UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 9 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Post-Effective Amendment No. 9 [x]
(Check appropriate box or boxes)
ACCOLADE FUNDS
(Exact Name of Registrant as Specified in Charter)
7900 Callaghan Road
San Antonio, Texas 78229
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: (210) 308-1234
Frank E. Holmes, President
Accolade Funds
7900 Callaghan Road
San Antonio, Texas 78229
(Name and Address of Agent for Service)
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Approximate date of proposed public offering:
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[x] 75 days after filing pursuant to paragraph (a)of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The registrant hereby declares, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, that an indefinite number of shares of beneficial interest,
no par value, is being registered by this registration statement, with respect
to one sub-trust of registrant, the Regent Emerging Europe Opportunity Fund.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
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ACCOLADE FUNDS
REGENT EMERGING EUROPE OPPORTUNITY FUND
FORM N-1A
CROSS REFERENCE SHEET
FORM N-1A
PART A CAPTION OR LOCATION IN
ITEM NO. PROSPECTUS
1....Cover Page
2....Summary of Fees and Expenses
3....Financial Highlights (also covered under Item 23 in Part B)
4....Cover Page; The Trust; Investment Objectives and Considerations; Special
Considerations
5....Management of the Fund
5A...Management's Discussion of Fund Performance
6....Cover Page; The Trust; Dividends and Taxes
7....How to Purchase Shares; How Shares Are Valued; Special Considerations -
Servicing Fee
8....How to Redeem Shares
9....Management of the Fund--the Sub-Advisor
FORM N-1A
PART B CAPTION OR LOCATION IN
ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
10....Cover Page
11....Table of Contents
12....General Information
13....Investment Objectives and Policies 14....Management of the Trust
15....Principal Holders of Securities 16....Investment Advisory Services
17....Portfolio Transactions 18....General Information
19....Not Covered in Statement of Additional Information (Covered under Item 7
in Part A)
20....Tax Status
21....Distribution Plan (also covered under Item 5 in Part A)
22....Calculation of Performance Data
23....Financial Statements (also covered under Item 3 in Part A)
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PART A -- THE PROSPECTUS
Inclued herein is the Prospectus for the
Accolade Funds-Regent Emerging Europe Opportunity Fund
Post-Effective Amendment No. 9
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ACCOLADE FUNDS
REGENT EMERGING EUROPE OPPORTUNITY FUND
1-800-USFUNDS (1-800-873-8637)
(Information, Shareholder Services and Requests)
INTERNET: http://www.usfunds.com
PROSPECTUS
............, 1996
This prospectus presents information that a prospective investor should know
about the Regent Emerging Europe Opportunity Fund (the "Fund"), a diversified
series of Accolade Funds (the "Trust"). The Trust is an open-end management
investment company. Investors are responsible for determining whether or not an
investment in the fund is appropriate for their needs. Read and retain this
prospectus for future reference.
A Statement of Additional Information dated ................., 1996, has been
filed with the Securities and Exchange Commission and is incorporated herein by
reference. The Statement of Additional Information is available without charge
from Accolade Funds upon request at the address set forth above or by calling
1-800-USFUNDS (1-800-873-8637).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STAT E SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
SUMMARY OF FEES AND EXPENSES..................................................4
INVESTMENT OBJECTIVES AND PRACTICES...........................................4
SPECIAL RISK CONSIDERATIONS...................................................6
SPECIAL RISKS OF REPRESENTATIVE EMERGING EUROPEAN COUNTRIES...................7
ADDITIONAL INVESTMENT PRACTICES...............................................8
FUTURES CONTRACTS AND OPTIONS................................................10
HOW TO PURCHASE SHARES.......................................................11
HOW TO EXCHANGE SHARES.......................................................13
HOW TO REDEEM SHARES.........................................................14
HOW SHARES ARE VALUED........................................................17
DIVIDENDS AND TAXES..........................................................17
THE TRUST....................................................................19
MANAGEMENT OF THE FUND.......................................................19
DISTRIBUTION EXPENSE PLAN....................................................21
PERFORMANCE INFORMATION......................................................21
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SUMMARY OF FEES AND EXPENSES
The following summary is provided to assist you in understanding the various
costs and expenses a shareholder in the Fund could bear directly or indirectly.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load............................................None
Redemption Fee................................................None
Administrative Exchange Fee....................................$ 5
Account Closing Fee (does not apply to exchanges)..............$10
Trader's Fee (shares held less than 30 days).................0.25%
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)(1)
Management Fees..............................................1.25%
12b-1 Fees...................................................0.25%
Other Expenses, including Transfer Agency....................1.00%
and Accounting Services Fees
Total Fund Operating Expenses................................2.50%
Except for active ABC Investment Plan(R) accounts, custodial accounts for minors
and retirement accounts, if an account balance falls, for any reason other than
market fluctuations, below $5,000 anytime during a month, that account will be
subject to a monthly small account charge of $1 that will be payable quarterly.
See "Small Accounts."
A shareholder who requests delivery of redemption proceeds by wire transfer will
be subject to a $10 charge. International wires will be higher.
HYPOTHETICAL EXAMPLE OF EFFECT OF FUND EXPENSES(1):
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and redemption at the end of each period.
1 year ...................................$ 35
3 years ...................................$ 88
In conformance with SEC regulations, the example is based upon a $1,000
investment; however, the Fund's minimum investment is $5,000. In practice, a
$1,000 account would be assessed a monthly $1 small account charge that is not
reflected in the example. See "Small Accounts." Included in these estimates is
the account closing fee of $10 for each period. This fee is a flat charge that
does not vary with the size of your investment. Accordingly, for investments
larger than $1,000, your total expenses will be substantially lower in
percentage terms than the illustration implies. The example should not be
considered a representation of future expenses. Actual expenses may be more or
less than those shown.
INVESTMENT OBJECTIVES AND PRACTICES
The Fund is designed for investors who believe that a rigorous program of
investing in securities of companies located in emerging European countries will
provide significant opportunities. Please read the prospectus carefully before
you invest. You are responsible for determining the suitability of the Fund to
meet your long-term investment goals.
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(1) Annual Fund Operating Expenses and the Hypothetical Example are based on the
Fund's projected expenses upon the Adviser's and Sub-Adviser's agreement to cap
total fund operating expenses at 2.50%. The Fund pays management fees to U.S.
Global Investors, Inc. (the "Advisor") for managing its investments and business
affairs. The Advisor then pays a portion of the management fee to Regent Pacific
Corporate Finance Limited (the "Sub-Advisor") for serving as Sub-Advisor. See
"Management of the Fund" for further information.
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INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT PRACTICES
The Fund's investment objective is long-term growth of capital. The Fund seeks
to achieve this objective by investing primarily in companies located in
emerging European countries. Investment in the Fund involves a high degree of
risk, and there can be no assurance that the Fund will achieve its objective.
The Fund's objective is not a fundamental policy and may be changed by the Board
of Trustees without shareholder approval. However, shareholders will be notified
in writing at least 30 days before any material change in the Fund's objective.
The Fund is not intended to be a complete investment program, and a prospective
investor should take into account personal objectives and other investments when
considering the purchase of Fund shares.
The Fund's investment strategies and portfolio investments will differ from
those of most other mutual funds. The Sub-Advisor seeks rigorously to identify
favorable securities, economic and market sectors, and investment opportunities
that other investors and investment advisers may not have identified. When the
Sub-Advisor identities such an investment opportunity, it may devote more of the
Fund's assets to pursuing that opportunity, and may select investments for the
Fund that would be inappropriate for less opportunistic mutual funds.
INVESTMENTS
The Fund's investments will normally include common stocks, preferred stocks,
securities convertible into common or preferred stocks, and warrants to purchase
common stocks or preferred stocks
"Emerging European countries" are countries in Europe that in the opinion of the
Sub-Advisor are generally considered to be in the early stages of industrial,
economic, or capital market development. Emerging European countries may include
countries that were until recently governed by communist governments or
countries that, for any other reason, have failed to achieve levels of
industrial production, market activity, or other measures of economic
development typical of the developed European countries. Emerging European
countries might currently include, by way of example, Russia, Poland, the Czech
Republic, the Slovak Republic, and Hungary.
Under normal circumstances, the Fund will invest at least 65% of its assets in
equity securities of companies located in emerging European countries. The Fund
may invest the remainder of its assets in securities (including debt securities
if the Sub-Advisor believes they offer potential for capital appreciation ) of
companies located anywhere in the world if the Sub-Advisor believes that such
investments are consistent with the Fund's investment objective. The Fund will
consider an issuer of securities to be located in an emerging European country
if (1) it is organized under the laws of any emerging European country and has a
principal office in an emerging European country, (2) it derives 50% or more of
its total revenues from business in emerging European countries, or (3) its
equity securities are traded principally on a securities exchange in an emerging
European country. For this purpose, investment companies that invest principally
in securities of companies located in one or more emerging European countries
will also be considered to be located in an emerging European country, as will
American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) with
respect to the securities of companies located in emerging European countries.
The Fund will not invest more than 15% of its net assets in illiquid securities.
Securities may be illiquid because they are unlisted, subject to contractual or
legal restrictions on resale or due to other factors which, in the Sub-Advisor's
opinion, raise a question concerning the Fund's ability to liquidate the
securities in a timely and orderly fashion without substantial loss.
The Fund may invest up to 10% of its total assets in the securities of
closed-end investment companies with investment policies similar to those of the
Fund, provided its investments in these securities do not exceed limitations
imposed by the Investment Company Act of 1940 in effect at the time of purchase.
The Fund will indirectly bear its proportionate share of any management fees
paid by investment companies in which it invests in addition to the advisory fee
paid by the Fund.
TEMPORARY DEFENSIVE INVESTMENT
For temporary defensive purposes during periods that, in the Sub-Advisor's
opinion, present the Fund with adverse changes in the economic, political or
securities markets of emerging European countries, the Fund may seek to protect
the capital value of the Fund's assets by temporarily investing up to 100% of
its assets in:
(1) money market instruments, deposits or such other investment grade
short-term investments in local emerging European county currencies as are
considered appropriate at the time;
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(2) U.S. Government bills, short-term indebtedness, money market instruments,
or other investment grade cash equivalents, each denominated in U.S.
dollars or any other freely convertible currency; or
(3) repurchase agreements as described herein.
SPECIAL RISK CONSIDERATIONS
Investments by the Fund in securities of companies in emerging European
countries may provide the potential for above-average capital appreciation, but
are subject to special risks. The Fund is designed for long-term investors who
can accept the special risks of investing in emerging European counties not
typically associated with investing in other more established economies or
securities markets. Investors should carefully consider their ability to assume
these risks before making an investment in the Fund. An investment in shares of
the Fund should be considered speculative and thus may not be appropriate for
all investors. An investment in shares of the Fund should not be considered a
complete investment program.
EMERGING EUROPEAN COUNTRIES RISKS
Political and economic structures in many emerging European countries are in
their infancy and developing rapidly, and such countries may lack the social,
political and economic stability characteristic of many more developed
countries. Emerging European countries have in the past failed to recognize
private property rights and have at times nationalized or expropriated the
assets of private companies. As a result, the risks normally associated with
investing in any foreign country may be heightened in emerging European
countries. In addition, unanticipated political or social developments may
affect the values of the Fund's investment in emerging European countries. The
small size and inexperience of the securities markets in emerging European
countries and the limited volume of trading in securities in those markets may
make the Fund's investments in such countries illiquid and more volatile than
investments in more developed countries. There may be little financial or
accounting information available with respect to companies located in certain
emerging European countries, and it may be difficult as a result to assess the
value or prospects of an investment in such companies.
Investments in foreign securities, whether in emerging or more developed
countries, are subject to risks and uncertainties not typically associated with
investments in domestic securities. These risks and uncertainties include
currency exchange rates and exchange control regulations, less publicly
available information, different accounting and reporting standards, less liquid
markets, more volatile markets, higher brokerage commissions and other fees,
possibility of nationalization or expropriation, confiscatory taxation,
political instability, and less protection provided by the judicial system..
Investments in emerging European countries may include the securities of both
large and small companies. Small companies may offer greater opportunities for
capital appreciation than larger companies, but investments in small companies
may involve certain special risks. Small companies may have limited product
lines, markets, or financial resources and may be dependent on a limited
management group. Securities issued by small companies may trade less frequently
and in smaller volume than more widely held securities issued by large
companies. The values of securities issued by small companies may fluctuate more
sharply than those issued by larger companies , and the Fund may experience some
difficulty in establishing or closing out positions in small company securities
at prevailing prices.
Although the Fund expects to invest primarily in listed securities of
established companies, it may, subject to local investment limitations, invest
in unlisted securities of companies in emerging European countries and companies
that have business associations in emerging European countries, including
investments in new and early stage companies. This may include direct equity
investments. Such investments may involve a high degree of business and
financial risk. Because of the absence of any trading markets for these
investments, the Fund may find itself unable to liquidate such securities in a
timely fashion, especially in the event of negative news regarding the specific
securities or emerging European country markets in general. Such securities
could decline significantly in value prior to the Fund's being able to liquidate
such securities. In addition to financial and business risks, issues whose
securities are not listed will not be subject to the same disclosure
requirements applicable to companies whose securities are listed.
For more information concerning the special risks of investing in the Fund see
the Statement of Additional Information.
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SPECIAL RISKS OF REPRESENTATIVE EMERGING EUROPEAN COUNTRIES
The Fund may invest in any emerging European country. In addition to the special
risks common to most emerging European countries described above, each
individual emerging European country also necessarily involves special risks
which may be unique to that country. Following is a brief description of special
risks which may be incurred when the Fund invests in Russia, Poland, the Czech
Republic, the Slovak Republic, and Hungary.
RUSSIA
Russia began reforms under "perestroika" as a member of the Soviet Union in
1987. After the collapse of the Soviet Union, Russia accelerated market-oriented
reforms. Privatization began in 1992 and economic conditions have begun to
stabilize.
Privatization of Russian industry through voucher systems has been substantial.
The government has also instituted a controversial loan-for-share program to
raise much needed cash. Banks now control many major Russian enterprises as a
result of this program. There is also speculation that organized crime exerts
significant influence on Russia industry. Concentrated ownership and control of
Russian companies limits the ability of outsiders to influence corporate
governance. Legal reforms to protect stockholders' rights have been implemented,
but stock markets remain underdeveloped and illiquid.
Privatization of agricultural land has been unsuccessful due to disputes between
executive and legislative branches regarding property rights. To date, the
Russian government has not authorized any form of property restitution.
Russian industry is in need of restructuring to close out-dated facilities and
increase investment in technology and management. Financial institutions do not
allocate capital in an efficient manner. Bankruptcy laws are restrictive and
offer little protection to creditors. Foreign creditors must file insolvency
claims through Russian subsidiaries. Bankruptcies remain rare.
The Russian system of taxation deters investment and hinders financial stability
by concentrating on the taxation of industry, with relatively little emphasis on
individual taxation. Additionally, the energy sector bears a relatively small
tax burden. Proposals for a new tax system exist, but the impact of a new tax
scheme remains uncertain.
POLAND
Poland began market-oriented reforms in 1981. In late 1989, more comprehensive
reforms were enacted. Most small enterprise has been privatized. Privatization
of larger entities has been a slower process, delayed by disputes regarding the
compensation of fund managers and the role of investment funds charged with
privatizing industry.
Barriers to trade were significantly reduced in 1990, but many have since been
reinstituted. The banking system has been reformed to increase capitalization,
but continues to under perform. Bank privatization has occurred at a slower pace
than expected.
A 1991 law permitted the formation of mutual funds in Poland. The Warsaw Stock
Exchange opened in 1991 and has grown dramatically, becoming one of the most
liquid markets in Eastern Europe. However, it is a young market with a
capitalization much lower than the capitalization of markets in Western Europe
and America.
Legal reforms have been instituted and laws regarding investments are published
on a routine basis. However, important court decisions are not always accessible
to practitioners. While there are currently no obstacles to foreign ownership of
securities and profits may be repatriated, these laws may be changed at any time
without notice.
THE CZECH REPUBLIC
The Czech Republic was formerly governed by a communist regime. In 1989, a
market-oriented reform process began. The market-oriented economy in the Czech
Republic is young and still evolving. These reforms leave many uncertainties
regarding market and legal issues.
The Czech Republic has instituted substantial privatization since 1992, when the
first wave of privatization began. Information suggests that dominant or
majority shareholders now control many of the larger privatized companies, and
that further restructuring is likely. Members of management and owners of these
companies are often less experienced than
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managers and owners of companies in Western European and American markets.
Additionally, securities markets on which the securities of these companies are
traded are in their infancy.
The legal system of the Czech Republic is still evolving. Bankruptcy laws have
been liberalized, giving creditors more power to force bankruptcies. The number
of bankruptcies, while still relatively low, is increasing each year. Laws
regulating direct and indirect foreign investment, as well as repatriation of
profits and income, exist and are subject to change at any time. Tax laws
include provisions for both value-added taxes and income taxes. Courts of law
are expected to, but may not, enforce the legal rights of private parties.
THE SLOVAK REPUBLIC
The Slovak Republic was formerly governed by a communist regime. In 1989, a
market-oriented reform process began. The market-oriented economy in the Czech
Republic is young and still evolving. These reforms leave many uncertainties
regarding economic and legal issues.
The Slovak Republic's path toward privatization differs from the path of the
Czech Republic. The Slovak government has issued bonds which can be held until
maturity, sold immediately, or redeemed for shares of stock in companies being
privatized. This method of privatization creates uncertainty about future
restructuring which may occur as bonds are sold and/or converted.
Owners and managers of Slovak enterprises are often less experienced with market
economies than owners and managers of companies in Western European and American
markets. The securities markets on which the securities of these companies are
traded are also in their infancy.
Laws regarding bankruptcy, taxation and foreign ownership of Slovak enterprises
are evolving and may be changed dramatically at any time. Import and export
regulations are minimal.
HUNGARY
Hungary was formerly governed by a communist regime and tried unsuccessfully to
implement market-oriented reforms in 1968. Beginning in 1989, Hungary again
undertook transformation to a market-oriented economy. These reforms are still
relatively recent and leave many uncertainties regarding economic and legal
issues.
Privatization in Hungary has been substantial but is not yet complete. It is
unclear whether a consolidation of ownership has occurred or will occur as a
result of privatization.
Owners and managers of Hungarian enterprises are often less experienced with
market economies than owners and managers of companies in Western European and
American markets. The securities markets on which the securities of these
companies are traded are in their infancy.
Laws governing taxation, bankruptcy, restrictions on foreign investments, and
enforcement of judgments are subject to change.
