File No. 33-61542 and 811-7662
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No.
------
[ X ] Post-Effective Amendment No. 1
(Check appropriate box or boxes)
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ACCOLADE FUNDS/MEGATRENDS FUND
(Exact Name of Registrant as Specified in Charter)
(800) 426-6635
(Registrant's Telephone Number, Including Area Code)
7900 Callaghan Road
San Antonio, Texas 78229
(Address of Principal Executive Offices)
Thomas D. Tays
7900 Callaghan Road
San Antonio, Texas 78229
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Registrant proposed that this
Registration Statement will become effective pursuant to Rule 488 under the
Securities Act of 1933.
Pursuant to Rule 473(b), the registration statement shall hereby become
effective in accordance with the provisions of Section 8(a) of the Securities
Act of 1933. The Registrant, pursuant to Rule 461, hereby requests acceleration
of its effective date to October 15, 1996.
No filing fee is required under the Securities Act of 1933 because an indefinite
number of shares of beneficial interest, without par value, has previously been
registered pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. The Registrant's Rule 24f-2 Notice for its most recent fiscal year was
filed on November 28, 1995.
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<PAGE>
MegaTrends Fund
series of
ACCOLADE FUNDS
Cross Reference Sheet
Items Required by Form N-14
ITEM CAPTION LOCATION IN FOLLOWING MATERIAL
----------------------------------- ------------------------------
Part A. INFORMATION REQUIRED IN THE PROSPECTUS
Item 1. Beginning of Registration Statement COVER PAGE OF REGISTRATION
and Outside Front Cover Page of STATEMENT; FRONT COVER OF
Prospectus PROSPECTUS/PROXY STATEMENT
Item 2. Beginning and Outside Back Cover TABLE OF CONTENTS
Page of Prospectus
Item 3. Fee Table, Synopsis Information and SUMMARY
Risk Factors
Item 4. Information About the Transaction SUMMARY; THE PROPOSED
REORGANIZATION
Item 5. Information About the Registrant COMBINED PROSPECTUS AND
PROXY STATEMENT
Item 6. Information About the Company COVER PAGE; SUMMARY OF THE
Being Acquired PORTFOLIO OF THE MEGATRENDS
FUND; ADDITIONAL INFORMATION
ABOUT THE ACCOLADE FUNDS;
MISCELLANEOUS
Item 7. Voting Information COVER PAGE, NOTICE OF SPECIAL
MEETING OF SHAREHOLDERS;
SUMMARY; ADDITIONAL INFORMATION
RELATING TO VOTING MATTERS
Item 8. Interest of Certain Persons and THE PROPOSED REORGANIZATION
Experts
Item 9. Additional Information Required NOT APPLICABLE
for Reoffering by Persons Deemed
to be Underwriters
Part B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page COVER PAGE
Item 11. Table of Contents NOT APPLICABLE
Item 12. Additional Information REGISTRANT'S PROSPECTUS,
about the Registrant INCLUDED AS EXHIBIT II
Item 13. Additional Information about NOT APPLICABLE
the Company Being Acquired
Item 14. Financial Statements NOT APPLICABLE
Part C. OTHER INFORMATION
Item 15. Indemnification INCLUDED UNDER ITEM 15 OF
PART C
Item 16. Exhibits INCLUDED AT END OF EDGAR
SUBMISSION
Item 17. Undertakings SIGNATURE PAGE
SIGNATURES SIGNATURE PAGE
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<PAGE>
[LETTER TO SHAREHOLDERS]
LEEB PERSONAL FINANCE TRUST
LEEB PERSONAL FINANCE FUND
45 Rockefeller Plaza
Suite 2570
New York, New York 10111
October 15, 1996
Dear Shareholder:
We are pleased to invite you to attend a special meeting (the "Meeting") of
the shareholders of the Leeb Personal Finance Fund ("Personal Finance Fund"), a
series of the Leeb Personal Finance Investment Trust ( "Leeb Trust") to be held
at 7900 Callaghan Road, San Antonio, Texas 78229 on November 15, 1996 at 3:00
p.m., Central Standard Time. The Meeting has been called to consider, among
other things, the approval of an Agreement and Plan of Reorganization (the
"Plan") pursuant to which the Personal Finance Fund will be reorganized into the
MegaTrends Fund, a new series of the Accolade Funds ("Accolade Trust"), a
Massachusetts business trust. The MegaTrends Fund will have the same investment
objectives and policies as the Personal Finance Fund. If the Plan is approved by
shareholders constituting a "majority" of outstanding shares [as defined in the
Investment Company Act of 1940 ("1940 Act")], upon consummation of the
reorganization, shareholders will each receive shares of the MegaTrends Fund
equal in value to the value of their Personal Finance Fund shares at the time of
the reorganization. The Plan provides for the reorganization to be consummated
on or about November 15, 1996. You may continue to purchase and redeem shares
until the close of business on November 14, 1996 (the business day prior to the
reorganization).
Currently Leeb Investment Advisors is the investment advisor of the
Personal Finance Fund. U.S. Global Investors, Inc. ("USGI") will be the
investment advisor to the MegaTrends Fund, and Money Growth Institute, Inc. will
be the sub-adviser responsible for daily management of the investment portfolio.
Dr. Stephen Leeb, president of Leeb Investment Advisors, will continue to serve
as the MegaTrends Fund portfolio manager.
The reorganization will not affect the net asset value of your investment.
On the day of reorganization, your shares of the Personal Finance Fund will be
exchanged, without cost and on a tax-free basis, for shares of equivalent value
of the MegaTrends Fund. Approval of the reorganization could result in more
efficient operations and expanded shareholder services.
Shareholders of the MegaTrends Fund will enjoy services offered by the
United Services family of funds, including exchange privileges with a number of
funds designed to meet different investment needs.
YOUR BOARD OF TRUSTEES HAS UNANIMOUSLY APPROVED THE REORGANIZATION AND
RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL CONTAINED IN THE COMBINED PROXY
STATEMENT AND PROSPECTUS ATTACHED HERETO.
Please take a moment to review the attached Combined Proxy Statement and
Prospectus. Then sign and return your proxy card in the enclosed postage paid
envelope. Remember to sign and return all proxy cards you receive whether you
are voting for or against the proxy.
We appreciate your commitment to the Leeb Personal Finance Fund, and look
forward to your continuing support as a shareholder.
Yours truly,
Stephen Leeb, President
Leeb Personal Financial Investment Trust
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<PAGE>
[NOTICE OF SHAREHOLDER MEETING]
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
OF
LEEB PERSONAL FINANCE INVESTMENT TRUST
LEEB PERSONAL FINANCE FUND
Notice is hereby given that a Special Meeting of Shareholders of Leeb
Personal Finance Trust - Leeb Personal Finance Fund (the "Personal Finance
Fund") will be held in the Board Room of U.S. Global Investors, Inc. ("USGI" or
the "Advisor"), 7900 Callaghan Road, San Antonio, Texas 78229 on November 15,
1996 at 3:00 p.m., Central Standard Time, for the following purposes:
ITEM 1. To approve or disapprove of a plan of reorganization providing for:
(a) the transfer of all the assets of the Personal Finance Fund to a
newly-created series of Accolade Funds named the MegaTrends Fund (the
"MegaTrends Fund") in exchange for shares of the MegaTrends Fund;
(b) the pro rata distribution of such MegaTrends Fund shares to
shareholders of the Personal Finance Fund; and
(c) the dissolution and deregistration of the Personal Finance Fund as an
investment company.
A vote in favor of Item 1 will be deemed to be a vote to authorize the Personal
Finance Fund, as the sole shareholder of the MegaTrends Fund, to:
(a) approve an Advisory Agreement between the MegaTrends Fund and the
Advisor, and a Sub-Advisory Agreement among the Fund, the Advisor, and
Money Growth Institute, Inc. (the "Sub-Advisor");
(b) approve the proposed Distribution Plan for the shares of the
MegaTrends Fund; and
(c) ratify the selection of Price Waterhouse LLP as independent accountant
of the MegaTrends Fund for the current fiscal year.
ITEM 2. To consider and act upon any other matters which may properly come
before this meeting.
By Order of the Board of Trustees
John F. Splain, Secretary
October 15, 1996
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<PAGE>
[COMBINED PROSPECTUS] AND PROXY STATEMENT
LEEB PERSONAL FINANCE FUND
COMBINED PROSPECTUS AND PROXY STATEMENT
DATED OCTOBER 15, 1996
This combined prospectus and proxy statement includes this cover page, a
Notice of Special Meeting of Shareholders of the Leeb Personal Finance Fund, a
series of the Leeb Personal Finance Investment Trust (the "Personal Finance
Fund"), a proxy statement, a form of proxy and the current prospectus for the
MegaTrends Fund (the "Fund"), a newly-established series of Accolade Funds.
If the proposed reorganization described herein is approved, the Personal
Finance Fund will transfer all of its assets to the MegaTrends Fund, and
Personal Finance Fund shareholders will receive shares of the MegaTrends Fund in
exchange for their Personal Finance Fund shares.
The MegaTrends Fund is an open-end diversified investment company. The
investment objective of the MegaTrends Fund is the same as that of the Personal
Finance Fund, primarily to seek long-term capital appreciation consistent with
the preservation of capital. Earning current income from dividends, interest and
short-term capital gains is a secondary objective.
The principal executive offices of the Personal Finance Fund are located at
45 Rockefeller Plaza, Suite 2570, New York, NY 10111 (1-800-224-LEEB). The
principal executive offices of the MegaTrends Fund are located at 7900 Callaghan
Road, San Antonio, Texas 78229 (1-800-524-LEEB).
This combined prospectus and proxy statement sets forth concisely the
information that a shareholder of the Personal Finance Fund should understand
before voting on the proposed reorganization. It should be read and retained for
future reference.
The prospectuses and Statements of Additional Information of both the
Personal Finance Fund and the MegaTrends Fund, and the 1996 annual report of the
Personal Finance Fund, including financial statements, are on file with the
Securities and Exchange Commission (the "SEC" or the "Commission"). The
MegaTrends Fund prospectus and Statement of Additional Information, dated
October 15, 1996, are incorporated by reference into this combined prospectus
and proxy statement. The MegaTrends Fund prospectus is included with this
document as Exhibit II. The MegaTrends Fund Statement of Additional Information
is available, without charge, by writing to or calling U.S. Global Investors,
Inc. at the number listed above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Combined Prospectus and Proxy Statement
Page 1
<PAGE>
SYNOPSIS
1. INTRODUCTION
A meeting of shareholders has been called to consider, among other things,
the approval of an agreement and plan of reorganization (the "Plan") pursuant to
which the Leeb Personal Finance Fund ("Personal Finance Fund") will be
reorganized into the MegaTrends Fund (the "Fund"), a new series of the Accolade
Funds ("Accolade Trust"), a Massachusetts business trust. The MegaTrends Fund
will have the same investment objectives and policies as the Personal Finance
Fund. If the Plan is approved by shareholders constituting a "majority" of
outstanding shares [as defined in the Investment Company Act of 1940 ("1940
Act")], upon consummation of the reorganization, shareholders will each receive
shares of the MegaTrends Fund equal in value to the value of their Personal
Finance Fund shares at the time of the reorganization. The Plan provides for the
reorganization to be consummated on or about November 15, 1996.
Currently Leeb Investment Advisors is the investment advisor of the
Personal Finance Fund. US Global Investors, Inc. ("USGI" or the "Advisor") will
be the investment advisor to the MegaTrends Fund, and Money Growth Institute,
Inc. (the "Sub-Advisor") will be the sub-advisor responsible for daily
management of the investment portfolio. Dr. Stephen Leeb, president of both Leeb
Investment Advisors and Money Growth Institute, Inc., will continue to serve as
the MegaTrends Fund portfolio manager.
2. SHAREHOLDERS MEETING
A meeting of shareholders will be held in the Advisor's board room, 7900
Callaghan Road, San Antonio, Texas 78229 on November 15, 1996 at 3:00 p.m.,
Central Standard Time, for the following purposes:
ITEM 1. To approve or disapprove of a plan of reorganization providing for:
(a) the transfer of all the assets of the Personal Finance Fund to a
newly-created series of Accolade Funds named the MegaTrends Fund
(the "Fund") in exchange for shares of the MegaTrends Fund;
(b) the pro rata distribution of such MegaTrends Fund shares to
shareholders of the Personal Finance Fund; and
(c) the dissolution and deregistration of the Personal Finance Fund
as an investment company.
A vote in favor of Item 1 will be deemed to be a vote to authorize the
Personal Finance Fund, as the sole shareholder of the MegaTrends Fund, to:
(a) approve an Advisory Agreement between the MegaTrends Fund and the
Advisor and a Sub-Advisory Agreement among the Fund, the Advisor,
and Money Growth Institute, Inc. (the "Sub-Advisor");
(b) approve the proposed Distribution Plan for the shares of the
MegaTrends Fund; and
(c) ratify the selection of Price Waterhouse LLP as independent
accountant of the MegaTrends Fund for the current fiscal year.
ITEM 2. To consider and act upon any other matters which may properly come
before this meeting.
The enclosed proxy is solicited by and on behalf of the management of Leeb
Personal Finance Trust - Leeb Personal Finance Fund. In addition to the
solicitation of proxies by mail, officers and employees of the Personal Finance
Fund may solicit in person or by telephone. Persons holding stock as nominees
will, upon request, be reimbursed for their reasonable expenses in sending
soliciting materials to their principals.
Holders of record as of the close of business on September 17, 1996 are
entitled to vote at the meeting or any adjourned session. As of the record date
there were issued and outstanding approximately 2,480,000 shares of beneficial
interest of the Personal Finance Fund.
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Combined Prospectus and Proxy Statement
Page 2
<PAGE>
Shares represented by a properly executed proxy will be voted in accordance
with the instructions thereon, or if no specification is made, the persons named
as proxies will vote in favor of the proposals set forth in the Notice of
Meeting and Proxy Statement. Proxies may be revoked at any time before they are
exercised by the subsequent execution and submission of a revised proxy, by
written notice of revocation to the Secretary of the Personal Finance Fund, or
by voting in person at the meeting. The business address of the Personal Finance
Fund is 45 Rockefeller Plaza, Suite 2570, New York, New York 10111.
