" ..................................................2
ARTICLE II - PURPOSE OF TRUST...............................................2
ARTICLE III - THE TRUSTEES
Section 3. 1 Number, Designation, Election, Term, etc..............3
(a) Trustees ..................................................3
(b) Number ..................................................3
(c) Election and Term...........................................3
(d) Resignation and Retirement..................................3
(e) Removal.....................................................3
(f) Vacancies...................................................3
(g) Effect of Death, Resignation, etc...........................4
(h) No Accounting...............................................4
Section 3.2 Powers of Trustees....................................4
(a) Investments.................................................5
(b) Disposition of Assets.......................................5
(c) Ownership Powers............................................5
(d) Subscription................................................5
(e) Form of Holding.............................................5
(f) Reorganization, etc.........................................5
(g) Voting Trusts, etc..........................................6
(h) Compromise..................................................6
(i) Partnerships, etc...........................................6
(j) Borrowing and Security......................................6
(k) Guarantees, etc.............................................6
<PAGE>
PAGE
(1) Insurance..................................................6
(m) Pensions, etc..............................................6
(n) Distribution Plans.........................................6
Section 3.3 Certain Contracts....................................7
(a) Advisory...................................................7
(b) Administration.............................................7
(c) Distribution...............................................7
(d) Custodian and Depository...................................7
(e) Transfer and Dividend Disbursing Agency....................7
(f) Shareholder Servicing......................................7
(g) Accounting.................................................8
Section 3.4 Payment of Trust Expenses and
Compensation of Trustees..;.....................................8
Section 3.5 Ownership of Assets of the Trust.. ..................9
ARTICLE IV - SHARES........................................................9
Section 4.1 Description of Shares................................9
Section 4.2 Establishment and Designation of Sub-Trusts
and Classes..................................................10
(a) Assets Belonging to Sub-Trusts............................11
(b) Liabilities Belonging to Sub-Trusts.......................11
(c) Dividends.................................................12
(d) Liquidation...............................................12
(e) Voting 12
(f) Redemption by Shareholder.................................13
(g) Redemption by Trust.......................................13
(h) Net Asset Value...........................................13
(i) Transfer ................................................14
(j) Equality ................................................14
(k) Fractions.................................................14
(1) Conversion Rights.........................................14
(m) Class Differences.........................................15
Section 4.3 Ownership of Shares.................................15
Section 4.4 Investments in the Trust............................15
Section 4.5 No Pre-emptive Rights...............................15
Section 4.6 Status of Shares and Limitation of
Personal Liability.............................................15
<PAGE>
PAGE
ARTICLE V - SHAREHOLDERS' VOTING POWERS AND MEETINGS......................16
Section 5.1 Voting Powers.......................................16
Section 5.2 Meetings............................................16
Section 5.3 Record Dates........................................17
Section 5.4 Quorum and Required Vote............................17
Section 5.5 Action by Written Consent...........................17
Section 5.6 Inspection of Records...............................17
Section 5.7 Additional Provisions...............................17
Section 5.8 Shareholder Communications..........................17
ARTICLE VI - LIMITATION OF LIABILITY; INDEMNIFICATION.....................18
Section 6.1 Trustees, Shareholders, etc. Not Personally
Liable; Notice............................................ ...18
Section 6.2 Trustee's Good Faith Action; Expert Advice;
No Bond or Surety..............................................19
Section 6.3 Identification of Shareholders......................19
Section 6.4 Indemnification of Trustees, Officers, etc..........19
Section 6.5 Compromise Payment..................................20
Section 6.6 Indemnification Not Exclusive, etc..................20
Section 6.7 Liability of Third Persons Dealing
with Trustees..................................................21
ARTICLE VII -MISCELLANEOUS................................................21
Section 7.1 Duration and Termination of Trust...................21
Section 7.2 Reorganization......................................21
Section 7.3 Amendments..........................................22
Section 7.4 Filing of Copies; References; Headings..............22
Section 7.5 Applicable Law......................................23
Section 7.6 Resident Agent......................................23
<PAGE>
UNITED SERVICES FUNDS
FIRST AMENDED AND RESTATED
MASTER TRUST AGREEMENT
AGREEMENT AND DECLARATION OF TRUST made at Boston, Massachusetts the 31st
day of July, 1984 by the Trustees hereunder, and by the holders of shares of
beneficial interest to be issued hereunder, is hereby amended and restated in
its entirety this 19th day of May, 1995 in the City of Santa Fe in the State of
New Mexico, as follows:
WITNESSETH
WHEREAS this Trust has been formed to carry on the business of an
investment company; and
WHEREAS the Trustees have agreed to manage all property coming into their
hands as trustees of a Massachusetts business trust in accordance with the
provisions hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the benefit of the holders from time to time
of shares of beneficial interest in this Trust or Sub-Trusts created hereunder
as hereinafter set forth.
ARTICLE I - NAME AND DEFINITIONS
Section 1. 1 NAME AND PRINCIPAL OFFICE. This Trust shall be known as United
Services Funds and the Trustees shall conduct the business of the Trust under
that name or any other name or names as they may from time to time determine.
The principal office of the Trust shall be located at 7900 Callaghan Road, San
Antonio, Texas or at such other location as the Trustees may from time to time
determine.
Section 1.2 DEFINITIONS. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust established
by this Trust Agreement, as amended from time to time, inclusive of each and
every Sub-Trust established hereunder;
(b) "Trustees" refers to the Trustees of the Trust and of each
Sub-Trust hereunder named herein or elected in accordance with Article III;
1
<PAGE>
(c) "Shares" refers to the transferable units of interest into which
the beneficial interest in the Trust and each Sub-Trust of the Trust and/or any
class of any Sub-Trust (as the context may require) shall be divided from time
to time;
(d) "Series" refers to Series of Shares established and designated
under or in accordance with the provisions of Article IV, each of which Series
shall be a Sub-Trust of the Trust;
(e) "Shareholder" means a record owner of Shares;
(f) The " 1940 Act" refers to the Investment Company Act of 1940 and
the Rules and Regulations thereunder, all as amended from time to time;
(g) The term "Commission" shall have the meaning given it in the 1940
Act;
(h) "Declaration of Trust" shall mean this Agreement and Declaration
of Trust as amended or restated from time to time;
(i) "By-Laws" shall mean the By-Laws of the Trust as amended from time
to time; and
(j) "class" refers to any class of Shares of any Series or Sub-Trust
established and designated under or in accordance with the provisions of Article
IV.
ARTICLE 11 - PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company and to
offer Shareholders of the Trust and each Sub-Trust of the Trust one or more
investment programs primarily in securities and debt instruments. The Trust
shall also have the power to invest in precious metals, bullion and gold coins.
ARTICLE III - THE TRUSTEES
Section 3. 1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
(a) Trustees. The Trustees hereof are John P. Allen, P.O. Box 160323,
San Antonio, Texas; William A. Fagan, Jr., P.O. Box 17903, San Antonio, Texas;
E. Douglas Hodo, 7706 Fondren, Houston, Texas; Frank E. Holmes, 7900 Callaghan
Road, San Antonio, Texas; Charles Z. Mann, "Turning Point," 13 Knapton Estates
Road, Smiths, Bermuda; W.C.J. van Rensburg, 6010 Sierra Arbor Court, Austin,
Texas.
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(b) NUMBER. The Trustee(s) serving as such, whether named above or
hereafter becoming a Trustee, may increase or decrease the number of Trustees to
a number other than the number theretofore determined. No decrease in the number
of Trustees shall have the effect of removing any Trustee from office prior to
the expiration of his term, but the number of Trustees may be decreased in
conjunction with the removal of a Trustee pursuant to subsection (e) of this
Section 3.1.
(c) ELECTION AND TERM. The Trustees shall be elected by Shareholders
of the Trust. Each Trustee, whether named above or hereafter becoming a Trustee,
shall serve as a Trustee of the Trust and of each Sub-Trust hereunder during the
lifetime of this Trust and until its termination as hereinafter provided except
as such Trustee sooner dies, resigns or is removed. Subject to Section 16(a) of
the 1940 Act, the Trustees may elect their own successors and may, pursuant to
Section 3.1 (f) hereof, appoint Trustees to FILL vacancies.
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign his trust or
retire as a Trustee, by written instrument signed by him and delivered to the
other Trustees or to any officer of the Trust, and such resignation or
retirement shall take effect upon such delivery or upon such later date as is
specified in such instrument and shall be effective as to the Trust and each
Sub-Trust hereunder.
(e) REMOVAL. Any Trustee may be removed with or without cause at any
time: (i) by written instrument, signed by at least two-thirds of the number of
Trustees prior to such removal, specifying the date upon which such removal
shall become effective; or (ii) by vote of Shareholders holding not less than
two-thirds of the Shares then outstanding, cast in person or by proxy at any
meeting called for the purpose; or (iii) by a written declaration signed by
Shareholders holding not less than two-thirds of the Shares then outstanding and
filed with the Trust's Custodian. Any such removal shall be effective as to the
Trust and each Sub-Trust hereunder.
(f) VACANCIES. Any vacancy or anticipated vacancy resulting from any
reason, including without limitation the death, resignation, retirement, removal
or incapacity of any of the Trustees, or resulting from an increase in the
number of Trustees by the other Trustees may (but need not unless required by
the 1940 Act) be filled either by a majority of the remaining Trustees, subject
to the provisions of Section 16(a) of the 1940 Act, through the appointment in
writing of such other person as such remaining Trustees in their discretion
shall determine and such appointment shall be effective upon the written
acceptance of the person named therein to serve as a Trustee and agreement by
such person to be bound by the provisions of this Declaration of Trust, except
that any such appointment in anticipation of a vacancy to occur by reason of
retirement, resignation, or increase in number of Trustees to be effective at a
later date shall become effective only at or after the effective date of said
retirement, resignation, or increase in number of Trustees. As soon as any
Trustee so appointed shall have accepted such appointment and shall have agreed
in writing to be bound by this Declaration of Trust and the appointment is
effective, the Trust estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act or conveyance.
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(g) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation,
retirement, removal, or incapacity of the Trustees, or any one of them, shall
not operate to annul or terminate the Trust or any Sub- Trust hereunder or to
revoke or terminate any existing agency or contract created or entered into
pursuant to the terms of this Declaration of Trust.
(h) NO ACCOUNTING. Except to the extent required by the 1940 Act or
under circumstances which would justify his removal for cause, no person ceasing
to be a Trustee as a result of his death, resignation, retirement, removal or
incapacity (nor the estate of any such person) shall be required to make an
accounting to the Shareholders or remaining Trustees upon such cessation.
Section 3.2 POWERS OF TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. Without limiting the
foregoing, the Trustees may adopt By-Laws not inconsistent with this Declaration
of Trust providing for the conduct of the business and affairs of the Trust and
may amend and repeal them to the extent that such By-Laws do not reserve that
right to the Shareholders; they may from time to time in accordance with the
provisions of Section 4.1 hereof establish Sub-Trusts, each such Sub-Trust to
cooperate as a separate and distinct investment medium and with separately
defined investment objectives and policies and distinct investment purpose; they
may from time to time in accordance with the provisions of Section 4.1 hereof
establish classes of Shares of any Series or Sub- Trust or divide the Shares of
any Series or Sub-Trust into classes; they may as they consider appropriate
elect and remove officers and appoint and terminate agents and consultants and
hire and terminate employees, any one or more of the foregoing of whom may be a
Trustee, and may provide for the compensation of all of the foregoing; they may
appoint from their own number, and terminate any one or more committees
consisting of two or more Trustees, including without implied limitation an
executive committee, which may, when the Trustees are not in session and subject
to the 1940 Act, exercise some or all of the power and authority of the Trustees
as the Trustees may determine; in accordance with Section 3.3 they may employ
one or more Advisers, Administrators, Depositories and Custodians and may
authorize any Depository or Custodian to employ subcustodians or agents and to
deposit all or any part of such assets in a system or systems for the central
handling of securities and debt instruments, retain transfer, dividend,
accounting or Shareholder servicing agents or any of the foregoing, provide for
the distribution of Shares by the Trust through one or more distributors,
principal underwriters or otherwise, set record dates or times for the
determination of Shareholders or various of them with respect to various
matters; they may compensate or provide for the compensation of the Trustees,
officers, advisers, administrators, custodians, other agents, consultants and
employees of the Trust or the Trustees on such terms as they deem appropriate;
and in general they may delegate to any officer of the Trust, to any committee
of the Trustees and to any employee, adviser, administrator, distributor,
depository, custodian, transfer and dividend disbursing agent, or any other
agent or consultant of the Trust such authority, powers, functions and duties as
they consider desirable or appropriate for the conduct of the business and
affairs of the Trust, including without implied limitation the power and
authority to act in the name of the Trust and of the Trustees, to sign documents
and to act as attorney-in-fact for the Trustees.