ADDITIONAL INVESTMENT PRACTICES
BORROWING
As a fundamental policy which cannot be changed without a vote by shareholders,
the Fund may borrow from a bank up to a limit of 5% of its total assets for
temporary or emergency purposes; and, it may borrow up to 33 1/3% of its total
assets (reduced by the amount of all liabilities and indebtedness other than
such borrowings) when deemed desirable or appropriate to meet redemption
requests. Such borrowing is intended only as a temporary solution until
securities can be sold in an orderly fashion. To the extent that the Fund
borrows money prior to selling securities, the Fund may be leveraged. At such
times, the Fund may appreciate or depreciate in value more rapidly than an
unleveraged portfolio. The Fund will repay any money borrowed in excess of 5% of
the value of its total assets prior to purchasing additional portfolio
securities.
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LENDING OF PORTFOLIO SECURITIES
The Fund may lend securities to broker-dealers or institutional investors for
their use in connection with short sales, arbitrages and other securities
transactions. This is a fundamental policy which cannot be changed without a
vote by shareholders. The Fund will not lend portfolio securities unless the
loan is secured by collateral (consisting of any combination of cash, United
States Government securities or irrevocable letters of credit) in an amount at
least equal (on a daily mark-to-market basis) to the current market value of the
securities loaned. In the event of a bankruptcy or breach of agreement by the
borrower of the securities, the Fund could experience delays and costs in
recovering the securities loaned. The Fund will not enter into securities
lending agreements unless its custodian bank/lending agent will fully indemnify
the Fund against loss due to borrower default. The Fund may not lend securities
with an aggregate market value of more than one-third of the Fund's total net
assets.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
The Fund may purchase securities on a when-issued or delayed delivery basis.
Securities purchased on a when-issued or delayed delivery basis are purchased
for delivery beyond the normal settlement date at a stated price and yield. No
income accrues to the purchaser of a security on a when-issued or delayed
delivery basis prior to delivery. Such securities are recorded as an asset and
are subject to changes in value based upon changes in the general level of
interest rates. Purchasing a security on a when-issued or delayed delivery basis
can involve a risk that the market price at the time of delivery may be lower
than the agreed upon purchase price, in which case there could be an unrealized
loss at the time of delivery. The Fund will only make commitments to purchase
securities on a when-issued or delayed delivery basis with the intention of
actually acquiring the securities, but may sell them before the settlement date
if it is deemed advisable. The Fund will restrict liquid securities in an amount
at least equal in value to the Fund's commitments to purchase securities on a
when-issued or delayed delivery basis. If the value of these assets declines,
the Fund will place additional liquid assets in the account on a daily basis so
that the value of the assets in the account is equal to the amount of such
commitments.
PORTFOLIO CONCENTRATION
As a fundamental policy which cannot be changed without a vote of shareholders,
the Fund will not invest more than 25% of its total assets in securities issued
by any single industry or government (other than obligations issued or
guaranteed by the United States Government or any of its agencies or
instrumentalities).
PORTFOLIO DIVERSIFICATION
The Fund will not purchase the securities of any one issuer (other than
obligations issued or guaranteed by the United States Government or any of its
agencies or instrumentalities) if, with respect to 75% of its total assets and
as a result of such purchase, (a) more than 5% of the total assets of the Fund
(taken at current value) would be invested in the securities of such issuer or
(b) the Fund would hold more than 10% of the outstanding voting securities of
such issuer.
PORTFOLIO TURNOVER
It is the policy of the Fund to seek long-term growth of capital. The Fund will
effect portfolio transactions without regard to its holding period if, in the
judgment of the Advisor and Sub-Advisor, such transactions are in the best
interests of the Fund. Increased portfolio turnover may result in higher costs
for brokerage commissions, dealer mark-ups and other transaction costs and may
also result in taxable capital gains. Certain tax rules may restrict the Fund's
ability to engage in short-term trading if the security has been held for less
than three months. See "Portfolio Turnover" in the Statement of Additional
Information.
REPURCHASE AGREEMENTS
The Fund may invest a portion of its assets in repurchase agreements with United
States broker-dealers, banks and other financial institutions, provided the
Fund's custodian always has possession of securities serving as collateral or
has evidence of book entry receipt of such securities.
In a repurchase agreement, the Fund purchases securities subject to the seller's
agreement to repurchase such securities at a specified time (normally one day)
and price. The repurchase price reflects an agreed upon interest rate during the
time of investment. All repurchase agreements must be collateralized by United
States Government or government agency securities,
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the market values of which equal or exceed 102% of the principal amount of the
repurchase obligation. If an institution enters an insolvency proceeding, the
resulting delay in liquidation of securities serving as collateral could cause
the Fund some loss if the value of the securities declined prior to liquidation.
To minimize the risk of loss, the Fund will enter into repurchase agreements
only with institutions and dealers which the Board of Trustees considers
creditworthy.
FUTURES CONTRACTS AND OPTIONS
For hedging purposes only, the Fund may sell financial futures contracts, sell
call options and purchase put options. Currently there is not a well developed
market for futures contracts and options on equity securities traded in emerging
Europe, and the Sub-Advisor does not expect to make extensive use of such
futures contracts and options until a liquid market develops. However, there are
well developed markets for futures contracts and options on foreign currencies
which the Sub-Advisor expects to use. The Sub-Advisor is not obligated to make
use of either futures contracts or options. See "Foreign Currency Transactions"
in the Statement of Additional Information.
FUTURES CONTRACTS
The Fund may sell financial futures contracts to hedge its portfolio against a
decline in the market price of securities which it owns or to defend the
portfolio against currency fluctuations. A financial futures contract is an
agreement between two parties to buy or sell a specified security at a set price
on a set future date. An index futures contract is an agreement to take or make
delivery of an amount of cash based on the difference between the value of the
index at the beginning and at the end of the contract period. A futures contract
on a foreign currency is an agreement to buy or sell a specified amount of a
currency for a set price on a set future date.
When the Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin," as a partial guarantee of its performance under the
contract. As the value of the security index or currency fluctuates, either
party to the contract is required to make additional margin payments, known as
"variation margin," to cover any additional obligation it may have under the
contract. In addition, when the Fund enters into a futures contract, it will
segregate assets or "cover" its position in accordance with applicable law. See
"Segregated Assets and Covered Portfolios" in the Statement of Additional
Information.
SELLING (OR WRITING) COVERED CALL OPTIONS
The Fund may sell (or write) covered call options on individual portfolio
securities or on futures contracts (described above). A call option gives the
buyer of the option, upon payment of a premium, the right to call upon the
writer to deliver a security on or before a fixed date at a predetermined price,
referred to as the "strike price." If the price of the hedged security or
futures contract should fall or remain below the strike price, the Fund will not
be called upon to deliver the security or make a cash payment and the Fund will
retain the premium received for the option as additional income. This additional
income may offset any decline in the value of the security or futures contract
up to the amount of premium received. If the price of the hedged security or
futures contract rises or remains above the strike price of the option, the Fund
will generally be called upon to deliver the security or make a cash payment.
This will prevent the Fund from benefiting from any gain on the security or
futures contract. See "Segregated Assets and Covered Positions" in the Statement
of Additional Information.
BUYING PUT OPTIONS
The Fund may purchase put options on individual portfolio securities or on
futures contracts (described above). A put option gives the buyer of the option,
upon payment of a premium, the right to sell a security or futures contract to
the writer of the option on or before a fixed date at a predetermined price. The
Fund will realize a gain from the exercise of a put option if, during the option
period, the price of the security or futures contract declines by an amount in
excess of the premium paid. The Fund will realize a loss equal to all or a
portion of the premium paid for the option if the price of the security or
futures contract increases or does not decrease by more than the premium.
CLOSING TRANSACTIONS
The Fund may dispose of an option written by the Fund by entering into a
"closing purchase transaction" for an identical option and may dispose of an
option purchased by the Fund by entering into a "closing sale transaction" for
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an identical option. In each case, the closing transaction will have the effect
of terminating the rights of the option holder and the obligations of the option
purchaser and will result in a gain or loss to the Fund based upon the relative
amount of the premiums paid or received for the original option and the closing
transaction. The Fund may sell (or write) put options solely for the purpose of
entering into closing sale transactions.
HOW TO PURCHASE SHARES
The minimum initial investment for the Fund is $5,000 for regular accounts or
$1,000 for custodial accounts for minors. The minimum subsequent investment is
$100. The minimum initial investment for persons enrolled in the ABC Investment
Plan(R) is $1,000 and the minimum subsequent investment pursuant to such a plan
is $100 or more per month per account. There is no minimum purchase for
retirement plan accounts, including IRAs, administered by the Advisor or its
agents and affiliates.
YOU MAY INVEST IN THE FOLLOWING WAYS:
BY MAIL
Send your application and check or money order, made payable to the Regent
Emerging Europe Opportunity Fund, P.O. Box 781234, San Antonio, Texas
78278-1234.
When making subsequent investments, enclose your check with the return
remittance portion of the confirmation of your previous investment or indicate
on your check or a separate piece of paper your name, address and account number
and mail to the address mentioned above. Do not use the remittance portion of
your confirmation statement for a different fund as it is pre-coded. Doing so
may cause your investment to be invested into the wrong fund. If you wish to
purchase shares in more than one fund, send a separate check or money order for
each fund. Third party checks will not be accepted, and the Fund reserves the
right to refuse to accept second party checks.
BY TELEPHONE
Once your account is open, you may make investments by telephone by calling
1-800-USFUNDS (1-800-873-8637). Investments by telephone are not available in
money market funds or any retirement account administered by the Advisor or its
agents. The maximum telephone purchase is ten times the value of the shares
owned, calculated at the last available net asset value. Payment for shares
purchased by telephone is due within seven business days after the date of the
transaction. You cannot exchange shares purchased by telephone until after the
payment has been received and accepted by the Trust.
BY WIRE
You may make your initial or subsequent investments in the Regent Emerging
Europe Opportunity Fund by wiring money. To do so, call the Fund at
1-800-USFUNDS (1-800-873-8637) for a confirmation number and wiring
instructions.
BY ABC INVESTMENT PLAN(R)
The ABC Investment Plan(R) (Automatically Building Capital Investment Plan) is
offered as a special service allowing you to build a position in any of the
funds managed by U.S. Global Investments, Inc. over time without trying to
outguess the market. Once your account is open, you may make investments
automatically by completing the ABC Investment Plan(R) form authorizing United
Shareholder Services, Inc. to draw on your money market or bank account monthly
for a minimum of $100 a month beginning within thirty (30) days after the
account is opened. These lower minimums are a special service bringing to small
investors the benefits of the U.S. Global Investors family of funds, which
include United Services Funds and Accolade Funds, without requiring a $5,000
minimum initial investment.
Your investment dollars will automatically buy more shares when the market is
undervalued and fewer shares when the market is overvalued. By investing an
equal amount at regular periodic intervals, you avoid the extremes in the
market. Of course, using the ABC Investment Plan(R) does not guarantee a profit.
If you sell at the bottom, no system will give you a gain.
You may call 1-800-USFUNDS (1-800-873-8637) to open a treasury money market fund
or you could inquire at your bank whether it will honor debits through the
Automated Clearing House ("ACH") or, if necessary, preauthorized checks. You
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may change the date or amount of your investment or discontinue the Plan any
time by letter received by United Shareholder Services, Inc. at least two weeks
before the change is to become effective.
ADDITIONAL INFORMATION ABOUT PURCHASES
All purchases of shares are subject to acceptance by the Fund and are not
binding until accepted. The Fund reserves the right to reject any application or
investment. Orders received by the Fund's Transfer Agent or sub-agent before
4:00 p.m., Regent Emerging time, Monday through Friday exclusive of business
holidays, and accepted by the Fund will receive the share price next computed
after receipt of the order. In the event that the New York Stock Exchange
("NYSE") and other financial markets close earlier, as on the eve of a holiday,
orders will become effective earlier in the day at the close of trading on the
NYSE.
If your telephone order to purchase shares is canceled due to nonpayment or late
payment (whether or not your check has been processed by the Fund), you will be
responsible for any loss incurred by the Fund by reason of such cancellation. If
checks are returned unpaid due to insufficient funds, stop payment or other
reasons, the Fund will charge your account $20 and you will be responsible for
any loss incurred by the Fund with respect to canceling the purchase.
To recover any such loss or charge, the Fund reserves the right, without further
notice, to redeem shares of any affiliated funds already owned by any purchaser
whose order is canceled, for whatever reason, and such a purchaser may be
prohibited from placing further orders unless investments are accompanied by
full payment by wire or cashier's check.
Accolade Funds charges no sales commissions or "loads." However, investors may
purchase and sell shares through registered broker/dealers who may charge fees
for their services.
CHECKS DRAWN ON FOREIGN BANKS. To be received in good order, an investment must
be made in U.S. dollars payable through a bank in the United States. As an
accommodation, the Funds' Transfer Agent may accept checks payable in a foreign
currency or drawn on a foreign bank and will attempt to convert such checks into
U.S. dollars and repatriate such amount to the Fund's account in the United
States. Your investment in the Fund will not be considered to have been received
in good order until your foreign check has been converted into U.S. dollars and
is available to the Fund through a bank in the United States. Your investment in
the Fund may be delayed until your foreign check has been converted into U.S.
dollars and cleared the normal collection process. Any amounts charged to the
Fund for collection procedures will be deducted from the amount invested.
If the Fund incurs a charge for locating a shareholder without a current
address, such charge will be passed through to the shareholder.
TAX IDENTIFICATION NUMBER
The Fund is required by federal law to withhold and remit to the United States
Treasury a portion of the dividends, capital gain distributions and proceeds of
redemptions paid to any shareholder who fails to furnish the Fund with a correct
taxpayer identification number, who underreports dividend or interest income or
who fails to provide certification of a tax identification number. In order to
avoid this withholding requirement, you must certify on your application, or on
a separate Form W-9 supplied by the Transfer Agent, that your taxpayer
identification number is correct and that you are not currently subject to
backup withholding or you are exempt from backup withholding. For individuals,
your taxpayer identification number is your social security number.
Instructions to exchange or transfer shares held in established accounts will be
refused until the certification has been provided. In addition, the Fund
assesses a $50 administrative fee if the taxpayer identification number is not
provided by year-end.
CERTIFICATES
When you open your account, the Fund will send you a confirmation statement,
which will be your evidence that you have opened an account with the Fund. The
confirmation statement is nonnegotiable, so if it is lost or destroyed, you will
not be required to buy a lost instrument bond or be subject to other expense or
trouble, as you would with a negotiable stock certificate. At your written
request, the Fund will issue negotiable stock certificates. Unless your shares
are purchased with wired money, a certificate will not be issued until 15 days
have elapsed from the time of purchase, or the Fund has
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satisfactory proof of payment, such as a copy of your canceled check. Negotiable
certificates will not be issued for fewer than 100 shares.
HOW TO EXCHANGE SHARES
You have the privilege of exchanging into any other fund in the U.S. Global
Investors, Inc. family of funds which is registered in your state. An exchange
involves the redemption (sale) of shares of one fund and purchase of shares of
another fund at the respective closing net asset value and is a taxable
transaction.
FUNDS IN THE U.S. GLOBAL INVESTORS, INC. FAMILY
Investing involves a trade-off between potential rewards and potential risks. In
order to achieve higher rewards on your investment, you must be willing to take
on higher risk. If you are most concerned with safety of principal, a lower risk
investment will provide greater stability but with lower potential earnings.
Another strategy for dealing with volatile markets is to use the ABC Investment
Plan(R). The list below is a reward and risk guide to all of the mutual funds in
the U.S. Global Investors, Inc. family of funds. This guide may help you decide
if a fund is suitable for your investment goals.
HIGH REWARD China Region Opportunity Fund
HIGH RISK Regent Emerging Europe Opportunity Fund
U.S. Gold Shares Fund
U.S. World Gold Fund
U.S. Global Resources Fund
Adrian Day Global Opportunity Fund
Bonnel Growth Fund
U.S. Real Estate Fund
MODERATE REWARD U.S. All American Equity Fund
MODERATE RISK MegaTrends Fund
U.S. Income Fund
U.S. Tax Free Fund
United Services Near-Term Tax Free Fund
United Services Intermediate Treasury Fund
LOW REWARD U.S. Government Securities Savings Fund
LOW RISK U.S. Treasury Securities Cash Fund
If you have additional questions, one of our professional investor
representatives will personally assist you. Call 1-800-USFUNDS (1-800-873-8637).
BY TELEPHONE
You will automatically have the privilege to direct the Fund to exchange your
shares between identically registered accounts by calling toll-free
1-800-USFUNDS (1-800-873-8637). In connection with such exchanges neither the
Fund nor the Transfer Agent will be responsible for acting upon any instructions
reasonably believed by them to be genuine. The shareholder, as a result of this
policy, will bear the risk of loss. The Fund and/or its Transfer Agent will,
however, employ reasonable procedures to confirm that instructions communicated
by telephone are genuine (including, requiring some form of personal
identification, providing written confirmation and tape recording
conversations); and if it does not employ reasonable procedures, it may be
liable for losses due to unauthorized or fraudulent transactions.
BY MAIL
You may direct the Fund in writing to exchange your shares. The request must be
signed exactly as the name appears in the registration. (Before writing, read
"Additional Information About Exchanges.")
ADDITIONAL INFORMATION ABOUT EXCHANGES
(1) There is a $5 charge, which is paid to United Shareholder Services, Inc.
for each exchange out of any Fund account except that retirement accounts
administered by the Advisor or its agents and affiliates are charged $5 for
each exchange
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exceeding three per quarter. The exchange fee is charged to cover
administrative costs associated with handling these exchanges.
(2) If the shares you wish to exchange are represented by a negotiable stock
certificate, the certificate must be returned before the exchange can be
effected.
(3) Shares may not be exchanged unless you have furnished the Fund with your
tax identification number, certified as prescribed by the Internal Revenue
Code and Regulations, and the exchange is to an account with like
registration and tax identification number. (See "Tax Identification
Number.")
(4) Exchanges out of equity funds in the U.S. Global Investors, Inc. family of
funds are subject to a trader's fee if held less than the prescribed time
period. The applicable trader's fee is described under "Trader's Fee Paid
to the Fund."
(5) The exchange privilege may be terminated at any time. The exchange fee and
other terms of the privilege are subject to change.
HOW TO REDEEM SHARES
You may redeem any or all of your shares at will. The Fund redeems shares at the
net asset value next determined after it has received and accepted a redemption
request in proper order. Redemption requests received in proper order by the
Trust's Transfer Agent or sub-agent prior to 4:00 p.m., Eastern Standard time,
Monday through Friday, exclusive of business holidays, to be effective that day,
will receive the share price next computed after receipt of the request.
BY MAIL
A written request for redemption must be in proper order, which requires
delivery of the following to the Transfer Agent:
(1) a written request for redemption signed by each registered owner exactly as
the shares are registered, the account number and the number of shares or
the dollar amount to be redeemed;
(2) negotiable stock certificates for any shares to be redeemed for which
certificates have been issued;
(3) signature guarantees when required; and,
(4) such additional documents as are customarily required to evidence the
authority of persons effecting redemptions on behalf of corporations,
executors, trustees, and other fiduciaries. Redemptions will not become
effective until all documents, in the form required, have been received by
the Transfer Agent. (Before writing, read "Additional Information About
Redemptions.")