A copy of the Personal Finance Fund's annual report for the fiscal year
ended June 30, 1996, including financial statements, has been mailed to each
shareholder of the Personal Finance Fund as of the record date. This combined
proxy statement and prospectus was mailed to shareholders on or about October
15, 1996.
3. SUMMARY OF FUND FEES AND EXPENSES
The following summary is provided to assist you in understanding the
various costs and expenses a shareholder in the Personal Finance Fund or
MegaTrends Fund could bear directly or indirectly.
PERSONAL
FINANCE MEGATRENDS
SHAREHOLDER TRANSACTION EXPENSES FUND FUND
Maximum Sales Load None None
Redemption Fee None None
Administrative Exchange Fee $0 $ 5
Account Closing Fee (does not apply to exchanges) $0 $10
Wire Transfer Fee $8 $10
Trader's Fee (shares held less than 30 days) 0% 0.25%
ANNUAL FUND OPERATING EXPENSES (AS A
PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 1.00% 1.00%
12b-1 Fees 0.00% 0.25%
Other Expenses, including Transfer Agency 1.10% 0.71%
and Accounting Services Fees
Total Fund Operating Expenses 2.10% 1.96%
Annual fund operating expenses for the Personal Finance Fund are based upon
operating results for the fiscal year ended June 30, 1996, adjusted for waiver
of management fees. After voluntary fee waivers, the Personal Finance Fund had
net management fees of 0.42% and total fund operating expenses of 1.50%.
Annual fund operating expenses for the MegaTrends Fund are based upon a
restatement of operating results for the Personal Finance Fund June 30, 1996
fiscal year end. The restatement is an estimate of the results which the
Personal Finance Fund might have achieved had it been operating as a series of
the Accolade Trust with the proposed agreements in place. The MegaTrends Fund
does not intend to waive or reduce its total fund operating fees.
4. PERSONAL FINANCE FUND FINANCIAL HIGHLIGHTS
The following per share data and ratios for a share of beneficial interest
outstanding throughout each fiscal period have been audited by Arthur Andersen
LLP. The related unaudited financial statements are available upon request and
have been incorporated by reference into the Statement of Additional Information
("SAI"). In addition to the data set forth below, further information about the
performance of the Personal Finance Fund is contained in the SAI which may be
obtained without charge by writing to or calling U.S. Global Investors, Inc. at
1-800-524-LEEB.
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Combined Prospectus and Proxy Statement
Page 3
<PAGE>
Per share data for a share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------
1996 1995 1994 1993 1992(1)
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of ...... $ 11.17 $ 10.29 $ 10.84 $ 10.36 $ 10.00
period ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income .............. 0.17 0.28 0.19 0.15 0.16
Net realized and unrealized ........ 1.72 0.95 (0.35) 0.55 0.51
gains (losses) on investments ------- ------- ------- ------- -------
Total from investment operations ..... 1.89 1.23 (0.16) 0.70 0.67
------- ------- ------- ------- -------
Dividends and distributions:
Dividends from net investment ...... (0.17) (0.28) (0.19) (0.15) (0.16)
income(2)
Distributions from net realized .... (1.61) -- (0.20) (0.07) (0.15)
gains(2)
In excess of net realized gains .... (0.01) (0.07) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions .... (1.79) (0.35) (0.39) (0.22) (0.31)
------- ------- ------- ------- -------
Net asset value at end of period ..... $ 11.27 $ 11.17 $ 10.29 $ 10.84 $ 10.36
======= ======= ======= ======= =======
Total return ......................... 17.10% 12.20% (1.50%) 6.79% 7.94%(4)
======= ======= ======= ======= =======
Net assets at end of period .......... $27,945 $32,976 $45,523 $58,955 $28,340
======= ======= ======= ======= =======
(000's)
Ratio of expenses to average net ..... 1.50% 1.50% 1.50% 1.50% 1.47%(4)
assets(3)
Ratio of net investment income to .... 1.30% 2.36% 1.65% 1.60% 2.21%(4)
average net assets
Portfolio turnover rate .............. 115.00% 163.00% 143.00% 83.00% 75.00%(4)
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<FN>
1 Represents the period from the date of public offering (October 21, 1991)
through June 30, 1992. No income was earned or expenses incurred from the start
of business through the date of public offering.
2 For the period ended June 30, 1992, the per share data was calculated
using average shares outstanding throughout the period, whereas for subsequent
periods, the per share data was calculated based upon actual distributions. For
the period ended June 30, 1992, actual distributions per share from net
investment income and from net realized gains from security transactions
amounted to $.11 and $.08, respectively.
3 Ratios of expenses to average net assets assuming no waiver of fees or
reimbursement of expenses by the Advisor was 2.10%, 1.98%, 1.81%, 1.95%, and
2.71%4 for the periods ended June 30, 1996, 1995, 1994, 1993, and 1992,
respectively.
4 Annualized.
</FN>
</TABLE>
The financial statements of the Personal Finance Fund have been audited by
Arthur Andersen LLP, independent accountant, for the periods indicated in said
firm's reports thereon which are included in the 1996 annual report to
shareholders. Such financial statements have been referred to herein in reliance
on the reports of Arthur Andersen LLP given on the authority of said firm as
experts in auditing and accounting.
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Combined Prospectus and Proxy Statement
Page 4
<PAGE>
5. INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
The Personal Finance Fund and MegaTrends Fund are subject to the
informational requirements of the Securities and Exchange Act of 1934 and the
Investment Company Act of 1940, and in accordance therewith, file reports, proxy
material and other information with the Securities and Exchange Commission. Such
reports, proxy material and other information can be inspected and copied at the
Public Reference Room maintained by the Securities and Exchange Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, and copies of such material can
be obtained at prescribed rates from the Public Reference Section of the
Securities and Exchange Commission, Washington, D.C. 20549.
6. INVESTMENT OBJECTIVES AND RESTRICTIONS
The primary objective of the Personal Finance Fund is to seek long-term
capital appreciation consistent with the preservation of capital. Earning
current income from dividends, interest and short-term capital gains is a
secondary objective. The MegaTrends Fund, which has not yet commenced
operations, has investment objectives identical to those of the Personal Finance
Fund.
The MegaTrends Fund investment limitations are identical to the Personal
Finance Fund investment limitations. The investment limitations for the
MegaTrends Fund are described in the section entitled "Investment Objectives,
Investment Policies, and Risk Considerations" in the MegaTrends Fund prospectus
(see Exhibit II), and in the section entitled "Investment Limitations" of its
Statement of Additional Information.
7. DIFFERENCES BETWEEN THE PERSONAL FINANCE AND MEGATRENDS FUNDS
As a new series of Accolade Funds, MegaTrends Fund shareholders will enjoy
many privileges, including exchange privileges with funds in the United Services
family of funds.
Purchase and redemption procedures for the Personal Finance Fund and
MegaTrends Fund are similar. Shareholders in either fund may purchase or redeem
shares at their net asset value, without sales charge or commission, on any
business day the MegaTrends Fund is open. The Personal Finance Fund requires an
initial investment of at least $2,500 while $5,000 is required for an initial
purchase in the MegaTrends Fund. The MegaTrends Fund will waive its $5,000
investment minimum for Personal Finance Fund shareholders owning less than
$5,000 of the Personal Finance Fund as of the closing date. A complete
discussion of purchase and redemption procedures for the MegaTrends Fund is
contained in the MegaTrends Fund prospectus included as Exhibit II.
The Advisor will also contribute marketing, legal, compliance, and
administrative support beyond that contributed by the current advisors to the
Leeb Personal Finance Fund. As a member of the United Services family of funds,
the MegaTrends Fund may be more attractive to potential shareholders than the
Personal Finance Fund, leading to an increase in net assets. An increase in net
assets will generally benefit shareholders by decreasing the fund's annual
expense ratio.
8. PRINCIPAL RISK FACTORS
Because the Personal Finance Fund and the MegaTrends Fund have identical
investment objectives and restrictions, their principal risk factors are also
identical. Following is a summary of the MegaTrends Fund principal risk factors.
A more complete discussion of risks is contained in the MegaTrends Fund
prospectus and Statement of Additional Information.
The MegaTrends Fund should be viewed essentially as an equity fund since it
is expected that, unless the MegaTrends Fund is in a defensive posture, the
majority of its assets will be held in common stocks most of the time. The
MegaTrends Fund, however, may from time to time have a significant portion, and
possibly all, of its assets in debt securities, including both shorter and
longer term market instruments.
Investments in equity and debt securities are subject to inherent market
risks and fluctuations in value due to earnings, economic conditions, quality
ratings and other factors. Debt securities also are subject to price
fluctuations based upon changes in the level of interest rates, which will
generally result in all those securities changing in price in the same way,
i.e., all those securities experiencing appreciation when interest rates decline
and depreciation when interest rates rise. As a result, the return and net asset
value of the MegaTrends Fund will fluctuate.
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Combined Prospectus and Proxy Statement
Page 5
<PAGE>
The stock selection approach within the equity sector of the MegaTrends
Fund portfolio can best be characterized in the vernacular of the investment
business as a "value" orientation. That is, great emphasis is placed on "value"
parameters, such as having a strong balance sheet, and/or having substantial
free cash flow, and/or having a record of rising dividends, and/or having a high
dividend yield. In addition, companies in whose equities the Fund may invest
will predominantly have large capitalizations in terms of total market value.
The Sub-Advisor determines the asset allocation of the Fund portfolio
primarily upon the basis of market timing techniques developed by Dr. Stephen
Leeb and his staff. Historical evidence indicates that correctly timing
portfolio allocations among asset classes has been an extremely difficult
investment strategy to implement successfully. While Dr. Leeb has substantial
experience in applying market timing techniques, there can be no assurance that
the Sub-Advisor will correctly anticipate relative asset class performance on a
consistent basis in the future.
9. TAX CONSEQUENCES
Prior to completion of the reorganization, the MegaTrends Fund will have
received from counsel an opinion that, upon the reorganization and the transfer
of the assets of the Personal Finance Fund in conformance with section 368 of
the Internal Revenue Code, no gain or loss will be recognized by the Personal
Finance Fund or its shareholders for Federal income tax purposes; the holding
period and tax basis of shares of the MegaTrends Fund that are received by each
Personal Finance Fund shareholder will be the same as the holding period and tax
basis of the shares of the Personal Finance Fund previously held by such
shareholder; and the holding period and tax basis of the assets of the
MegaTrends Fund as a result of the reorganization will be the same as that of
the Personal Finance Fund immediately prior to the reorganization.
THE PROPOSED REORGANIZATION
1. REASONS FOR THE PROPOSED REORGANIZATION
The Personal Finance Fund is presently managed by Leeb Investment Advisors
("LIA"), a joint venture of PF Funds Group, Inc. (the "Funds Group") and Money
Growth Institute, Inc.. Historically, the Funds Group has provided marketing and
other services to the Personal Finance Fund, whereas Money Growth Institute,
Inc., owned and controlled by Dr. Stephen Leeb, has been responsible for
managing the Personal Finance Fund portfolio of investments. In early 1996, the
Funds Group informed Money Growth Institute, Inc. that it was seeking to end its
provision of marketing and other services to the Personal Finance Fund. After
considering whether it would be feasible for Money Growth Institute, Inc. to
assume the tasks then performed by the Funds Group, Dr. Leeb concluded that it
would be advisable to seek a new partner to provide such marketing and other
services to the Personal Finance Fund. After discussions with a number of
possible such ventures, Dr. Leeb selected the Advisor.
In order to maximize the benefits to the Personal Finance Fund's current
shareholders, Dr. Leeb and the Advisor proposed to create the MegaTrends Fund as
a new member of the United Services family of funds with the same investment
objectives and restrictions as the Personal Finance Fund, and to sell the assets
of the Personal Finance Fund to the MegaTrends Fund in exchange for shares of
the MegaTrends Fund. As a result of this transaction, each shareholder of the
Personal Finance Fund will become a shareholder of the MegaTrends Fund, and the
MegaTrends Fund will succeed to the assets of the Personal Finance Fund. As a
result of the Sub-Advisory Agreement between the Advisor and Money Growth
Institute, Inc., Dr. Leeb will continue to serve as portfolio manager to the
MegaTrends Fund following the transactions described herein.
The MegaTrends Fund will be a member of the United Services family of funds
whose shareholders enjoy many privileges, including exchange privileges with
other funds in the United Services family of funds. The Advisor can also
contribute marketing, legal, compliance, and administrative support beyond that
contributed by the current advisors to the Leeb Personal Finance Fund. As a
member of the United Services family of funds, the MegaTrends Fund may be more
attractive to potential shareholders than the Personal Finance Fund, leading to
an increase in net assets. An increase in net assets will generally benefit
shareholders by decreasing the Fund's annual expense ratio.
NO COMMISSIONS, SALES LOADS OR OTHER SIMILAR CHARGES WILL BE INCURRED BY
SHAREHOLDERS IN CONNECTION WITH THE REORGANIZATION.
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Combined Prospectus and Proxy Statement
Page 6
<PAGE>
As a result of the reorganization, an account will be established for each
shareholder in the MegaTrends Fund. Each account will be credited with full and
fractional shares of the MegaTrends Fund equal in value to the value of the
shares of the Personal Finance Fund held by the shareholder immediately prior to
the reorganization.
Given this background, the officers and trustees of the Personal Finance
Fund have carefully evaluated the Personal Finance Fund operational record since
inception, giving careful consideration to the risks and opportunities of making
changes. The officers and trustees have concluded that it would be in the best
interest of the Personal Finance Fund and its shareholders that the assets of
the Personal Finance Fund be acquired by the MegaTrends Fund.