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Without limiting the foregoing and to the extent not inconsistent with the
1940 Act or other applicable law, the Trustees shall have power and authority
for and on behalf of the Trust and each separate Sub-Trust established
hereunder:
(a) INVESTMENTS. To invest and reinvest cash and other property, and
to hold cash or other property uninvested without in any event being bound or
limited by any present or future law or custom in regard to investments by
trustees;
(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the Trust;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise any rights
of ownership, with respect to stock or other securities, debt instruments or
property; and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper, granting to such person or
persons such power and discretion with relation to securities, debt instruments
or property as the Trustees shall deem proper;
(d) SUBSCRIPTION. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities or debt
instruments;
(e) FORM OF HOLDING. To hold any security, debt instrument or
property in a form not indicating any trust, whether in bearer, unregistered or
other negotiable form, or in the name of the Trustees or of the Trust or of any
Sub-Trust or in the name of a custodian, subcustodian or other depository or a
nominee or nominees or otherwise;
(f) REORGANIZATION, ETC. To consent to or participate in any plan for
the reorganization, consolidation or merger of any corporation or issuer, any
security or debt instrument of which is or was held in the Trust; to consent to
any contract, lease, mortgage, purchase or sale of property by such corporation
or issuer, and to pay calls or subscriptions with respect to any security or
debt instrument held in the Trust;
(g) VOTING TRUSTS, ETC. To join with other holders of any securities
or debt instruments in acting through a committee, depository, voting trustee or
otherwise, and in that connection to deposit any security or debt instrument
with, or transfer any security or debt instrument to, any such committee,
depository or trustee, and to delegate to them such power and authority with
relation to any security or debt instrument (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to pay,
such portion of the expenses and compensation of such committee, depository or
trustee as the Trustees shall deem proper;
(h) COMPROMISE. To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any Sub-Trust or any matter in controversy,
including but not limited to claims for taxes;
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(i) PARTNERSHIPS, ETC. To enter into joint ventures, general or
limited partnerships and any other combinations or associations;
(j) BORROWING AND SECURITY. To borrow funds and to mortgage and pledge
the assets of the Trust or any part thereof to secure obligations arising in
connection with such borrowing;
(k) GUARANTEES, ETC. To endorse or guarantee the payment of any notes
or other obligations of any person; to make contracts of guaranty or suretyship,
or otherwise assume liability for payment thereof; and to mortgage and pledge
the Trust property or any part thereof to secure any of or all such obligations;
(1) INSURANCE. To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, consultants, investment advisers, managers,
administrators, distributors, principal underwriters, or independent
contractors, or any thereof (or any person connected therewith), of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such person in
any such capacity, including any action taken or omitted that may be determined
to constitute negligence, whether or not the Trust would have the power to
indemnify such person against such liability;
(m) PENSIONS, ETC. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trust and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust; and
(n) DISTRIBUTION PLANS. To adopt on behalf of the Trust or any
Sub-Trust with respect to any class thereof a plan of distribution and related
agreements thereto pursuant to the terms of Rule 12b-1 of the 1940 Act and to
make payments from the assets of the Trust or the relevant Sub-Trust or
Sub-Trusts pursuant to said Rule 12b-1 Plan.
Except as otherwise provided by the 1940 Act or other applicable law, this
Declaration of Trust or the By-Laws, any action to be taken by the Trustees on
behalf of the Trust or any Sub-Trust may be taken by a majority of the Trustees
present at a meeting of Trustees (a quorum, consisting of at least a majority of
the Trustees then in office, being present), within or without Massachusetts,
including any meeting held by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person
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at a meeting, or by written consents of a majority of the Trustees then in
office (or such larger or different number as may be required by the 1940 Act or
other applicable law).
Section 3.3 CERTAIN CONTRACTS. Subject to compliance with the provisions of
the 1940 Act, but notwithstanding any limitations of present and future law or
custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to time and without limiting the generality of
their powers and authority otherwise set forth herein, enter into one or more
contracts with any one or more corporations, trusts, associations, partnerships,
limited partnerships, other type of organizations, or individuals ("Contracting
Party"), to provide for the performance and assumption of some or all of the
following services, duties and responsibilities to, for or on behalf of the
Trust and/or any Sub-Trust, and/or the Trustees, and to provide for the
performance and assumption of such other services, duties and responsibilities
in addition to those set forth below as the Trustees may determine appropriate:
(a) ADVISORY. Subject to the general supervision of the Trustees and
in conformity with the stated policy of the Trustees with respect to the
investments of the Trust or of the assets belonging to any Sub-Trust of the
Trust (as that phrase is defined in subsection (a) of Section 4.2), to manage
such investments and assets, make investment decisions with respect thereto, and
to place purchase and sale orders for portfolio transactions relating to such
investments and assets;
(b) ADMINISTRATION. Subject to the general supervision of the Trustees
and in conformity with any policies of the Trustees with respect to the
operations of the Trust and each Sub-Trust (including any classes thereof), to
supervise all or any part of the operations of the Trust and each Sub-Trust, and
to provide all or any part of the administrative and clerical personnel, office
space and office equipment and services appropriate for the efficient
administration and operations of the Trust and each Sub-Trust;
(c) DISTRIBUTION. To distribute the Shares of the Trust and each
Sub-Trust (including any classes thereof), to be principal underwriter of such
Shares, and/or to act as agent of the Trust and each Sub- Trust in the sale of
Shares and the acceptance or rejection of orders for the purchase of Shares;
(d) CUSTODIAN AND DEPOSITORY. To act as depository for and to maintain
custody of the property of the Trust and each Sub-Trust and accounting records
in connection therewith;
(e) TRANSFER AND DIVIDEND DISBURSINQ AGENCY. To maintain records of
the ownership of outstanding Shares, the issuance and redemption and the
transfer thereof, and to disburse any dividends declared by the Trustees and in
accordance with the policies of the Trustees and/or the instructions of any
particular Shareholder to reinvest any such dividends;
(f) SHAREHOLDER SERVICING. To provide service with respect to the
relationship of the Trust and its Shareholders, records with respect to
Shareholders and their Shares, and similar matters; and
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(g) ACCOUNTINIG. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties, Shareholders
or otherwise.
The same person may be the Contracting Party for some or all of the
services, duties and responsibilities to, for and of the Trust and/or the
Trustees, and the contracts with respect thereto may contain such terms
interpretive of or in addition to the delineation of the services, duties and
responsibilities provided for, including provisions that are not inconsistent
with the 1940 Act relating to the standard of duty of and the rights to
indemnification of the Contracting Party and others, as the Trustees may
determine. Nothing herein shall preclude, prevent or limit the Trust or a
Contracting Party from entering into sub-contractual arrangements relative to
any of the matters referred to in Sections 3.3(a) through (g) hereof.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
Contracting Party, or of or for any parent or affiliate of any Contracting
Party or that the Contracting Party or any parent or affiliate thereof is a
Shareholder or has an interest in the Trust or any Sub-Trust, or that
(ii) any Contracting Party may have a contrast providing for the
rendering of any similar services to one or more other corporations,
trusts, associations, partnerships, limited partnerships or other
organizations, or have other business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust or any
Sub-Trust and/or the Trustees or disqualify any Shareholder, Trustee or officer
of the Trust from voting upon or executing the same or create any liability or
accountability to the Trust, any Sub-Trust or its Shareholders, provided that in
the case of any relationship on interest referred to in the preceding clause (i)
on the part of any Trustee or officer of the Trust either (x) the material facts
as to such relationship or interest have been disclosed to or are known by the
Trustees not having any such relationship or interest and the contract involved
is approved in good faith by a majority of such Trustees not having any such
relationship or interest (even though such unrelated or disinterested Trustees
are less than a quorum of all of the Trustees), (y) the material facts as to
such relationship or interest and as to the contract have been disclosed to or
are known by the Shareholders entitled to vote thereon and the contract involved
is specifically approved in good faith by vote of the Shareholders, or (z) the
specific contract involved is fair to the Trust as of the time it is authorized,
approved or ratified by the Trustees or by the Shareholders.
Section 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust or any Sub-Trust, or partly out of principal and partly out
of income, and to charge or allocate the same to, between or among such one or
more of the Sub-Trusts and/or one or more classes of Shares
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thereof that may be established and designated pursuant to Article IV, as the
Trustees deem fair, all expenses, fees, charges, taxes and liabilities incurred
or arising in connection with the Trust, any Sub-Trust and/or any class of
Shares thereof, or in connection with the management thereof, including, but not
limited to, the Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, investment adviser, administrator,
distributor, principal underwriter, auditor, counsel, depository, custodian,
transfer agent, dividend disbursing agent, accounting agent, Shareholder
servicing agent, and such other agents, consultants, and independent contractors
and such other expenses and charges as the Trustees may deem necessary or proper
to incur. Without limiting the generality of any other provision hereof, the
Trustees shall be entitled to reasonable compensation from the Trust for their
services as Trustees and may fix the amount of such compensation.
Section 3.5 OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the assets of
the Trust shall at all times be considered as vested in the Trustees.
ARTICLE IV - SHARES
Section 4.1 DESCRIPTION OF SHARES. The beneficial interest in the Trust
shall be divided into Shares, all without par value, but the Trustees shall have
the authority from time to time to divide the Shares into two or more Series of
Shares, (each of which Series of Shares shall be a separate and distinct
Sub-Trust of the Trust, including without limitation those Sub-Trusts
specifically established and designated in Section 4.2), as they deem necessary
or desirable. Each Sub-Trust established hereunder shall be deemed to be a
separate trust under Massachusetts General Laws Chapter 182. The Trustees shall
have exclusive power without the requirement of shareholder approval to
establish and designate such separate and distinct Sub-Trusts, and to fix and
determine the relative rights and preferences as between the shares of the
separate Sub-Trusts as to right of redemption and the price, terms and manner of
redemption, special and relative rights as to dividends and other distributions
and on liquidation, sinking or purchase fund provisions, conversion rights, and
conditions under which the several Sub-Trusts shall have separate voting rights
or no voting rights.
In addition, the Trustees shall have exclusive power, without the
requirement of Shareholder' approval, to issue classes of Shares of any
Sub-Trust or divide the Shares of any Sub-Trust 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 Sub-Trust. The fact that a Sub-Trust shall have initially been established
and designated without any specific establishment or designation of classes
(i.e., that all Shares of such Sub-Trust are initially of a single class), or
that a Sub-Trust shall have more than one established and designated class,
shall not limit the authority of the Trustees to establish and designate
separate classes, or one or more further classes, of said Sub-Trust without
approval of the holders of the initial class thereof, or previously established
and designated class or classes thereof, provided that the establishment and
designation of such further separate classes would not adversely affect the
rights of the holders of the initial or previously established and designated
class or classes.
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The number of authorized Shares and the number of Shares of each Sub-Trust
or class thereof that may be issued is unlimited, and the Trustees may issue
Shares of any Sub-Trust or class thereof for such consideration and on such
terms as they may determine (or for no consideration if pursuant to a Share
dividend or split-up), all without action or approval of the Shareholders. All
Shares when so issued on the terms determined by the Trustees shall be fully
paid and non-assessable (but may be subject to mandatory contribution back to
the Trust as provided in subsection (h) of Section 4.2). The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued and
reacquired of any Sub-Trust or class thereof into one or more Sub-Trusts or
classes thereof that may be established and designated from time to time. The
Trustees may hold as treasury Shares, reissue for such consideration and on such
terms as they may determine, or cancel, at their discretion from time to time,
any Shares of any Sub-Trust or class thereof reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Shares
entitled to be treated as such, to the extent provided or referred to or Section
5.3.
The establishment and designation of any Sub-Trust or of any class of
Shares of any Sub-Trust in addition to those established and designated in
Section 4.2 shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and designation and
the relative rights and preferences of the Shares of such Sub-Trust or class, or
as otherwise provided in such instrument. At any time that there are no Shares
outstanding of any particular Sub-Trust or class previously established and
designated the Trustees may by an instrument executed by a majority of their
number (or by an instrument executed by an officer of the Trust pursuant to the
vote of a majority of the Trustees) abolish that Sub-Trust or class and the
establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any Organization in
which any such person is interested may acquire, own, hold and dispose of Shares
of any Sub-Trust (including any classes thereof) of the Trust to the same extent
as if such person were not a Trustee, officer or other agent of the Trust; and
the Trust may issue and sell or cause to be issued and sold and may purchase
Shares of any Sub-Trust (including any classes thereof) from any such person or
any such organization subject only to the general limitations, restrictions or
other provisions applicable to the sale or purchase of Shares of such Sub-Trust
(including any classes thereof) generally.
Section 4.2 ESTABLISHMENT AND DESIGNATION OF SUB-TRUSTS AND CLASSES.
Without limiiting the authority of the Trustees set forth in Section 4.1 to
establish and designate any further Sub-Trusts, the Trustees hereby establish
and designate fifteen Sub-Trusts: U.S. Gold Shares Fund, U.S. Global Resources
Fund, U.S. World Gold Fund, U.S. Treasury Securities Cash Fund, U.S. All
American Equity Fund, U.S. Income Fund, U.S. Tax Free Fund, U.S. Government
Securities Savings Fund, U.S. Real Estate Fund, United Services Near- Term Tax
Free Fund, United Services Intermediate Treasury Fund; United Services Special
Term Government Fund, and China Region Opportunity Fund. Each such Sub-Trust
shall consist of one class of Shares.