HOW TO EXPEDITE REDEMPTIONS
To redeem your Fund shares by telephone, you may call the Fund and direct an
exchange out of the Fund into an identically registered account in a United
Services treasury money market fund ($1,000 minimum initial investment).You may
then write a check against your treasury money market fund account. See "How to
Exchange Shares" for a description of exchanges, including the $5 exchange fee.
Call 1-800-USFUNDS (1-800-873-8637) for more information concerning telephone
redemption and a treasury money market fund prospectus.
Telephone redemptions without opening a treasury money market account are
available for members of the Chairman's Circle. For more information about the
Fund's Chairman's Circle program, call 1-800-USFUNDS (1-800-873-8637).
SPECIAL REDEMPTION ARRANGEMENTS
Special arrangements may be made by institutional investors, or on behalf of
accounts established by brokers, advisers, banks or similar institutions, to
have redemption proceeds transferred by wire to pre-established accounts upon
telephone instructions. For further information call the Fund at 1-800-USFUNDS
(1-800-873-8637).
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SIGNATURE GUARANTEE
Redemptions in excess of $15,000 currently require a signature guarantee. A
signature guarantee is required for all redemptions, regardless of the amount
involved, when the proceeds are to be paid to someone other than the registered
owner of the shares to be redeemed, or if proceeds are to be mailed to an
address other than the registered address of record.
When a signature guarantee is required, each signature must be guaranteed by:
(a) a federally insured bank or thrift institution;
(b) a broker or dealer (general securities, municipal, or government)
or clearing agency registered with the U.S. Securities and
Exchange Commission that maintains net capital of at least
$100,000; or
(c) a national securities exchange or national securities association.
The guarantee must:
(i) include the statement "Signature(s) Guaranteed;"
(ii) be signed in the name of the guarantor by an authorized
person, include the person's printed name and position with
guarantor; and
(iii) include a recital that the guarantor is federally insured,
maintains the requisite net capital or is a national
securities exchange or association.
Shareholders living abroad may acknowledge their signatures before a U.S.
consular officer. Military personnel may acknowledge their signatures before
officers authorized to take acknowledgments (e.g., legal officers and
adjutants).
REDEMPTION PROCEEDS MAY BE SENT TO YOU:
BY MAIL
If your redemption check is mailed, it is usually mailed within 48 hours;
however, the Fund reserves the right to hold redemption proceeds for up to seven
days. If the shares to be redeemed were purchased by check, the redemption
proceeds will not be mailed until the purchase check has cleared, which may take
up to seven days. You may avoid this requirement by investing by bank wire
(federal funds). Redemption checks may be delayed if you have changed your
address in the last 30 days. Please notify the Fund promptly in writing, or by
telephone, of any change of address.
BY WIRE
You may authorize the Fund to transmit redemption proceeds by wire, provided you
send written wiring instructions with a signature guarantee at the time of
redemption. Proceeds from your redemption will usually be transmitted on the
first business day following the redemption. However, the Fund reserves the
right to hold redemption proceeds for up to seven days. If the shares to be
redeemed were purchased by check, the redemption proceeds will not be mailed or
wired until the purchase check has cleared, which may take up to seven days.
There is a $10 charge to cover the wire, which is deducted from redemption
proceeds. International wires will be higher.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS
The redemption price may be more or less than your cost, depending on the net
asset value of the Fund's portfolio next determined after your request is
received.
A request to redeem shares in an IRA or similar retirement account must be
accompanied by an IRS Form W4-P and a reason for withdrawal as specified by the
IRS. Proceeds from the redemption of shares from a retirement account may be
subject to withholding tax.
The Fund has the authority to redeem existing accounts and to refuse a potential
account holder the privilege of having an account in the Fund if the Fund
reasonably determines that the failure to so redeem, or to so prohibit, would
have a material adverse consequence to the Fund and its shareholders. The power
to redeem existing accounts will be exercised in light of
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the Trustees' fiduciary duties and in conformance with Massachusetts law. The
Fund will not redeem an existing account solely to prevent the legitimate
exercise of a shareholder's rights. No account closing fee will be charged to
investors whose accounts are closed under this provision.
TRADER'S FEE PAID TO FUND
A trader's fee of 25 basis points or 0.25% of the value of shares redeemed or
exchanged will be assessed to shareholders who redeem or exchange shares of the
Fund held less than thirty (30) days. The trader's fee will be paid to the Fund
to benefit remaining shareholders by protecting them against expenses due to
excessive trading. Excessive short-term trading has an adverse impact on
effective portfolio management as well as upon Fund expenses. The Fund has
reserved the right to refuse investments from shareholders who engage in
short-term trading that may be disruptive to the Fund.
ACCOUNT CLOSING FEE
In order to reduce Fund expenses, an account closing fee of $10 will be assessed
to shareholders who redeem all shares in their Fund account and direct that
redemption proceeds be delivered to them by mail or wire. The charge is payable
directly to the Fund's Transfer Agent which, in turn, will reduce its charges to
the Fund by an equal amount. The purpose of the charge is to allocate to
redeeming shareholders a more equitable portion of the Transfer Agent's fee,
including the cost of tax reporting, which is based upon the number of
shareholder accounts. The account closing fee does not apply to exchanges
between the Fund and affiliated funds nor will it be imposed on any account
which is involuntarily redeemed.
SMALL ACCOUNTS
Fund accounts which fall, for any reason other than market fluctuations, below
$5,000 at any time during the month, will be subject to a monthly small account
charge of $1 which will be payable quarterly. The charge is payable directly to
the Fund's Transfer Agent which, in turn, will reduce its charges to the Fund by
an equal amount. The purpose of the charge is to allocate the costs of
maintaining shareholder accounts more equally among shareholders.
As a special service, active ABC Investment Plan(R), custodial accounts for
minors with at least $1,000, and retirement plan accounts administered by the
Advisor or its agents and affiliates will not be subject to the small account
charge.
In order to reduce expenses of the Fund, the Fund may redeem all shares in any
shareholder account, other than active ABC Investment Plan(R), custodial
accounts for minors and retirement plan accounts, if, for a period of more than
three months, the account has a net asset value of $2,500 or less and the
reduction in value is not due to market fluctuations. If the Fund elects to
close such accounts, it will notify shareholders whose accounts are below the
minimum of its intention to do so, and will provide those shareholders with an
opportunity to increase their accounts by investing a sufficient amount to bring
their accounts up to the minimum amount within 90 days of the notice. No account
closing fee will be charged to investors whose accounts are closed under this
redemption provision.
CONFIRMATION STATEMENTS
Shareholders normally will receive a confirmation statement after each
transaction (purchase, redemption, dividend, etc.) showing activity in the
account. If you have no transactions, you will receive an annual statement only.
OTHER SERVICES
The Fund has available a number of plans and services to meet the special needs
of certain investors. Plans available include:
(1) payroll deduction plans, including military allotments;
(2) custodial accounts for minors;
(3) a flexible, systematic withdrawal plan; and,
(4) various retirement plans such as IRA, SEP/IRA, 403(b)(7), 401(k)
and employer-adopted defined contribution plans.
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There is an annual charge for each retirement plan fund account with respect to
which Security Trust & Financial Company ("ST&FC"), a wholly-owned subsidiary of
the Advisor, acts as custodian (for example, $10 for IRAs and $15 for SEP/IRAs,
403(b)(7)s, profit sharing and other such accounts). If this administrative
charge is not paid separately prior to the last business day of a calendar year
or prior to a total redemption, it will be deducted from the shareholder's
account.
Application forms and brochures describing these plans and services can be
obtained from the Transfer Agent by calling 1-800-USFUNDS (1-800-873-8637).
24-HOUR ACCOUNT INFORMATION
Shareholders can also access 24 hours a day current information on yields, share
prices, latest dividends, account balances, deposits and redemptions. Just call
1-800-USFUNDS (1-800-873-8637) and press the appropriate codes into your
touch-tone phone.
HOW SHARES ARE VALUED
Shares of the Fund are purchased or redeemed, on a continuous basis without a
sales charge, at their next determined net asset value per share. The net asset
value per share of the Fund is calculated separately by USSI. Net asset value
per share is determined and orders become effective as of 4:00 p.m. Eastern
Standard time, Monday through Friday, exclusive of business holidays on which
the NYSE is closed, by dividing the aggregate net assets of the Fund at market
value by the total number of shares of the Fund outstanding. In the event that
the NYSE and other financial markets close earlier, as on the eve of a holiday,
the net asset value per share will be determined earlier in the day at the close
of trading on the NYSE.
Valuation shall be calculated in U.S. dollars. Securities quoted in other
currencies will be converted to U.S. dollars using the exchange rate then in
effect in the principal market in which the relevant securities are traded.
A portfolio security listed or traded on an international market, either on an
exchange or over-the-counter, is valued at the last reported sales price prior
to the time when assets are valued.
A portfolio security listed or traded in the domestic market, either on an
exchange or over-the-counter, is valued at the latest reported sale price prior
to the time when assets are valued; and, lacking any sales on that day, the
security is valued at the mean between the last reported bid and ask prices.
When market quotations are not readily available, or when restricted securities
or other assets are being valued, such assets are valued at fair value as
determined in good faith by or under procedures established by the Board of
Trustees.
Portfolio securities which are traded on more than one market are valued
according to the broadest and most representative market. Prices used to value
portfolio securities are monitored to ensure that they represent current market
values. If the price of a portfolio security is determined to be materially
different from its current market value, then such security will be valued at
fair value as determined by management and approved in good faith by the Board
of Trustees.
Short-term investments with maturities of 60 days or less at the time of
purchase are valued on the basis of the amortized cost. This involves valuing an
instrument at its cost initially and, thereafter, assuming a constant
amortization to maturity of any discount or premium.
DIVIDENDS AND TAXES
UNITED STATES TAXES
The Fund intends to qualify as a "regulated investment company" under subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"). By complying
with the applicable provisions of the Code, a Fund will not be subject to
Federal income tax on its net investment income and capital gain net income that
are distributed to shareholders.
All income dividends and capital gain distributions are normally reinvested,
without charge, in additional full and fractional shares of the Fund.
Alternatively, investors may choose: (1) automatic reinvestment of capital gain
distributions in Fund shares and payment of income dividends in cash; (2)
payment of capital gain distributions in cash and automatic reinvestment of
dividends in Fund shares; or (3) all income dividend and capital gain
distributions paid in cash. The share price of the
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reinvestment will be the net asset value of the Fund shares computed at the
close of business on the date the dividend or distribution is paid. Dividend
checks returned to the Fund as being undeliverable and dividend checks not
cashed after 180 days will automatically be reinvested at the price of the Fund
on the day returned or on or about the 181st day and the distribution option
will be changed to "reinvest."
At the time of purchase, the share price of the Fund may reflect undistributed
income, capital gains or unrealized appreciation of securities. Any dividend or
capital gain distribution paid to a shareholder shortly after a purchase of
shares will reduce the per share net asset value by the amount of the
distribution. Although in effect a return of capital to the shareholder, these
distributions are fully taxable. The Fund expects to distribute substantially
all of its net investment income, if any, and any net realized capital gains at
least once each year.
The Fund is subject to a nondeductible 4 percent excise tax calculated as a
percentage of certain undistributed amounts of taxable ordinary income and
capital gains net of capital losses. The Fund intends to make such distributions
as may be necessary to avoid this excise tax.
Dividends from taxable net investment income and distributions of net short-term
capital gains paid by the Fund are taxable to shareholders as ordinary income,
whether received in cash or reinvested in additional shares of the Fund. A
portion of these dividends may qualify for the 70 percent dividends received
deduction available to corporations. Distributions of net capital gains will be
taxable to shareholders as long-term capital gains, whether paid in cash or
reinvested in additional shares, and regardless of the length of time the
investor has held his shares.
Each January, the Fund will report to its shareholders the Federal tax status of
dividends and distributions paid or declared by the Fund during the preceding
calendar year. This statement will also indicate whether and to what extent
distributions qualify for the 70 percent dividends received deduction available
to corporations.
There is a possibility that exchange control regulations imposed by Regent
Emerging Europe Region countries may restrict or limit the ability of the Fund
to distribute net investment income or the proceeds from the sale of its
investments to its shareholders. Any such restrictions or limitations could
impact the Fund's ability to meet the distribution requirements described above.
If the Fund owns shares in a foreign corporation that constitutes a "passive
foreign investment company" for U.S. Federal income tax purposes and the Fund
does not elect to treat the foreign corporation as a "qualified electing fund"
within the meaning of the Code, the Fund may be subject to U.S. Federal income
tax on a portion of any "excess distribution" it receives from the foreign
corporation or any gain it derives from the disposition of such shares, even if
such income is distributed as a taxable dividend by the Fund to its U.S.
shareholders. The Fund may also be subject to additional tax in the nature of an
interest charge with respect to deferred taxes arising from such distributions
or gains. Any tax paid by the Fund as a result of its ownership of shares in a
"passive foreign investment company" will not give rise to any deduction or
credit to the Fund or any shareholder. If the Fund owns shares in a "passive
foreign investment company" and the Fund does elect to treat the foreign
corporation as a "qualified electing fund" under the Code, the Fund may be
required to include in its income each year a portion of the ordinary income and
net capital gains of the foreign corporation, even if this income is not
distributed to the Fund. Any such income would be subject to the distribution
requirements described above even if the Fund did not receive any income to
distribute.
FOREIGN TAXES
Income received by the Fund from sources within Regent Emerging Europe Region
countries a and any other countries in which the issuers of securities purchased
by the Fund are located may be subject to withholding and other taxes imposed by
such countries.
If the Fund is liable for foreign income and withholding taxes that can be
treated as income taxes under U.S. Federal income tax principles, the Fund
expects to meet the requirements of the Code for "passing-through" to its
shareholders such foreign taxes paid, but there can be no assurance that the
Fund will be able to do so. Under the Code, if more than 50% of the value of the
Fund's total assets at the close of its taxable year consists of stocks or
securities of foreign corporations, the Fund will be eligible for, and intends
to file, an election with the Internal Revenue Service to "pass-through" to the
Fund's shareholders the amount of such foreign income and withholding taxes paid
by the Fund. Pursuant to this election a shareholder will be required to: (1)
include in gross income (in addition to taxable dividends actually received) his
pro rata share of such foreign taxes paid by the Fund; (2) treat his pro rata
share of such foreign taxes as having been paid by him; and (3) either deduct
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his pro rata share of such foreign taxes in computing his taxable income or use
it as a foreign tax credit against his U.S. Federal income taxes. No deduction
for such foreign taxes may be claimed by a shareholder who does not itemize
deductions. Each shareholder will be notified within 60 days after the close of
the Fund's taxable year whether the foreign taxes paid by the Fund will
"pass-through" for that year and, if so, such notification will designate (a)
the shareholder's portion of the foreign taxes paid to each such country; and
(b) the portion of dividends that represents income derived from sources within
each such country.
The amount of foreign taxes for which a shareholder may claim a credit in any
year will be subject to an overall limitation which is applied separately to
"passive income," which includes, among other types of income, dividends and
interest.
The foregoing is only a general description of the foreign tax credit under
current law. Because applicability of the credit depends on the particular
circumstances of each shareholder, shareholders are advised to consult their own
tax advisers.
The foregoing discussion relates only to generally applicable Federal income tax
provisions in effect as of the date of this Prospectus. Shareholders should
consult their tax advisers about the status of distributions from the Fund in
their own states and localities.
THE TRUST
Accolade Funds (the "Trust") is an open-end management investment company
consisting of separate, diversified portfolios. The Regent Emerging Europe
Opportunity Fund, Adrian Day Global Opportunity Fund, the Bonnel Growth Fund and
the MegaTrends Fund are currently offered to the public.
The Trust was formed April 16, 1993, as a "business trust" under the laws of the
Commonwealth of Massachusetts. It is a "series" company which is authorized to
issue shares without par value in separate series. Shares of the series have
been authorized, each of which represents an interest in a separate portfolio.
The Board of Trustees of the Trust has the power to create additional portfolios
at any time without a vote of shareholders of the Trust.
Under the Trust's Master Trust Agreement, no annual or regular meeting of
shareholders is required, although the Trustees may authorize special meetings
from time to time. Under the terms of the Master Trust Agreement, the Trust has
a staggered Board with terms of at least 25% of the Trustees expiring every
three years. The Trustees serve in that capacity for six year terms. Thus, there
will ordinarily be no shareholder meeting unless otherwise required by the
Investment Company Act of 1940 (the "1940 Act"). The Trust will call a meeting
of shareholders for purposes of voting on the question of removal of one or more
Trustees when requested in writing to do so by record holders of not less than
10% of the Trust's outstanding shares, and in connection with such meeting to
comply with the provisions of Section 16(c) of the Investment Company Act of
1940 relating to shareholder communications.
On any matter submitted to shareholders, shares of the portfolio entitle their
holder to one vote per share, irrespective of the relative net asset value of
the portfolio's shares. On matters affecting an individual portfolio, a separate
vote of shareholders of the portfolio is required. The portfolio's shares are
fully paid and non-assessable by the Trust, have no preemptive or subscription
rights, and are fully transferable, with no conversion rights.
MANAGEMENT OF THE FUND
TRUSTEES
The business affairs of the Fund are managed by the Trust's Board of Trustees.
The Trustees establish policies, as well as review and approve contracts and
their continuance. The Trustees also elect the officers and select the Trustees
to serve as executive and audit committee members.
THE SUB-ADVISOR
Effective ....................., 1996 the Advisor and the Trust contracted with
Regent Fund Management Limited ("Sub-Advisor") International Trading Centre,
Warrens, St. Michael, Barbados to serve as Sub-Advisor for the Fund, managing
the Fund's investments subject to the overall supervision of the Advisor and the
Trustees of the Fund and in accordance with the terms of the Sub-Advisory
Agreement.
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The Sub-Advisor was incorporated in British Virgin Islands on June 30, 1988, and
its domicile was changed to Barbados on April 5, 1994. The Sub-Advisor is wholly
- -owned by Regent Pacific Group Limited ("Regent Pacific") which was established
in 1990 and is a holding company of a financial services group with operations
in Hong Kong, London and Toronto and with associations with financial investment
companies in certain other countries. Regent Pacific manages and advises in
respect of assets in excess of $2.2 billion on behalf of clients, of which $160
million is attributable to the Sub-Advisor.
The Sub-Advisor utilizes a team approach to manage the assets of the Fund. The
team meets regularly to review portfolio holdings and to discuss purchase and
sale activity. Dominic Bokor-Ingram has been team leader for the Fund. Mr.
