FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For The Fiscal Year Ended June 30, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For The Transition Period From --- To ---
Commission File Number 0-13928
UNITED SERVICES ADVISORS, INC.
(Exact name of registrant as specified in its charter)
7900 Callaghan Road, San Antonio, TX 78229
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 210-308-1234
Texas 74-1598370
(State of Organization) (I.R.S. Employer Identification No.)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Preferred Stock, par value $0.05 Per share
Indicate by check mark whether the Company (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of
Registrant on August 31, 1995 was $ 253,088. Registrant's only voting stock is
Class A Common Stock, par value $0.05 per share, for which there is no active
market. The 101,235 shares of Class A Common held by non-affiliates were valued
at the average of the closing bid and asked prices of Registrant's Preferred
Stock as reported by the National Quotation Bureau, Inc., NASDAQ reports and
financial publications, which was $2.50 per share.
On August 31, 1995 there were 567,279 shares of Registrant's Class A common
stock outstanding and 1,000,000 shares of Registrant's Class B non-voting common
shares outstanding. In addition, there were 5,074,995 shares of Registrant's
Preferred Stock issued and 4,971,695 shares of Registrant's Preferred Stock
issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Securities Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I
ITEM 1. BUSINESS.
United Services Advisors, Inc., a Texas corporation organized in 1968 (the
"Company" or "Registrant"), and its wholly-owned subsidiaries provide five types
of services: (1) investment adviser to institutions (namely, investment
companies) and other persons; (2) transfer agency and record keeping services;
(3) mailing services; (4) custodial and administrative services for IRAs and
other types of retirement plans; and (5) administrative services for
institutions (namely, investment companies) and other persons. The provision of
investment advisory, transfer agent, administrative and custodial services are
the primary sources of the Company's revenue. (See Consolidated Statements of
Operations in Item 8 of this Form 10-K.)
The Company is a registered investment adviser under the Investment
Advisers Act of 1940 and is principally engaged in the business of rendering
investment advisory and other services to United Services Funds, a Massachusetts
business trust ("USF", "Trust" or "Funds"). USF is a no-load, open-end
management investment company which offers shares of beneficial interest in
thirteen diversified portfolios or sub-trusts (commonly referred to as mutual
funds).
The Company organized U.S. Advisers (Guernsey) Ltd. on August 20, 1993 for
the purpose of acting as "Manager" for investment companies whose shares are
offered to non-U.S. citizens. U.S. Advisors (Guernsey) Ltd. has delegated its
administrative duties to Butterfield Fund Managers (Guernsey) Limited and its
investment advisory duties to Registrant. The off-shore fund commenced
operations during September 1993.
The Company is the administrator to Pauze'/Swanson United Services Funds
("PSUSF"), a Massachusetts business trust formed on November 1, 1993. PSUSF is
an open-end management investment company. The Pauze' U.S. Government Total
Return Bond Fund, a no-load mutual fund, is one series of PSUSF. The Company
does not furnish investment advice to this Fund; however, it generally manages
the affairs of the Fund under an Administrative Services Agreement dated
November 1, 1993.
The Company is also the investment advisor to the Accolade Funds, a
Massachusetts business trust. Accolade Funds is an open-end management
investment company which offers shares of the Bonnel Growth Fund, a no-load
mutual fund. The Bonnel Growth Fund commenced operations in October 1994.
The Company is the investment advisor to United Services Insurance Funds
("USIF"), a Massachusetts business trust formed for the purpose of providing an
investment vehicle for variable annuity products. USIF currently offers shares
of the Schabacker Select Fund through variable annuity contracts purchased by
clients from Integrity Life Insurance Company. USIF commenced operations in June
1995. Marleau, Lemire (USA), Inc., which occupies office space supplied by the
Registrant, acts as broker for the variable annuity contracts.
During July 1994, USAI agreed to form a joint venture with Marleau, Lemire
Inc. of Montreal, Quebec, to offer mutual funds in Canada. In February 1995, the
joint venture, United Services Advisors Wealth Management Inc. ("USAWMI"), was
formed. In July 1995, Guy Prescott was named Chief Executive Officer of USAWMI,
and he commenced efforts to qualify USAWMI so that it may provide investment
management services as well as offer shares of mutual funds in Canada.
Registrant trades securities for its own account. Management believes it
can more effectively manage the Company's cash position by broadening the types
of investments utilized in cash management.
MUTUAL FUND MANAGEMENT
For each of the funds it manages, the Company provides portfolio management
services, subject to the overall supervision and review of a Board of Trustees
of each trust. Consistent with the investment restrictions, objectives and
policies of the particular fund, the portfolio manager for each fund determines
what investments should be purchased, sold and held, and makes changes in the
portfolio deemed to be necessary or appropriate. Though subject to overall
supervision and review by management, the portfolio managers of the various
funds are generally given reasonable latitude with regard to investment
decisions relating to the fund for which each is responsible. In the advisory
agreement with the funds, the Company is charged with seeking the best overall
terms in executing portfolio transactions and selecting brokers or dealers.
Depending upon the particular fund and the particular security involved, a
variety of brokers and dealers are utilized by the Company.
The tables on the following pages reflect the net assets for each of the
funds managed or administered by the Company as of the dates indicated. The
information in parentheses immediately following each fund name in the tables
indicate the year of a fund's establishment and a brief summary of its
investment objectives.
THE ADVISORY AGREEMENTS
The funds comprising USF, Accolade and USIF are managed by the Company
pursuant to advisory agreements (the "Advisory Agreements"). Under the terms of
each Advisory Agreement, the Company provides management and investment advisory
services to each of the funds. The Company receives an advisory fee from each
fund based on a percentage of each fund's average net assets. The Company
furnishes an investment program for each of the mutual funds it manages and
determines, subject to the overall supervision and review of the Board of
Trustees of the funds, the funds' investments. The Company also manages,
supervises and conducts certain other affairs of the funds, subject to the
control of the Boards of Trustees.
In addition, the Company provides office space, facilities and certain
business equipment and also provides the services of executive, clerical and
accounting personnel for administering the affairs of the mutual funds. The
Company and its affiliates compensate all personnel, officers, directors and
interested Trustees if such persons are employees of the Company or its
affiliates. However, the funds are required to reimburse the Company for a
portion of the compensation of the Company's employees who perform certain state
and federal securities law regulatory compliance work on behalf of the funds
based upon the time spent on such matters. Under the terms of the Advisory
Agreements, the Company pays the expense of printing and mailing prospectuses
and sales materials used for promotional purposes. Other than the foregoing,
each fund pays its allocable portion of all other expenses for the operations
and activities of the funds which the Company manages and administers.
On October 14, 1994, the Board of Trustees of USF approved the Advisory
Agreement with the Company through October 30, 1995. The Advisory Agreement is
subject to annual renewal by a majority vote of the shareholders of each fund or
the Trustees of USF and by the vote of a majority of the disinterested Trustees
cast in person at a meeting called for the purpose of voting on such approval.
As required by the Investment Company Act of 1940, the Advisory Agreement is
terminable upon 60 days notice. The Board of Trustees will consider renewal of
the Agreement on October 25, 1995 and it is expected that it will be renewed.
On September 14, 1995 the Board of Trustees of Accolade Funds approved the
Advisory Agreement with the Company through September 21, 1996. The Advisory
Agreement is subject to annual renewal by a majority vote of the shareholders of
each fund or the Trustees of Accolade Funds and by the vote of a majority of the
disinterested Trustees cast in person at a meeting called for the purpose of
voting on such approval. As required by the Investment Company Act of 1940, the
Advisory Agreement is terminable upon 60 days notice.
The Board of Trustees of USIF approved the Advisory Agreement with the
Registrant in July 1995. The terms of the Advisory Agreement provide that it
will continue initially for two years, and from year to year thereafter as long
as it is approved at least annually both (i) by a vote of a majority of the
outstanding voting securities of each Fund (as defined in the Investment Company
Act of 1940) or by the Board of Trustees of the Trust, and (ii) by a vote of a
majority of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. As required by the Investment
Company Act of 1940, the Advisory Agreement is terminable upon 60 days notice.
<PAGE>
<TABLE>
<CAPTION>
Name of NET ASSETS (IN THOUSANDS) OF UNITED SERVICES FUNDS
FUND 1 JUNE 30,
--------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Gold Shares (1969; long-term growth; gold) ........................ $ 211,171 $ 263,827 $ 299,808 $ 187,937 $ 343,148
All-American Equity Fund (1981; capital
appreciation; broadly diversified domestic
common stock) ................................................... 11,931 10,227 12,331 11,825 10,306
Treasury Securities Cash Fund (1982; current
income; U.S. Treasury securities) .............................. 190,373 164,708 142,888 150,192 155,849
Global Resources Fund (1983; long-term
growth; natural resources) ...................................... 21,452 21,620 23,939 25,384 28,157
World Gold Fund (1985; long-term
growth; natural resources) ...................................... 181,473 202,819 109,805 57,942 65,423
Growth Fund2 1983; long-term growth;
common stocks ................................................... -0- 3,553 3,927 4,562 4,720
Income Fund (1983; preservation of capital
and current income; common stocks) ............................. 10,230 11,865 11,009 7,845 7,456
Tax Free Fund (1984; current tax-exempt income;
municipal debt securities) ..................................... 18,613 18,657 17,192 7,790 7,236
European Income Fund2 (1985; high current income
and capital growth; common stock and debt
securities) ..................................................... -0- 2,431 1,754 1,782 1,326
Government Securities Savings Fund (1986; current
income, U.S. Treasury and Government agency
securities) ..................................................... 529,372 610,229 445,418 117,092 22,291
Real Estate Fund (1987; long-term capital
appreciation; real estate securities) ........................... 9,169 14,597 19,780 21,514 6,678
Near-Term Tax Free (1991; current tax-exempt
income; municipal debt securities) .............................. 7,128 9,190 1,775 1,309 592
Intermediate Treasury Fund (1992; high current
income and preservation of capital) ............................. 4,580 4,340 4,581 1,078 --
Special-Term Government Fund (1993; high level
of current income, consistent with low volatility) 6,506 ........ 17,426 10,072 -- --
China Region Opportunity Fund (1994; capital
appreciation through investments in
"China Region") ................................................. 19,022 7,655 -- -- --
---------- ----------- ----------- --------- ---------
Total USF Net Assets Under Management ............................. $1,221,020 $ 1,363,144 $ 1,104,279 $ 596,252 $ 653,182
========== =========== =========== ========= =========
<FN>
1 Each fund name except for China Region Opportunity Fund is preceded by "U.S." or "United Services;" such designation has been
omitted throughout this Form 10-K.
2 Liquidated in December, 1994, Assets are as of December 1994.
</FN>
</TABLE>
<PAGE>
NAME OF NET ASSETS (IN THOUSANDS) OF ACCOLADE FUNDS
FUND JUNE 30,
-------------------------------------------
1995
----
Bonnel Growth Fund (10/94;long-
term growth of capital) $ 13,842
NAME OF NET ASSETS (IN THOUSANDS) OF
FUND PAUZE'/SWANSON UNITED SERVICES FUNDS
JUNE 30,
------------------------------------
1995 1994
---- ----
Pauze' U.S. Government Total $ 31,994 $ 13,661
Return Bond Fund (1/94; achieve
a rate of total return above
the rate of other funds with
similar investment objectives
by investing exclusively in
securities backed by the full
faith and credit of
the United States Government)
ADVISORY FEES AND EXPENSE REIMBURSEMENTS
UNITED SERVICES FUNDS
Under the Advisory Agreement, the Company receives from each of the mutual
funds a separate advisory fee based upon the average net assets of such fund as
set forth below. The advisory fee for each mutual fund is computed and accrued
daily based on the net assets represented by the particular fund on that day.
The fees are paid monthly. Further, the Company has agreed to waive its fee
revenues and/or pay expenses for certain USF funds for purposes of enhancing the
funds' competitive market position as set forth below.
The fee for managing each of the Gold Shares Fund, the Income Fund and the
Real Estate Fund is equal on an annual basis to 0.75% of the first $250,000,000
of average net assets of each such fund and 0.50% of the average net assets of
each such fund in excess of $250,000,000.
The fee for managing the World Gold Fund and the Global Resources Fund is
equal on an annual basis to 1% of the first $250,000,000 of average net assets
and 0.50% of average net assets in excess of $250,000,000.
The annual fee for managing the Treasury Securities Cash Fund is 0.50% of
the first $250,000,000 of the fund's average net assets and 0.375% of average
net assets in excess of that amount.
The annual fee for managing the Government Securities Savings Fund is 0.50%
of the first $250,000,000 of the fund's average net assets and 0.375% of average
net assets in excess of that amount. The Company has guaranteed that total fund
operating expenses (as a percentage of net assets) will not exceed 0.40% of
total net assets through June 30, 1997 and until such later date as the Company
determines. The Company absorbed certain expenses so that the fund's total
operating expenses for the year ended June 30, 1995 were, after subsidization,
0.23%. During the fiscal year the Fund generated cash flow to the Company.
The fee for managing the Tax Free Fund is equal on an annual basis to 0.75%
of the first $250,000,000 of average net assets and 0.50% of the average net
assets in excess of $250,000,000. The Company has guaranteed that total fund
operating expenses (as a percentage of net assets) will not exceed 0.40% on an
annualized basis through June 30, 1996 and until such later date as the Company
determines.
The fees for managing the Near-Term Tax Free Fund and the Intermediate
Treasury Fund are based on an annual fee equal to 0.50% of the Funds' average
net assets. The Company has guaranteed that total fund operating expenses (as a
percentage of net assets) will not exceed 0.70% and 0.40%, respectively, through
June 30, 1996 and until such later date as the Company determines.
The fee for managing the Special-Term Government Fund is based on an annual
fee of 0.30% of the Fund's average net assets. The Company has guaranteed that
total fund operating expenses (as a percentage of average net assets) will not
exceed 0.40% on an annualized basis through June 30, 1996 and until such later
date as the Company determines.
The fee for managing the European Income Fund was equal on an annual basis
to 1.00% of the first $250,000,000 of average net assets and 0.75% of the
average net assets in excess of $250,000,000. The fee for managing the Growth
Fund was equal on an annual basis to 0.75% of the first $250,000,000 of average
net assets of the fund and 0.50% of the average net assets of the fund in excess
of $250,000,000. These Funds were liquidated on December 31, 1994, following the
recommendation of the USF Board of Trustees and the affirmative vote of
shareholders.
The fee for managing the All American Equity Fund is equal on an annual
basis to 0.75% of the first $250,000,000 of average net assets and 0.50% of
average net assets in excess of $250,000,000. The Company has guaranteed that
total fund operating expenses (as a percentage of net assets) will not exceed
0.70% on an annualized basis through June 30, 1996 and until such later date as
the Advisor determines.
The fee for managing the China Region Opportunity Fund is equal on an
annual basis to 1.25% of the Fund's average net assets. The Company has
guaranteed that total fund operating expenses (as a percentage of net assets)
will not exceed 2.25% on an annualized basis through June 30, 1996 and until
such later date as the Advisor determines.
The Company, USF and Batterymarch Financial Management, Inc. ("BFM")
entered into a sub-advisory agreement with respect to the China Region
Opportunity Fund effective January 20, 1995. As compensation for sub- advising
the fund, BFM receives a monthly fee based upon the monthly average net assets
of the fund. On an annual basis, the fee will be 1.00%, with no minimum fee. The
Company is responsible for BFM's fee.
Administrative expenses incurred by each of the United Services Funds,
exclusive of interest, brokerage fees and commissions, taxes, extraordinary
items and certain other excludable expenses for which a waiver has been
obtained, which exceed the lowest expense limitation imposed in any state in
which USF is registered, are reimbursed by the Company up to the amount of the
advisory fee.
For the three fiscal periods ended June 30, 1993, 1994 and 1995, the Funds
paid the Company the following advisory fees (net of expenses paid by the
Company or voluntary fee reductions or waivers):
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- -----------
<S> <C> <C> <C>
Gold Shares Fund ...................... $1,969,645 $2,011,687 $1,290,528
Global Resources Fund ................. 218,438 240,729 237,977
World Gold Fund ....................... 1,900,764 1,753,641 661,882
U.S. Treasury Securities Cash Fund .... 894,643 760,423 492,909
All American Equity Fund .............. 79,885 86,748 92,374
Growth Fund ........................... 5,010 14,978 30,314
Income Fund ........................... 80,223 99,688 65,758
Tax Free Fund ......................... -0- -0- 73,538
European Income Fund .................. -0- -0- -0-
Government Securities Savings Fund .... -0- -0- -0-
Real Estate Fund ...................... 85,225 140,661 168,181
Near-Term Tax Free Fund ............... -0- -0- -0-
Intermediate Treasury Fund ............ -0- -0- 14,722
Special-Term Government Fund .......... -0- -0- -0-
China Region Opportunity Fund ......... 235,328 18,303 0-
---------- ----------- -----------
Total Fees .............................. $5,469,161 $ 5,126,858 $ 3,128,183
========== =========== ===========
</TABLE>
The aggregate amount of management fees waived or expenses borne (inclusive
of amounts reimbursed pursuant to state expense reimbursement requirements) by
the Company for the fiscal year ended June 30, 1995 were as follows:
<TABLE>
<CAPTION>
TOTAL OF
MANAGEMENT FEES WAIVED AND
FUND FEES WAIVED EXPENSES BORNE
---------- ----------
<S> <C> <C>
European Income Fund .................... $ 11,799 $ 39,525
Government Securities Savings Fund ...... $2,442,620 $2,599,512
Growth Fund ............................. $ 7,998 $ 7,998
Intermediate Treasury Fund .............. $ 21,969 $ 93,923
Near-Term Tax Free Fund ................. $ 42,816 $ 128,156
Special-Term Government Fund ............ $ 27,218 $ 136,224
Tax Free Fund ........................... $ 134,701 $ 240,252
All American Equity Fund ................ $ -0- $ 161,322
China Region Opportunity Fund ........... $ -0- $ 161,239
---------- ----------
Total ................................... $2,689,121 $3,568,151
========== ==========
</TABLE>
ACCOLADE FUNDS
Under the advisory agreement, the Company receives from the Bonnel Growth
Fund a management fee of 1% of the fund's average net assets. The advisory fee
for the mutual fund is computed and accrued daily based upon the net assets
represented of the fund on that day. The fees are paid monthly. For the period
ended June 30, 1995, the Bonnel Growth Fund paid the Company $39,320 in
management fees.
The Company, Accolade and Bonnel, Inc. ("BI") entered into a sub-advisory
agreement with respect to the Bonnel Growth Fund effective September 21, 1994.
BI is located at 1106 Ivy Court, Reno, Nevada. It manages the composition of the
portfolio and furnishes the Fund advice and recommendations with respect to its
investments and its investment program strategy, subject to the general
supervision and control of the Registrant and the Trust's Board of Trustees. Mr.
Arthur Bonnel, who owns 100% of BI, serves as the Fund's portfolio manager.
While the Sub-Advisor has not previously served as investment advisor or
sub-advisor to any registered investment company, Mr. Bonnel served as a
portfolio manager of a successful mutual fund for over a period of five years.
As compensation for sub-advising the Bonnel Growth Fund, BI receives a minimum
fee of $150,000 per year. The Fund is not responsible for the Sub- Advisor's
fee.
UNITED SERVICES INSURANCE FUNDS
The Company, USIF and Schabacker Investment Management, Inc. have entered
into a sub-advisory agreement with respect to the Schabaker Select Fund
effective December 18, 1994. The Company will receive a fee of 1.25% on an
annualized basis as compensation for providing investment advise to USIF. Of
this amount Schabaker Investment Management, Inc. will receive a fee of 0.625%
on an annualized basis, with no minimum fee, as compensation for sub- advising
the fund.
ADMINISTRATIVE AGREEMENT
PAUZE'/SWANSON UNITED SERVICES FUNDS
The Administrative Agreement between the Company and Pauze'/Swanson United
Services Funds was renewed in April 1995. The fees for providing administrative
services to the Pauze' U.S. Government Total Return Bond Fund are a fixed
monthly fee, with compensation for coordinating with state regulatory
authorities based on a monthly fee for each state in which the fund is
registered, and a percentage of average net assets in excess of $50 million.
MARKETING
Since taking control of the Company in October of 1989, Management has
endeavored to enhance its reputation by shifting the Company's focus away from
its historical gold identity to that of a provider of balanced financial
products and services and to build the Company's reputation and establish its
credibility as a provider of the basic building blocks of investing. For
example, the Company has been able to position its U.S. Government Securities
Savings Fund as the number one performing government only money market fund for
more than 40 months through early 1994 and the Fund continues to be in or near
the top ten of such funds according to IBC/Donoghue. IBC/Donoghue is a
nationally recognized service which establishes its own categories for money
market funds and which publishes said funds' effective yield and/or total
return, ranked in order of the yield.
The Company markets the funds' shares utilizing various techniques: (1)
public relations; (2) direct response marketing; (3) attendance at various
investment conferences; (4) voluntarily waiving or reducing fees and agreeing to
bear fund expenses beyond a stated threshold so that the fund offers a
competitive return; and (5) third-party service providers such as Schwab,
Fidelity and Jack White.
TRANSFER AGENT AND OTHER SERVICES
The Registrant's wholly-owned subsidiary, United Shareholder Services, Inc.
("USSI"), is a transfer agent registered under the Securities Exchange Act of
1934, and provides transfer agency, bookkeeping, accounting, lockbox and
printing services for USF, PSUSF, Accolade and USIF. The transfer agency
utilizes a coordinated internal system connecting the Company's fund shareholder
communication network with computer equipment and software designed to meet the
operating requirements of a mutual fund transfer agency.
The transfer agency's duties to the funds encompass: (1) acting as
servicing agent in connection with dividend and distribution functions; (2)
performing shareholder account and administrative agent functions in connection
with issuance, transfer and redemption or repurchase of shares; (3) maintaining
such records as are necessary to document transactions in the funds' shares; (4)
acting as servicing agent in connection with mailing of shareholder
communications, including reports to shareholders, dividend and distribution
notices, and proxy materials for shareholder meetings; and (5) investigating and
answering all shareholder account inquiries.
On October 14, 1994 the Board of Trustees of USF approved the transfer
agency agreement with USSI through October 31, 1995. The transfer agency
agreement with USF provides that USSI will receive, as compensation for services
rendered as transfer agent, an annual fee of $20.00 per account, except for
money market accounts with monthly zero balances. In connection with
obtaining/providing administrative services to the beneficial owners of Trust
shares through broker-dealers which provide such services and maintain an
omnibus account with USSI, each fund pays a monthly fee equal to one-twelfth
(1/12) of 12.5 basis points (.00125) of the value of the shares of the fund held
in accounts at the broker-dealer, which payment shall not exceed $1.67 times the
average daily number of accounts holding USF shares at the broker-dealers. USSI
bills USF separately for all out-of-pocket disbursements incurred at the
direction of USF. Further, the Trust assesses account and transaction fees to
shareholders of certain sub-trusts in accordance with the Funds' prospectuses.
Said fees are paid directly to USSI which, in turn, applies such amounts first
to its annual fee and then, in the event aggregate fees and charges exceed its
annual fee, to out-of-pocket disbursements incurred at the direction of USF. The
remainder, if any, is retained by USSI.
The transfer agency agreement with PSUSF provides for each Fund to pay USSI
an annual fee of $25.00 per account (1/12 of $25 monthly) with a minimum monthly
fee of $2,500.00. In connection with obtaining/providing administrative services
to the beneficial owners of PSUSF shares through broker-dealers which provide
such services and maintain an omnibus account with USSI, each fund pays a
monthly fee equal to one-twelfth (1/12) of 12.5 basis points (.00125) of the
value of the shares of the fund held in accounts at the broker-dealer, which
payment shall not exceed $2.08 multiplied by the average daily number of
accounts holding PSUSF shares at the broker-dealers.
In September 1995 the Board of Trustees of Accolade Funds approved the
transfer agency agreement with USSI through September 21 1996. The transfer
agency agreement with Accolade Funds provides that USSI will receive, as
compensation for services rendered as transfer agent, an annual fee of $20.00
per account. In connection with obtaining/providing administrative services to
the beneficial owners of Trust shares through broker-dealers which provide such
services and maintain an omnibus account with USSI, each fund pays a monthly fee
equal to one-twelfth (1/12) of 12.5 basis points (.00125) of the value of the
shares of the fund held in accounts at the broker-dealer, which payment shall
not exceed $1.67 times the average daily number of accounts holding Trust shares
at the broker-dealers. USSI bills the Trust separately for all out-of-pocket
disbursements incurred at the direction of the Trust. Further, the Trust
assesses account and transaction fees to shareholders of certain sub-trusts in
accordance with the Funds' prospectuses. Said fees are paid directly to USSI
which, in turn, applies such amounts first to its annual fee and then, in the
event aggregate fees and charges exceed its annual fee, to out-of-pocket
disbursements incurred at the direction of the Trust. The remainder, if any, is
retained by USSI.
<TABLE>
<CAPTION>
NUMBER OF SHAREHOLDER ACCOUNTS
JUNE 30,
-----------------------------------------------------------------------
NAME OF FUND 1995 1994 1993 1992 1991
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Gold Shares ........................................ 47,888 50,590 55,883 57,301 63,151
All American Equity Fund ........................... 2,662 2,936 3,453 3,596 3,092
Treasury Securities Cash Fund ...................... 13,161 12,465 12,920 15,705 17,322
Global Resources Fund .............................. 7,107 7,829 8,496 9,393 10,774
World Gold Fund .................................... 22,125 23,737 17,971 18,204 21,023
Growth Fund ........................................ -0- 1,403 1,476 1,697 1,743
Income Fund ........................................ 1,612 1,938 1,971 1,754 1,905
Tax Free Fund ...................................... 1,205 1,390 1,131 851 939
European Income Fund ............................... -0- 644 723 891 788
Government Securities Savings Fund ................. 21,837 20,304 14,573 5,633 2,194
Real Estate Fund ................................... 1,457 2,101 2,575 2,824 1,928
Near-Term Tax Free Fund ............................ 377 431 104 128 72
Intermediate Treasury Fund ......................... 351 414 428 46 --
Special-Term Government Fund ....................... 596 1,071 328 -- --
China Region Opportunity Fund ...................... 4,377 2,117 -- -- --
------- ------- ------- ------- -------
Total USF Accounts ................................. 124,755 129,370 122,032 118,023 124,931
======= ======= ======= ======= =======
</TABLE>
As of August 31, 1995 total accounts for Pauze'/Swanson United Services
Funds was 34.
As of August 31, 1995 total accounts for Accolade Funds was 1,734.
For the three fiscal years ended June 30, 1993, 1994 and 1995, USF paid
USSI total transfer agency (including lockbox and printing) fees of $2,343,018,
$2,681,398 and $2,770,094, respectively. For the period ended June 30, 1994,
USSI waived such fees for PSUSF, and for the fiscal year ended June 30, 1995,
PSUSF paid USSI total of $31,711. For the period ended June 30, 1995, Accolade
paid USSI total fees of $10,671.
BOOKKEEPING AND ACCOUNTING
USSI also maintains the books and records of each Trust and of each fund of
each Trust, including calculations of the daily net asset value per share. The
services are currently provided to USF for an asset based fee on a tiered level
of average net assets -- subject to an annual minimum fee of at least $24,000.
The services are currently provided to Accolade Funds and USIF for an asset
based fee on a tiered level of average net assets -- subject to an annual
minimum fee of $24,000. The agreements may be terminated by either party without
penalty by giving 60 days written notice.
USSI performs bookkeeping and accounting services, and determines the daily
net asset value for each fund in PSUSF. Those services are provided at a fixed
annual fee of $37,500, payable in 12 monthly installments. The agreement may be
terminated by either party without penalty by giving 60 days written notice.
MAILING SERVICES
A&B Mailers, Inc., a wholly-owned subsidiary of the Company, provides mail
handling services to various persons. A&B Mailers' primary customers include the
Company in connection with its efforts to promote the funds and USF in
connection with required mailings. Each service is priced separately. For the
three years ended June 30, 1993, 1994 and 1995, USF paid A&B Mailers $65,403,
$73,583 and $77,773, respectively. A&B Mailers' total revenue was $333,922,
$402,077 and $330,982, respectively, for the three years ended June 30, 1993,
1994 and 1995.
TRUST COMPANY SERVICES
SECURITY TRUST AND FINANCIAL COMPANY ("ST&FC"), a wholly-owned state
chartered trust company provides custodial and tax reporting services for IRA
and other retirement plans funded with shares issued by the funds advised and
administered by the Company. ST&FC also actively markets 401(k) and other
retirement plans. The custodial fees are generally paid to ST&FC at year-end
upon separate invoice to the customer, not the fund. At June 30, 1995 ST&FC was
providing custodial services to 27,102 IRAs and other retirement accounts. Fee
revenue attributable to such accounts for the fiscal year ended June 30, 1995
was $352,195.
During the fiscal year ST&FC commenced providing custodial and
administrative services to investor accounts managed by investment advisers not
associated with the Registrant. These services are negotiated with the
client-adviser and may be terminated upon notice. Fee revenue attributable to
such accounts for the fiscal year ended June 30, 1995 was $122,296.
EMPLOYEES
As of June 30, 1994, the Company and its subsidiaries employed 111
full-time employees and 11 part-time employees; and, as of June 30, 1995, it
employed 100 full-time employees and 8 part-time employees. The Company
considers its relationship with its employees to be excellent.
COMPETITION
The mutual fund industry is highly competitive. As of June 30, 1995 there
were over 6,000 registered open-end management investment companies of varying
sizes and investment policies whose shares were being offered to the public.
Generally, there are two types of mutual funds: "load" and "no-load." In
addition there are both no-load and load funds which have "12b-1" plans
authorizing the payment of distribution costs of the funds out of fund assets,
such as PSUSF and Accolade Funds. Load funds are typically sold through or
sponsored by brokerage firms, and a sales commission is charged on the amount of
the investment. No-load funds, such as USF's, however, may be purchased directly
from the particular mutual fund organization and thus no sales commission is
charged.
In addition to competition from other mutual fund managers and investment
advisers, the Company and the mutual fund industry are in competition with
various investment alternatives offered by insurance companies, banks,
securities dealers and other financial institutions. Many of these institutions
are able to engage in more liberal advertising than mutual funds and may offer
accounts at competitive interest rates, which are insured by federally chartered
corporations such as the Federal Deposit Insurance Corporation. Recent
regulatory pronouncements related to the Glass-Steagall Act, the statute that
has prohibited banks from engaging in various securities activities, are
enabling banks to compete with the Company in a variety of areas.
A number of mutual fund groups are significantly larger than the funds
managed by the Company, offer a greater variety of investment objectives and
have more experience and greater resources to promote the sale of investments
therein. However, the Company believes it has the resources, products and
personnel to compete with these other mutual funds. Competition for sales of
fund shares is influenced by various factors, including investment objectives
and performance, advertising and sales promotional efforts, distribution
channels and the types and quality of services offered to fund shareholders.
Success in the investment advisory and mutual fund share distribution
businesses is substantially dependent on the Funds' investment performance, the
quality of services provided to shareholders and the Company's efforts to
effectively market the performance. In other words, good performance combined
with a strong public relations program heightens investor awareness, stimulates
sales of the Funds' shares and tends to keep redemptions low. Sales of Funds'
shares generate management fees (which are based on assets of the Funds) and
transfer agent fees (which are based on the number of Fund accounts). Good
performance also attracts private institutional accounts to the Company.
Conversely, relatively poor performance results in decreased sales and increased
redemptions of the Funds' shares and the loss of private accounts, with
corresponding decreases in revenues to the Company.
SUPERVISION AND REGULATION
The Company, USSI, and the investment companies it manages and administers
operate under certain laws, including federal and state securities laws,
governing their organization, registration, operation, legal, financial and tax
status. ST&FC operates under certain laws, including Texas banking laws,
governing its organization, registration, operation, legal, financial and tax
status. Among the penalties for violation of the laws and regulations applicable
to the Company and its subsidiaries are fines, imprisonment, injunctions,
revocation of registration and certain additional administrative sanctions. A
determination that the Company or its management had violated applicable laws
and regulations could have a material adverse effect on the business of the
Company. Moreover, there is no assurance that changes to existing laws,
regulations or rulings promulgated by governmental entities having jurisdiction
over the Company and the funds will not have a material adverse effect on the
business of the Company.
The Company is a registered investment adviser and is subject to regulation
by the U.S. Securities and Exchange Commission ("SEC") pursuant to the
Investment Advisers Act of 1940, the Investment Company Act of 1940 and the
Securities Exchange Act of 1934 (the "1934 Act"). The Company is required to
keep and maintain certain reports and records which must be made available to
the SEC upon request. Moreover, the funds managed by the Company are subject to
regulation and periodic reporting under the Investment Company Act of 1940 and,
with respect to their continuous public offering of shares, the registration
provisions of the Securities Act of 1933. The Company's affiliate transfer agent
operations are also subject to the provisions of the 1934 Act and the
regulations promulgated thereunder.
The Investment Company Act of 1940, which governs the activities of the
Company and the funds managed by it, requires any investment advisory agreement
to be approved by the vote of a majority of the voting shares of the applicable
mutual fund and provides that it will continue thereafter from year to year 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 each fund or by the
Board of Trustees of the Trust, and (ii) by a vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such approvals. The statute further provides that an investment
advisory agreement may be terminated at any time, without penalty, by a fund's
board of directors or a majority of its outstanding voting shares on not more
than 60 days written notice to the investment adviser managing the fund and that
the advisory agreement will automatically terminate in the event of its
assignment.
RELATIONSHIPS WITH THE FUNDS
The businesses of the Company are to a very significant degree dependent
upon their associations and contractual relationships with the Trusts. In the
event any of the management or investment company services agreements with USF
were canceled or not renewed pursuant to the terms thereof, the Company would be
substantially adversely affected. The Company, USSI and ST&FC consider their
relationships with the Trusts to be good and they have no reason to believe that
their management and service contracts will not be renewed in the future;
however, there is no assurance that the Trusts will choose to continue its
relationships with the Company, USSI, and ST&FC.
ITEM 2. PROPERTIES.
The Company presently occupies approximately a 46,000 square foot office
building with approximately 2.5 acres of land. The Company purchased this
building from the Resolution Trust Corporation on February 28, 1992, for
$1,018,165 (which included closing costs). To finance acquisition and
improvements, the Company obtained a bank loan in the amount of $1,425,000 and
refinanced the note during fiscal year 1994. (See Note E to the Consolidated
Financial Statements in Item 8 of this Form 10-K.) The Company moved to its new
headquarters during August 1992. The Company has made substantial improvements
to the building. USAI, USSI, A&B Mailers, Inc., Marleau, Lemire (USA), Inc. and
ST&FC occupy sections in the building.
ITEM 3. LEGAL PROCEEDINGS.
There is no material legal proceeding to which the Company is involved.
There are no material legal proceedings to which any director, officer or
affiliate of the Company or any associate of any such director or officer is a
party or has a material interest, adverse to the Company or any of its
subsidiaries.
In June 1994 Gerald Letch sued the Company in state district court located
in San Antonio, Texas for breach of contract. Mr. Letch asked for an unspecified
amount of damages based upon an alleged oral promise by a deceased Company
officer to pay a finder's fee for introducing certain parties to the Company
leading to the organization of PSUSF. During August 1994 Mr. Letch amended his
complaint to include PSUSF and allegations of fraud and conspiracy between USAI
and PSUSF. During June 1995 summary judgment was rendered in favor of PSUSF
which did not exist at the time the alleged cause of action arose. To date legal
fees and expenses to defend this action exceed in excess of $143,000, a
significant portion of which was incurred during fiscal year 1995. The matter is
currently docketed for hearing in October 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of Registrant's security holders
through the solicitation of proxies or otherwise during the fourth quarter of
the fiscal year covered by this report. After the fiscal year end, Registrant
solicited proxies for a proposal to increase the number of shares of
Registrant's preferred stock. Shareholders voted to increase the shares of
Preferred Stock authorized from 6,000,000 shares to 7,000,000 shares at a
shareholder meeting held August 3, 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
MARKET INFORMATION
The Company may be considered to have two classes of common equity--Common
Stock, par value $0.05 per share, and Preferred Stock, par value $0.05 per
share. The Company's Common Stock is divided into two sub-classes -- Class A and
Class B.
There is no established public trading market for the Company's Common
Stock.
The holders of the Company's Class A Common Stock of record on March 12,
1985 (and their transferees by gift, devise or descent) have the right to
exchange their shares of Common Stock for Preferred Stock on a share-for-share
basis until April 30, 2000. At August 31, 1995 the holders of 99,003 shares of
Class A Common Stock have the right to exchange.
The Company's Preferred Stock is traded over-the-counter; is quoted daily
under the NASDAQ Small-Cap Issues and is listed as "USvAd pf" in the Wall Street
Journal. Trades are reported by NASDAQ under the symbol "USVSP."
The following table sets forth the range of high and low closing bid
quotations from the NASDAQ System for the fiscal years ended June 30, 1994 and
1995, as reported by the National Quotation Bureau, Inc., NASDAQ reports and
financial publications. The quotations represent prices between dealers and do
not include any retail markup, markdown or commission and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
BID PRICE ($)
1995 1994
----------------- -----------------
HIGH LOW HIGH LOW
-----------------------------------------
<S> <C> <C> <C> <C>
First Quarter (9/30) ........... 5 3 3/4 5 3/4 3 7/8
Second Quarter (12/31) ......... 4 1/2 2 1/2 5 5/8 3 7/8
Third Quarter (3/31) ........... 3 5/8 2 3/4 5 7/8 5 1/8
Fourth Quarter (6/30) .......... 3 3/8 2 1/2 5 3/8 4
</TABLE>
HOLDERS
On August 31, 1995 there were 79 holders of record of Class A Common Stock,
1 holder of record of Class B Common Stock and 278 holders of record of the
Preferred Stock.
A substantial number of the Preferred shares are held of record by nominees
and Management believes that as of August 31, 1995 there were more than 1,000
beneficial owners of the Company's Preferred Stock.
DIVIDENDS
The Company has not paid cash dividends on its Common Stock during the last
eleven fiscal years, and has never paid cash dividends on its Preferred Stock.
Payment of cash dividends is within the discretion of the Company's Board of
Directors and is dependent upon earnings, operations, capital requirements,
general financial condition of the Company and general business conditions.