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The Shares of each such Sub-Trust and class thereof and any Shares of any
further Sub-Trusts or classes thereof that may from time to time be established
and designated by the Trustees shall (unless the Trustees otherwise determine
with respect to some further Sub-Trust or class thereof at the time of
establishing and designating the same) have the following relative rights and
preferences:
(a) ASSETS BELONGING TO SUB-TRUSTS. All consideration received by the
Trust for the issue or sale of Shares of a particular Sub-Trust or any classes
thereof, together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds in whatever
form the same may be, shall be held by the Trustees in trust for the benefit of
the holders of Shares of that Sub-Trust or class thereof and shall irrevocably
belong to that Sub- Trust (and be allocable to any classes thereof) for all
purposes, and shall be so recorded upon the books of account of the Trust. Such
consideration, assets, income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, together with any General Items
allocated to that Sub-Trust as provided in the following sentence, are herein
referred to as "assets belonging to" that Sub-Trust (and allocable to any
classes thereof). In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular Sub-Trust (collectively "General
Items"), the Trustees shall allocate such General Items to and among any one or
more of the Sub-Trusts established and designated from time to time in such
manner and on such basis as they, in their sole discretion, deem fair and
equitable; and any General Items so allocated to a particular Sub-Trust shall
belong to that Sub-Trust (and be allocable to any classes thereof). Each such
allocation by the Trustees shall be conclusive and binding upon the Shareholders
of all Sub-Trusts (including any classes thereof) for all purposes.
(b) LIABILITIES BELONGING. TO SUB-TRUSTS. The assets belonging to each
particular Sub- Trust shall be charged with the liabilities in respect of that
Sub-Trust and all expenses, costs, charges and reserves attributable to that
Sub-Trust, and any general liabilities, expenses, costs, charges or reserves of
the Trust which are not readily identifiable as belonging to any particular
Sub-Trust shall be allocated and charged by the Trustees to and among any one or
more of the Sub-Trusts established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion deem fair and
equitable. In addition, the liabilities in respect of a particular class of
Shares of a particular Sub-Trust and all expenses, costs, charges and reserves
belonging to that class of Shares, and any general liabilities, expenses, costs,
charges or reserves of that particular Sub-Trust which are not readily
identifiable as belonging to any particular class of Shares of that Sub-Trust
shall be allocated and charged by the Trustees to and among any one or more of
the classes of Shares of that Sub-Trust established and designated from time to
time in such manner and on such basis as the Trustees in their sole discretion
deem fair and equitable. The liabilities, expenses, costs, charges and reserves
allocated and so charged to a Sub-Trust or class thereof are herein referred to
as "liabilities belonging to" that Sub-Trust or class thereof. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
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conclusive and binding upon the Shareholders of all Sub-Trusts (including any
classes thereof) for all purposes. Any creditor of any Sub-Trust may look only
to the assets of that Sub-Trust to satisfy such creditor's debt.
(c) DIVIDENDS. Dividends and distributions on Shares of a particular
Sub-Trust or any class thereof may be paid with such frequency as the Trustees
may determine, which may be daily or otherwise pursuant to a standing resolution
or resolutions adopted only once or with such frequency as the Trustees may
determine, to the holders of Shares of that Sub-Trust or class, from such of the
income and capital gains, accrued or realized, from the assets belonging to that
Sub-Trust, or in the case of a class, belonging to that Sub-Trust and allocable
to that class, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that Sub-Trust or class. All dividends and
distributions on Shares of a particular Sub-Trust or class thereof shall be
distributed pro rata to the holders of Shares of that Sub-Trust or class in
proportion to the number of Shares of that Sub-Trust or class held by such
holders at the date and time of record established for the payment of such
dividends or distributions, except that in connection with any dividend or
distribution program or procedure the Trustees may determine that no dividend or
distribution shall be payable on Shares as to which the Shareholder's purchase
order and/or payment have not been received by the time or times established by
the Trustees under such program or procedure. Such dividends and distributions
may be made in cash or Shares of that Sub-Trust or class or a combination
thereof as determined by the Trustees or pursuant to any program that the
Trustees may have in effect at the time for the election by each Shareholder of
the mode of the making of such dividend or distribution to that Shareholder. Any
such dividend or distribution paid in Shares will be paid at the net asset value
thereof as determined in accordance with subsection (h) of Section 4.2.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act, to determine which items shall be treated as income and which
items as capital; and each such determination and allocation shall be conclusive
and binding upon the Shareholders.
(d) LIQUIDATION. In the event of the liquidation or dissolution of the
Trust, the Shareholders of each Sub-Trust or any class thereof that has been
established and designated shall be entitled to receive, when and as declared by
the Trustees, the excess of the assets belonging to that Sub-Trust, or in the
case of a class, belonging to that Sub-Trust and allocable to that class, over
the liabilities belonging to that Sub-Trust or class. The assets so
distributable to the Shareholders of any particular Sub-Trust or class thereof
shall be distributed among such Shareholders in proportion to the number of
Shares of that Sub-Trust or class thereof held by them and recorded on the books
of the Trust. The liquidation of any particular Sub-Trust or class thereof may
be authorized by vote of a majority of the Trustees then in office subject to
the approval of a majority of the outstanding voting Shares of that Sub-Trust or
class thereof, as defined in the 1940 Act.
(e) VOTING. On each matter submitted to a vote of the Shareholders,
each holder of a Share of each Sub-Trust shall be entitled to one vote for each
whole Share and for a proportionate fractional vote for each fractional Share
standing in his name on the books of the
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Trust and all shares of each Sub-Trust or class thereof shall vote as a separate
class, except as to voting for Trustees and as otherwise required by the 1940
Act. As to any matter which does not affect the interest of a particular
Sub-Trust or class thereof, only the holders of Shares of one or more of the
affected Sub-Trusts or classes thereof shall be entitled to vote.
(f) REDEMPTION BY SHAREHOLDER. Each holder of Shares of a particular
Sub-Trust or any class thereof shall have the right at such times as may be
permitted by the Trust, but no less frequently than once each week, to require
the Trust to redeem all or any part of his Shares of that Sub-Trust or class
thereof at a redemption price equal to the net asset value per Share of that
Sub-Trust or class thereof next determined in accordance with subsection (h) of
this Section 4.2 after the Shares are properly tendered for redemption. Payment
of the redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that conditions
exist which make payment wholly in cash unwise or undesirable, the Trust may
make payment wholly or partly in securities or other assets belonging to the
Sub- Trust of which the Shares being redeemed are part at the value of such
securities or assets used in such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of any
Sub-Trust or class thereof to require the Trust to redeem Shares of that
Sub-Trust during any period or at any time when and to the extent permissible
under the 1940 Act.
(g) REDEMPTION BY TRUST. Each Share of each Sub-Trust or class thereof
that has been established and designated is subject to redemption by the Trust
at the redemption price which would be applicable if such Share was then being
redeemed by the Shareholder pursuant to subsection (f) of this Section 4.2: (a)
at any time, if the Trustees determine in their sole discretion that failure to
so redeem may have materially adverse consequences to the holders of the Shares
of the Trust or any Sub-Trust thereof or class thereof, or (b) upon such other
conditions as may from time to time be determined by the Trustees and set forth
in the then current Prospectus of the Trust with respect to maintenance of
Shareholder accounts of a minimum amount. Upon such redemption the holders of
the Shares so redeemed shall have no further right with respect thereto other
than to receive payment of such redemption price.
(h) NET ASSET VALUE. The net asset value per Share of any Sub-Trust
shall be (a) in the case of a Sub-Trust whose Shares are not divided into
classes, the quotient obtained by dividing the value of the net assets of that
Sub-Trust (being the value of the assets belonging to that Sub-Trust less the
liabilities belonging to that Sub-Trust) by the total number of Shares of that
Sub-Trust outstanding, and (b) in the case of a class of Shares of a Sub-Trust
whose Shares are divided into classes, the quotient obtained by dividing the
value of the assets of that Sub-Trust allocable to such class (less the
liabilities belonging to such class) by the total number of Shares of such class
outstanding; all determined in accordance with the methods and procedures,
including without limitation those with respect to rounding, established by the
Trustees from time to time.
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The Trustees may determine to maintain the net asset value per Share of any
Sub-Trust at a designated constant dollar amount and in connection therewith may
adopt procedures not inconsistent with the 1940 Act for the continuing
declarations of income attributable to that Sub-Trust as dividends payable in
additional Shares of that Sub-Trust at the designated constant dollar amount and
for the handling of any losses attributable to that Sub-Trust. Such procedures
may provide that in the event of any loss each Shareholder shall be deemed to
have contributed to the capital of the Trust attributable to that Sub-Trust his
pro rata portion of the total number of Shares required to be canceled in order
to permit the net asset value per Share of that Sub- Trust to be maintained,
after reflecting such loss, at the designated constant dollar amount. Each
Shareholder of the Trust shall be deemed to have agreed, by his investment in
any Sub-Trust with respect to which the Trustees shall have adopted any such
procedure, to make the contribution referred to in the preceding sentence in the
event of any such loss.
(i) TRANSFER. All Shares of each particular Sub-Trust or class thereof
shall be transferable, but transfers of Shares of a particular Sub-Trust or
class thereof will be recorded on the Share transfer records of the Trust
applicable to that Sub-Trust or class only at such times as Shareholders shall
have the right to require the Trust to redeem Shares of that Sub-Trust or class
and at such other times as may be permitted by the Trustees.
(j) EQUALITY. Except as provided herein or in the instrument
designating and establishing any class of Shares or any Sub-Trust, all Shares of
each particular Sub-Trust or class thereof shall represent an equal
proportionate interest in the assets belonging to that Sub-Trust, or in the case
of a class, belonging to that Sub-Trust and allocable to that class (subject to
the liabilities belonging to that Sub-Trust or class), and each Share of any
particular Sub-Trust or class shall be equal to each other Share of that
Sub-Trust or class; but the provisions of this sentence shall not restrict any
distinctions permissible under subsection (c) of this Section 4.2 that may exist
with respect to dividends and distributions on Shares of the same Sub-Trust or
class. The Trustees may from time to time divide or combine the Shares of any
particular Sub-Trust or class into a greater or lesser number of Shares of that
Sub-Trust or class without thereby changing the proportionate beneficial
interest in the assets belonging to that Sub-Trust or class or in any way
affecting the rights of Shares of any other Sub-Trust or class.
(k) Fractions. Any fractional Share of any Sub-Trust or class, if any
such fractional Share is outstanding, shall carry proportionately all the rights
and obligations of a whole Share of that Sub-Trust or class, including rights
and obligations with respect to voting, receipt of dividends and distributions,
redemption of Shares, and liquidation of the Trust.
(1) CONVERSION RIGHTS. Subject to compliance with the requirements of
the 1940 Act, the Trustees shall have the authority to provide that holders of
Shares of any Sub-Trust or class thereof shall have the right to convert said
Shares into Shares of one or more other Sub-Trust or class thereof in accordance
with such requirements and procedures as may be established by the Trustees.
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(m) CLASS DIFFERENCES. The relative rights and preferences of the
classes of any Sub-Trust may differ in such other respects as the Trustees may
determine to be appropriate in their sole discretion, provided that such
differences are set forth in the resolutions adopted by the Trustees or the
instrument establishing and designating such classes and executed by a majority
of the Trustees (or by an instrument executed by an officer of the Trust
pursuant to a vote of a majority of the Trustees).
Section 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be recorded
on the books of the Trust or of a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Sub-Trust and each
class thereof that has been established and designated. No certificates
certifying the ownership of Shares need be issued except as the Trustees may
otherwise determine from time to time. The Trustees may make such rules as they
consider appropriate for the assurance of Shares certificates, the use of
facsimile signatures, the transfer of Shares and similar matters. The record
books of the Trust as kept by the Trust or any transfer or similar agent, as the
case may be, shall be conclusive as to who are the Shareholders and as to the
number of Shares of each Sub-Trust and class thereof held from time to time by
each such Shareholder.
Section 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept investments
in the Trust and each Sub-Trust thereof from such persons and on such terms and
for such consideration, not inconsistent with the provisions of the 1940 Act, as
they from time to time authorize. The Trustees may authorize any distributor,
principal underwriter, custodian, transfer agent or other person to accept
orders for the purchase of Shares that conform to such authorized terms and to
reject any purchase orders for Shares whether or not conforming to such
authorized terms.
Section 4.5 NO PRE-EMPTIVE RIGHTS. Shareholders shall have no pre-emptive
or other right to subscribe to any additional Shares or other securities issued
by the Trust.
Section 4.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares
shall be deemed to the personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the Trust or any Sub-Trust thereof nor
entitle the representative of any deceased Shareholder to an accounting or to
take any action in court or elsewhere against the Trust or the Trustees, but
only to the rights of said decedent under this Trust. Ownership of Shares shall
not entitle the Shareholder to any title in or to the whole or any part of the
Trust property or right to call for a partition or division of the same or for
an accounting, nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or agent
of the Trust shall have any power to bind personally any Shareholder, nor except
as specifically provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder may
at any time personally agree to pay.