Bokor-Ingram started his career in 1989 as a stockbroker at Olliff & Partners
where he was involved with investment trust and closed-end fund research and
sales. He then joined Buchanan Partners, an investment management company, in
1992 as a founder member of Buchanan Securities where he specialized in
closed-end funds and emerging markets securities, again in a fund research and
sales capacity. From 1993 to 1995 he was a member of the emerging markets team,
where he specialized in the emerging markets of Eastern and Southern Europe. In
1995 he left Buchanan to establish, with a number of ex-Buchanan colleagues,
Regent Kingpin Capital Management, of which he is a director and shareholder
where he is responsible for fund management in emerging markets in Europe,
Russia and the former Soviet Republics. He is also a director of the Czech Value
Fund. Mr. Bokor-Ingram received his BA (Hons) in Economics and Statistics from
Exeter University.
The Sub-Advisor manages the composition of the portfolio and furnishes the Fund
advice and recommendations with respect to its investments and its investment
program and strategy, subject to the general supervision and control of the
Advisor and the Trust's Board of Trustees. While the Sub-Advisor does not have
previous experience managing a mutual fund's portfolio, it has experience, and
continues to manage off shore funds, private investment companies, and separate
accounts for institutions and wealthy individuals. Investment decisions for the
Fund are made independently of investment decisions made for other clients.
In consideration for such services, the Advisor shares the management fee (net
of all expense reimbursements and waivers) equally with the Sub-Advisor. The
Fund is not responsible for paying any portion of the Sub-Advisor's fees.
THE INVESTMENT ADVISOR
U.S. Global Investors, Inc., 7900 Callaghan Road, San Antonio, Texas 78229,
under an Investment Advisory Agreement with the Trust dated September 21, 1994,
furnishes investment advice and is responsible for overall management of the
Trust's business affairs. Frank E. Holmes is Chairman of the Board of Directors
and Chief Executive Officer of the Advisor, as well as President and Trustee of
the Trust. Since October 1989, Mr. Holmes has owned more than 25% of the voting
stock of the Advisor and is its controlling person. The Advisor was organized in
1968. The Advisor serves as investment advisor to United Services Funds and
Accolade Funds, a family of mutual funds with over $1.4 billion in assets.
The Advisor provides to the Trust, and to the funds in the Trust, management and
investment advisory services. The Advisor furnishes an investment program for
the Fund, determines, subject to the overall supervision and review of the Board
of Trustees of the Trust, what investments should be purchased, sold and held,
and makes changes on behalf of the Trust in the investments of the Fund.
The Advisor provides the Trust with office space, facilities and business
equipment and provides the services of executive and clerical personnel for
administering the affairs of the Trust.
Investment decisions for the Fund are made independently from those of other
investment companies advised by U.S. Global Investors, Inc.
The Advisory Agreement with the Trust provides for the Fund to pay the Advisor a
flat management fee of 1.25% of the Fund's average net assets.
The Advisor may, out of profits derived from its management fee, pay certain
financial institutions (which may include banks, trust companies, securities
dealers and other industry professionals) a "servicing fee" for performing
certain administrative servicing functions for Fund shareholders to the extent
these institutions are allowed to do so by applicable statute, rule or
regulation. These fees will be paid periodically and will generally be based on
a percentage of the value of the institutions' client Fund shares, although such
fees may be account based.
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The Transfer Agency Agreement with the Trust provides for the Fund to pay USSI
an annual fee of $23 per account (1/12 of $23 monthly). In connection with
obtaining and/or providing administrative services to the beneficial owners of
Fund shares through broker/dealers, banks, trust companies and similar
institutions which provide such services and maintain an omnibus account with
the Transfer Agent, the Fund shall pay to the Transfer Agent a monthly fee equal
to one-twelfth (1/12) of 12.5 basis points (.00125) of the value of the shares
of the fund held in accounts at the institutions, which payment shall not exceed
$1.92 multiplied by the average daily number of accounts holding Fund shares at
the institutions. These fees cover the usual transfer agency functions. In
addition, the Fund bears certain other Transfer Agent expenses such as the costs
of record retention and postage, plus the telephone and line charges (including
the toll-free 800 service) used by shareholders to contact the Transfer Agent.
Transfer Agent fees and expenses including reimbursed expenses, are reduced by
the amount of small account charges and account closing fees the Transfer Agent
is paid.
USSI performs bookkeeping and accounting services, and determines the daily net
asset value for the Fund. Bookkeeping and accounting services are provided to
the Fund at an asset based fee of 0.03% of the first $250 million average net
assets, 0.02% of the next $250 million average net assets and 0.01% of average
net assets in excess of $500 million--subject to an annual minimum fee of
$24,000.
Additionally, the Advisor is reimbursed certain costs for in-house legal
services pertaining to the Fund.
The Fund pays all other expenses for its operations and activities. The expenses
borne by the Fund include the charges and expenses of any shareholder servicing
agents; custodian fees; legal and auditors' expenses; brokerage commissions for
portfolio transactions; the advisory fee; extraordinary expenses; expenses of
shareholders and trustee meetings; expenses for preparing, printing, and mailing
prospectuses, proxy statements, reports and other communications to
shareholders; and expenses of registering and qualifying shares for sale, among
others.
DISTRIBUTION EXPENSE PLAN
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund has
adopted a distribution expense plan (the "Plan") under which Fund assets may be
utilized to pay for or reimburse expenditures in connection with sales and
promotional services related to the distribution of Fund shares, including
personal services provided to prospective and existing Fund shareholders, which
include the costs of: printing and distribution of prospectuses and promotional
materials; making slides and charts for presentations; assisting shareholders
and prospective investors in understanding and dealing with the Fund; and travel
and out-of-pocket expenses (e.g., copy and long distance telephone charges)
related thereto. Fund assets may be utilized to pay for or reimburse such
expenditures provided the total amount expended pursuant to this Plan does not
exceed 0.25% of net assets on an annual basis.
Under the terms of the Plan the Fund may pay a "servicing fee" of up to 0.25% of
the Fund's average net assets (1/12 of 0.25% monthly) to persons or institutions
for performing certain servicing functions for Fund shareholders. These fees
will be paid periodically and will generally be based on a percentage of the
value of Fund shares held by the institution's clients. The Plan allows the Fund
to pay for or reimburse expenditures in connection with sales and promotional
services related to the distribution of Fund shares, including personal services
provided to prospective and existing Fund shareholders.
See"Distribution Plan" in the Statement of Additional Information.
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders or
prospective shareholders, the Fund may compare its performance, either in terms
of its yield, total return or its yield and total return, to that of other
mutual funds with similar investment objectives and to stock or other indices as
reported in various periodicals. Performance comparisons should not be
considered as representative of the future performance of the Fund.
The Fund's average annual total return is computed in accordance with SEC rules
by determining the average annual compounded rate of return for a specified
period that, if applied to a hypothetical $1,000 initial investment, would
produce the redeemable value of that investment at the end of the period,
assuming reinvestment of all dividends and distributions and with recognition of
all recurring charges. The Fund may also utilize a total return for differing
periods computed in the same manner but without annualizing the total return.
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The Fund's "yield" refers to the income generated by an investment in the Fund
over a 30 day (or one month) period (which period will be stated in the
advertisement). Yield is computed by dividing the net investment income per
share earned during the most recent calendar month by the maximum offering price
per share on the last day of such month. This income is then "annualized." That
is, the amount of income generated by the investment during that 30 day period
is assumed to be generated each month over a 12 month period and is shown as a
percentage of the investment.
For purposes of the yield calculation, interest income is computed based on the
yield to maturity of each debt obligation and dividend income is computed based
upon the stated dividend rate of each security in the Fund's portfolio, and all
recurring charges are recognized.
The standard total return and yield results do not take into account recurring
and nonrecurring charges for optional services which only certain shareholders
elect and which involve nominal fees such as the $5 fee for exchanges. These
fees have the effect of reducing the actual return realized by shareholders.
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<PAGE>
ACCOLADE FUNDS
SHARES OF THE FUND ARE SOLD
AT NET ASSET VALUE WITHOUT SALES COMMISSIONS OR
REDEMPTION FEES
Regent Emerging Europe Opportunity Fund
INVESTMENT ADVISOR
U.S. Global Investors, Inc.
7900 Callaghan Road
Mailing Address: P.O. Box 29467
San Antonio, Texas 78229-0467
SUB-ADVISOR
Regent Fund Management Limited
International Trading Centre
Warrens, St. Michael
Barbados
TRANSFER AGENT
United Shareholder Services, Inc.
P.O. Box 781234
San Antonio, Texas 78278-1234
CUSTODIAN
Bankers Trust Company
16 Wall Street
New York, New York 10005
INDEPENDENT ACCOUNTANT
Price Waterhouse LLP
One Riverwalk Place, Ste. 900
San Antonio, Texas 78205
No Load
Be Sure to Retain This Prospectus; It Contains Valuable Information.
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- --------------------------------------------------------------------------------
PART B -- STATEMENT OF ADDITIONAL INFORMATION
Included herein is the Statement of Additional Information
for the
Accolade-Regent Emerging Europe Opportunity Fund
Post-Effective Amendment No. 9
- --------------------------------------------------------------------------------
ACCOLADE FUNDS
REGENT EMERGING EUROPE OPPORTUNITY FUND
(THE "FUND")
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus; it should be read
in conjunction with the Fund's prospectus dated ......................, 1997,
(the "Prospectus"), which may be obtained from U. S. Global Investors, Inc. (the
"Advisor"), P.O. Box 29467, San Antonio, Texas 78229-0467.
The date of this Statement of Additional Information is
........................., 1997.
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STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION..........................................................3
INVESTMENT OBJECTIVES AND POLICIES...........................................3
RISK FACTORS.................................................................4
PORTFOLIO TURNOVER..........................................................11
MANAGEMENT OF THE FUND......................................................11
INVESTMENT ADVISORY SERVICES................................................12
TRANSFER AGENCY AND OTHER SERVICES..........................................14
DISTRIBUTION PLAN...........................................................14
CERTAIN PURCHASES OF SHARES OF THE FUND.....................................14
ADDITIONAL INFORMATION ON REDEMPTIONS.......................................15
CALCULATION OF PERFORMANCE DATA.............................................15
TAX STATUS..................................................................16
INDEPENDENT ACCOUNTANTS ....................................................17
FINANCIAL STATEMENTS........................................................17
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GENERAL INFORMATION
Accolade Funds (the "Trust") is an open-end management investment company and is
a business trust organized under the laws of the Commonwealth of Massachusetts.
There are numerous series within the Trust, each of which represents a separate
diversified portfolio of securities (a "Portfolio"). This Statement of
Additional Information ("SAI") presents important information concerning the
Regent Emerging Europe Opportunity Fund ("Fund") and should be read in
conjunction with the Prospectus.
The assets received by the Trust from the issue or sale of shares of the Fund
and all income, earnings, profits and proceeds thereof, subject only to the
rights of creditors, are separately allocated to such Fund. They constitute the
underlying assets of the Fund, are required to be segregated on the books of
accounts, and are to be charged with the expenses with respect to such fund. Any
general expenses of the Trust, not readily identifiable as belonging to a
particular fund, will be allocated by or under the direction of the Board of
Trustees in such manner as the Board determines to be fair and equitable.
Each share of the Fund represents an equal proportionate interest in the Fund
with each other share and is entitled to such dividends and distributions, out
of the income belonging to that Fund, as are declared by the Board. Upon
liquidation of the Trust, shareholders of each fund are entitled to share pro
rata in the net assets belonging to the Fund available for distribution.
As described under "The Trust" in the Prospectus, the Trust's Master Trust
Agreement provides that no annual or regular meeting of shareholders is
required. However, the Trust has a staggered Board with terms such that the
tenure of at least 25% of the Trustees expires every three years. The Trustees
serve for six-year terms. Thus, there will ordinarily be no shareholder meetings
unless otherwise required by the Investment Company Act of 1940.
On any matter submitted to shareholders, the holder of each share is entitled to
one vote per share (with proportionate voting for fractional shares). On matters
affecting any individual fund, a separate vote of that fund would be required.
Shareholders of any fund are not entitled to vote on any matter that does not
affect their fund but that requires a separate vote of another fund.
Shares do not have cumulative voting rights, which means that in situations in
which shareholders elect Trustees, holders of more than 50% of the shares voting
for the election of Trustees can elect 100% of the Trust's Trustees, and the
holders of less than 50% of the shares voting for the election of Trustees will
not be able to elect any person as a Trustee.
Shares have no preemptive or subscription rights and are fully transferable.
There are no conversion rights.
Under Massachusetts law, the shareholders of the Trust could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Master Trust Agreement disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or the Trustees. The Master Trust Agreement provides for indemnification out of
the Trust's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to meet its
obligations.
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the Fund's investment
objectives and policies discussed in the Fund's Prospectus.
INVESTMENT RESTRICTIONS. If a percentage investment restriction is adhered to at
the time of investment, a later increase or decrease in percentage, resulting
from a change in values of portfolio securities or amount of net assets, will
not be considered a violation of any of the foregoing restrictions.
FUNDAMENTAL INVESTMENT RESTRICTIONS. The Fund will not change any of the
following investment restrictions without the affirmative vote of a majority of
the outstanding voting securities of the Fund, which, as used herein, means the
lesser of: (1) 67% of that Fund's outstanding shares present at a meeting at
which more than 50% of the outstanding shares of that Fund are represented
either in person or by proxy, or (2) more than 50% of that Fund's outstanding
shares.
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<PAGE>
The Fund may not:
(1) Issue senior securities.
(2) Borrow money, except that the Fund may borrow not in excess of 5% of its
total assets from banks as a temporary measure for extraordinary purposes,
may borrow up to 331/3% of the amount of its total assets (reduced by the
amount of all liabilities and indebtedness other than such borrowing) when
deemed desirable or appropriate to effect redemptions provided, however,
that the Fund will not purchase additional securities while borrowings
exceed 5% of the total assets of the Fund.
(3) Underwrite the securities of other issuers.
(4) Invest in real estate.
(5) Engage in the purchase or sale of commodities or commodity futures
contracts, except that the Fund may invest in futures contracts, forward
contracts, options, and other derivative investments in conformance with
policies disclosed in the Fund's then current Prospectus and/or Statement
of Additional Information.
(6) Lend its assets, except that the Fund may purchase money market debt
obligations and repurchase agreements secured by money market obligations,
and except for the purchase or acquisition of bonds, debentures or other
debt securities of a type customarily purchased by institutional investors
and except that any Fund may lend portfolio securities with an aggregate
market value of not more than one-third of such Fund's total net assets.
(Accounts receivable for shares purchased by telephone shall not be deemed
loans.)
(7) Purchase any security on margin, except that it may obtain such short-term
credits as are necessary for clearance of securities transactions.
(8) Sell short more than 5% of its total assets.
(9) Invest more than 25% of its total assets in securities of companies
principally engaged in any one industry. For the purposes of determining
industry concentration, the Fund relies on the Standard Industrial
Classification as complied by Standard & Poor's Compustat Services, Inc.
as in effect from time to time.
(10) With respect to 75% of its total assets, the Fund will not: (a) invest
more than 5% of the value of its total assets in securities of any one
issuer, except such limitation shall not apply to obligations issued or
guaranteed by the United States ("U.S.") Government, its agencies or
instrumentalities; or (b) acquire more than 10% of the voting securities
of any one issuer.
(11) Invest more than 10% of its total net assets in open-end investment
companies. To the extent that the Fund shall invest in open-end investment
companies, the Fund's Advisor and Sub-Advisor shall waive a proportional
amount of their management fee.
RISK FACTORS
The following information supplements the discussion of the Fund's risk factors
discussed in the Fund's Prospectus. The following are among the most significant
risks associated with an investment in the Fund.
EQUITY PRICE FLUCTUATION. Equity securities are subject to price fluctuations
depending on a variety of factors, including market, business, and economic
conditions.
FOREIGN INVESTMENTS. Investing in securities issued by companies whose principal
business activities are outside the United States may involve significant risks
not present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those not
subject to the disclosure and reporting requirements of the United States
securities laws. Foreign issuers are generally not bound by uniform accounting,
auditing, and financial reporting requirements and standards of practice
comparable to those applicable to domestic issuers. Investments in foreign
securities also involve the risk of possible adverse changes in investment or
exchange control regulations, expropriation or confiscatory taxation, limitation
of the removal of funds or other assets of the Fund, political or financial
instability or diplomatic and other developments which could affect such
investment. Further, economies of particular countries or areas of the world may
differ favorably or unfavorably from the economy of the United States. It is
anticipated that in most cases
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the best available market for foreign securities will be on exchanges or in
over-the-counter markets located outside of the United States. Foreign stock
markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable United States companies. In addition,
foreign brokerage commissions are generally higher than commissions on
securities traded in the United States and may be non-negotiable. In general,
there is less overall governmental supervision and regulation of foreign
securities markets, broker/dealers, and issuers than in the United States.
EMERGING MARKETS. Investing in emerging markets involves risks and special
considerations not typically associated with investing in other more established
economies or securities markets. Investors should carefully consider their
ability to assume the risks listed below before making an investment in the
Fund. Investing in emerging markets is considered speculative and involves the
risk of total loss. Because the Fund's investments will be subject to the market
fluctuations and risks inherent in all investments, there can be no assurance
that the Fund's stated objective will be realized. The Fund's Advisor and
Sub-Advisor will seek to minimize these risks through professional management
and investment diversification. As with any long-term investment, the value of
shares when sold may be higher or lower than when purchased.