2. INVESTMENT OBJECTIVES, RESTRICTIONS, AND RISKS
The investment objectives of both the Personal Finance Fund and the
MegaTrends Fund are the same; that is, the primary investment objective of the
Fund is to seek long-term capital appreciation consistent with the preservation
of capital. Earning current income from dividends, interest and short-term
capital gains is a secondary objective.
Because the investment objective and investment restrictions of the
MegaTrends Fund are identical to those of the Personal Finance Fund, an
investment in the MegaTrends Fund will involve investment risks that are
substantially the same as those of an investment in the Personal Finance Fund.
Both funds should be viewed essentially as equity funds, since it is expected
that, unless the fund is in a defensive posture, most of its assets will be held
in common stocks most of the time. For a more complete description of investment
risks, consult the attached MegaTrends Fund prospectus, Exhibit II.
3. THE AGREEMENT AND PLAN OF REORGANIZATION
The terms and conditions under which the proposed reorganization may be
consummated are set forth in the Agreement and Plan of Reorganization (the
"Reorganization Agreement"), dated May 16, 1996, between the Personal Finance
Fund and MegaTrends Fund. The Reorganization Agreement is attached as Exhibit I
to this combined prospectus and proxy statement.
THE CLOSING DATE
The Reorganization Agreement provides that the MegaTrends Fund will acquire
all of the assets of the Personal Finance Fund in exchange solely for shares of
the MegaTrends Fund to be issued to shareholders of the Personal Finance Fund on
November 15, 1996, or such later date as may be agreed upon by the parties (the
"Closing Date"). Shareholders in the Personal Finance Fund will be issued the
same number of full and fractional shares of the MegaTrends Fund as they held of
the Personal Finance Fund as of the close of the New York Stock Exchange on the
Closing Date. Immediately following the Closing Date, the Personal Finance Fund
will dissolve and distribute pro rata to its shareholders of record, as of the
close of business on the Closing Date, the shares of the MegaTrends Fund
received by the Personal Finance Fund.
EXPENSES OF THE REORGANIZATION
The Personal Finance Fund and MegaTrends Fund will each bear such
expenses of entering into and carrying out the provisions of the Reorganization
Agreement as will be separately incurred by it. Expenses which the Personal
Finance Fund will incur include its proposed liquidation and dissolution, and
legal and accounting fees. It is estimated that these expenses will not exceed
0.50% of the Personal Finance Fund's net assets. The Advisor will pay the costs
of the special meeting and proxy costs (including all costs of solicitation,
printing and mailing of this Proxy Statement).
TAX CONSEQUENCES
Consummation of the proposed reorganization is conditioned upon receipt of
an opinion of Fried, Frank, Harris, Shriver & Jacobson that the acquisition will
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and that the proposed reorganization will not
result in the recognition of gain or loss for Federal income tax purposes for
either the Personal Finance Fund, the MegaTrends Fund or their respective
shareholders. See Section 8(f) of the Reorganization Agreement.
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ADDITIONAL INFORMATION CONCERNING THE AGREEMENT AND PLAN OF REORGANIZATION
The Reorganization Agreement provides that the MegaTrends Fund will acquire
all of the assets of the Personal Finance Fund in exchange solely for shares of
beneficial interest of the MegaTrends Fund on the Closing Date, November 15,
1996 or such later date as may be agreed upon by the parties. Shareholders of
the Personal Finance Fund will be issued the same number of full and fractional
shares of the MegaTrends Fund as they held of the Personal Finance Fund as of
the close of the New York Stock Exchange on the Closing Date. Personal Finance
Fund shareholders will become shareholders of the MegaTrends Fund and will
receive the same dollar amount in MegaTrends Fund shares as the shareholder had
held in the Personal Finance Fund.
The MegaTrends Fund is a newly established series of the Accolade Trust and
has engaged in no business activities prior to this transaction. The MegaTrends
Fund has no issued or outstanding shares.
Immediately following the Closing Date, the Personal Finance Fund will
dissolve and distribute pro rata to its shareholders of record as of the close
of business on the Closing Date, the shares of the MegaTrends Fund received by
the Personal Finance Fund. Such liquidation and distribution will be
accomplished by the establishment of open accounts on the share records of the
MegaTrends Fund in the names of such Personal Finance Fund shareholders and
representing the respective pro rata number of shares of the MegaTrends Fund due
such shareholders. Fractional shares of the MegaTrends Fund will be carried to
the third decimal place. As promptly as practicable after the Closing Date, each
holder of any outstanding certificate or certificates representing shares of the
Personal Finance Fund may surrender the same to United Shareholder Services,
Inc., as transfer agent for the MegaTrends Fund, and request in exchange
therefore a certificate representing the number of whole shares of the
MegaTrends Fund into which shares of the Personal Finance Fund theretofore
represented by the certificate or certificates so surrendered shall have been
converted. However, no fractional share certificates will be issued. The
MegaTrends Fund will issue new certificates only upon written request. Until so
surrendered, each outstanding certificate, which, prior to the Closing Date,
represented shares of the Personal Finance Fund shall be deemed for all purposes
to evidence ownership of the number of shares of MegaTrends Fund into which the
former shares of the Personal Finance Fund have been converted.
The consummation of the Reorganization Agreement is further subject to the
customary conditions applicable to corporate reorganizations of this type as set
forth in Section 8 of the Reorganization Agreement. Moreover, the Reorganization
Agreement may be terminated and the reorganization abandoned at any time, before
or after consent of the two parties, or by either party if any condition set
forth in Section 8 has not been fulfilled by the other party or waived by the
party entitled to its benefits.
4. SHAREHOLDER RIGHTS
The MegaTrends Fund is a Massachusetts business trust, and the Personal
Finance Fund is an Ohio business trust. Shareholders' rights are determined by
their respective Declarations of Trust, By-Laws and applicable state law. Shares
of both funds are fully paid and nonassessable. Holders thereof have
noncumulative voting rights and equal rights with respect to dividends, assets
and liquidations, but no preemptive rights. Neither fund is required to hold
annual meetings of shareholders.
Under Ohio law, shareholders of the Leeb Trust are statutorily protected
against personal liability for the obligations of the Leeb Trust. Under
Massachusetts law, the shareholders of the Accolade Trust could, under certain
circumstances, be held personally liable for the obligations of the Accolade
Trust. However, the Master Trust Agreement disclaims shareholder liability for
acts or obligations of the Accolade Trust and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Accolade Trust or the trustees. The Master Trust Agreement
provides for indemnification out of the Accolade Trust's property for all losses
and expenses of any shareholder held personally liable for the obligations of
the Accolade Trust. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which the
Accolade Trust itself would be unable to meet its obligations.
Trustees of the Leeb Trust have unlimited tenure. The members of the Board
of Trustees of the Accolade Trust have staggered terms so that the tenure of at
least 25% of the trustees expires every three years. The Accolade trustees serve
in
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that capacity for six-year terms. Thus, neither Trust ordinarily will hold
shareholder meetings unless otherwise required by the Investment Company Act of
1940.
Shareholders of the Personal Finance Fund will not be entitled to any
"dissenters rights" under Ohio law since the reorganization is between two
open-end investment companies registered under the Investment Company Act of
1940. However, shareholders who find that the proposed reorganization does not
meet their particular investment needs and objectives may consider two
additional options: (1) they may exchange their holdings without sales
commissions into another mutual fund in the United Services family of funds
which is better suited to their goals, or (2) they may redeem shares for cash.
These options are available to a Personal Finance Fund shareholder after the
reorganization. Exchanges and redemptions are both taxable events so either
action will result in the realization of a capital gain or capital loss to the
shareholder, depending upon the original cost basis of the shareholder's
investment.
As of August 30, 1996 management is not aware of any shareholder owning 5%
or more of the Personal Finance Fund's outstanding shares; officers and
trustees, as a group, owned approximately 2% of the Personal Finance Fund's
outstanding shares. As of August 30, 1996 the MegaTrends Fund did not have any
outstanding shares.
5. CAPITALIZATION
The following table shows the capitalization of the Personal Finance Fund
and MegaTrends Fund as of June 30, 1996, and on a pro forma basis as of that
date giving effect to the proposed acquisition of assets at net asset value
PERSONAL
FINANCE MEGATRENDS PRO FORMA
FUND FUND COMBINED
----------- ---------- -----------
Net Assets (000) $27,945,285 $0.00 $27,945,285
Net Assets Per Share $ 11.27 $0.00 $ 11.27
Shares Outstanding (000) 2,479,333 0 2,479,333
The relative net asset values do not include the respective expenses of
each fund connected with the reorganization; however, such expenses would not be
expected to cause the net asset value to change by more than $.01 per share for
either fund.
Pro forma financial statements have not been prepared because the
MegaTrends Fund has no assets and has not engaged in any operations, other than
preparatory corporate actions such as filing a registration statement and
preparing for the asset transfer from the Personal Finance Fund.
ADDITIONAL INFORMATION ON
THE PERSONAL FINANCE FUND AND THE MEGATRENDS FUND
1. BACKGROUND
The Personal Finance Fund made its initial public offering October 21,
1991. The objective in forming the Personal Finance Fund was to provide
investors with an opportunity to have their money managed in conformance with
principles developed by Dr. Stephen Leeb.
The MegaTrends Fund was organized in 1996 as a new series of Accolade
Funds. The objective in forming the MegaTrends Fund was to combine the
marketing, legal, compliance and administrative expertise of the United Services
family of funds with an opportunity to manage money in conformance with
principles developed by Dr. Stephen Leeb.
2. INVESTMENT OBJECTIVE AND LIMITATIONS
The primary objective of the Personal Finance Fund is to seek long-term
capital appreciation consistent with the preservation of capital. Earning
current income from dividends, interest and short-term capital gains is a
secondary objective.
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The Fund investment objectives are fundamental and as such may not be changed
without the affirmative vote of the holders of a majority of its outstanding
shares as defined in the Investment Company Act of 1940.
The MegaTrends Fund, which has not yet commenced operations, has investment
objectives identical to those of the Personal Finance Fund. The primary
objective of the MegaTrends Fund is to seek long-term capital appreciation
consistent with the preservation of capital. Earning current income from
dividends, interest and short-term capital gains is a secondary objective. See
"Investment Objectives, Investment Policies, and Risk Considerations" in the
MegaTrends Fund prospectus, Exhibit II.
The MegaTrends Fund investment limitations are identical to the Personal
Finance Fund investment limitations. The investment limitations for the
MegaTrends Fund are described in the section entitled "Investment Objectives,
Investment Policies, and Risk Considerations" in the MegaTrends Fund prospectus
and in the section entitled "Investment Limitations" of its Statement of
Additional Information.
3. INVESTMENT ADVISOR AND SUB-ADVISOR
The Personal Finance Fund employs LIA to manage the investment and
reinvestment of the assets of the fund and to continuously review, supervise and
administer the Fund investment program. LIA discharges its responsibilities
subject to the control of the officers and trustees of the Personal Finance
Fund. Dr. Stephen Leeb serves as portfolio manager of the fund.
The Personal Finance Fund pays LIA a fee at an annual rate of 1% of the
average value of the Fund's daily net assets. For the fiscal year ended June 30,
1996 the Personal Finance Fund paid LIA management fees equal to 0.40% (after
waivers) of the average net assets of the fund.
During the fiscal years ended June 30, 1996, 1995 and 1994, the Personal
Finance Fund paid advisory fees of $127,519; $204,936; and $371,602 net of
voluntary fee waivers.
The MegaTrends Fund employs U.S. Global Investors, Inc. to manage its
affairs. The Advisor will contract with Money Growth Institute, Inc. to manage
the MegaTrends Fund investment portfolios subject to oversight by the Advisor
and the Board of Trustees. To date the Accolade Trust has paid the Advisor $0.00
for its services to the MegaTrends Fund; the Accolade Trust has paid the Advisor
for its services to a separate fund in the Accolade Trust.
The Advisor and Sub-Advisor and the Advisory Agreements are discussed in
this proxy in the section entitled "Advisory and Sub-Advisory Agreements."
The MegaTrends Fund is a member of the United Services family of funds.
Shareholders may exchange MegaTrends Fund shares for shares in other funds in
the United Services family of funds. Shareholders are also entitled to a broad
range of other services. See the section entitled "How to Exchange Shares" in
the MegaTrends Fund prospectus.
4. TRANSFER AGENT, BOOKKEEPING AND ACCOUNTING, AND ADMINISTRATIVE SERVICES
The Personal Finance Fund has retained MGF Service Corp. ("MGF"), P.O. Box
5354, Cincinnati, Ohio, to serve as its transfer agent, dividend paying agent
and shareholder service agent. MGF receives for its services as transfer agent a
fee payable monthly at an annual rate of $14 per account, provided, however,
that the minimum fee is $1,000 per month.
MGF Service Corp. also provides accounting and pricing services to the
Personal Finance Fund. MGF Service Corp. receives $3,400 per month from the Fund
for calculating daily net asset value per share.
In addition, MGF Service Corp. has been retained to provide administrative
services to the Personal Finance Fund. In this capacity, MGF Service Corp.
supplies executive, administrative and regulatory services, supervises the
preparation of tax returns, and coordinates the preparation of reports to
shareholders and reports to and filings with the Securities and Exchange
Commission and state securities authorities. The Fund pays MGF Service Corp. a
fee for these administrative services at the annual rate of 0.2% of the average
value of its daily net assets up to $100 million, 0.175% of such assets from
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$100 million to $200 million, and 0.15% of such assets in excess of $200 million
provided, however, that the minimum fee is $1,000 per month.
The MegaTrends Fund has retained United Shareholder Services Inc. ("USSI"),
a wholly-owned subsidiary of the Advisor, to serve as its transfer agent,
dividend paying agent and shareholder service agent. USSI receives for its
services as transfer agent a fee payable monthly at an annual rate of $23 per
account, with no minimum fee.
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.
The Advisor provides administrative services to the MegaTrends Fund at no
additional cost.
5. EXPENSE RATIOS
On June 30, 1996, the Personal Finance Fund had total net assets of
approximately $28 million. For the fiscal year ended June 30, 1996, the Personal
Finance Fund had an expense ratio of 2.10% of its average net assets prior to
waivers of management fees. The expense ratio for the MegaTrends Fund is
projected to be 1.96% of its average net assets, based upon a projection of $40
million in average net assets.