Holders of the outstanding shares of the Company's Preferred Stock are
entitled to receive, when and as declared by the Company's Board of Directors, a
non-cumulative cash dividend equal in the aggregate to 5% of the Company's
after-tax net earnings for its prior fiscal year. After such dividend has been
paid, the holders of the outstanding shares of Common Stock are entitled to
receive, when and as declared by the Company's Board of Directors, cash
dividends per share equal to the cash dividends per share paid to the holders of
the Preferred Stock. Thereafter, if the Board of Directors determines to pay
additional cash dividends, such dividends will be paid simultaneously on a
prorata basis to holders of both the Preferred Stock and the Common Stock. The
holders of the Preferred Stock are protected in certain instances against
dilution of the dividend amount payable to such holders.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data is qualified by reference to, and
should be read in conjunction with, the Company's Consolidated Financial
Statements and related notes and Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in Items 8 and 7,
respectively, of this Form 10-K. The selected financial data as of June 30, 1991
through June 30, 1995 and the years then ended is derived from the Company's
Consolidated Financial Statements, which were examined by Price Waterhouse LLP,
independent certified public accountants. Year Ended June 30,
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
SELECTED EARNINGS DATA:
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues ......................... $ 15,770,738 $ 10,879,156 $ 7,393,502 $ 6,979,845 $ 6,797,531
Expenses ......................... 21,666,598 10,108,181 7,302,036 7,406,179 6,485,211
------------- ------------- ------------- ------------- -------------
Earnings (loss) before
income taxes, extra- ............. (5,895,860) 770,975 91,466 (426,334) 312,320
ordinary item and ------------- ------------- ------------- ------------- -------------
cumulative effect
Income taxes and
extraordinary item ............... 2,005,142 178,665 -- -- 2,200
------------- ------------- ------------- ------------- -------------
Cumulative effect of
change in accounting ............. 43,284 200,420 -- -- --
------------- ------------- ------------- ------------- -------------
Net earnings (loss) .............. (3,847,434) 1,150,060 91,466 (426,334) 310,120
Earnings (loss) per share ........ (.64) .19 .02 (.10) .07
Working capital .................. $(106,863,206)* $ 3,391,974 $ 2,952,737 $ 2,119,233 $ 2,657,504
Total assets .................... 128,073,122 9,143,448 7,224,495 4,918,085 4,649,587
Long-term obligations ........... 6,016, 617 1,619,989 1,718,518 1,181,245 362,556
Shareholders' equity ............ 8,661,223 6,730,003 5,055,567 3,288,200 3,788,947
* Working capital includes amounts due to broker-dealers under reverse repurchase agreements related to the
Company's purchase of certain U.S. Government securities but does not include the securities collateralizing the
obligations. (See "Government Securities" discussed in Item 7 of this Form 10-K and/or Note F to the Consolidated
Financial Statements, Item 8 of this Form 10-K.)
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
INTRODUCTION
Fiscal 1995 was a year of tremendous challenges which required a
significant commitment of Management's time and Company resources in order to
overcome the effects of rising interest rates and regulatory pronouncements, the
consequences of which had a direct bearing on our largest fund, the U.S.
Government Securities Savings Funds ("USG"). As part of USAI's response to
rising interest rates, and regulatory pronouncements issued to money market
funds in general, during fiscal 1995 USAI arranged for the purchase and/or
purchased directly approximately $130.5 million par value adjustable rate U.S.
Government agency notes ("Notes") from USG. The Notes acquired by USAI were
issued by the Federal Home Loan Bank, Federal Farm Credit Bank and the Student
Loan Marketing Association and have the highest credit rating, Aaa by Moody's,
will mature at their par value, and have a remaining average weighted maturity
of less than two years. These Notes were confused with high risk securities like
options, futures, structured notes, exotic floaters, or CMO's, which contain a
multiplicity of complex and undeterminable risks, including extension,
prepayment, and coupon cap risks. USAI acquired the Notes from its top
performing money market fund in order to calm any derivative-induced fears and
to maintain the confidence of our shareholders by assuring a stable one dollar
per share net asset value.
As a result of intense effort, the Company was able to meet the challenges
presented during fiscal 1995 while continueing to expand products and services
by offering the Bonnel Growth Fund and by providing additional services through
its trust company subsidiary. During the year shareholders' equity, including
book value per share, increased due to the sale of Company shares; and, the
Company's core business has continued to generate the revenue necessary to meet
ongoing expenses and the obligations associated with the challenges presented
during the year. Management believes the Company's financial condition is stable
and the Company is in a position to take advantage of opportunities presenting
themselves for future growth. The discussion below provides detail concerning
the results of operations for recent years and the Company's liquidity and
capital resources.
RESULTS OF OPERATIONS
FISCAL YEAR 1994 VS. FISCAL YEAR 1993
The Company posted net earnings of $1,150,060 ($0.19 per share) for the
fiscal year ended June 30, 1994, as compared to $91,466 ($0.02 per share) for
the fiscal year ended June 30, 1993.
ASSETS UNDER MANAGEMENT
The Company's investment advisory fee revenue is based upon a percentage of
average net assets under management. Therefore, fluctuations in financial
markets impact revenues and results of operations.
Assets under management for USF for the fiscal year ended June 30, 1994
averaged $1.28 billion versus $782.4 million for the previous fiscal year. This
64% increase in average net assets was primarily the result of a $216 million
growth in gold related average net assets under management and a $224 million
increase in average net assets in the U.S. Government Securities Savings Fund.
As of September 20, 1994, total assets under management were approximately
$1.46 billion with non-gold assets comprising nearly 60% of this total versus
65% at June 30, 1993.
FUND SHAREHOLDER ACCOUNTS
Corresponding to the increase in total assets under management during
fiscal 1994, investors opened in excess of 23,000 new accounts. This compares to
approximately 18,000 new accounts opened during fiscal 1993. Further, the number
of account closures decreased by 9% comparing fiscal 1994 to fiscal 1993.
REVENUES
Total consolidated revenues for the fiscal year ended June 30, 1994
increased approximately 47% over the previous fiscal year. This resulted
primarily from a 64% increase in investment advisory fee revenue. The Company
also recorded an increase in investment income primarily from gains on the sales
of investments. Additionally, exchange fee revenue increased 70% due to
increased shareholder exchange activity between mutual fund accounts. Fees
associated with operation of the Transfer Agent increased approximately $266,000
due to an increase in the average number of fee based accounts outstanding
during the 1994 fiscal year. Miscellaneous transfer agency fees increased due to
performing lock-box and printing functions for United Services Funds.
EXPENSES
General and administrative expenses increased approximately 42% during
fiscal 1994. This increase resulted principally from increases in aggregate
compensation, marketing, distribution, and fund expenses borne.
Greater compensation and related costs are attributable to a 15% increase
in the number of full time equivalent employees. Rather than provide for annual
cost of living increases, the Company has tied increases in remuneration to
employee performance (bonus plans) for purposes of further enhancing quality and
productivity. The overall performance of certain mutual funds managed by the
Company has provided the Company with the opportunity to expose these funds to
more investors. Increased marketing efforts coupled with mutual fund performance
is contributing to the growth in assets under management (see Assets Under
Management above).
FISCAL YEAR 1995 VS. FISCAL YEAR 1994
The Company posted a net loss of $3,847,434 ($0.64 per share) for the
fiscal year ended June 30, 1995, as compared to net earnings of $1,150,060
($0.19 per share) for the fiscal year ended June 30, 1994.
ASSETS UNDER MANAGEMENT
The Company's investment advisory fee revenue is based upon a percentage of
average net assets under management. Therefore, fluctuations in financial
markets impact revenues and results of operations.
Assets under management for USF for the fiscal year ended June 30, 1995
averaged $1.32 billion versus $1.28 billion for the previous fiscal year.
Additionally, assets under management for the Accolade Funds ("Accolade"), which
commenced operations in October 1994, averaged $5.6 million for the fiscal year
ended June 30, 1995.
As of September 22, 1995, total assets under management for USF were over
$1.30 billion with non-gold assets comprising 65% of this total, which was the
same percentage at June 30, 1994.
REVENUES
Total consolidated revenues for the fiscal year ended June 30, 1995
increased approximately 45% over the previous fiscal year. This resulted
primarily from interest income and accretion on the U.S. Government Agency Notes
("Notes") which were purchased during the fiscal year. See further discussion
regarding the purchase of the Notes following in the "Liquidity and Capital
Resources" section of Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in this Form 10K.
Excluding the income from the Notes, revenue for the period ended June 30,
1995 decreased approximately 4% over the previous fiscal year. This decrease
resulted primarily from an 80% decrease in investment income, which was due to:
1) the Company recognizing more realized gains on the sales of investments
during the prior year; and 2) the Company implementing SFAS 115 "Accounting for
Certain Investments in Debt and Equity Securities" ("SFAS 115") as of July 1,
1994 which required the Company to recognize unrealized gains and losses on
investments defined as trading securities in the Company's income statement.
Approximately $150,000 of unrealized losses on trading securities are included
in earnings as of June 30, 1995.
However, the Company had increases in advisory fee revenue of approximately
$382,000 due to increased assets under management. Additionally, fees associated
with the operation of the Transfer Agent increased approximately $177,000 due to
performing increased lock-box and printing functions for USF as well as
providing transfer agency services to PSUSF and the Accolade Funds.
EXPENSES
Exclusive of the expenses attributable to the purchase and financing of the
Notes as described above, expenses of the Company increased less than 1% over
the previous fiscal year.
Total consolidated expenses for the fiscal year ended June 30, 1995
approximately doubled from the previous fiscal year. This increase was the
direct result of: 1) a non-recurring non-cash charge of $5,375,269 relating to
the purchase of the Notes; 2) interest expense of $5,650,020 on securities sold
to broker-dealers under agreements to repurchase the Notes; and 3) interest
expense of $433,136 on the convertible subordinated debenture. See further
discussion of the purchase of the Notes and the Notes' financing with
broker-dealers and with the convertible subordinated debenture following in the
"Liquidity and Capital Resources" section of Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in this Form 10K.
LIQUIDITY AND CAPITAL RESOURCES
DECEMBER 1994 MARLEAU, LEMIRE TRANSACTION
Marleau, Lemire Inc. ("ML"), a public company whose shares are traded on
the Toronto Stock Exchange and the Montreal Exchange (Symbol "MRM"), is an
investment dealer in the small and mid-cap Canadian market, with offices in
Montreal, Toronto, Vancouver and Victoria. Through collaborative agreements ML
also has offices in Switzerland and Hong Kong.
At the end of September 1994, the Company and ML entered into a letter of
intent pursuant to which ML would purchase a significant ownership interest in
the Company. On December 7, 1994, the Company and ML entered into an agreement
whereby the Company issued to ML one million shares of a new class of
convertible non-voting common stock (Class B) at $5.00 per share and a warrant
to purchase an additional one million shares of capital stock at $6.00 per share
in consideration of an investment of $5 million. The warrant allows ML, at its
option, to purchase either one million shares of Class A Common Stock or one
million shares of Preferred Stock at a price of $6.00 per share during the six
month period between October 1, 1997 and March 31, 1998. In addition, an
existing $6 million subordinated debenture note of the Company held by ML was
amended so as to be convertible at the option of ML into Preferred Stock at a
price of $7.00 per share. The aggregate number of shares of Preferred Stock ML
could purchase under the warrant, by conversion with the promissory note and by
conversion of its Class B Common Stock is 2,857,142 shares.
Preferred shareholder approval for an increase in the number of authorized
shares of Preferred Stock is required so that the Company may have sufficient
shares of Preferred Stock in the event ML decides to convert its Class B shares
to shares of Preferred Stock. On August 3, 1995, shareholders approved a one
million share increase in the number of authorized shares of Preferred Stock.
ML may not convert its Class B shares to Class A shares until after mutual
fund shareholders approve continuation of the investment advisory agreements
with the Company in light of ML having voting control. Management anticipates
seeking mutual fund shareholder approval sometime in 1996.
The ML transaction includes a possible change-in-control for the Company.
As part of the transaction, Mr. Frank E. Holmes, Chairman and CEO of the
Company, exchanged 72,720 shares of the Company's Class A Common Stock for
164,347 shares of ML common stock. In addition, subject to certain conditions,
including obtaining mutual fund shareholder approvals in the future, the terms
of the agreement require Mr. Holmes to exchange an additional 177,280 Class A
common shares for 400,653 shares of ML, and ML to convert its Class B shares to
Class A shares, whereupon ML would own more than 50% of the issued and
outstanding voting shares of the Company, and Mr. Holmes would then own
approximately 3% of the total outstanding common shares of ML.
A conversion feature allows ML to convert its Class B shares to Preferred
Stock, which conversion would allow ML to sell said shares in a public offering
in the event mutual fund shareholder approval is not obtained. Mutual fund
shareholder approval is not required for conversion of Class B shares to
Preferred Stock. Alternatively, in the event Company shareholders do not
authorize additional Preferred Stock and/or USF shareholders do not approve
continuation of the Advisory Agreement with ML owning control of the Company, ML
may opt, during prescribed periods in 1996 and 1997, to convert its investment
into a US $5 million debenture payable by USAI over a two-year period from the
date of ML's conversion. The interest rate on the debenture would be equal to an
annual rate of 1% plus the annual rate of interest established by Bankers Trust
of New York for U.S. dollar commercial demand loans to its U.S. customers.
The agreements also provided for certain other corporate action relating to
composition of the Board of Directors and continued employment of Frank E.
Holmes. (See Item 13 of this Form 10-K for further detail.)
Shareholder value was enhanced by the ML transaction. The market price for
the Company's Preferred Stock on December 7, 1994 was $3.25 per share. The
Company's book value per share prior to the transaction was $0.99; and, the
Company's book value per share after the transaction was $1.60. Of course, with
more shares outstanding, Company earnings per share will be diluted; however,
management believes that such transactions will strategically position the
Company to take advantage of opportunities in an effort to build earnings and
shareholder value.
The foregoing transactions have strengthened the Company's balance sheet by
increasing its cash position and the book value per share. The relationship
allows the Company to grow its financial services business in the U.S., Canada
and offshore, and to enter new areas of business which are related to the
Company's current business.
INVESTMENT IN JOINT VENTURE
During the fiscal year ended June 30, 1994, USAI and ML entered into
discussions with respect to potential joint enterprises. Such discussions
culminated in USAI and ML entering into a joint venture agreement on July 20,
1994 whereby USAI and ML are undertaking to offer mutual funds in Canada,
primarily through ML's broker network located in Toronto, Montreal, Vancouver,
and Victoria. As part of the agreement to enter into a joint venture, USAI
issued 120,000 shares of its preferred stock to ML. The estimated value of the
stock upon issuance was $510,000, which the Company recorded as its investment
in the joint venture during the first quarter of fiscal 1995. In conjunction
with this joint venture, United Services Advisors Wealth Management Inc.
("USAWMI") was incorporated during the third quarter of fiscal 1995 with a 50%
ownership to each USAI and ML. Also, USAI has agreed to incur the initial
organization and development costs, including formation and registration of the
Canadian mutual funds up to a maximum of $250,000 (Canadian) for which an
additional $8,073 USD was spent during fiscal 1995 and with approximately
$38,000 USD spent subsequent to June 30, 1995. Management anticipates that
USAWMI, through its wholly-owned subsidiary United Services Advisors Fund
Management Inc. which was formed in September 1995 to provide investment
services to Canadian investors, will become the advisor to the ML Small Cap Fund
and will also offer other Canadian funds and investment products and services
during fiscal 1996. Upon commencement of USAWMI operations, USAI's investment in
USAWMI will be accounted for under the equity method.
GOVERNMENT SECURITIES
USG from its inception has invested in, among other types of Government
securities, certain Government agency notes whose interest rates reset monthly
based on a cost-of-funds index ("Notes"). This reset feature lags changes in
short- term interest rates. During fiscal 1995, due to such interest rates
rising and regulatory directives issued to money market funds in general, the
market value of the Notes deteriorated. To reduce USG's exposure to said Notes
and in order to maintain the confidence of our shareholders by assuring a stable
one dollar per share net asset value, USAI decided, in the first quarter of
fiscal 1995, to arrange for USG to sell $40 million par amount of Notes at USG's
amortized cost of approximately $39,777,000 plus accrued interest to ML.
Thereafter, USAI decided to purchase directly from the fund $90,525,000 par
amount of Notes ($53,275,000 during the first quarter of fiscal 1995 and
$37,250,000 during the third quarter of fiscal 1995) at USG's amortized cost of
approximately $90,337,000 plus accrued interest. Additionally, in connection
with such decision, USAI purchased the Notes from ML for approximately
$39,777,000 plus accrued interest during the first quarter of fiscal 1995. The
$13,000,000 par value Note which was to mature in September 1995 was sold in
June 1995 for a realized loss of $32,073. This note was sold in order to reduce
USAI's future cost of financing by approximately $50,000 and was sold near
enough the date of maturity that changes in market interest rates did not have a
significant effect on the security's fair value. The remaining Notes acquired by
USAI mature at their aggregate $117,525,000 par amount as follows:
<TABLE>
<CAPTION>
MATURITY PAR VALUE
----------------------- ------------
<S> <C>
October 1996-March 1997 $ 63,725,000
July 1997 $ 16,550,000
September 1997 $ 37,250,000
</TABLE>
USAI recorded the Notes at their fair value. As the Notes had an aggregate
fair value of approximately $124,739,000 on the dates USAI acquired the
securities, the Company recorded pre-tax non-cash charges to the results of
operations of approximately $2,574,000 during the first quarter and $2,800,000
during the third quarter of fiscal 1995. It is USAI's intent, and management
believes the Company has the ability, to hold these Notes to maturity as defined
by SFAS 115; and therefore, the Company anticipates ultimately realizing the
Notes' approximate par value. Therefore in accordance with SFAS 115, the Company
has classified the Notes as held-to-maturity securities. As a result, and in
addition to periodic receipts of interest income, USAI recognized $1,499,521 in
non-cash income during fiscal 1995 and anticipates recognizing non-cash income
in the future by accreting the discount to par value approximately as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDING JUNE 30 AMOUNT
-------------- -----------
<S> <C>
1996 $ 2,133,000
1997 $ 1,867,000
1998 $ 265,000
-----------
$ 4,265,000
===========
</TABLE>
USAI financed the acquisition of the Notes, including purchased accrued
interest, as follows: 1) approximately $120.9 million was provided by third
party broker-dealers under reverse repurchase agreements; 2) USAI issued a $6.0
million 8% subordinated debenture to ML, the terms of which require principal
payments as the Notes mature and interest payments quarterly (see further
discussion under CONVERTIBLE SUBORDINATED DEBENTURE); and 3) USAI utilized
approximately $3,563,000 of its own cash. Although it is USAI's intent, and
Management believes that the Company has the ability to own the Notes until
maturity, under the terms of the subordinated debenture with ML, ML has retained
the right to acquire the Notes collateralizing the reverse repurchase agreements
with broker-dealers and the Company's obligation under the debenture payable to
ML.
During calendar 1994 the Federal Reserve Board raised interest rates to
address perceived inflationary pressures and could raise rates for such reason
in the future. Notwithstanding the fact that the coupon on the Notes resets
every 30 days, the Notes have been and may in the future be priced to actual
maturity as opposed to the reset date due to the lagging index used to determine
the coupon rate. As a consequence, as interest rates increase the market value
of the Notes may decrease, which could result in the broker-dealers under the
reverse repurchase agreements to request additional collateral. In addition, the
spread between interest due to the broker-dealers and the interest earning on
the Notes with a lagging index may increase, increasing the Company's interest
expense. To reduce this risk the Company purchases Eurodollar puts.
During fiscal 1995, USAI purchased put options on Eurodollar futures which
expired resulting in a $231,625 loss. The options were purchased in an effort to
reduce USAI's exposure to temporary declines in the value of the Notes and
reduce USAI's exposure to increased interest costs of the reverse repurchase
agreements in the event of a significant increase in interest rates.
CONVERTIBLE SUBORDINATED DEBENTURE
In conjunction with the purchase of the Notes described above, USAI issued
a $6 million 8% subordinated debenture to ML, the terms of which require
principal payments as the Notes mature and quarterly interest payments. The
debenture was amended in December 1994 to allow ML to convert the principal
balance into USAI Preferred Stock at $7.00 per share. In June 1995, USAI reduced
the principal balance of the debenture by prepaying $1 million to ML and making
a payment of $465,788 to ML upon the sale of a $13 million par value Note.
Future principal payments to be made over the next two years based upon the
amount outstanding at June 30, 1995 are $3,575,014 in fiscal 1997 and $959,198
in fiscal 1998 which are to be paid as the Notes mature.
INVESTMENT ACTIVITIES
Management believes it can more effectively manage the Company's cash
position by broadening the types of investments utilized in cash management. At
fiscal year end the Company held approximately $2.977 million in investment
securities other than the Notes and money market mutual fund shares. The value
of these investments is approximately 34% of stockholders' equity at year-end.
Company investments in marketable securities classified as trading securities
totaled approximately $1,510,000 (market value). Cost exceeded market value on
these securities by approximately $150,000. In addition, there was approximately
$1,467,000 in investments in securities classified as available for sale. These
securities are primarily private placements that Management expects will become
free-trading within one year. Fair value exceeded cost by approximately $356,000
before tax. During fiscal year 1995 net realized gains from the sale of
investments aggregated approximately $512,000 which excludes the sale of the
Note in June and sales or expirations of Eurodollar puts, compared to
approximately $1,383,000 for fiscal 1994 and $475,000 for fiscal 1993.
Management believes that such activities are in the best interest of the
Company. The activities are scrutinized by Company compliance personnel and
reported to investment advisory clients.
DEFERRED TAX ASSET
SFAS No. 109 "Accounting for Income Taxes" requires tax benefits of net
operating losses, book/tax timing differences, and various tax credits be
recorded as a deferred tax asset. Upon adoption of SFAS No. 109 in July 1993,
the Company recorded a valuation allowance related to the deferred tax asset.
Late in fiscal 1994, Management re-evaluated the valuation allowance and the
likelihood of full realization of the deferred tax asset. Based on the
substantial increase in the amount of taxable income, Management determined that
the allowance was no longer necessary. Management has assessed the likelihood of
realization of the recorded deferred tax asset at June 30, 1995 to be "more
likely than not." Net operating losses ("NOLs") of $6.012 million, primarily
resulting from the non-cash charge to earnings related to the purchase of the
Notes during fiscal 1995, do not expire until fiscal 2007 and 2010. The discount
to par on the Notes will accrete to income for both book and taxable income over
the remaining period to maturity. Also, based on the current level of earnings
and Management's expectations for the future, Management believes that operating
income will "more likely than not" generate the minimum amount of future taxable
income necessary to fully realize the deferred tax assets. Additionally,
Management believes that the Company has certain tax planning strategies,
including the sale of appreciated marketable securities, that could be
implemented to supplement taxable income from operations in order to fully
realize the recorded tax benefits before expiration. Of course, future levels of
taxable gains from sales of marketable securities are dependent upon economic
and market conditions. These factors are beyond the Company's control and no
assurance can be given that sufficient taxable income will be generated from the
sale of marketable securities for full utilization of the deferred tax assets.
Further, a change in control as defined in the Internal Revenue Code
("IRC") could limit the Company's ability to fully realize the deferred tax
asset. The Company reviewed the IRC to determine whether a possibility of a
change in control/ownership existed upon issuance of shares and warrants to ML.
It was determined that the ML transaction does not constitute a change in
control under the IRC. If certain changes in the Company's ownership should
occur subsequent to June 30, 1995, there could be an annual limitation on the
amount of NOLs that could be utilized.
FEE WAIVERS
The Company has agreed to waive a portion of its fee revenues and/or to pay
for expenses of certain mutual funds for purposes of enhancing the funds'
competitive market position. Should assets of these funds increase, fund
expenses borne by the Company would increase to the extent that such expenses
would exceed any expense caps on any mutual fund, the amount of which the
Company has agreed to bear. The Company expects to continue to waive fees and/or
pay for fund expenses as long as market and economic conditions warrant.
However, subject to the Company's commitment to certain funds with respect to
fee waivers and expense limitations, the company may reduce the amount of fund
expenses it is bearing.
CONCLUSION
At fiscal year-end the Notes purchased by the Company had an average
maturity of less than two years. The Notes have a face value of $117.525 million
which is greater than the Company's purchase price. As of June 30, 1995 the
Company had approximately $116.7 million in debt related to the Notes (comprised
of the $4.5 million balance on the ML debenture and $112.2 million advanced by
brokers pursuant to reverse repurchase agreement transactions). The ML note is
essentially unsecured with ML looking to the collateral under the reverse
repurchase agreements as its primary source payment. The reverse repurchase
agreements with the broker-dealers are backed with collateral valued at
approximately $113 million. The broker-dealers have and continue to extend the
agreements; however, if all of the broker-dealers refused to roll-over their
repurchase agreements there would be sufficient collateral to cover the brokers
and there would be approximately $800,000 to repay the ML note, leaving a
balance to ML of $3.7 million. As of June 30, 1995, USAI had unrestricted cash
and marketable securities with an aggregate value of almost $4.3 million, an
amount in excess of the debt related to the Notes.
Based upon available information and internal analyses, through the last
maturity date of the Notes, Management anticipates positive cash flow and net
income in the related fiscal years, which income will include accretion related
to the Notes in excess of the non-cash charge discussed above. Management
believes current cash reserves, plus financing obtained and cash flow from
operations, will be sufficient to meet foreseeable cash needs or capital
necessary for the above mentioned activities, as well as allow the Company to
take advantage of investment opportunities whenever available. However, it is
difficult to predict future events and should cash flow be insufficient, the
Company would seek additional sources of financing to meet future working
capital requirements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITOR'S REPORT
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
United Services Advisors, Inc.
In our opinion, the accompanying balance sheets and the related
consolidated statements of operations, cash flows and shareholders' equity
present fairly, in all material respects, the financial position of United
Services Advisors, Inc. and its subsidiaries at June 30, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note B to the financial statements, the Company changed its
method of accounting for income taxes during the year ended June 30, 1994 and
its method of accounting for investments in debt and equity securities during
the year ended June 30, 1995.
/S/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Antonio, Texas September 26, 1995
<PAGE>
<TABLE>
<CAPTION>
UNITED SERVICES ADVISORS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30,
---------------------------------
1995 1994
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents (Notes A & O) ............................................... $ 2,772,221 $ 1,258,599
Trading securities, at fair value (Note A & C) ........................................ 1,510,316 --
Marketable securities (Note A & C) .................................................... -- 1,086,974
Receivables:
Mutual funds (Note D) .............................................................. 720,134 579,025
Accrued interest (Note K) .......................................................... 504,647 --
Custodial fees ..................................................................... 192,248 107,966
Employees .......................................................................... 98,121 128,997
Receivable from brokers ............................................................ 104,747 186,880
Other .............................................................................. 77,098 120,714
Prepaid expenses ...................................................................... 488,773 544,291
Deferred tax asset (Note P) ........................................................... 63,771 171,984
------------ ------------
TOTAL CURRENT ASSETS ............................................................. 6,532,076 4,185,430
------------ ------------
NET PROPERTY AND EQUIPMENT (NOTES A & E) ................................................ 2,664,820 2,762,594
------------ ------------
OTHER ASSETS
Government securities held-to-maturities (Note F) ..................................... 113,260,361 --
Restricted investments (Note C & J) ................................................... 897,556 453,648
Long-term receivables ................................................................. 219,982 144,187
Long-term deferred tax asset (Note P) ................................................. 2,224,602 254,459
Residual equity interest (Note G) ..................................................... 217,861 217,861
Investment in joint venture (Note H) .................................................. 518,073 --
Investment securities available-for-sale, at fair value (Note A & C) .................. 1,466,622 --
Other investments at cost (Note A & C) ................................................ -- 1,058,750
Other ................................................................................. 71,169 66,519
------------ ------------
TOTAL OTHER ASSETS ............................................................. 118,876,226 2,195,424
------------ ------------
TOTAL ASSETS ....................................................................... $128,073,122 $ 9,143,448
============ ============
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNITED SERVICES ADVISORS, INC.
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
JUNE 30,
--------------------------------
1995 1994*
------------- -------------
CURRENT LIABILITIES
<S> <C> <C>
Current portion of capital lease obligation (Note E) ...................................... $ 93,658 $ 103,430
Current portion of notes payable (Note I) ................................................. 38,325 35,321
Current portion of annuity obligation (Note J) ............................................ 18,000 18,000
Securities sold under agreements to repurchase (Note K) ................................... 112,201,469 --
Accounts payable .......................................................................... 167,598 217,838
Accrued interest payable to third parties ................................................. 388,217 654
Accrued interest payable to related party (Note M & O) .................................... 113,126 --
Accrued compensation and related costs .................................................... 53,700 10,000
Accrued profit sharing and 401(k) (Note L) ................................................ 48,000 144,904
Accrued vacation pay ...................................................................... 75,959 54,194
Accrued legal fees ........................................................................ 50,722 97,310
Other accrued expenses .................................................................... 146,508 111,805
------------- -------------
TOTAL CURRENT LIABILITIES ........................................................... 113,395,282 793,456
------------- -------------
Convertible Subordinated Debenture Held By a Related Party (Note M & O) ...................... 4,534,212 --
Capital Lease Obligations (Note E) ........................................................... 24,354 118,013
Notes Payable-Net of Current Portion (Note I) ................................................ 1,301,723 1,340,064
Annuity and Contractual Obligations (Note J) ................................................. 156,328 161,912
Commitments and Contingencies (Notes J) ...................................................... -- --
------------- -------------
TOTAL NON-CURRENT LIABILITIES ....................................................... 6,016,617 1,619,989
------------- -------------
TOTAL LIABILITIES ................................................................... 119,411,899 2,413,445
------------- -------------
SHAREHOLDERS' EQUITY (NOTE N)
Preferred stock--$.05 par value; non-voting; authorized, 6,000,000 shares;
issued and outstanding, 5,071,495 in 1995 and 4,867,557 in 1994 ........................ 253,575 243,378
Common stock (class A)-- $.05 par value; authorized, 1,750,000 shares; issued
and outstanding, 570,779 in 1995 and 576,217 in 1994 ................................... 28,539 28,811
Common stock (class B)--$.05 par value; non-voting; authorized, 2,250,000 shares;
issued and outstanding, 1,000,000 in 1995 and 0 in 1994 ................................ 50,000 --
Additional paid-in-capital ................................................................ 12,852,986 7,305,344
Treasury stock at cost; 92,500 and 68,700 shares held in
1995 and 1994, respectively ............................................................ (198,366) (134,737)
Net unrealized gain on available-for-sale securities (net of tax of $120,914) ............. 234,716 --
Retained earnings (deficit) ............................................................... (4,560,227) (712,793)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY ........................................................... 8,661,223 6,730,003
------------- -------------
$ 128,073,122 $ 9,143,448
============= =============
<FN>
* Reclassified for comparative purposes
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNITED SERVICES ADVISORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30,
----------------------------------------------------
1995 1994* 1993*
------------ ------------ ------------
REVENUE (NOTE D)
<S> <C> <C> <C>
Investment advisory fee ................................................ $ 5,508,482 $ 5,126,858 $ 3,128,183
Transfer agent fee ..................................................... 3,187,037 3,010,097 2,579,741
Accounting fee ......................................................... 421,190 388,454 315,612
Exchange fee ........................................................... 270,105 320,470 188,126
Custodial fees ......................................................... 503,225 362,758 350,162
Investment income ...................................................... 267,379 1,332,630 544,964
Mailroom operations .................................................... 169,743 185,283 175,403
Other .................................................................. 89,868 152,606 111,311
Government security income (Note F) .................................... 5,353,709 -- --
------------ ------------ ------------
15,770,738 10,879,156 7,393,502
------------ ------------ ------------
EXPENSES
General and administrative ............................................. 9,405,031 9,455,974 6,629,633
Depreciation and amortization .......................................... 536,920 480,491 523,864
Interest expense-note payable and other ................................ 266,222 171,716 148,539
Government security non-cash charge (Note F) ........................... 5,375,269 -- --
Interest expense-securities sold under agreement
to repurchase (Note F & K) ........................................... 5,650,020 -- --
Interest expense- convertible subordinated debenture
to a related party (Note M & O) ...................................... 433,136 -- --
------------ ------------ ------------
21,666,598 10,108,181 7,302,036
------------ ------------ ------------
EARNINGS (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING ..................... (5,895,860) 770,975 91,466
------------ ------------ ------------
PROVISION (BENEFIT) FOR FEDERAL INCOME TAXES (NOTE P)
Current .............................................................. -- 47,358 47,166
Deferred ............................................................. (2,005,142) (226,023) (13,259)
------------ ------------ ------------
(2,005,142) (178,665) 33,907
------------ ------------ ------------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING ......................................... (3,890,718) 949,640 57,559
EXTRAORDINARY ITEM
Reduction of income taxes arising from utilization of net
operating loss carryforwards ......................................... -- -- 33,907
------------ ------------ ------------
NET EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING ................................................. (3,890,718) 949,640 91,466
Cumulative Effect of Change in Accounting for Marketable
Securities (net of taxes of $22,298) (Note B) ....................... 43,284 -- --
Cumulative Effect of Change in Accounting for Income Taxes
(Note B) ............................................................. -- 200,420 --
------------ ------------ ------------
NET EARNINGS (LOSS) .................................................... $ (3,847,434) $ 1,150,060 $ 91,466
============ ============ ============
<FN>
*Reclassified for comparative purposes
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNITED SERVICES ADVISORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(CONTINUED)
YEAR ENDED JUNE 30,
-----------------------------------------------
1995 1994 1993
--------- --------- ---------
PER SHARE AMOUNTS
PRIMARY AND FULLY DILUTED
<S> <C> <C> <C>
Continuing operations ............................. ........................ $ (0.65) $ 0.16 $ 0.01
Extraordinary item ................................ ........................ -- -- 0.01
Cumulative effect of change in accounting ......... ........................ 0.01 0.03 0.00
--------- --------- ---------
NET EARNINGS .......................................... ........................ $ (0.64) $ 0.19 $ 0.02
--------- --------- ---------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
Primary ............................................. ........................ 6,013,393 6,012,151 5,395,696
Fully diluted ....................................... ........................ 6,013,393 6,012,151 5,768,297
========= ========= =========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNITED SERVICES ADVISORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED JUNE 30,
-------------------------------------------------
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net earnings (loss) ........................................................ $ (3,847,434) $ 1,150,060 $ 91,466
------------- ------------- -------------
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization ............................................. 536,920 480,491 528,848
Government security accretion ............................................. (1,499,521) -- --
Government security charge ................................................ 5,375,269 -- --
Net gain on sales of securities ........................................... (248,661) (1,383,246) (456,405)
Gain on disposal of equipment ............................................. (1,100) -- 2,097
Cumulative effect of change in acctg ...................................... (43,284) (200,420) --
Treasury Stock granted .................................................... 32,381 -- --
Changes in assets and liabilities, impacting cash from operations:
Restricted investments ................................................. (443,908) (108,648) 15,000
Accounts receivable .................................................... (793,395) (21,128) (325,531)
Deferred tax asset ..................................................... (2,005,142) (226,023) --
Prepaid expenses and other ............................................. 177,487 (318,835) (145,265)
Trading securities ..................................................... 894,453 -- --
Accounts payable ....................................................... (50,240) 111,148 44,818
Accrued expenses ....................................................... 457,365 239,022 (37,883)
------------- ------------- -------------
Total adjustments ......................................................... 2,388,624 (1,427,639) (374,321)
------------- ------------- -------------
NET CASH USED FOR OPERATIONS ................................................. (1,458,810) (277,579) (282,855)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of building and land .............................................. (27,461) (39,075) (1,158,618)
Purchase of furniture and equipment ........................................ (402,190) (303,932) (337,020)
Proceeds on sale of equipment .............................................. 1,100 -- 5,442
Purchase of securities ..................................................... -- (3,018,554) (3,169,113)
Proceeds on sale of securities ............................................. -- 3,644,777 2,590,882
Purchase of available-for-sale securities .................................. (1,023,721) -- --
Purchase of government securities held-to-maturity ......................... (130,113,712) -- --
Proceeds on sale of government securities held-to-maturity ................. 12,945,530 -- --
------------- ------------- -------------
(118,620,454) 283,216 (2,068,427)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on annuity ........................................................ (5,584) (5,206) (3,536)
Payments on note payable to bank ........................................... (35,337) (1,395,726) (29,274)
Payments on capital lease .................................................. (103,431) (111,807) (89,329)
Proceeds from note payable to bank ......................................... -- 1,375,385 538,500
Net proceeds from securities sold under agreement to repurchase ............ 124,794,309 -- --
Proceeds from issuance of subordinated debenture to related party .......... 6,000,000 -- --
Payments on subordinated debenture to related party ........................ (1,465,788) -- --
Net payments on securities sold under agreement to repurchase .............. (12,592,840) -- --
Proceeds from issuance of preferred stock, warrants, and options ........... 144,274 565,625 1,615,545
Proceeds from issuance of Common Stock (Class B) to related party .......... 4,964,271 -- --
Purchase of Treasury stock and warrants .................................... (106,988) (41,249) (39,644)
------------- ------------- -------------
121,592,886 387,022 1,992,262
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......................... 1,513,622 392,659 (359,020)
BEGINNING CASH AND CASH EQUIVALENTS .......................................... 1,258,599 865,940 1,224,960
------------- ------------- -------------
ENDING CASH AND CASH EQUIVALENTS ............................................. $ 2,772,221 $ 1,258,599 $ 865,940
============= ============= =============
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNITED SERVICES ADVISORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
YEAR ENDED JUNE 30,
--------------------------------------------------
1995 1994 1993
---------- ---------- ----------
SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
<S> <C> <C> <C>
Purchase of equipment under capital lease ............................ $ -- $ 31,701 $ 223,433
Issuance of shares for investment in joint venture ................... 510,000 -- --
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid for interest ............................................... 5,848,689 171,716 148,539
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNITED SERVICES ADVISORS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
UNREALIZED
GAIN (LOSS)
COMMON COMMON ON SECURITIES
PREFERRED STOCK STOCK PAID-IN PREFERRED EARNINGS TREASURY AVAILABLE
STOCK (CLASS A) (CLASS B) CAPITAL WARRANTS (DEFICIT) STOCK FOR SALE TOTAL
-------- ------- ------- ----------- -------- ----------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1992
(3,857,623 shares of Preferred
stock; 603,651 shares of Common
stock (Class A)) .............. $192,881 $30,183 $0 $5,173,299 $39,644 ($1,954,319) ($93,488) $0 $3,388,200
Issuance of 756,500 shares of
Preferred stock ............... 37,825 -- -- 1,577,720 -- -- -- -- 1,615,545
Exercise of 750,000 Preferred
stock warrants ................ -- -- -- -- (39,644) -- -- -- (39,644)
Conversion of 14,682 shares of
Common stock (Class A) to
Preferred stock ............... 734 (734) -- -- -- -- -- -- --
Net Earnings .................. -- -- -- -- -- 91,466 -- -- 91,466
-------- ------- ------- ----------- -------- ----------- --------- -------- ----------
Balance at June 30, 1993
(4,628,805 shares of Preferred
stock; 588,969 shares of Common
stock (Class A)) .............. $231,440 $29,449 $0 $6,751,019 $0 ($1,862,853) ($93,488) $0 $5,055,567
Purchase of 10,000 shares of
Preferred treasury stock ...... -- -- -- -- -- -- (41,249) -- (41,249)
Issuance of 226,000 shares of
Preferred stock ............... 11,300 -- -- 554,325 -- -- -- -- 565,625
Conversion of 12,752 shares of
Common stock(Class A) to
Preferred stock ............... 638 (638) -- -- -- -- -- -- --
Net Earnings .................. -- -- -- -- -- 1,150,060 -- -- 1,150,060
-------- ------- ------- ----------- -------- ----------- --------- -------- ----------
Balance at June 30, 1994
(4,867,557 shares of Preferred
stock; 576,217 shares of
Common stock (Class A)) ....... $243,378 $28,811 $0 $7,305,344 $0 ($712,793) ($134,737) $0 $6,730,003
Purchase of 35,000 shares of
Preferred treasury stock ...... -- -- -- -- -- -- (106,988) -- (106,988)
Reissuance of 11,200 shares of
Preferred treasury stock ...... -- -- -- (10,978) -- -- 43,359 -- 32,381
Issuance of 198,500 shares of
Preferred stock ............... 9,925 -- -- 644,349 -- -- -- -- 654,274
Issuance of 1,000,000 shares of
Common stock (Class B) ........ -- -- 50,000 4,914,271 -- -- -- -- 4,964,271
Conversion of 5,438 shares of
Common stock (Class A) to
Preferred stock ............... 272 (272) -- -- -- -- -- -- --
Unrealized gain (loss) on
securities available-for-sale
(net of tax) upon adoption of
SFAS 115 ...................... -- -- -- -- -- -- -- 197,009 197,000
Unrealized gain (loss) on
securities available-for-sale
(net of tax) .................. -- -- -- -- -- -- -- 37,707 37,707
Net Earnings .................. -- -- -- -- -- (3,847,434) -- -- (3,847,434)
-------- ------- ------- ----------- -------- ----------- --------- -------- ----------
Balance at June 30, 1995 ...... $253,575 $28,539 $50,000 $12,852,986 $ 0 ($4,560,227) ($198,366) $234,716 $8,661,223
======== ======= ======= =========== ======== =========== ========= ======== ==========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
UNITED SERVICES ADVISORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A. SIGNIFICANT ACCOUNTING POLICIES.