Risks of investing in emerging markets include:
(1) the risk that the Fund's assets may be exposed to nationalization,
expropriation, or confiscatory taxation;
(2) the fact that emerging market securities markets are substantially
smaller, less liquid and more volatile than the securities markets of more
developed nations The relatively small market capitalization and trading
volume of emerging market securities may cause the Fund's investments to
be comparatively less liquid and subject to greater price volatility than
investments in the securities markets of developed nations. Many emerging
markets are in their infancy and have yet to be exposed to a major
correction. In the event of such an occurrence, the absence of various
market mechanisms which are inherent in the markets of more developed
nations may lead to turmoil in the market place, as well as the inability
of the Fund to liquidate its investments;
(3) greater social, economic and political uncertainty (including the risk of
war);
(4) greater price volatility, substantially less liquidity and significantly
smaller market capitalization of securities markets;
(5) currency exchange rate fluctuations and the lack of available currency
hedging instruments;
(6) higher rates of inflation;
(7) controls on foreign investment and limitations on repatriation of invested
capital and on the Fund's ability to exchange local currencies for U.S.
dollars;
(8) greater governmental involvement in and control over the economy;
(9) the fact that emerging market companies may be smaller, less seasoned and
newly organized;
(10) the difference in, or lack of, auditing and financial reporting standards
which may result in unavailability of material information about issuers;
(11) the fact that the securities of many companies may trade at prices
substantially above book value, at high price/earnings ratios, or at
prices which do not reflect traditional measures of value;
(12) the fact that statistical information regarding the economy of many
emerging market countries may be inaccurate or not comparable to
statistical information regarding the United States or other economies;
(13) less extensive regulation of the securities markets;
(14) certain considerations regarding the maintenance of Fund portfolio
securities and cash with foreign subcustodians and securities
depositories;
(15) the risk that it may be more difficult, or impossible, to obtain and/or
enforce a judgment than in other countries;
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<PAGE>
(16) the risk that the Fund may be subject to income or withholding taxes
imposed by emerging market countries or other foreign governments. The
Fund intends to elect, when eligible, to "pass through" to the Fund's
shareholders the amount of foreign income tax and similar taxes paid by
the Fund. The foreign taxes passed through to a shareholder would be
included in the shareholder's income and may be claimed as a deduction or
credit. Other taxes, such as transfer taxes, may be imposed on the Fund,
but would not give rise to a credit or be eligible to be passed through to
the shareholders;
(17) the fact that the Fund also is permitted to engage in foreign currency
hedging transactions and to enter into stock options on stock index
futures transactions, each of which may involve special risks, although
these strategies cannot at the present time be used to a significant
extent by the Fund in the markets in which the Fund will principally
invest;
(18) the risk that enterprises in which the Fund invests may be or become
subject to unduly burdensome and restrictive regulation affecting the
commercial freedom of the invested company and thereby diminishing the
value of the Fund's investment in it. Restrictive or over regulation may
therefore be a form of indirect nationalization;
(19) the risk that businesses in emerging markets have only a very recent
history of operating within a market-oriented economy. In general,
relative to companies operating in western economies, companies in
emerging markets are characterized by a lack of (i) experienced
management, (ii) modern technology and (iii) sufficient capital base with
which to develop and expand their operations. It is unclear what will be
the effect on companies in emerging markets, if any, of attempts to move
towards a more market-oriented economy;
(20) the fact that investments in equity securities are subject to inherent
market risks and fluctuations in value due to earnings, economic
conditions, quality ratings and other factors beyond the control of the
Advisor or Sub-Advisor. As a result, the return and net asset value of the
Fund will fluctuate;
(21) the fact that the Sub-Advisor may engage in hedging transactions in an
attempt to hedge the Fund's foreign securities investments back to the
U.S. dollar when, in its judgment, currency movements affecting particular
investments are likely to harm the performance of the Fund. Possible
losses from changes in currency exchange rates are primarily a risk of
unhedged investing in foreign securities. While a security may perform
well in a foreign market, if the local currency declines against the U.S.
dollar, gains from the investment can disappear or become losses.
Typically, currency fluctuations are more extreme than stock market
fluctuations. Accordingly, the strength or weakness of the U.S. dollar
against foreign currencies may account for part of the Fund's performance
even when the Sub-Advisor attempts to minimize currency risk through
hedging activities. While currency hedging may reduce portfolio
volatility, there are costs associated with such hedging, including the
loss of potential profits, losses on hedging transactions, and increased
transaction expenses; and
(22) disposition of illiquid securities often takes more time than for more
liquid securities, may result in higher selling expenses and may not be
able to be made at desirable prices or at the prices at which such
securities have been valued by the Fund. As a non-fundamental policy the
Fund will not invest more than 15% of its net assets in illiquid
securities.
LOWER-RATED AND UNRATED DEBT SECURITIES. The Fund may invest up to 5% of its
total assets in debt rated less than investment grade (or unrated) by Standard &
Poor's Corporation (Chicago), Moody's Investors Service (New York), Duff &
Phelps (Chicago), Fitch Investors Service (New York), Thomson Bankwatch (New
York), Canadian Bond Rating Service (Montreal), Dominion Bond Rating Service
(Toronto), IBCA (London), The Japan Bond Research Institute (Tokyo), Japan
Credit Rating Agency (Tokyo), Nippon Investors Service (Tokyo), or S&P-ADEF
(Paris). In calculating the 5% limitation, a debt security will be considered
investment grade if any one of the above listed credit rating agencies rates the
security as investment grade.
In general, the market for lower-rated or unrated bonds may be thinner and less
active, such bonds may be less liquid and their market prices may fluctuate more
than those of higher-rated bonds, particularly in times of economic change and
market stress. In addition, because the market for lower-rated or unrated
corporate debt securities has in recent years experienced a dramatic increase in
the large-scale use of such securities to fund highly leveraged corporate
acquisitions and restructuring, past experience may not provide an accurate
indication of the future performance of that market or of the frequency of
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default, especially during periods of economic recession. Reliable objective
pricing data for lower-rated or unrated bonds may tend to be more limited; in
that event, valuation of such securities in the Fund's portfolio may be more
difficult and will require greater reliance on judgment.
Since the risk of default is generally higher among lower-rated or unrated
bonds, the Sub-Advisor's research and analysis are especially important in the
selection of such bonds, which are often described as "high yield bonds" because
of their generally higher yields and referred to figuratively as "junk bonds"
because of their greater risks.
In selecting lower-rated bonds for investment by the Fund, the Sub-Advisor does
not rely exclusively on ratings, which in any event evaluate only the safety of
principal and interest, not market value risk, and which furthermore, may not
accurately reflect an issuer's current financial condition. The Fund does not
have any minimum rating criteria for its investments in bonds. Through portfolio
diversification, good credit analysis and attention to current developments and
trends in interest rates and economic conditions, investment risk can be
reduced, although there is no assurance that losses will not occur.
RESTRICTED SECURITIES. The Fund may, from time to time, purchase securities
which are subject to restrictions on resale. While such purchases may be made at
an advantageous price and offer attractive opportunities for investment not
otherwise available on the open market, the Fund may not have the same freedom
to dispose of such securities as in the case of the purchase of securities in
the open market or in a public distribution. These securities may often be
resold in a liquid dealer or institutional trading market, but the Fund may
experience delays in its attempts to dispose of such securities. If adverse
market conditions develop, the Fund may not be able to obtain as favorable a
price as that prevailing at the time the decision is made to sell. In any case,
where a thin market exists for a particular security, public knowledge of a
proposed sale of a large block may have the effect of depressing the market
price of such securities.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities, that is,
bonds, notes, debentures, preferred stocks and other securities which are
convertible into or exchangeable for another security, usually common stock.
Convertible debt securities and convertible preferred stocks, until converted,
have general characteristics similar to both debt and equity securities.
Although to a lesser extent than with debt securities generally, the market
value of convertible securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In addition, because of
the conversion or exchange feature, the market value of convertible securities
typically increases or declines as the market value of the underlying common
stock increases or declines, although usually not to the same extent.
Convertible securities generally offer lower yields than non-convertible fixed
income securities of similar quality because of their conversion or exchange
features. Convertible bonds and convertible preferred stock typically have lower
credit ratings than similar non-convertible securities because they are
generally subordinated to other similar but non-convertible fixed income
securities of the same issuer.
OTHER RIGHTS TO ACQUIRE SECURITIES. The Fund may also invest in other rights to
acquire securities, such as options and warrants. These securities represent the
right to acquire a fixed or variable amount of a particular issue of securities
at a fixed or formula price either during specified periods or only immediately
prior to termination. These securities are generally exercisable at premiums
above the value of the underlying securities at the time the right is issued.
These rights are more volatile than the underling stock and will result in a
total loss of the Fund's investment if they expire without being exercised
because the value of the underlying security does not exceed the exercise price
of the right.
ADRS AND GDRS. The Fund may invest in sponsored or unsponsored American
Depository Receipts ("ADRs") or Global Depository Receipts ("GDRs") representing
shares of companies located in the emerging Europe region. ADRs are depository
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. GDRs are
typically issued by foreign banks or trust companies, although they also may be
issued by U.S. banks or trust companies, and evidence ownership of underlying
securities issued by either a foreign or a United States corporation. Generally,
depository receipts in registered form are designed for use in the U.S.
securities market, and depository receipts in bearer form are designed for use
in securities markets outside the United States. Depository receipts may not
necessarily be denominated in the same currency as the underlying securities
into which they may be converted. In addition, the issuers of the securities
underlying unsponsored depository receipts are not obligated to disclose
material information in the United States; and, therefore, there may be less
information available regarding such issuers and there may not be a correlation
between such information and the market value of the depository receipts. For
purposes of the Fund's investment policies, the Fund's investments in depository
receipts will be deemed to be investments in the underlying securities.
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FUTURES CONTRACTS. The Fund may sell futures contracts to hedge against a
decline in the market price of securities which it owns or to defend the
portfolio against currency fluctuations. When the Fund establishes a short
position by selling a futures contract, the Fund will be required to deposit
with the broker an amount of cash or U.S. Treasury bills equal to approximately
5% of the contract amount ("initial margin"). The nature of initial margin in
futures transactions is different from that of margin in securities transactions
in that futures contract margin does not involve the borrowing of funds by the
customer to finance the transactions. Rather, initial margin is in the nature of
a performance bond or good faith deposit on the contract which is returned to
the Fund upon termination of the futures contract assuming all the Fund's
contractual obligations have been satisfied. Subsequent payments, called
variation margin, to and from the broker will be made on a daily basis as the
price of the underlying currency or stock index fluctuates making a short
position in the futures contract more or less valuable, a process known as
"marking-to-market." For example, when the Fund has sold a currency futures
contract and the prices of the stocks included in the underlying currency has
fallen, that position will have increased in value and the Fund will receive
from the broker a variation margin payment equal to that increase in value.
Conversely, when the Fund has sold a currency futures contract and the prices of
the underlying currency has risen, the position would be less valuable and the
Fund would be required to make a variation margin payment to the broker. At any
time prior to expiration of the futures contract, the Fund may elect to close
the position by taking an opposite position, which will operate to terminate the
Fund's position in the futures contract. A final determination of variation
margin is then made, additional cash is required to be paid by or released to
the Fund, and it realizes a loss or a gain.
There is a risk that futures contract price movements will not correlate
perfectly with movements in the value of the underlying stock index. For a
number of reasons the price of the stock index future may move more than or less
than the price of the securities that make up the index. First, all participants
in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and futures markets.
Secondly, from the point of view of speculators, the deposit requirements in the
futures market are less onerous than margin requirements in the stock market.
Therefore, increased participation by speculators in the futures market may also
cause temporary price distortions.
There is a further risk that a liquid secondary trading market may not exist at
all times for these futures contracts, in which event the Fund might be unable
to terminate a futures position at a desired time. Positions in stock index
futures may be closed out only on an exchange or board of trade which provides a
secondary market for such futures. Although the Fund intends to purchase futures
only on exchanges or boards of trade where there appears to be an active
secondary market, there is no assurance that a liquid secondary market on an
exchange or board of trade will exist for any particular contract or at any
particular time. If there is not a liquid secondary market at a particular time,
it may not be possible to close a futures position at such time, and in the
event of adverse price movements, the Fund would continue to be required to make
daily cash payments of variation margin.
OPTIONS. The Fund may sell call options or purchase put options on futures
contracts to hedge against a decline in the market price of securities which it
owns or to defend the portfolio against currency fluctuations. Options on
futures contracts differ from options on individual securities in that the
exercise of an option on a futures contract does not involve delivery of an
actual underlying security. Options on futures contracts are settled in cash
only. The purchaser of an option receives a cash settlement amount and the
writer of an option is required, in return for the premium received, to make
delivery of a certain amount if the option is exercised. A position in an option
on a futures contract may be offset by either the purchaser or writer by
entering into a closing transaction, or the purchaser may terminate the option
by exercising it or allowing it to expire.
The risks associated with the purchase and sale of options on futures contracts
are generally the same as those relating to options on individual securities.
However, the value of an option on a futures contract depends primarily on
movements in the value of the currency or the stock index underlying the futures
contract rather than in the price of a single security. Accordingly, the Fund
will realize a gain or loss from purchasing or writing an option on a futures
contract as a result of movements in the related currency or in the stock market
generally, rather than changes in the price for a particular security.
Therefore, successful use of options on futures contracts by the Fund will
depend on the Advisor's ability to predict movements in the direction of the
currency or stock market underlying the futures contract. The ability to predict
these movements requires different skills and techniques than predicting changes
in the value of individual securities.
Because index options are settled in cash, the Fund cannot be assured of
covering its potential settlement obligations under call options it writes on
futures contracts by acquiring and holding the underlying securities. Unless the
Fund has cash on
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hand that is sufficient to cover the cash settlement amount, it would be
required to sell securities owned in order to satisfy the exercise of the
option.
As a non-fundamental policy the Fund will not invest more than 5% of its total
net assets in options.
SEGREGATED ASSETS AND COVERED POSITIONS. When purchasing a stock index futures
contract, selling an uncovered call option, or purchasing securities on a
when-issued or delayed delivery basis, the Fund will restrict cash, which may be
invested in repurchase obligations) or liquid securities. When purchasing a
stock index futures contract, the amount of restricted cash or liquid
securities, when added to the amount deposited with the broker as margin, will
be at least equal to the market value of the futures contract and not less than
the market price at which the futures contract was established. When selling an
uncovered call option, the amount of restricted cash or liquid securities, when
added to the amount deposited with the broker as margin, will be at least equal
to the value of securities underlying the call option and not less than the
strike price of the call option. When purchasing securities on a when-issued or
delayed delivery basis, the amount of restricted cash or liquid securities will
be at least equal to the Fund's when-issued or delayed delivery commitments.
The restricted cash or liquid securities will either be identified as being
restricted in the Fund's accounting records or physically segregated in a
separate account at Bankers Trust Company, the Fund's custodian. For the purpose
of determining the adequacy of the liquid securities which have been restricted,
the securities will be valued at market or fair value. If the market or fair
value of such securities declines, additional cash or liquid securities will be
restricted on a daily basis so that the value of the restricted cash or liquid
securities, when added to the amount deposited with the broker as margin, equals
the amount of such commitments by the Fund.
Fund assets need not be segregated if the Fund "covers" the futures contract or
call option sold. For example, the Fund could cover a futures or forward
contract which it has sold short by owning the securities or currency underlying
the contract. The Fund may also cover this position by holding a call option
permitting the Fund to purchase the same futures or forward contract at a price
no higher than the price at which the sell position was established.
The Fund could cover a call option which it has sold by holding the same
currency or security (or, in the case of a stock index, a portfolio of stock
substantially replicating the movement of the index) underlying the call option.
The Fund may also cover by holding a separate call option of the same security
or stock index with a strike price no higher than the strike price of the call
option sold by the Fund. The Fund could cover a call option which it has sold on
a futures contract by entering into a long position in the same futures contract
at a price no higher than the strike price of the call option or by owning the
securities or currency underlying the futures contract. The Fund could also
cover a call option which it has sold by holding a separate call option
permitting it to purchase the same futures contract at a price no higher than
the strike price of the call option sold by the Fund.
FOREIGN CURRENCY TRANSACTIONS. Investments in foreign companies usually involve
use of currencies of foreign countries. The Fund also may hold cash and
cash-equivalent investments in foreign currencies. The value of the Fund's
assets as measured in U.S. dollars will be affected by changes in currency
exchange rates and exchange control regulations. The Fund may, as appropriate
markets are developed, but is not required to, engage in currency transactions
including cash market purchases at the spot rates, forward currency contracts,
exchange listed currency futures, exchange listed and over-the-counter options
on currencies, and currency swaps for two purposes. One purpose is to settle
investment transactions. The other purpose is to try to minimize currency risks.
All currency transactions involve a cost. Although foreign exchange dealers
generally do not charge a fee, they do realize a profit based on the difference
(spread) between the prices at which they are buying and selling various
currencies. Commissions are paid on futures options and swaps transactions, and
options require the payment of a premium to the seller.
A forward contract involves a privately negotiated obligation to purchase or
sell at a price set at the time of the contract with delivery of the currency
generally required at an established future date. A futures contract is a
standardized contract for delivery of foreign currency traded on an organized
exchange that is generally settled in cash. An option gives the right to enter
into a contract. A swap is an agreement based on a nominal amount of money to
exchange the differences between currencies.
The Fund will generally use spot rates or forward contracts to settle a security
transaction or handle dividend and interest collection. When the Fund enters
into a contract for the purchase or sale of a security denominated in a foreign
currency or has been notified of a dividend or interest payment, it may desire
to lock in the price of the security or the amount of the
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payment in dollars. By entering into a spot rate or forward contract, the Fund
will be able to protect itself against a possible loss resulting from an adverse
change in the relationship between different currencies from the date the
security is purchased or sold to the date on which payment is made or received
or when the dividend or interest is actually received.
The Fund may use forward or futures contracts, options, or swaps when the
investment manager believes the currency of a particular foreign country may
suffer a substantial decline against another currency. For example, it may enter
into a currency transaction to sell, for a fixed amount of dollars, the amount
of foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. The precise matching
of the securities transactions and the value of securities involved generally
will not be possible. The projection of short-term currency market movements is
extremely difficult and successful execution of a short-term strategy is highly
uncertain.
The Fund may cross-hedge currencies by entering into transactions to purchase or
sell one or more currencies that are expected to decline in value relative to
other currencies in which the Fund has (or expects to have) portfolio exposure.
The Fund may engage in proxy hedging. Proxy hedging is often used when the
currency to which a fund's portfolio is exposed is difficult to hedge. Proxy
hedging entails entering into a forward contract to sell a currency whose
changes in value are generally considered to be linked to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, and simultaneously buy U.S. dollars. The amount of
the contract would not exceed the value of the Fund's securities denominated in
linked securities.
The Fund will not enter into a currency transaction or maintain an exposure as a
result of the transaction when it would obligate the Fund to deliver an amount
of foreign currency in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency. The Fund will designate cash or
securities in an amount equal to the value of the Fund's total assets committed
to consummating the transaction. If the value of the securities declines,
additional cash or securities will be designated on a daily basis so that the
value of the cash or securities will equal the amount of the Fund's commitment.
On the settlement date of the currency transaction, the Fund may either sell
portfolio securities and make delivery of the foreign currency or retain the
securities and terminate its contractual obligation to deliver the foreign
currency by purchasing an offsetting position. It is impossible to forecast what
the market value of portfolio securities will be on the settlement date of a
currency transaction. Accordingly, it may be necessary for the Fund to buy
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the securities are less than the amount of
foreign currency the Fund is obligated to deliver and a decision is made to sell
the securities and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received on
the sale of the portfolio securities if its market value exceeds the amount of
foreign currency the Fund is obligated to deliver. The Fund will realize gains
or losses on currency transactions.
The Fund may also buy put options and write covered call options on foreign
currencies to try to minimize currency risks. The risk of buying an option is
the loss of premium. The risk of selling (writing) an option is that the
currency option will minimize the currency risk only up to the amount of the
premium, and then only if rates move in the expected direction. If this does not
occur, the option may be exercised and the Fund would be required to buy the
underlying currency at the loss which may not be offset by the amount of the
premium. Through the writing of options on foreign currencies, the Fund may also
be required to forego all or a portion of the benefits which might otherwise
have been obtained from favorable movements on exchange rates. All options
written on foreign currencies will be covered; that is, the Fund will own
securities denominated in the foreign currency, hold cash equal to its
obligations or have contracts that offset the options.