6. PURCHASE, REDEMPTION AND EXCHANGE PROCEDURES
Purchase and redemption procedures for the Personal Finance Fund and
MegaTrends Fund are similar. Shareholders in either fund may purchase or redeem
shares at their net asset value, without sales charge or commission, on any
business day the fund is open. In addition, as members of the United Services
family of funds, MegaTrends Fund shareholders enjoy exchange privileges which
the shareholders of the Personal Finance Fund do not have.
The Personal Finance Fund requires an initial investment of at least $2,500
while $5,000 is required for an initial purchase in the MegaTrends Fund. The
MegaTrends Fund will waive its $5,000 investment minimum for Personal Finance
Fund shareholders owning less than $5,000 of the Personal Finance Fund as of the
Closing Date.
7. INCOME, DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Both the Personal Finance Fund and MegaTrends Fund pay income dividends, if
any, semi-annually and pay capital gains, if any, annually. Shareholders may
elect to accept such dividends in additional shares or take them in cash.
8. LITIGATION
The MegaTrends Fund is not involved in any litigation.
On May 2, 1995, the Securities and Exchange Commission instituted
administrative proceedings against several parties affiliated with the Personal
Finance Fund, including Dr. Leeb. The order initiating the proceedings alleged
that PF Funds Group, Inc. violated Section 17(a) of the Securities Act of 1933,
Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder,
and Section 34(b) of the Investment Company Act of 1940 and alleged that certain
of the other Respondents caused and willfully aided and abetted such violations.
The order alleged that Respondents carried out a marketing strategy for the
Personal Finance Fund that allegedly defrauded or operated as a potential fraud
of actual and potential Fund investors. The order alleged that this marketing
strategy involved the use of allegedly false advertisements concerning the
Master Key, a market-timing program.
Without admitting or denying any of the SEC's charges, Dr. Leeb and all
other respondents agreed to an Offer and Settlement and to the issuance on
January 16, 1996 of an Order Making Findings and Imposing Remedial Sanctions and
a Cease and Desist Order. The SEC concluded that Dr. Leeb and other parties
failed to adequately review or to take steps to ensure the accuracy of the
advertisements and, accordingly, concluded that Dr. Leeb and others aided and
abetted and caused the violations of Section 17(a)(2) of the Securities Act and
Section 34(b) of the 1940 Act. Dr. Leeb and others were each
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censured, and each agreed to pay a $60,000 civil money penalty and to cease and
desist from committing or causing any future violation of Section 17(a)(2) or
Section 34(b). In addition, the parties agreed to implement new procedures to
ensure the accuracy of future advertising. Neither the Personal Finance Fund nor
the Sub-Advisor was a party to the proceeding.
In February, 1995 the Sub-Advisor reached an agreement in principle to
resolve a contemplated administrative proceeding, providing for the Sub-Advisor
and Dr. Leeb, without admitting or denying the allegations of the SEC, to
consent to a cease and desist order concerning alleged violations of certain SEC
record keeping regulations, payment of a fine, a censure of both the Sub-Advisor
and Dr. Leeb, and an undertaking to implement the appropriate steps to correct
these alleged record keeping deficiencies. Such agreement in principle is
subject to acceptance by the SEC in the form of formal order and formal offer of
settlement by the Sub-Advisor and Dr. Leeb.
Three states issued orders against the Sub-Advisor for conducting advisory
business in their states without prior registration as an investment advisor.
The Sub-Advisor agreed to cease and desist such practice, paid fines, and
registered in each state.
9. PORTFOLIO BROKERAGE
A. THE PERSONAL FINANCE FUND
The Personal Finance Fund directs substantially all of its portfolio
transactions through Brimberg & Co., L.P., 540 Madison Avenue, New York, New
York ( the "Underwriter"). The Underwriter serves as principal underwriter for
the Personal Finance Fund and, as such, is the exclusive agent for the
distribution of shares of the Personal Finance Fund. Although the Underwriter
receives no direct compensation from the Fund for serving as principal
underwriter, the Underwriter executes securities transactions on a "best
execution" basis for the Fund portfolio securities. Francis A. Mlynarczyk, Jr.,
Executive Vice President of the Fund and Chief Administrative Officer of the
Advisor, is a general partner in the Underwriter. Money Growth Institute, Inc.,
a partner in the Advisor, is among the limited partners in the Underwriter.
During the fiscal year ended June 30, 1996, the Personal Finance Fund had a
portfolio turnover ratio of 115%.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best execution
of portfolio transactions, the advisor to the Personal Finance Fund may give
consideration to sales of shares of the Personal Finance Fund as a factor in the
selection of brokers and dealers to execute portfolio transactions of the
Personal Finance Fund. Subject to the requirements of the Investment Company Act
of 1940 and procedures adopted by the Board of Trustees, the Personal Finance
Fund may execute portfolio transactions through any broker or dealer and pay
brokerage commissions to a broker which is (i) an affiliated person of the
Personal Finance Fund, or (ii) an affiliated person of such person, or (iii) an
affiliated person of an affiliated person of the Personal Finance Fund, its
advisor, or the Underwriter.
Decisions to buy and sell securities for the Personal Finance Fund and the
placing of the Personal Finance Fund securities transactions and negotiation of
commission rates, where applicable, are made by LIA and are subject to review by
the Board of Trustees of the Personal Finance Fund. In the purchase and sale of
portfolio securities, LIA seeks best execution for the Personal Finance Fund,
taking into account such factors as price (including the applicable brokerage
commission or dealer spread), the execution capability, financial responsibility
and responsiveness of the broker or dealer and the brokerage and research
services provided by the broker or dealer. LIA generally seeks favorable prices
and commission rates that are reasonable in relation to the benefits received.
For the fiscal years ended June 30, 1996, 1995 and 1994, the Personal Finance
Fund paid brokerage commissions of $120,408; $95,561; and $135,045,
respectively.
Generally, the Personal Finance Fund attempts to deal directly with the
dealers who make a market in the securities involved unless better prices and
execution are available elsewhere. Such dealers usually act as principals for
their own account. On occasion, portfolio securities for the Personal Finance
Fund may be purchased directly from the issuer.
LIA is specifically authorized to select brokers who also provide brokerage
and research services to the Personal Finance Fund and/or other accounts over
which LIA exercises investment discretion and to pay such brokers a commission
in excess of the commission another broker would charge if LIA determines in
good faith that the commission is reasonable in relation to the value of the
brokerage and research services provided. The determination may be viewed in
terms of a
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particular transaction or LIA's overall responsibilities with respect to the
Personal Finance Fund and to accounts over which it exercises investment
discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Personal Finance Fund and statistical
services and information with respect to the availability of securities or
purchasers or sellers of securities. Although this information is useful to the
Personal Finance Fund and LIA, it is not possible to place a dollar value on it.
Research services furnished by brokers through whom the Fund effects securities
transactions may be used by LIA in servicing all of its accounts, and not all
such services may be used by the Advisor in connection with the Fund.
The Personal Finance Fund has no obligation to deal with any broker or
dealer in the execution of securities transactions. However, the Underwriter,
LIA, and other affiliates of the Personal Finance Fund may effect securities
transactions which are executed on a national securities exchange or
transactions in the over-the-counter market conducted on an agency basis. The
Personal Finance Fund's former underwriter, Midwest Group Financial Services,
Inc. ("Midwest Group," formerly Leshner Financial Services, Inc.), may be deemed
to be an affiliate of the Personal Finance Fund by reason of having certain
officers in common.
During the fiscal year ended June 30, 1996, the Personal Finance Fund paid
to the Underwriter brokerage commissions of $120,408 (which equals 100% of the
total brokerage commissions paid by the Personal Finance Fund ) for effecting
the Personal Finance Fund portfolio transactions involving the payment of
brokerage commissions. During the fiscal years ended June 30, 1995 and 1994, the
Personal Finance Fund paid to the Underwriter brokerage commissions of $94,361
and $135,045, respectively. The Personal Finance Fund will not effect any
brokerage transactions in its portfolio securities with the Underwriter or
Midwest Group Financial Services, Inc. if such transactions would be unfair or
unreasonable to its shareholders. Over-the-counter transactions will be placed
either directly with principal market makers or with broker-dealers. Although
the Personal Finance Fund does not anticipate any ongoing arrangements with
other brokerage firms, brokerage business may be transacted from time to time
with other firms. Neither the Underwriter nor affiliates of the Personal Finance
Fund, LIA or the Underwriter will receive reciprocal brokerage business as a
result of the brokerage business transacted by the Personal Finance Fund with
other brokers.
B. THE MEGATRENDS FUND
In executing portfolio transactions and selecting brokers or dealers, the
MegaTrends Fund will seek the best overall terms available. In assessing the
terms of a transaction, consideration may be given to various factors, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer (for a
specified transaction and on a continuing basis), the reasonableness of the
commission, if any, and the brokerage and research services provided. Under the
Advisory and Sub-Advisory Agreements the Advisor and Sub-Advisor are permitted,
in certain circumstances, to pay a higher commission than might otherwise be
obtained in order to acquire brokerage and research services. The Advisor and
Sub-Advisor must determine in good faith, however, that such commission is
reasonable in relation to the value of the brokerage and research services
provided -- viewed in terms of that particular transaction or in terms of all
the accounts over which investment discretion is exercised. In such case, the
Board of Trustees will review the commissions paid by the MegaTrends Fund to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits obtained. The advisory fee of the Advisor
would not be reduced by reason of its receipt of such brokerage and research
services. To the extent that any research services of value are provided by
broker-dealers through or with whom the MegaTrends Fund places portfolio
transactions, the Advisor or Sub-Advisor may be relieved of expenses which they
might overwise bear.
Decisions to buy and sell securities for the MegaTrends Fund and the
placing of the MegaTrends Fund securities transactions and negotiation of
commission rates, where applicable, will be made by the Sub-Advisor and are
subject to review by the MegaTrends Fund Advisor and Board of Trustees. In the
purchase and sale of portfolio securities, the Sub- Advisor will seek best
execution for the MegaTrends Fund, taking into account such factors as price
(including the applicable brokerage commission or dealer spread), the execution
capability, financial responsibility and responsiveness of the broker or dealer
and the brokerage and research services provided by the broker or dealer. The
Sub-Advisor will generally seek favorable prices and commission rates that are
reasonable in relation to the benefits received.
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Generally, the MegaTrends Fund will attempt to deal directly with the
dealers who make a market in the securities involved unless better prices and
execution are available elsewhere. Such dealers usually act as principals for
their own account. On occasion, portfolio securities for the Fund may be
purchased directly from the issuer.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the MegaTrends Fund and statistical services
and information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the MegaTrends
Fund and the Advisor or Sub-Advisor, it may not be possible to place a dollar
value on it. Research services furnished by brokers through whom the MegaTrends
Fund effects securities transactions may be used by the Advisor or Sub-Advisor
in servicing all of its accounts and not all such services may be used by the
Advisor or Sub-Advisor in connection with the MegaTrends Fund.
ADVISORY AND SUB-ADVISORY AGREEMENTS
1. BACKGROUND
The Accolade Board of Trustees, including a majority of the independent
trustees, has determined that it is in the best interest of shareholders of the
MegaTrends Fund to approve Advisory and Sub-Advisory Agreements with the Advisor
and Sub-Advisor. Accolade trustees considered the Advisor's and Sub-Advisor's
investment capabilities and performance, marketing, legal, compliance and
administrative support, the amount of the fee relative to similar mutual funds,
and other factors in arriving at their decision. Dr. Stephen Leeb will continue
as the MegaTrends Fund portfolio manager, and the Advisor will provide
substantial marketing, legal, compliance, and administrative capabilities.
Shareholders of the Personal Finance Fund are being asked to consider and
authorize the Personal Finance Fund to approve Advisory and Sub-Advisory
Agreements as required by the 1940 Act. If both agreements are approved by
shareholders, effective November 15, 1996 (or as soon as possible thereafter),
the MegaTrends Fund will contract with the Advisor and Sub-Advisor to serve as
advisor and sub-advisor for the MegaTrends Fund.
If approved by shareholders, the Advisory and Sub-Advisory Agreements will
continue for an initial two-year period. The agreements are renewable thereafter
for successive one year periods, only if each renewal is specifically approved
by a vote of the Board of Trustees, including the affirmative vote of a majority
of the trustees who are not parties to the contract or "interested persons" (as
defined in the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of considering such approval. The agreements are automatically
terminated if assigned, and may be terminated without penalty at any time (1) by
vote of the Board of Trustees of the MegaTrends Fund upon 60 days' written
notice to the Advisor or Sub-Advisor, (2) by the Advisor upon 60 days' written
notice to the MegaTrends Fund and/or Sub-Advisor, or (3) by the Sub-Advisor on
90 days' written notice to the MegaTrends Fund and the Advisor.
2. THE ADVISOR AND ADVISORY AGREEMENT
The Advisor 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, a family of
mutual funds with approximately $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 MegaTrends 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. The Advisor pays the expense of printing
and mailing prospectuses and sales materials used for promotional purposes. The
Advisor will pay the costs of the special meeting and proxy costs, including all
costs of solicitation, printing and mailing of this Proxy Statement.
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Investment decisions for the MegaTrends 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 MegaTrends Fund to
pay the Advisor a flat management fee of 1% 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, securities dealers and
other industry professionals) a "servicing fee" for performing certain
administrative servicing functions for the MegaTrends 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.
It is proposed that United Shareholder Services Inc., a wholly owned
subsidiary of the Advisor, will provide transfer agent and bookkeeping and
accounting services to the MegaTrends Fund. See "Management of the Fund" for
more information concerning the Advisor.