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ARTICLE V - SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 5.1 VOTING POWERS. The Shareholders shall have power to vote only
(i) for the election or removal of Trustees as provided in Section 3.1, (ii)
with respect to any contract with a Contracting Party as provided in Section 3.3
as to which Shareholder approval is required by the 1940 Act, (iii) with respect
to any termination or reorganization of the Trust or any Sub-Trust to the extent
and as provided in Sections 7.1 and 7.2, (iv) with respect to any amendment of
this Declaration of Trust to the extent and as provided in Section 7.3, (v) to
the same extent as the stockholders of a Massachusetts business corporation as
to whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or any Sub-Trust thereof or the Shareholders, (provided, however, that a
shareholder of a particular Sub-Trust shall not be entitled to a derivative or
class action on behalf of any other Sub-Trust (or shareholder of any other
Sub-Trust) of the Trust) and (vi) with respect to such additional matters
relating to the Trust as may be required by the 1940 Act, this Declaration of
Trust, the By-Laws or any registration of the Trust with the Commission (or any
successor agency) or any state, or as the Trustees may consider necessary or
desirable. There shall be no cumulative voting in the election of Trustees.
Shares may be voted in person or by proxy. Proxies may be given orally or in
writing or pursuant to any computerized or mechanical data gathering process
specifically approved by the Trustees. A proxy with respect to Shares held in
the name of two or more persons shall be valid if executed by any one of them
unless at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by law, this
Declaration of Trust or the By-Laws to be taken by Shareholders.
Section 5.2 MEETINGS. No annual or regular meeting of Shareholders is
required. Special meetings of Shareholders may be called by the Trustees from
time to time for the purpose of taking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable. Written notice of any
meeting of Shareholders shall be given or caused to be given by the Trustees by
mailing such notice at least seven days before such meeting, postage prepaid,
stating the time, place and purpose of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust. The Trustees
shall promptly call and give notice of a meeting of Shareholders for the purpose
of voting upon removal of any Trustee of the Trust when requested to do so in
writing by Shareholders holding not less than 10% of the Shares then
outstanding. If the Trustees shall fail to call or give notice of any meeting of
Shareholders for a period of 30 days after written application by Shareholders
holding at least 10% of the Shares then outstanding requesting a meeting be
called for a purpose requiring action by the Shareholders as provided herein or
in the By-Laws, then Shareholders holding at least 10% of the Shares then
outstanding may call and give notice of such meeting, and thereupon the meeting
shall be held in the manner provided for herein in case of call thereof by the
Trustees.
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Section 5.3 RECORD DATES. For the purpose of determining the Shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to participate in any dividend or distribution, or for the
purpose of any other action, the Trustees may from time to time close the
transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine or
without closing the transfer books the Trustees may fix a date and time not more
than 60 days prior to the date of any meeting of Shareholders or other action as
the date and time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or to be treated as a Shareholder of record
for purposes of such other action, even though he has since that date and time
disposed of his Shares, and no Shareholder becoming such after that date and
time shall be so entitled to vote at such meeting or any adjournment thereof or
to be treated as a Shareholder of record for purposes of such other action.
Section 5.4 QUORUM AND REQUIRED VOTE. A majority of the Shares entitled to
vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting without the necessity of further notice. A
majority of the Shares voted, at a meeting of which a quorum is present shall
decide any questions and a plurality shall elect a Trustee, except when a
different vote is required or permitted by any provision of the 1940 Act or
other applicable law or by this Declaration of Trust or the By-Laws.
Section 5.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof as shall be required by the 1940 Act or by
any express provision of this Declaration of Trust or the By-Laws) consent to
the action in writing and such written consents are filed with the records of
the meetings of Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
Section 5.6 INSPECTION OF RECORDS. The records of the Trust shall be open
to inspection by Shareholders to the same extent as is permitted stockholders of
a Massachusetts business corporation under the Massachusetts Business
Corporation Law.
Section 5.7 ADDITIONAL PROVISIONS. The By-Laws may include farther
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
Section 5.8 SHAREHOLDER COMMUNICATIONS. Whenever ten or more Shareholders
of record have been such for at least six months preceding the date of
application, and who hold in the aggregate either Shares having a net asset
value of at least $25,000 or at least 1 % of the outstanding Shares, whichever
is less, shall apply to the Trustees in writing, stating that they wish to
communicate with other Shareholders with a view to obtaining signatures to a
request for a
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Shareholder meeting and accompanied by a form of communication and request which
they wish to transmit, the Trustees shall within five business days after
receipt of such application either (1) afford to such applicants access to a
list of the names and addresses of all Shareholders as recorded on the books of
the Trust or Sub- Trust, as applicable; or (2) inform such applicants as to the
approximate number of Shareholders of record, and the approximate cost of
mailing to them the proposed communication and form of request.
If the Trustees elect to follow the course specified in paragraph (2) above
the Trustees, upon the written request of such applicants, accompanied by a
tender of the material to be mailed and of the reasonable expenses of mailing,
shall, with reasonable promptness, mail such material to all Shareholders of
record at their addresses as recorded on the books, unless within five business
days after such tender the Trustees shall mail to such applicants and FILE with
the Commission, together with a copy of the material to be mailed, a written
statement signed by at least a majority of the Trustees to the effect that in
their opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in such violation of applicable law, and specifying the
basis of such opinion. The Trustees shall thereafter comply with the
requirements of the 1940 Act.
ARTICLE VI - LIMITATION OF LIABILITY: INDEMNIFICATION
Section 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE: NOTICE. All
persons extending credit to, contracting with or having any claim against the
Trust shall look only to the assets of the Sub-Trust with which such person
dealt for payment under such credit, contract or claim; and neither the
Shareholders of any Sub-Trust nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, nor any other Sub-Trust
shall be personally liable therefor. Every note, bond, contract, instrument,
certificate or undertaking and every other act or thing whatsoever executed or
done by or on behalf of the Trust, any Sub-Trust or the Trustees or any of them
in connection with the Trust shall be conclusively deemed to have been executed
or done only by or for the Trust (or the Sub-Trust) or the Trustees and not
personally. Nothing in this Declaration of Trust shall protect any Trustee or
officer against any liability to the Trust or the Shareholders to which such
Trustee or officer would otherwise be subject by reason of wilful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee or of such officer.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that this
Declaration of Trust is on file with the Secretary of The Commonwealth of
Massachusetts and shall recite to the effect that the same was executed - or
made by or on behalf of the Trust or by them as Trustees or Trustee or as
officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually but
are binding only upon the assets and property of the Trust, or the particular
Sub-Trust in question, as the case may be, but the omission thereof shall not
operate to bind any Trustees or Trustee or officers or officer or Shareholders
or Shareholder individually.
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Section 6.2 TRUSTEE'S GOOD FAITH ACTION: EXPERT ADVICE: NO BOND OR SURETY.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his own wilful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing else, and
shall not be liable for errors of judgment or mistakes of fact or law. Subject
to the foregoing, (a) the Trustees shall not be responsible or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, consultant,
adviser, administrator, distributor or principal underwriter, custodian or
transfer, dividend disbursing, Shareholder servicing or accounting agent of the
Trust, nor shall any Trustee be responsible for the act or omission of any other
Trustee; (b) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice; and (c) in
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written reports
made to the Trustees by any officer appointed by them, any independent public
accountant, and (with respect to the subject matter of the contract involved)
any officer, partner or responsible employee of a Contracting Party appointed by
the Trustees pursuant to Section 3.3. The Trustees as such shall not be required
to give any bond or surety or any other security for the performance of their
duties.
Section 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder (or
former Shareholder) of any Sub-Trust of the Trust shall be charged or held to be
personally liable for any obligation or liability of the Trust solely by reason
of being or having been a Shareholder and not because of such Shareholder's acts
or omissions or for some other reason, said Sub-Trust (upon proper and timely
request by the Shareholder) shall assume the defense against such charge and
satisfy any judgment thereon, and the Shareholder or former Shareholder (or his
heirs, executors, administrators or other legal representatives or in the case
of a corporation or other entity, its corporate or other general successor)
shall be entitled out of the assets of said Sub-Trust estate to be held harmless
from and indemnified against all loss and expense arising from such liability.
Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. The Trust shall
indemnify (from the assets of the Sub-Trust or Sub-Trusts in question) each of
its Trustees and officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise [hereinafter referred to as
a "Covered Person"]) against all liabilities, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and counsel fees,
incurred by any 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 in one of the manners
described below, 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
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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 due to Disabling Conduct
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 a majority of a quorum of Trustees who are neither "interested
persons" of the Trust as defined in section 2(a)(19) of the 1940 Act nor parties
to the proceeding, or (b) an independent legal counsel in a written opinion.
Expenses, including accountants' and counsel fees so incurred by any such
Covered Person (but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), may be paid from time to time in advance
of the final disposition of any such action, suit or proceeding, provided that
the Covered Person shall have undertaken to repay the amounts so paid to the
Sub-Trust in question if it is ultimately determined that indemnification of
such expenses is not authorized under this Article VI and (i) the Covered Person
shall have provided security for such undertaking, (ii) the Trust shall be
insured against losses arising by reason of any lawful advances, or (iii) a
majority of a quorum of the disinterested Trustees who are not a party to the
proceeding, or an independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as opposed to a FULL
trial-type inquiry), that there is reason to believe that the Covered Party
ultimately will be found entitled to indemnification.
Section 6.5 COMPROMISE PAYMENT. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 6.4,
pursuant to a consent decree or otherwise, no such indemnification either for
said payment or for any other expenses shall be provided unless such
indemnification shall be approved (a) by a majority of the disinterested
Trustees who are not a party to the proceeding or (b) by an independent legal
counsel in a written opinion. Approval by the Trustees pursuant to clause (a) or
by independent legal counsel pursuant to clause (b) shall not prevent the
recovery from any Covered Person of any amount paid to such Covered Person in
accordance with any of such clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction not to have acted
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 to have been liable to the
Trust or its Shareholders by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Covered Person's office.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled. As used in
this Article VI, "Covered Person" shall include such person's heirs, executors
and administrators, an "interested Covered Person" is one against whom the
action, suit or other proceeding in question or another action, suit or other
proceeding on the same or similar grounds is then or has been pending or
threatened, and a "disinterested" person is a
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person against whom none of such actions, suits or other proceedings or another
action, suit or other proceeding on the same or similar grounds is then or has
been pending or threatened. Nothing contained in this article shall affect any
rights to indemnification to which personnel of the Trust, other than Trustees
and officers, and other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain liability insurance on
behalf of any such person.
Section 6.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE VII - MISCELLANEOUS
Section 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as
provided herein, the Trust shall continue without limitation of time and,
without limiting the generality of the foregoing, no change, alteration or
modification with respect to any Sub-Trust or class thereof shall operate to
terminate the Trust. The Trust may be terminated at any time by a majority of
the Trustees then in office subject to a favorable vote of a majority of the
outstanding voting securities, as defined in the 1940 Act, Shares of each
Sub-Trust voting separately by Sub-Trust.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with such procedures
as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of subsection (d) of Section 4.2.
Section 7.2 REORGANIZATION. The Trustees may sell, convey, merge and
transfer the assets of the Trust, or the assets belonging to any one or more
Sub-Trusts, to another trust, partnership, association or corporation organized
under the laws of any state of the United States, or to the Trust to be held as
assets belonging to another Sub-Trust of the Trust, in exchange for cash, shares
or other securities (including, in the case of a transfer to another Sub-Trust
of the Trust, Shares of such other Sub-Trust or class thereof) with such
transfer either (1) being made subject to, or with the assumption by the
transferee of, the liabilities belonging to each Sub-Trust the assets of which
are so transferred, or (2) not being made subject to, or not with the assumption
of, such liabilities; provided, however, that no assets belonging to any
particular Sub-Trust shall be so transferred unless the terms of such transfer
shall have first been approved at a meeting called for the purpose by the
affirmative vote of the holders of a majority of the outstanding voting Shares,
as defined in the 1940 Act, of that Sub-Trust. Following such transfer, the
Trustees shall distribute such cash, shares or other securities (giving due
effect to the assets and liabilities belonging to and any other difference among
the various Sub-Trusts and classes the assets belonging to which have been so
transferred) among the Shareholders of the Sub-Trust the assets
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belonging to which have been so transferred; and if all of the assets of the
Trust have been so transferred, the Trust shall be terminated.
The Trust, or any one or more Sub-Trusts, may, either as the successor,
survivor, or non-survivor, (1) consolidate with one or more other trusts,
partnerships, associations or corporations organized under the laws of the
Commonwealth of Massachusetts or any other state of the United States, to form a
new consolidated trust, partnership, association or corporation under the laws
of which any one of the constituent entities is organized, or (2) merge into one
or more other trusts, partnerships, associations or corporations organized under
the laws of the Commonwealth of Massachusetts or any other state of the United
States, or have one or more such trusts, partnerships, associations or
corporations merged into it, any such consolidation or merger to be upon such
terms and conditions as are specified in an agreement and plan of reorganization
entered into by the Trust, or one or more Sub-Trusts as the case may be, in
connection therewith. The terms "merge" or "merger" as used herein shall also
include the purchase or acquisition of any assets of any other trust,
partnership, association or corporation which is an investment company organized
under the laws of the Commonwealth of Massachusetts or any other state of the
United States. Any such consolidation or merger shall require the affirmative
vote of the holders of a majority of the outstanding voting Shares, as defined
in the 1940 Act, of each Sub-Trust affected thereby.