The Fund may construct a synthetic foreign currency investment, sometimes called
a structured note, by (a) purchasing a money market instrument which is a note
denominated in one currency, generally U.S. dollars, and (b) concurrently
entering into a forward contract to deliver a corresponding amount of that
currency in exchange for a different currency on a future date and at a
specified rate of exchange. Because the availability of a variety of highly
liquid short-term U.S. dollar market instruments, or notes, a synthetic money
market position utilizing such U.S. dollar instruments may offer greater
liquidity than direct investment in foreign currency.
CURRENCY FLUCTUATIONS -- "SECTION 988" GAINS OR LOSSES. Under the Code, gains or
losses attributable to fluctuations in exchange rates which occur between the
time the Fund accrues interest or other receivables, or accrues expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities are treated as
ordinary income or ordinary loss. Similarly, gains or losses from the
disposition of foreign currencies or from the disposition of debt securities
denominated in a foreign currency attributable to fluctuations in the value of
the foreign
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currency between the date of acquisition of the currency or security and the
date of disposition also are treated as ordinary gain or loss. These gains or
losses, referred to under the Code as "section 988" gains or losses, increase or
decrease the amount of the Fund's net investment income (which includes, among
other things, dividends, interest and net short-term capital gains in excess of
net long-term capital losses, net of expenses) available to be distributed to
its shareholders as ordinary income, rather than increasing or decreasing the
amount of the Fund's net capital gain. If section 988 losses exceed such other
net investment income during a taxable year, any distributions made by the Fund
could be recharacterized as a return of capital to shareholders, rather than as
an ordinary dividend, reducing each shareholder's basis in his Fund shares. To
the extent that such distributions exceed such shareholder's basis, they will be
treated as a gain from the sale of shares. As discussed below, certain gains or
losses with respect to forward foreign currency contracts, over-the-counter
options or foreign currencies and certain options graded on foreign exchanges
will also be treated as section 988 gains or losses.
Forward currency contracts and certain options entered into by the Fund may
create "straddles" for U.S. Federal income tax purposes and this may affect the
character of gains or losses realized by the Fund on forward currency contracts
or on the underlying securities and cause losses to be deferred. Transactions in
forward currency contracts may also result in the loss of the holding period of
underlying securities for purposes of the 30% of gross income test. The Fund may
also be required to "mark-to-market" certain positions in its portfolio (i.e.,
treat them as if they were sold at year end). This could cause the Fund to
recognize income without having the cash to meet the distribution requirements.
PORTFOLIO TURNOVER
The Fund's management buys and sell securities for the Fund to accomplish
investment objectives. The Fund's investment policy may lead to frequent changes
in investments, particularly in periods of rapidly changing markets. The Fund's
investments may also be traded to take advantage of perceived short-term
disparities in market values.
A change in the securities held by the Fund is known as "portfolio turnover." A
high portfolio turnover rate may cause the Fund to pay higher transaction
expenses, including more commissions and markups, and also result in quicker
recognition of capital gains, resulting in more capital gain distributions which
may be taxable to shareholders. Any short term gain realized on securities will
be taxed to shareholders as ordinary income. See "Tax Status."
MANAGEMENT OF THE FUND
The Trustees and Officers of the Trust and their principal occupations during
the past five years are set forth below. Except as otherwise indicated, the
business address of each is 7900 Callaghan Road, San Antonio, Texas 78229.
NAME AND ADDRESS TRUST POSITION PRINCIPAL OCCUPATION
- -------------------- --------------- -----------------------------------
Frank E. Holmes(1) Trustee Chairman of the Board of Directors
President, and Chief Executive Officer of the
Chief Executive Advisor. Since October 1989 Mr.
Officer Holmes has served and continues to
serve in various positions with
the Advisor, its subsidiaries, and
the investment companies which it
sponsors. Director of Franc-Or
Resource Corp. from November 1994
to November 1996. Director of
Marleau, Lemire Inc. from January
1995 to December 1995.
------------------
(1) This Trustee may be deemed an
"interested person" of the Trust
as defined in the Investment
Company Act of 1940.
Richard E. Hughs Trustee Professor at the School of
11 Dennin Drive Business of the State University
Menands, NY 12204 of New York at Albany from 1990 to
present; Dean, School of Business
1990-1994; Director of the
Institute for the Advancement of
Health Care Management,
1994-present. Corporate Vice
President, Sierra Pacific
Resources, Reno, NV, 1985-1990.
Dean and Professor, College of
Business Administration,
University of Nevada, Reno,
1977-1985. Associate Dean, Stern
School of Business, New York
University, New York City,
1970-1977.
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NAME AND ADDRESS TRUST POSITION PRINCIPAL OCCUPATION
- -------------------- --------------- -----------------------------------
Clark R. Mandigo Trustee Business consultant since 1991.
1250 N.E. Loop 410 From 1985 to 1991, President, Chief
Suite 900 Executive Officer, and Director of
San Antonio, Texas 78209 Intelogic Trace, Inc., a nationwide
company which sells, leases and
maintains computers and
telecommunications systems and
equipment. Prior to 1985, President
BHP Petroleum (Americas), Ltd., an
oil and gas exploration and
development company. Director of
Palmer Wireless, Inc., Lone Star
Steakhouse & Saloon, Inc. and
Physician Corporation of America.
Formerly a Director of Datapoint
Corporation. Trustee for
Pauze/Swanson United Services Funds
from November 1993 to February
1996.
Bobby D. Duncan Executive Vice President, Chief Financial Officer,
President, and Chief Operating Officer of the
Chief Operating Advisor. Since January 1985 Mr.
Officer Duncan has served and continues to
serve in various positions with the
Advisor, its subsidiaries, and the
investment companies which it
sponsors.
Thomas D. Tays Vice President, Vice President and Securities
Secretary of the Specialist of the Advisor. Since
Trust September 1993 Mr. Tays has served
and continues to serve in various
positions with the Advisor, its
subsidiaries, and the investment
companies which it sponsors. Prior
to September 1993 Mr. Tays was an
attorney in private practice.
Susan B. McGee Vice President, Vice President and Secretary of the
Assistant Advisor. Since September 1992 Ms.
Secretary McGee has served and continues to
serve in various positions with the
Advisor, its subsidiaries, and the
investment companies which it
sponsors. Prior to September 1992
Ms. McGee was a student at St.
Mary's Law School.
Kevin C. White Chief Accounting Chief Accounting Officer of the
Officer Advisor. Since November 1995 Mr.
White has served and continues to
serve in various positions with the
Advisor, its subsidiaries, and the
investment companies which it
sponsors. Closing Manager for World
Savings and Loan from January 1995
to November 1995. Controller of
Swearingen Aircraft from December
1991 to January 1995. Financial
Analyst for Fox Photo from February
1991 to December 1991.
PRINCIPAL HOLDERS OF SECURITIES
As of .........................., 1997, shares of the Fund had not yet been
offered to the public and ............................ owned 100% of the Fund's
outstanding shares.
INVESTMENT ADVISORY SERVICES
The investment adviser to the Fund is U. S. Global Investors, Inc. (the
"Advisor"), a Texas corporation, pursuant to an advisory agreement dated
September 21, 1994. Frank E. Holmes, Chief Executive Officer and a Director of
the Advisor, as well as a Trustee, President and Chief Executive Officer of the
Trust, beneficially owns more than 25% of the outstanding voting stock of the
Advisor and may be deemed to be a controlling person of the Advisor.
In addition to the services described in the Fund's Prospectus, the Advisor will
provide the Trust with office space, facilities and simple business equipment,
and will provide the services of executive and clerical personnel for
administering the affairs
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of the Trust. It will compensate all personnel, officers, and trustees of the
Trust, if such persons are employees of the Advisor or its affiliates, except
that the Trust will reimburse the Advisor for a portion of the compensation of
the Advisor's employees who perform certain legal services for the Trust,
including state securities law regulatory compliance work, based upon the time
spent on such matters for the Trust.
In consideration for such services, the Advisor pays the Sub-Advisor a
sub-advisory fee. The Advisor and the Sub-Advisor share the management fee
equally.
The Trust pays all other expenses for its operations and activities. Each of the
funds of the Trust pays its allocable portion of these expenses. The expenses
borne by the Trust include the charges and expenses of any transfer agents and
dividend disbursing agents, custodian fees, legal and auditing expenses,
bookkeeping and accounting expenses, brokerage commissions for portfolio
transactions, taxes, if any, the advisory fee, extraordinary expenses, expenses
of issuing and redeeming shares, expenses of shareholder and trustee meetings,
and of preparing, printing and mailing proxy statements, reports and other
communications to shareholders, expenses of registering and qualifying shares
for sale, fees of Trustees who are not "interested persons" of the Advisor,
expenses of attendance by officers and trustees at professional meetings of the
Investment Company Institute, the No-Load Mutual Fund Association or similar
organizations, and membership or organization dues of such organizations,
expenses of preparing and setting in type prospectuses and periodic reports and
expenses of mailing them to current shareholders, fidelity bond premiums, cost
of maintaining the books, and records of the Trust, and any other charges and
fees not specifically enumerated.
The Trust and the Advisor, in connection with the Fund, have entered into a
sub-advisory agreement with another firm as discussed in the Prospectus. The
Sub-Advisor's compensation is set forth in the Prospectus and is paid by the
Advisor. The Fund will not be responsible for the Sub-Advisor's fee.
The Advisor may, out of profits derived from its management fee, pay certain
financial institutions (which may include banks, securities dealers, and other
industry professionals) a "servicing fee" for performing certain administrative
servicing functions for Fund shareholders to the extent these institutions are
allowed to do so by applicable statute, rule or regulation. These fees will be
paid periodically and will generally be based on a percentage of the value of
the institutions' client Fund shares. The Glass-Steagall Act limits banks in
engaging in the business of underwriting, selling or distributing securities.
However, in the Advisor's opinion, such laws should not preclude a bank from
performing shareholder administrative and servicing functions as contemplated
herein.
The Advisory Agreement was approved by the Board of Trustees of the Trust
(including a majority of the "disinterested Trustees") with respect to the Fund
and will be submitted for approval by shareholders of the Fund at the initial
meeting of shareholders. The Advisory Agreement provides that it will continue
initially for two years, and from year to year thereafter, with respect to each
fund, as long as it is approved at least annually both (i) by a vote of a
majority of the outstanding voting securities of such fund [as defined in the
Investment Company Act of 1940 (the "Act")] or by the Board of Trustees of the
Trust, and (ii) by a vote of a majority of the Trustees who are not parties to
the Advisory Agreement or "interested persons" of any party thereto cast in
person at a meeting called for the purpose of voting on such approval. The
Advisory Agreement may be terminated on 60 days' written notice by either party
and will terminate automatically if it is assigned.
Both the Advisor and Sub-Advisor provide investment advise to a variety of
clients (the Advisor also provides investment advise to other mutual funds).
Investment decisions for each client are made with a view to achieving their
respective investment objectives. Investment decisions are the product of many
factors in addition to basic suitability for the particular client involved.
Thus, a particular security may be bought or sold for certain clients even
though it could have been bought or sold for other clients at the same time.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In some instances, one client
may sell a particular security to another client. It also sometimes happens that
two or more clients simultaneously purchase or sell the same security, in which
event each day's transactions in such security are, insofar as possible,
averaged as to price and allocated between such clients in a manner which in the
Advisor's or Sub-Advisor's opinion is equitable to each and in accordance with
the amount being purchased or sold by each. There may be circumstances when
purchases or sales of portfolio securities for one or more clients will have an
adverse effect on other clients. The Advisor and Sub-Advisor employ professional
staffs of portfolio managers who draw upon a variety of resources for research
information for the clients.
In addition to advising client accounts, the Advisor invests in securities for
its own account. The Advisor has adopted policies and procedures intended to
minimize or avoid potential conflicts with its clients when trading for its own
account. The Advisor's investment objective and strategies are not the same as
its clients, emphasizing venture capital investing, private
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placement arbitrage, and speculative short-term trading. The Advisor uses a
diversified approach to venture capital investing. Investments typically involve
early-stage businesses seeking initial financing as well as more mature
businesses in need of capital for expansion, acquisitions, management buyouts,
or recapitalization. In general, the Advisor invests in start-up companies in
the natural resources or technology fields.
TRANSFER AGENCY AND OTHER SERVICES
In addition to the services performed for the Funds and the Trust under the
Advisory Agreement, the Advisor, through its subsidiary USSI, provides transfer
agent and dividend disbursement agent services pursuant to the Transfer Agency
Agreement as described in the Fund's Prospectus under "Management of the Fund --
The Investment Advisor." In addition, lockbox and statement printing services
are provided by USSI.
USSI also maintains the books and records of the Trust and of each fund of the
Trust and calculates their daily net asset value as described in the Fund's
Prospectus under "Management of the Funds -- The Investment Advisor."
A & B Mailers, Inc., a corporation wholly owned by the Advisor, provides the
Trust with certain mail handling services. The charges for such services have
been negotiated by the Audit Committee of the Trust and A & B Mailers, Inc. Each
service is priced separately.
DISTRIBUTION PLAN
As described under "Distribution Expense Plan" in the Prospectus, the Fund has
adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act (the
"Distribution Plan"). The Distribution Plan allows the Fund to pay for or
reimburse expenditures in connection with sales and promotional services related
to the distribution of Fund shares, including personal services provided to
prospective and existing Fund shareholders, and includes the costs of: printing
and distribution of prospectuses and promotional materials, making slides and
charts for presentations, assisting shareholders and prospective investors in
understanding and dealing with the Fund, and travel and out-of-pocket expenses
(e.g., copy and long distance telephone charges) related thereto.
The total amount expended pursuant to the Distribution Plan may not exceed 0.25%
of the Fund's net assets on an annual basis. Distribution expenses paid by the
Advisor or other third parties in prior periods that exceeded 0.25% of net
assets may be paid by the Fund with distribution expenses accrued pursuant to
the 12b-1 plan in the current or future periods, so long as the 0.25% limitation
is never exceeded.
Expenses which the Fund incurs pursuant to the Distribution Plan are reviewed
quarterly by the Board of Trustees. On an annual basis the Distribution Plan is
reviewed by the Board of Trustees as a whole, and the Trustees who are not
"interested persons" as that term is defined in the 1940 Act and who have no
direct or indirect financial interest in the operation of the Distribution Plan
("Qualified Trustees"). In their review of the Distribution Plan the Board of
Trustees, as a whole, and the Qualified Trustees determine whether, in their
reasonable business judgment and in light of their fiduciary duties under state
law and under Section 36(a) and (b) of the 1940 Act that there is a reasonable
likelihood that the Distribution Plan will benefit the Fund and its
shareholders. The Distribution Plan may be terminated at any time by vote of a
majority of the Qualified Trustees, or by vote of a majority of the outstanding
voting securities of the Fund.
The Fund is unaware of any Trustee or any interested person of the Fund who had
a direct or indirect financial interest in the operations of the Distribution
Plan.
The Fund expects that the Distribution Plan will be used primarily to pay a
"service fee" to persons who provide personal services to prospective and
existing Fund shareholders. Shareholders of the Fund will benefit from these
personal services and the Fund expects to benefit from economies of scale as
more shareholders are attracted to the Fund.
CERTAIN PURCHASES OF SHARES OF THE FUND
Shares of the Fund are continuously offered by the Trust at their net asset
value next determined after an order is accepted. The methods available for
purchasing shares of the Fund are described in the Prospectus. In addition,
shares of the Fund may be purchased using stock, so long as the securities
delivered to the Trust meet the investment objectives and concentration policies
of the Fund, and are otherwise acceptable to the Advisor, which reserves the
right to reject all or any part of the securities offered in exchange for shares
of the Fund. On any such "in kind" purchase, the following conditions will
apply:
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(1) the securities offered by the investor in exchange for shares of the Fund
must not be in any way restricted as to resale or otherwise be illiquid;
(2) securities of the same issuer must already exist in the Fund's portfolio;
(3) the securities must have a value which is readily ascertainable (and not
established only by evaluation procedures) as evidenced by a listing on
the AMEX, the NYSE, or NASDAQ;
(4) any securities so acquired by any fund shall not comprise over 5% of the
Fund's net assets at the time of such exchange;
(5) no over-the-counter securities will be accepted unless the principal
over-the-counter market is in the United States; and,
(6) the securities are acquired for investment and not for resale.
The Trust believes that this ability to purchase shares of the Fund using
securities provides a means by which holders of certain securities may obtain
diversification and continuous professional management of their investments
without the expense of selling those securities in the public market.
An investor who wishes to make an "in kind" purchase should furnish (either in
writing or by telephone) to the Trust a list with a full and exact description
of all of the securities which he or she proposes to deliver. The Trust will
advise him or her as to those securities which it is prepared to accept and will
provide the investor with the necessary forms to be completed and signed by the
investor. The investor should then send the securities, in proper form for
transfer, with the necessary forms to the Trust and certify that there are no
legal or contractual restrictions on the free transfer and sale of the
securities. The securities will be valued as of the close of business on the day
of receipt by the Trust in the same manner as portfolio securities of the Fund
are valued. See the section entitled "How Shares Are Valued" in the Prospectus.
The number of shares of the Fund, having a net asset value as of the close of
business on the day of receipt equal to the value of the securities delivered by
the investor, will be issued to the investor, less applicable stock transfer
taxes, if any.
The exchange of securities by the investor pursuant to this offer will
constitute a taxable transaction and may result in a gain or loss for Federal
income tax purposes. Each investor should consult his or her tax adviser to
determine the tax consequences under Federal and state law of making such an "in
kind" purchase.
ADDITIONAL INFORMATION ON REDEMPTIONS
SUSPENSION OF REDEMPTION PRIVILEGES. The Trust may suspend redemption privileges
or postpone the date of payment for up to seven days, but cannot do so for more
than seven days after the redemption order is received except during any period
(1) when the NYSE is closed, other than customary weekend and holiday closings,
or trading on the Exchange is restricted as determined by the Securities and
Exchange Commission ("SEC"); (2) when an emergency exists, as defined by the
SEC, which makes it not reasonably practicable for the Trust to dispose of
securities owned by it or fairly to determine the value of its assets; or, (3)
as the SEC may otherwise permit.
REDEMPTION IN KIND. The Trust reserves the right to redeem shares of the Fund in
cash or in kind. However, the Trust has elected to be governed by Rule 18f-1
under the Investment Company Act of 1940, pursuant to which the Trust is
obligated to redeem shares of the Fund solely in cash up to the lesser of
$250,000 or one percent of the net asset value of the Fund during any 90-day
period for any one shareholder. Any shareholder of the Fund receiving a
redemption in kind would then have to pay brokerage fees in order to convert his
Fund investment into cash. All redemption in kind will be make in marketable
securities of the Fund.
CALCULATION OF PERFORMANCE DATA
TOTAL RETURN. The Fund may advertise performance in terms of average annual
total return for 1-, 5- and 10-year periods, or for such lesser periods as the
Fund has been in existence. Average annual total return is computed by finding
the average
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39
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annual compounded rates of return over the periods that would equate the initial
amount invested to the ending redeemable value, according to the following
formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a
hypothetical $1,000 payment made at the
beginning of the 1-, 5- or 10-year
periods at the end of the year or
period.