In addition to the management fee, under the Advisory Agreement the
MegaTrends Fund will continue to pay its own or its portion of each of the
following types of expenses of the Accolade Trust which are properly allocated
to such fund: its taxes (if any); brokerage commissions on portfolio
transactions; custodian fees; extraordinary expenses; expenses of issuance and
redemption of shares; charges of transfer agents and dividend disbursing agents;
expenses of meetings of shareholders and trustees and of preparing, printing and
mailing proxy materials; auditing and legal expenses; certain expenses of
registering and qualifying shares for sale; fees of independent trustees;
expenses of attendance by officers and trustees at professional meetings of the
Investment Company Institute, the 100% No-Load Mutual Fund Council, or similar
organizations, and membership dues of such organizations; costs of typesetting,
printing and mailing the prospectus and periodic reports to current
shareholders; fidelity bond premiums; costs of maintaining the books and records
of the Trust; and any other charges and fees not specifically enumerated.
The Advisory Agreement provides that the Advisor shall reimburse the
MegaTrends Fund for expenses of the funds, inclusive of the management fee but
exclusive of interest, taxes, brokerage fees and extraordinary items, which
exceed the lowest expense limitation required by any state in which a fund is
then making sales of its shares or in which its shares are then qualified for
sale. The State of California has the most restrictive expense limitation, which
on an annual basis is currently equal to 2.5% of the first $30 million of net
assets of such fund, 2% of the next $70 million of net assets, and 1.5% of the
remaining average net assets. At the end of the fiscal year, if the aggregate
annual expenses chargeable to a fund for that year exceed the amount permissible
under the foregoing limitation, the Advisor will be required to reimburse the
fund. Such reimbursement will not be recovered by the Advisor in subsequent
years. A copy of the Advisory Agreement is included as Exhibit III.
PRINCIPAL DIRECTORS AND EXECUTIVE OFFICERS
OF U.S. GLOBAL INVESTORS, INC. ("ADVISOR")
NAME POSITION WITH THE ADVISOR -- PRINCIPAL OCCUPATION
- - ----------------- ---------------------------------------------------
JEROLD RUBINSTEIN Mr. Rubinstein has been a Director of the Advisor
since October 1989. Since May 1986 he has served as
Chairman of the Board of Directors and as Chief
Executive Officer of DMX Inc., (formerly
International Cablecasting Technologies, Inc.), a
publicly-traded media technology company.
ROY D. TERRACINA Director of the Advisor since December 1994.
Director of Security Trust & Financial Company
since August 1992. Owner of Sunshine Consulting,
investment firm, since January 1994.
Owner/President of Sterling Foods, Inc., food
manufacturer, from May 1984 to December 1993.
FRANK E. HOLMES Chairman of the Board of Directors and Chief
Executive Officer of U.S. Global Investors, Inc.
from October 1989 to present. Has held and
continues to hold various executive positions with
U.S. Global Investors, Inc. and its affiliates
(including mutual funds) since 1989.
- - --------------------------------------------------------------------------------
Combined Prospectus and Proxy Statement
Page 15
<PAGE>
NAME POSITION WITH THE ADVISOR -- PRINCIPAL OCCUPATION
- - ----------------- ----------------------------------------------------
BOBBY D. DUNCAN Director of the Advisor since July, 1986, President
of U.S. Global Investors, Inc. since September 1995,
Chief Operating Officer since 1993, and Chief
Financial Officer since March 1996. Has held and
continues to hold various executive positions with
U.S. Global Investors, Inc. and its affiliates
(including mutual funds) since 1985.
VICTOR FLORES Vice President, Chief Investment Officer and
Director of U.S. Global Investors, Inc. since
February 1994. Has held and continues to hold
various executive positions with U.S. Global
Investors, Inc. and its affiliates (including mutual
funds) since January 1988.
The business address of each person above is U.S. Global Investors, Inc., 7900
Callaghan, San Antonio, Texas 78229.
3. PROPOSED SUB-ADVISOR AND SUB-ADVISORY AGREEMENT
Money Growth Institute, Inc., under an investment Sub-Advisory Agreement
with the Trust to be dated November 15, 1996, will furnish investment advice and
serve as Sub-Advisor for the MegaTrends Fund. Dr. Stephen Leeb, president of the
Sub-Advisor and its controlling shareholder, is, and has been since the Personal
Finance Fund's inception on October 21, 1991, the Fund's portfolio manager. 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.
In consideration for such services, the Advisor will pay the Sub-Advisor
for one year from the date of the Sub- Advisory Agreement a fee, on an annual
basis, of (1) one percent (1%) of Fund assets of $40 million or less, (2) 75
basis points on assets between $40 and $50 million, and (3) 50 basis points on
assets of $50 million and over. After one year, the Sub-Advisor will receive a
fee, on an annual basis, of 50 basis points on all assets. A copy of the
Sub-Advisory Agreement is attached as Exhibit IV.
Prior to the effective date of the current Sub-Advisory Agreement, the
Personal Finance Fund compensated LIA, an affiliate of the Sub-Advisor, at an
annual rate of 1% of average net assets. However LIA agreed to waive a portion
of its advisory fees so as to limit the Personal Finance Fund's total operating
expense ratio to 1.50%.
Dr. Leeb has been engaged in the business of providing investment advisory
and portfolio management services for approximately 19 years. The business
address of the Sub-Advisor is 45 Rockefeller Plaza, Suite 2570, New York, New
York 10111. As the Fund portfolio manager, Dr. Leeb is primarily responsible for
the day-to-day investment management of the MegaTrends Fund. The Sub-Advisor is
an investment advisor with assets under management of approximately $40 million
as of June 30, 1996, apart from the Personal Finance Fund. Dr. Leeb is editor of
BALANCED, a highly regarded and award winning investment advisory newsletter,
and THE BIG PICTURE, one of the nation's top market timing newsletters. Author
of the acclaimed book, GETTING IN ON THE GROUND FLOOR, Dr. Leeb accurately
forecast the great bull market of the 1980s and early 1990s. He is also the
author of MARKET TIMING FOR THE NINETIES. He is now at work on a third book
which will examine the investment and economic climate in the nineties and
beyond. Dr. Leeb holds a Bachelor's Degree in Economics from The Wharton School
of Business. He also received an M.A. in Psychology and Math and a Ph.D. in
Psychology from the University of Illinois. Dr. Leeb has been quoted in numerous
financial publications, and he has appeared on WALL STREET WEEK, NIGHTLY
BUSINESS REPORT, CNN and CNBC.
PRINCIPAL DIRECTORS AND EXECUTIVE OFFICERS
OF MONEY GROWTH INSTITUTE, INC.
NAME POSITION WITH THE SUB-ADVISOR -- PRINCIPAL OCCUPATION
- - --------------- -----------------------------------------------------
STEPHEN L. LEEB Contract Editor of K.C.I. Communications, Inc. since
January 1, 1990. President/Director of Money Growth
Institute, Inc. since August 1984. Chief Investment
Officer of Leeb Investment Advisors since April 1991.
President/Trustee of Leeb Personal Finance Investment
Trust since August 1991. President/Director of Leeb
Lines, Inc. from May 1979 to May 1995.
President/Director of Leeb Research Consultants, Inc.
since June 6, 1994.
- - --------------------------------------------------------------------------------
Combined Prospectus and Proxy Statement
Page 16
<PAGE>
NAME POSITION WITH THE SUB-ADVISOR -- PRINCIPAL OCCUPATION
- - ----------------- -----------------------------------------------------
DONNA A. LEEB Vice President/Secretary/ Director of Money Growth
Institute, Inc. since August 1984. Vice
President/Secretary/Director of Leeb Research
Consultants, Inc. since June 1994.
FRANCIS A. MLYNARCZYK, JR. General Partner of Brimberg & Co., L.P. since August
1993. Limited Partner of Brimberg & Co., L.P. from
January 1992 to July 1993. Chief Administration
Officer of Leeb Investment Advisors since April 1991.
Executive Vice President of Leeb Personal Finance
Investment & Trust since August 1991.
Chairman/President of Prospect Advisors, Inc. since
May 1985. Senior Vice President of Brokaw Capital
Management, Inc. from December 1982 to April 1985.
General Partner of President Street Fund, L.P. since
October 1988.
The business address of each person above is Money Growth Institute, Inc.,
45 Rockefeller Plaza, Suite 2570, New York, New York 10111.
4. PORTFOLIO TRANSACTIONS
The MegaTrends Fund portfolio transactions were previously described in the
section of this proxy statement entitled "Portfolio Brokerage."
DISTRIBUTION PLAN
The Accolade Board of Trustees, including a majority of the independent
trustees, has determined that there is a reasonable likelihood that shareholders
of the MegaTrends Fund would benefit by the adoption of a Distribution Plan
(Exhibit V) as authorized under Rule 12b-1 of the 1940 Act. The Distribution
Plan would authorize the use of MegaTrends Fund assets to assist in the
distribution of its shares. Shareholders may benefit from positive cash flows
which may replace redeemed shares, facilitate portfolio management, and reduce
expense ratios through economies of scale.
The Personal Finance Fund is distributed through a broker-dealer who serves
as the Fund's primary underwriter. Brimberg & Co., L.P., 540 Madison Avenue, New
York, New York (the "Underwriter"), serves as principal underwriter for the
Personal Finance Fund and, as such, is the exclusive agent for the distribution
of shares of the Personal Finance Fund. Although the Underwriter receives no
direct compensation from the Personal Finance Fund for serving as principal
underwriter, the Underwriter executes securities transactions on a "best
execution" basis for the Personal Finance Fund portfolio securities. Francis A.
Mlynarczyk, Jr., Executive Vice President of the Personal Finance Fund, is a
general partner in the Underwriter. Money Growth Institute, Inc., a partner in
the Personal Finance Fund investment advisor, is among the limited partners in
the Underwriter. During the fiscal year ended June 30, 1996, the Personal
Finance Fund paid to the Underwriter brokerage commissions of $120,408.
The MegaTrends Fund will be self-distributing and thus will not require the
services of an underwriter. Shareholders are being asked to approve a plan of
distribution authorized under Rule 12b-1 of the Investment Company Act of 1940
which would authorize the use of up to 0.25% of the MegaTrends Fund's average
net assets on an annual basis to pay for distributing the MegaTrends Fund
shares.
If the Plan of Reorganization is approved by the requisite vote of
shareholders and consummated, the MegaTrends Fund will have a Distribution Plan
under Rule 12b-1 of the 1940 Act under which MegaTrends Fund assets may be
utilized to pay for or reimburse expenditures in connection with sales and
promotional services related to the distribution of MegaTrends Fund shares,
including personal services provided to prospective and existing MegaTrends 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 MegaTrends Fund, and travel and out-of-pocket expenses
(e.g., copy and long distance telephone charges) related thereto. MegaTrends
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. For more information see "Distribution Plan" in the
MegaTrends Fund Statement of Additional Information.
- - --------------------------------------------------------------------------------
Combined Prospectus and Proxy Statement
Page 17
<PAGE>
RATIFICATION OF PRICE WATERHOUSE LLP
AS INDEPENDENT PUBLIC ACCOUNTANT
The Board of Trustees of the Accolade Funds, including a majority of the
trustees who are not interested persons of the Accolade Funds, is recommending
Price Waterhouse LLP to serve as independent public accountant of the MegaTrends
Fund for its next fiscal period, subject to the right of the MegaTrends Fund to
terminate such employment immediately without penalty by vote of a majority of
the outstanding voting securities of the Personal Finance Fund at any meeting
called for such purpose.
Price Waterhouse LLP currently serves as independent accountants to all
other funds in the United Services family of funds. The Board of Trustees'
recommendation of Price Waterhouse LLP was based on considerations of
administrative convenience and cost efficiency, and did not involve any dispute
with Arthur Andersen LLP, which serves as independent accountant of the Personal
Finance Fund. The MegaTrends Fund Board of Trustees voted to select Price
Waterhouse LLP to serve as the MegaTrends Fund independent accountant on May 8,
1996. The Board's selection is hereby submitted to the shareholders for
ratification.
VOTE REQUIRED
Approval of Item I, including the Agreement and Plan of Reorganization, the
Advisory and Sub-Advisory Agreements, the Distribution Plan, and ratification of
Price Waterhouse LLP as independent accountant requires the affirmative vote of
the holders of a majority of the outstanding voting securities of the Personal
Finance Fund, defined under the 1940 Act as the lesser of (i) a majority of the
outstanding shares of a fund or (ii) 67% or more of the shares of a fund
represented at the Special Meeting if more than 50% of the outstanding shares of
the fund are present or represented by proxy at the Meeting. Abstentions and
proxies with respect to shares held by a broker or other nominee that are not
voted because the nominee lacks discretionary authority to vote the shares will
be treated as follows. With respect to the first alternative (i) broker "non
votes" and "abstentions" will have the effect of "no" votes. With respect to
(ii), broker "non votes" will have no effect and "abstentions" will have the
effect of "no" votes.
In the event that the shareholders of the Personal Finance Fund fail to
approve Item I, the Board of Trustees of the Leeb Trust will consider
alternative dispositions of the Personal Finance Fund's net assets, including
the sale of assets to, or merger with, another investment company.
THE TRUSTEES RECOMMEND APPROVAL OF THE AGREEMENT AND PLAN OF
REORGANIZATION.
OTHER MATTERS
As of August 30, 1996, officers and trustees of the Leeb Trust as a group
owned approximately 2% of the total outstanding shares of the Personal Finance
Fund, and the Leeb Trust is unaware of any shareholders holding more than 5% of
the outstanding shares of the Personal Finance Fund as of such date.
The Board of Trustees knows of no other business to be brought before the
meeting. However, if any other matters come before the meeting, it is the
intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
Further information about the MegaTrends Fund is contained in the
accompanying MegaTrends Fund prospectus (Exhibit II). Shareholders of the
Personal Finance Fund are urged to read this proxy statement and the prospectus
carefully prior to executing and returning their proxies and to retain the
prospectus for future reference.