ORGANIZATION
United Services Advisors, Inc. ("the Company") serves as investment
advisor, investment manager and transfer agent to United Services Funds ("USF"),
a Massachusetts business trust which is a no-load, open-end investment company
offering shares in numerous mutual funds to the investing public. The Company
has served as investment adviser and manager since USF's inception and assumed
the transfer agency function in November 1984. For these services, the Company
receives fees from USF.
The Company has formed a limited liability company which was incorporated
in Guernsey on August 20, 1993. This company, U.S. Advisors (Guernsey) Limited
is manager of an off-shore fund. U.S. Advisors (Guernsey) Limited has agreed to
waive fees and absorb all expenses of the off-shore fund except custodian and
certain directors' fees until further notice. The cost of this guarantee is
considered immaterial at this time. The Company manages the portfolio of this
fund.
The Company provides administrative and transfer agency services to
Pauze'/Swanson United Services Funds ("PSUSF"), a Massachusetts business trust.
The Company is also the investment advisor to the Accolade Funds, a
Massachusetts business trust. Accolade Funds is a management investment company
which offers shares of Bonnel Growth Fund, a no-load mutual fund. Bonnel Growth
Fund commenced operations in October 1994. The Company also provides the
transfer agency function for which the Company receives a fee from Accolade
Funds.
The Company has been named investment advisor to United Services Insurance
Funds ("USIF"), a Massachusetts business trust formed for the purpose of
providing an investment vehicle for variable annuity products. USIF currently
offers shares of the Schabacker Select Fund through variable annuity contracts
purchased by clients from Integrity Life Insurance Company. USIF commenced
operations in June 1995. Marleau, Lemire (USA), Inc. which occupies office space
supplied by the Company, acts as broker for the variable annuity company.
During July 1994, USAI agreed to form a joint venture with Marleau, Lemire
Inc. ("ML") of Montreal, Quebec, to offer mutual funds in Canada. In February
1995, United Services Wealth Management Co. ("USAWMI"), a Montreal based
company, was formed.
The Company, through its wholly-owned subsidiary, Security Trust &
Financial Company, also serves as custodian for retirement accounts invested in
USF, PSUSF, and other mutual funds.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, United Shareholder Services, Inc. ("USSI"),
Security Trust and Financial Company ("STFC" or "ST&FC"), A&B Mailers, Inc.
("A&B"), and U.S. Advisors (Guernsey) Limited ("USAG"). Additionally, the
Company has consolidated the balance sheet and results of operations of the
Guernsey off-shore fund since it owned substantially all of the issued shares of
the Fund during fiscal 1995 and 1994. All significant inter-company balances and
transactions have been eliminated in consolidation. Certain amounts have been
reclassified for comparative purposes.
CASH AND CASH EQUIVALENTS
Cash consists of cash on hand and cash equivalents with original maturities
of three months or less. Cash and cash equivalents at June 30, 1995 and at June
30, 1994 include $2,673,156 and $1,006,151, respectively, in USF money market
mutual funds (see Note O). This investment is valued at amortized cost which
approximates market. In addition, not included in cash and cash equivalents is
restricted cash of $315,000 and $330,000 at June 30, 1995 and June 30, 1994,
respectively, which was held in a USF money market mutual fund and classified as
a restricted investment on the June 30, 1995 and 1994 balance sheet (see Note
J).
FIXED ASSETS
Fixed assets are recorded at cost including capitalized interest.
Depreciation for owned fixed assets and capital leases is recorded using the
straight-line method over the estimated useful life of each asset as follows:
Leasehold improvements, furniture, and equipment are depreciated over 3 years;
capitalized leased phone equipment is depreciated over 5 years and the building
is depreciated over 31.5 years.
INCOME TAXES
Income taxes are provided during the year in which transactions affect the
determination of financial statement income, regardless of when they are
recognized for tax purposes. Deferred income taxes are provided for temporary
differences between the tax and book bases of assets and liabilities.
Effective July 1, 1993, the company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (see Note B).
EARNINGS PER SHARE
Primary and fully diluted earnings per share are based on the weighted
average number of shares of Common stock and Preferred stock outstanding during
the year. Common and Preferred stock are considered equivalent in the
calculation of earnings per share since each share has essentially equivalent
interests in the income of the Company. Preferred and Common stock warrants, a
convertible debenture and options are included to the extent dilutive.
SECURITY INVESTMENTS
Effective July 1, 1994 the Company adopted Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115") (see Note B). Prior to implementation of SFAS
115, investments in securities were stated at the lower of aggregate cost or
market. Realized gains (losses) from security transactions are calculated on the
first-in/first-out cost basis.
Under SFAS 115, the Company classifies its investments in equity and debt
securities into three categories. Management determines the appropriate
classification of securities at the time of purchase and reevaluates such
designation as of each reporting period date.
Securities that are purchased and held principally for the purpose of
selling them in the near term are classified as trading securities and reported
at fair value. Unrealized gains and losses on these securities are included in
earnings.
Investments in debt securities for which the Company has the positive
intent and ability to hold to maturity are classified as held-to-maturity
securities. Held-to-maturity securities are reported at amortized cost. Discount
to par value is accreted, and recognized as income, over the remaining term to
maturity.
Investments not classified as trading securities nor as held-to-maturity
securities are classified as available-for-sale securities and reported at fair
value. Unrealized gains and losses on these securities are excluded from
earnings and reported, net of tax, as a separate component of shareholders'
equity. Realized gains and losses on sales of the securities are recorded in
earnings on trade date.
Put options on Eurodollar futures are accounted for on a "mark-to-market"
basis.
In 1994, the FASB issued SFAS 119, "Disclosure about Derivative Instruments
and Fair Value of Financial Instruments". This pronouncement requires
disclosures related to the amounts, nature, and terms of derivative financial
instruments. Additionally, SFAS 107, "Disclosures about Fair Value of Financial
Instruments", requires disclosures of the fair value of financial instruments.
The Company has elected not to adopt SFAS 119 or SFAS 107 until fiscal 1996. The
Company has not determined the effect of adopting SFAS 119 and 107.
FOREIGN CURRENCY TRANSACTIONS
Transactions between the Company and foreign entities are converted to U.S.
dollars using the exchange rate on the date of the transactions. Security
investments valued in foreign currencies are translated to U.S. dollars using
the applicable exchange rate as of June 30, 1995. Foreign currency gain (loss)
is included as a component of investment income.
ORGANIZATION COSTS
Organization costs in the amount of $14,509 and $24,005 net of amortization
at June 30, 1995, and 1994, respectively, which relate to the organization of
STFC and USAG, are amortized on a straight-line basis over 60 months. These
costs are included in other assets on the consolidated balance sheet.
NOTE B. CHANGE IN ACCOUNTING PRINCIPLE.
In the first quarter of fiscal 1995, the Company adopted SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities," effective
July 1, 1994. The adoption of SFAS 115 changed the method of accounting and
reporting for investments in equity securities that have readily determinable
fair values and for all investments in debt securities. The Company recognized
the cumulative effect of adopting the pronouncement in the first quarter of
fiscal 1995 as a change in accounting principle. The financial impact of
adopting SFAS 115 was a net increase in earnings of $43,284 (net of taxes of
$22,298) or $.01 per share representing net unrealized gains on securities
classified as trading securities and $197,009 (net of taxes of $101,489) on net
unrealized gains on securities classified as available for sale which was
reported as a separate component of equity.
In the first quarter of fiscal 1994, the Company adopted Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes," effective July 1, 1993. The adoption of SFAS 109 changed the Company's
method of accounting for income taxes from the deferred method to the liability
method of accounting for deferred income taxes. Under the liability method
prescribed by SFAS 109, deferred taxes are provided based upon enacted tax laws
and rates applicable to the periods in which taxes become payable. As permitted
by SFAS 109, prior years' financial statements have not been restated to apply
the provisions of the new method. The Company recognized the cumulative effect
of adopting the pronouncement in the first quarter of fiscal 1994 as a change in
accounting principle. The cumulative effect of adoption on July 1, 1993 was to
increase deferred tax assets by $200,420. This amount primarily represented the
impact of recognizing the benefit of a net operating loss carryover that could
not be recorded under the previous method of accounting for income taxes. This
increased net income in fiscal year 1994 by $200,420 or $.03 per share.
NOTE C. INVESTMENTS.
As discussed in Notes A and B, in fiscal 1995 the Company adopted SFAS 115,
which changed the method of accounting and reporting for investments in equity
securities that have readily determinable fair values and for all investments in
debt securities.
The cost and market value of investments classified as trading at June 30,
1995 was $1,661,113 and $1,510,316 respectively. The net change in the
unrealized holding loss on trading securities held at June 30, 1995 that has
been included in earnings for the period was $150,797.
The cost of investments in securities, which are classified as
available-for-sale, which may not be readily marketable at June 30, 1995 was
$1,122,992. These investments are reflected as non-current assets on the June
30, 1995 consolidated balance sheet. These investments are in private placements
which are restricted for sale as of June 30, 1995. It is anticipated the
securities obtained in these private placements will become free trading during
fiscal 1996. The estimated fair value of the investments classified as
available-for-sale at June 30, 1995 was $1,466,622 with $343,630 in unrealized
gains being recorded as a separate component of Shareholders' Equity as of June
30, 1995. Approximately $12,000 was also included in Shareholders' Equity for
unrealized gains on short sales by the Company. During fiscal 1995, the Company
recorded realized gains of $202,441, on securities which were transferred from
available-for-sale securities to trading securities upon becoming free trading.
The Company also recorded unrealized gains of $158,498 and unrealized losses of
$188,124 on securities which were transferred from available-for-sale securities
to trading securities upon becoming free trading during the year.
Additionally, the Company holds Notes with an amortized cost of
$113,260,361 which are classified as held-to-maturity securities. (See further
discussion of these securities at Note F.)
In September 1994, subsequent to USAI's purchase of Notes discussed in Note
F to the Consolidated Financial Statements, the Company and USF entered into an
agreement, under which USAI agreed to transfer $900,000 in cash and securities
into an account at a financial institution in the name of USAI for the benefit
of USG under the control of USF's independent Trustees. Under the terms of the
agreement, these assets may be drawn upon by USF, if necessary, to continue to
maintain the Fund's net asset value per share at $1.00. The agreement terminates
the earlier of 1) when USG no longer owns any of the variable rate government
agency Notes set forth under the agreement; or 2) October 1997. Collateral of
$500,000 was returned to the Company during the year ended June 30, 1995 due to
the reduced percentage of USG's net assets invested in the Notes in accordance
with the agreement. These assets are classified as part of Restricted
Investments in the consolidated balance sheet.
Restricted investments include cash of $ 76,604 and $120,000 held in margin
accounts at brokers at June 30, 1995 and June 30, 1994, respectively.
Prior to the implementation of SFAS 115, marketable securities which were
classified as current assets at June 30, 1994 consisted of the following:
<TABLE>
<CAPTION>
GROSS UNREALIZED
COST CARRYING --------------------- MARKET
DATE AMOUNT GAINS LOSSES VALUE
------------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C>
June 30, 1994 $1,086,974 $199,369 ($133,787) $1,152,556
</TABLE>
Net realized gains on sales of securities of $1,383,246 and $456,405 are
included in fiscal 1994 and 1993 investment income, respectively. Market value
of these investments exceeded cost at June 30, 1994 and June 30, 1993.
The cost of investments in securities which may not be readily marketable
at June 30, 1994 was $1,058,750. These investments, which were recorded at cost,
were reflected as non-current assets on the June 30, 1994 consolidated balance
sheet. These investments were in private placements which were restricted for
sale as of June 30, 1994. These private placements became free trading during
the fiscal year ended June 30, 1995. Management determined that the fair value
of these investments exceeded cost as of June 30, 1994.
NOTE D. INVESTMENT MANAGEMENT, TRANSFER AGENT AND OTHER FEES.
The Company serves as investment advisor to USF and is transfer agent to
USF. For these services the Company receives fees based on a specified
percentage of net assets under management and the number of shareholder
accounts. The Company also provides in-house legal and accounting services to
USF. The accounting services are provided to USF for an annual fee. The Company
also receives exchange, maintenance, closing and small account fees directly
from USF shareholders.
The Company also provides administrative services to PSUSF; is investment
advisor and transfer agent to Accolade Funds; and is the investment advisor and
transfer agent to USIF.
USAI receives additional revenue from several sources including: STFC
custodian and administrative fee revenues, gains on marketable securities
transactions, revenues from miscellaneous transfer agency activities including
lockbox functions as well as mailroom operations (A&B).
Investment advisory fees, transfer agency fees, accounting fees, custodian
fees and all other fees to the Company are recorded as income during the period
in which services are performed.
The Company has voluntarily waived or lowered its advisory fees and is
bearing expenses on several funds within USF as follows:
The Company has unconditionally guaranteed that the total fund operating
expenses (as a percentage of average net assets) of the U.S. Tax Free Fund, the
United Services Intermediate Treasury Fund, and the United Services Special-Term
Government Fund will not exceed 0.40% on an annualized basis through June 30,
1996 or such later date as the Company determines.
The Company has unconditionally guaranteed that the total fund operating
expenses (as a percentage of average net assets) of the U.S. All American Fund
and the United Services Near-Term Tax Free Fund will not exceed 0.70% on an
annualized basis through June 30, 1996 or such later date as the Company
determines.
The Company has unconditionally guaranteed that the total fund operating
expenses (as a percentage of average net assets) of the U.S. Government
Securities Savings Fund will not exceed 0.40% on an annualized basis through
June 30, 1997 or such later date as the Company determines.
The Company has unconditionally guaranteed that the total fund operating
expenses (as a percentage of average net assets) of the China Region Opportunity
Fund will not exceed 1.95% on an annualized basis through June 30, 1995 and
2.25% on an annualized basis through June 30, 1996 or such later date as the
Company determines.
The aggregate amount of fees waived or expenses voluntarily reimbursed
totalled $3,568,151, $4,190,821 and $2,380,801 in fiscal 1995, 1994, and 1993,
respectively. The Company also reimbursed $0, $14,234, and $-0- in the aggregate
for each of the three fiscal years ended June 30, 1995, 1994, and 1993
respectively, to the funds for expenses in excess of state statutory limitation
requirements.
The following funds accounted for more than 10% of revenue (excluding
government security income) in the years indicated:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
U.S. Gold Shares Fund ......................... 32% 31% 34%
U.S. World Gold Fund .......................... 25% 22% 15%
U.S. Treasury Securities Cash Fund ............ 13% 10% 11%
</TABLE>
Receivables from mutual funds represent amounts due the Company, and its
wholly-owned subsidiaries, for investment advisory fees, transfer agent fees,
accounting fees, and exchange fees, net of amounts payable to the mutual funds.
The investment advisory contract and related contracts between the Company
and USF expire on or about October 25, 1995. Management anticipates the Trustees
of USF will renew the contracts.
NOTE E. PROPERTY AND EQUIPMENT.
Property and equipment are composed of the following:
<TABLE>
<CAPTION>
JUNE 30,
----------------------------
1995 1994
----------- -----------
<S> <C> <C>
Leasehold improvements .............. $ 184,416 $ 156,955
Capitalized leased equipment ........ 519,768 519,768
Furniture and equipment ............. 3,769,171 3,473,114
Building and land ................... 2,203,757 2,203,757
----------- -----------
6,677,112 6,353,594
----------- -----------
Accumulated depreciation and
amortization ...................... (4,012,292) (3,591,000)
----------- -----------
Net property and equipment .......... $ 2,664,820 $ 2,762,594
=========== ===========
</TABLE>
At June 30, 1995 and 1994 accumulated amortization for capitalized leased
equipment was $450,303 and $325,105, respectively. Amortization expense for
capitalized leased equipment was $125,198, $116,391 and $129,986 for the fiscal
years ended June 30, 1995, 1994 and 1993, respectively. Minimum lease payments
required by obligations under capital leases are $93,658 in fiscal 1996 and
$24,354 in fiscal 1997.
On February 28, 1992, the Company acquired a 46,000 square foot office
building with approximately 2.5 acres of land from the Resolution Trust
Corporation. As of June 30, 1993, total capitalized costs associated with the
building are approximately $2.2 million, including capitalized interest of
$33,783, closing costs and improvements. The Company moved its headquarters to
this building during August and September of 1992. The Company made additional
substantial improvements to the building in order to accommodate this move.
Depreciation on the building and improvements commenced upon occupancy. The
building is pledged as collateral for the financing used to acquire the building
(see Note I).
NOTE F. GOVERNMENT SECURITIES.
The U.S. Government Securities Savings Fund ("USG"), a USF fund, from its
inception has invested in, among other types of Government securities, certain
Government agency notes whose interest rates reset monthly based on a
cost-of-funds index ("Notes"). This reset feature lags changes in short-term
interest rates. To reduce USG's exposure to said Notes and in order to maintain
a $1.00 per share net asset value, USAI decided, in the first quarter of fiscal
1995, to arrange for USG to sell $40 million par amount of Notes at USG's
amortized cost of approximately $39,777,000 plus accrued interest to ML.
Thereafter, USAI decided to purchase directly from the fund $90,525,000 par
amount of Notes ($53,275,000 during the first quarter of fiscal 1995 and
$37,250,000 during the third quarter of fiscal 1995) at USG's amortized cost of
approximately $90,337,000 plus accrued interest. Additionally, in connection
with such decision, USAI purchased the Notes from ML for approximately
$39,777,000 plus accrued interest during the first quarter of fiscal 1995. The
$13,000,000 par value Note which was to mature in September 1995 was sold in
June 1995 for a realized loss of $32,073. This note was sold in order to reduce
USAI's future cost of financing by approximately $50,000 and was sold near
enough the date of maturity that changes in market interest rates did not have a
significant effect on the security's fair value. The remaining Notes acquired by
USAI mature at their aggregate $117,525,000 par amount as follows:
<TABLE>
<CAPTION>
MATURITY PAR VALUE
----------------------- ------------
<S> <C>
October 1996-March 1997 $ 63,725,000
July 1997 $ 16,550,000
September 1997 $ 37,250,000
</TABLE>
USAI recorded the Notes at their fair value. As the Notes had an aggregate
fair value of approximately $124,739,000 on the dates USAI acquired the
securities, the Company recorded pre-tax non-cash charges to the results of
operations of approximately $2,574,000 during the first quarter and $2,800,000
during the third quarter of fiscal 1995. It is USAI's intent, and management
believes the Company has the ability, to hold these Notes to maturity as defined
by SFAS 115; and therefore, the Company anticipates ultimately realizing the
Notes' approximate par value. Therefore in accordance with SFAS 115, the Company
has classified the Notes as held-to-maturity securities. As a result, and in
addition to periodic receipts of interest income, USAI recognized $1,499,521 in
non-cash income during fiscal 1995 and anticipates recognizing non-cash income
in the future by accreting the discount to par value approximately as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
ENDING JUNE 30 AMOUNT
-------------- -----------
<S> <C>
1996 $ 2,133,000
1997 $ 1,867,000
1998 $ 265,000
-----------
$ 4,265,000
===========
</TABLE>
USAI financed the acquisition of the Notes, including purchased accrued
interest, as follows: 1) approximately $120.9 million was provided by third
party broker-dealers under reverse repurchase agreements (see Note K); 2) USAI
issued a $6.0 million 8% subordinated debenture to ML, the terms of which
require principal payments as the Notes mature and interest payments quarterly
(see Note M); and 3) USAI utilized approximately $3,563,000 of its own cash.
Although it is USAI's intent, and Management believes that the Company has the
ability to own the Notes until maturity, under the terms of the subordinated
debenture with ML, ML has retained the right to acquire the Notes
collateralizing the reverse repurchase agreements with broker-dealers and its
obligation under the debenture payable to ML.
During fiscal 1995, USAI purchased put options on Eurodollar futures for
approximately $274,125 in premiums which expired resulting in a $231,625 loss.
The options were purchased with the expectation that they would reduce USAI's
exposure to temporary declines in the value of the Notes and reduce USAI's
exposure to increased interest costs of the reverse repurchase agreements in the
event of a significant increase in interest rates. During the fourth quarter of
Fiscal 1995, USAI purchased 35 put options on Eurodollar futures for
approximately $13,700 in premiums which expire in September 1995 which reduce
the risk of declines in the value of the Notes held by approximately 13%. These
options are accounted for on a "mark-to-market" basis with unrealized
appreciation of $3,763 included in the results of operations. The options
purchased are exchange traded and require no cash requirements other than the
initial premiums and USAI's exposure on the options is limited to the initial
premium invested.
NOTE G. RESIDUAL EQUITY INTEREST.
In June 1992 the Company made its final payment to the Settlement Pool
established under the June 1988 Settlement Agreement relating to the original
Prospector Fund (now operating as the U.S. Global Resources Fund); and the
Settlement Pool made the final payout to "Eligible Shareholders" thereof in June
1992. Under the 1988 Settlement Agreement, any amounts payable to "Eligible
Shareholders" who cannot be located, together with interest thereon, will be
held for six years after the final payout against the claims of those
shareholders. At the end of six years, such amounts will be made available to
all persons claiming subrogation. The Company has first right of subrogation to
the amounts. The amount of cash currently being held is approximately $586,000.
Management believes the Company will receive a sum which will equal or exceed
the amount currently recorded as the Company's residual equity interest,
$217,861.
NOTE H. INVESTMENT IN JOINT VENTURE.
During the fiscal year ended June 30, 1994, USAI and ML, a Canadian
brokerage firm, entered into discussions with respect to potential joint
enterprises. Such discussions culminated in USAI and ML entering into a joint
venture agreement on July 20, 1994 whereby USAI and ML are undertaking to offer
mutual funds in Canada, primarily through ML's broker network located in
Toronto, Montreal, Vancouver, and Victoria. As part of the agreement to enter
into a joint venture, USAI issued 120,000 shares of its preferred stock to ML.
The estimated value of the stock upon issuance was $510,000, which the Company
recorded as its investment in the joint venture during the first quarter of
fiscal 1995. In conjunction with this joint venture, United Services Advisors
Wealth Management Inc. ("USAWMI") was incorporated during the third quarter of
fiscal 1995 with a 50% ownership to each USAI and ML. Also, USAI has agreed to
incur the initial organization and development costs, including formation and
registration of the Canadian mutual funds up to a maximum of $250,000 (Canadian)
for which an additional $8,073 USD was spent during fiscal 1995 with
approximately $38,000 USD spent subsequent to June 30, 1995. Management
anticipates that USAWMI through its wholly-owned subsidiary United Services
Advisors Fund Management Inc., which was formed in September 1995 to provide
investment services to Canadian investors, will become the advisor to the ML
Small Cap Fund and will also offer other Canadian funds and investment products
and services during fiscal 1996. Upon commencement of USAWMI operations, USAI's
investment in USAWMI will be accounted for under the equity method.
NOTE I. NOTE PAYABLE.
To facilitate the cost of acquiring the building and the necessary
improvements, the Company obtained permanent financing from a bank in the amount
of $1,425,000. On June 30, 1994, the Company re-financed the original building
loan with another bank on more favorable terms. As of June 30, 1995, the balance
on the note was $1,340,048. The loan is currently amortizing over a twenty year
period with payments of both principal and interest due monthly based on a fixed
rate of 7.75%. The current monthly payment is $11,750. The loan matures July
2001. Under this agreement, the Company must maintain certain financial
covenants. Because of events described in Note F, the Company obtained a waiver
of the covenants from the bank through June 30, 1995 and subsequently negotiated
an amendment to the loan agreement and covenants with the bank to cover periods
beyond June 30, 1995. The Company is currently in compliance with all loan
covenants.
Future principal payments to be made over the next five years based on the
amount outstanding at June 30, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ----------
<S> <C>
1996 $ 38,325
1997 41,695
1998 44,899
1999 48,504
2000 52,273
Thereafter 1,114,352
----------
Total $1,340,048
==========
</TABLE>
NOTE J. ANNUITY AND CONTRACTUAL OBLIGATIONS.
On February 6, 1989, the Company entered into an agreement with Clark
Aylsworth ("Aylsworth") related to his retirement on December 31, 1988. This
agreement provided for the payment to Aylsworth of a monthly annuity of $1,500
for the remainder of his life or his wife's life, if he predeceases her. During
fiscal 1989, $179,787 was charged to income to record the estimated fair value
of this transaction, which approximated the present value of future estimated
payments.
On December 30, 1990, the Company entered into a
non-compete/non-interference agreement, an executory contract, pursuant to which
it pays the Aylsworths $4,500 monthly, such amount to continue for the longer of
Aylsworth's or his wife's life. The Company recorded a charge to income in
fiscal year 1991 of $70,803, which represented the fair value of the obligation
for estimate future payment to Mrs. Aylsworth which assume continued compliance
with contractual covenants and, in light of actuarial estimates, that she
outlives Mr. Aylsworth. The Company placed $360,000 in escrow to cover the
Company's obligation to the Aylsworths if the Company defaults. The escrowed
amount decreases $15,000 annually.
During fiscal 1993, the Company evaluated the amount recorded relating to
the above obligations. The Company determined that the executory contract should
be expensed as payments are made, with no provision for future payments, and
that the amount recorded for the 1989 annuity was increased in fiscal 1993.
Therefore, the amount recorded for these obligations is attributed only to the
1989 annuity.
NOTE K. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE.
As discussed in Note F, USAI financed the acquisition of the Notes by
entering into agreements to repurchase securities with third party
broker-dealers. The terms with the broker-dealers provide that the reverse
repurchase agreements must be collateralized by the Notes and/or cash. The Notes
described in Note F are held by the broker-dealers as collateral. Throughout
fiscal 1995, and as of September 15,1995, each reverse repurchase agreement has
matured and has been renewed on a 30, 60, or 90 day basis. Management believes
that the reverse repurchase agreements can be periodically renewed until the
Notes mature. All reverse repurchase agreements are with major broker-dealers
and are secured by U.S. Government Agency obligations. The following is a
summary of information as of June 30, 1995 on the securities sold under
agreements to repurchase and the repurchase liability:
<TABLE>
<CAPTION>
MATURES
LESS THAN MATURES
30 DAYS 30 TO 90 DAYS TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
Carrying Amount of Collateral ....................... $ 61,358,666 $ 51,901,695 $113,260,361
Market Value of Collateral .......................... 61,009,938 52,036,056 113,045,994
Repurchase Liability ................................ 60,692,406 51,509,063 112,201,469
Accrued Interest Receivable
on Collateral ..................................... 317,678 186,969 504,647
</TABLE>
The amount at risk, defined as the greater of the market value or carrying
amount plus the accrued coupon interest less the repurchase liability and the
interest due to the broker-dealer on the repurchase liability, under the reverse
repurchase agreements with Dean Witter Reynolds Inc. exceed 10% of shareholder's
equity. The amount at risk was $1,058,657 and the reverse repurchase agreements
had maturities of 87 days as of June 30, 1995.
NOTE L. BENEFIT PLANS.
The Company and its subsidiaries have a contributory profit-sharing plan in
which all qualified employees who have completed one year of employment with the
Company are included. The amount of the annual contribution, which may not
exceed 15% of earnings before income taxes, is determined by the Company's Board
of Directors. At June 30, 1995, the Company has no accrual for fiscal 1995.
The Company and its subsidiaries also have a savings and investment plan
qualified under Section 401(k) of the Internal Revenue Code. The Company makes
contributions on behalf of eligible employees to fund this plan. In connection
with this 401(k) Plan, participants can voluntarily contribute up to 15% of
their compensation to this plan, and the Company will match their contribution
up to 2%. At June 30, 1995, the Company has accrued $48,000 for this matching
contribution.
Additionally, effective February 1, 1993, the Company began self-funding
its employee health care plan. The Company has obtained reinsurance with both a
specific and an aggregate stop-loss in the event of catastrophic claims. At June
30, 1995, the Company has accrued an amount representing the Company's estimate
of incurred but not reported claims.
NOTE M. CONVERTIBLE SUBORDINATED DEBENTURE.
In conjunction with the purchase of the Notes described in Note F, USAI
issued a $6 million 8% subordinated debenture to ML, the terms of which require
principal payments as the Notes mature and quarterly interest payments. In June
1995, USAI reduced the principal balance of the debenture by prepaying $1
million to ML and making a payment of $465,788 to ML upon the sale of the $13
million par value Note. Future principal payments to be made over the next two
years based upon the amount outstanding at June 30, 1995 are $3,575,014 in
fiscal 1997 and $959,198 in fiscal 1998, which will be paid to ML as the Notes
mature.
Additionally, due to the transaction between USAI and ML described in Note
N, the debenture agreement between USAI and ML was amended so as to be
convertible at the option of ML into preferred stock at a cost of $7.00 per
share for each dollar of par value outstanding.
NOTE N. SHAREHOLDERS' EQUITY.
In a private placement on October 27, 1989, Frank E. Holmes and the F.E.
Holmes Organization, Inc. acquired control of the Company by purchasing for
$2,200,000 550,000 shares of the Company's Common stock and warrants to acquire
an additional 550,000 shares of Common stock at $4.00 per share. These warrants
include a provision for adjustment to the number of warrants and exercise price
in the event additional securities are issued at an amount below the exercise
price of such outstanding warrants. At June 30, 1994, there were outstanding
Common stock warrants to purchase 586,122 shares at $3.75 per share expiring
October 1994. Effective August 11, 1994 such warrants were cancelled and new
agreements were approved providing for warrants to acquire 586,122 shares of
common stock at the August 11, 1994 market price of $4.00 per share expiring
October 1999 which were all outstanding as of June 30, 1995.
In December 1991, the Company issued to Mr. Holmes options to purchase
400,000 shares of Common stock at $2.625 per share which equaled or exceeded the
fair value of the stock on the date of grant. During fiscal 1992, the Board of
Directors approved the issuance of 100,000 shares of Preferred stock to F.E.
Holmes Organization, Inc. in exchange for 100,000 shares of its Common stock.
Mr. Holmes now owns approximately 68.27% of the outstanding shares of the
Company's Common stock, which is the only class of the Company's stock having
voting rights.
During fiscal 1993, warrants covering 750,000 shares of Preferred stock
were exercised, and warrants covering 80,957 shares of Preferred stock expired.
At June 30, 1993, 1994 and 1995 the Company had no outstanding Preferred stock
warrants.
In March 1985, the Board of Directors adopted an Incentive Stock Option
Plan (the "1985 Plan"), amended in November 1989 and December 1991, which
provides for the granting of options to purchase 200,000 shares of the Company's
Preferred stock, at or above fair market value, to certain executives and key
salaried employees of the Company and its subsidiaries. Options under the 1985
Plan may be granted for a term of up to five years in the case of employees who
own in excess of 10% of the total combined voting power of all classes of the
Company's stock and up to ten years for other employees. During the 1991 fiscal
year, options covering 150,000 shares of Preferred stock were granted at prices
ranging from $1.50 to $1.65. During the fiscal year 1994, options covering
10,500 shares were granted at an exercise price of $4.25 per share. During the
fiscal year 1995, options covering 42,500 shares were granted at exercise prices
ranging from $2.625 to $4.50 per share. As of June 30, 1995, options covering
79,000 shares have been exercised and options covering 5,000 shares have
expired. The 1985 plan expired December 31, 1994; as a consequence, there will
be no further option grants under the 1985 plan.
In November 1989, the Board of Directors adopted the 1989 Non-Qualified
Stock Option Plan (the "1989 Plan"), amended in December 1991, which provides
for the granting of options to purchase 800,000 shares of the Company's
Preferred stock to directors, officers and employees of the Company and its
subsidiaries. Since adoption of the 1989 Plan, options for 780,000 shares were
granted at prices ranging from $1.50 to $5.69 per share, which equaled or
exceeded the fair market value at date of grant. During the fiscal year 1993,
options covering 5,000 shares were granted at an exercise price of $3.00. During
the fiscal year 1994, options covering 22,000 shares were granted at exercise
prices ranging from $4.75 to $5.69 per share. During the fiscal year 1995
options covering 7,000 shares were granted at exercise prices ranging from
$2.625 to $3.375 per share. As of June 30, 1995, options covering 252,500 shares
have been exercised under this plan and options covering 4,700 shares have
expired.
Preferred stock options outstanding as of June 30, 1995 under the 1989 Plan
are as follows:
<TABLE>
<CAPTION>
DATE OF OPTION NUMBER
GRANT PRICE OUTSTANDING
-------- ------ -----------
<S> <C> <C>
11/07/89 $1.50 50,000
11/13/89 $2.25 145,000
12/06/91 $2.625 293,800
9/24/92 $3.00 5,000
2/16/94 $5.69 20,000
5/16/94 $4.75 2,000
12/15/94 $2.625 2,000
2/24/95 $3.375 5,000
-------
522,800
</TABLE>
On a per share basis, the holders of the Common stock and the non-voting
Preferred stock participate equally in dividends as declared by the Company's
Board of Directors, with the exception that any dividends declared must first be
paid to the holders of the Preferred stock to the extent of 5% of the Company's
after-tax prior year net earnings.
The holders of the Preferred stock have a liquidation preference equal to
the par value of $.05 per share. Certain Common stock is exchangeable on a
one-for-one basis for Preferred stock.
During fiscal year ended June 30, 1995, the Company purchased 35,000 shares
of its preferred stock on the open market at an average price of $3.06 per
share.
At the end of September 1994, the Company and ML entered into a letter of
intent pursuant to which ML would purchase a significant ownership interest in
the Company. On December 7, 1994, the Company and ML entered into an agreement
whereby the Company issued to ML one million shares of new class of convertible
non-voting common stock (Class B) at $5.00 per share and warrant to purchase an
additional one million shares of capital stock at $6.00 per share in
consideration of an investment of $5 million. The warrant allows ML, at its
option, to purchase either one million shares of Class A Common Stock or one
million shares of Preferred Stock at a price of $6.00 per share during the six
month period between October 1, 1997 and March 31, 1998. In addition, an
existing $6 million subordinated debenture of the Company held by ML was amended
so as to be convertible at the option of ML into Preferred Stock at a price of
$7.00 per share. The aggregate number of shares of Preferred Stock ML could
purchase under the warrant, by conversion with the promissory note and by
conversion of its Class B Common Stock is 2,857,142 shares.
Preferred shareholder approval for an increase in the number of authorized
shares of Preferred Stock is required so that the Company may have sufficient
shares of Preferred Stock in the event ML decides to convert its Class B shares
to shares of Preferred Stock. On August 3, 1995, USAI shareholders approved an
amendment to the Company's Restated Articles of Incorporation providing for an
increase in the number of shares of Preferred Stock that the Company is
authorized to issue by one million shares.
ML can only convert its Class B shares to Class A shares after mutual fund
shareholders approve continuation of the investment advisory agreements with the
Company because the agreements contain a statutory contractual provision
providing for automatic termination upon an assignment of the investment
advisory agreement. Such conversion would be deemed a change in control and,
thereby, an assignment of the contract.
As part of the transaction, Mr. Frank E. Holmes, Chairman and CEO of the
Company, exchanged 72,720 shares of the Company Class A Common Stock for 164,347
shares of ML common stock. In addition, subject to certain conditions, including
obtaining mutual fund shareholder approvals in the future, the terms of the
agreement require Mr. Holmes to exchange an additional 177,280 Class A common
shares for 400,653 shares of ML, and ML to convert its Class B shares to Class A
shares, whereupon ML would own more that 50% of the issued and outstanding
voting shares of the Company, and Mr. Holmes would then own approximately 3% of
the total outstanding common shares of ML.