The calculation assumes all charges are deducted from the initial $1,000 payment
and assumes all dividends and distributions by the Fund are reinvested at the
price stated in the Prospectus on the reinvestment dates during the period, and
includes all recurring fees that are charged to all shareholder accounts.
NONSTANDARDIZED TOTAL RETURN. The Fund may provide the above described standard
total return results for a period which ends as of not earlier than the most
recent calendar quarter end and which begins either twelve months before or at
the time of commencement of the Fund's operations. In addition, the Fund may
provide nonstandardized total return results for differing periods, such as for
the most recent six months. Such nonstandardized total return is computed as
otherwise described under "Total Return" except that no annualization is made.
TAX STATUS
TAXATION OF THE FUND -- IN GENERAL. As stated in its Prospectus, the Fund
intends to qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, the Fund
will not be liable for Federal income taxes on its taxable net investment income
and capital gain net income that are distributed to shareholders, provided that
the Fund distributes at least 90% of its net investment income and net
short-term capital gain for the taxable year.
To qualify as a regulated investment company, the Fund must, among other things:
(1) derive in each taxable year at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities or foreign currencies, or other income
derived with respect to its business of investing in such stock, securities or
currencies (the "90% test"); (2) derive in each taxable year less than 30% of
its gross income from the sale or other disposition of stock or securities held
less than three months (the "30% test"); and (3) satisfy certain diversification
requirements at the close of each quarter of the Fund's taxable year.
The Code imposes a non-deductible 4% excise tax on a regulated investment
company that fails to distribute during each calendar year an amount equal to
the sum of: (1) at least 98% of its ordinary income for the calendar year; (2)
at least 98% of its capital gain net income for the twelve-month period ending
on October 31 of the calendar year; and (3) any portion (not taxable to the
Fund) of the respective balance from the preceding calendar year. The Fund
intends to make such distributions as are necessary to avoid imposition of this
excise tax.
TAXATION OF THE FUND'S INVESTMENTS. The Fund's ability to make certain
investments may be limited by provisions of the Code that require inclusion of
certain unrealized gains or losses in the Fund's income for purposes of the 90%
test, the 30% test, and the distribution requirements of the Code, and by
provisions of the Code that characterize certain income or loss as ordinary
income or loss rather than capital gain or loss. Such recognition,
characterization and timing rules generally apply to investments in certain
forward currency contracts, foreign currencies and debt securities denominated
in foreign currencies.
TAXATION OF THE SHAREHOLDER. Taxable distributions generally are included in a
shareholder's gross income for the taxable year in which they are received.
However, dividends declared in October, November, or December and made payable
to shareholders of record in such a month, will be deemed to have been received
on December 31, if a fund pays the dividends during the following January.
Distributions by the Fund will result in a reduction in the fair market value of
the Fund's shares. Should a distribution reduce the fair market value below a
shareholder's cost basis, such distribution nevertheless would be taxable to the
shareholder as ordinary income or long-term capital gain, even though, from an
investment standpoint, it may constitute a partial return
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of capital. In particular, investors should be careful to consider the tax
implications of buying shares of the Fund just prior to a distribution. The
price of such shares purchased at that time includes the amount of any
forthcoming distribution. Those investors purchasing the Fund's shares
immediately prior to a distribution may receive a return of investment upon
distribution which will nevertheless be taxable to them.
A shareholder of the Fund should be aware that a redemption of shares (including
any exchange into other funds offered, affiliated or administered by U. S.
Global Investors, Inc.) is a taxable event and, accordingly, a capital gain or
loss may be recognized. If a shareholder of the Fund receives a distribution
taxable as long-term capital gain with respect to shares of the Fund and redeems
or exchanges shares before he has held them for more than six months, any loss
on the redemption or exchange (not otherwise disallowed as attributable to an
exempt-interest dividend) will be treated as long-term capital loss to the
extent of the long-term capital gain recognized.
CUSTODIAN
Bankers Trust Company acts as custodian for the Fund. Services with respect to
the retirement accounts will be provided by Security Trust and Financial Company
of San Antonio, Texas, a wholly-owned subsidiary of the Advisor.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, One Riverwalk Place, San Antonio, Texas 78205 is the
independent accountant for the Trust.
FINANCIAL STATEMENTS
The Fund was established as a separate series of the Trust on ..........., 1996,
and as of yet does not have any operating history. Shareholders will be provided
with annual and semi-annual reports as they become available.
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- --------------------------------------------------------------------------------
PART C -- OTHER INFORMATION
Included herein is Part C for
Accolade Funds-Regent Emerging Europe Opportunity Fund
Post-Effective Amendment No. 9
- --------------------------------------------------------------------------------
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
The Fund was established as a separate series of the Trust
and does not yet have any operating history.
(b) EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
(1) (a) First Amended and Restated Master Trust Agreement, dated May
22, 1996, incorporated by reference to Post- Effective
Amendment No. 5 dated May 28, 1996.
(2) By-laws of Accolade Funds, incorporated by reference to
initial registration dated April 15, 1993.
(3) Not applicable
(4) Specimen certificate for Accolade Funds incorporated by
reference to Post-Effective Amendment No. 1 dated March 20,
1995.
(5) (a) Advisory Agreement between United Services Advisors, Inc.
and Accolade Funds dated September 21, 1994 incorporated by
reference to Pre-Effective Amendment No. 3 dated October 17,
1994.
(b) Sub-Advisory Agreement among Accolade Funds, United Services
Advisors, Inc. and Bonnel, Inc. dated September 21, 1994,
incorporated by reference to Pre-Effective Amendment No. 3
dated October 17, 1994.
(c) Amendment dated May 22, 1996, to Advisory Agreement between
Accolade Funds and United Services Advisors, Inc. to add
MegaTrends Fund incorporated by reference to Post-Effective
Amendment No. 5 dated May 28, 1996.
(d) Sub-Advisory Agreement among Accolade Funds, United Services
Advisors, Inc. and Money Growth Institute, Inc. incorporated
by reference to Post-Effective Amendment No. 5 dated May 28,
1996.
(e) Amendment dated ...................., 1996, to Advisory
Agreement between Accolade Funds and U.S. Global Investors,
Inc. to add Adrian Day Global Opportunity Fund incorporated
by reference to Post-Effective Amendment No. 8 dated
December 6, 1996.
(f) Sub-Advisory Agreement dated .........................,
1996, among Accolade Funds, U.S. Global Investors, Inc. and
Global Strategic Management, Inc. incorporated by reference
to Post-Effective Amendment No. 8 dated December 6, 1996.
(g) * Amendment dated ...................., 1996, to Advisory
Agreement between Accolade Funds and U.S. Global Investors,
Inc. adding Regent Emerging Europe Opportunity Fund.
(h) * Sub-Advisory Agreement dated .........................,
1996, among Accolade Funds, U.S. Global Investors, Inc. and
Regent Fund Management Limited.
(6) Not applicable
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
(7) Not applicable
(8) (a) Custodian Agreement dated October 4, 1994, between Accolade
Funds and Bankers Trust Company of New York incorporated by
reference to Pre-Effective Amendment No. 3 dated October 17,
1994.
(b) Amendment dated July 18, 1996, to Custodian Agreement with
Bankers Trust Company of New York adding MegaTrends Fund to
the Agreement incorporated by reference to Post-Effective
Amendment No. 6 dated October 10, 1996.
(c) Amendment dated ................., 1996, to Custodian
Agreement with Bankers Trust Company of New York to add
Adrian Day Global Opportunity Fund incorporated by reference
to Post-Effective Amendment No. 8 dated December 6, 1996.
(d) * Amendment dated ................., 1996, to Custodian
Agreement with Bankers Trust Company of New York to add
Regent Emerging Europe Opportunity Fund to the Agreement.
(9) (a) Transfer Agent Agreement between United Shareholder
Services, Inc. and Accolade Funds dated September 21, 1994,
incorporated by reference to Pre-Effective Amendment No. 3
dated October 17, 1994.
(b) Bookkeeping and Accounting Agreement between United
Shareholder Services, Inc. and Accolade Funds dated
September 21, 1994, incorporated by reference to
Pre-Effective Amendment No. 3 dated October 17, 1994.
(c) Lockbox Service Agreement between United Shareholder
Services, Inc. and Accolade Funds dated September 21, 1994,
incorporated by reference to Pre-Effective Amendment No. 3
dated October 17, 1994.
(d) Printing Agreement between United Shareholder Services, Inc.
and Accolade Funds dated September 21, 1994, incorporated by
reference to Pre-Effective Amendment No. 3 dated October 17,
1994.
(e) Amendment dated May 22, 1996, to Transfer Agent Agreement
between United Shareholder Services, Inc. and Accolade Funds
adding MegaTrends Fund to the Agreement, incorporated by
reference to Post-Effective Amendment No. 5 dated May 28,
1996.
(f) Amendment dated ................., 1996, to the Transfer
Agent Agreement between United Shareholder Services, Inc.
and Accolade Funds Adrian Day Global Opportunity Fund
incorporated by reference to Post-Effective Amendment No. 8
dated December 6, 1996.
(g) Amendment dated ................., 1996, to the Bookkeeping
and Accounting Agreement between United Shareholder
Services, Inc. and Accolade Funds to add Adrian Day Global
Opportunity Fund incorporated by reference to Post-Effective
Amendment No. 8 dated December 6, 1996.
(h) Amendment dated ................., 1996, to the Printing
Agreement between United Shareholder Services, Inc. and
Accolade Funds to add MegaTrends Fund and Adrian Day Global
Opportunity Fund incorporated by reference to Post-Effective
Amendment No. 8 dated December 6, 1996.
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
(i) Amendment dated ................., 1996, to the Lockbox
Service Agreement between United Shareholder Services, Inc.
and Accolade Funds to add MegaTrends fund and Adrian Day
Global Opportunity Fund incorporated by reference to
Post-Effective Amendment No. 8 dated December 6, 1996.
(j) * Amendment dated ................., 1996, to the Transfer
Agent Agreement between United Shareholder Services, Inc.
and Accolade Funds adding Regent Emerging Europe Opportunity
Fund to the Agreement.
(k) * Amendment dated ................., 1996, to the Bookkeeping
and Accounting Agreement between United Shareholder
Services, Inc. and Accolade Funds adding Regent Emerging
Europe Opportunity Fund to the Agreement.
(l) * Amendment dated ................., 1996, to the Printing
Agreement between United Shareholder Services, Inc. and
Accolade Funds to add Regent Emerging Europe Opportunity
Fund to the Agreement.
(m) * Amendment dated ................., 1996, to the Lockbox
Service Agreement between United Shareholder Services, Inc.
and Accolade Funds to add Regent Emerging Europe Opportunity
Fund to the Agreement.
(10) (a) Opinion and consent of Thomas D. Tays, Esq., counsel to the
Registrant, incorporated by reference to Pre-Effective
Amendment No. 3 dated October 17, 1994.
(b) Opinion and consent of Thomas D. Tays, Esq., counsel to the
Registrant, incorporated by reference to Post-Effective
Amendment No. 6 dated October 8, 1996.
(11) (a) Consent of Independent Accountant, Arthur Andersen LLP,
dated October 8, 1996, with respect to MegaTrends Fund
incorporated by reference to Post-Effective Amendment No. 6
dated October 8, 1996.
(b) Power of Attorney incorporated by reference to Pre-Effective
Amendment No. 3 dated October 17, 1994.
(c) Power of Attorney incorporated by reference to
Post-Effective Amendment No. 2 dated January 15, 1996.
(d) Power of Attorney incorporated by reference to
Post-Effective Amendment No. 6 dated October 8, 1996.
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15) (a) Accolade Funds/Bonnel Growth Fund Distribution Plan pursuant
to Rule 12b-1 approved September 21, 1994, incorporated by
reference to Pre-Effective Amendment No. 2 dated May 11,
1994.
(b) Accolade Funds/MegaTrends Fund Distribution Plan pursuant to
Rule 12b-1 approved May 22, 1996, incorporated by reference
to Post-Effective Amendment No. 5 dated May 28, 1996.
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EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
(c) Accolade Funds/Adrian Day Global Opportunity Fund
Distribution Plan pursuant to Rule 12b-1 approved
................., 1996 incorporated by reference to
Post-Effective Amendment No. 8 dated December 6, 1996..
(d) * Accolade Funds/Regent Emerging Europe Opportunity Fund
Distribution Plan pursuant to Rule 12b-1 approved
................., 1996.
(16) (a) Schedule for computation of each performance quotation
provided in the Registration Statement in response to Item
22 incorporated by reference to initial registration
statement dated April 15, 1993.
* Filed Herein
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Information pertaining to persons controlled by or under common control
with Registrant is incorporated by reference to the Statement of
Additional Information contained in Part B of this Registration
Statement at the section entitled "Principal Holders of Securities."
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The number of record holders, as of December 20, 1996, of each class
of securities of the Registrant.
Title of Class Number of Record
Holders
-------------- ----------------
Bonnel Growth Fund 6,258
MegaTrends Fund 1,934
Adrian Day Global Opportunity Fund **
** Not effective as of date of this filing
ITEM 27. INDEMNIFICATION
Under Article VI of the Registrant's Master Trust Agreement, each of
its Trustees and officers or person serving in such capacity with
another entity at the request of the Registrant (a "Covered Person")
shall be indemnified (from the assets of the Sub-Trust or Sub-Trusts in
question) against all liabilities, including, but not limited to,
amounts paid in satisfaction of judgments, in compromises or as fines
or penalties, and expenses, including reasonable legal and accounting
fees, incurred by the Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
criminal before any court or administrative or legislative body, in
which such Covered Person may be or may have been involved as a party
or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having
been such a Trustee or officer, director or trustee, except with
respect to any matter as to which it has been determined that such
Covered Person (i) did not act in good faith in the reasonable belief
that such Covered Person's action was in or not opposed to the best
interests of the Trust or (ii) had acted with wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of such Covered Person's office (either and both of the
conduct described in (i) and (ii) being referred to hereafter as
"Disabling Conduct"). A determination that the Covered Person is not
entitled to indemnification may be made by (i) a final decision on the
merits by a court or other body before whom the proceeding was brought
that the person to be indemnified was not liable by reason of Disabling
Conduct, (ii) dismissal
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<PAGE>
of a court action or an administrative proceeding against a Covered
Person for insufficiency of evidence of Disabling Conduct, or (iii) a
reasonable determination, based upon a review of the facts, that the
indemnitee was not liable by reason of Disabling Conduct by (a) a vote
of the majority of a quorum of Trustees who are neither "interested
persons" of the Trust as defined in Section 1(a)(19) of the 1940 Act
nor parties to the proceeding, or (b) as independent legal counsel in a
written opinion.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
Information pertaining to business and other connections of
Registrant's investment adviser is incorporated by reference to the
Prospectus and Statement of Additional Information contained in Parts A
and B of this Registration Statement at the sections entitled
"Management of the Funds" in the Prospectus and "Investment Advisory
Services" in the Statement of Additional Information.
ITEM 29. PRINCIPAL UNDERWRITERS
The Registrant is currently comprised of a single no-load fund which
acts as distributor of its own shares.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records maintained by the Registrant are kept at the
Registrant's office located at 7900 Callaghan Road, San Antonio, Texas.
All accounts and records maintained by Bankers Trust Company as
custodian for Accolade Funds are maintained at 16 Wall Street, New
York, New York 10005.
ITEM 31. Not applicable
ITEM 32. Not applicable
46
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(a) under the Securities Act of 1933
and that it has duly caused this Amendment to the Registration Statement on Form
N-1A to be signed on its behalf by the undersigned, thereunto duly authorized in
the city of San Antonio, State of Texas, on this 24th of December, 1996.
ACCOLADE FUNDS
By: * /s/ Frank E. Holmes
___________________________________________________
FRANK E. HOLMES, President, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
* /s/ Frank E. Holmes President December 24, 1996
______________________ Chief-Executive-Officer
FRANK E. HOLMES Trustee
Trustee December 24, 1996
* /s/ Clark R. Mandigo Audit-Committee
______________________
CLARK R. MANDIGO
* /s/ Richard E. Hughs Trustee December 24, 1996
______________________ Audit-Committee
RICHARD E. HUGHS
* /s/ Bobby D. Duncan Executive Vice President December 24, 1996
_______________________ Chief-Operating-Officer
BOBBY D. DUNCAN
* /s/ Kevin C. White Principal Accounting Officer December 24, 1996
_______________________
KEVIN C. WHITE
/s/ Thomas D. Tays Vice President December 24, 1996
_______________________ Secretary
THOMAS D. TAYS
* BY: /s/ Thomas D. Tays Vice President December 24, 1996
__________________________ Secretary
THOMAS D. TAYS Power of Attorney
47
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
(5)(g) Amendment dated .........................., 1996, to
Advisory Agreement between Accolade Funds and U.S. Global
Investors, Inc.
(5)(h) Sub-Advisory Agreement dated .........................,
1996, among Accolade Funds, U.S. Global Investors, Inc. and
Regent Fund Management Limited
(8)(d) Amendment dated ......................, 1996, to Custodian
Agreement with Bankers Trust Company of New York adding
Regent Emerging Europe Opportunity Fund to the Agreement.
(9)(j) Amendment dated ......................, 1996, to the
Transfer Agent Agreement between United Shareholder
Services, Inc. and Accolade Funds adding Regent Emerging
Europe Opportunity Fund to the Agreement.
(9)(k) Amendment dated ....................., 1996, to Bookkeeping
and Accounting Agreement between United Shareholder
Services, Inc. and Accolade Funds adding Regent Emerging
Europe Opportunity Fund to the Agreement.
(9)(l) Amendment dated ....................., 1996, to Printing
Agreement between United Shareholder Services, Inc. and
Accolade Funds adding Regent Emerging Europe Opportunity
Fund to the Agreement.
(9)(m) Amendment dated ....................., 1996, to Lockbox
Service Agreement between United Shareholder Services, Inc.
and Accolade Funds adding Regent Emerging Europe Opportunity
Fund to the Agreement.
(15)(d) Accolade Funds/Regent Emerging Europe Opportunity Fund
Distribution Plan pursuant to Rule 12b-1 approved
...................., 1996.
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ADDENDUM TO ADVISORY AGREEMENT
.........................., 1996
U.S. Global Investors, Inc.
7900 Callaghan Road
San Antonio, Texas 78229
Gentlemen:
Pursuant to Section 1(b) of the Advisory Agreement dated September 21, 1994,
between Accolade Funds (the "Trust") and U.S. Global Investors, Inc. (the
"Advisor"), please be advised that the Trust has established one new series of
its shares, namely the Regent Emerging Europe Opportunity Fund, and please be
further advised that the Trust desires to retain the Advisor to render
management and investment advisory services under the Advisory Agreement to this
Fund at the fees stated below:
REGENT EMERGING EUROPE OPPORTUNITY FUND
Monthly Average Net Assets 1/12 of 1.25%
Please state below whether you are willing to render such services at the fees
stated above.