- - --------------------------------------------------------------------------------
Combined Prospectus and Proxy Statement
Page 18
================================================================================
<PAGE>
[FORM OF PROXY-FRONT]
*Please fold and detach card at perforation before mailing*
PROXY
LEEB PERSONAL FINANCE FUND
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoint(s) Susan B. McGee and Thomas D. Tays, and
each of them, proxies with full power of substitution to act for and vote on
behalf of the undersigned all shares of the Leeb Personal Finance Fund which the
undersigned would be entitled to vote if personally present at the Special
Meeting of the Shareholders of the Fund to be held on November 15, 1996 (the
"Meeting").
The undersigned hereby acknowledge(s) receipt of the Notice of Special
Meeting of Shareholders and Combined Prospectus and Proxy Statement furnished in
connection with the Meeting and hereby instruct(s) said proxies to vote said
shares as indicated hereon. Both of the proxies present and acting at the
meeting in person or by substitute (or, if only one shall be so present, then
that one) shall have and may exercise all of the power and authority of said
proxies hereunder. The undersigned hereby revoke(s) any proxy previously given.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
DATED ..................., 1996
Please sign exactly as your name appears on this proxy card. When
signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation,
please sign in the full corporate name by president or other
authorized officer. If a partnership, please sign in partnership
name by authorized person.
------------------------------------------------------
ALL SIGNATURES IF HELD JOINTLY
................................................................................
[FORM OF PROXY-BACK]
*Please fold and detach card at perforation before mailing*
IF A CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED AS INDICATED. IF NO
CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSAL ONE. In their
discretion, the proxies are authorized to vote upon such business as may
properly come before the Meeting. The Board of Trustees recommends a vote FOR
Proposal One.
This proxy may be revoked at any time prior to exercise of the powers
conferred by the proxy.
PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW, AS SHOWN, USING BLUE OR
BLACK INK OR DARK PENCIL. DO NOT USE RED INK.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
1. PROPOSAL ONE: APPROVE A PLAN OF REORGANIZATION
PROVIDING FOR:
(a) the transfer of all the assets of the
Personal Finance Fund to a newly-created
series of Accolade Funds named the MegaTrends
Fund in exchange for shares of the MegaTrends
Fund; (b) the pro rata distribution of such
MegaTrends Fund shares to shareholders of the
Personal Finance Fund; and (c) the
dissolution and deregistration of the
Personal Finance Fund as an investment
company. A vote in favor of Item 1 will be
deemed to be a vote to authorize the Personal
Finance Fund, as the sole shareholder of the
MegaTrends Fund, to: (a) approve an Advisory
Agreement between the MegaTrends Fund and the
Advisor, and a Sub-Advisory Agreement among
the MegaTrends Fund, the Advisor, and Money
Growth Institute, Inc. (the "Sub-Advisor");
(b) approve the proposed Distribution Plan
for the shares of the MegaTrends Fund; and
(c) ratify the selection of Price Waterhouse
LLP as independent accountant of the
MegaTrends Fund for the current fiscal year.
2. TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY [ ] [ ] [ ]
COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
================================================================================
<PAGE>
[EXHIBIT II TO COMBINED PROSPECTUS AND PROXY STATEMENT - PROSPECTUS]
ACCOLADE FUNDS
MEGATRENDS FUND
PROSPECTUS
October 15, 1996
P.O. Box 781234
San Antonio, Texas 78278-1234
1-800-524-5332 or 1-800-524-LEEB
(Information, Shareholder Services and Requests)
INTERNET: http://www.usfunds.com
This prospectus presents information that a prospective investor should
know about the MegaTrends 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 October 15, 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
1-800-524-5332 or 1-800-524-LEEB.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- - --------------------------------------------------------------------------------
TABLE OF CONTENTS
SUMMARY OF FEES AND EXPENSES..................................................2
FINANCIAL HIGHLIGHTS -- MEGATRENDS FUND.......................................3
INVESTMENT OBJECTIVES, INVESTMENT POLICIES, AND RISK CONSIDERATIONS...........4
OTHER INVESTMENT PRACTICES....................................................6
HOW TO PURCHASE SHARES........................................................6
HOW TO EXCHANGE SHARES........................................................8
HOW TO REDEEM SHARES.........................................................10
HOW SHARES ARE VALUED........................................................13
DIVIDENDS AND TAXES..........................................................13
THE TRUST....................................................................14
MANAGEMENT OF THE FUND.......................................................15
DISTRIBUTION EXPENSE PLAN....................................................16
PERFORMANCE INFORMATION......................................................17
- - --------------------------------------------------------------------------------
Exhibit No. II - Prospectus
Page 1
<PAGE>
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 and Administrative Fees...........................1.00%
12b-1 Fees...................................................0.25%
Other Expenses, including Transfer Agency....................0.71%
and Accounting Services Fees
Total Fund Operating Expenses................................1.96%
1 Annual Fund Operating Expenses have been restated using the current
fees that would have been applicable had they been in effect during the
previous fiscal year. The Fund's Management and Administrative Fee rate
of 1% is higher than that of most other mutual funds investing in the
domestic market. Management fees are paid to U.S. Global Investors,
Inc. (the "Advisor") for managing the Fund's investments and business
affairs. The Advisor then pays a portion of the management fee to Money
Growth Institute, Inc. (the "Sub-Advisor") for serving as Sub-Advisor.
See "Management of the Fund." The Fund incurs other expenses for
maintaining shareholder records, furnishing shareholder statements and
reports, and for other services. Transfer agency and accounting service
fees are paid to United Shareholder Services, Inc. ("USSI" or "Transfer
Agent"), a subsidiary of the Advisor, and are not charged directly to
individual shareholder accounts. The Transfer Agent charges the Fund
$23 per shareholder account per year. The account closing fee and small
account charge will be paid by the shareholder directly to the Transfer
Agent which will, in turn, reduce its charges to the Fund by like
amount. Please refer to the section entitled "Management of the Fund"
for further information.
Except for active ABC Investment Plan(R), custodial accounts for minors,
and retirement accounts, if an account balance falls, for any reason other than
market fluctuations, below $5,000 at any time during a month, that account will
be subject to a monthly small account charge of $1 which 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:
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and redemption at the end of each period.
1 year.............................................$ 30
3 years............................................$ 72
5 years............................................$116
10 years...........................................$239
The hypothetical example is based upon the Fund's historical expenses which
are expected to decline as the Fund's net assets increase. 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 which is not reflected in the
example. See "Small Accounts." Included in these estimates is the account
closing fee of $10
- - --------------------------------------------------------------------------------
Exhibit No. II - Prospectus
Page 2
<PAGE>
for each period. This fee is a flat charge which 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.
FINANCIAL HIGHLIGHTS -- MEGATRENDS FUND
The following per share data and ratios for a share of beneficial interest
outstanding throughout each fiscal period has been audited by Arthur Andersen
LLP. The related financial statements and the report of Independent Accountants
are included in the Personal Finance Fund's 1996 Annual Report to Shareholders
and are incorporated by reference into the Statement of Additional Information
("SAI"). In addition to the data set forth below, further information about the
performance of the Fund is contained in the Annual Report to Shareholders and
SAI which may be obtained without charge.
Per share data for a share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------
1996 1995 1994 1993 1992(1)
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of ...... $ 11.17 $ 10.29 $ 10.84 $ 10.36 $ 10.00
period ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income .............. 0.17 0.28 0.19 0.15 0.16
Net realized and unrealized ........ 1.72 0.95 (0.35) 0.55 0.51
gains (losses) on investments ------- ------- ------- ------- -------
Total from investment operations ..... 1.89 1.23 (0.16) 0.70 0.67
------- ------- ------- ------- -------
Dividends and distributions:
Dividends from net investment ...... (0.17) (0.28) (0.19) (0.15) (0.16)
income(2)
Distributions from net realized .... (1.61) -- (0.20) (0.07) (0.15)
gains(2)
In excess of net realized gains .... (0.01) (0.07) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions .... (1.79) (0.35) (0.39) (0.22) (0.31)
------- ------- ------- ------- -------
Net asset value at end of period ..... $ 11.27 $ 11.17 $ 10.29 $ 10.84 $ 10.36
======= ======= ======= ======= =======
Total return ......................... 17.10% 12.20% (1.50%) 6.79% 7.94%(4)
======= ======= ======= ======= =======
Net assets at end of period .......... $27,945 $32,976 $45,523 $58,955 $28,340
======= ======= ======= ======= =======
(000's)
Ratio of expenses to average net ..... 1.50% 1.50% 1.50% 1.50% 1.47%(4)
assets(3)
Ratio of net investment income to .... 1.30% 2.36% 1.65% 1.60% 2.21%(4)
average net assets
Portfolio turnover rate .............. 115.00% 163.00% 143.00% 83.00% 75.00%(4)
(1) Represents the period from the date of public offering (October 21,
1991) through June 30, 1992. No income was earned or expenses incurred from the
start of business through the date of public offering.
(2) For the period ended June 30, 1992, the per share data was calculated
using average shares outstanding throughout the period, whereas for subsequent
periods, the per share data was calculated based upon actual distributions. For
the period
- - --------------------------------------------------------------------------------
Exhibit No. II - Prospectus
Page 3
<PAGE>
ended June 30, 1992, actual distributions per share from net investment income
and from net realized gains from security transactions amounted to $.11 and
$.08, respectively.
(3) Ratios of expenses to average net assets assuming no waiver of fees or
reimbursement of expenses by the Advisor was 2.10%, 1.98%, 1.81%, 1.95%, and
2.71%4 for the periods ended June 30, 1996, 1995, 1994, 1993, and 1992,
respectively.
(4) Annualized.
</TABLE>
INVESTMENT OBJECTIVES, INVESTMENT POLICIES, AND RISK CONSIDERATIONS
The primary investment objective of the Fund is to seek long-term capital
appreciation consistent with the preservation of capital. Earning current income
from dividends, interest and short-term capital gains is a secondary objective.
The Fund is not intended to be a complete investment program, and there is no
assurance that its investment objectives can be achieved. The Fund's investment
objectives are fundamental and as such may not be changed without the
affirmative vote of the holders of a majority of its outstanding shares as
defined in the Investment Company Act of 1940. Unless otherwise indicated, all
investment practices and limitations of the Fund are nonfundamental policies
which may be changed by the Board of Trustees without shareholder approval.
The Fund should be viewed essentially as an equity fund since it is
expected that, unless the Fund is in a defensive posture, the majority of its
assets will be held in common stocks most of the time. The Fund, however, may
from time to time have a significant portion, and possibly all, of its assets in
obligations issued or guaranteed as to principal and interest by the United
States Government, its agencies or instrumentalities ("U.S. Government
obligations" described below) and corporate debt securities of various
maturities. When the Sub-Advisor believes substantial price risks exist for
common stocks because of uncertainties in the investment outlook or when, in the
judgment of the Sub-Advisor, it is otherwise warranted in selling to manage the
Fund's portfolio against the risks of a major stock market decline, the Fund may
temporarily hold, for defensive purposes, all or a portion of its assets in
money market instruments.
Investments in equity and debt securities are subject to inherent market
risks and fluctuations in value due to earnings, economic conditions, quality
ratings and other factors beyond the control of the Sub-Advisor. Debt securities
also are subject to price fluctuations based upon changes in the level of
interest rates, which will generally result in all those securities changing in
price in the same way, i.e., all those securities experiencing appreciation when
interest rates decline and depreciation when interest rates rise. As a result,
the return and net asset value of the Fund will fluctuate.
ASSET ALLOCATION
The Sub-Advisor determines the asset allocation of the Fund's portfolio
primarily upon the basis of market timing techniques developed by Dr. Stephen
Leeb, President and controlling shareholder of the Sub-Advisor, and his staff.
These techniques attempt to identify the degree of risk in holding stocks versus
debt securities and/or versus money market instruments. Dr. Leeb and his staff
have developed models over the years to assist him in assessing risk in the
equity and debt markets. These models emphasize general economic and monetary
factors and, to a lesser extent, trends in the equity and debt markets
themselves.
Investors should be aware that the investment results of the Fund depend
upon the ability of the Sub-Advisor to correctly anticipate the relative
performance and risk of stocks, debt securities and money market instruments.
Historical evidence indicates that correctly timing portfolio allocations among
these asset classes has been an extremely difficult investment strategy to
implement successfully. While Dr. Leeb has substantial experience in applying
market timing techniques, there can be no assurance that the Sub-Advisor will
correctly anticipate relative asset class performance in the future on a
consistent basis. Investment results would suffer, for example, if only a small
portion of the Fund's assets were invested in stocks during a significant stock
market advance or if a major portion were invested in stocks during a major
decline.
STOCK SELECTION
The stock selection approach within the equity sector of the Fund's
portfolio can best be characterized in the vernacular of the investment business
as a "value" orientation. That is, great emphasis is placed on
"value"parameters, such as having a strong balance sheet, and/or having
substantial free cash flow, and/or having a record of rising dividends, and/or
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Exhibit No. II - Prospectus
Page 4
<PAGE>
having a high dividend yield. In addition, companies in whose equities the Fund
may invest will predominantly have large capitalizations in terms of total
market value. Usually, but not always, the stocks of such companies are traded
on major stock exchanges. Such stocks are usually very liquid, but there may be
periods when a particular stock or stocks in general become substantially less
liquid. Such periods are usually, but not always, brief, and the Sub-Advisor
will seek to minimize the overall liquidity risk of the Fund's portfolio. In
addition, it is unlikely that the Fund would have more than a token amount of
its assets, and in no case more than five percent (5%) of its net assets, in
stocks with market capitalizations less than $300 million at the time of
purchase. The Fund may invest in foreign companies through the purchase of
sponsored American Depository Receipts, "ADRs," (certificates of ownership
issued by an American bank or trust company as a convenience to investors in
lieu of the underlying shares which it holds in custody), or other securities of
foreign issuers that are publicly traded in the United States. The Fund does not
currently intend to invest more than five percent (5%) of its net assets in
American Depository Receipts and other foreign securities.
GOVERNMENT AND CORPORATE DEBT SECURITIES
When the Fund has a portion of its assets in U.S. Government obligations or
corporate debt securities, the maturities of these securities will be based in
large measure both on the Advisor's perception as to general risk levels in the
debt market versus the equity market, and on the Advisor's perception of the
future trend and term structure of interest rates. Dr. Leeb, with his staff, has
developed models that assist him in assessing risk in the debt markets and
interest rate trends.