Section 7.3 AMENDMENTS. All rights granted to the Shareholders under this
Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time, so long as such
amendment does not adversely affect the rights of any Shareholder with respect
to which such amendment is or purports to be applicable and so long as such
amendment is not in contravention of applicable law, including the 1940 Act, by
an instrument in writing signed by a majority of the then Trustees (or by an
officer of the Trust pursuant to the vote of a majority of such Trustees). Any
amendment to this Declaration of Trust that adversely affects the rights of
Shareholders may be adopted at any time by an instrument in writing signed by a
majority of the then Trustees (or by an officer of the Trust pursuant to a vote
of a majority of such Trustees) when authorized to do so by the vote in
accordance with subsection (e) of Section 4 2 of Shareholders holding a majority
of the Shares entitled to vote. Subject to the foregoing, any such amendment
shall be effective as provided in the instrument containing the terms of such
amendment or, if there is no provision therein with respect to effectiveness,
upon the execution of such instrument and of a certificate (which may be a part
of such instrument) executed by a Trustee or officer of the Trust to the effect
that such amendment has been duly adopted.
Section 7.4 FILING OF COPIES: REFERENCES, HEADINGS. The original or a copy
of this instrument and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be
22
<PAGE>
filed by the Trust with the Secretary of The Commonwealth of Massachusetts and
with the Boston City Clerk, as well as any other governmental office where such
filing may from time to time be required, but the failure to make any such
filing shall not impair the effectiveness of this instrument or any such
amendment. Anyone dealing with the Trust may rely on a certificate by an officer
of the Trust as to whether or not any such amendments have been made, as to the
identities of the Trustees and officers, and as to any matters in connection
with the Trust hereunder and, with the same effect as if it were the original,
may rely on a copy certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and in any such
amendment, references to this instrument, and all expressions like "herein",
"hereof' and hereunder" shall be deemed to refer to this instrument as a whole
as the same may be amended or affected by any such amendments. The masculine
gender shall include the feminine and neuter genders. Headings are placed herein
for convenience of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this instrument. This
instrument may be executed in any number of counterparts each of which shall be
deemed an original.
Section 7.5 APPLICABLE LAW. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth,
including the Massachusetts Business Corporation Law as the same may be amended
from time to time, to which reference is made with the intention that matters
not specifically covered herein or as to which an ambiguity may exist shall be
resolved as if the Trust were a business corporation organized in Massachusetts,
but the reference to said Business Corporation Law is not intended to give the
Trust, the Trustees, the Shareholders or any other person any right, power,
authority or responsibility available only to or in connection with an entity
organized in corporate form. The Trust shall be of the type referred to in
Section 1 of Chapter 182 of the Massachusetts General Laws and of the type
commonly called a Massachusetts business trust, and without limiting the
provisions hereof, the Trust may exercise all cowers which are ordinarily
exercised by such a trust.
Section 7.6 RESIDENT AGENT. Edward T. O'Dell, Jr., Goodwin, Procter & Hoar,
Exchange Place, Boston, Massachusetts is hereby designated as the resident agent
of the Trust in Massachusetts.
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IN WITNESS WHEREOF, the undersigned have hereunto set their hand and seals
for themselves and their assigns, as of the day and year first above written.
/s/ John P. Allen
-----------------------------------
John P. Allen
/s/ E. Douglas Hodo
-----------------------------------
E. Douglas Hodo
/s/ Frank E. Holmes
-----------------------------------
Frank E. Holmes
/s/ Charles Z. Mann
-----------------------------------
Charles Z. Mann
/s/ W.C.J. van Rensburg
-----------------------------------
W.C.J. van Rensburg
24
BY- LAWS
OF
UNITED SERVICES FUNDS
ARTICLE 1
AGREEMENT AND DECLARATION
OF TRUST AND PRINCIPAL OFFICE
1.1 AGREEMENT AND DECLARATION OF Trust. These By-Laws shall be subject to
the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of United Services Funds, the Massachusetts business
trust established by the Declaration of Trust (the "Trust").
1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of the Trust shall
be located in San Antonio, Texas.
ARTICLE 2
MEETINGS OF TRUSTEES
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may from time to
time determine, provided that notice of the first regular meeting following any
such determination shall be given to absent Trustees.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting when called by the
Chairman of the Trustees, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Secretary
or an Assistant Secretary or by the officer of the Trustees calling the meeting.
2.3 NOTICE. It shall be sufficient notice to a Trustee of a special meeting
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to the Trustee at his or her
usual or last known business or residence address or to give notice to him or
her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him or
her. Neither notice of a meeting nor a waiver of a notice need specify the
purposes of the meeting.
2.4 QUORUM. At any meeting of the Trustees a majority of the Trustees then
in office shall constitute a quorum. Any meeting may be adjourned from time to
time by a majority of the votes cast upon the question, whether or not a quorum
is present, and the meeting may be held as adjourned without further notice.
2.5 PARTICIPATION BY TELEPHONE. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
<PAGE>
ARTICLE 3
OFFICERS
3.1 ENUMERATION; Qualification. The officers of the Trust shall be a
Chairman of the Trustees, a President, a Treasurer, a Secretary and such other
officers, including Vice Presidents, if any, as the Trustees from time to time
may in their discretion elect. The Trust may also have such agents as the
Trustees from time to time may in their discretion appoint. The Chairman of the
Trustees shall be a Trustee and may but need not be a shareholder; and any other
officer may be but none need be a Trustee or shareholder. Any two or more
offices may be held by the same person.
3.2 ELECTION. The Chairman of the Trustees, the President, the Treasurer
and the Secretary shall be elected annually by the Trustees at a meeting held
within the first four months of the Trust's fiscal year. The meeting at which
the officers are elected shall be known as the annual meeting of Trustees. Other
officers, if any, may be elected or appointed by the Trustees at said meeting or
at any other time. Vacancies in any office may be filled at any time.
3.3 TENURE. The Chairman of the Trustees, the President, the Treasurer and
the Secretary shall hold office until the next annual meeting of the Trustees
and until their respective successors are chosen and qualified, or in each case
until he or she sooner dies, resigns, is removed or becomes disqualified. Each
other officer shall hold office and each agent shall retain authority at the
pleasure of the Trustees.
3.4 POWERS. Subject to the other provisions of these By-Laws, each officer
shall have, in addition to the duties and powers herein and in the Declaration
of Trust set forth, such duties and powers as are commonly incident to the
office occupied by him or her as if the Trust were organized as a Massachusetts
business corporation and such other duties and powers as the Trustees may from
time to time designate.
3.5 CHAIRMAN; PRESIDENT. Unless the Trustees otherwise provide, the
Chairman of the Trustees, or, if there is none, or in the absence of the
Chairman, the President shall preside at all meetings of the shareholders and of
the Trustees. The President shall be the chief executive officer.
3.6 VICE PRESIDENT. The Vice President, or if there be more than one Vice
President, the Vice Presidents in the order determined by the Trustees (or if
there be no such determination, then in the order of their election) shall in
the absence of the President or in the event of his inability or refusal to act,
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall perform such other duties and have such other powers as the
Board of Trustees may from time to time prescribe.
3.7 TREASURER. The Treasurer shall be the chief financial and accounting
officer of the Trust, and shall, subject to the provisions of the Declaration of
Trust and to any arrangement made by the Trustees with a custodian, investment
adviser or manager, or transfer, shareholder servicing or similar agent, be in
charge of the valuable papers, books of account and accounting records of the
Trust, and shall have such other duties and powers as may be designated from
time to time by the Trustees or by the President.
3.8 ASSISTANT TREASURER. The Assistant Treasurer, or if there shall be more
than one, the Assistant Treasurers in the order determined by the Trustees (or
if there be no such determination, then in the order of their election), shall,
in the absence of the Treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Board of Trustees
may from time to time prescribe.
<PAGE>
3.9 SECRETARY. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.10 ASSISTANT SECRETARY. The Assistant Secretary, or if there be more than
one, the Assistant Secretaries in the order determined by the Trustees (or if
there be no determination, then in the order of their election), shall, in the
absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Trustees may from
time to time prescribe.
3.11 RESIGNATIONS AND REMOVALS. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the Chairman,
the President or the Secretary or to a meeting of the Trustees. Such resignation
shall be effective upon receipt unless specified to be effective at some other
time. The Trustees may remove any officer elected by them with or without cause.
Except to the extent expressly provided in a written agreement with the Trust,
no Trustee or officer resigning and no officer removed shall have any right to
any compensation for any period following his or her resignation or removal, or
any right to damages on account of such removal.
ARTICLE 4
COMMITTEES
4.1 GENERAL. The Trustees, by vote of a majority of the Trustees then in
office, may elect from their number an Executive Committee or other committees
and may delegate thereto some or all of their powers except those which by law,
by the Declaration of Trust, or by these By-Laws may not be delegated. Except as
the Trustees may otherwise determine, any such committee may make rules for the
conduct of its business, but unless otherwise provided by the Trustees or in
such rules, its business shall be conducted so far as possible in the same
manner as is provided by these By-Laws for the Trustees themselves. All members
of such committees shall hold such offices at the pleasure of the Trustees. The
Trustees may abolish any such committee at any time. Any committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its action to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such rescission shall have
retroactive effect.
ARTICLE 5
REPORTS
5.1 GENERAL. The Trustees and officers shall render reports at the time and
in the manner required by the Declaration of Trust or any applicable law.
Officers and Committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
FISCAL YEAR
6.1 GENERAL. The fiscal year of the Trust shall be fixed by resolution of
the Trustees.
<PAGE>
ARTICLE 7
SEAL
7.1 GENERAL. The seal of the Trust shall consist of a flat-faced die with
the word "Massachusetts", together with the name of the Trust and the year of
its organization cut or engraved thereon, but, unless otherwise required by the
Trustees, the seal shall not be necessary to be placed on, and its absence shall
not impair the validity of, any document, instrument or other paper executed and
delivered by or on behalf of the Trust.
ARTICLE 8
EXECUTION OF PAPERS
8.1 GENERAL. Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President, or by the Treasurer and need not bear the
seal of the Trust.
ARTICLE 9
ISSUANCE OF SHARE CERTIFICATES
9.1 SHARE CERTIFICATES. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share certificates
either in limited cases or to all shareholders. In that event, a shareholder may
receive a certificate stating the number of shares owned by him, in such form as
shall be prescribed from time to time by the Trustees. Such certificate shall be
signed by the president or a vice president and by the treasurer or assistant
treasurer. Such signatures may be facsimiles if the certificate is signed by a
transfer agent, or by a registrar, other than a Trustee, officer or employee of
the Trust. In case any officer who has signed or whose facsimile signature has
been placed on such certificate shall cease to be such officer before such
certificate is issued, it may be issued by the Trust with the same effect as if
he were such officer at the time of its issue.
9.2 LOSS OF CERTIFICATES. In case of the alleged loss or destruction or the
mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3 ISSUANCE of New Certificate to Pledgee. A pledgee of shares transferred
as collateral security shall be entitled to a new certificate if the instrument
of transfer substantially describes the debt or duty that is intended to be
secured thereby. Such new certificate shall express on its face that it is held
as collateral security, and the name of the pledgor shall be stated thereon, who
alone shall be liable as a shareholder, and entitled to vote thereon.
9.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES.. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of
<PAGE>
shares certificates to the Trust for cancellation. Such surrender and
cancellation shall not affect the ownership of shares in the Trust.
ARTICLE 10
DEALINGS WITH TRUSTEES AND OFFICERS
10.1 GENERAL. Any Trustee, officer or other agent of the Trust may acquire,
own and dispose of shares of the Trust to the same extent as if he were not a
Trustee, officer or agent; and the Trustees may accept subscriptions to shares
or repurchase shares from any firm or company in which any Trustee, officer or
other agent of the Trust may have an interest.
ARTICLE 11
AMENDMENTS TO THE BY-LAWS
12.1 GENERAL. These By-Laws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
The foregoing By-Laws were adopted by the Board of Trustees on August 1,
1984.
C174/K
9/28/84
ADVISORY AGREEMENT ADVISORY AGREEMENT
AGREEMENT made as of the 27th day of October, 1989 between UNITED SERVICES
ADVISORS, INC., a corporation organized under the laws of the State of Texas and
having its principal place of business in San Antonio, Texas (the "Manager"),
and UNITED SERVICES FUNDS, a Massachusetts business trust having its principal
place of business in San Antonio, Texas (the "Trust").
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is so registered under the Investment Company Act of 1940
(the "1940 Act"); and
WHEREAS, the Manager is engaged principally in the business of rendering
investment management services and is so registered under the Investment
Advisers Act of 1940; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust intends to initially offer shares in eleven series, the
U.S. Gold Shares Fund, U.S. Growth Fund, U.S. Income Fund, Prospector Fund, U.S.
Tax Free Fund, U.S. Treasury Securities Fund, U.S. Good and Bad Times Fund, U.S.
LoCap Fund, U.S. New Prospector Fund, U.S. GNMA Fund, U.S. Real Estate Fund,
[such series (the "Initial Funds") together with all other series subsequently
established by the Trust with respect to which the Trust desires to retain the
Manager to render investment advisory services hereunder and the Manager is
willing so to do, being herein collectively referred to as the "Funds"];
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF MANAGER.