ACCOLADE FUNDS
Attest:_________________________ By:________________________
Secretary Executive Vice President
Date:___________________________
- --------------------------------------------------------------------------------
We are willing to render management and investment advisory services to the
Regent Emerging Europe Opportunity Fund at the fee stated above.
U.S. GLOBAL INVESTORS, INC.
Attest:________________________ By:_______________________________
Secretary President
49
<PAGE>
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the ___ day of _____, 199_ among U.S. GLOBAL
INVESTORS, INC., a corporation organized under the laws of the State of Texas
(the "Advisor"), ACCOLADE FUNDS, a Massachusetts business trust having its
principal place of business in San Antonio, Texas (the "Trust"), on behalf of
the Regent Emerging Europe Opportunity Fund (the "Fund"), a series of shares of
the Trust, a corporation organized under the laws of Barbados. Regent Fund
Management Limited (the "Sub-Advisor").
WHEREAS, the Advisor 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 four 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-ADVISOR.
The Sub-Advisor is hereby appointed to provide investment
advisory services to the Fund for the period and on the terms
herein set forth. The Sub-Advisor accepts such appointment and
agrees to render the services herein set forth, for the
compensation herein provided. To enable Sub-Advisor to
exercise fully its discretion and authority as provided in
this Section 1, the Trust hereby constitutes and appoints
Sub-Advisor 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-ADVISOR.
(a) The Sub-Advisor is hereby authorized and directed and
hereby agrees, subject to the stated investment
objectives and policies of the Fund as set forth in the
Fund's Prospectus (as defined below) and subject to the
supervision of the Advisor 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 under the circumstances appears 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 which 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-Advisor will advise the Trust's custodian and
the Advisor 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
Advisor may reasonably request, the Sub-Advisor 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 Advisor may reasonably
request. The Sub- Advisor will also inform the Trust's
officers and Trustees on a current basis of changes in
investment strategy or tactics. The Sub-Advisor 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-Advisor 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-Advisor, although the Trust will pay the actual
brokerage commissions and any transfer taxes with
respect to transactions in the
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portfolio securities of the Trust. The Sub-Advisor is
authorized to submit any such order collectively with
orders on behalf of other accounts under its
management, provided that the Sub-Advisor 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-Advisor 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-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 Sub-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 the Fund and/or other accounts
over which the Sub-Advisor or an affiliate of the
Sub-Advisor exercises investment discretion. The
Sub-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
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-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. An
affiliated person of the Sub-Advisor may provide
brokerage services to the Fund provided that the
Sub-Advisor 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-Advisor to
enter into transactions with the Fund as principal.
In the performance of its duties hereunder, the
Sub-Advisor 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 Advisor.
(b) Delivery of Documents. The Advisor will furnish upon
request or has previously furnished the Sub-Advisor
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, are
herein called the "By-Laws");
(iii) Resolutions of the Trust's Board of Trustees
authorizing the appointment of the Advisor
and Sub-Advisor 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.
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During the term of this Agreement, the Advisor shall not use
or implement any amendment or supplement that relates to or
affects the obligations of the Sub-Advisor hereunder if the
Sub-Advisor reasonably objects in writing within five business
days after delivery thereof (or such shorter period of time as
the Advisor 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-Advisor as provided in Paragraph 2 hereof, the
Advisor will pay the Sub-Advisor in accordance with
the following:
(i) Subject to shareholder approval the initial
term of the advisory agreement will be for
two years, and the Fund will pay a one and
one quarter percent (1.25%) annual
management fee to the Advisor;
The Advisor will pay to the Sub-Advisor 50
percent of the management fee received net
of all waivers and reimbursements.
(ii) The Fund is not responsible for paying any
portion of the Sub-Advisor's fees.
(iii) The fee is payable in monthly installments
in arrears. The "Management Fee" means the
management fee paid by the Trust to the
Advisor under the Addendum to the Advisory
Agreement, dated as of ______________,
199__, between the Trust and the Advisor
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-Advisor will bear
all expenses incurred by it in the performance of its duties
hereunder.
5. FUND TRANSACTIONS.
The Sub-Advisor 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-Advisor hereby represents and warrants to the Advisor
that it is duly registered as an investment Advisor, 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.
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<PAGE>
7. LIABILITY OF SUB-ADVISOR.
In the performance of its duties under this Agreement, the
Sub-Advisor 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-Advisor that a
notice of eligibility may be filed on behalf of the Trust
pursuant to Rule 4.5 promulgated under said Act). The
Sub-Advisor 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 statutes 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-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.
8. REPORTS.
The Sub-Advisor 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-Advisor 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 for two years from
the date of shareholder approval and 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 Advisor on sixty (60) days'
written notice to the other parties or (iii) by the
Sub-Advisor 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 Advisor and the Trust with
respect to the Fund.
10. SERVICES NOT EXCLUSIVE.
The services of the Sub-Advisor of the Fund hereunder are not
to be deemed exclusive, and the Sub-Advisor shall be free to
render similar services to others.
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. 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
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<PAGE>
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 obligations of the Advisor and Sub-Advisor hereunder
shall not be binding upon any of the shareholders,
nominees, officers, agents or employees of the Advisor
or Sub-Advisor, personally, but bind only the assets and
property of the Advisor and Sub-Advisor, respectively.
The execution and delivery of the Agreement have been
authorized by the directors and officers of the Advisor
and Sub-Advisor and signed by an authorized officer of
the Advisor and Sub-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
and Sub-Advisor, respectively. This limitation of
liability shall not be deemed to protect the
shareholders, nominees, officers, agents or employees of
the Advisor and Sub-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.
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 constitutes the entire agreement of the
parties and supersedes all prior or contemporaneous
written or oral negotiations, correspondence, agreements
and understandings, regarding the subject matter hereof.
13. STANDARD OF CARE.
To the extent permitted under applicable law (including
section 36 of the 1940 Act), the Sub-Advisor will not be
liable to the Trust or the Advisor for any losses incurred by
the Trust, the Fund or the Advisor that arise out of or are in
any way connected with any recommendation or other act or
failure
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54
<PAGE>
to act of the Sub-Advisor 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-Advisor's
fiduciary duty to the Trust, the Fund or the Advisor. 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 Advisor or the Fund may have under any Federal or
state securities laws.
IN WITNESS WHEREOF, the Advisor, the Trust and the Sub-Advisor have caused this
Agreement to be executed on the day and year first above written.
U.S. GLOBAL INVESTORS, INC.
By:_______________________________
ACCOLADE FUNDS
By:_______________________________
REGENT FUND MANAGEMENT LIMITED
By:_______________________________
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<PAGE>
December ____, 1996
Bankers Trust Company
16 Wall Street
New York, New York 10005
Gentlemen:
Pursuant to the Custodian Agreement between Bankers Trust Company and Accolade
Funds, a Massachusetts business trust, this is notification that one new
Sub-Trust has been created, namely the Regent Emerging Europe Opportunity Fund.
This new portfolio will become effective with the Securities and Exchange
Commission in the near future.
Accolade Funds will consist of four separate portfolios. Bankers Trust Company
currently serves as Custodian for the portfolios.
We hereby request that Bankers Trust Company act as Custodian for the Regent
Emerging Europe Opportunity Fund and that an authorized officer of Bankers Trust
Company execute both copies of this letter as agreement to include the new
portfolio under the Custodian Agreement - as contemplated in Paragraph 2 and
subject to the execution of the appropriate amendments.
Please retain one executed copy for your records and return one copy to the
Secretary of the Trust of Accolade Funds. In addition, please prepare and
forward an amended Schedule A to the Custodian Agreement for our signature.
ACCOLADE FUNDS
Bobby D. Duncan
Executive Vice President
Chief Operating Officer
- --------------------------------------------------------------------------------
Bankers Trust Company hereby agrees to act as Custodian for the Regent Emerging
Europe Opportunity Fund.
BANKERS TRUST COMPANY
By:_____________________________ Date:___________________
________________________________
Print Name and Title
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<PAGE>
ACCOLADE FUNDS
Bonnel Growth Fund
MegaTrends Fund
Adrian Day Global Opportunity Fund
Regent Emerging Europe Opportunity Fund
........................., 1996
United Shareholder Services, Inc.
7900 Callaghan Road
San Antonio, TX 78229
Gentlemen:
Pursuant to Section 1(b) of the Transfer Agency Agreement dated September 21,
1994, between Accolade Fund (the "Trust") and United Shareholder Services, Inc.
(the "Transfer Agent"), please be advised that the Trust has established a new
series of its shares, namely the Regent Emerging Europe Opportunity Fund, and be
further advised that the Trust desires to retain the Transfer Agent to render
services under the Transfer Agency Agreement to this Fund at the fee stated in
Amendment No. 1 to the fee schedule of the Transfer Agency Agreement.
Please state below whether you are willing to render such services at the fee
stated above.
ACCOLADE FUNDS
Attest:____________________________ By:___________________________
Thomas D. Tays, Secretary Frank E. Holmes, President
Date:______________________________
- --------------------------------------------------------------------------------
We are willing to render services to the Regent Emerging Europe Opportunity Fund
at the fee stated above.
UNITED SHAREHOLDER SERVICES, INC.
Attest:____________________________ By:________________________________
Susan B. McGee, Secretary Bobby D. Duncan, President
................................................................................
7900 Callaghan Road
Mail Address: P.O. Box 781234, San Antonio, TX 78278-1234
................................................................................
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<PAGE>
ACCOLADE FUNDS
Bonnel Growth Fund
MegaTrends Fund
Adrian Day Global Opportunity Fund
Regent Emerging Europe Opportunity Fund
........................., 1996
U.S. Global Investors, Inc.
7900 Callaghan Road
San Antonio, Texas 78229
Gentlemen:
Pursuant to the Compensation Section of the Bookkeeping and Accounting Agreement
dated September 21, 1994 between Accolade Funds (the "Trust") and U.S. Global
Investors, Inc. (the "Advisor"), please be advised that the Trust has
established one new series of its shares, namely, the Regent Emerging Europe
Opportunity Fund, and please be further advised that the Trust desires to retain
United Shareholder Services, Inc. to render bookkeeping and acounting services
under the Bookkeeping and Accounting Agreement to this Fund.
Name of Fund: Regent Emerging Europe Opportunity Fund
Date Subject to Agreement: ....................., 1996
Please state below whether you are willing to render such services.
ACCOLADE FUNDS
Attest:_____________________________ By:_______________________________
Secretary Executive Vice President
Date:__________________________
- --------------------------------------------------------------------------------
We are willing to render bookkeeping and accounting services to the Regent
Emerging Europe Opportunity Fund.
UNITED SHAREHOLDER SERVICES, INC.
Attest:_____________________________ By:_______________________________
Secretary President
Date:__________________________
................................................................................
7900 Callaghan Road
Mail Address: P.O. Box 781234, San Antonio, TX 78278-1234
................................................................................
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<PAGE>
ACCOLADE FUNDS
Bonnel Growth Fund
MegaTrends Fund
Adrian Day Global Opportunity Fund
Regent Emerging Europe Opportunity Fund
........................, 1996
United Shareholder Services, Inc.
7900 Callaghan Road
San Antonio, TX 78229
Gentlemen:
Pursuant to the EFFECTIVE DATE Section of the Printing Agreement dated September
21, 1994, between Accolade Fund (the "Trust") and United Shareholder Services,
Inc. (the "Transfer Agent"), please be advised that the Trust has established
two a series of its shares, namely the Regent Emerging Europe Opportunity Fund,
and be further advised that the Trust desires to retain the Transfer Agent to
render services under the Printing Agreement to the Fund at the fee stated in
the COMPENSATION Section of the Printing Agreement.
Please state below whether you are willing to render such services.
ACCOLADE FUNDS
Attest:_____________________________ By:_______________________________
Thomas D. Tays, Secretary Frank E. Holmes, President
Date:__________________________
- --------------------------------------------------------------------------------
We are willing to render services to the Regent Emerging Europe Opportunity Fund
at the fee stated in the COMPENSATION Section of the Printing Agreement.
UNITED SHAREHOLDER SERVICES, INC.
Attest:_____________________________ By:_______________________________
Susan B. McGee, Secretary Bobby D. Duncan, President
Date:__________________________
................................................................................
7900 Callaghan Road
Mail Address: P.O. Box 781234, San Antonio, TX 78278-1234
................................................................................
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<PAGE>
ACCOLADE FUNDS
Bonnel Growth Fund
MegaTrends Fund
Adrian Day Global Opportunity Fund
Regent Emerging Europe Opportunity Fund
........................, 1996
United Shareholder Services, Inc.
7900 Callaghan Road
San Antonio, TX 78229
Gentlemen:
Pursuant to the EFFECTIVE DATE Section of the Printing Agreement dated September
21, 1994, between Accolade Fund (the "Trust") and United Shareholder Services,
Inc. (the "Transfer Agent"), please be advised that the Trust has established
two a series of its shares, namely the Regent Emerging Europe Opportunity Fund,
and be further advised that the Trust desires to retain the Transfer Agent to
render services under the Printing Agreement to the Fund at the fee stated in
the COMPENSATION Section of the Printing Agreement.
Please state below whether you are willing to render such services.
ACCOLADE FUNDS
Attest:_____________________________ By:_______________________________
Thomas D. Tays, Secretary Frank E. Holmes, President
Date:__________________________
- --------------------------------------------------------------------------------
We are willing to render services to the Regent Emerging Europe Opportunity Fund
at the fee stated in the COMPENSATION Section of the Printing Agreement.
UNITED SHAREHOLDER SERVICES, INC.
Attest:_____________________________ By:_______________________________
Susan B. McGee, Secretary Bobby D. Duncan, President
Date:__________________________
................................................................................
7900 Callaghan Road
Mail Address: P.O. Box 781234, San Antonio, TX 78278-1234
................................................................................
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<PAGE>
DISTRIBUTION PLAN PURSUANT TO RULE 12B-1
FOR
REGENT EMERGING EUROPE OPPORTUNITY FUND
Adopted ....................., 1996
RECITALS
1. ACCOLADE FUNDS, an unincorporated business trust organized under the
laws of the Commonwealth of Massachusetts (the "Trust") is engaged in business
as an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act").
2. The Trust operates as a "series company" within the meaning of Rule
18f-2 under the Act and is authorized to issue shares of beneficial interest in
various series or sub-trusts (collectively the "Funds").
3. Funds of the Trust may utilize Fund assets to pay for, or reimburse
payment for, sales or promotional services or activities that have been or will
be provided in connection with distribution of shares of the Funds if such
payments are made pursuant to a Plan adopted and continued in accordance with
Rule 12b-1 under the Act.
4. Regent Emerging Europe Opportunity Fund, a series of the Trust (the
"Fund") by virtue of such arrangement may be deemed to act as a distributor of
its shares as provided in Rule 12b-1 under the Act and desires to adopt a Plan
pursuant to such Rule (the "Plan").
5. The Trustees as a whole, and the Trustees who are not interested persons
of the Trust (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan and any agreements relating to
it (the "Qualified Trustees"), having determined, in the exercise of reasonable
business judgment and in light of their fiduciary duties under state law and
under Section 36(a) and (b) of the Act, that there is a reasonable likelihood
that this Plan will benefit the Fund and its shareholders, have approved the
Plan by votes cast in person at a meeting called for the purpose of voting on
this Plan and agreements related thereto.
6. Shareholder approval of the Plan was initially obtained on ...........,
1996.
PLAN PROVISIONS
SECTION 1. EXPENDITURES
a. PURPOSES. Fund assets may be utilized to pay for or reimburse
expenditures in connection with sales and promotional services related to
the distribution of Fund shares, including personal services provided to
prospective and existing Fund shareholders, which include the costs of:
printing and distribution of prospectuses and promotional materials; making
slides and charts for presentations; assisting shareholders and prospective
investors in understanding and dealing with the Fund; and travel and
out-of-pocket expenses (E.G. copy and long distance telephone charges)
related thereto.
b. AMOUNTS. Fund assets may be utilized to pay for or reimburse
expenditures in connection with sales and promotional services related to
the distribution of Fund shares, including personal services provided to
prospective and existing Fund shareholders, provided the total amount
expended pursuant to this Plan does not exceed 0.25% of net assets on an
annual basis.
SECTION 2. TERM AND TERMINATION
(a) INITIAL TERM. This Plan shall become effective upon effective
registration of the Fund and shall continue in effect for a period of one
year thereafter unless terminated or otherwise continued or discontinued as
provided in this Plan.
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(b) CONTINUATION OF THE PLAN. The Plan and any related agreements shall
continue in effect for periods of one year thereafter for so long as such
continuance is specifically approved at least annually by votes of a
majority of both (a) the Trustees of the Trust and (b) the Qualified
Trustees, cast in person at a meeting called for the purpose of voting on
this Plan and such related agreements.
(c) TERMINATION OF THE PLAN. This Plan may be terminated at any time by
vote of a majority of the Qualified Trustees, or by vote of a majority of
the outstanding voting securities of the Fund.
SECTION 3. AMENDMENTS
This Plan may not be amended to increase materially the amount of
distribution expenditures provided for in Section 1 hereof unless such amendment
is approved by a vote of the majority of the outstanding voting securities of
the Fund, and no material amendment to the Plan shall be made unless approved in
the manner provided for annual renewal in Section 2(b) hereof.
SECTION 4. INDEPENDENT TRUSTEES
While this Plan is in effect with respect to the Fund, the selection and
nomination of Trustees who are not interested persons of the Trust (as defined
in the Act) shall be committed to the discretion of the Trustees who are not
interested persons.
SECTION 5. QUARTERLY REPORTS
The Treasurer of the Trust shall provide to the Trustees and the Trustees
shall review, at least quarterly, a written report of the amounts accrued and
the amounts expended under this Plan for distribution, along with the purposes
for which such expenditures were made.
SECTION 6. RECORDKEEPING
The Trust shall preserve copies of this Plan and any related agreements and
all reports made pursuant to Section 5 hereof, for a period of not less than six
years from the date of this Plan, the agreements or such report, as the case may
be; the first two years in an easily accessible place.
SECTION 7. AGREEMENTS RELATED TO THIS PLAN
Agreements with persons providing distribution services to be paid for or
reimbursed under this Plan shall provide that:
(a) the agreement will continue in effect for a period of one year and will
continue thereafter only if specifically approved by vote of a majority of
the Trustees of the Trust;
(b) the agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of (i) the Qualified Trustees or (ii) the
outstanding voting securities of the Fund, on not more than sixty (60)
days' written notice to any other party to the agreement;
(c) the agreement will terminate automatically in the event of an
assignment;
(d) in the event the agreement is terminated or otherwise discontinued, no
further payments or reimbursements will be made by the Fund after the
effective date of such action; and
(e) payments and/or reimbursements may only be made for the specific sales
or promotional services or activities identified in Section 1 of this Plan
and must be made on or before the last day of the one-year period
commencing on the last day of the calendar quarter during which the service
or activity was performed.
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<PAGE>