U.S. Government obligations include securities which are issued or
guaranteed by the United States Treasury, by various agencies of the United
States Government, and by various instrumentalities which have been established
or sponsored by the United States Government. U.S. Treasury obligations are
backed by the "full faith and credit" of the U.S. Government. U.S. Treasury
obligations include Treasury bills, Treasury notes and Treasury bonds. Agencies
or instrumentalities established by the United States Government include the
Federal Home Loan Bank, the Federal Land Bank, the Government National Mortgage
Association, the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, and the Student Loan Marketing Association.
Also included are the Bank for Cooperatives, the Federal Intermediate
Credit Bank, the Federal Financing Bank, the Federal Farm Credit Bank, the
Federal Agricultural Mortgage Corporation, the Resolution Funding Corporation,
the Financing Corporation of America and the Tennessee Valley Authority. Some of
these securities are supported by the full faith and credit of the United States
Government while others are supported only by the credit of the agency or
instrumentality, which may include the right of the issuer to borrow from the
United States Treasury.
The Fund may also purchase corporate debt securities rated "B" or higher by
Standard & Poor's Ratings Group or Moody's Investors Service, Inc., although the
Fund does not hold, nor intends to invest, more than five percent (5%) of its
net assets in corporate debt securities rated at least "B" but less than "A" by
either of these two rating organizations.
Lower-rated debt securities (commonly called "junk bonds") are often
considered to be speculative and involve greater degrees of risk of default or
price changes due to changes in the issuer's creditworthiness. The Fund may also
purchase debt securities on a when-issued basis, but the Fund does not currently
intend to invest more than five percent (5%) of its net assets in such
securities during the coming year.
MONEY MARKET SECURITIES
The money market instruments which the Fund may own from time to time
include U.S. Government obligations having a maturity of less than one year,
commercial paper rated A-1 by Standard & Poor's Ratings Group or Prime-1 by
Moody's Investors Service, Inc., bank debt instruments (certificates of deposit,
time deposits and bankers' acceptances) and other short-term instruments issued
by domestic branches of U.S. financial institutions that are insured by the
Federal Deposit Insurance Corporation and have assets exceeding $10 billion.
The Fund may also invest a portion of its assets in repurchase agreements
with domestic 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 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 the United
States Government or government agency securities, the market values of which
equal or exceed 102% of the principal amount of the repurchase obligation. If an
institution enters an insolvency proceeding, the resulting delay in
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Exhibit No. II - Prospectus
Page 5
<PAGE>
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.
OTHER INVESTMENT PRACTICES
The Fund may make short-term loans of its portfolio securities to banks,
brokers and dealers, although the Fund has no present intention to do so.
The Fund may borrow money from banks or as may be necessary for the
clearance of securities transactions but only for emergency or extraordinary
purposes in an amount not exceeding five percent (5%) of the Fund's total
assets. The Fund's policy on borrowing is a fundamental policy which may not be
changed without the affirmative vote of a majority of its outstanding shares.
PORTFOLIO TURNOVER
The Fund does not intend to use short-term trading as a primary means of
achieving its investment objectives. However, the Fund's rate of portfolio
turnover will depend on market and other conditions, and it will not be a
limiting factor when portfolio changes are deemed necessary or appropriate by
the Sub-Advisor. For the fiscal years ended June 30, 1995 and 1996, the Fund's
portfolio turnover was 163% and 115%, respectively. Although the annual
portfolio turnover rate of the Fund cannot be accurately predicted, it will
likely be between 75% and 150%, but may be either higher or lower. High turnover
involves correspondingly greater commission expenses and transaction costs and
increases the possibility that the Fund would not qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code. The Fund
will not qualify as a regulated investment company if it derives 30% or more of
its gross income from gains (without offset for losses) from the sale or other
disposition of securities held for less than three months. High turnover may
result in the Fund recognizing greater amounts of income and capital gains,
which would increase the amount of income and capital gains which the Fund must
distribute to its shareholders in order to maintain its status as a regulated
investment company and to avoid the imposition of federal income or excise taxes
(see "Taxes").
PORTFOLIO TRANSACTIONS
In executing portfolio transactions and selecting brokers or dealers, the
Fund seeks the best overall terms available. In assessing the terms of a
transaction, consideration may be given to various factors, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer (for a specified
transaction and on a continuing basis), the reasonableness of the commission, if
any, and the brokerage and research services provided. Under the Advisory and
Sub-Advisory agreements, the Advisor and Sub-Advisor are permitted, in certain
circumstances, to pay a higher commission than might otherwise be obtained in
order to acquire brokerage and research services. The Advisor and Sub-Advisor
must determine in good faith, however, that such commission is reasonable in
relation to the value of the brokerage and research services provided -- viewed
in terms of that particular transaction or in terms of all the accounts over
which investment discretion is exercised. In such case, the Board of Trustees
will review the commissions paid by the Fund to determine if the commissions
paid over representative periods of time were reasonable in relation to the
benefits obtained. The advisory fee of the Advisor would not be reduced by
reason of its receipt of such brokerage and research services. To the extent
that any research services of value are provided by broker-dealers through or
with whom the Fund places portfolio transactions, the Advisor or Sub-Advisor
maybe relieved of expenses which they might otherwise bear.
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.
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Exhibit No. II - Prospectus
Page 6
<PAGE>
YOU MAY INVEST IN THE FOLLOWING WAYS:
BY MAIL
Send your application and check or money order, made payable to the
MegaTrends Fund, to 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
1-800-524-5332 or 1-800-524-LEEB. 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 MegaTrends Fund
by wiring money. To do so, call the Fund at 1-800-524-5332 or 1-800-524-LEEB 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
United Services family of funds 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
United Services family of 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 1-800-524-5332 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 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., Eastern 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.
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Exhibit No. II - Prospectus
Page 7
<PAGE>
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
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 United
Services 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.
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Exhibit No. II - Prospectus
Page 8
<PAGE>
FUNDS IN THE UNITED SERVICES 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 United Services 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 U.S. Gold Shares Fund
U.S. World Gold Fund
U.S. Global Resources 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 1-800-524-LEEB.
BY TELEPHONE
You will automatically have the privilege to direct the Fund to exchange
your shares between identically registered accounts by calling toll-free
1-800-524-5332 or 1-800-524-LEEB. 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.
("USSI" or the "Transfer Agent") 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 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.")
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Exhibit No. II - Prospectus
Page 9
<PAGE>
(4) Exchanges out of certain equity funds in the United Services family of
funds may be 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 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 1-800-524-5332 or 1-800-524-LEEB 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 1-800-524-5332 or 1-800-524-LEEB.
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- 524-5332
or 1-800-524-LEEB.
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.
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Exhibit No. II - Prospectus
Page 10
<PAGE>
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,
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 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 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.
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Exhibit No. II - Prospectus
Page 11
<PAGE>
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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Exhibit No. II - Prospectus
Page 12
<PAGE>
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 1-800-524-5332 or 1-800-524-LEEB.
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 1-800-524-5332 or 1-800-524-LEEB 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 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
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 reinvestment will be the net
asset value of the Fund shares computed at the close of business on the date the
- - --------------------------------------------------------------------------------
Exhibit No. II - Prospectus
Page 13
<PAGE>
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 gain 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 generally pays dividends, if any, semiannually and pays capital
gains, if any, annually.
The Fund is subject to a nondeductible 4% excise tax calculated as a
percentage of certain undistributed amounts of taxable ordinary income and
capital gains net of capital losses. The 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% 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, 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% dividends received deduction available
to corporations.
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 four separate, diversified portfolios. The Bonnel Growth Fund and
the MegaTrends Fund are the only funds 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.
- - --------------------------------------------------------------------------------
Exhibit No. II - Prospectus
Page 14
<PAGE>
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 November 14, 1996, the Advisor and the Trust contracted with
Money Growth Institute, Inc. (the "Sub-Advisor") to serve as Sub-Advisor for the
Fund. Dr. Stephen Leeb, president of the Sub-Advisor and its controlling
shareholder, is, and since the Fund's inception October 21, 1991, has been the
Fund's portfolio manager. 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.
In consideration for such services, the Advisor will pay the Sub-Advisor a
fee, on an annual basis, from 50 basis points to 1% of Fund assets based on the
assets of the Fund.
Prior to the effective date of the current Sub-Advisory Agreement, the Fund
compensated a different investment advisor at an annual rate of one percent(1%)
of average net assets for its services under a separate agreement. For the
fiscal year ended June 30, 1996, the advisory fee paid to the Advisor was 0.42%
(net of waivers by the Advisor) of the Fund's average net assets.
Dr. Leeb has been engaged in the business of providing investment advisory
and portfolio management services since the late 1970s. The business address of
the Sub-Advisor is 45 Rockefeller Plaza, Suite 2570, New York, New York 10111.
As the Fund's portfolio manager, Dr. Leeb is primarily responsible for the
day-to-day investment management of the Fund. The Sub-Advisor is an investment
adviser with assets under management, apart from the Fund, of approximately $40
million as of June 30, 1996 . Dr. Leeb is editor of BALANCED, a highly regarded
and award winning investment advisory newsletter, and THE BIG PICTURE, one of
the nation's top market timing newsletters. Author of the acclaimed book GETTING
IN ON THE GROUND FLOOR, Dr. Leeb accurately forecast the great bull market of
the 1980s and early 1990s. He is also the author of MARKET TIMING FOR THE
NINETIES. He is now at work on a third book which will examine the investment
and economic climate in the nineties and beyond. Dr. Leeb holds a Bachelor's
Degree in Economics from The Wharton School. He also received an M.A. in
Psychology and Math and a Ph.D. in Psychology from the University of Illinois.
Dr. Leeb has been quoted in numerous financial publications, and he has appeared
on Wall Street Week, Nightly Business Report, CNN and CNBC.
Dr. Leeb and the Sub-Advisor have recently consented to, without admitting
or denying any of the charges, two SEC orders. The order dated January 16, 1996
related to certain advertisements for a newsletter edited by Dr. Leeb. Dr. Leeb
was neither the owner nor the publisher of the newsletter. The order dated July
14, 1995 related to certain record keeping requirements and requirements
governing client solicitations. Considered jointly, the orders allege that Dr.
Leeb and other respondents willfully violated, or aided and abetted violations
of various provisions of the Securities Act of 1933, the Securities Exchange Act
of 1934, the Investment Company Act of 1940, and the Advisers Act of 1940. Dr.
Leeb and the other respondents agreed to certain remedial sanctions including
censures, cease and desist orders, payment of civil money penalties, and the
implementation of certain procedures to ensure their compliance with the federal
securities laws. Neither the MegaTrends Fund nor the Leeb Personal Finance Fund
were a party to either proceeding.
Three states issued orders against the Sub-Advisor for conducting advisory
business in their states without prior registration as an investment adviser.
The Sub-Advisor agreed to cease and desist such practice, paid fines, and
registered in each state.
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
- - --------------------------------------------------------------------------------
Exhibit No. II - Prospectus
Page 15
<PAGE>
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, a family of mutual funds with approximately $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% 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.
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;
- - --------------------------------------------------------------------------------
Exhibit No. II - Prospectus
Page 16
<PAGE>
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 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.
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.
- - --------------------------------------------------------------------------------
Exhibit No. II - Prospectus
Page 17
<PAGE>
ACCOLADE FUNDS
SHARES OF THE FUND ARE SOLD
AT NET ASSET VALUE WITHOUT SALES COMMISSIONS OR
REDEMPTION FEES
MegaTrends Fund
INVESTMENT ADVISOR
U.S. Global Investors, Inc.
7900 Callaghan Road
Mailing Address: P.O. Box 29467
San Antonio, Texas 78229-0467
SUB-ADVISOR
Money Growth Institute, Inc.
45 Rockefeller Plaza, Suite 2570
New York, New York 10111
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.
- - --------------------------------------------------------------------------------
Exhibit No. II - Prospectus
Page 18
================================================================================
PART C. OTHER INFORMATION
ITEM 15. 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 judgements, 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 Cover Person's action was in or not opposed to the
best interests of the Trust or (ii) had acted with wilful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office (either and
both of the conduct described in (i) and (ii) being referred to
hereafter as "Disabling Conduct"). A determination that the Covered
Person is not entitled to indemnification may be made by (i) a final
decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not
liable by reason of Disabling Conduct, (ii) dismissal of a court
action or an administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii) a runcible
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 16. EXHIBITS
( 1) Amended and Restated Master Trust Agreement of Registrant
filed with initial N-14 filing on May 28, 1996
( 2) By-Laws of Registrant filed with initial N-14 filing on
May 28, 1996
( 3) Not applicable
*( 4) Agreement and Plan of Reorganization dated May 16, 1996,
included as Exhibit I of the Combined Proxy Statement and
prospectus.
( 5) Specimen stock certificate of Registrant (incorporated by
reference to Post-Effective Amendment No. 1 to Registration
Statement dated March 20, 1995).
*( 6) (a) Amended Investment Advisory Agreement, included as Exhibit
III of the Combined Proxy Statement and Prospectus
*( 6) (b) Sub-Advisory Agreement, included as Exhibit IV of the
Combined Proxy Statement and Prospectus
( 7) Not applicable
( 8) Not applicable
( 9) Copy of Custodian Agreement with Bankers Trust Company of New
York (incorporated by reference to Post Effective Amendment
No. 6 to Registration Statement dated October 9, 1996)
*(10) 12b-1 Plan included as Exhibit V of the Combined Proxy
Statement and Prospectus
*(11) Opinion and consent of counsel as to the legality of securities
being registered
*(12) Opinion and consent of counsel as to Federal tax matters
(13) Not applicable
*(14) Consent of independent public accountants, Arthur Andersen
(15) Not applicable
*(16) Power of Attorney
(17) Not applicable
* Filed herewith.