(a) Initial Funds. The Trust hereby appoints the Manager to act as manager
and investment adviser to each of the Initial Funds for the period and
on the terms herein set forth. The Manager accepts such appointment
and agrees to render the services herein set forth, for the
compensation herein provided.
(b) Additional Funds. In the event that the Trust establishes one or more
series of shares other than the Initial Funds with respect to which it
desires to retain the Manager to render management and investment
advisory services hereunder, it shall so notify the Manager in
writing, indicating the advisory fee which will be payable with
respect to the additional series of shares. If the Manager is willing
to render such services, it shall so notify the Trust in writing,
whereupon such series of shares shall become a Fund hereunder.
2. DUTIES OF MANAGER.
The Manager, at its own expense, shall furnish the following services and
facilities to the Trust:
(a) Investment Program. The Manager will (i) furnish continuously an
investment program of each Fund, (ii) determine (subject to the
overall supervision and review of the Board of Trustees of the Trust)
what investments shall be purchased, held, sold or exchanged by each
Fund and what portion, if any, of the assets of each Fund shall be
held uninvested, and (iii) make changes
1
<PAGE>
on behalf of the Trust in the investments of each Fund. The Manager will
also manage, supervise and conduct the other affairs and business of the
Trust and each Fund thereof and matters incidental thereto, subject always
to the control of the Board of Trustees of the Trust and to the provisions
of the Declaration of Trust and By-laws and the 1940 Act.
(b) Office Space and Facilities. The Manager shall furnish the Trust
office space in the offices of the Manager, or in such other place or
places as may be agreed upon from time to time, and all necessary
office facilities, simple business equipment, supplies, utilities, and
telephone service for managing the affairs and investments of the
Trust. These services are exclusive of the necessary services and
records of any dividend disbursing agent, transfer agent, registrar or
custodian, and accounting and bookkeeping services to be provided by
the custodian.
(c) Personnel. The Manager shall provide all necessary executive and
clerical personnel for administering the affairs of the Trust, and
shall compensate all personnel, officers and Trustees of the Trust if
such persons are also employees of the Manager or its affiliates,
except as provided in Paragraph 3(f) hereof.
(d) Distribution Expenses. The Manager shall bear all sales, promotions or
distribution expenses in connection with the distribution of shares of
any Fund and shall be the sole judge of the extent to which sales or
promotion expenses shall be incurred; provided however, that the
Manager shall not be obligated to pay for any portion of the cost of
prospectuses or periodic reports provided to shareholders. Expenses
incurred in complying with laws regulating the issue or sale of
securities shall not be deemed to be sales, promotion or distribution
expenses.
(e) Portfolio Transactions. The Manager shall place all orders for the
purchase and sale of portfolio securities for the account of each Fund
with brokers or dealers selected by the Manager, although the Trust
will pay the actual brokerage commissions on portfolio transactions in
accordance with Paragraph 3(c). In executing portfolio transactions
and selecting brokers or dealers, the Manager will use its best
efforts to seek on behalf of the Trust or any Fund thereof the best
overall terms available. In assessing the best overall terms available
for any transaction, the Manager shall consider all factors it deems
relevant, 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, and the reasonableness of the
commission, if any (for the specific transaction and on a continuing
basis). In evaluating the best overall terms available, and in
selecting the broker or dealer to execute a particular transaction,
the Manager may also consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) provided to any Fund and/or other accounts over which the
Manager or an affiliate of the Manager exercises investment
discretion. The Manager is authorized to pay to a broker or dealer who
provides such brokerage and research services a commission for
executing a portfolio transaction for any Fund which is in excess of
the amount of commission another broker or dealer would have charged
for effecting that transaction if, but only if, the Manager determines
in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such broker
or dealer, viewed in terms of that particular transaction or in terms
of all of the accounts over which investment discretion is so
exercised.
2
<PAGE>
3. ALLOCATION OF EXPENSES.
Except for the services and facilities to be provided by the Manager as set
forth in Paragraph 2 above, the Trust assumes and shall pay all expenses for all
other Trust operations and activities and shall reimburse the Manager for any
such expenses incurred by the Manager. The expenses to be borne by the Trust
shall include, without limitation:
(a) The charges and expenses of any registrar, stock transfer or dividend
disbursing agent, custodian, or depository appointed by the Trust for
the safekeeping of its cash, portfolio securities and other property;
(b) the charges and expenses of auditors;
(c) brokerage commissions for transactions in the portfolio securities of
the Trust;
(d) all taxes, including issuance and transfer taxes, and corporate fees
payable by the Trust to Federal, state or other governmental agencies;
(e) the cost of stock certificates (if any) representing shares of the
Trust;
(f) expenses involved in registering and maintaining registrations of the
Trust and of its shares with the Securities and Exchange Commission
and various states and other jurisdictions, including reimbursement of
actual expenses incurred by the Manager in performing such functions
for the Trust, and including compensation of persons who are Manager
employees in proportion to the relative time spent on such matters;
(g) all expenses of shareholders' and Trustees' meetings committees, and
of preparing, printing and mailing reports, semi-annual reports,
annual reports and other communications to shareholders;
(h) all expenses of preparing and setting in type prospectuses, and
expenses of printing and mailing the same to shareholders (but not
expenses of printing and mailing of prospectuses and literature used
for promotional purposes);
(i) compensation and travel expenses of Trustees who are not "interested
persons" within the meaning of the 1940 Act;
(j) the expense of furnishing, or causing to be furnished, to each
shareholder a statement of his account, including the expense of
mailing;
(k) charges and expenses of legal counsel in connection with matters
relating to the Trust, including, without limitation, legal services
rendered in connection with the Trust's corporate and financial
structure and relations with its shareholders, issuance of Trust
shares, and registration and qualification of securities under
Federal, state and other laws;
(1) the expenses of attendance at professional meetings of organizations
such as the Investment Company Institute, the No Load Mutual Fund
Association, or Commerce Clearing House by officers and Trustees of
the Trust, and the membership or association dues of such
organizations;
(m) the cost and expense of maintaining the books and records of the
Trust, including general ledger accounting;
3
<PAGE>
(n) the expense of obtaining and maintaining a fidelity bond as required
by Section 17(g) of the 1940 Act;
(o) interest payable on Trust borrowings; and
(p) postage.
4. ADVISORY FEE.
(a) For the services and facilities to be provided to each of the Funds by
the Manager as provided in Paragraph 2 hereof, the Trust shall pay the
Manager a monthly fee with respect to each of the Funds as soon as
practical after the last day of each calendar month, which fee shall
be paid at the rate set forth below based upon the Monthly Average Net
Assets [as defined in subparagraph (c) below] of such Fund for such
calendar month:
ADVISORY FEE SCHEDULE
MONTHLY AVERAGE MONTHLY
NET ASSETS FEE RATE
- -------------------------------- --------------
U.S. GOLD SHARES FUND
Up to and including $250 million 1/12 of .75%
Over $250 million I/ 1 2 of .50%
U.S. GROWTH FUND
Up to and including $250 million 1/12 of .75%
Over $250 million 1/12 of .50%
U.S. INCOME FUND
Up to and including $250 million 1/12 of .75%
Over $250 million 1/12 of .50%
PROSPECTOR FUND
Up to and including $250 million 1/12 of 1%
Over $250 million 1/12 of .50%
U.S. TREASURY SECURITIES FUND
Up to and including $250 million 1/12 of .50%
Over $250 million 1/12 of .375%
U.S. GOOD AND BAD TIMES FUND
Up to and including $250 million 1/12 of .75%
Over $250 million 1/12 of .50%
U.S. LOCAP FUND
Up to and including $250 million 1/12 of 1%
Over $250 million 1/12 of .75%
4
<PAGE>
U.S. TAX FREE FUND
Up to and including $250 million 1/12 of .75%
Over $250 million 1/12 of .50%
U.S. NEW PROSPECTOR FUND
Up to and including $250 million 1/12 of 1%
Over $250 million 1/12 of .50%
U.S. GNMA FUND
Net Assets I/ 1 2 of .66%
U.S. REAL ESTATE FUND
Up to and including $250 million 1/12 of .75%
Over $250 million 1/12 of .50%
(b) In the case of termination of this Agreement with respect to any Fund
during any calendar month, the fee with respect to such Fund for that
month shall be reduced proportionately based upon the number of
calendar days during which it is in effect and the fee shall be
computed upon the average net assets of such Fund for the business
days during which it is so in effect.
(c) The "Monthly Average Net Assets" of any Fund of the Trust for any
calendar month shall be equal to the quotient produced by dividing (i)
the sum of the net assets of such Fund, determined in accordance with
procedures established from time to time by or under the direction of
the Board of Trustees of the Trust in accordance with the Declaration
of Trust of the Trust, as of the close of business on each day during
such month that such Fund was open for business, by (ii) the number of
such days.
13. EXPENSE LIMITATION.
The Manager agrees that for any fiscal year of the Trust during which the total
of all expenses of the Trust (including investment advisory fees under this
agreement, but excluding interest, portfolio brokerage commissions and expenses,
taxes and extraordinary items) exceeds the lowest expense limitation imposed in
any state in which the Trust is then making sales of its shares or in which its
shares are then qualified for sale, the Manager will reimburse the Trust for
such expenses not otherwise excluded from reimbursement by this Paragraph 5 to
the extent that they exceed such expense limitation.
14. TRUST TRANSACTIONS.
The Manager agrees that neither it nor any of its officers or Trustees will take
any long or short term position in the shares of the Trust; provided, however,
that such prohibition:
(a) shall not prevent the Manager from purchasing shares of the Trust if
orders to purchase such shares are placed upon the receipt by the
Manager of purchase orders for such shares and are not in excess of
such purchase orders received by the Manager; and
(b) shall not prevent the purchase of shares of the Trust by any of the
persons above described for their account and for investment at the
price at which such shares are available to the public at the time of
purchase or as part of the initial capital of the Trust.
5
<PAGE>
7. RELATIONS WITH TRUST.
Subject to and in accordance with the Declaration of Trust and By-laws of the
Trust and the Articles of Incorporation and By-laws of the Manager,
respectively, it is understood that Trustees, officers, agents and shareholders
of the Trust are or may be interested in the Manager (or any successor thereof)
as directors, officers, or otherwise, that directors, officers, agents and
shareholders of the Manager are or may be interested in the Trust as Trustees,
officers, shareholders, or otherwise, that the Manager (or any such successor)
is or may be interested in the Trust as a shareholder or otherwise and that the
effect of any such adverse interests shall be governed by said Declaration of
Trust, Articles of Incorporation and By-laws.
8. LIABILITY OF MANAGER AND OFFICERS AND TRUSTEES OF THE TRUST.
No provision of this Agreement shall be deemed to protect the Manager against
any liability to the Trust or its shareholders to which it might otherwise be
subject by reason of any willful misfeasance, bad faith or gross negligence in
the performance of its duties or the reckless disregard of its obligations and
duties under this Agreement. Nor shall any provision hereof be deemed to protect
any Trustee or officer of the Trust against any such liability to which he might
otherwise be subject by reason of any willful misfeasance, bad faith or gross
negligence in the performance of his duties or the reckless disregard of his
obligations and duties. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to each
Initial Fund on the date hereof and, with respect to any additional
Fund, on the date of receipt by the Trust of notice from the Manager
in accordance with Paragraph l(b) hereof that the Manager is willing
to serve as Manager with respect to such Fund. Unless terminated as
herein provided, this Agreement shall remain in full force and effect
until October 26, 1991 with respect to the Initial Funds and, with
respect to each additional Fund, until the October 26 following the
date on which such Fund becomes a Fund hereunder, and shall continue
in full force and effect for periods of one year thereafter with
respect to each Fund so long as such continuance with respect to any
such Fund is approved at least annually (i) by either the Trustees of
the Trust or by vote of a majority of the outstanding voting shares
(as defined in the 1940 Act) of such 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. However, the continuance of
this Agreement with respect to any Fund other than the Initial Funds
is subject to the approval of this Agreement by a majority of the
outstanding voting shares of such Fund on or before the next October
26 following the date on which such Fund becomes a Fund hereunder.
Any approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 1940 Act) of any Fund shall be
effective to continue this Agreement with respect to any such Fund
notwithstanding (i) that this Agreement has not been approved by the
holders of a majority of the outstanding shares of any other Fund
affected thereby, and (ii) that this Agreement has not been approved
by the vote of a majority of the outstanding shares of the Trust,
unless such approval shall be required by any other applicable law or
otherwise.
6
<PAGE>
(b) Termination. This Agreement may be terminated at any time, without
payment of any penalty, by vote of the Trustees of the Trust or by
vote of a majority of the outstanding shares (as defined in he 1940
Act), or by the Manager on sixty (60) days' written notice to the
other party.
(c) Automatic Termination. This Agreement shall automatically and
immediately terminate in the event of its assignment.
10. NAME OF TRUST.
It is understood that the name "United Services", and any logo associated with
that name, is the valuable property of United Services Advisors, Inc., and that
the Trust has the right to include "United Services' as a part of its name only
so long as this Agreement shall continue. Upon termination of this Agreement the
Trust shall forthwith cease to use the United Services name and logos and shall
submit to its shareholders an amendment to its Declaration of Trust to change
the Trust's name.