The conversion feature allowing ML to convert its Class B shares to
Preferred Stock would allow ML to sell said shares in a public offering in the
event mutual fund shareholder approval is not obtained. Alternatively, in the
event Company Shareholders do not authorize additional Preferred Stock and/or
mutual fund shareholders do not approve continuation of the Advisory Agreement
with ML owning control of the Company, ML may opt, during prescribed periods in
1996 and 1997, to convert its investment to a US $5 million debenture payable by
USAI over a two-year period from the date of ML's conversion. The interest rate
on the debenture would be equal to an annual rate of 1% plus the annual rate of
interest established by Bankers Trust of New York for U.S. dollar commercial
demand loans to its U.S. customers.
As discussed in Note P, certain changes in the Company's ownership may
result in a limitation on the amount of net operating losses ("NOLs") that could
be utilized under Section 382 of the Internal Revenue Code. The Company reviewed
Section 382 and has determined that no change in control/ownership, as defined
by Section 382, occurred as a result of the fiscal 1995 transactions described
above.
NOTE O. RELATED PARTY TRANSACTIONS.
In addition to the Company's receivable from USF relating to investment
management, transfer agent and other fees (see Note D), the Company had
$2,673,156 and $1,006,151 invested in USF money market mutual funds at June 30,
1995 and 1994, respectively. Dividend income earned from these investments in
USF totaled $132,881, $47,739 and $71,266 for the years ended June 30, 1995,
1994 and 1993 respectively.
The Company and USF's contract with Bankers Trust Company ("Sub-Advisor")
to provide sub-advisory services for certain USF funds was terminated effective
November 21, 1993. As compensation for its services, the Sub-Advisor received
from the Manager a fee based upon the average net assets of the fund. The
Manager incurred $12,500 and $26,402 in sub- advisory fees to Bankers Trust
during the 1994 and 1993 fiscal years, respectively, including $0, and $2,500
payable at June 30, 1994 and 1993, respectively.
In connection with ML's investment in the Company as described in Note N,
the Company's Board of Directors was expanded from five to nine and includes two
ML representatives (including ML's Chairman and CEO); and, Mr. Holmes has been
elected to ML's Board of Directors. During the fiscal year ended June 30, 1995
USAI purchased approximately 105,000 shares of ML common stock through USAI's
brokerage account at Marleau, Lemire Securities Inc., ("MLSI") a subsidiary of
ML for $181,778. After a 1 for 3 reverse stock split on June 23, 1995 USAI's
position in ML common stock was converted to approximately 35,000 shares which
represents less than 1% of the ML common shares outstanding.
At various intervals during fiscal 1995, the Company purchased 700 put
options on Eurodollar futures for premiums of $165,375 through Marleau, Lemire
Futures which is a division of MLSI. The Company also purchased securities which
MLSI was either the agent or underwriter of the share offering. The securities
were purchased at a cost of $199,609 and had $58,120 of unrealized losses
included in the Company's income statement as of June 30, 1995. Additionally,
the Company purchased a security for $110,685 for which Griffiths McBurney &
Partners acted as Agent. Eugene McBurney, a director of USAI from December 1994
to July 1995, is a partner in Griffiths McBurney & Partners. Mr. Renaud became a
director of the Company in December 1994. At June 30, 1994 a $100,000 loan
receivable between USAI and Hornchurch Investments Limited was outstanding. Loan
proceeds were used by Hornchurch to purchase a debenture issued by Weider Europe
B.V., an entity in which Mr. Renaud had a material interest. During November
1994 the loan was repaid to USAI along with interest due, and USAI recognized
approximately $80,000 in income as a result of receiving a pro rata
participation in the equity appreciation of the Hornchurch/Weider transactions.
As of June 30, 1995, USAI has accrued approximately $113,000 in
subordinated debenture interest payable to ML.
There were additional related party transactions involving ML related to a
joint venture to market mutual funds in Canada (see Note H) and the purchase of
U.S. Government securities (see Note F).
NOTE P. INCOME TAXES.
As discussed in Note B, in fiscal 1994 the Company adopted SFAS 109, which
changed the method of accounting for income taxes.
The differences in income taxes attributable to continuing operations
determined by applying the U.S. federal statutory rate of 34% and the Company's
effective tax rate are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Tax expense at statutory rate .................................. $(2,004,592) $ 262,132 $ 31,098
Exercise of non-qualified stock options
treated as equity for financial statements ................... (59,885) (191,186) --
Non-deductible membership dues ................................. 13,825 6,686 --
Non-deductible meals & entertainment ........................... 17,668 6,093 2,768
Utilization of valuation allowance ............................. -- (249,042) --
Other .......................................................... 50,140 (13,348) 41
----------- ----------- -----------
$(1,982,844) $ 178,665 $ 33,907
=========== =========== ===========
</TABLE>
In fiscal 1993, prior to the adoption of SFAS 109, deferred income tax
expense (benefit) resulted from timing differences as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1993
-------------
<S> <C>
Depreciation ................................................ $(24,822)
Annuity obligation .......................................... 1,193
Charitable contributions .................................... (4,780)
Accrued expenses ............................................ (2,352)
Utilization of capital loss carryover ....................... 16,671
Other ....................................................... 831
--------
$(13,259)
========
</TABLE>
Deferred income taxes for fiscal 1995 and 1994, after adoption of SFAS 109,
reflect the net tax effects of temporary differences between the carrying amount
of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. The tax effects of these temporary differences that
give rise to the net deferred tax asset as of July 1, 1993 (adoption of SFAS
109), June 30, 1994 and June 30, 1995 are presented below:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, JULY 1,
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Deferred Tax Assets
Book/tax differences in the balance sheet:
Trading securities ......................................... $ 33,995 $ -- $ --
Marketable securities ...................................... -- 40,642 --
Accumulated depreciation ................................... 106,100 82,105 67,036
Accrued expenses ........................................... 29,776 20,160 21,093
Annuity obligations ........................................ 59,272 61,170 62,940
Net unrealized holding gain ................................ 120,914 -- --
350,057 204,077 151,069
----------- ----------- -----------
Tax carryovers:
NOL carryover .............................................. 2,044,251 102,778 240,212
Contributions carryover .................................... 44,635 18,829 4,780
Investment credit carryover ................................ 34,472 37,615 53,401
Minimum tax credits ........................................ 56,786 63,144 --
----------- ----------- -----------
2,180,144 222,366 298,393
----------- ----------- -----------
2,530,201 426,443 449,462
Less valuation allowance ...................................... -- -- (249,042)
----------- ----------- -----------
Deferred tax asset ............................................ 2,530,201 426,443 200,420
----------- ----------- -----------
Deferred Tax Liabilities
Investment securities available-for-sale ...................... (120,914) -- --
----------- ----------- -----------
Net deferred tax asset ........................................ $ 2,409,287 $ 426,443 $ 200,420
=========== =========== ===========
</TABLE>
For federal income tax purposes at June 30, 1995, the Company has NOLs of
approximately $6,012,000 which will expire in fiscal 2007 and 2010, charitable
contribution carryovers of approximately $131,000 expiring 1998-2000, investment
credits of $34,472 expiring in 1998 and minimum tax credits of $56,786 with
indefinite expirations. Certain changes in the Company's ownership may result in
a limitation on the amount of net operating losses ("NOLs") that could be
utilized under Section 382 of the Internal Revenue Code. The Company reviewed
Section 382 and has determined that no change in control/ownership, as defined
by Section 382, occurred as a result of the fiscal 1995 transactions described
in Note N. If certain changes in the Company's ownership should occur subsequent
to June 30, 1995, there could be an annual limitation on the amount of NOLs that
could be utilized.
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax amount will not be realized. The valuation allowance
of $249,042 at July 1, 1993 was reversed during fiscal 1994 due to the
substantial increase in taxable income and management's reassessment of the
likelihood of realization of the deferred tax asset.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Within twenty-four months prior to the date of Registrant's most recent
financial statement, no Form 8-K recording a change of accountants due to a
disagreement on any matter of accounting principles or practices or financial
statement disclosure has been filed with the Commission.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The directors and executive officers of the Company are as follows:
NAME AGE POSITION
John A.M. Budden ........ 52 ... Mr. Budden has been a Director of the Company
since October 1989. John Budden, d.b.a.
John Budden, Associated Person as an
Introducing Broker for Refco Inc., from
March 1995 to present. John Budden, d.b.a.
John Budden, Registered Investment Advisor,
Mutual Fund Analyst, from September 1993 to
present. Contributing writer for CNBC
Insight, an investment letter/broadcaster
from June 1993 to September 1994. Formerly
a Director of Dundee Capital Inc., a
Canadian publicly traded financial services
company, and a Director and Vice President
of Goodman & Company, a private Canadian
investment counsellor and a Director,
President and Chief Executive Officer of
Dynamic Fund Management Ltd., a private
Canadian mutual fund manager from December
1990 to August 1992. From September 1989 to
November 1990, he was a registered
representative and portfolio manager with
BBN James Capel Inc., investment dealers.
Jerold H. Rubinstein .... 56 ... Mr. Rubinstein has been a Director of the
Company since October 27, 1989. Since May
1986 he has served as Chairman of the Board
of Directors and as Chief Executive Officer
of DMX Inc., (formerly International
Cablecasting Technologies, Inc.), a
publicly-traded media technology company.
Bobby D. Duncan ........ 38 ... President of the Company since September 1995
and Chief Operating Officer since 1993.
Formerly Executive Vice President and Chief
Financial Officer of the Company from
October 27, 1989 to September 1995.
Executive Vice President, Chief Operating
Officer of USF since September 1995,
formerly was Executive Vice President,
Chief Financial Officer and Chief Operating
Officer of USF from October 1989 to
September 1995. CEO, President, Chief
Operating Officer of USSI since September
1994. Director of A&B Mailers, Inc. since
February 1988 and Chairman since July 1991.
Director of the Company since 1986.
Director, Executive Vice President, and
Chief Financial Officer of ST&FC from
November 1991 to March 1994. Vice President
and Trustee of Pauze'/Swanson United
Services Funds since November 1993, Chief
Financial Officer from November 1993 to
September 1995. Executive Vice President,
Chief Operating Officer of Accolade Funds
since April 1993, Chief Financial Officer
from April 1993 to September 1995.
President, CEO and Trustee of United
Services Insurance Funds since July 1994.
Director and Chief Financial Officer of
United Services Advisors Wealth Management
Inc. since February 13, 1995.
Victor Flores .......... 31 ... Executive Vice President, Chief Investment
Officer and Director of the Company since
February 1994. Executive Vice President,
Chief Investment Officer of the Funds since
February 1994. Portfolio Manager U.S. Gold
Shares Fund since November 1992 and U.S.
World Gold Fund since January 1990.
Portfolio Manager, U.S. Global Resources
Fund, from January 1990 to November 1992.
Formerly Vice President, Portfolio Manager
of United Services Advisors, Inc. (July
1993 - February 1994).
Frank E. Holmes ........ 40 ... Chairman of the Board of Directors and Chief
Executive Officer of the Company since
October 27, 1989, President from October
1989 to September 1995. Director of ST&FC
since November 1991. President, Chief
Executive Officer and Trustee of USF since
October 1989. President, Chief Executive
Officer and Trustee of Accolade Funds since
April 1993. Director of U.S. Advisors
(Guernsey) Limited, a wholly- owned
subsidiary of Advisor, and of the Guernsey
Funds managed by that Company since August
1993. Trustee of Pauze'/Swanson United
Services Funds since November 1993.
Director of Franc-Or Resource Corp. since
November 1994. Director of Marleau, Lemire
Inc. since January 1995. Director and Chief
Executive Officer of United Services
Advisors Wealth Management Inc. since
February 1995. Formerly a Director of Merit
Investment Corporation.
Hubert Marleau ......... 52 ... Director of the Company since December 1994.
Chairman of United Services Advisors Wealth
Management Inc., an investment advisor,
since February 1995. Chairman, CEO of
Marleau, Lemire Inc., a Canadian investment
brokerage firm, since 1989.
Richard J. Renaud ...... 49 ... Director of the Company since December 1994.
Director of United Services Advisors
(Guernsey) Ltd. since July 1993. Chairman,
CEO of Weider Health & Fitness, Inc.
Director of ICON Health and Fitness, Inc.
Director of Marleau, Lemire Inc. Vice
Chairman and Director of Benvest Capital
Inc., merchant banking firm, from September
1992 to September 1994. Was Vice Chairman,
Director of Dundee Capital Inc., a merchant
banking firm, from January 1987 to May
1992.
Roy D. Terracina ....... 49 ... Director of the Company since December 1994.
Director of ST&FC since August 1992. Owner
of Sunshine Consulting, investment company,
since January 1994. Owner/President of
Sterling Foods, Inc., food manufacturer,
from May 1984 to December 1993.
Eric W. Farr ............ 48 ... Vice President, Information Services of the
Company and USF since June 1987.
Marie A. Kriley ......... 53 ... Vice President, Mailing Services of the
Company since December 1991. President of
A&B Mailers, Inc. since February 1983.
Charles W. Lutter, Jr. .. 51 ... Serves as Consultant to Company effective
September 1, 1995. Vice President-Special
Counsel and Secretary of the Company from
November 1993 to August 1995. Vice
President, Associate General Counsel, and
Secretary from January 1991 to November
1993. Vice President and Secretary of USF
from January 1991 to August 1995. Vice
President and Secretary of USSI, Secretary
of A&B Mailers, Inc. from January 1991 to
August 1995, and Assistant Secretary of
ST&FC from July 1993 to August 31, 1995.
Vice President, Secretary of Accolade Funds
from April 1993 to August 31, 1995. Private
practice of law from October to December
1990 and from July 1983 to May 1987. From
May 1987 to September 1990, Senior
Corporate Attorney for La Quinta Motor
Inns, Inc.
Teresa G. Rowan ........ 31 ... Vice President, Mutual Fund Accounting of the
Company since February 1995. Vice
President, Chief Financial Officer and
Chief Accounting Officer of USF since
September 1995. Served as Vice President,
Chief Accounting Officer, Treasurer, and
Controller of USF from March 3, 1995 to
September 1995. Vice President, Mutual Fund
Accounting of USSI since March 13, 1995.
Vice President and Treasurer of
Pauze'/Swanson United Services Funds since
March 8, 1995, Chief Financial Officer
since September 1995, Chief Accounting
Officer from March 1995 to September 1995.
Vice President, Chief Financial Officer,
Chief Accounting Officer, Treasurer of
Accolade Funds since September 1995.
Employee of the Company from October 1986
to present.
Jane K. Hatton ......... 28 ... Vice President, Chief Financial Officer,
Chief Accounting Officer, Controller and
Treasurer of the Company since September
1995. Controller of the Company from
December 1994 to September 1995. Accounting
Manager of the Company from November 1992
to December 1994. From 1989 to 1992 was
Senior Auditor at Price Waterhouse.
John W. Teter .......... 50 ... Vice President, Corporate Planning of the
Company since December 1991. Vice
President, Corporate Planning of USSI since
February 1990.
Susan B. McGee ......... 36 ... Vice President, Corporate Secretary of the
Company from September 1995 to present;
Associate Counsel from August 1994 to
present. Vice President, Secretary of USF
since September 1995. Vice President,
Counsel to ST&FC from September 1992 to
present; Vice President- Operations of
ST&FC from May 1993 to December 1994.
Thomas D. Tays .......... 38 ... Vice President-Special Counsel, Securities
Specialist, Director of Compliance,
Assistant Secretary of the Company from
September 1995 to present; Associate
Counsel, Assistant Secretary of the Company
from September 1993 to September 1995. Vice
President, Securities Specialist, Director
of Compliance and Assistant Secretary of
USF since September 1995. Vice President
and Secretary of Accolade Funds since
September 1995, was Assistant Secretary
from September 1994 to September 1995. Vice
President, Secretary of United Services
Insurance Funds from June 1994 to present.
Private practice of law from 1990 to August
1993.
None of the directors or executive officers of the Company has a family
relationship with any of the other directors or executive officers.
Each member of the Board of Directors is elected for a one-year term or
until their successors are elected and qualify. The executive officers of the
Company are appointed by, and serve at the pleasure of, the Board of Directors.
The Company does not have a Nominating Committee. The Board created a
Compensation Committee consisting of Messrs. Budden, Holmes, Renaud and
Rubinstein. The Company's Audit Committee consists of Messrs. Budden, Duncan,
Renaud, Rubinstein and Terracina. The Board of Directors Stock Option Committee
consists of Messrs. Budden and Rubinstein.
COMPLIANCE WITH SECTION 16(A) OF THE 1934 ACT
Section 16(a) of the 1934 Act requires directors and officers of the
Company, and persons who own more than 10 percent of the Company's Preferred
Stock, to file with the SEC initial reports of ownership and reports of changes
in ownership of the stock. Directors, officers and more than 10 percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the year ended June 30, 1995 all Section 16(a)
filing requirements applicable to its directors, officers and more than 10
percent beneficial owners were complied with.
ITEM 11. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
----------------------------
ANNUAL COMPENSATION AWARDS
- - - ------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
OTHER
ANNUAL 6
COMPENSATION RESTRICTED
NAME AND 1,2 2 3 STOCK AWARDS OPTIONS/ 4
PRINCIPAL POSITION DURING FY 95 YEAR SALARY ($) BONUS ($) ($) ($) SARs (#)
- - - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Frank E. Holmes .................... 1995 $303,835 $ 2,098 $46,326 $ 288 0
Chairman 1994 $308,343 $74,024 $34,754 0
Chief Executive Officer 1993 $302,564 $ 0 $30,364 0
Victor Flores ...................... 1995 $150,292 $65,877 $14,877 $ 288 17,000
Exec. V.P 1994 $ 93,864 $97,848 $ 3,504 30,000
Chief Investment Officer 1993 $ 42,917 $15,089 $ 1,222 0
Bobby D. Duncan .................... 1995 $103,854 $24,862 $16,820 $3,163 0
President 1994 $103,536 $15,963 $12,619 0
Chief Operating Officer 1993 $ 90,564 $ 5,745 $18,909 0
Charles W. Lutter, Jr .............. 1995 $ 93,854 $11,193 $ 7,918 $ 288 2,000
1994 $ 92,043 $ 9,395 $ 3,306 0
1993 $ 82,564 $ 1,083 $ 5,303 0
<FN>
The Company has intentionally omitted columns (h), and (i) as they are non applicable.
1 Includes amounts identified for 401(k) contributions and amounts for Company Savings Plans. The amounts are
calculable through to the end of the June 30, 1995 fiscal year.
2 Does not include the cost to the Company of incidental personal use of automobiles furnished by the Company
for use in its business and certain other personal benefits. The Company believes that the aggregate
amounts of such omitted personal benefits do not exceed the lesser of $50,000 or 10% of the total of
annual salary or bonus reported for the named executive officers in columns (c) and (d).
3 Other compensation including perquisites exceeding 25% of total perquisites:
NAME DESCRIPTION 1995 1994 1993
--------------------------- -------------- -------- -------- --------
Frank E. Holmes ........... Trustee fees $ 24,000 $ 28,000 $ 21,500
Profit sharing $ 12,941 $ 0 $ 871
Victor Flores ............. Profit sharing $ 10,183 $ 0 $ 1,195
401 (k) match $ 3,000 $ 3,000 $ 0
Bobby D. Duncan ........... Car allowance $ 8,523 $ 8,523 $ 8,523
Profit sharing $ 6,202 $ 0 $ 5,649
Charles W. Lutter, Jr. .... Profit sharing $ 4,540 $ 0 $ 0
401 (k) match $ 2,101 $ 2,029 $ 1,673
Secretary fees $ 0 $ 0 $ 2,400
4 All options pertain to Company preferred stock.
5 Principal position on September 25, 1995. Mr. Lutter was V.P.-Special Counsel and Secretary of the Company
until August 31, 1995.
6. Restricted stock balances of the Company's preferred stock as of June 30, 1995:
# OF RESTRICTED VALUE OF RESTRICTED
NAME SHARES HELD @ 6/30/95 SHARES HELD @ 6/30/95
--------------------------- --------------------- ---------------------
Frank E. Holmes ........... 100 $ 263
Victor Flores ............. 100 $ 263
Bobby D. Duncan ........... 1,100 $ 2,888
Charles W. Lutter, Jr. .... 100 $ 263
No dividends have ever been paid on the Company's preferred stock. However, the restricted stock would
receive dividends if declared.
</FN>
</TABLE>
INCENTIVE COMPENSATION
Effective July 1, 1993, the Company implemented a team performance pay
program based on each employee's annual salary to recognize monthly completion
of departmental goals. Effective July 1, 1995 a portion of the team bonus became
payable in the Company's preferred stock. The Company also implemented
semi-annual perfect attendance awards based on employee classification.
PROFIT SHARING PLAN
In June 1983, the Company adopted a profit sharing plan in which all
qualified employees who have completed one year of employment with the Company
are included. Subject to Board action, the Company may contribute 15% of its net
income before taxes during each fiscal year, limited to 15% of qualifying
salaries, to a trust, the beneficiaries of which are the eligible employees of
the Company. The Company's contribution to the trust is then apportioned to each
employee's account in the trust in an amount equal to the percentage of the
total basic compensation paid to all eligible employees which each employee's
individual basic compensation represents. An employee generally becomes eligible
to receive a distribution from the trust upon the occurrence of retirement,
death, total disability or termination. Distributions of an employee's account
may be made either in one lump sum or in installments over a period not
exceeding 15 years. For the fiscal year ended June 30, 1995 the Company did not
contribute to the profit sharing plan. There have been no recent material
changes to the plan.
401(K) PLAN
The Company adopted a 401(k) Plan in October 1990 for the benefit of all
employees. The Company will contribute 50 cents for every $1.00 of the first 4%
of an employee's pay deferment. The Company will make contributions to employee
accounts at the end of each plan year if the employee is still employed on that
date. New employees may enroll on any quarterly entry date following six months
of employment. The Plan offers thirteen different investment options which
represent different levels of risk and return. Employees have the option to
invest in one of eleven of the USF funds offered, the Company's Preferred Stock
or the Bonnel Growth Fund. For the fiscal year ended June 30, 1995, the Company
has accrued $48,000 for its 401(k) Plan matching contribution.
SAVINGS PLANS
The Company has continued the program started during fiscal 1993 pursuant
to which it offers senior employees, including its executive officers, an
opportunity to participate in savings programs utilizing USF, which was accepted
by essentially all such employees. Limited employee contributions to an
Individual Retirement Account are matched by the Company. Similarly, if such
employees contribute monthly to the USF Tax Free Fund, the Company will match
these contributions on a limited basis. Under each program, if the employee
ceases to make personal contributions or withdraws the money, their
participation in the program is terminated and they may not participate in the
future.
STOCK OPTION PLANS
In March 1985, the Board of Directors of the Company adopted an Incentive
Stock Option Plan ("1985 Plan") which was approved by the shareholders of the
Company on April 2, 1985. Under the terms of the 1985 Plan, certain executives
and key salaried employees of the Company and its subsidiaries were granted
options to purchase shares of the Company's Preferred Stock. The maximum number
of shares of Preferred Stock authorized for issuance under the 1985 Plan was
200,000 shares (subject to adjustment in the event of reorganization, merger,
consolidation, liquidation, recapitalization, or stock splits). Shares subject
to purchase pursuant to an option granted under the 1985 Plan may be either
authorized but unissued shares or shares that were once issued and subsequently
reacquired by the Company.
The 1985 Plan was amended on November 7, 1989 and December 6, 1991. In
December 1991 it was amended to provide provisions to cause the Plan and future
grants under the Plan to qualify under 1934 Act Rule 16b-3. The 1985 Plan was
administered by a committee consisting of the two outside members of the Board
of Directors of the Company. The 1985 Plan terminated on December 31, 1994.
Options granted under the 1985 Plan were granted for a term of up to five
years in the case of employees who own in excess of 10% of the total combined
voting power of all classes of the Company's stock and for up to ten years for
other employees. The options were granted at an exercise price of not less than
100% of the fair market value as of the date of the grant, or 110% of the fair
market value in the case of any officer or employee holding in excess of 10% of
the combined voting power of the Company's stock. The aggregate fair market
value of the Preferred Stock for which any employee was granted options in any
calendar year could not exceed $100,000 plus any unused carry-over from a
preceding year. During fiscal 1995 options covering 42,500 shares were granted
at prices ranging from $2.625 to $4.50 per share. All of the options were
granted at or above market price on the date of the grant. To date 79,000 option
grants have been exercised under the 1985 Plan; and, grants covering 5,000
shares have expired.
In November 1989 the Board of Directors adopted the 1989 Non-Qualified
Stock Option Plan (the "1989 Plan") which provides for the granting of options
to purchase shares of the Company's Preferred Stock to directors, officers and
employees of the Company and its subsidiaries. On December 6, 1991, the 1989
Plan was amended to provide provisions to cause the Plan and future grants under
the Plan to qualify under 1934 Act Rule 16b-3. The 1989 Plan is administered by
a committee consisting of two outside members of the Board of Directors. The
maximum number of shares of Preferred Stock initially approved for issuance
under the 1989 Plan is 800,000 shares. During the fiscal year ended June 30,
1995 there were 7,000 shares granted at exercise prices ranging from $2.625 to
$3.375 per share. All options were granted at or above market price on the date
of grant. To date, 252,500 options have been exercised under the 1989 Plan; and
4,700 options have expired.
The Board of Directors, at a meeting held on July 14, 1992, amended the
Stock Option Agreement for stock options granted during November 1989 to provide
for an option period of ten years. The amendment was accepted by all optionees.
The following table shows, as to each of the officers of the Company listed
in the cash compensation table, aggregated option exercises during the last
fiscal year and fiscal year-end option values.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN THE MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED ON VALUE FY-END (#) FY-END ($)
NAME EXERCISE (#) REALIZED EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
---- ------------ -------- --------------- --------------------
<S> <C> <C> <C> <C>
Frank E. Holmes ....................... -0- $ -0- 200,000 $63,750
Chairman,
Chief Exec. Officer
Bobby D. Duncan ....................... -0- $ -0- 95,000 $31,875
President
Chief Operating Officer
Victor Flores ......................... -0- $ -0- 50,000 $ 1,125
Executive Vice President
Chief Investment Officer
Charles W. Lutter, Jr ................. -0- $ -0- 12,000 $ -0-
</TABLE>
COMPENSATION OF DIRECTORS
The Company pays non-employee directors, Messrs. Budden, Marleau, Renaud,
Rubinstein and Terracina, $500 per meeting and grants them options under the
Company's stock option plans. Their compensation is subject to a minimum of
$3,000 in any quarter. During the fiscal year ended June 30, 1995 Messrs. Budden
and Rubinstein each received cash compensation of $12,000 and Messrs. Marleau,
Renaud and Terracina each received cash compensation of $6,000. Mr. Terracina is
also a Director of ST&FC where he received cash compensation of $2,400. Mr.
Renaud is also a Director of U.S. Advisors (Guernsey) Ltd. for which he received
no cash compensation. No stock options were granted during the fiscal year.
Directors are reimbursed for reasonable travel expenses incurred in attending
the meetings held by the Board of Directors.
REPORT ON EXECUTIVE COMPENSATION
Effective February 1995 the Executive Compensation Committee of the
Registrant's Board of Directors was comprised of Messrs. Budden, Holmes, Renaud
and Rubinstein.
The Company's program regarding compensation of executive officers is
different from most public corporations' programs due to the concentration of
control in one individual. When Mr. Holmes' compensation is reviewed by Messrs.
Budden, Renaud and Rubinstein, Mr. Holmes is not present nor does he participate
in the final decision. The Compensation Committee did not meet during fiscal
year 1995. Mr. Holmes, Chairman and Chief Executive Officer of the Company, owns
68.3% of the Company's Common Stock. He informs the Board of Directors as to the
amount of his proposed remuneration and that of the Company's other executive
officers. Mr. Holmes recognizes that Registrant is a small business and believes
that an acceptable base compensation should reflect an amount competitive with
industry peers taking into account the relative cost of living in San Antonio,
Texas. The base pay of the executives is relatively fixed but the executive has
the opportunity to increase his/her compensation by (1) participating in team
building programs in order to enhance operational and fiscal efficiencies
throughout the Company with a percent of resulting savings flowing to the
executive; and (2) participating directly in retirement and savings programs
whereby the Company will contribute amounts relative to the executive's
contribution.
The Company utilizes option grants under the 1985 Plan and the 1989 Plan to
induce qualified individuals to join the Company with a base pay consistent with
the foregoing -- providing the individual with an opportunity to benefit if
there is significant Company growth. Similarly, options are utilized to reward
existing employees for long and faithful service and to encourage them to stay
with the Company. Messrs. Budden and Rubinstein constitute the Stock Option
Committee of the Board of Directors. This Committee acts upon recommendations of
the President and Executive Vice Presidents. Shares available for stock option
grants under the 1989 Plan aggregate to less than 26,700 shares remaining. There
were grants from the 1985 Plan during December 1994, prior to Plan expiration,
to officers and employees of the Company for outstanding work, and to a new
hire. There were grants from the 1989 Plan during the fiscal year to officers
and employees of the Company.
Submitted by the Executive Compensation Committee of the Board of
Directors: John Budden; Frank E. Holmes, Richard Renaud; and Jerold H.
Rubinstein.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of John
Budden, Jerold Rubinstein, Richard Renaud and Frank E. Holmes, Chairman and
Chief Executive Officer. Mr. Renaud, a member of the Committee is also a member
of the ML Board and serves on its Executive, Audit and Compensation Committees.
In addition, he is a director of U.S. Advisors (Guernsey) Ltd. Mr. Holmes is a
director of ML and serves on its Management Committee and is also a director of
United Services Advisors Wealth Management Inc., a joint venture owned by the
Company and ML. ML, the Company and Mr. Holmes have entered into agreements that
may lead to a change in control of the Company. (See Item 7 to this Form 10-K).
COMPANY PERFORMANCE PRESENTATION
The following graph compares the cumulative total return for the Company's
Preferred Stock to the cumulative total return for the S&P 500 Composite Index
and the S&P Financial Index for the Company's last five fiscal years. The graph
assumes an investment of $100 in the Preferred Stock and in each index as of
June 30, 1990, and that all dividends were reinvested.
<TABLE>
<CAPTION>
(LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW)
S&P S&P UNITED SERVICES
500 FINANCIAL ADVISORS, INC.
--- --------- ---------------
<S> <C> <C> <C>
Jun-90 .............. 100.00 100.00 100.00
Jul-90 .............. 99.47 95.05 100.00
Aug-90 .............. 90.09 82.96 127.27
Sep-90 .............. 86.32 73.14 122.73
Oct-90 .............. 85.75 66.55 109.09
Nov-90 .............. 90.88 77.97 109.09
Dec-90 .............. 94.02 83.20 113.64
Jan-91 .............. 97.93 89.59 127.27
Feb-91 .............. 104.51 99.21 136.36
Mar-91 ............. 107.63 105.46 168.18
Apr-91 .............. 107.66 106.36 177.27
May-91 .............. 111.81 111.55 195.45
Jun-91 .............. 107.39 104.78 181.82
Jul-91 .............. 112.21 110.68 190.91
Aug-91 .............. 114.41 115.30 163.64
Sep-91 ............... 113.12 115.42 145.45
Oct-91 .............. 114.47 116.69 172.73
Nov-91 .............. 109.44 108.56 163.64
Dec-91 .............. 122.54 125.26 200.00
Jan-92 .............. 120.10 123.16 209.09
Feb-92 .............. 121.25 127.94 236.36
Mar-92 .............. 119.46 126.07 200.00
Apr-92 .............. 122.79 127.36 190.91
May-92 .............. 122.91 129.62 190.91
Jun-92 .............. 121.73 133.06 222.73
Jul-92 .............. 126.52 136.41 236.36
Aug-92 .............. 123.49 129.93 218.18
Sep-92 .............. 125.57 135.18 245.45
Oct-92 .............. 125.84 138.30 250.00
Nov-92 .............. 129.64 147.35 236.36
Dec-92 .............. 131.86 154.44 222.73
Jan-93 .............. 132.79 159.58 218.18
Feb-93 .............. 134.19 162.67 218.18
Mar-93 .............. 137.60 169.93 272.73
Apr-93 .............. 134.10 164.15 381.82
May-93 .............. 137.15 163.43 381.82
Jun-93 .............. 138.26 172.66 363.64
Jul-93 .............. 137.52 175.84 409.09
Aug-93 .............. 142.26 180.16 345.45
Sep-93 .............. 141.81 184.52 290.91
Oct-93 .............. 144.57 173.59 345.45
Nov-93 .............. 142.70 167.36 354.55
Dec-93 .............. 145.09 171.48 409.09
Jan-94 .............. 149.81 180.35 418.18
Feb-94 .............. 145.31 170.08 381.82
Mar-94 .............. 139.63 164.00 390.91
Apr-94 .............. 141.25 169.35 318.18
May-94 .............. 143.00 177.97 354.55
Jun-94 .............. 140.23 173.68 336.36
Jul-94 .............. 144.65 177.38 309.09
Aug-94 .............. 150.10 183.15 309.09
Sep-94 .............. 147.10 170.85 336.36
Oct-94 .............. 150.16 173.27 300.00
Nov-94 .............. 144.23 162.61 272.73
Dec-94 .............. 147.07 165.54 236.36
Jan-95 .............. 150.64 175.61 245.45
Feb-95 .............. 156.07 184.85 245.45
Mar-95 .............. 160.34 186.52 245.45
Apr-95 .............. 164.81 192.81 245.45
May-95 .............. 170.80 207.23 200.00
Jun-95 .............. 175.59 209.45 190.91
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
CLASS A COMMON STOCK
At August 31, 1995 there were 567,279 shares of the Company's Class A
Common Stock outstanding. The following table sets forth, as of such date,
information regarding the beneficial ownership of the Company's Class A Common
Stock by each person known by the Company to own 5% or more of the outstanding
shares of Class A Common Stock.
<TABLE>
<CAPTION>
OUTSTANDING PERCENT OF
NAME AND ADDRESS COMMON SHARES SHARES SHARES ISSUED
OF BENEFICIAL OWNER BENEFICIALLY OWNED OWNED OUTSTANDING
- - - ------------------- ------------------ ----------- -------------
<S> <C> <C> <C>
Frank E. Holmes ................................. 1,373,402(1) 387,280 68.27%
7900 Callaghan Road
San Antonio, TX 78229
Marleau, Lemire Inc. ............................ 72,720(2) 72,720 12.82%
1 Place Ville Marie
Suite 3601
Montreal, Quebec H3B 3P2
Moneyco, Inc. ................................... 64,140 64,140 11.31%
1740 Broadway
New York, NY 10019
<FN>
(1) Includes 586,122 shares of Common Stock underlying presently exercisable Common Stock Warrants held by Mr. Holmes
and F. E. Holmes Organization Inc.; 102,280 shares of Common Stock owned by F. E. Holmes Organization Inc., a
corporation wholly-owned by Mr. Holmes; 400,000 shares obtainable upon exercise of a Common Stock option issued
to Mr. Holmes; and 285,000 shares owned directly by Mr. Holmes.
(2) Marleau, Lemire Inc. holds a warrant to acquire one million shares of the Company's Class A Common or Preferred
Shares at $6.00 per share during a six month period between October 1, 1997 and March 31, 1998. Shares shown in this
table do not reflect this warrant.
</FN>
</TABLE>
CLASS B COMMON STOCK
At August 31, 1995 there were 1,000,000 shares of the Company's Class B
Common Stock outstanding. The following table sets forth, as of such date,
information regarding the beneficial ownership of the Company's Class B Common
Stock by each person known by the Company to own 5% or more of the outstanding
shares of Class B Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS COMMON SHARES OUTSTANDING PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED SHARES OWNED SHARES OUTSTANDING
- - - ------------------- ------------------ ------------ ------------------
<S> <C> <C> <C>
Marleau, Lemire Inc. 1,000,000 1,000,000 100%
1 Place Ville Marie
Suite 3601
Montreal, Quebec H3B 3P2
</TABLE>
PREFERRED STOCK
At August 31, 1995 there were 4,971,695 shares of the Company's Preferred
Stock outstanding. The following table sets forth, as of such date, information
regarding the beneficial ownership of the Company's Preferred Stock by each
person known by the Company to own 5% or more of the outstanding shares of
Preferred Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS PREFERRED SHARES PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
------------------- ------------------ --------
<S> <C> <C>
Updyke Associates .................................................. 518,500 (A) 10.43%
Hatsboro, PA
Robertson Stephens Orphan Fund ..................................... 461,450 (B) 9.28%
San Francisco, CA
Quest Management Co. ............................................... 353,305 (C) 7.11%
New York, NY
Frank E. Holmes .................................................... 339,550 (D) 6.57%
Constable Partners, L.P. ........................................... 300,000 (E) 5.17%
Radnor, PA
<FN>
(A) Information is from Form 4, dated August 8, 1995, filed with the SEC.
(B) Information is from Schedule 13D, dated December 23,1995, filed with the SEC.
(C) Charles M. Royce controls Quest Advisory Corp. as well as Quest Management Co. Quest Advisory Corp. owns
130,200 shares, or 2.62%, of the Company's preferred stock. Combined, Mr. Royce controls 9.73% of the preferred
stock outstanding. Information is from Schedule 13G filed with the SEC on February 14, 1995.
(D) Detail of beneficial ownership set forth below under "Security Ownership of Management."
(E) Information is from Schedule 13G, dated July 24,1995, filed with the SEC.
</FN>
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of August 31, 1995, information
regarding the beneficial ownership of the Company's Common and Preferred Stock
by each director and by all directors and officers as a group. Except as
otherwise indicated in the notes below each director owns directly the number of
shares indicated in the table and has the sole voting power and investment power
with respect to all such shares.