11. PRIOR AGREEMENT SUPERSEDED.
This Agreement supersedes any prior agreement relating to the subject matter
hereof between the parties.
12. SERVICES NOT EXCLUSIVE.
The services of the Manager to the Trust hereunder are not to be deemed
exclusive, and the Manager shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
13. LIMITATION OF LIABILITY.
The term "United Services Funds" means and refers to the Trustees from time to
time serving under the Master Trust Agreement of the Trust dated July 31, 1984,
as the same may subsequently thereto have been, or subsequently hereto be
amended. It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the assets and
property of the Trust, as provided in the Master Trust Agreement of the Trust.
The execution and delivery of this Agreement have been authorized by the
Trustees and shareholders of the Trust and signed by an authorized officer of
the Trust, acting as such, and neither such authorization by such Trustees and
shareholders nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the assets and property of the Trust as
provided in its Master Trust Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
UNITED SERVICES FUNDS UNITED SERVICES ADVISORS, INC.
By _____________________________ By _____________________________
Executive Vice President Executive Vice President
Attest: Attest:
- ------------------------------- -------------------------------
Secretary Secretary
7
<PAGE>
UNITED
SERVICES
ADVISORS
INC.
INVESTMENT ADVISOR TO UNITED SERVICES FUNDS
- --------------------------------------------------------------------------------
November 1, 1990
United Services Advisors, Inc.
11330 IH 10 West, Ste. 5300
San Antonio, Texas 78249
Gentlemen:
Pursuant to Section l(b) of the Advisory Agreement dated October 27,1989
between United Services Funds (the "Trust") and United Services Advisors, Inc.
(the "Manager"), please be advised that the Trust has established two new series
of its shares, namely, the U.S. Vision 2020 Fund and the U.S. California Double
Tax Free Fund, and please be further advised that the Trust desires to retain
the Manager to render management and investment advisor services under the
Advisory Agreement to these Funds at the fees stated below:
MONTHLY AVERAGE NET ASSETS MONTHLY FEE RATE
U.S. VISION 2020 FUND
Up to and including $250 million 1/12 of .75%
over $250 million 1/12 of .50%
U.S. CALIFORNIA DOUBLE TAX FREE FUND
Up to and including $250 million 1/12 of .75%
Over $250 million 1/12 of .50%
Please stated below whether you are willing to render such services at the
fees stated above.
UNITED SERVICES FUNDS
Attest:________________________ By: __________________________
Secretary Executive Vice President
Date: November 1, 1990
We are willing to render management and investment advisory services to the
U.S. Vision 2020 Fund and the U.S. California Double Tax Free Fund at the fees
stated above.
UNITED SERVICES ADVISORS, INC.
Attest: _______________________ By: __________________________
Assistant Secretary Executive Vice President
Date: November 1, 1990
8
<PAGE>
UNITED
SERVICES
ADVISORS
INC.
INVESTMENT ADVISOR TO UNITED SERVICES FUNDS
- --------------------------------------------------------------------------------
November 1, 1990
United Services Advisors, Inc.
11330 IH 10 West, Ste. 5300
San Antonio, Texas 78249
Gentlemen:
The purpose of this letter is to correct the November 1, 1990 Letter
Agreement which erroneously stated the fees to be charged to the named Funds
from effective registration.
Pursuant to Section l(b) of the Advisory Agreement dated October 27, 1989
between United Services Funds (the "Trust") and United Services Advisors, Inc.
(the "Manager"), please be advised that the Trust has established two new series
of its shares, namely, the U.S. Vision 2020 Fund and the U.S. California Double
Tax Free Fund, and please be further advised that the Trust desires to retain
the Manager to render management and investment advisor services under the
Advisory Agreement to these Funds at the fees stated below:
U.S. VISION 2020 FUND
Monthly Average Net Assets 1/12 of .50%
U.S. CALIFORNIA DOUBLE TAX FREE FUND
Monthly Average Net Assets 1/12 of .50%
Please state below whether you are willing to render such services at the
fees stated above.
UNITED SERVICES FUNDS
Attest:________________________ By: __________________________
Secretary Executive Vice President
Date: March 6, 199
We are willing to render management and investment advisory services to the
U.S. Vision 200 the U.S. California Double Tax Free Fund at the fees stated
above.
UNITED SERVICES ADVISORS, INC.
Attest: _______________________ By: __________________________
Secretary Executive Vice President
Date: March 6, 1991
9
<PAGE>
UNITED
SERVICES
ADVISORS
INC.
INVESTMENT ADVISOR TO UNITED SERVICES FUNDS
- --------------------------------------------------------------------------------
March 6, 1992
United Services Advisors, Inc.
11330 IH 10 West, Ste. 5300
San Antonio, Texas 78229
Gentlemen:
Pursuant to Section l(b) of the Advisory Agreement dated October 27, 1989
between United Services Funds (the "Trust") and United Services Advisors, Inc.
(the "Manager"), please be advised that the Trust has established one new series
of its shares, namely, the U.S. Treasury Bond Fund, and please be further
advised that the Trust desires to retain the Manager to render management and
investment advisory services under the Advisory Agreement to this Fund at the
fees stated below:
U.S. TREASURY BOND FUND
Monthly Average Net Assets 1/12 of .50%
Please state below whether you are willing to render such services at the
fees stated above.
UNITED SERVICES FUNDS
Attest: By:
Secretary President
Date: May 15, 1992
We are willing to render management and investment advisory services to the
U.S. Treasury Bond Fund at the fee stated above.
Attest: By
Secretary Executive Vice President
10
<PAGE>
UNITED SERVICES FUNDS
February 19, 1993
United Services Advisors, Inc.
7900 Callaghan Road
San Antonio, Texas 78229
Gentlemen:
Pursuant to Section l(b) of the Advisory Agreement dated October 27, 1989
between United Services Funds (the "Trust") and United Services Advisors, Inc.
(the "Manager"), please be advised that the Trust has established one new series
of its shares, namely, the United Services Adjustable Government Fund, and
please be further advised that the Trust desires to retain the Manager to render
management and investment advisory services under the Advisory Agreement to this
Fund at the fees stated below:
UNITED SERVICES ADJUSTABLE GOVERNMENT FUND
Monthly Average Net Assets 1/12 of .30%
Please state below whether you are willing to render such services at the
fees stated above.
UNITED SERVICES FUNDS
Attest: By:
Secretary Executive Vice President
Date: March 1, 1993
We are willing to render management and investment advisory services to the
United Services Adjustable Government Fund at the fee stated above.
UNITED SERVICES ADVISORS, INC.
Attest: By:
Secretary Executive Vice President
11
<PAGE>
UNITED SERVICES FUNDS
October 20, 1993
United Services Advisors, Inc.
7900 Callaghan Road
Sam Antonio, Texas 78229
Gentlemen:
Pursuant to Section I (b) of the Advisory Agreement dated October 27, 1989
between United Services Funds (the "Trust") and United Services Advisors, Inc.
(the "Manager"), please be advised that the Trust has established one new series
of its shares, namely, the U.S. China Opportunity Fund, and please be further
advised that the Trust desires to retain the Manager to render management and
investment advisory services under the Advisory Agreement to this Fund at the
fees stated below:
U.S. CHINA OPPORTUNITY FUND
Monthly Average Net Assets 1/12 of I.25%
Please state below whether you are willing to render such services at the
fees stated above.
UNITED SERVICES FUNDS
Attest: By:
Secretary Executive Vice President
Date:
We are willing to render management and investment advisory services to the
U.S. China Opportunity Fund at the fee stated above.
UNITED SERVICES ADVISORS, INC.
Attest: By:
Secretary Executive Vice President
12
U.S. GLOBAL INVESTORS FUNDS
DISTRIBUTION AGREEMENT
AGREEMENT effective as of the 3rd day of September 1998 between U.S. Global
Investors Funds, a Massachusetts business trust (the "Trust"), having its
principal place of business in San Antonio, Texas, and U.S. Global Brokerage,
Inc. a corporation organized under the laws of the State of Texas (the
"Distributor"), having its principal place of business in San Antonio, Texas.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company and is
authorized (i) to issue shares of beneficial interest in separate series, with
the shares of each such series representing the interests in a separate
portfolio of securities and other assets, and (ii) to divide such shares of
beneficial interest of each such series into two or more classes; and
WHEREAS, the Trust wishes to employ the services of the Distributor with
respect to the distribution of shares of beneficial interest of the Trust
("Shares") and classes thereof representing interests in each portfolio series
thereof identified from time to time on Schedule A hereto (each such portfolio
series being referred to herein as a "Fund"); and
WHEREAS, the Distributor wishes to provide distribution services to the
Trust with respect to the Shares.
NOW, THEREFORE, in consideration of the mutual promises and undertakings
herein contained, the parties agree as follows:
1. SALE OF SHARES BY THE DISTRIBUTOR. The Trust grants to the Distributor
the right to sell Shares during the term of this Agreement and subject to the
registration requirements of the Securities Act of 1933, as amended (the "1933
Act"), under the following terms and conditions: (i) the Distributor, as agent
for the Trust, shall sell Shares authorized for issue and registered under the
1933 Act; and (ii) the Distributor shall sell such Shares only in compliance
with the terms set forth in the Trust's currently effective registration
statement, as may be in effect from time to time, and any further limitations
the Trustees of the Trust may impose. The Distributor may enter into selling
agreements with selected dealers and others for the sale of Shares and will act
only on its behalf as principal in entering into such selling agreements.
2. SALE OF SHARES BY THE TRUST. The Trust reserves the right to issue
Shares in connection with (i) the merger or consolidation of the assets of, or
acquisition by the Trust through purchase or otherwise, with any other
investment company, trust or personal holding company; (ii) a pro rata
distribution directly to the holders of Shares in the nature of a stock dividend
or split-up; and (iii) as otherwise may be provided in the then current
registration statement of the Trust.
3. SHARES COVERED BY THIS AGREEMENT. This Agreement shall apply to issued
Shares, Shares held in its treasury in the event that in the discretion of the
Trust treasury Shares shall be sold, and Shares repurchased for resale.
4. PUBLIC OFFERING PRICE. Except as otherwise noted in the Trust's
prospectus for any Fund (the "Prospectus") or Statement of Additional
Information for any Fund (the "SAI"), as amended or supplemented from time to
time, all Shares sold by the Distributor or the Trust will be sold at the public
offering price plus any applicable sales charge described therein. The public
offering price for all accepted subscriptions will be the net asset value per
share, determined in the manner described in the Trust's then current Prospectus
and SAI with respect to the applicable Fund. The Trust shall in all cases
receive the net asset value per Share on all sales and the Distributor shall be
entitled to retain the applicable sales charges, if any, subject to any
reallowance obligations of the Distributor as set forth in any selling
agreements with selected dealers and others for the sale of Shares and/or as set
forth in the Prospectus and/or SAI of the Trust with respect to Shares.
5. SUSPENSION OF SALES. If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further orders
for Shares shall be processed by the Distributor, except such unconditional
orders placed with the Distributor before it had knowledge of the suspension. In
addition, the Trust reserves the right to suspend sales of Shares and the
Distributor's authority to sell Shares if, in the judgment of the Trust, it is
in the best interest of the Trust to do so. Suspension will continue for such
period as may be determined by the Trust. In addition, the Trust and Distributor
reserve the right to reject any purchase order.
6. SOLICITATION OF SALES. In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts, consistent
with its other business, to secure purchasers for Shares of the Trust. This
shall not prevent the Distributor from entering into like arrangements
(including arrangements involving the payment of underwriting commissions) with
other issuers. Distributor agrees to use all reasonable efforts to ensure that
taxpayer identification numbers provided for holders of Shares of the Trust are
correct. In addition, Distributor (in coordination with investment advisers
retained by the Trust) will be responsible for the production of marketing and
advertising materials for the sale of Shares of the Trust and the review thereof
for compliance with applicable regulatory requirements, entering into other
agreements with broker-dealers, if any, to sell Shares of the Trust and
monitoring their financial strength and contractual compliance.
7. AUTHORIZED REPRESENTATIONS. The Distributor is not authorized by the
Trust to give any information or to make any representations other than those
contained in the appropriate registration statements, Prospectuses or SAIs filed
with the Securities and Exchange Commission under the 1933 Act (as those
registration statements, Prospectuses and SAIs may be amended from time to
time), or contained in shareholder reports or other material that may be
prepared by or on behalf of the Trust for the Distributor's use. This shall not
be construed to prevent the Distributor from preparing and distributing, in
compliance with applicable laws and regulations, sales literature or other
material as it may deem appropriate. Distributor will furnish or cause to be
furnished copies of such sales literature or other material to the Trust.
Distributor agrees to take appropriate action to cease using such sales
literature or other material to which the Trust reasonably objects as promptly
as practicable after receipt of the objection. Distributor further agrees that,
in connection with the offer and sale of Shares, Distributor shall comply with
all applicable securities laws of the United States and each state thereof in
which Shares are offered and/or sold (including without limitation, the
maintenance of effective federal and state broker-dealer registrations, as
required).