<TABLE>
<CAPTION>
BENEFICIAL OWNER COMMON (1) % PREFERRED(1) %
- - - ---------------- --------- ------ ----------- -----
<S> <C> <C> <C> <C>
John A.M. Budden ........................... -- 0% 98,000 1.94%
Bobby D. Duncan ............................ 4,931 0.87% 108,500 2.14%
Victor Flores .............................. -- 0% 56,250 1.12%
Frank E. Holmes ............................ 1,373,402 88.41% 340,850 6.59%
Hubert Marleau(4) .......................... 72,720 12.82% 120,000 2.41%
Richard Renaud(4) .......................... 72,720 12.82% -- 0%
Jerold H. Rubinstein ....................... -- 0% 90,000 1.78%
Roy D. Terracina ........................... -- 0% 35,000 0.70%
All directors and .......................... 1,452,016 93.47% 911,252(5) 16.45%
officers as a group
( 18 persons)
<FN>
(1) Includes shares of Preferred Stock underlying presently exercisable options held directly by each individual director as
follows: Mr. Budden - 90,000 shares; Mr. Duncan - 95,000 shares; Mr. Flores - 33,000 shares; Mr. Holmes - 200,000
shares; and Mr. Rubinstein - 90,000 shares. ML holds a warrant to acquire one million shares of the Company's Class
A Common or Preferred Shares at $6.00 per share during a six month period between October 1, 1997 and March 31,
1998. Shares shown in this table do not reflect this warrant.
(2) Includes 586,122 shares of Common Stock underlying presently exercisable Common Stock warrants held by Mr. Holmes
and F. E. Holmes Organization Inc.; 400,000 shares underlying a presently exercisable option to purchase Common Stock
held by Mr. Holmes; 102,280 shares of Common Stock owned by F. E. Holmes Organization Inc., a corporation wholly-
owned by Mr. Holmes; and 285,000 shares owned directly by Mr. Holmes.
(3) Also includes 1,300 shares of Preferred Stock owned separately by Mr. Holmes' wife. Mr. Holmes disclaims beneficial
ownership of these 1,300 shares of Preferred Stock.
(4) Shares are owned by ML. Mr. Marleau is CEO, President and Director and Messrs. Holmes and Renaud are directors
of Marleau, Lemire Inc. Messrs. Holmes, Marleau and Renaud disclaim beneficial ownership of the Company's Common
and Preferred Stock.
(5) Includes the shares underlying presently exercisable options held by the directors and officers listed above and an
additional 41,000 shares of Preferred Stock underlying presently exercisable options held by officers other than those
listed above.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Registrant is invested in several of the Funds. (See Note O of the
Consolidated Financial Statements in Item 8 of this Form 10-K).
During July 1994 the Company issued a $6 million subordinated debenture to
ML. The proceeds were utilized in connection with the Company's purchases of
adjustable rate government securities. The debenture is collateralized only by
said government securities. See Note M to the Company's Consolidated Financial
Statement under Item 8 of this Form 10-K. Principal of the note in the amount of
approximately $1.5 million was repaid to ML during June 1995, thereby reducing
the balance under the debenture.
Also, during July 1994, ML and the Company agreed to be joint venturers in
connection with managing mutual funds in Canada. United Services Advisors Wealth
Management Inc. was formed in February 1995 and United Services Fund Management,
Inc. was formed in September 1995 in furtherance of the joint venture. See Note
H to the Company's Consolidated Financial Statement under Item 8 of this Form
10-K.
On December 7, 1994, the Company and ML entered into an agreement whereby
the Company issued to ML one million shares of a new class of convertible
non-voting common stock (Class B) at $5.00 per share and a warrant to purchase
an additional one million shares of capital stock at $6.00 per share in
consideration of an investment of US $5 million. The market price for the
Company's preferred stock on December 7, 1994 was $3.25 per share. (See Item 7
this Form 10-K for further detail.)
In connection with ML's investment in the Company, the Company's Board of
Directors was expanded from five to nine, including two ML representatives; and,
Mr. Holmes has been elected to ML's Board of Directors. Hubert Marleau and
Richard Renaud, an independent outside director for ML, was appointed as an ML
representative on the Company's Board. Mr. Holmes serves on the Management
Committee, and Mr. Renaud serves on the Executive, Audit and Compensation
Committees of ML. Mr. Holmes, Hubert Marleau and Richard Renaud, as directors
and shareholders of ML, stand to benefit from the loan agreement reached in July
1994.
Pursuant to the Shareholder's Agreement dated December 7, 1994, the Class B
stock will be convertible into either one million shares of voting stock (Class
A) or one million shares of the Company's existing preferred stock if and when
mutual fund shareholder and/or USAI preferred shareholder approvals are
obtained. As part of the transaction, Mr. Frank Holmes, Chairman and CEO of the
Company, exchanged 72,720 shares of the Company's Class A common stock for
164,347 shares of ML common stock. In addition, subject to certain conditions,
including obtaining mutual fund shareholder approvals in the future, Mr. Holmes
will exchange an additional 177,280 Class A shares for 400,653 shares of ML. ML
may, if it converts its Class B shares to Class A shares after mutual fund
shareholder approval, own more than 50% of the issued and outstanding voting
shares of the Company. Mr. Holmes would then own approximately 3% of the total
outstanding common shares of ML. Failing approvals, ML may opt, during
prescribed periods in 1996 and 1997, to convert its investment into a US $5
million debenture payable by the Company over a two year period from the date of
ML's conversion.
The warrant will allow ML, at its option, to purchase either one million
shares of Class A common stock or, subject to preferred stockholder approval,
one million shares of the Company's existing preferred stock at a price of $6.00
per share during the six month period between October 1, 1997 and March 31,
1998. In addition, an existing US $6 million debenture of the Company held by ML
was amended so as to be convertible at the option of ML into existing preferred
shares of the Company at a price of $7.00 per share if and when preferred
shareholder approval is obtained.
Pursuant to the Shareholders' Agreement dated December 7, 1995, among the
Company, Frank E. Holmes, F.E. Holmes Organization Inc., and ML, both Mr. Holmes
(individually and for his holding company) and ML agree not to sell or transfer
in any manner any of the shares either party owns directly or beneficially
without obtaining the prior written consent of the other party. In the event one
party receives an offer from a third party to purchase any of its shares, the
other party has thirty (30) days to either purchase the securities subject to
the offer at the same price and under the same terms or to join with the other
party to sell all but not less than all of its shares to the third party under
the same terms and conditions in the offer.
Additionally, in the event of the death or disability of Mr. Holmes, then
each of Mr. Holmes and F. E. Holmes Organization Inc. shall be deemed to have
made an offer to sell the shares owned by both persons to the Company and the
Company will buy such shares. Furthermore, if a change of control in Marleau,
Lemire Inc. occurs after it has voting control of the Company, the Company shall
be deemed to have made an offer to purchase the shares, options and warrants
owned by Mr. Holmes and F. E. Holmes Organization Inc. which offer expires after
30 days if not accepted. This agreement replaces the agreement between the
Company and Mrs. Sorcha Holmes dated January 5, 1993.
In addition, the agreements provided, among other things, for by-law
amendments providing for ML representation on Board committees, an employment
agreement for Mr. Holmes, and registration rights so that certain shares
acquired by ML may be sold in public offerings.
Additionally, in the event of termination of Mr. Holmes' employment with
the Company for any reason other than death, incapacity, termination for cause
or non-renewal of the term of the agreement at Mr. Holmes' option, the
employment agreement provides for the Company to pay Mr. Holmes within 30 days
of such termination an amount equal to two times all manner of compensation paid
or payable to Mr. Holmes during the last fiscal year, adjusted to reflect any
increase in compensation granted to Mr. Holmes subsequent to the previous fiscal
year. Currently Mr. Holmes receives a yearly salary of $303,835 with additional
remuneration of quarterly Trustee fees of $4,000 and per meeting fees of $2,000.
The agreement contains a non-compete clause applicable to Mr. Holmes for a
period of one year from the date of termination of employment. The employment
agreement expires on October 31, 1997 and can be renewed for successive one-year
terms unless a party gives notice of at least 120 days before the end of the
then current term. This agreement replaces the agreement between the Company and
Mrs. Sorcha Holmes dated January 5, 1993.
During the fiscal year, the Company, using ML as its broker, purchased
35,119 (after 1 for 3 reverse stock split) shares of ML stock at an aggregate
price of $181,778, which at June 30, 1995 had an approximate market value of
$150,000. The Company's consolidated ownership in ML is less than one (1)%. The
Company also engaged in Eurodollar transactions at a cost of $165,375 through
Marleau, Lemire Inc. In addition, the Company purchased other securities at an
aggregate price of $409,811 through Marleau, Lemire Inc.
Eugene McBurney served as a director of the Registrant from December 22,
1994 to July 10, 1995. During the fiscal year, the Registrant purchased
securities valued at $110,685 in a transaction in which the firm Griffiths,
McBurney & Partners, of which Mr. McBurney is a principal, acted as the issuers
agent.
Mr. Renaud became a director of the Company in December 1994. At the
beginning of the fiscal year a $100,000 loan, memorialized by a May 27, 1993
Loan Agreement between USAI and Hornchurch Investments Limited was outstanding.
Loan proceeds were used by Hornchurch to purchase a debenture issued by Weider
Europe B.V., an entity in which Mr. Renaud had a material interest. During
November 1994 the loan was repaid to USAI along with interest due and USAI
recognized approximately $80,000 in income as a result of receiving a pro rata
participation in the equity appreciation of the Hornchurch/Weider transaction.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Report:
1. Financial Statements Page
Report of Independent Accountants 23
Consolidated Balance Sheets at June 30, 1995 and 1994 24
Consolidated Statements of Operation for the three years 25 ended June
30, 1995
Consolidated Statements for Cash Flows for the three years 26 ended
June 30, 1995
Consolidated Statements of Shareholders Equity for 27 the three years
ended June 30, 1995
Notes to Consolidated Financial Statements 28
2. Financial Statement Schedules
None
3. Exhibits
a. Exhibits
3. 1* Restated Articles of Incorporation of Registrant as amended
(incorporated by reference to Exhibit 3(a) to the Registrant's Form
10-K for the fiscal year ended June 30, 1985).
3. 2 By-Laws of Registrant (incorporated by reference to Exhibit D to the
Registrant's Registration Statement No. 33-33012 filed on Form S-8
with the Commission on January 30, 1990).
3.3* Amendment to Restated Articles of Incorporation of Registrant adding
Article Eleven (incorporated by reference to Exhibit (3)(d) to the
Registrant's Form 10-K for the fiscal year ended June 30, 1989).
3.4 Amendment to Article II, Section 2 of the By-Laws (incorporated by
reference to Exhibit 3(e) to the Registrant's Form 10-K for the fiscal
year ended June 30, 1991).
3.5* Amendment to Restated Articles of Incorporation of Registrant amending
Article Four (incorporated by reference to Exhibit (4)(a) to the
Registrant's Form 10-K for the fiscal year ended June 30, 1985).
3.6* Amendment to Restated Articles of Incorporation of Registrant adding
Article Twelve (incorporated by reference to Exhibit 6(a)1. to
Registrant's Form 10-Q for quarter ending September 30, 1991).
3.7* Amendment to the Restated Articles of Incorporation of Registrant
amending Article Four establishing a new class of common stock
(incorporated by reference to Exhibit 3 to the Registrant's Form 10-Q
dated December 31, 1995).
3.8* Articles of Amendment to the Restated Articles of Incorporation of
Registrant Article Four, increasing existing authorized and
outstanding preferred stock of Registrant, filed herein.
3.9 Amendment to By-Laws of Registrant (incorporated by reference to
Exhibit 3(h) to the Registrant's Registration Statement No. 33-90518
filed on Form S-3 on March 16, 1995).
10. 1 Advisory Agreement dated October 27, 1989 by and between Registrant
and United Services Funds ("USF") (incorporated by reference to
Exhibit (4)(b) to the Registrant's Form 10-K for fiscal year ended
June 30, 1990).
10.2*Advisory Agreement dated September 21, 1994 by and between Registrant
and Accolade Fund, filed herein.
10.3*Sub-Advisory Agreement dated September 21, 1994 by and between
Registrant and Accolade Funds/Bonnel Growth Fund and Bonnel, Inc.,
filed herein.
10.4*Transfer Agency Agreement dated September 21, 1994 by and between
United Shareholder Holder Services ("USSI") and Accolade Funds/Bonnel
Growth Fund, filed herein.
10.5*Sub-Advisory Agreement dated January 5, 1995 by and among Registrant,
United Services Funds/China Region Opportunity Fund and Batterymarch
Financial Management, Inc., filed herein.
10.6 Agreement between Registrant and Mrs. Sorcha Holmes, dated January 5,
1993 (incorporated by reference to Exhibit (10)(b) to the Registrant's
Form 10-K for fiscal year ended June 30, 1993).
10.7 Transfer Agent Agreement by and between USSI and USF (incorporated by
reference to Exhibit 10(b) to the Registrant's Form 10-K for the
fiscal year ended June 30, 1989).
10.8*Loan Agreement between Registrant and BankOne, dated April 12, 1994,
and Modification Agreement, dated February 28, 1995, for $1,385,000
for refinancing new building, filed herein.
10.9 Special Warranty Deed (with Vendor's Lien) in favor of Registrant from
Resolution Trust Corporation, dated February 28, 1992 (incorporated by
reference to Registrant's Form 10-K for fiscal year ended June 30,
1992).
10.10United Services Advisors, Inc. 1985 Incentive Stock Option Plan as
amended November 1989 (incorporated by reference to Exhibit A to the
Registrant's Registration Statement No. 33-3012 filed on Form S-8 with
the Commission on January 16, 1990).
10.11United Services Advisors, Inc. 1989 Non-Qualified Stock Option Plan
(incorporated by reference to Exhibit B to the Registrant's
Registration Statement No. 33-3012 filed on Form S-8 with the
Commission on January 16, 1990).
10.12Bookkeeping and Accounting Agreement by and between USSI and USF,
dated February 1, 1992 (incorporated by reference to Exhibit E 1 to
the Registrant's Form 10-Q dated December 31, 1991).
10.13Lockbox Agreement between USSI and USF, July 28, 1992 (incorporated by
reference to Exhibit (10)(r) to Registrant's Form 10-K dated June 30,
1992).
10.14Compromise and Settlement Agreement and Mutual General Release among
Clark Aylsworth, Ann Aylsworth and the Registrant, dated December 19,
1990 (incorporated by reference to Exhibit (10)(n) to the Registrant's
Form 10-K for fiscal year ended June 30, 1991).
10.15Investment Adviser's Agreement dated August 24, 1993, by and among
U.S. Advisors (Guernsey) Ltd, Registrant and U.S. Global Strategies
Fund Limited (incorporated by reference to Exhibit (10)(o) to the
Registrant's Form 10-K for fiscal year ended June 30, 1993).
10.16Administrative Agreement, dated November 1, 1993, by and between the
Registrant and PauzE'/Swanson United Services Funds/PauzE' U.S.
Government Total Return Bond Fund (incorporated by reference to
Exhibit 10(q) to the Registrant's Form 10-K for fiscal year ended June
30, 1994).
10.17Lock-box, Printing Agreement, dated January 4, 1994, by and between
USSI and PauzE'/Swanson United Services Funds/Pauze' U.S. Government
Total Return Bond Fund, (Incorporated by reference to Exhibit (10)(r)
to the Registrant's Form 10-K for fiscal year ended June 30, 1994).
10.18Transfer Agent Agreement, dated January 1, 1994, by and between USSI
and PauzE'/Swanson United Services Funds/PauzE' U.S. Government Total
Return Bond Fund (incorporated by reference to Exhibit 10(t) to
Registrant's Form 10-K for fiscal year ended June 30, 1994).
10.19Escrow and Pledge Agreement between Registrant and USF, dated
September 7, 1994 (incorporated by reference to Exhibit 10(u) to
Registrant's Form 10-K for fiscal year ended June 30, 1994).
10.20Joint Venture Agreement between Registrant and Marleau, Lemire Inc.,
dated July 28, 1994 (incorporated by reference to Exhibit 10(v) to
Registrant's Form 10-K for fiscal year ended June 30, 1994).
10.21* Bookkeeping and Accounting Agreement by and between United
Shareholder Services, Inc. and Accolade Funds, dated September 21,
1994, filed herein.
10.22* Lockbox Service Agreement by and between United Shareholder
Services, Inc. and Accolade Funds, dated September 21, 1994, filed
herein.
10.23* Printing Agreement by and between United Shareholder Services, Inc.
and Accolade Funds, dated September 21, 1994, filed herein.
10.24December 7, 1994 Subscription and Purchase Agreement among
Registrant, Marleau, Lemire Inc., Frank E. Holmes and F.E. Holmes
Organization (incorporated by reference to Exhibit 10 to the
Registrant's Registration Statement No. 33-90518 filed on Form S-3
with the Commission on March 16, 1995).
10.25December 7, 1994 Employment and Non-Competition Agreement between
Registrant and Frank E. Holmes (incorporated by reference to Exhibit
10(b) to the Pre- Effective Amendment No. 1 to Registrant's
Registration Statement No. 33-90518 on Form S-3 on May 12, 1995).
10.26December 7, 1994 Shareholders' Agreement among Registrant, Mr. Frank
E. Holmes, F.E. Holmes Organization Inc. and Marleau, Lemire Inc.
(incorporated by reference to Exhibit 10(c) to the Pre-Effective
Amendment No. 1 to Registrant's Registration Statement No. 3390518
filed on Form S-3 with the Commission on May 12, 1995).
11* Statement re: computation of per share earnings, filed herein.
21* List of subsidiaries of the Registrant, filed herein.
24* Consent of Independent Accountant filed herein.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNITED SERVICES ADVISORS, INC.
/S/ BOBBY D. DUNCAN, PRESIDENT
By:--------------------------------------
BOBBY D. DUNCAN, PRESIDENT
Date: September 22, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
--------- ------------------------ ----
<S> <C> <C>
/S/ John A.M. Budden Director September 22, 1995
John A. M. Budden
/S/ Bobby D. Duncan President, Chief Operating Officer, September 22, 1995
Bobby D. Duncan Director
/S/ Victor Flores Executive Vice President September 22, 1995
Victor Flores Chief Investment Officer,
Director
/S/ Jane K. Hatton Vice President, Chief Financial Officer, September 22, 1995
Jane K. Hatton Chief Accounting Officer, Controller,
Treasurer
/S/ Frank E. Holmes Chairman of the Board of Directors, September 22, 1995
Frank E. Holmes Chief Executive Officer
/S/ Hubert Marleau Director September 20, 1995
Hubert Marleau
/S/ Richard Renaud Director September 20, 1995
Richard Renaud
Director September ---,1995
Jerold H. Rubinstein
/S/ Roy D. Terracina Director September 20, 1995
Roy D. Terracina
</TABLE>
<PAGE>
INDEX TO EXHIBITS
ITEM DESCRIPTION
3.1 Restated Articles of Incorporation, as amended
3.3 Amendment to Restated Articles of Incorporation adding Article
Eleven
3.5 Amendment to Restated Articles of Incorporation amending Article
Four
3.6 Amendment to Restated Articles of Incorporation adding Article
Twelve
3.7 Amendment to Restated Articles of Incorporation amending Article
Four, establishing a new class of common stock
3.8 Articles of Amendment to Restated Articles of Incorporation
amending Article Four, increasing existing authorized and
outstanding preferred stock
10.2 Advisory Agreement between Registrant and Accolade Funds
10.3 Sub-Advisory Agreement between Registrant, Accolade Funds/Bonnel
Growth Fund and Bonnel, Inc.
10.4 Transfer Agency Agreement between United Shareholder Services,
Inc. and Accolade Funds/Bonnel Growth Fund
10.5 Sub-Advisory Agreement among Registrant, United Services
Funds/China Region Opportunity Fund and Batterymarch Financial
Management, Inc.
10.8 Loan Agreement between Registrant and Bank One; and Modification
Agreement
10.21 Bookkeeping and Accounting Agreement
10.22 Lockbox Service Agreement
10.23 Accolade-USSI Printing Agreement
11 Statement re: computation of per share earnings
21 List of subsidiaries
24 Consent of Independent Accountants
EX 3.1
RESTATED ARTICLES OF INCORPORATION AS AMENDED (INCORPORATED BY REFERENCE TO
EXHIBIT 3(a) TO THE REGISTRANT'S FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30,
1985)
FILED IN THE OFFICE OF THE SECRETARY OF STATE OF TEXAS OCT 1 1984 CLERK IIS
CORPORATIONS SECTION
ARTICLES OF AMENDMENT TO THE
RESTATED ARTICLES OF INCORPORATION
OF
UNITED SERVICES ADVISORS, INC.
Pursuant to the provisions of the Texas Business Corporation Act. the
undersigned Corporation hereby adopts the following Articles of Amendment to its
Restated Articles of Incorporation.
ARTICLE I
The name of the Corporation is United Services Advisors, Inc.
ARTICLE II
The following amendments to the Restated Articles of Incorporation were
adopted by the shareholders of the Corporation on the 28th day of September
1984.
The amendments delete the provisions of Article Four and add new paragraphs
in substitution therefor, which provide for an increase in the authorized number
of shares of the two classes of common stock, a stock split, an authorization
for the issuance of preferred stock, and a broadening of the restriction against
preemptive rights to include holders of both common and preferred shares. The
Restated Articles of Incorporation are hereby amended as follows:
Article Four of the Restated Articles of Incorporation is hereby amended by
deleting said Article Four in its entirety and by substituting as a new Article
Four the following:
"ARTICLE FOUR
"1. GENERAL. The corporation is authorized to issue one class of Preferred Stock
and two classes of Common Stock, one designated Class A Common Stock and the
other designated Class B Common Stock. The total number of shares which the
corporation is authorized to issue is 15,000,000 shares. The number of shares of
Preferred Stock authorized is 5,000,000 shares, and the par value of each such
share is $1.00. The number of shares of Class A Common Stock authorized is
4,000,000, and the par value of each such shares if $0.05. The number of shares
of Class B Common Stock authorized is 6,000,000 and the par value of each such
share is $0.05.
"2. PREFERRED STOCK.
"2.1 AUTHORIZATION OF DIRECTORS TO DETERMINE CERTAIN RIGHTS. The Board of
Directors is authorized, from time to time, to divide the preferred
Stock into Series, to designate each Series, to fix and determine
separately for each Series any one or more of the following relative
rights and preferences, and to issue shares of any Series then or
previously designated, fixed and determined:
"(A) the rate of dividend;
"(B) the price at and the terms and conditions on which shares may be
redeemed;
"(C) the amount payable upon shares in event of involuntary
liquidation;
"(D) the amount payable upon shares in event of voluntary liquidation;
"(E) sinking fund provisions (if any) for the redemption or purchase
of shares;
"(F) the terms and conditions on which shares may be converted if the
shares of any Series are issued with the privilege of conversion;
and
"(G) voting rights (including the number of votes per share, the
matters on which the shares can vote, and the contingencies which
make the voting rights effective.)
"2.2. PREFERENCES, POWERS, LIMITATIONS AND RELATIVE RIGHTS.
"(A")GENERAL. Except as provided in this Article Four, all shares of
Preferred Stock shall have preferences, limitations, and relative
rights identical with each other. Except as otherwise expressly
provided by law, shares of Preferred Stock shall have only the
preferences and relative rights expressly stated in this Article
Four.
"(B) DIVIDENDS.
"(1) AMOUNT; TIME. The Preferred Stock at the time outstanding
shall be entitled to receive, when and as declared by the
Board of Directors, out of any funds legally available
therefor, dividends at the rate fixed by the Board of
Directors (pursuant to paragraph 2.1 above), and no more,
payable semi-annually on the 15th day of January and July
each year.
"(2) CUMULATIVITY. Dividends on Preferred Stock shall be
cumulative from date of issue. Cumulations of dividends
shall not bear interest.
"(3) PRIORITY OVER COMMON; RESTRICTION ON PURCHASES OF COMMON. No
dividend shall be declared or paid on any class of Common
Stock, and no shares of any class of Common Stock shall be
purchased by the corporation, unless full dividends on
outstanding Preferred Stock for all past dividend periods
and for the current dividend period shall have been declared
and paid.
"(4) PARITY AMONG SERIES. No dividend shall be declared on any
Series of Preferred Stock: (a) for any dividend period
unless all dividends cumulated for all prior dividend
periods shall have been declared or shall then be declared
at the same time upon all Preferred Stock then outstanding;
of (b( unless a dividend for the same period shall be
declared at the same time upon all Preferred Stock then
outstanding in like proportion to the dividend rate then
declared.
"(C) LIQUIDATION PREFERENCE. In event of dissolution, liquidation, or
winding up of the corporation (whether voluntary or involuntary),
after payment or provision for payment of debts but before any
distribution to the holders of shares of any class of Common
Stock, the holders of each Series of Preferred Stock then
outstanding shall be entitled to receive the amount fixed by the
Board of Directors (pursuant to paragraph 2.1 above) plus a sum
equal to all cumulated but unpaid dividends (whether or not
earned or declared) to the date fixed for distribution, and no
more. All remaining assets shall be distributed pro rata among
the holders of the shares of Class A Common Stock and Class B
Common Stock. If the assets distributable among the holders of
Preferred Stock are insufficient to permit full payment to them,
the entire assets shall be distributed among the holders of the
Preferred Stock in proportion to their respective liquidation
preferences. None of the following events is a dissolution,
liquidation, or winding up within the meaning of this paragraph:
consolidation, merger, or reorganization of the corporation with
any other corporation or corporations, sale of all or
substantially all the assets of the corporation, or any purchase
or redemption by the corporation of any of its outstanding
shares.
"(D) REDEMPTION.
"(1) RIGHT; METHOD. All or any part of any one or more Series of
Preferred Stock may be redeemed at any time or times at the
option of the corporation, by resolution of the Board of
Directors, in accordance with the terms and conditions of
this Article Four and those fixed by the Board of Directors
(pursuant to paragraph 2.1 above). The corporation may
redeem shares of any one or more Series without redeeming
shares of any other Series. If less than all the shares of
any Series are to be redeemed, the shares of the Series to
be redeemed shall be selected ratably or any lot or by any
other equitable method determined by the Board of Directors.
"(2) NOTICE. Notice shall be given to the holders of shares to be
redeemed, either personally or by mail, not less than twenty
(20) nor more than fifty (50) days before the date fixed for
redemption.
"(3) PAYMENT. Redeemed shares shall be paid in cash, the amount
fixed by the Board of Directors (pursuant to paragraph 2.1
above) plus a sum equal to all cumulated by unpaid dividends
(whether or not earned or declared) to the date fixed for
redemption, and no more.
"(4) PROVISION FOR PAYMENT. On or before the date fixed for
redemption, the corporation may provide for payment of a sum
sufficient to redeem the shares called for redemption either
(i) by setting aside the sum, separate from its other funds,
in trust for the benefit of the holders of the shares to be
redeemed, or (ii) by depositing such sum in a bank or trust
company (either one in Texas having capital and surplus of
at least Ten Million Dollars [$10,000,000] according to its
latest statement of condition, or one anywhere in the United
States duly appointed and acting as transfer agent of the
corporation) as a trust fund, with irrevocable instructions
and authority to the bank or trust company to give of
complete the notice of redemption and to pay, on or after
the date fixed for redemption, the redemption price on
surrender of their respective share certificates. The
holders may be evidenced by a list certified by the
corporation (by its president or a vice president and by its
secretary or an assistant secretary) or by its transfer
agent. If the corporation so provides for payment, then from
and after the date fixed for redemption: (a) the shares
shall be deemed to be redeemed, (b) dividends thereon shall
cease to accrue, (C)such setting aside or deposit shall be
deemed to constitute full payment for the shares, (d) the
shares shall no longer be deemed to be outstanding, (e) the
holders thereof shall cease to be shareholders with respect
to such shares, and (f) the holders shall have no rights
with respect thereto except the right to receive (without
interest) their proportionate shares of the funds so set
aside or deposited upon surrender of their respective
certificates, and any right to convert such shares which may
exist. Any interest accrued on funds so set aside or
deposited shall belong to the corporation. If the holders of
the shares do not, within six (6) years after such deposit,
claim any amount so deposited for redemption thereof, the
bank or trust company shall upon demand pay over to the
corporation the balance of the funds so deposited, and the
bank or trust company shall thereupon be relieved of all
responsibility to such holders.
"(5) STATUS OF REDEEMED SHARES. Shares of Preferred Stock which
are redeemed shall be canceled and shall be restored to the
status of authorized but unissued shares.
"(E) PURCHASE. Except as specified in paragraph 2.2B(3) nothing herein
shall limit the right of the corporation to purchase any of its
outstanding shares of Preferred Stock in accordance with law, by
public or private transaction.
"(F")VOTING. Except as fixed by the Board of Directors (pursuant to
paragraph 2.1 above), and except as otherwise expressly provided
by law, all voting power shall be in the Class A Common Stock as
provided for in paragraph 3.2A below, and none in the Preferred
Stock. Where Preferred Stock as a class has voting power, all
Series of Preferred Stock shall be a single class.
"3. COMMON STOCK.
"3.1.PREFERENCES, POWERS, LIMITATIONS, AND RELATIVE RIGHTS. Class A Common
Stock and Class B Common Stock shall have the same powers, preferences
and rights except as limited in this Article Four.
"3.2.CLASS A COMMON STOCK.
"(A) VOTING POWERS. The holders of shares of Class A Common Stock
shall have full voting rights at any annual or special meeting of
the shareholders and as provided for in the Texas Business
Corporation Act.
"(B) CONVERSION RIGHTS. Shares of Class A Common Stock shall be
convertible, at the option of the respective holders thereof,
into shares of Class B Common Stock on a share-for-share basis,
at any time.
"(C) AUTHORIZED SHARES AND PAR VALUE. The number of shares of Class A
Common Stock authorized shall be 4,000,000 shares, each such
share having a par value of $0.05 per share.
"(D) PURCHASE. The corporation has the right to purchase any of its
outstanding shares of Class A Common Stock in accordance with
law, by public or private transaction.
"3.3. CLASS B COMMON STOCK.
"(A) VOTING POWERS. The holders of shares of Class B Common Stock
shall have no power to vote at any annual or special meeting of
the shareholders, except as may be required by the Texas Business
Corporation Act.
"(B) NO CONVERSION RIGHTS. Shares of Class B Common Stock shall not be
convertible into shares of Class A Common Stock.
"(C) AUTHORIZED SHARES AND PAR VALUE. The number of shares of Class B
Common Stock authorized shall be 6,000,000 shares, each such
share having a par value of $0.05 per share.
"(D) PURCHASE. The corporation has the right to purchase any of its
outstanding shares of Class B Common Stock in accordance with
law, by public or private transaction.
"4. DENIAL OF PREEMPTIVE RIGHTS. No holder of shares of any class of the
corporation, Preferred or Common, shall have any preemptive right to subscribe
for or acquire additional shares of the corporation of the same or any other
class, whether such shares shall be hereby or hereafter authorized; and no
holder of shares of any class of the corporation shall have any right to acquire
any shares which may be held in the treasury of the corporation. All such
additional or treasury shares may be sold for such consideration, at such time,
and to such person or persons as the Board of Directors may from time to time
determine."
ARTICLE III
Each such amendment made by these Articles of Amendment to the Restated
Articles of Incorporation has been effected in conformity with the provisions of
the Texas Business Corporation Act, and such amendments were duly adopted by the
shareholders of the Corporation on SEPTEMBER 28, 1994.
ARTICLE IV
The number of shares entitled to vote on the amendments made by these
Articles of Amendment to the Restated Articles of Incorporation, the same
constituting all of the outstanding shares of the Corporation, was 1,069,068
shares of Class A Common Stock. The number of shares of Class A Common Stock
which voted for such amendment was 809,822, and the number of shares of Class A
Common Stock which voted against such amendment was 376.
ARTICLE V
Any exchange, reclassification or cancellation of issued shares provided
for in the amendments shall be effected in the following manner:
Each outstanding shares of Class A Common Stock, of par value of $0.10 per
share, shall become two (2) shares of Class A Common Stock, par value $0.05
per share, effective upon the issuance by the Secretary of the State of
Texas of the Certificate of Amendment to the Restated Articles of
Incorporation, whereupon each outstanding certificate which, prior to the
time of issuance of such Certificate of Amendment to the Restated Articles
of Incorporation, represented shares of Class A Common Stock, par value
$0.10 per share, shall evidence for all purposes two times the number of
shares evidenced by said certificate of Class A Common Stock, par value
$0.05 per share, of the corporation.
ARTICLE VI
The amendments do not effect a change in the amount of stated capital.
IN WITNESS WHEREOF, we have hereunto set our hands this the 28th day of
September, 1984.
UNITED SERVICES ADVISORS, INC.
/S/ CLARK AYLSWORTH PRES)
------------------------------
Clark Aylsworth, President
/S/ MARY JANE WEBER
------------------------------
Mary Jane Weber, Secretary
THE STATE OF TEXAS ss.
COUNTY OF BEXAR ss.
Before me, a notary public, on this day personally appeared CLARK AYLSWORTH
and MARY JANE WEBER, known to me to be the persons whose names are subscribed to
the foregoing document, and being by me first duly sworn, declared that the
statements therein contained are true and correct.
Given under my hand and seal of office this 28th day of September, A.D.,
1984
/S/ T. DREW CAUTHORN
------------------------------
Notary Public in and for
The State of Texas
My commission expires:
8/23/88
EX 3.3
(3)(c) AMENDMENT TO RESTATED ARTICLES OF INCORPORATION ADDING ARTICLE ELEVEN
(INCORPORATED BY REFERENCE TO EXHIBIT (3)(d) TO FORM 10-K FOR THE FISCAL YEAR
ENDED JUNE 30, 1989)
FILED IN THE OFFICE OF THE SECRETARY OF STATE OF TEXAS MAY 08, 1989 -
CORPORATION SECTION
ARTICLE ONE
NAME
The name of the corporation is United Services Advisors, Inc.
ARTICLE TWO
AMENDMENTS
The following new Article Eleven is added to the Articles of Incorporation
of the corporation in its entirety to read as follows:
ARTICLE ELEVEN
Notwithstanding any provision in Article IX to the contrary, no director of
the Company shall be liable to the Company or its shareholders for monetary
damages or an act or omission in the director's capacity as a director, except
for liability for (i) any breach of a director's duty of loyalty for (i) any
breach of a director's duty of loyalty to the Company or its shareholders, (ii)
an act or omission not in good faith or which involves intentional misconduct or
a knowing violation of law, (iii) any transaction from which as director
received an improper benefit, whether or not the benefit resulted from an action
taken within the scope of the director's office, (iv) an act or omission for
which the liability of a director is expressly provided for by statute or (v) an
act related to an unlawful stock repurchase or payment of a dividend.
If the Texas Miscellaneous Corporation Laws Act is hereafter amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of the Company, in addition to the limitation
of personal liability provided herein, shall be limited to the fullest extent
permitted by the amended Texas Miscellaneous Corporation Laws Act. Any repeal or
modification of this paragraph by the shareholders of the Company shall be
prospective only, and shall not adversely affect any limitation on the personal
liability of a director of the Company existing at the time of such repeal or
modification.
ARTICLE THREE
DATE AND PROCEDURE OF ADOPTION OF AMENDMENT
The amendment to the Articles of Incorporation was adopted by the
shareholders of the corporation on April 28, 1989. The number of shares of the
corporation outstanding at the time of such adoption was 992,344 and the number
of shares entitled to vote thereon was 854,729. The number of shares of the
corporation voting for the amendment was 831,966 and the number of shares of the
corporation voting against the amendment was 5,688.
IN WITNESS WHEREOF, the undersigned as executed these Articles of Amendment
of the corporation this 4 day of May, 1989.
/S/ OFELIA M. MAYO
-----------------------------
Ofelia M. Mayo
STATE OF TEXAS
COUNTY OF BEXAR
Before me, a notary public, on this day personally appeared Ofelia M. Mayo,
known to me to be the person whose name is subscribed to the foregoing document
and, being by me first duly sown, declared that the statements therein contained
are true and correct.
Given under my hand and seal of office this 4th day of May, A.D. 1989.
/S/ JACKIE L. SCHLINGER
------------------------------
Notary Public, State of Texas
SEAL Jackie L. Schlinger
Expires June 20, 1992
EX 3.5
(3)(e) AMENDMENT TO RESTATED ARTICLES OF INCORPORATION AMENDING ARTICLE FOUR
(INCORPORATED BY REFERENCE TO EXHIBIT 4(a) TO THE REGISTRANT'S FORM 10-K FOR THE
FISCAL YEAR ENDED JUNE 30, 1985)
FILED IN THE OFFICE OF THE SECRETARY OF STATE OF TEXAS APRIL 03, 1985 - CLERK
II-G CORPORATIONS SECTION
ARTICLES OF AMENDMENT TO THE
RESTATED ARTICLES OF INCORPORATION
OF
UNITED SERVICES ADVISORS, INC.
Pursuant to the provisions of the Texas Business Corporation Act, the
undersigned Corporation hereby adopts the following Articles of Amendment to its
Restated Articles of Incorporation.
ARTICLE I
The name of the Corporation is United Services Advisors, Inc.
ARTICLE II
The following amendments to the Restated Articles of Incorporation were
adopted by the shareholders of the Corporation on the 2nd day of April, 1985.
The amendments delete the provisions of Article Four and add new paragraphs
in substitution therefor, which provide that each outstanding share of Class A
Common Stock, par value $0.05 per share, shall be converted into one share of
Common Stock, par value $0.05 per share, provide for the authorization of a new
class of Preferred Stock and delete authorization for the Company to issue
shares of Class A Common Stock, Class B Common Stock and Series Preferred Stock.
The Restated Articles of Incorporation are hereby amended as follows:
Articles Four of the Restated Articles of Incorporation is hereby amended
by deleting said Article Four in its entirety and by substituting a new Article
Four as follows:
"ARTICLE FOUR
"1. GENERAL. The corporation is authorized to issue one class of Preferred Stock
("Preferred Stock"), and one class of Common Stock ("Common Stock"). The total
number of shares which the corporation is authorized to issue is 10,000,000
shares. The number of shares of Preferred Stock authorized is 6,000,000 and the
par value of each such share if $0.05. The number of shares of Common Stock
authorized is 4,000,000, and the par value of each such share is $0.05.
"2. PREFERRED STOCK.
"2.1 VOTING RIGHTS. Except as otherwise expressly provided by law, all
voting rights shall be in the Common Stock as provided for in paragraph 3.1
below, and none in the Preferred Stock.
"2.2 DIVIDENDS.
"(1) AMOUNT; PARTICIPATING. In any fiscal year of the corporation, the
holders of the Preferred Stock at the time outstanding shall be entitled to
receive, when and as declared by the Board of Directors of the corporation, out
of any funds legally available therefor, noncumulative cash dividends in an
aggregate amount up to 5% of the corporation's after-tax net earnings for its
prior fiscal year. In any fiscal year of the corporation, until the holders of
the Preferred Stock shall have received cash dividends aggregating 5% of the
corporation's after-tax net earnings for its prior fiscal year, no cash
dividends shall be paid to the holders of the Common Stock. In any fiscal year
of the corporation in which the holders of the Preferred Stock shall have
received cash dividends aggregating 5% of the corporation's after-tax net
earnings for its prior fiscal year, the holders of the Common Stock shall then
be entitled to receive, when and as declared by the Board of Directors, out of
any funds legally available therefor, cash dividends per share up to the amount
of cash dividends per share theretofore received during such fiscal adjustment
as provided in paragraph 2.2(4) hereof. In any fiscal year of the corporation,
when the cash dividends per share paid to the holders of the Common Stock during
such fiscal year shall be the maximum amount permitted pursuant to the preceding
sentence, such cash dividends, if any, as the Board of Directors may elect to
pay during the balance of such fiscal year, out of any funds legally available
therefor, shall be paid simultaneously on both the Preferred Stock and the
Common Stock in the same proportionate amounts per share as theretofore paid
during the fiscal year on the Preferred Stock and the Common Stock.
"(2) NONCUMULATIVE. Dividends on Preferred Stock shall be noncumulative and
no rights shall accrue to the holders of Preferred Stock in the event that, in
any fiscal year, the corporation shall fail to declare or pay dividends of up to
5% of the after-tax net earnings of the corporation for its prior fiscal year,
whether or not the earnings of the corporation for the prior fiscal year were
sufficient to pay such dividend in whole or in part.
"(3) NET EARNINGS AFTER TAXES. Net earnings after taxes for any fiscal year
shall be the amount shown as after-tax net earnings in the corporation's audited
statement of operations or audited consolidated statement of operations for the
fiscal year, as the case may be. Such audited statement of operations or audited
consolidated statement of operations shall be prepared in accordance with
generally accepted accounting principles. The amount shown as after-tax net
earnings in the audited statement of operations or audited consolidated
statement of operation shall be final and binding upon the holders of Preferred
Stock.
"(4) DIVIDEND DILUTION PROTECTION. In the event of any stock split, stock
dividend or other stock subdivision or stock combination, of or with respect to
the Common Stock of the corporation (each of the foregoing hereinafter referred
to as an "Event") but not including shares of Common Stock issued in a merger or
other business combination, then the maximum cash dividends per share payable to
the holders of shares of Common Stock pursuant to the third sentence of
paragraph 2.2(1) hereof shall be adjusted by multiplying each such per share
cash dividend amount by a fraction whose numerator shall be the number of shares
of Common Stock outstanding immediately prior to such Event and whose
denominator shall be the number of shares of Common Stock outstanding
immediately following such Event. Such adjustment shall be made at the time of
each occurrence of an Event, giving effect to all prior adjustments. Holders of
shares of Preferred Stock shall be entitled to notice of any Event within ten
(10) business days of its occurrence.
"2.3 PURCHASE. Nothing herein shall limit the right of the corporation to
purchase any of its outstanding shares of Preferred Stock in accordance with
law, by public or private transaction.
"2.4 CONVERSION RIGHTS. The shares of Preferred Stock shall be convertible
into the shares of any other class of stock of the corporation.
"2.5 LIQUIDATION PREFERENCE OVER COMMON STOCK. In the event of dissolution,
liquidation or winding up of the corporation (whether voluntary or involuntary),
after payment or provision for payment of debts but before any distribution to
the holders of shares of Common Stock, the holders of the shares of Preferred
Stock shall be entitled to receive $0.05 per share. Holders of shares of Common
Stock shall then be entitled to receive $0.05 per share. All remaining assets of
the corporation upon liquidation shall be distributed pro rata among the holders
of the shares of Preferred Stock and Common Stock. If the assets distributable
among the holders of Preferred Stock as insufficient to permit full payment to
them of $0.05 per share, the entire assets of corporation shall be distributed
prorata among the holders of the Preferred Stock. None of the following events
is a dissolution, liquidation or winding up within the meaning of this
paragraph: consolidation, merger, or reorganization of the corporation with any
other corporation or corporations, sale of all or substantially all the assets
of the corporation, or any purchase or redemption by the corporation of any of
its outstanding shares.
"3. COMMON STOCK.
"3.1 VOTING RIGHTS. The holders of shares of Common Stock shall have full
voting rights at any annual or special meeting of the shareholders and as
provided for in the Texas Business Corporation Act.
"3.2 DIVIDENDS. No cash dividends shall be declared or paid on Common Stock
in any fiscal year unless cash dividends paid during such fiscal year on
outstanding Preferred Stock shall equal at least 5% of the after-tax net
earnings of the corporation for its prior fiscal year.
"3.3 PURCHASE. No Common Stock shall be purchased by the corporation in any
fiscal year unless cash dividends shall have been paid during such fiscal year
on outstanding Preferred Stock in the amount of at least 5% of the after-tax net
earnings of the corporation for its prior fiscal year. Except as provided in the
foregoing sentence, nothing herein shall limit the right of the corporation to
purchase any of its outstanding shares of Common Stock in accordance with law,
by public or private transaction.
"4. DENIAL OF PREEMPTIVE RIGHTS. No holder of shares of any class of the
corporation, Preferred Stock or Common Stock, shall have any preemptive right to
subscribe for or acquire additional shares of the corporation of the same or any
other class, whether such shares shall be hereby or hereafter authorized; and no
holder of shares of any class of the corporation shall have any right to acquire
any shares which may be held in the treasury of the corporation. All such
additional or treasury shares may be sold for such consideration, at such time,
and to such person or persons as the Board of Directors may from time to time
determine."
"5. CLASS A COMMON STOCK INTO COMMON STOCK. Each outstanding share of Class A
Common Stock, par value $0.05 per share, shall become one share of Common Stock,
par value $0.05 per share, effective upon the issuance by the Secretary of State
of the State of Texas of the Certificate of Amendment to the Restated Articles
of Incorporation wherein this Article Four becomes part of the Restated Articles
of Incorporation, as amended, of the corporation.
ARTICLE III
Each such amendment made by these Articles of Amendment to the Restated
Articles of Incorporation has been effected in conformity with the provisions of
the Texas Business Corporation Act, and such amendments were duly adopted by the
shareholders of the Corporation on April 2, 1985.
ARTICLE IV
The number of shares entitled to vote on the amendments made by these
Articles of Amendment to the Restated Articles of Incorporation, the same
constituting all of the outstandingm shares of the Corporation, was 2,159,516
shares of Class C Common Stock. The number of shares of Class A Common Stock
which voted for such amendment was 2,640,744, and the number of shares of Class
A Common Stock which voted against such amendment was 296.
ARTICLE V
Any exchange, reclassification or cancellation of issued shares provided
for in the amendments shall be effected in the following manner:
Each outstanding share of Class A Common Stock, of par value of $0.05 per
share, shall be come one (1) share of Common Stock, par value $0.05 per
share, effective upon the issuance by the Secretary of State of the State
of Texas of the Certificate of Amendment to the Restated Articles of
Incorporation, whereupon each outstanding certificate which, prior to the
time of issuance of such Certificate of Amendment to the Restated Articles
of Incorporation, represented shares of Class A Common Stock, par value
$0.05 per share, shall evidence for all purposes the same number of shares
of Common Stock, par value $0.05 per share, of the Corporation.
ARTICLE VI
The amendments do not effect a change in the amount of stated capital.
IN WITNESS WHEREOF, we have hereunto set our hands this the 2nd day of
April, 1985.
UNITED SERVICES ADVISORS, INC.
BY: /S/ CLARK AYLSWORTH
------------------------------
Clark Aylsworth, President
BY: /S/ MARY JANE WEBER
------------------------------
Mary Jane Weber, Secretary
State of Texas
County of Bexar
Before me, a Notary Public, on this day personally appeared CLARK AYLSWORTH
and MARY JANE WEBER, known to me to be the persons whose names are subscribed to
the foregoing document, and being by me first duly sworn, declared that the
statements therein contained are true and correct.
Given under my hand and seal of office this 2nd day of April, 1985
/S/ JANE M. VARLEY
------------------------------
Notary Public, State of Texas
My Commission Expires:
EX 3.6
AMENDMENT TO RESTATED ARTICLES OF INCORPORATION ADDING ARTICLE TWELVE
(INCORPORATED BY REFERENCE TO EXHIBIT 6(a) TO FORM 10-Q FOR QUARTER ENDING
SEPTEMBER 30, 1991)
ARTICLES OF AMENDMENT TO THE
RESTATED ARTICLES OF INCORPORATION OF
UNITED SERVICES ADVISORS, INC.
Pursuant to the Texas Business Corporation Act, the undersigned corporation
hereby adopts the following Articles of Amendment to its Restated Articles of
Incorporation.
ARTICLE I
The name of the corporation is United Services Advisors, Inc.
ARTICLE II
The following amendment to the Restated Articles of Incorporation were
adopted by shareholders of the corporation on the 16th day of October 1991.
The amendment adds a new Article Twelve allowing consent actions by
shareholder by other than unanimous written consent.
ARTICLE TWELVE
Any action required by the Texas Business Corporation Act to be taken at
any annual or special meeting of shareholders, or any action which may be taken
at any annual or special meeting of shareholders, may be taken without a
meeting, without prior notice, and without a vote provided: (1) a consent or
consents in writing, setting forth the action so taken, are signed by the holder
or holders of shares having not less than the minimum number of votes that would
be necessary to take such action at a meeting at which the holders of all shares
entitled to vote on the action were present and voted; and (2) prompt notice of
such action is given to those shareholders entitled to vote who did not consent
in writing to the action.
ARTICLE III
The amendment made by these Articles of Amendment to the Restated Articles
of Incorporation has been effected in conformity with the provisions of the
Texas Business Corporation Act, and such amendment was duly adopted by
shareholders of the corporation on October 16, 1991.
ARTICLE IV
The number of shares entitled to vote on the amendment made by these
Articles of Amendment to the Restated Articles of Incorporation, the same
constituting all of the outstanding shares of the corporation's Common Stock was
779,320. The number of shares of Common Stock which voted for the amendment was
572,202, and the number of shares of Common Stock which voted against the
amendment was zero.
ARTICLE V
The amendment does not effect a change in the amount of stated capital.
IN WITNESS WHEREOF, we have hereunto set our hands this 18th day of October
1991.
UNITED SERVICES ADVISORS, INC.
/S/ FRANK E. HOLMES,
------------------------------
Frank E. Holmes, President
/S/ CHARLES W. LUTTER, JR.
------------------------------
Charles W. Lutter, Jr., Secretary
STATE OF TEXAS
COUNTY OF BEXAR
Before me, a notary public, on this day personally appeared Frank E. Holmes
and Charles W. Lutter, Jr., known to me to be the persons whose names are
subscribed to the foregoing document, and being by me first duly sworn, declared
that the statements therein contained are true and correct.
Given under my hand and seal of office this 18th day of October 1991.
/S/ JUNE L. FALKS
------------------------------
Notary Public in and for
The State of Texas
My commission expires:
2/14/92
------------------------------
EX3.7
AMENDMENT TO THE RESTATED ARTICLES OF INCORPORATION OF REGISTRANT AMENDING
ARTICLE FOUR ESTABLISHING A NEW CLASS OF COMMON STOCK (INCORPORATED BY REFERENCE
TO EXHIBIT 3 TO THE REGISTRANT'S FORM 10-Q DATED 31 DECEMBER, 1994)
FILED IN THE OFFICE OF THE SECRETARY OF STATE OF TEXAS 22 NOVEMBER, 1994,
CORPORATIONS SECTION.
ARTICLES OF AMENDMENT TO THE
RESTATED ARTICLES OF INCORPORATION
OF
UNITED SERVICES ADVISORS, INC.
Pursuant to the provisions of the Texas Business Corporations Act, the
undersigned Corporation hereby adopts the following Articles of Amendment to its
Restated Articles of Incorporation.
ARTICLE I
The name of the Corporation is United Services Advisors, Inc.
ARTICLE II
The following amendment to the Restated Articles of Incorporation was
adopted by the shareholders of the Corporation on the 21st day of November,
1994.
The amendment deletes Article Four, Provisions 1, 3.1 and 5 and adds new
paragraphs in substitution therefor, and adds Provisions 3.4 and 3.5, which
changes provide for a reclassification of the existing authorized and
outstanding voting common stock of USAI into a new class of stock to be called
Class "A" Common Stock of USAI. The amendment also authorizes the creation of a
new class of stock , Class "B" Common Stock, which shall be non-voting common
stock of USAI. The Class "B" shares would be convertible, beginning October 1,
1997.
Article Four, Provisions 1, 3.1 and 5 of the Restated Articles of
Incorporation are hereby amended by deleting said provisions of Article Four in
their entirety and by substituting new Provisions therefor as well as Provision
3.4 as follows:
"ARTICLE FOUR
"1. GENERAL. The corporation is authorized to issue one class of Preferred Stock
and two classes of Common Stock, one designated Class A Common Stock and the
other designated Class B Common Stock (collectively referred to herein as
"Common Stock"). The total number of shares which the corporation is authorized
to issue is 10,000,000. The total number of shares of Preferred Stock authorized
is 6,000,000 and the par value of each share is $0.05. The aggregate number of
shares of Class A Common Stock and Class B Common Stock authorized is 4,000,000
and the par value of each share is $0.05. As provided in Part of 3.4 of this
Article Four, the Class B Common Stock may be converted to Class A Common Stock.
If and when the conversion right of Class B Common Stock is exercised, allowing
shares of Class B Common Stock to be exchanged into Class A Common Stock, the
number of authorized shares of Class B Common Stock shall be reduced by the
number of Class B shares exchanged into Class A Common Stock shares, thereby
allowing the total number of shares of Common Stock authorized and outstanding
to remain constant at all times. Except for the voting and conversion rights set
forth in Parts 3.1 and 3.4 of this Article Four, all other rights and
preferences of the Common Stock are equal.
"3. COMMON STOCK.
"3.1 VOTING RIGHTS. The holders of the shares of Class A Common Stock shall
have full voting rights at any annual or special meeting of the shareholders and
as provided for in the Texas Business Corporations Act. Except as otherwise
expressly provided by law, the holders of the shares of Class B Common Stock
shall have no voting rights at any annual or special meeting of the
shareholders.
"3.4 CONVERSION RIGHT. The holders of the shares of Class B Common Stock
shall have the right to convert Class B Common Stock shares into Class A Common
Stock shares on a one-to-one ratio on such date as the Corporation's Board of
Director shall establish; and pending Board of Director action, the conversion
date for Class B Common Stock to be issued shall be October 1, 1997. The holders
of shares of Class B Common Stock shall have the right to convert Class B Common
Stock shares into shares of Preferred Stock, on a one-for-one basis, at any time
after October 1, 1997, provided that the holders of shares of Preferred Stock
have approved an increase in the authorized number of shares of Preferred Stock,
as provided in Part 3.5 below.
"3.5 CONVOCATION OF MEETING OF SHARES OF THE CORPORATION. The holders of
shares of Class B Common Stock shall have the right to require the Corporation
from its 1995 fiscal year to its 1997 fiscal year (exclusively), to validly call
and hold meetings of the holders of each class of stock in the capital of the
Corporation, at least once during each such fiscal year until the consents and
approvals of such holders have been obtained so that there shall exist such
number of authorized shares of Preferred Stock as is equal to the aggregate of
(i) the issued and outstanding shares of Preferred Stock at the time of such
consents and approvals and (ii) the number of shares of Preferred Stock as may
be issuable pursuant to any outstanding subscriptions, calls, options, warrants,
or other agreements or rights to sell, purchase or subscribe for any shares of
Preferred Stock or convert any obligations into shares of Preferred Stock. "5.
COMMON STOCK INTO CLASS A COMMON STOCK. Each outstanding shares of Common Stock,
par value $0.05 per share, shall become one share of Class A Common Stock, par
value $0.05 per share, and shall become effective upon the issuance by the
Secretary of State of the State of Texas of the Certificate of Amendment to the
Restated Articles of incorporation wherein these Provisions of Article Four
become part of the Restated Articles of Incorporation, as amended, of the
Corporation."
ARTICLE III
The amendment made by these Articles of Amendment to the Restated Articles
of Incorporation has been effected in conformity with the provisions of the
Texas Business Corporation Act, and such amendment was duly adopted by the
shareholders of the Corporation on November 21, 1994 by written consent given in
accordance with the provisions of Article 9.10A of the Texas Business
Corporation Act and written notice required by said Article has been given.
ARTICLE IV
The number of shares entitled to vote on the amendments made by these
Articles of Amendment to the Restated Articles of Incorporation, the same
constituting all of the outstanding shares of Common Stock of the Corporation,
was 576,127 shares of Common Stock. The number of shares of Common Stock which
voted for such amendment was 474,951, and the number of shares of Common Stock
which voted against such amendment was 0.
ARTICLE V
Any exchange, reclassification or cancellation of issued shares provided
for in the amendment shall be effected in the following manner:
Each of the outstanding shares of Common Stock, par value $0.05 per
share shall become one share of Class A Common Stock, par value $0.05
per share, effective upon the date of the issuance by the Secretary of
State of the State of Texas of the Certificate of Amendment to the
Restated Articles of Incorporation. Holders of Class A Common Stock
may, with approval of the Corporation's Board of Directors, instruct
the Company to issue shares of Class B Common Stock when their shares
of Class A Common Stock are submitted for transfer.
ARTICLE VI
The amendment does not effect a change in the amount of the stated capital.
IN WITNESS WHEREOF, we have hereunto set our hands this 22nd day of
November, 1994.
UNITED SERVICES ADVISORS, INC.
BY: /S/ BOBBY D. DUNCAN
------------------------------
Bobby D. Duncan, Executive Vice President,
Chief Operating Officer,
Chief Financial Officer
BY: /S/ CHARLES W. LUTTER, JR.
------------------------------
Charles W. Lutter, Jr., Secretary
EX 3.8
FILED HEREIN - ARTICLES OF AMENDMENT TO THE RESTATED ARTICLES OF INCORPORATION
OF REGISTRANT AMENDING ARTICLE FOUR, INCREASING EXISTING AUTHORIZED AND
OUTSTANDING PREFERRED STOCK OF REGISTRANT
FILED IN THE OFFICE OF THE SECRETARY OF STATE OF TEXAS AUG 07, 1995 CORPORATIONS
SECTION
ARTICLES OF AMENDMENT TO THE
RESTATED ARTICLES OF INCORPORATION
OF
UNITED SERVICES ADVISORS, INC.
Pursuant to the provisions of the Texas Business Corporations Act, the
undersigned Corporation hereby adopts the following Articles of Amendment to its
Restated Articles of Incorporation.
ARTICLE I
The name of the Corporation is United Services Advisors, Inc.
ARTICLE II
The following amendment to the Restated Articles of Incorporation was
adopted by the shareholders of the Corporation on the 3rd day of August, 1995.
The amendment deletes Article Four, Provision 1. General and substitutes a
new paragraph which increases existing authorized and outstanding preferred
stock of United Services Advisors, Inc.
"ARTICLE FOUR
"1. GENERAL. The corporation is authorized to issue one class of Preferred
Stock and two classes of Common Stock, one designated Class A Common Stock and
the other designated Class B Common Stock (collectively referred to herein as
"Common Stock"). The total number of shares which the corporation is authorized
to issue is 11,000,000. The total number of shares of Preferred Stock authorized
is 7,000,000 and the par value of each share is $0.05. The aggregate number of
shares of Class A Common Stock and Class B Common Stock authorized is 4,000,000
and the par value of each share is $0.05. The total number of shares of Class A
Common Stock is 1,750,000 and the par value of each share is $0.05. The total
number of shares of Class B Common Stock is 2,250,000 and the par value of each
shares if $0.05. As provided in Part of 3.4 of this Article Four, the Class B
Common Stock may be converted to Class A Common Stock. If and when the
conversion right of Class B Common Stock is exercised, allowing shares of Class
B Common Stock to be exchanged into Class A Common Stock, the number of
authorized shares of Class B Common Stock shall be reduced by the number of
Class B shares exchanged into Class A Common Stock shares, thereby allowing the
total number of shares of Common Stock authorized and outstanding to remain
constant at all times. Except for the voting and conversion rights set forth in
Parts 3.1 and 3.4 of this Article Four, all other rights and preferences of the
Common Stock are equal.
ARTICLE III
The amendment made by these Articles of Amendment to the Restated Articles
of Incorporation has been effected in conformity with the provisions of the
Texas Business Corporation Act, and such amendment was duly adopted by the
holders of the Corporation's Class A and Class B Common Stock and Preferred
Stock on August 3, 1995 at a Special Meeting of Shareholders called for the
purpose of increasing the number of authorized preferred stock.
ARTICLE IV
The number of shares entitled to vote on the amendments made by these
Articles of Amendment to the Restated Articles of Incorporation, the same
constituting all of the outstanding shares of Class A Common Stock of the
Corporation, was 570,779 shares of Common Stock and Class B Common Stock of the
Corporation was 1,000,000 shares of Common Stock. The number of shares of Class
A Common Stock which voted for such amendment was 536,038; the number of shares
of Class A Common Stock which voted against such amendment was 752 and 0 number
of shares abstained. The number of shares of Class B Common Stock which voted
for such amendment was 1,000,000 shares, none voted against and no abstentions.
The number of shares entitled to vote on the amendment made by these Articles of
Amendment to the Restated Articles of Incorporation, the same constituting all
of the outstanding shares of Preferred Stock of the Corporation, was 4.991,495
of Preferred Stock. The number of shares of Preferred Stock which voted for such
amendment was 3,582,573, 253,225 shares voted against and 32,020 shares
abstained.
ARTICLE VI
The amendment does not effect a change in the amount of the stated capital.
IN WITNESS WHEREOF, we have hereunto set our hands this 3rd day of August,
1995.
UNITED SERVICES ADVISORS, INC.
BY:/S/ FRANK E. HOLMES
------------------------------
Frank E. Holmes, President
BY:/S/ CHARLES W. LUTTER, JR.
------------------------------
Charles W. Lutter, Jr., Secretary
STATE OF TEXAS
COUNTY OF BEXAR
Before me, a Notary Public, on this day personally appeared FRANK E. HOLMES
and CHARLES W. LUTTER, JR., known to me to be the persons whose names are
subscribed to the foregoing document, and being by me first duly sworn, declared
that the statements therein contained are true and correct.
Given under my hand and seal of office this 3rd day of August, 1995.
/S/ Cynthia L. Neathery
------------------------------
Notary Public, State of Texas
My Commission Expires: 7-21-98
S E A L
EX 10.2
ADVISORY AGREEMENT
AGREEMENT made as of the 21st day of September, 1994 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
"Advisor"), and ACCOLADE 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 registered under the Investment Company Act of 1940
(the "1940 Act"); and
WHEREAS, the Advisor is engaged principally in the business of rendering
investment management services and is registered under the Investment Advisors
Act of 1940; and
WHEREAS, the Trust intends to initially offer shares in SIF Government
Money Fund and SIF Government Short-Term 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 Advisor to render investment
advisory services hereunder the Advisor is willing so to do (collectively
referred to as the "Funds")];
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. APPOINTMENT OF ADVISOR.
(a) Initial Funds. The Trust hereby appoints the Advisor to act as
Advisor and investment advisor to each of the Initial Funds for
the period and on the terms herein set forth. The Advisor 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 Advisor to render management
and investment advisory services hereunder, it shall so notify
the Advisor in writing, indicating the advisory fee which will be
payable with respect to the additional series of shares. If the
Advisor 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 ADVISOR.
The Advisor, at its own expense, shall furnish the following services
and facilities to the Trust:
(a) Investment Program. The Advisor 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 on
behalf of the Trust in the investments of each Fund. The Advisor
will also manage, supervise and conduct the other affairs and
business of the Trust of 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 Advisor shall furnish the Trust
office space in the offices of the Advisor, 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 provided by the Trust's transfer agent,
record keeping service or custodian.
(c) Personnel. The Advisor 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 Advisor or its
affiliates, except as provided in Paragraph 3(f) hereof.
(d) Distribution Expenses. Except as may be provided in distribution
expense plans as contemplated by Rule 12b-1 under the 1940 Act,
the Advisor 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
Advisor 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 Advisor 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 Advisor,
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 Advisor 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 Advisor 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 Advisor 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 Advisor or an
affiliate of the Advisor exercises investment discretion. The
Advisor 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 Advisor
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.
3. ALLOCATION OF EXPENSES.
Except for the services and facilities to be provided by the Advisor
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 Advisor for any such expenses incurred by the Advisor.
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 Advisor in
performing such functions for the Trust, and including
compensation of persons who are Advisor employees in proportion
to the relative time spent on such matters;
(g) all expenses of shareholders' and Trustees' meetings, including
meetings of committees, and of preparing, printing and mailing
proxy statements, quarterly 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 in accordance with
Paragraph 2(d) above];
(i) compensation and travel expenses of Trustees who are not
"interest 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 and internal
audit/compliance personnel in connection with matters relating to
the Trust, including, without limitations, 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;
(l) 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;
(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 Advisor as provided in Paragraph 2 hereof, the Trust
shall pay the Advisor 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
Fee Rate
Bonnel Growth Fund 1/12 of 1.00%
(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 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.
5. EXPENSE LIMITATION.
The Advisor 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 Advisor 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.
6. TRUST TRANSACTIONS.
The Advisor agrees that neither it nor any of its officers or
Directors will take any long or short term position in the shares of
the Trust; provided, however, that such prohibition:
(a) shall not prevent the Advisor from purchasing shares of the Trust
if orders to purchase such shares are placed upon the receipt by
the Advisor of purchase orders for such shares and are not in
excess of such purchase orders received by the Advisor; 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.
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
Advisor, respectively, it is understood that Trustees, officers,
agents and shareholders of the Trust are or may be interested in the
Advisor (or any successor thereof) as directors, officers, or
otherwise; that directors, officers, agents and shareholders of the
Advisor are or may be interested in the Trust as Trustees, officers,
shareholders, or otherwise; that the Advisor (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 ADVISOR AND OFFICERS AND TRUSTEES OF THE TRUST.
No provision of this Agreement shall be deemed to protect the Advisor
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 AGREEMENTS.
(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 Advisor in accordance with Paragraph 1(b) hereof that
the Manager is willing to serve as Advisor with respect to such
Fund. Unless terminated as herein provided, this Agreement shall
remain in full force and effect until September 21, 1994 with
respect to the Initial Funds and, with respect to each additional
Fund, until one year following the date on which such Fund
becomes a Fund hereunder, and shall continue in full force and
effect for period on 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. 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 approval shall be
required by any other applicable law or otherwise.
(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 the 1940 Act), or by the Advisor 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. SERVICES NOT EXCLUSIVE.
The services of the Advisor to the Trust hereunder are not to be
deemed exclusive, and the Advisor shall be free to render similar
services to others so long as its services hereunder are not impaired
thereby.
11. LIMITATION OF LIABILITY.
(a) THE TRUST. The term "Accolade Funds" means and refers to the
Trustees from time to time serving under the Master Trust
Agreement of the Trust dated April 15, 1993, 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.
(b) THE ADVISOR. It is expressly agreed that the oblations of the
Advisor hereunder shall not be binding upon any of the
shareholders, nominees, officers, agents or employees of the
Advisor, personally, but bind only the assets and property of the
Advisor, respectively. The execution and delivery of the
Agreement have been authorized by the directors and officers of
the Advisor and signed by an authorized officer of the Advisor,
acting as such, and neither such authorization by such directors
and officers 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 Advisor, respectively. This
limitation of liability shall not be deemed to protect the
shareholders, nominees, officers, agents or employees of the
Advisor against any liability to the Trust or its shareholders to
which they might otherwise be subject by reason of any willful
misfeasance, bad faith or gross negligence in the performance of
their duties or the reckless disregard of their obligations and
duties under this Agreement. IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be executed as of the date
first set forth above.
ACCOLADE FUNDS UNITED SERVICES ADVISORS, INC.
By/S/ BOBBY D. DUNCAN By /S/ Bobby D. Duncan
- - - ---------------------------------- Executive Vice President
Executive Vice President
Attest: Attest:
/S/ CHARLES W. LUTTER, JR. /S/ CHARLES W. LUTTER, JR.
- - - ---------------------------------- -----------------------------------
Secretary Secretary
Ex 10.3
SUB-ADVISERY AGREEMENT
AGREEMENT made as of the 21st day of September, 1994 between UNITED
SERVICES ADVISORS, INC., a corporation organized under the laws of the State of
Texas (the "Adviser"), ACCOLADE FUNDS, a Massachusetts business trust having its
principal place of business in San Antonio, Texas (the "Trust"), on behalf of
the Bonnel Growth Fund (the "Fund"), a series of shares of the Trust, and
BONNEL, INC. (the "Sub-Adviser") of Reno, Nevada.
WHEREAS, the Adviser is engaged in the business of rendering investment
management services to the Trust; and
WHEREAS, the Trust is an open-end management investment company and is so
registered under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Trust is operated as a "series company" within the meaning of
Rule 18f-2 under the 1940 Act and has three separate series of shares of
beneficial interest, one of which series is the Fund.
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF SUB-ADVISER.
The Sub-Adviser is hereby appointed to provide investment advisory
services to the Fund for the period and on the terms herein set forth.
The Sub-Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided. To
enable Sub-Adviser to exercise fully its discretion and authority as
provided in this Section 1, the Trust hereby constitutes and appoints
Sub-Adviser as the Trust's agent and attorney-in-fact with full power
and authority for the Trust and on the Trust's behalf to buy, sell and
otherwise deal in securities and contracts relating to same for the
Fund.
2. DUTIES OF SUB-ADVISER.
(a) The Sub-Adviser is hereby authorized and directed and hereby
agrees, subject to the stated investment objective and policies
of the Fund as set forth in the Fund's Prospectus (as defined
below) and subject to the supervision of the Adviser and the
Board of Trustees of the Trust, (i) to develop, recommend and
implement such investment program and strategy for the Fund as
may from time to time in the circumstances appear most
appropriate to the achievement of the investment objective of the
Fund as stated in the aforesaid Prospectus, (ii) to provide
research and analysis relative to the investment program and
investments of the Fund, (iii) to determine what securities
should be purchased and sold and what portion of the assets of
the Fund should be held in cash or cash equivalents and (iv) to
monitor on a continuing basis the performance of the portfolio
securities of the Fund. The Sub-Adviser will advise the Trust's
custodian and the Adviser on a prompt basis of each purchase and
sale of a portfolio security specifying the name of the issuer,
the description and amount or number of shares of the security
purchased, the market price, commission and gross or net price,
trade date, settlement date and identity of the effecting broker
or dealer; and will review the accuracy of the pricing of
portfolio securities in accordance with Trust procedures. From
time to time, as the Trustees of the Trust or the Adviser may
reasonably request, the Sub-Adviser will furnish to the Trust's
officers and to each of its Trustees reports on portfolio
transactions and reports on issues of securities held in the
portfolio, all in such detail as the Trust or the Adviser may
reasonably request. The Sub-Adviser will also inform the Trust's
officers and Trustees on a current basis of changes in investment
strategy or tactics. The Sub-Adviser will make its officers and
employees available to meet with the Trust's officers and
Trustees on due notice to review the investments and investment
program of the Fund in the light of current and prospective
economic and market conditions.
The Sub-Adviser shall place all orders for the purchase and sale
of portfolio securities for the account of the Fund with brokers
or dealers selected by the Sub-Adviser, although the Trust will
pay the actual brokerage commissions and any transfer taxes with
respect to transactions in the portfolio securities of the Trust.
The Sub-Adviser is authorized to submit any such order
collectively with orders on behalf of other accounts under its
management, provided that the Sub-Adviser shall have determined
that such action is in the best interest of the Fund and is in
accordance with applicable law, including, without limitation,
Rule 17d-1 under the 1940 Act. In executing portfolio
transactions and selecting brokers or dealers, the Sub- Adviser
will use its best efforts to seek on behalf of the Fund the best
overall terms available. In assessing the best overall terms
available for any transaction, the Sub-Adviser 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 Sub-Adviser may also
consider the brokerage and research services (as those terms
defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Fund and/or other accounts over which the
Sub-Adviser or an affiliate of the Sub-Adviser exercises
investment discretion. The Sub-Adviser is authorized to pay to a
broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for
the 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 Sub-Adviser 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. An affiliated person of the
Sub-Adviser may provide brokerage services to the Fund provided
that the Sub-Adviser shall have determined that such action is
consistent with its obligation to seek the best overall terms
available and is in accordance with applicable law, including,
without limitation, Section 17(e) of the 1940 Act. The foregoing
shall not be deemed to authorize an affiliated person of the
Sub-Adviser to enter into transactions with the Fund as
principal.
In the performance of its duties hereunder, the Sub-Adviser is
and shall be an independent contractor and unless otherwise
expressly provided or authorized shall have no authority to act
for or represent the Trust in any way or otherwise be deemed to
be an agent of the Trust or of the Adviser.
(b) Delivery of Documents. The Adviser will furnish upon request or
has furnished the Sub- Adviser with true copies of each of the
following:
(i) The Trust's Master Trust Agreement dated April 15, 1993 as
filed with the Secretary of State of the Commonwealth of
Massachusetts and all amendments thereto (such Master Trust
Agreement, as presently in effect and as it shall from time to
time be amended, is herein called the "Master Trust Agreement");
(ii) The Trust's By-Laws and amendments thereto (such By-Laws, as
presently in effect and as it shall from time to time be amended,
is herein called the "By-Laws);
(iii)Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Adviser and Sub-Adviser and approving the
Advisory Agreement and this Agreement;
(iv) The most recent Post-Effective Amendment to the Trust's
Registration Statement on Form N-1A under the Securities Act of
1933 as amended ("1933 Act") and the 1940 Act as filed with the
Securities and Exchange Commission;
(v) The Fund's most recent prospectus (such prospectus, as
presently in effect and all amendments and supplements thereto
being referred to herein as the "Prospectus"); and
(vi) All resolutions of the Board of Trustees of the Trust
pertaining to the management of the assets of the Fund.
During the term of this Agreement the Adviser shall not use or
implement any amendment or supplement that relates to or affects the
obligations of the Sub-Adviser hereunder if the Sub-Adviser reasonably
objects in writing within five business days after delivery thereof
(or such shorter period of time as the Adviser shall specify upon
delivery, if such shorter period of time is reasonable under the
circumstances).
3. ADVISORY FEE.
(a) For the services to be provided to the Fund by the Sub-Adviser as
provided in Paragraph 2 hereof, the Adviser will pay the
Sub-Adviser a minimum fee of $150,000 per year. When the Fund's
assets exceed $30 million, the Adviser and Sub-Adviser will share
the management fee (as defined below) equally except that the
Sub-Adviser's share would be subject to downward adjustments for:
(1) the Adviser's incurred costs and expenses of marketing the
Bonnel Fund (including prospectus fulfillment, Mr. Bonnel's
travel costs, annual costs for marketing and promotion of the
Fund etc.) that exceed the .25% "12b-1 fee" charged to the Fund
for such marketing purposes; (2) for any monies previously
received as a result of the minimum sub-advisory fee set forth
above that were paid by the Adviser or the Trust prior to the
date that the Securities and Exchange Commission declared the
Fund's Registration Statement to be effective; (3) the
unrecovered costs of organizing the Bonnel Fund up to $40,000
(the Adviser will be responsible for bearing costs of
organization of the Fund in excess of $40,000); and (4) if a
decision is made with respect to placing a cap on expenses to the
extent that actual expenses of the Fund would exceed the cap, and
the Adviser would be required to pay or absorb any of the excess
expenses, by the amount of the excess expenses paid or absorbed
by the Adviser through such downward adjustments. Advisor agrees
to pay the Sub-Advisor the minimum fee for a period of three
years provided Mr. Bonnel is ready, willing and able to perform
the Sub-Advisor's duties hereunder. The fee is payable in monthly
installments in arrears. The "Management Fee" means the
management fee paid by the Trust to the Adviser under the
Advisory Agreement, dated as of September 21, 1994, between the
Trust and the Adviser with respect to the management of the Fund.
(b) In the case of termination of the Agreement during any calendar
month, the fee with respect to 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 the Fund for the days during which it is so
in effect.
(c) The "Monthly Average Net Assets" of the Fund for any calendar
month shall be equal to the quotient produced by dividing (i) the
sum of the net assets of the 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 Master Trust Agreement, as of the close of business on
each day during such month that the Fund was open for business,
by (ii) the number of such days.
4. EXPENSES.
During the term of this Agreement, the Sub-Adviser will bear all
expenses incurred by it in the performance of its duties hereunder.
5. FUND TRANSACTIONS.
The Sub-Adviser agrees that neither it nor any of its employees,
officers or directors will take any long or short term position in the
shares of the Fund or portfolio securities of the Fund for trading
purposes; provided, however, that such prohibition shall not prevent
the purchase of shares of the Fund 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.
6. REPRESENTATION AND WARRANTY.
The Sub-Adviser hereby represents and warrants to the Adviser that it
is duly registered as an investment adviser, or is exempt from
registration, under the Investment Advisor's Act of 1940, as amended,
and that it shall maintain such registration or exemption at all times
during which this Agreement is in effect.
7. LIABILITY OF SUB-ADVISER.
In the performance of its duties under this Agreement, the Sub-Adviser
shall act in conformity with and in compliance with the requirements
of the 1940 Act and all other applicable U.S. Federal and state laws
and regulations and shall not cause the Fund to take any action that
would require the Fund or any affiliated person thereof to register as
a commodity pool operator under the terms of the U.S. Commodity
Exchange Act, as amended (it being understood by the Sub-Adviser that
a notice of eligibility has been filed on behalf of the Trust pursuant
to Rule 4.5 promulgated under said Act). The Sub-Adviser shall be
responsible for maintaining such procedures as may be reasonably
necessary to ensure that the investment and reinvestment of the Fund's
assets are made in compliance with its investment objectives and
policies and with all applicable statues and regulations and that the
Fund qualifies as a regulated investment company under Subchapter M of
the Internal Revenue Code. No provision of this Agreement shall be
deemed to protect the Sub-Adviser 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.
8. REPORTS.
The Sub-Adviser shall render to the Board of Trustees of the Trust
such periodic and special reports as the Board of Trustees may
reasonably request with respect to matters relating to duties of the
Sub- Adviser set forth herein.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. With respect to the Trust, this Agreement shall become
effective upon the date hereof and shall continue in full force
and effect from year to year thereafter so long as such
continuance is 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.