8. REGISTRATION OF SHARES. The Trust agrees that it will use its best
efforts to register Shares under the 1933 Act (subject to the necessary
approval, if any, of its shareholders) and to qualify and maintain the
registration and qualification of an appropriate number of shares under the 1933
Act so that there will be available for sale the number of Sales the Distributor
may reasonably be expected to sell. Distributor shall furnish such information
and other materials relating to its affairs and activities as shall be required
by the Trust in connection with such registration and qualification. The
Distributor agrees that it will not offer or sell Shares in any jurisdiction
unless the offer or sale of Shares has been so qualified or registered or is
otherwise exempt from such registration or qualification. The Trust shall
furnish to the Distributor copies of all information, financial statements and
other papers which the Distributor may reasonably request for use in connection
with the distribution of Shares of each series of the Trust.
9. EXPENSES, COMPENSATION AND REIMBURSEMENT.
(a) The Trust shall pay all fees and expenses:
(i) in connection with the preparation, setting in type and
filing of any registration statement, Prospectus and SAI under the 1933 Act, and
any amendments thereto, for the issue of its Shares;
(ii) in connection with the registration and qualification of
Shares for sale in states in which the Board of Trustees (the "Trustees") of the
Trust shall determine it advisable to qualify such Shares for sale (including
registering the Trust as a broker or dealer or any officer of the Trust as agent
or salesperson in any such location);
(iii) of preparing, setting in type, printing and mailing any
report or other communication to holders of Shares of the Trust in their
capacity as such; and
(iv) of preparing, setting in type, printing and mailing
Prospectuses, SAIs, and any supplements thereto, sent to existing holders of
Shares.
(b) The Distributor shall pay cost of:
(i) printing and distributing Prospectuses, SAIs and reports
prepared for its use in connection with the offering of the Shares for sale to
the public;
(ii) any other literature used in connection with such offering;
(iii) advertising in connection with such offering including, but
not limited to the following: public relations services, sales presentations,
media charges, preparation, printing and mailing of advertising and sales
literature, data processing necessary to distribution effort, printing and
mailing of prospectuses; and
(iv) any additional out-of-pocket expenses incurred in connection
with these costs.
10. INDEMNIFICATION.
(a) The Trust agrees to indemnify and hold harmless the Distributor
and each of its directors and officers and each person, if any, who controls the
Distributor within the meaning of Section 15 of the 1933 Act against any loss,
liability, claim, damage or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage or expense
and reasonable counsel fees incurred in connection therewith) arising out of or
based upon: (i) any violation of the Trust's representations or covenants herein
contained; (ii) any wrongful act of the Trust or any of its representatives
(other than the Distributor or any of its employees or representatives
(regardless of the capacity in which such employee or representative is acting)
or any other person for whose acts the Distributor is responsible or is alleged
to be responsible (including any selected dealer or person through whom sales
are made pursuant to an agreement with the Distributor)); (iii) any untrue
statement of a material fact contained in a registration statement, Prospectus,
SAI or shareholder report of any Fund or any omission to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, except to the extent the statement or omission was made
in reliance upon, and in conformity with, information furnished in writing to
the Trust by or on behalf of the Distributor; or (iv) any untrue statement of a
material fact contained in any advertising material of a Fund or any omission to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading, to the extent that such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Distributor by the Trust. In no case (v) is the indemnity by
the Trust in favor of the Distributor or any person indemnified to be deemed to
protect the Distributor or any person against any liability to the Trust or its
security holders to which the Distributor or such person would otherwise be
subject by reason of willful misfeasance, bad faith or ordinary negligence in
the performance of its duties or by reason of its reckless disregard of its
obligations and duties under this agreement, or (y) is the Trust to be liable
under its indemnity agreements contained in the Section 10(a) with respect to
any claim made against the Distributor or any person indemnified unless the
Distributor or person, as the case may be, shall have notified the Trust in
writing of the claim within a reasonable time after the summons or other first
written notification giving information of the nature of the claim shall have
been served upon the Distributor or any such person or after the Distributor or
such person shall have received notice of service on any designated agent.
However, except to the extent the Trust is harmed thereby, failure to notify the
Trust of any claim shall not relieve the Trust from any liability which it may
have to the Distributor or any person against whom such action is brought other
than on account of its indemnity agreement contained in this Section 10(a). The
Trust shall be entitled to participate at its own expense in the defense, or, if
it so elects, to assume the defense of any suit brought to enforce any claims,
but if the Trust elects to assume the defense, the defense shall be conducted by
counsel chosen by it and satisfactory to the Distributor, or person or persons,
defendant or defendants in the suit. In the event the Trust elects to assume the
defense of any suit and retain counsel, the Distributor, officers or directors
or controlling person(s) or defendant(s) in the suit, shall bear the fees and
expenses of any additional counsel retained by, them. If the Trust does not
elect to assume the defense of any suit, it will reimburse the Distributor,
officers or directors or controlling person(s) or defendant(s) in the suit, for
the reasonable fees and expenses of any counsel retained by them. The Trust
agrees to notify the Distributor promptly of the commencement of any litigation
or proceedings against it or any of its officers or Trustees in connection with
the issuance or sale of any of the Shares.
(b) The Distributor agrees to indemnify and hold harmless the Trust
and each of its Trustees and officers and each person, if any, who controls the
Trust within the meaning of Section 15 of the 1933 Act, against any loss,
liability, claim, damage or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage or expense
and reasonable counsel fees incurred in connection therewith) arising out of or
based upon: (i) any violation of the Distributor's representations or covenants
herein contained; (ii) any wrongful act of the Distributor or any of its
employees or representatives or any other person for whose acts the Distributor
is responsible or is alleged to be responsible (including any selected dealer or
person through whom sales are made pursuant to an agreement with the
Distributor); (iii) any untrue statement of a material fact contained in a
registration statement, Prospectus, SAI or shareholder report of any Fund or any
omission to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, to the extent the statement
or omission was made in reliance upon, and in conformity with, information
furnished in writing to the Trust by or on behalf of the Distributor; or (iv)
any untrue statement of a material fact contained in any advertising material of
a Fund or any omission to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading, except to the
extent that such statement or omission was made in reliance upon, and in
conformity with, information furnished to the Distributor by the Trust. In no
case (x) is the indemnity by the Distributor in favor of the Trust or any person
indemnified to be deemed to protect the Trust or any person against any
liability to the Distributor or its security holders to which the Trust or such
person would otherwise be subject by reason of willful misfeasance, bad faith or
ordinary negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this agreement, or (y) is
the Distributor to be liable under its indemnity agreements contained in the
Section 10(b) with respect to any claim made against the Trust or any person
indemnified unless the Trust or person, as the case may be, shall have notified
the Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon the Distributor or any such person or
after the Distributor or such person shall have received notice of service on
any designated agent. However, except to the extent the Distributor is harmed
thereby, failure to notify the Distributor of any claim shall not relieve the
Distributor from any liability which it may have to the Trust or any person
against whom such action is brought other than on account of its indemnity
agreement contained in this Section 10(b). The Distributor shall be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any claims, but if the Distributor
elects to assume the defense, the defense shall be conducted by counsel chosen
by it and satisfactory to the Trust, or person or persons, defendant or
defendants in the suit. In the event the Distributor elects to assume the
defense of any suit and retain counsel, the Trust, officers or Trustees or
controlling person(s) or defendant(s) in the suit, shall bear the fees and
expenses of any additional counsel retained by, them. If the Distributor does
not elect to assume the defense of any suit, it will reimburse the Trust,
officers or Trustees or controlling person(s) or defendant(s) in the suit, for
the reasonable fees and expenses of any counsel retained by them. The
Distributor agrees to notify the Trust promptly of the commencement of any
litigation or proceedings against it or any of its officers or directors in
connection with the issuance or sale of any of the Shares.
(c) The indemnification obligations of the parties in this Section 10
shall survive the termination of this Agreement.
11. EFFECTIVENESS, TERMINATION, ETC. This Agreement shall become effective
as follows: (i) with respect to the Shares of each Fund (or class thereof)
identified on Schedule A hereto on the date hereof, as of the date hereof, and
(ii) with respect to the Shares of any Fund (or class thereof) added to Schedule
A hereto, subsequent hereto, as of the date Schedule A is amended to add such
Fund or class of Shares. Unless terminated as provided herein, the Agreement
shall continue in force for two (2) years from the date of its execution and
thereafter from year to year, provided continuance is approved at least annually
by either (i) the vote of a majority of the Trustees of the Trust, or by the
vote of a majority of the outstanding voting securities of the Trust, and (ii)
the vote of a majority of those Trustees of the Trust who are not interested
persons of the Trust and who are not parties to this Agreement or interested
persons of any party, cast in person at a meeting called for the purpose of
voting on the approval. This Agreement shall automatically terminate in the
event of its assignment. In addition to termination by failure to approve
continuance or by assignment, this Agreement may at any time be terminated
without the payment of any penalty with respect to any Fund or class of Shares
thereof by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust, or by vote of a majority of the outstanding
voting securities of the Trust, on not more than sixty (60) days written notice
by the Trust. This Agreement may be terminated by the Distributor upon not less
than sixty (60) days prior written notice to the Trust. As used in this Section
11, the terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person" shall have the respective meanings
specified in the 1940 Act and the rules enacted thereunder as now in effect or
as hereafter amended.
12. NOTICE. Any notice under this Agreement shall be given in writing
addressed and hand delivered or sent by registered or certified mail, postage
prepaid, to the other party to this Agreement at its principal place of
business.
<PAGE>
13. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
14. GOVERNING LAW. To the extent that state law has not been preempted by
the provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the State of
Texas.
15. LIMITATION OF LIABILITY. The Distributor acknowledges that it has
received notice of and accepts the limitations set forth in the Trust's Amended
and Restated Master Trust Agreement. The Distributor agrees that the Trust's
obligations hereunder shall be limited to the Trust, and that the Distributor
shall have recourse solely against the assets of the Fund with respect to which
the Trust's obligations hereunder relate and shall have no recourse against the
assets of any other Fund or against any shareholder, Trustee, officer, employee
or agent of the Trust.
16. MISCELLANEOUS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect. This Agreement may be executed in two
counterparts, each of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year written below.
U.S. GLOBAL INVESTORS FUNDS U.S. GLOBAL BROKERAGE, INC.
By: /s/ Frank E. Holmes By: /s/ Anthony A. Rabago
---------------------------- -----------------------------
Frank E. Holmes Anthony A. Rabago
President President
Chief Executive Officer
Date: August 30, 1999 Date: August 30, 1999
<PAGE>
SCHEDULE A
U.S. Global Investors Funds
Portfolios and Fee Schedule
Portfolios covered by Distribution Agreement:
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
U.S. Treasury Securities Cash Fund
Fees for distribution and distribution support services on behalf of the
Portfolios:
Annual Fee: None. Trust has no Distribution Plans.
August 30, 1999
U.S. GLOBAL INVESTORS FUNDS U.S. GLOBAL BROKERAGE, INC.
By: /s/ Frank E. Holmes By: /s/ Anthony A. Rabago
---------------------------- -----------------------------
Frank E. Holmes Anthony A. Rabago
President President
Chief Executive Officer
POWER OF ATTORNEY
We the undersigned officers and trustees of U.S. Global Investors Funds
(Trust), do hereby severally constitute and appoint Frank E. Holmes and Susan B.
McGee, and each of them acting singularly, as our true and lawful attorneys,
with full powers to them and each of them to sign for us, in our names in the
capacities indicated below, any Post-Effective Amendment to the Registration
Statement of the Trust on Form N-1A to be filed with the Securities and Exchange
Commission and to take such further action in respect thereto as they, in their
sole discretion, deem necessary to enable the Trust to comply with the
provisions of the Securities Act of 1933, as amended, and the Investment Company
Act of 1940, as amended, and all requirements and regulations of the Securities
and Exchange Commission, hereby ratifying and confirming our signatures as they
may be signed by our said attorneys to any and all documents related to said
Amendment to the Registration Statement.
IN WITNESS WHEREOF, we have hereunto set our hands on the dates indicated
below.
SIGNATURE TITLE DATE
- ---------------------------------- ------------------- ---------------
/s/ Frank E. Holmes
- ----------------------------------
FRANK E. HOLMES Trustee August 13, 1999
President, Chief
Executive Officer,
Chief Financial
Officer
/s/ John P. Allen
- ----------------------------------
JOHN P. ALLEN Trustee August 13, 1999
/s/ W.C.J. van Rensburg
- ----------------------------------
W.C.J. VAN RENSBURG Trustee August 13, 1999
/s/ E. Douglas Hod
- ----------------------------------
E. DOUGLAS HODO Trustee August 13, 1999
/s/ Charles A. Mann
- ----------------------------------
CHARLES A. MANN Trustee August 13, 1999
/s/ Clark R. Mandigo
- ----------------------------------
CLARK R. MANDIGO Trustee August 13, 1999
/s/ Walter "Bo" W. McAllister, III
- ----------------------------------
WALTER "BO" W. MCALLISTER, III Trustee August 13, 1999
/s/ Susan B. McGee
- ----------------------------------
SUSAN B. MCGEE Executive Vice August 13, 1999
President,
Secretary,
General Counsel