(b) Termination. With respect to the Trust, this Agreement may be
terminated at any time, without payment of any penalty (i) by
vote of the Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940
Act) on sixty (60) days' written notice to the other parties,
(ii) by the Adviser on sixty (60) days' written notice to the
other parties or (iii) by the Sub-Adviser on ninety (90) days'
written notice to the other parties.
(c) Automatic Termination. With respect to the Trust, this Agreement
shall automatically and immediately terminate in the event of its
assignment or upon expiration of the Advisory Agreement now or
hereafter in effect between the Adviser and the Trust with
respect to the Fund.
(d) It is understood that the Letter Agreement, dated March 22, 1994,
as subsequently clarified by letters dated April 7, 1994, and
April 19, 1994 (the "Letter Agreement"), shall survive the
termination of this Sub-Advisory Agreement with regards to the
relationship between the Adviser and the Sub-Adviser. In
particular, and without limiting the foregoing, so long as the
Sub-Adviser is ready, willing and able to perform its duties
hereunder, the Adviser shall pay the Sub-Adviser the minimum fee
of $150,000, even if this Agreement has been terminated with
respect to the Trust.
10. SERVICES NOT EXCLUSIVE.
The services of the Sub-Adviser of the Fund hereunder are not to be
deemed exclusive, and the Sub- Adviser shall be free to render similar
services to others.
11. LIMITATION OF LIABILITY.
(a) THE TRUST. The term "Sophisticated Investors Funds" means and
refers to the Trustees from time to time serving under the Master
Trust Agreement. 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. The
execution and delivery of the 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.
(b) THE ADVISOR AND SUB-ADVISOR. It is expressly agreed that the
oblations of the Advisor and Sub- Adviser hereunder shall not be
binding upon any of the shareholders, nominees, officers, agents
or employees of the Advisor or Sub-Adviser, personally, but bind
only the assets and property of the Advisor and Sub-Adviser,
respectively. The execution and delivery of the Agreement have
been authorized by the directors and officers of the Advisor and
Sub-Adviser and signed by an authorized officer of the Advisor
and Sub-Adviser, acting as such, and neither such authorization
by such directors and officers 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
Advisor and Sub-Adviser, respectively. This limitation of
liability shall not be deemed to protect the shareholders,
nominees, officers, agents or employees of the Advisor and
Sub-Adviser against any liability to the Trust or its
shareholders to which they might otherwise be subject by reason
of any willful misfeasance, bad faith or gross negligence in the
performance of their duties or the reckless disregard of their
obligations and duties under this Agreement.
12. MISCELLANEOUS.
(a) Notice. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
parties at such address as such other parties may designate in
writing for the receipt of such notices.
(b) Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
(c) Applicable Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Texas.
(d) This Agreement and the Letter Agreement constitute the entire
agreement of the parties and supersede all prior or
contemporaneous written or oral negotiations, correspondence,
agreements and understandings, regarding the subject matter
hereof. To the extent that the Letter Agreement is inconsistent
with this Agreement, the terms of this Agreement shall control.
13. STANDARD OF CARE.
To the extent permitted under applicable law (including section 36 of
the 1940 Act), the Sub-Adviser will not be liable to the Trust or the
Adviser for any losses incurred by the Trust, the Fund or the Adviser
that arise out of or are in any way connected with any recommendation
or other act or failure to act of the Sub-Adviser under this
Agreement, including, but not limited to, any error in judgment with
respect to the Fund, so long as such recommendation or other act or
failure to act does not constitute a breach of the Sub-Adviser's
fiduciary duty to the Trust, the Fund or the adviser. Anything in this
section 13 or otherwise in this Agreement to the contrary
notwithstanding, however, nothing herein shall constitute a waiver or
limitation of any rights that the Trust, the Adviser or the Fund may
have under any Federal or state securities laws.
14. RIGHT OF SUB-ADVISER IN CORPORATE NAME
The phrase "Bonnel", which comprises a component of the Fund's name,
is a property right of the Sub- Adviser. The Trust, the Adviser and
the Fund agree and consent that so long as this Agreement is in
effect: (i) the Fund may use the phrase "Bonnel" as a component of its
corporate name (including corporate documents, sales literature, and
marketing) and the Trust, the Adviser and the Fund will not use that
name for any other purpose; (ii) none of them will purport to grant to
any third party the right to use the phrase "Bonnel" for any purpose;
(iii) the Sub-Adviser or any corporate affiliate of the Sub- Adviser
may use or grant to others the right to use the phrase "Bonnel" or any
combination or abbreviation thereof, as all or a portion of a
corporate or business name or for any commercial purpose, so long as
there in no material adverse effect to the Fund, and at the request of
the Sub- Adviser, the Trust, the Adviser and the Fund will take such
actions as may be required to provide their consent to such use or
grant; and (iv) on the termination of any investment advisory contract
into which the Sub-Adviser and the Trust, the Adviser and the Fund may
enter, the trust, the Adviser and the fund shall, on request by the
Sub-Adviser, promptly take such action, at their own expense, as may
be necessary to change its corporate name to one not containing
"Bonnel" and following such change, shall not use the phrase "Bonnel"
or any combination thereof, as a part of its corporate name, or for
any other commercial purpose, and shall use its best efforts to cause
its officers, directors and stockholders to take any and all actions
which the Sub-Adviser may request to effect the foregoing and recovery
to the Sub-Adviser any and all rights to such phrase.
IN WITNESS WHEREOF, the Adviser, the Trust and the Sub-Adviser have caused
this Agreement to be executed on the day and year first above written.
UNITED SERVICES ADVISORS, INC.
By: /S/ Bobby D. Duncan
ACCOLADE FUNDS
By: /S/ Bobby D. Duncan
BONNEL, INC.
By: /S/ Arthur J. Bonnel, Jr.
Arthur J. Bonnel, Jr., President
EX.10.4
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of the 21st day of September 1994, by and between
Accolade Funds, an unincorporated business trust organized under the laws of the
Commonwealth of Massachusetts, having its principal office and place of business
at 7900 Callaghan Road, San Antonio, Texas 78229 (hereinafter referred to as the
"Trust"), and United Shareholder Services, Inc., a Texas corporation authorized
to do business at 7900 Callaghan Road, San Antonio, Texas 78229 (hereinafter
referred to as the "Transfer Agent").
WITNESSETH:
That for and in consideration of the mutual promises hereinafter set forth,
the Trust on behalf of each Sub-Trust and the Transfer Agent agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the
following meanings:
(a) "Authorized Person" shall be deemed to include the President, any
Vice President, the Secretary, Treasurer, the persons listed in
Appendix A hereto, or any other person, whether or not any such
person is an Officer or employee of the Trust, duly authorized to
give Oral Instructions and Written Instructions on behalf of the
Trust as indicated in a certification pursuant to Section 6(d) or
6(e) hereof as may be received by the Transfer Agent from time to
time;
(b) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this Agreement
to be given to the Transfer Agent, which is actually received by
the Transfer Agent and signed on behalf of the Trust by any two
Officers thereof;
(c) "Commission" shall have the meaning given it in the 1940 Act;
(d) "Custodian" refers to the custodian of all of the securities and
other moneys owned by the Trust;
(e) "Declaration of Trust" shall mean the Master Trust Agreement and
Declaration of Trust of Accolade Funds dated April 15, 1993, as
the same is amended from time to time;
(f) "Officer" shall mean the President, Vice President, Secretary and
Treasurer;
(g) "Oral Instructions" shall mean instructions orally communicated
and actually received by the Transfer Agent from an Authorized
Person or from a person reasonably believed by the Transfer Agent
to be an Authorized Person;
(h) "Prospectus" shall mean the most current effective prospectus
relating to the particular Sub-Trust's Shares under the
Securities Act of 1933, as amended;
(i) "Shares" refers to the transferable units of interest into which
the beneficial interest in the Trust or any Sub-Trust of the
Trust (as the context may require) shall be divided from time to
time;
(j) "Shareholder" means a record owner of Shares;
(k) "Sub-Trust" shall mean each series of Shares established and
designated under or in accordance with the provisions of Article
IV of the Declaration of Trust, including the SIF Government
Money Fund and the SIF Government Short-Term Fund and such other
separate and distinct sub-trusts as may from time to time be
created by the Trust;
(l) "Trust" refers to the Massachusetts business trust established
under the Declaration of Trust;
(m) "Trustees" or "Board of Trustees" refers to the duly elected
Trustees of the Trust;
(n) "Written Instruction" shall mean a written communication actually
received by the Transfer Agent from an Authorized Person or from
a person reasonably believed by the Transfer Agent to be an
Authorized Person by telex or any other such system whereby the
receiver of such communication is able to verify through codes or
otherwise with a reasonable degree of certainty the authenticity
of the sender of such communication; and
(o) The "1940 Act" refers to the Investment Company Act of 1940 and
regulations thereunder.
2. REPRESENTATION OF TRANSFER AGENT. The Transfer Agent does hereby
represent and warrant to the Trust that it is duly registered as a
transfer agent as provided in Section 17A(C) of the Securities
Exchange Act of 1934.
3. APPOINTMENT OF THE TRANSFER AGENT. The Trust hereby appoints and
constitutes the Transfer Agent as transfer agent for all of the Shares
of each Sub-Trust of the Trust in existence as of the date hereof, and
as shareholder servicing agent for the Trust and the Transfer Agent
accepts such appointments and agrees to perform the duties herein set
forth. If the Board of Trustees, pursuant to Article IV of the
Declaration of the Trust, hereafter designates and establishes a new
Sub-Trust, the Transfer Agent agrees that it will act as transfer
agent and shareholders servicing agent for such new Sub-Trust on the
terms set forth herein. The Trust shall cause a written notice to be
sent to the Transfer Agent to the effect that it has established a new
Sub-Trust and that it appoints the Transfer Agent as transfer agent
and shareholder servicing agent for the new Sub-Trust. Compensation of
the Transfer Agent shall be established pursuant to Section 4 hereof.
The Trust shall be obligated to provide such Documents and Further
Documents as are specified in Sections 5 and 6 hereof as the Transfer
Agent may reasonably request.
4. COMPENSATION.
(a) Each Sub-Trust will initially compensate the Transfer Agent for
its services rendered under this Agreement in accordance with the
fees set forth in the Fee Schedule annexed hereto and
incorporated herein for the existing Sub-Trusts. The Fee Schedule
shall specify out-of-pocket disbursements of the Transfer Agent
for which the Transfer Agent shall be entitled to bill
separately. No sub-Trust shall be liable for any expenses, debts
or obligations arising under this Agreement of any other
Sub-Trust.
(b) The parties hereto will agree upon the compensation for acting as
Transfer Agent for any Sub-Trust hereafter designated and
established at the time that the Transfer Agent commences serving
as such for said Sub-Trust, and such agreement shall be reflected
in a Fee Schedule for that Sub-Trust, dated and signed by an
authorized officer of each party hereto, to be attached to this
Agreement.
(c) Any compensation agreed to hereunder may be adjusted from time to
time by attaching a revised Fee Schedule, approved by the Board
of Trustees of the Trust and dated and signed by an Officer of
each party hereto, to this Agreement.
(d) The Transfer Agent will bill the Trust for each Sub-Trust as soon
as practicable after the end of each calendar month, and said
billings will be detailed in accordance with the Fee Schedule for
each Sub- Trust. The Trust will promptly pay to the Transfer
Agent the amount of such bill.
5. DOCUMENTS. In connection with the appointment of the Transfer Agent,
the Trust shall, on or before the date this Agreement goes into
effect, file with the Transfer Agent the following documents:
(a) A copy of the Declaration of Trust as then in effect;
(b) A copy of the By-laws of the Trust, as then in effect;
(c) A copy of the resolution of the Trustees authorizing this
Agreement;
(d) If applicable, a specimen of the certificate for Shares of each
Sub-Trust of the Trust in the form approved by the Trustees, with
a certificate of the Secretary of the Trust as to such approval;
(e) All account application forms and other documents relating to
Shareholder accounts or relating to any plan, program or service
offered by the Trust;
(f) If applicable, a list of Shareholders of the existing Sub-Trusts
with the name, address and tax identification number of each
Shareholder, and the number of Shares of the existing Sub-Trusts
held by each, certificate numbers and denominations (if any
certificates have been issued), lists of any accounts against
which stops have been placed, together with the reasons for said
stops, and the number of Shares redeemed by the Sub-Trusts; and
(g) A copy of the opinion of counsel for the Trust with respect to
the validity of the Shares and the status of such shares under
the Securities Act of 1933.
6. FURTHER DOCUMENTATION. The Trust will also furnish from time to time
the following documents:
(a) Each resolution of the Trustees authorizing the original issue of
Shares or establishing a new Sub- Trust;
(b) Each Registration Statement filed with the Commission, and all
amendments and orders with respect thereto, in effect with
respect to the sale of Shares of the Trust;
(c) A copy of each amendment to the Declaration of Trust by the
By-laws of the Trust;
(d) Copies of each vote of the Trustees designating Authorized
Persons to give instructions to the Transfer Agent;
(e) Certificates as to any change in an Officer or Trustee of the
Trust;
(f) Specimens of all new certificates for Shares, accompanied by the
Trustees' resolutions approving such forms; and
(g) Such other certificates, documents or opinions as may mutually be
deemed necessary or appropriate for the Transfer Agent in the
proper performance of its duties.
7. REPRESENTATION OF THE TRUST. The Trust represents to the Transfer
Agent that, as of the date hereof, all outstanding Shares are validly
issued, fully paid and non-assessable by the Trust. The Trust may
hereafter issue an unlimited number of Shares of each Sub-Trust
presently existing or hereafter created. When Shares are hereafter
issued in accordance with the terms of the Prospectus, such Shares
shall be validly issued, fully paid and non-assessable by the Trust.
8. DUTIES OF THE TRANSFER AGENT.
(a) The Transfer Agent shall be responsible for administering and/or
performing transfer agent functions, for acting as service agent
in connection with dividend and distribution functions and for
performing shareholder account administrative agent functions in
connection with the issuance, transfer and redemption or
repurchase (including coordination with the Custodian) of the
Trust's Shares. The details of the operating standards and
procedures to be followed shall be determined from time to time
by agreement between the Transfer Agent and the Trust.
(b) The Transfer Agent shall create and maintain all necessary
records including those specified in Section 17 hereof, in
accordance with all applicable laws, rules and regulations,
including but not limited to records required by Section 31(a) of
the 1940 Act, and those records pertaining to the various
functions performed by it hereunder. All records shall be
available for inspection and use by the Trust. Where applicable,
such records shall be maintained by the Transfer Agent for the
periods and in the places required by Rule 31a-2 under the 1940
Act. All such records shall be the property of the Trust and the
Transfer Agent shall deliver such records to the Trust or its
designee upon request.
(c) The Transfer Agent shall make available during regular business
hours all records and other data created and maintained pursuant
to this Agreement for reasonable audit and inspection by the
Trust, or any person retained by the Trust. Upon reasonable
notice by the Trust, the Transfer Agent shall make available
during regular business hours its facilities and premises
employed in connection with its performance of this Agreement for
reasonable visitation by the Trust, or any person retained by the
Trust.
(d) At the expense of the Trust, the Transfer Agent shall maintain an
adequate supply of blank share certificates for each Sub-Trust
providing for the issuance of certificates to meet the Transfer
Agent's requirements therefor. Such share certificates shall be
properly signed by facsimile. The Trust agrees that,
notwithstanding; the death, resignation, or removal of any
officer of the Trust whose signature appears on such
certificates, the Transfer Agent may continue to countersign
certificates which bear such signatures until other directed by
the Trust. Share certificates may be issued and accounted for
entirely by the Transfer Agent and do not require any third party
registrar or other endorsing party.
(e) The Transfer Agent shall issue replacement share certificates in
lieu of certificates which have been lost, stolen or destroyed,
without any further action by the Board of Trustees or any
Officer of the Trust, upon receipt by the Transfer Agent of
properly executed affidavits and lost certificate bonds, in form
satisfactory to the Transfer Agent, with the Trust and the
Transfer Agent as obligees under replacement certificates without
requiring the affidavits and lost certificate bonds described
above and the Transfer Agent agrees to indemnify the Trust
against any and all losses or claims which may arise by reason of
the issuance of such new certificates in the place of the one
allegedly lost, stolen or destroyed.
(f) The Transfer Agent shall also maintain a record of each
certificate issued, the number of Shares represented thereby and
the holder of record. With respect to shares held in open
account, i.e. no certificate being issued with respect thereto,
the Transfer Agent shall maintain comparable records of the
record holders thereof, including their addresses and tax
identification numbers. The Transfer Agent shall further maintain
a stop transfer record on lost and/or replaced certificates.
(g) The Transfer Agent will address and mail all account
communication by the Trust to its Shareholders, including reports
to Shareholders and dividend and distribution notices.
(h) The Transfer Agent will investigate all Shareholder inquiries
relating to Shareholder accounts and will answer all
correspondence from Shareholders, securities brokers and other
relating to its duties hereunder and such other correspondence as
may from time to time be mutually agreed upon between the
Transfer Agent and the Trust.
(i) The Transfer Agent shall furnish the Trust state by state
registration reports, such period and special reports as the
Trust may reasonably request, and such other information,
including Shareholder lists and statistical information
concerning accounts as may be agreed upon from time to time
between the Trust and the Transfer Agent.
(j) In connection with special meetings of Shareholders, the Transfer
Agent will prepare Shareholder lists, process and tabulate
returned proxy cards, report on proxies voted prior to meetings,
act as teller at meetings and certify Shares voted at meetings.
9. SALE OF TRUST SHARES.
(a) Whenever the Trust shall sell or cause to be sold any Shares of a
Sub-Trust, the Trust shall deliver or cause to be delivered to
the Transfer Agent a Certificate duly specifying: (i) the name of
the Sub-Trust whose Shares were sold; (ii) the number of Shares
sold, trade date, and price; (iii) the amount of money to be
delivered to the Custodian for the sale of such Shares and
specifically allocated to such Sub-Trust; and (iv) in the case of
a new account, a new account application or sufficient
information to establish an account.
(b) The Transfer Agent will, upon receipt by it of a check or other
payment identified by it as an investment in Shares of one of the
Sub-Trusts and drawn or endorsed to the Transfer Agent as agent
for, or identified as being for the account of, one of the
Sub-Trusts, promptly deposit such check or other payment to the
appropriate account, postings necessary to reflect the
investment. The Transfer Agent will notify the Trust, or its
designee, and the Custodian of all purchases and related account
adjustments.
(c) Under procedures as established by mutual agreement between the
Trust and the Transfer Agent, the Transfer Agent shall issue to
the purchaser or his authorized agent such Shares as he is
entitled to receive, based on the appropriate net asset value of
the Sub-Trust's Shares, determined in accordance with applicable
Federal law or regulation. In issuing Shares to a purchaser or
his authorized agent, the Transfer Agent shall be entitled to
rely upon the latest directions, if any, previously received by
the Transfer Agent from the purchaser or his authorized agent
concerning the delivery of such Shares.
(d) The Transfer Agent shall not be required to issue any Shares of
the Trust where it has received a Written Instruction from the
Trust or written notification from any appropriate Federal or
state authority that the sale of the Shares of the Sub-Trust in
question has been suspended or discontinued, and the Transfer
Agent shall be entitled to rely upon such written Instructions or
written notification.
(e) Upon the issuance of any Shares of any Sub-Trust in accordance
with the foregoing provision of this Section, the Transfer Agent
shall not be responsible for the payment of any original issue or
other taxes required to be paid by the Trust in connection with
such issuance.
(f) The Transfer Agent may establish such additional rules and
regulations governing the transfer or registration of Shares as
it may deem advisable and consistent with such rules and
regulations generally adopted by transfer agents.
10. RETURNED CHECKS. In the event that any check or other order for the
transfer of money is returned unpaid for any reason, the Transfer
Agent will take such steps as the Transfer Agent may, in its
discretion, deem appropriate to protect the Trust from financial loss
or as the Trust or its designee may instruct. Provided that the
standard procedures, as agreed upon from time to time, between the
Trust and the Transfer Agent, regarding purchases and redemptions of
shares, are adhered to by the Transfer Agent, the Transfer Agent shall
not be liable for any loss suffered by the Sub-Trust as a result of
returned or unpaid purchase or redemption transactions. Legal or other
expenses incurred to collect amounts owed to a Sub-Trust as a
consequence of returned or unpaid purchase or redemption transaction
shall be an expense of that Sub-Trust. A Sub-Trust may, at its option,
purchase insurance to reduce its potential losses from collection
activities.
11. REDEMPTIONS. Shares of any Sub-Trust may be redeemed in accordance
with the procedures set forth in the Prospectus of the Trust and the
Transfer Agent will duly process all redemption requests.
12. TRANSFER AND EXCHANGES. The Transfer Agent is authorized to review and
process transfers of Shares of each Sub-Trust, exchanges between
Sub-Trusts on the records of the Sub-Trusts maintained by the Transfer
Agent, and exchanges between the Trust and other funds as may be
permitted by the prospectus of the Trust. If Shares to be transferred
are represented by outstanding certificates, the Transfer Agent will,
upon surrender to it of the certificates in proper form for transfer,
and upon cancellation thereof, countersign and issue new certificates
for a like number of Shares and deliver the same. If the Shares to be
transferred are not represented by outstanding certificates, the
Transfer Agent will, upon an order therefor by or on behalf of the
registered holder thereof in proper form, credit the same to the
transferee on its books. If Shares are to be exchanged for Shares of
another fund, the Transfer Agent will process such exchange in the
same manner as a redemption of sale of Shares, except that it may in
its discretion waive requirements for information and documentation.
13. RIGHT TO SEE ASSURANCES. The Transfer Agent reserves the right to
refuse to transfer or redeem Shares until it is satisfied that the
requested transfer or redemption is legally authorized, and it shall
incur no liability for the refusal, in good faith, to make transfers
or redemptions which the Transfer Agent, in its judgment, deems
improper or unauthorized, or until it is satisfied that there is no
basis for any claim adverse to such transfer or redemption. The
Transfer Agent may, in effecting transfers, rely upon the provisions
of the Uniform Act for the Simplification of Fiduciary Security
Transfers or the Uniform Commercial Code, as the same may be amended
from time to time, which in the opinion of legal counsel for the Trust
or of its own legal counsel protect it in not requiring certain
documents in connection with the transfer or redemption of Shares of
any Sub- Trust, and the Trust shall indemnify the Transfer Agent for
any act done or omitted by it in reliance upon such laws of opinions
of counsel of the Trust or its own counsel.
14. DISTRIBUTIONS.
(a) The Trust will promptly notify the Transfer Agent of the
declaration of any dividend or distribution. The Trust shall
furnish to the Transfer Agent a resolution of the Board of
Trustees of the Trust certified by the Secretary; (i) authorizing
the declaration of dividends on a specified period basis and
authorizing the Transfer Agent to rely on Oral Instructions or a
Certificate specifying the date of the declaration of such
dividend or distribution, the date of payment thereof, the record
date as of which Shareholders entitled to payment shall be
determined and the amount payable per share to Shareholders of
record as of that date and the total amount payable to the
Transfer Agent of the Trust on the payment date; or (ii) setting
forth the date of the declaration of any dividend or distribution
by a Sub-Trust, the date of payment thereof, the record date as
of which Shareholders entitled to payment shall be determined,
and the amount payable per share to the Shareholders of record as
of that date and the total amount payable to the Transfer Agent
on the payment date.
(b) The Transfer Agent, on behalf of the Trust, shall instruct the
Custodian to place in a dividend disbursing account funds equal
to the cash amount of any dividend or distribution to be paid
out. The Transfer Agent will calculate, prepare and mail checks
to, or (where appropriate) credit such dividend or distribution
to the account of, Sub-Trust Shareholders, and maintain and
safeguard all underlying records.
(c) The Transfer Agent will replace lost checks at its discretion and
in conformity with regular business practices.
(d) The Transfer Agent will maintain all records necessary to reflect
the crediting of dividends which are reinvested in Shares of the
Trust, including without limitation daily dividends.
(e) The Transfer Agent shall not be liable for any improper payments
made in accordance with a resolution of the Board of Trustees of
the Trust.
(f) If the Transfer Agent shall not receive from the Custodian
sufficient cash to make payment to all shareholders of the Trust
as of the record date, the Transfer Agent shall, upon notifying
the Trust, withhold payment to all Shareholders of record as of
the record date until such sufficient cash is provided to the
Transfer Agent.
15. OTHER DUTIES. In addition to the duties expressly provided for herein,
the Transfer Agent shall perform such other duties and functions and
shall be paid such amounts therefor as may from time to time be agreed
in writing.
16. TAXES. It is understood that the Transfer Agent shall file such
appropriate information returns concerning the payment of dividends
and capital gain distributions with the proper Federal, State and
local authorities as are required by law to be filed by the Trust and
shall withhold such sums as are required to be withheld by applicable
law.
17. BOOKS AND RECORDS.
(a) The Transfer Agent shall maintain records showing for each
Shareholder's account the following: (i) names, addresses and tax
identification numbers; (ii) number of Shares held; (iii)
historical information regarding the account of each Shareholder,
including dividends paid and date and price of all transactions
on a Shareholder's account; (iv) any stop or restraining order
placed against a Shareholder's account; (v) information with
respect to withholdings; (vi) any capital gain or dividend
reinvestment order, plan application, dividend address and
correspondence relating to the current maintenance of a
Shareholder's account; (vii) certificate numbers and
denominations for any Shareholders holding certificates; (viii)
any information required in order for the Transfer Agent to
perform the calculations contemplated or required by this
Agreement; and (ix) such other information and data as may be
required by applicable law.
(b) Any records required to be maintained by Rule 31a-1 under the
1940 Act will be preserved for the periods prescribed in Rule
31a-2 under the 1940 Act. Such records may be inspected by the
Trust at reasonable times. The Transfer Agent may, at its option
at any time, and shall forthwith upon the Trust's demand, turn
over to the Trust and cease to retain in the Transfer Agent's
files, records and documents created and maintained by the
Transfer Agent in performance of its services or for its
protection. At the end of the six-year retention period, such
records and documents will either be turned over to the Trust, or
destroyed in accordance with the Trust's authorization.
18. RELIANCE BY TRANSFER AGENT; INSTRUCTIONS.
(a) The Transfer Agent shall be protected in acting upon any paper or
document believed by it to be genuine and to have been signed by
an Authorized Person and shall not be held to have any notice of
any change of authority of any person until receipt of written
certification thereof from the Trust. It shall also be protected
in processing Share certificates which it reasonably believes to
bear the proper manual or facsimile signatures.
(b) At any time the Transfer Agent may apply to any Authorized Person
of the Trust for Written Instructions, and, at the expense of the
Trust, may seek advice from legal counsel for the Trust or its
own legal counsel, with respect to any matter arising in
connection with this Agreement, and it shall not be liable for
any action taken or not taken or suffered by it in good faith in
accordance with such Written Instructions or with the opinion of
such counsel. In addition, the Transfer Agent, its officers,
agents or employees, shall accept instructions or requests given
to them by any person representing or acting on behalf of the
Trust only if said representative is known by the Transfer Agent,
its officers, agents or employees, to be an Authorized Person.
The Transfer Agent shall have no duty or obligation to inquire
into, nor shall the Transfer Agent be responsible for, the
legality of any act done by it upon the request or direction of
Authorized Persons of the Trust.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, the Transfer Agent shall be under no duty or
obligation to inquire into, and shall not be liable for: (i) the
legality of the issue or sale of any Shares of the Trust, or the
sufficiency of the amount to be received therefor; (ii) the
legality of the redemption of any Shares of the Trust, or the
propriety of the amount to be paid therefor; (iii) the legality
of the declaration of any dividend by the Trust, or the legality
of the issue of any Shares of the Trust in payment of any stock
dividend; or (iv) the legality of any recapitalization of
readjustment of the Shares of the Trust.
19. STANDARD OF CARE AND INDEMNIFICATION.
(a) The Transfer Agent may, in connection with this Agreement, employ
agents or attorneys in fact, and shall not be liable for any loss
arising out of or in connection with its actions under this
Agreement so long as it acts in good faith and with due
diligence, and is not negligent or guilty of any willfully
misconduct.
(b) The Trust hereby agrees to indemnify and hold harmless the
Transfer Agent from and against any and all claims, demands,
expenses and liabilities (whether with or without basis in fact
of law) of any and every nature which the Transfer Agent may
sustain or incur or which may be asserted against the Transfer
Agent by any person by reason of, or as a result of: (i) any
action taken or omitted to be taken by the Transfer Agent in good
faith in reliance upon any Certificate, instrument, order or
stock certificate believed by it to be genuine and to be signed,
countersigned or executed by any duly authorized person, upon the
Oral Instructions or Written Instructions of an Authorized Person
of the Trust or upon the opinion of legal counsel for the Trust
or its own counsel; or (ii) any good action taken or permitted to
be taken by the Transfer Agent in connection with its appointment
in good faith in reliance upon any law, act, regulation or
interpretation of the same even though the same may thereafter
have been altered, changed, amended or repealed. However,
indemnification hereunder shall not apply to actions or omissions
of the Transfer Agent or its directors, officers, employees or
agents in cases of its own negligence, willful misconduct, bad
faith, or reckless disregard of its or their own duties
hereunder.
20. AFFILIATION BETWEEN TRUST AND TRANSFER AGENT. It is understood that
the Trustees, officers, employees, agents and Shareholders of the
Trust are or may be interested in the Transfer Agent as directors,
officers, employees, agents, stockholders, or otherwise, and that the
directors, officers, employees, agents or stockholders of the Transfer
Agent may be interest in the Trust as Trustees, officers, employees,
agents, Shareholders, or otherwise. The fact that the officers,
Trustees, employees, agents or Shareholders of the Trust are or may be
affiliated persons (as defined in the 1940 Act) of the Transfer Agent
shall not affect the validity of this Agreement.
21. TERM.
(a) This Agreement shall become effective on the date hereof (the
"Effective Date") and shall continue in effect until September
21, 1994 and thereafter with respect to each Sub-Trust, so long
as such continuance with respect to any such Sub-Trust is
specifically approved on or prior to the anniversary date of the
Effective Date and at least annually thereafter by either a
majority of the Trustees or the vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of
such Sub-Trust.
(b) This Agreement may be terminated at any time without payment of
any penalty by vote of the Trustees of the Trust or by the
Transfer Agent on sixty (60) days' written notice to the other
party. In the event such notice is given by the Trust, it shall
be accompanied by a resolution of the Board of Trustees,
certified by the Secretary, electing to terminate this Agreement
and designating a successor transfer agent.
22. AMENDMENT. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the
formality of this Agreement, and (i) authorized or approved by a
resolution of the Board of Trustees, including a majority of the
Trustees of the Trust who are not interested persons of the Trust as
defined in the 1940 Act, or (ii) authorized and approved by such other
procedures as may be permitted or required by the 1940 Act.
23. SUBCONTRACTING. The Trust agrees that the Transfer Agent may, in its
discretion, subcontract for certain of the services to be provided
hereunder.
24. SECURITY. The Transfer Agent represents and warrants that, to the best
of its knowledge, the various procedures and systems which the
Transfer Agent has implemented with regard to safeguarding from loss
or damage attributable to fire, theft or any other cause (including
provision for twenty-four hours a day restricted access) the Trust's
blank checks, records and other data and the Transfer Agent's records,
data, equipment, facilities and other property used in the performance
of its obligations hereunder are adequate and that it will make such
changes therein from time to time as in its judgment are required for
the secure performance of its obligations hereunder. The parties shall
review such systems and procedures on a periodic basis.
25. MISCELLANEOUS.
(a) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Trust or the Transfer Agent,
shall be sufficiently given if addressed to that party and mailed
or delivered to it at its office set forth below or at such other
place as it may from time to time designate in writing.
To the Trust: To The Transfer Agent:
Accolade Funds United Shareholder Services, Inc.
7900 Callaghan Road 7900 Callaghan Road
San Antonio, Texas 78229 San Antonio, Texas 78229
Attention: President Attention: President
(b) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by
the Trust or the Transfer Agent without the written consent of
the other.
(c) This Agreement shall be construed in accordance with the laws of
the State of Texas.
(d) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
26. LIMITATION OF LIABILITY. The term "Accolade Funds" means and refers to
the Trustees from time to time serving under the Master Trust
Agreement of the Trust dated April 15, 1993, as the same may
subsequently thereto have been, or subsequently hereto be, amended. It
is expressly agreed that obligations of the Trust hereunder shall not
be binding upon any Trustee, Shareholder, 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. The
execution and delivery of this Agreement have been authorized by the
Trustees and signed by an authorized officer of the Trust, acting as
such, and neither such authorization nor such execution and delivery
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 the Master Trust
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunder duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
Attest: ACCOLADE FUNDS
By:/S/ Thomas Tays By:/S/ Bobby D. Duncan
Attest: UNITED SHAREHOLDER SERVICES, INC.
By:/S/ Thomas Tays By:/S/ Bobby D. Duncan
APPENDIX A
I, Bobby D. Duncan, Executive Vice President, Chief Operating Officer,
and I, Charles W. Lutter, Jr., Secretary of ACCOLADE FUNDS, a Massachusetts
business trust (the "Trust"), do hereby certify that:
The following individuals have been duly authorized by the Board of
Trustees of the Trust in conformity with the Trust's Declaration of Trust and
By-Laws to give Oral Instructions and Written Instructions on behalf of the
Trust, and the signatures set forth opposite their respective names are their
true and correct signatures:
NAME POSITION SIGNATURE
- - - ----------------------- ---------------------- ---------------------
Frank E. Holmes President and Chief
Executive Officer /S/ Frank E. Holmes
Elizabeth A. Applin Vice President,
Shareholder Services /S/
Charles W. Lutter, Jr. Vice President and /S/ Charles W. Lutter, Jr.
Secretary
Bobby D. Duncan Executive Vice President,
Chief Financial Officer,
and Chief Operating
Officer /S/ Bobby D. Duncan
Kelli D. Shomaker Vice President, Chief
Accounting Officer
and Treasurer /S/ Kelli D. Shomaker
FEE SCHEDULE
As compensation for all services rendered and to be rendered by the
Transfer Agent hereunder, each Sub-Trust (including SIF Government Money Fund
and SIF Government Short-Term Fund) shall pay to the Transfer Agent an annual
fee per investor account. For all Funds, including equity, bond and "money
market" funds, the annual fee is $20.00 per account. At the discretion of the
Board of Trustees of the Trust, the annual fees may be increased in future
years.
The Transfer Agent shall be entitled to bill the Trust separately for all
out-of-pocket disbursements incurred at the direction of the Trust, including,
without limitation:
(a) costs of postage, envelopes, statements, confirmations, forms, labels
and any other materials required to be sent to shareholders;
(b) costs of stationery and postage for communications with individual
shareholders regarding investment accounts;
(c) costs of microfilm and microfilm storage;
(d) costs of storage of records to be maintained under applicable law;
(e) telephone and line charges, including "800 service", used by
shareholders to contact the Transfer Agent, telephone equipment and
maintenance contracts;
(f) processing forms and printing thereof;
(g) other usual and customary miscellaneous items;
(h) voice response unit;
(i) electronic image storage of communications.
EX 10.5
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 20th day of January, 1995 among UNITED SERVICES
ADVISORS, INC., a corporation organized under the laws of the State of Texas
(the "Adviser"), UNITED SERVICES FUNDS, a Massachusetts business trust having
its principal place of business in San Antonio, Texas (the "Trust"), on behalf
of the China Region Opportunity Fund (the "Fund"), a series of shares of the
Trust, and Batterymarch Financial Management, Inc. ("BFM, Inc."), whose
principal place of business is Boston, Massachusetts (the "Sub-Adviser").
WHEREAS, the Adviser is engaged in the business of rendering investment
management services to the Trust; and
WHEREAS, the Trust is an open-end management investment company and is so
registered under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Trust is operated as a "series company" within the meaning of
Rule 18f-2 under the 1940 Act and has fifteen separate series of shares of
beneficial interest, one of which series is the Fund.
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF SUB-ADVISER.
The Sub-Adviser is hereby appointed to provide investment advisory
services to the Fund for the period and on the terms herein set forth.
The Sub-Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. DUTIES OF SUB-ADVISER.
(a) The Sub-Adviser is hereby authorized and directed and hereby
agrees, subject to the stated investment objective and policies
of the Fund as set forth in the Fund's Prospectus (as defined
below) and subject to the supervision of the Adviser and the
Board of Trustees of the Trust, (i) to develop, recommend and
implement such investment program and strategy for the Fund as
may from time to time in the circumstances appear most
appropriate to the achievement of the investment objective of the
Fund as stated in the aforesaid Prospectus, (ii) to provide
research and analysis relative to the investment program and
investments of the Fund, (iii) to determine what securities
should be purchased and sold and what portion of the assets of
the Fund should be held in cash or cash equivalents and (iv) to
monitor on a continuing basis the performance of the portfolio
securities of the Fund. The Sub-Adviser will advise the Trust's
custodian and the Adviser on a prompt basis of each purchase and
sale of a portfolio security specifying the name of the issuer,
the description and amount or number of shares of the security
purchased, the market price, commission and gross or net price,
trade date, settlement date and identity of the effecting broker
or dealer. From time to time, as the Trustees of the Trust or the
Adviser may reasonably request, the Sub-Adviser will furnish to
the Trust's officers and to each of its Trustees reports on
portfolio transactions and reports on issues of securities held
in the portfolio, all in such detail as the Trust or the Adviser
may reasonably request. The Sub-Adviser will also inform the
Trust's officers and Trustees on a current basis of changes in
investment strategy or tactics. The Sub-Adviser will make its
officers and employees available to meet with the Trust's
officers and Trustees on due notice to review the investments and
investment program of the Fund.
The Sub-Adviser shall place all orders for the purchase and sale
of portfolio securities for the account of the Fund with brokers
or dealers selected by the Sub-Adviser, although the Trust will
pay the actual brokerage commissions and any transfer taxes with
respect to transactions in the portfolio securities of the Trust.
The Sub-Adviser is authorized to submit any such order
collectively with orders on behalf of other accounts under its
management, provided that the Sub-Adviser shall have determined
that such action is in the best interest of the Fund and is in
accordance with applicable law, including, without limitation,
Rule 17d-1 under the 1940 Act. In executing portfolio
transactions and selecting brokers or dealers, the Sub- Adviser
will use its best efforts to seek on behalf of the Fund the best
overall terms available. In assessing the best overall terms
available for any transaction, the Sub-Adviser 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 Sub-Adviser may also
consider the brokerage and research services (as those terms
defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Fund and/or other accounts over which the
Sub-Adviser or an affiliate of the Sub-Adviser exercises
investment discretion. The Sub-Adviser is authorized to pay to a
broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for
the 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 Sub-Adviser 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. An affiliated person of the
Sub-Adviser may provide brokerage services to the Fund provided
that the Sub-Adviser shall have determined that such action is
consistent with its obligation to seek the best overall terms
available and is in accordance with applicable law, including,
without limitation, Section 17(e) of the 1940 Act. The foregoing
shall not be deemed to authorize an affiliated person of the
Sub-Adviser to enter into transactions with the Fund as
principal.
In the performance of its duties hereunder, the Sub-Adviser is
and shall be an independent contractor and unless otherwise
expressly provided or authorized shall have no authority to act
for or represent the Trust in any way or otherwise be deemed to
be an agent of the Trust or of the Adviser.
(b) Delivery of Documents. The Adviser will furnish upon request or
has furnished the Sub- Adviser with true copies of each of the
following:
(i) The Trust's Master Trust Agreement dated July 31, 1984, as
filed with the Secretary of State of the Commonwealth of
Massachusetts and all amendments thereto (such Master Trust
Agreement, as presently in effect and as it shall from time
to time be amended, is herein called the "Master Trust
Agreement");
(ii) The Trust's By-Laws and amendments thereto (such By-Laws, as
presently in effect and as it shall from time to time be
amended, is herein called the "By-Laws");
(iii)Resolutions of the Trust's Board of Trustees authorizing
the appointment of the Adviser and Sub-Adviser and approving
the Advisory Agreement and this Agreement;
(iv) The most recent Post-Effective Amendment to the Trust's
Registration Statement on Form N-1A under the Securities Act
of 1933 as amended ("1933 Act") and the 1940 Act as filed
with the Securities and Exchange Commission;
(v) The Fund's most recent prospectus (such prospectus, as
presently in effect and all amendments and supplements
thereto being referred to herein as the "Prospectus"); and
(vi) All resolutions of the Board of Trustees of the Trust
pertaining to the management of the assets of the Fund.
During the term of this Agreement the Adviser shall not use or
implement any amendment or supplement that relates to or affects the
obligations of the Sub-Adviser hereunder if the Sub-Adviser reasonably
objects in writing within five business days after delivery thereof
(or such shorter period of time as the Adviser shall specify upon
delivery, if such shorter period of time is reasonable under the
circumstances).
3. ADVISORY FEE.
(a) For the services to be provided to the Fund by the Sub-Adviser as
provided in Paragraph 2 hereof, the Adviser will pay the
Sub-Adviser a monthly fee as soon as practical after the last day
of each calendar month, which fee shall be paid at a rate set
forth below upon the Monthly Average Net Assets (as defined in
subparagraph (C) below) of the Fund for such calendar month. The
Sub-Advisers fee will be 1.00% (100 basis points) on an
annualized basis, with no minimum fee.
(b) In the case of termination of the Agreement during any calendar
month, the fee with respect to 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 the Fund for the business days during which
it is so in effect.
(c) The "Monthly Average Net Assets" of the Fund for any calendar
month shall be equal to the quotient produced by dividing (i) the
sum of the net assets of the 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 Master Trust Agreement, as of the close of business on
each day during such month that the Fund was open for business,
by (ii) the number of such days.
4. EXPENSES.
During the term of this Agreement, the Sub-Adviser will bear all
expenses incurred by it in the performance of its duties hereunder.
5. FUND TRANSACTIONS.
The Sub-Adviser agrees that neither it nor any of its trustees,
employees, officers or directors will take any long or short term
position in the shares of the Fund; provided, however, that such
prohibition shall not prevent the purchase of shares of the Fund 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.
6. REPRESENTATION AND WARRANTY.
The Sub-Adviser hereby represents and warrants to the Adviser that it
is duly registered as an investment adviser, or is exempt from
registration, under the Investment Advisor's Act of 1940, as amended,
and that it shall maintain such registration or exemption at all times
during which this Agreement is in effect.
7. LIABILITY OF SUB-ADVISER.
In the performance of its duties under this Agreement, the Sub-Adviser
shall act in conformity with and in compliance with the requirements
of the 1940 Act and all other applicable U.S. Federal and state laws
and regulations and shall not cause the Fund to take any action that
would require the Fund or any affiliated person thereof to register as
a commodity pool operator under the terms of the U.S. Commodity
Exchange Act, as amended (it being understood by the Sub-Adviser that
a notice of eligibility has been filed on behalf of the Trust pursuant
to Rule 4.5 promulgated under said Act). The Sub-Adviser shall be
responsible for maintaining such procedures as may be reasonably
necessary to ensure that the investment and reinvestment of the Fund's
assets are made in compliance with its investment objectives and
policies and with all applicable statues and regulations. No provision
of this Agreement shall be deemed to protect the Sub-Adviser 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.
8. REPORTS.
The Sub-Adviser shall render to the Board of Trustees of the Trust
such periodic and special reports as the Board of Trustees may
reasonably request with respect to matters relating to duties of the
Sub- Adviser set forth herein.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective upon the date
hereof and shall continue in full force and effect from year to
year thereafter so long as such continuance is 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.
(b) Termination. This Agreement may be terminated at any time,
without payment of any penalty (i) by vote of the Trustees of the
Trust or by vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act) on sixty (60)
days' written notice to the other parties, (ii) by the Adviser on
sixty (60) days' written notice to the other parties or (iii) by
the Sub-Adviser on ninety (90) days' written notice to the other
parties.
(c) Automatic Termination. This Agreement shall automatically and
immediately terminate in the event of its assignment or upon
expiration of the Advisory Agreement now or hereafter in effect
between the Adviser and the Trust with respect to the Fund.
10. SERVICES NOT EXCLUSIVE.
The services of the Sub-Adviser of the Fund hereunder are not to be
deemed exclusive, and the Sub- Adviser shall be free to render similar
services to others.
11. LIMITATION OF LIABILITY.
(a) The term "United Services Funds" means and refers to the Trustees
from time to time serving under the Master Trust Agreement. 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. The execution and delivery of the
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.
12. PROXY VOTING.
Decisions on voting of proxies will be made by or under the direction
of the Sub-Adviser.
13. MISCELLANEOUS.
(a) Notice. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
parties at such address as such other parties may designate in
writing for the receipt of such notices.
(b) Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
(c) Applicable Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Texas.
IN WITNESS WHEREOF, the Adviser, the Trust and the Sub-Adviser have caused
this Agreement to be executed on the day and year first above written.
UNITED SERVICES ADVISORS, INC.
By: FRANK E. HOLMES
------------------------------
UNITED SERVICES FUNDS
By: FRANK E. HOLMES
------------------------------
BATTERYMARCH FINANCIAL MANAGEMENT, INC.
By: TANIA ZOUIKIN
------------------------------
EXHIBIT 10.8
Mr. Bobby Duncan
Executive Vice President and Chief Financial Officer
United Services Advisors, Inc.
7900 Callaghan Road
San Antonio, Texas 78229
Dear Bobby:
Bank One, Texas, NA ("Bank") is pleased to offer United Services Advisors, Inc.
("Borrower") a Real Estate Term Loan Facility ("Loan"). The amount, the terms
and the conditions of this facility is as follows:
REAL ESTATE TERM LOAN FACILITY
Borrower: United Services Advisors, Inc.
Amount: $1,385,000.00
Purposed: To provide refinancing of an existing real estate note currently
held at Frost Bank.
Fundings: Loan will be fully funded at closing (Subject to an
outside appraisalindicating a minimum value of $1,900,000. The
appraisal value shall be determined by an independent MAI
appraiser whose acceptability will be determined by Bank One
in its sole discretion).
Rate: 7.75% fixed.
Fees: None
Repayment: Repayment will consist of level monthly payments of
approximately $11,738.23 (principal including interest) based
on a 18.5 year amortization schedule with a seven year balloon.
All unpaid principal and accrued interest will be due at
maturity.
Maturity: Seven (7) years from closing.
Collateral: First security interest in the following:
* Deed of Trust to real property and improvements located at
7900 Callaghan Road, San Antonio, Texas 78229.
Guarantors: None
LOAN AGREEMENT PROVISIONS
The above availability will be governed by a comprehensive loan agreement
consisting of, but not limited to, the following:
* Borrower will present annual audited financial statements (10-K) to Bank
within 90 days of fiscal year end.
* Borrower will present the quarterly 10-Q report and compliance certificate
within 60 days of each quarter end.
* Borrower will maintain the following financial ratios:
Minimum current ratio 2.0/1.0
Maximum debt/worth ratio 1.0/1.0
Minimum annual debt coverage ratio 1.5/1.0
Debt Coverage Ratio defined as Net Income plus Depreciation plus
Amortization plus Interest expense divided by Current Maturities of
Long Term Debt plus Current Portion of Capitalized Leases plus Current
Portion of Annuity Obligations plus Dividend Payments and Interest
Expense. (To be calculated on a rolling four (4) quarter basis).
* Borrower will not make investments in or loans, or advances to any company,
person, or entity outside of borrower's ordinary course of business.
* Borrower will not merge or consolidate with any corporation, or enter into
any partnership, joint venture, or acquire any other entity.
* Borrower will not sell, transfer, or otherwise dispose of any of its
assets, or enter into any arrangement accomplishing substantially the same
except for transactions which occur in the Borrower's ordinary course of
business.
* Borrower will not incur additional indebtedness except for payables and
accruals incurred in Borrower's ordinary course of business. Specific
purchase money liens for equipment and fixed assets will be permitted.
* Borrower will not pledge assets, guarantee indebtedness of others, nor
permit any liens on its assets except as previously disclosed in the
Borrower's financial statements.
* Other standard loan agreement covenants applicable to credit facilities
similar in nature.
CONDITIONS TO FUNDING
* Receipt, review, and acceptance of a current MAI appraisal on the proposed
real estate collateral property indicating a fair market value of at least
$1,900,000. APPRAISAL TO BE ORDERED BY BANK ONE UPON ACCEPTANCE OF
COMMITMENT.
* Receipt, review, and acceptance of a Phase I Environmental Site Assessment
study indicating the proposed real estate collateral is free from any
hazardous contamination. PHASE I STUDIES TO BE ORDERED BY BANK ONE UPON
ACCEPTANCE OF COMMITMENT.
* Receipt by the Bank of A Mortgagee's Title Policy issued to the Bank by an
acceptable title company in the amount of the respective Real Estate Lien
Note stating that fee simple title to the properties are vested in Borrower
and that the Bank's Deed of Trust is the valid first lien thereon subject
to no exceptions as the areas or boundaries or any other matters not
approved by Bank.
* Receipt of a current survey or plat of the properties prepared by a
registered professional engineer or licensed land surveyor acceptable to
the Bank and to the title company which shall show dimensions, all lot
lines, easements, adjoining roads, streets, and such other details as may
reasonably be required by Bank. The surveys shall be accompanied by a
description of the property which shall be satisfactory to our legal
counsel and the title company as the description to be in the Mortgagee's
Title Policy and the Deed of Trust. Said survey must be in a form
acceptable to the issuer of the title policy to delete the survey
exception, save shortages in the area.
* Receipt of Flood Plain Certification from an engineer or surveyor stating
if any of the security property lies within the flood plain.
* No material adverse change will have occurred in the financial condition of
the borrower or guarantor.
* The proper execution of the loan, collateral and loan agreement documents
in form and substance acceptable to Bank.
* Other requirements which may be deemed necessary by Bank's legal counsel.
* All legal fees, appraisal fees, environmental site assessment fees, closing
costs, or costs incidental to closing are to be paid by Borrower.
This commitment letter will be governed by and construed in accordance with the
laws of the State of Texas and the applicable laws of the United States of
America and shall be performed in Bexar County, Texas.
This written letter agreement represents the final agreement between the parties
and may not be contradicted by evidence of prior, contemporaneous, or subsequent
agreements of the parties. There are no unwritten oral agreements between the
parties.
The above commitment will expire if not accepted in writing on or before May 1,
1994. If accepted, this commitment will expire within 120 days of acceptance if
the loan referenced herein has not been closed.
Bank One is please to offer the above facility to United Services Advisors, Inc.
We look forward to providing professional services of the highest standards and
to the continual expansion and development of our existing business
relationship.
Upon review of the terms and conditions, please indicate acceptance where
indicated and return the original to me at Bank One.
Sincerely,
/S/ Mark A. Miller
Mark A. Miller
Senior Vice President
Commercial Banking
Agreed and Accepted this 12th day of April, 1994.
UNITED SERVICES ADVISORS, INC. ("Borrower")
By: /S/ Bobby D. Duncan
Name: Bobby D. Duncan
Title: EVP, COO & CFO
MODIFICATION AGREEMENT
This Modification Agreement is made and entered into to be effective as of
September 30, 1994, by and between United Services Advisors, Inc., a Texas
corporation ("Borrower") and Bank One, Texas, N.A., a national banking
association ("Lender");
WITNESSETH:
WHEREAS, Borrower has heretofore executed and delivered to the Lender that
certain Real Estate Lien Note ("Note") dated June 30, 1994, in the original
principal amount of One Million Three Hundred Seventy Five Thousand Three
Hundred Eight Five and 38/100 Dollars ($1,375,385.38), payable to the order of
the Lender, and secured by, among other things a Deed of Trust, Security
Agreement and Financing Statement ("Deed of Trust"), of even date therewith,
executed by Borrower to Charles D. Lutz, III, Trustee for the Lender, recorded
in Volume 6122, Page 43, of the Official Public Records of Real Property of
Bexar County, Texas, covering the real property described in Exhibit "A"
attached hereto and incorporated herein for all purposes ("Property"). The Note,
Deed of Trust, and all instruments executed by Borrower in connection therewith
are herein referred to as the "Loan Documents";
WHEREAS, the Borrower and the Lender now desire to amend certain terms of
the Deed of Trust as hereinbelow provided;
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree and the
Deed of Trust is hereby modified and amended as follows:
MODIFY PARAGRAPH 4.11. The following sentence shall be added at the end of
the last paragraph in Paragraph 4.11:
"The purchase or ownership of C.O.F.I. indexed Government Agency Securities
and their related assets and liabilities will be excluded from the
calculations of the financial ratios provided in subparagraph 4.11(b) and
4.11 (c) above."
Borrower acknowledges and agrees that the modification of the Deed of Trust
shall in no manner impair or affect the validity or enforceability of the Note
or the liens of the Deed of Trust securing the Note and that the liens of the
Deed of Trust securing the Noted and that the liens of the Deed of Trust shall
not in any manner be waived, the purpose of this instrument being to modify and
to carry forward all liens securing the Note. Borrower acknowledges and agrees
that the liens of the Deed of Trust are valid and subsisting liens and that all
covenants, agreements, terms and provisions of the Noted, Deed of Trust, and
Loan Documents are continued in full force and effect to secure payment of the
Noted, as modified herein.
Except as specifically modified hereby, the terms and conditions of the
Note, the Deed of Trust, and any other of the Loan Documents shall remain
unchanged and in full force and effect.
EXECUTED to be effective as of September 30, 1994.
BORROWER:
UNITED SERVICES ADVISORS, INC.,
a Texas corporation
By: /S/ Bobby D. Duncan
Name: Bobby D. Duncan
Title: EVP, CFO & COO
LENDER
BANK ONE, TEXAS, N.A.
By: /S/ Mark Miller
Name: Mark Miller
Title: SVP
State of Texas
County of Bexar
This instrument was acknowledged before me on February 28, 1995, by Bobby
D. Duncan, EX V.P. COO & CFO of United Services Advisors, Inc., a Texas
corporation on behalf of said corporation.
/S/ Pamela E. Kirchner
Notary Public, State of Texas
State of Texas
County of Bexar
This instrument was acknowledged before me on February 28, 1995, by Mark
Miller, SVP Commercial Banking of Bank One, Texas, N.A., a national banking
association, on behalf of said association
/S/ Pamela E. Kirchner
Notary Public, State of Texas
EXHIBITS:
Exhibit "A" - Real Property Description
EXHIBIT A
TRACT I:
2.55 ACRE TRACT
BEING 2.55 ACRES OF LAND LYING IN New City Block 15101 and being the remaining
portion of Lot 2, Nob Hill Subdivision, recorded in Volume 6900, Page 37 of the
Plat Records of Bexar County, Texas and being more particularly described as
follows:
BEGINNING at an iron rod set, with cap, at the most northeast corner of the
beforementioned Lot 2, lying in the west right-of-way line of Interstate High 10
(300 foot wide right-of-way) and also being the most east corner of Lot 5, Exxon
Subdivision, recorded in Volume 7700, Page 198, of the Plat Records of Bexar
County, Texas;
THENCE S 14" 11'50" E along the east line of the beforementioned Lot 2 and the
west right-of-way line of Interstate Highway 10 for a distance of 370.00 feet to
an iron rod set, with cap, in the north line of Lot 12, Lincoln Center
Subdivision, recorded in Volume 9504, Page 135 of the Plat Records of Bexar
County, Texas;
THENCE S 75" 48' 10"W along the north line of the beforementioned Lot 12 a
distance of 299.68 to an iron rod set, with cap, in the west line of the
beforementioned Lot 2 and the east line of Lot 9, Nob Hill Subdivision, recorded
in Volume 7900, Page 185 of the Plat Records of Bexar County, Texas;
THENCE N 14" 11'50" W along the west line of the beforementioned Lot 2 and the
east lines of the beforementioned Lot 9 and Lots 13 and 14, Nob Hill
Subdivision, Recorded in Volume 9517, Page 114 of the Plat Records of Bexar
County, Texas a distance of 462.73 feet to an iron rod set, with cap, in
southeast right-of-way line of Callaghan Road;
THENCE N 41" 08'00 E along the beforementioned Lot 2 and the west line of the
beforementioned Lot 5 a distance of 95.44 feet to an iron rod found in concrete;
THENCE N 75" 48'10E along the beforementioned Lot 2 and the south line of the
beforementioned Lot 5 for a distance of 295.76 feet to THE PLACE OF BEGINNING
and containing 2.55 acres of land.
TRACT II:
An Easement recorded in Volume 7177, Page 397, Deed Records, Bexar County,
Texas, over and across the following described property:
A 25 foot wide parcel of land out of Lot 1. New City Block 15101, NOB HILL
SUBDIVISION, City of San Antonio, Texas County, Texas, according to plat
recorded in Volume 6900, Page 37, Deed and Plat Records, Bexar County, Texas,
and having been vacated and resubdivided into Lot 8, New City Block 15101, NOB
HILL SUBDIVISION, City of San Antonio, Bexar County, Texas, according to plat
recorded in Volume 7900, Page 185, Deed and Plat Records, Bexar County, Texas,
said 25 foot wide parcel of land being more particularly described as follows:
BEGINNING at a point on the Southeast right-of-way line of Callaghan Road, said
point bearing South 41"08'00" West, along the Southeast right-of-way of
Callaghan Road, a distance of 70.95 feet from the most Northerly corner of said
Lot 1:
THENCE Southeasterly along the Northeasterly edge of asphalt drive the following
courses:
15'30" East, a distance of 3.30 feet to the point of curvature of a curve
to South 50"15'30" East, a distance of 3.30 feet to the point of curvature
of a curve to the left; along said curve to the left, having a radius of
149.92 feet, a central angle of 13"07'01" and a tangent length of 17.24
feet, an arc distance of 34.32 feet to the Point of Tangency; and South
63"22'31" East, a distance of 43.88 feet to a point on the division line
between said Lots 1 and 2, New City Block 15101, NOB HILL SUBDIVISION:
THENCE South 14"11'50" East, along said division line, a distance of 41.11 feet
to a point of a curve Northwesterly to the left, at a radial bearing North
51"19'26" East;
THENCE Northwesterly along the Southwesterly edge of said asphalt drive the
following courses:
Along said curve to the left having a radius of 61.79 feet, a central angle
of 25"41'57" and a tangent length of 14.09 feet, and arc distance of 27.71
feet to the Point of Tangency; North 63"22'31 West, a distance of 43.96
feet to the point of curvature of a curve to the right; Along said curve to
the right, having a radius of 174.92 feet, a central angle of 13"07'01" and
a tangent length of 20.11 feet, an arc distance of 40.04 feet to the point
of tangency; and North 50"15'30" West, a distance of 3.92 feet to a point
on the Southeast right-of-way line of Callaghan Road;
THENCE North 41"08'00" East, along the Southeast right-of-way line of Callaghan
Road, a distance of 25.01 feet to the POINT OF BEGINNING.
EX 10.21
BOOKKEEPING AND ACCOUNTING AGREEMENT
This Agreement is made and entered into this 21st day of September, 1994 by
and between Accolade Funds, a Massachusetts business trust having its principal
place of business at 7900 Callaghan Road, San Antonio, Texas, hereinafter called
the "Fund" and United Shareholder Services, Inc., a corporation organized under
the laws of Texas having its principal place of business at the same address as
the Fund, hereinafter called "USSI".
SERVICES
The Fund hereby employs USSI: (1) to create, keep and maintain all books
and records required for the Fund by: Section 31 of the Investment Company Act
of 1940 (the "Act") and any Rules thereunder and any other applicable Rules
promulgated by the Securities and Exchange Commission for the keeping,
maintenance and preservation of specific records; and any applicable Federal or
state laws which may require the Fund to keep and maintain books and records;
and (2) to compute net asset value per share of the outstanding shares of the
Fund in compliance with Sections 2(a)(41) and 22(C) of the Act and Rules 2a-4
and 22c-1 thereunder.
FUND RECORDS
All records mentioned above shall be the property of the Fund and shall at
all times during the regular business hours of USSI be open for inspection by
duly authorized officers, employees or agents of the Fund and employees and
agents of the Securities and Exchange Commission or any other state or Federal
governmental agency having legal authority to inspect such books and records.
COMPENSATION
USSI, for performing the functions set forth above shall be compensated in
accordance with Exhibit A.
EFFECTIVE DATE
This Agreement shall become effective with respect to a Fund of the Fund as
of the date first written above (or, if a particular series or sub-trust of the
Fund is not in existence on that date, on the date an amendment to Exhibit B to
this Agreement relating to the Fund is executed).
TERMINATION
This Contract may be terminated by either party without penalty by giving
60 days written notice.
PERFORMANCE OF SERVICE
USSI shall exercise reasonable care in the performance of its duties under
this Agreement.
UNCONTROLLABLE EVENTS
USSI assumes no responsibility hereunder, and shall not be liable, for any
damage, loss of data, delay or any other loss whatsoever caused by events beyond
its reasonable control, including, without limitation, hardware and software
failures and pricing data provided by third persons. The foregoing does not
relieve USSI from acting in a commercially reasonable manner and using its best
efforts to recover from any such failure, delay or loss.
ASSIGNMENT
This Agreement and the rights and duties hereunder shall not be assignable
by either of the parties hereto except by the specific written consent of the
other party.
INTERPRETATION
This Agreement shall be interpreted under the laws of the State of Texas.
Words and phrases used herein shall be interpreted in accordance with the Act.
LIMITATION ON LIABILITY
The term "Accolade Funds" means and refers to the Trustees from time to
time serving under the Master Trust Agreement of the Fund dated April 15, 1993
as the same may subsequently thereto have been, or subsequently hereto be
amended. It is expressly agreed that the obligations of the Fund hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Fund, personally, but bind only the assets and
property of the Fund, as provided in the Master Trust Agreement of the Fund. The
execution and delivery of this Agreement have been authorized by the Trustees of
the Fund and signed by an authorized officer of the Fund, acting as such, and
neither such authorization by such Trustees 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 Fund as provided in its Master Trust Agreement.
IN WITNESS WHEREOF, The parties have caused this Agreement to be signed by
their respective officials duly authorized, as of the day and year first above
written.
ACCOLADE FUNDS
/S/ Thomas Tays /S/ Bobby D. Duncan
Witness Bobby D. Duncan
Executive Vice President
UNITED SHAREHOLDER SERVICES, INC.
/S/ Thomas Tays /S/ Bobby D. Duncan
Witness Bobby D. Duncan
President
EXHIBIT A
TO
BOOKKEEPING AND ACCOUNTING AGREEMENT
BETWEEN
UNITED SHAREHOLDER SERVICES, INC.
AND
ACCOLADE FUNDS
FEES
USSI shall be entitled to receive a fee from Accolade Funds as calculated
herein for providing bookkeeping and accounting services to the BONNEL GROWTH
FUND sub-trusts (or mutual funds) set forth in Exhibit B.
0.03% of the first $250 million average net assets
0.02% of the next $250 million average net assets
0.01% of the average net assets in excess of $500 million subject to an
annual minimum fee of $24,000
Dated: As of September 21, 1994 UNITED SHAREHOLDER SERVICES, INC.
BY: /S/ Bobby D. Duncan
Bobby D. Duncan, President
ACCOLADE FUNDS
BY: /S/ Bobby D. Duncan
Bobby D. Duncan, Executive Vice President
EXHIBIT B
TO
BOOKKEEPING AND ACCOUNTING AGREEMENT
BETWEEN
UNITED SHAREHOLDER SERVICES, INC.
AND
ACCOLADE FUNDS
NAME OF FUND DATE SUBJECT TO AGREEMENT
- - - ------------ -------------------------
Bonnel Growth Fund September 21, 1994
Dated: As of September 21, 1994 UNITED SHAREHOLDER SERVICES, INC.
BY: /S/ Bobby D. Duncan
Bobby D. Duncan, President
ACCOLADE FUNDS
BY: /S/ Bobby D. Duncan
Bobby D. Duncan, Executive Vice President
EX 10.22
LOCKBOX SERVICE AGREEMENT
This Agreement is made and entered into this 21st day of September, 1994 by
and between Accolade Funds, a Massachusetts business trust having its principal
place of business at 7900 Callaghan Road, San Antonio, Texas, hereinafter called
the "Fund" and United Shareholder Services, Inc., a corporation organized under
the laws of Texas having its principal place of business at the same address as
the Fund, hereinafter called "USSI".
SERVICES
The Fund hereby requests and USSI hereby agrees to provide lockbox
processing services to the Fund in accordance with applicable statutes and
regulations promulgated by regulatory authorities.
USSI's lockbox processing service involves receiving, processing and
depositing all investment checks, drafts or other negotiable instruments for the
Fund. [Fund shareholders or customers mail their payments for shares or services
to the Fund's post office box. USSI's employees pick up the mail several times a
day and transport it directly to USSI for processing. Items are examined to make
sure they have been properly written. Unacceptable items are forwarded to
appropriate USSI personnel, unprocessed, for their review and handling.
Acceptable items are microfilmed, encoded, stamped for deposit and deposited on
behalf of the Fund on the day processed. The envelope in which the payment was
received, a record of the total checks processed for the Fund's account, along
with all invoices and other correspondence, are forwarded to appropriate USSI
personnel for further processing.]
COMPENSATION
USSI, for performing lockbox processing, shall be compensated in accordance
with Exhibit A. The pricing schedule in Exhibit A is subject to modification,
from time to time, upon agreement of the parties.
EFFECTIVE DATE
This Agreement shall become effective with respect to a Fund as of the date
first written above (or, if a particular series or sub-trust of the Fund is not
in existence on that date, on the date an amendment to Exhibit B to this
Agreement relating to the Fund is executed).
TERMINATION
This Contract may be terminated by either party without penalty by giving
60 days written notice.
PERFORMANCE OF SERVICE
USSI shall exercise reasonable care in the performance of its duties under
this Agreement.
UNCONTROLLABLE EVENTS
USSI assumes no responsibility hereunder, and shall not be liable, for any
damage, loss of data, delay or any other loss whatsoever caused by events beyond
its reasonable control, including, without limitation, failure of hardware and
software provided by third persons. The foregoing does not relieve USSI from
acting in a commercially reasonable manner and using its best efforts to recover
from any such failure, delay or loss.
ASSIGNMENT
This Agreement and the rights and duties hereunder shall not be assignable
by either of the parties hereto except by the specific written consent of the
other party.
INTERPRETATION
This Agreement shall be interpreted under the laws of the State of Texas.
Words and phrases used herein shall be interpreted in accordance with the Act.
LIMITATION ON LIABILITY
The term "Accolade Funds" means and refers to the Trustees from time to
time serving under the Master Trust Agreement of the Fund dated April 15, 1993,
as the same may subsequently thereto have been, or subsequently hereto be
amended. It is expressly agreed that the obligations of the Fund hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Fund, personally, but bind only the assets and
property of the Fund, as provided in the Master Trust Agreement of the Fund. The
execution and delivery of this Agreement have been authorized by the Trustees of
the Fund and signed by an authorized officer of the Fund, acting as such, and
neither such authorization by such Trustees 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 Fund as provided in its Master Trust Agreement.
IN WITNESS WHEREOF, The parties have caused this Agreement to be signed by
their respective officials duly authorized, as of the day and year first above
written.
ACCOLADE FUNDS
/S/ Thomas Tays /S/Frank E. Holmes
Witness Frank E. Holmes
President
UNITED SHAREHOLDER SERVICES, INC.
/S/ Thomas Tays /S/ Bobby D. Duncan
Witness Bobby D. Duncan
President
EXHIBIT A
TO
LOCKBOX SERVICE AGREEMENT
BETWEEN
UNITED SHAREHOLDER SERVICES, INC.
AND
ACCOLADE FUNDS
PRICING SCHEDULE FOR
LOCKBOX SERVICES
ITEMS PROCESSED PRICE
BREAKPOINT VOLUME PER ITEM PROCESSED
up to 90,000 $ .81
90,000 to 115,000 $ .61
115,001 and over $ .51
An "Item" for the purposes of compensation under this Agreement is a check,
draft or other negotiable instrument to be encoded and/or deposited. The volume
breakpoints and the per Item processing charges are subject to modifications as
agreed upon by the parties to this Agreement.
Dated: As of September 21, 1994 UNITED SHAREHOLDER SERVICES, INC.
BY: /S/ Bobby D. Duncan
Bobby D. Duncan, President
ACCOLADE FUNDS
BY: /S/ Frank E. Holmes
Frank E. Holmes President
EXHIBIT B
TO
LOCKBOX SERVICE AGREEMENT
BETWEEN
UNITED SHAREHOLDER SERVICES, INC.
AND
ACCOLADE FUNDS
NAME OF FUND DATE SUBJECT TO AGREEMENT
Bonnel Growth Fund September 21, 1994
Dated: As of September 21, 1994 UNITED SHAREHOLDER SERVICES, INC.
BY:/S/ Bobby D. Duncan
Bobby D. Duncan, President
ACCOLADE FUNDS
BY:/S/ Frank E. Holmes
Frank E. Holmes, President
EX 10.23
ACCOLADE-USSI PRINTING AGREEMENT
This Agreement is made and entered into this 21st day of September, 1994,
by and between Accolade Funds, a Massachusetts business trust having its
principal place of business at 7900 Callaghan Road, San Antonio, Texas,
hereinafter called the "Fund" and United Shareholder Services, Inc., a
corporation organized under the laws of Texas having its principal place of
business at the same address as the fund, hereinafter called "USS."
SERVICES
The Fund hereby requests and USSI hereby agrees to provide printing
services to the Fund in accordance with applicable statutes and regulations
promulgated by regulatory authorities. Printing services involve daily, monthly,
quarterly and annual statements of a shareholders account activity plus tax
reporting when possible.
COMPENSATION
USSI, for performing printing services, shall be compensated at $.03 per
image. Such price is subject to modification, from time to time, upon agreement
of the parties.
EFFECTIVE DATE
This Agreement shall become effective with respect to a Fund as of the date
first written above (or, if a particular series or sub-trust of the Fund is not
in existence on that date, on the date an amendment to Exhibit A to this
Agreement relating to the Fund is executed).
TERMINATION
This Contract may be terminated by either party without penalty by giving
60 days written notice.
PERFORMANCE OF SERVICE
USSI shall exercise reasonable care in the performance of its duties under
this Agreement.
UNCONTROLLABLE EVENTS
USSI assumes no responsibility hereunder, and shall not be liable, for any
damage, loss of data, delay or any other loss whatsoever caused by events beyond
its reasonable control, including, without limitation, failure of hardware and
software provided by third persons. The foregoing does not relieve USSI from
acting in a commercially reasonable manner and using its best efforts to recover
from any such failure, delay or loss.
ASSIGNMENT
This Agreement and the rights and duties hereunder shall not be assignable
by either of the parties hereto except by the specific written consent of the
other party.
INTERPRETATION
This Agreement shall be interpreted under the laws of the State of Texas.
Words and phrases used herein shall be interpreted in accordance with applicable
law.
LIMITATION ON LIABILITY
The term "Accolade Funds" means and refers to the Trustees from time to
time serving under the Master Trust Agreement of the Fund dated April 15, 1993,
as the same may be subsequently thereto have been, or subsequently hereto be
amended. It is expressly agreed that the obligation of the Fund hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Fund, personally, but bind only the assets and
property of the Fund, as provided in the Master Trust Agreement of the Fund. The
execution and delivery of this Agreement have been authorized by the Trustees of
the Fund and signed by an authorized officer of the Fund, acting as such, and
neither such authorization by such Trustees 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 Fund as provided in its Master Trust Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officials duly authorized, as of the day and year first above
written.
ACCOLADE FUNDS
/S/Thomas Tays /S/ Frank E. Holmes
Witness Frank E. Holmes
President
UNITED SHAREHOLDER SERVICES, INC.
/S/ Thomas Tays /S/ Bobby D.
Witness Bobby D. Duncan
President
EXHIBIT A
TO
PRINTING AGREEMENT
BETWEEN
UNITED SHAREHOLDER SERVICES, INC.
AND
ACCOLADE FUNDS
NAME OF FUND DATE SUBJECT TO AGREEMENT
Bonnel Growth Fund September 21, 1994
Dated: As of September 21, 1994
UNITED SHAREHOLDER SERVICES, INC.
BY: /S/ Bobby D. Duncan
Bobby D. Duncan, President
ACCOLADE FUNDS
BY: /S/ Frank E. Holmes
Frank E. Holmes, President
EXHIBIT 11
<TABLE>
<CAPTION>
UNITED SERVICES ADVISORS, INC.
EXHIBIT 11
SCHEDULE OF COMPUTATION OF NET EARNINGS PER SHARE
YEAR ENDED JUNE 30,
------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Earnings (loss) before extraordinary item ............................................ $(3,890,718) $ 949,640 $ 57,559
Extraordinary item ................................................................... -- -- 33,907
----------- ----------- -----------
Cumulative effect of change in accounting ............................................ 43,284 200,420 --
----------- ----------- -----------
Net earnings ......................................................................... $(3,847,434) $ 1,150,060 $ 91,466
=========== =========== ===========
PRIMARY
Weighted average number shares outstanding
during the year .................................................................. 6,013,393 5,315,862 4,969,449
Add:
Common stock equivalent shares (determined using the "treasury stock"
method) representing shares issuable upon exercise
of Preferred or Common stock warrants .......................................... -- 149,658 --
Common stock equivalent shares (determined
using the "treasury stock" method)
representing shares issuable upon exercise
of Preferred or common stock options ........................................... -- 546,631 423,247
----------- ----------- -----------
Weighted average number of shares used in
calculation of primary earnings per share ...................................... 6,013,393 6,012,151 5,392,696
=========== =========== ===========
Primary earnings (loss) per share
Net earnings before extraordinary item ........................................... $ (0.65) $ 0.16 $ 0.01
Extraordinary item ............................................................... -- 0.00 0.01
Cumulative effect of change in accounting ........................................ 0.01 0.03 0.00
----------- ----------- -----------
Net Earnings Per Share ........................................................... $ (0.64) $ 0.19 $ 0.02
=========== =========== ===========
FULLY DILUTED
Weighted average number of shares outstanding
during the year .................................................................. 6,013,393 5,315,862, 4,969,449
Add:
Common stock equivalent shares (determined using the "treasury stock"
method) representing shares issuable upon exercise
of Preferred or Common stock warrants .......................................... -- 90,808 73,265
Common stock equivalent shares (determined
using the "treasury stock" method)
representing shares issuable upon exercise
of Preferred or common stock options ........................................... -- 478,697 725,583
----------- ----------- -----------
Weighted average number of shares used
in calculation of fully diluted earnings
per share ...................................................................... 6,013,393 5,885,367 5,768,297
=========== =========== ===========
Fully diluted earnings (loss) per share
Net earnings before extraordinary item ........................................... $ (0.65) $ 0.16 $ 0.01
Extraordinary item ............................................................... 0.00 0.00 0.01
Cumulative effect of change in accounting ........................................ 0.01 0.03 0.00
----------- ----------- -----------
Net Earnings Per Share ......................................................... $ (0.64) $ 0.19 $ 0.02
=========== =========== ===========
</TABLE>
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE REGISTRANT
1. United Shareholder Services, Inc., Texas, wholly owned by the
Registrant
2. A & B Mailers, Inc., Texas, wholly owned by the Registrant
3. Securities Trust and Financial Company, Texas, wholly owned by the
Registrant
4. U.S. Advisors (Guernsey) Limited, Guernsey, Channel Islands, wholly
owned by the Registrant
5. United Services Advisors Wealth Management Inc., Montreal, Quebec,
Canada, 50% owned by the Registrant
6. U.S. Global Strategies Fund Limited, Guernsey, Channel Islands, $100%
owned by Registrant
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED JUNE 30, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 2772221
<SECURITIES> 116237299
<RECEIVABLES> 1916977
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6532076
<PP&E> 6677112
<DEPRECIATION> (4012292)
<TOTAL-ASSETS> 128073122
<CURRENT-LIABILITIES> 113395282
<BONDS> 0
<COMMON> 78539
0
253575
<OTHER-SE> 8329109
<TOTAL-LIABILITY-AND-EQUITY> 128073122
<SALES> 10059782
<TOTAL-REVENUES> 15770738
<CGS> 0
<TOTAL-COSTS> 21666598
<OTHER-EXPENSES> 15317220
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6349378
<INCOME-PRETAX> (5895860)
<INCOME-TAX> (2005142)
<INCOME-CONTINUING> (3890718)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 43284
<NET-INCOME> (3847434)
<EPS-PRIMARY> (.64)
<EPS-DILUTED> (.64)
</TABLE>
EXHIBIT 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-3 (Nos. 33-53300 and
33-90518) and on Form S-8 (No. 38-33012) of United Services Advisors, Inc. of
our report dated September 26, 1995 appearing on page 25 of this Form 10-K.
/S/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Antonio, Texas
September 26, 1995