ITEM 17. UNDERTAKINGS
The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to
the registration statement and will not be used under the amendment is
effective, and that, in determining any liability under the 1933 Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
<PAGE>
SIGNATURE PAGE
As required by the Securities Act of 1933, this registration statement has been
signed on behalf of the registrant, in the City of San Antonio and State of
Texas, on the 8th day of October, 1996.
Registrant: ACCOLADE FUNDS/MEGATRENDS FUND
By: * /s/ Frank E. Holmes
------------------------------------
PRESIDENT
As required by the Securities Act of 1933, this registration statement has been
signed below by the following persons in the capacities and on the date
indicated:
SIGNATURE TITLE DATE
- - ------------------------ -------------------------- ---------------
* /s/ Frank E. Holmes
- - ------------------------ President, Chief Executive October 8, 1996
FRANK E. HOLMES Officer, Trustee
* /s/ Richard E. Hughs
- - ------------------------ Trustee October 8, 1996
RICHARD E. HUGHS
* /s/ Clark R. Mandigo
- - ------------------------ Trustee October 8, 1996
CLARK R. MANDIGO
* BY: /s/ Thomas D. Tays
---------------------- Vice President, October 8, 1996
THOMAS D. TAYS Secretary
POWER OF ATTORNEY
[EXHIBIT NO. 1 TO COMBINED PROXY STATEMENT AND PROSPECTUS - AGREEMENT AND PLAN
OF REORGANIZATION]
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
the 16th day of May, 1996, by and among the Leeb Personal Finance Investment
Trust, an Ohio business trust (the "Leeb Trust"), with its principal place of
business at 45 Rockefeller Plaza, Suite 2570, New York, NY 10111 for itself and
on behalf of its authorized series, the Leeb Personal Finance Fund (the
"Personal Finance Fund"), and the Accolade Funds, a Massachusetts business trust
(the "Accolade Trust"), with its principal place of business at 7900 Callaghan
Road, San Antonio, Texas 78229, for itself and on behalf of its
newly-established series the MegaTrends Fund (the "Fund").
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan of
Reorganization") will consist of (i) the acquisition by the MegaTrends Fund of
substantially all of the property, assets and goodwill of the Personal Finance
Fund in exchange solely for shares of beneficial interest in the MegaTrends
Fund, (ii) the distribution of such shares of the MegaTrends Fund shares to the
stockholders of the Personal Finance Fund according to their respective
interests, and (iii) the dissolution of the Personal Finance Fund as soon as
practicable after the closing provided for in Section 3, all upon and subject to
the terms and conditions of the Agreement hereinafter set forth.
A special meeting of the shareholders of the Personal Finance Fund (the
"Meeting") will be called for the purposes of (i) considering adoption of this
Agreement and Plan of Reorganization (the "Agreement"); (ii) considering a
proposal to authorize the Personal Finance Fund, as the sole shareholder of the
MegaTrends Fund immediately prior to the reorganization contemplated by this
Agreement, to: (a) approve the proposed Investment Advisory and Sub-Advisory
Agreements, (b) approve the proposed Plan of Distribution under Rule 12b-1 of
the Investment Company Act of 1940, (c) ratify the selection of Price Waterhouse
LLP as the MegaTrends Fund's independent accountant for the current fiscal year,
and (d) provide such other approval or ratification as may be necessary to
consummate the transactions contemplated herein; and (iii) considering any other
business as may properly come before the Meeting. The agenda for such Meeting
may include such other proposals as the Board of Trustees of the Leeb Fund may
deem appropriate.
AGREEMENT
In order to consummate the Plan of Reorganization and in consideration of
the premises and of the covenants and agreements hereinafter set forth, the
parties hereto covenant and agree as follows:
1. SALE AND TRANSFER OF ASSETS, LIQUIDATION AND DISSOLUTION OF THE PERSONAL
FINANCE FUND
a. The Personal Finance Fund agrees that it will convey, transfer and
deliver to MegaTrends Fund at the closing provided for in Section 3
(hereinafter called the "Closing") all of its then existing assets
free and clear of all liens, encumbrances and claims whatsoever,
except for cash or bank deposits in an amount necessary to pay: (i)
its costs and expenses of carrying out this Agreement,(including but
not limited to any income dividend payable prior to the Closing Date,
and expenses of its liquidation and dissolution contemplated
hereunder); (ii) to discharge its unpaid liabilities on its books at
the Closing Date; and (iii) to pay such contingent liabilities as its
Trustees shall reasonably deem to exist against the Personal Finance
Fund, if any, at the Closing Date, for which contingent and other
appropriate liability reserves shall be established on the Personal
Finance Fund's books. Any unspent portion of such funds retained shall
be delivered to the MegaTrends Fund upon dissolution of the Personal
Finance Fund.
b. Subject to the terms and conditions of this Agreement and in reliance
on the representations and warranties of the Personal Finance Fund
herein contained, and in consideration of such sale, conveyance,
transfer and delivery, MegaTrends Fund agrees at the Closing to
deliver to the Personal Finance Fund the number of shares of
beneficial interest of the MegaTrends Fund determined as set forth in
Section 2 hereof.
c. Immediately following the Closing Date, the Personal Finance Fund will
liquidate and distribute pro-rata to its shareholders of record as of
the close of business on the Closing Date, the shares of beneficial
interest of the MegaTrends Fund received by the Personal Finance Fund
pursuant to this Section 1. Such liquidation and distribution will be
accompanied by the establishment of open accounts on the share records
of MegaTrends Fund in the names of such shareholders of the Personal
Finance Fund representing the respective pro rata number of MegaTrends
Fund shares due such shareholders. Fractional shares of the Personal
Finance Fund's shares of
- - --------------------------------------------------------------------------------
Exhibit No. I - Agreement and Plan of Reorganization
Page 1
<PAGE>
beneficial interest will be carried to the third decimal place. As
promptly as practicable after the Closing Date, each holder of any
outstanding certificate or certificates theretofore representing
shares of beneficial interest of the Personal Finance Fund may
surrender the same to a transfer agent designated by MegaTrends Fund
and request in exchange a certificate or certificates representing the
number of whole and fractional shares of beneficial interest of
MegaTrends Fund into which the shares of the Personal Finance Fund
theretofore represented by the certificate or certificates so
surrendered shall have been converted. Certificates for fractional
shares of MegaTrends Fund will not be issued, however, but shall
continue to be carried for the open account of such shareholder. Until
so surrendered, each outstanding certificate which, prior to the
Closing Date, represented shares of beneficial interest of the
Personal Finance Fund shall be deemed for all corporate purposes to
evidence ownership of the number of shares of beneficial interest of
the MegaTrends Fund into which the shares of beneficial interest of
the Personal Finance Fund (which, prior to the Closing Date, were
represented thereby) have been so converted.
d. As promptly as practicable after the liquidation of the Personal
Finance Fund as aforesaid, the Personal Finance Fund shall be
dissolved pursuant to the provisions of the General Laws of the State
of Ohio and its legal existence shall be terminated as provided
therein.
2. EXCHANGE RATIO
a. The value of the Personal Finance Fund's assets to be acquired by the
MegaTrends Fund hereunder shall be the net asset value computed as of
the close of business (close of the New York Stock Exchange) on the
Closing Date, using the valuation procedures set forth in the
MegaTrends Fund's registration statement under the Securities Act of
1933.
b. The total net assets of the Personal Finance Fund determined under (a)
shall be divided by the number of shares of its outstanding shares of
beneficial interest, to determine the Personal Finance Fund's net
asset value per share as of the close of business on the Closing Date.
c. The net asset value of a MegaTrends Fund share of beneficial interest
shall be determined to the nearest full cent as of the close of
business on the Closing Date, using the valuation as set forth in
MegaTrends Fund's registration statement under the Securities Act of
1933.
d. The net asset value per share for the Personal Finance Fund as
determined in (b) shall then be divided by the MegaTrends Fund net
asset value per share as determined in (c) to determine the exchange
ratio.
3. CLOSING AND CLOSING DATE
The Closing shall be November 15, or such later date as the parties may
mutually agree. The Closing shall take place at the principal office of
MegaTrends Fund, at 4:30 p.m., Eastern Standard Time. The Personal Finance Fund
shall, on or before the Closing of its assets, deliver to Bankers Trust, as
Custodian for MegaTrends Fund, all of its assets. The Personal Finance Fund
shall deliver at the Closing a list of names and addresses of the shareholders
of the Personal Finance Fund and the number of shares owned by each such
shareholder, indicating thereon which such shares are represented by outstanding
certificates and which by open accounts, all as of the close of business on the
Closing Date, certified by its transfer agent. MegaTrends Fund shall issue and
deliver a certificate or certificates evidencing the shares of the MegaTrends
Fund's shares of beneficial interest to be delivered at the Closing to said
transfer agent registered in such manner as the Personal Finance Fund may
request, or provide evidence satisfactory to the Personal Finance Fund that such
shares of the MegaTrends Fund's shares of beneficial interest have been
registered in an open account on the books of the MegaTrends Fund in such manner
as the Personal Finance Fund may reasonably request. Simultaneous with the
Closing, the parties shall cause the filing of Articles of Transfer with respect
to the sale and transfer of assets contemplated hereunder with the Department of
Assessments and Taxation of the State of Ohio.
4. REPRESENTATIONS AND WARRANTIES BY THE PERSONAL FINANCE FUND
The Personal Finance Fund represents and warrants that:
a. The Personal Finance Fund is a series of shares of an Ohio business
trust duly organized, validly existing and in good standing under the
laws of the State of Ohio and has all power and authority to conduct
its business as such business is now being conducted;
- - --------------------------------------------------------------------------------
Exhibit No. I - Agreement and Plan of Reorganization
Page 2
<PAGE>
b. The Personal Finance Fund has a duly authorized capital consisting of
unlimited shares of beneficial interest of which approximately
2,952,795 shares were issued and outstanding on the date hereof. All
of its presently outstanding shares are validly issued, fully paid and
non-assessable by it;
c. The Personal Finance Fund is duly registered as a diversified,
open-end management company under the Investment Company Act of 1940;
d. There has been mailed to each shareholder of record of the Personal
Finance Fund entitled to vote at the meeting of shareholders, at which
action this Agreement is to be considered, a combined proxy statement
and prospectus which complies in all material respects with the
applicable provisions of the Federal securities laws and the rules and
regulations thereunder;
e. The financial statements appearing in the Personal Finance Fund's
annual report for the year ended June 30, 1996, audited by Arthur
Andersen LLP, a copy of which has been delivered to MegaTrends Fund,
and similar unaudited financial statements and other financial data as
of December 31, 1995, and for the period then ended, which have been
delivered to the MegaTrends Fund by the principal financial officer of
the Personal Finance Fund, fairly present the financial position of
the Personal Finance Fund as of the respective dates indicated, and
the results of its operations and changes in net assets for the
respective periods indicated, in conformity with generally accepted
accounting principles applied on a consistent basis.
From the date of the most recent report referred to above, there has
not been any material adverse change in the Personal Finance Fund's
financial condition, assets, liabilities or business other than
changes occurring in the ordinary course of business or as a result of
this transaction. For the purposes of this paragraph, a decline in net
assets of the Personal Finance Fund shall not constitute a material
adverse change.
f. The Personal Finance Fund has no material contracts or other
commitments (other than this Agreement) which will be terminated with
liability to the Personal Finance Fund prior to Closing, except
contracts entered into in the ordinary course of its business and this
Agreement.
5. REPRESENTATIONS AND WARRANTIES BY THE MEGATRENDS FUND
MegaTrends Fund represents and warrants that:
a. MegaTrends Fund is a Massachusetts business trust duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has all power and authority to
conduct its business as such business is presently being conducted;
b. MegaTrends Fund has duly authorized capital consisting of unlimited
shares of beneficial interest. On the date of this Agreement,
MegaTrends Fund had issued an outstanding approximately zero shares of
beneficial interest;
c. MegaTrends Fund is duly registered as a diversified, open-end
investment company under the Investment Company Act of 1940 and is
authorized to offer and sell shares of beneficial interest in its two
series;
d. MegaTrends Fund will file with the United States Securities and
Exchange Commission a Registration Statement on Form N-14 (the
"Registration Statement") under the Securities Act of 1933 relating to
the MegaTrends Fund's shares of beneficial interest issuable
hereunder. Appropriate portions of such Registration Statement after
effectiveness will be delivered to shareholders of the Personal
Finance Fund as proxy materials in connection with the solicitation of
proxies approving the proposed transaction, and other portions will be
available upon request by shareholders. The Registration Statement
will note, on its facing page, that the securities proposed to be
distributed thereunder have previously been registered in accordance
with Rule 24f-2 under the Investment Company Act of 1940. At the time
such Registration Statement becomes effective, it (i) will comply in
all material respects with the provisions of the Securities Act of
1933 and the rules and regulations promulgated thereunder, and (ii)
will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and at the time the
Registration Statement becomes effective, at the time of the Personal
Finance Fund's shareholders' meeting and at the Closing Date, the
prospectus included therein will not contain an untrue statement of a
material fact or omit to state a material fact
- - --------------------------------------------------------------------------------
Exhibit No. I - Agreement and Plan of Reorganization
Page 3
<PAGE>
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
e. The shares of beneficial interest of MegaTrends Fund are duly
qualified for offering to the public in all states of the United
States, and there are a sufficient number or value of shares of each
share so qualified and a sufficient number of shares registered under
the Securities Act of 1933, pursuant to the Investment Company Act of
1940 Rule 24f-2, to permit the transfers contemplated by this
Agreement to be consummated.
From the date of the most recent report referred to above, there has
not been any material adverse change in the MegaTrends Fund's
financial condition, assets, liabilities or business other than
changes occurring in the ordinary course of business or as a result of
this transaction. For the purposes of this paragraph a decline in net
assets of the MegaTrends Fund shall not constitute a material adverse
change.
6. REPRESENTATIONS AND WARRANTIES BY PERSONAL FINANCE FUND AND MEGATRENDS FUND
The Personal Finance Fund and MegaTrends Fund each represent and warrant to
the other that:
a. The statement of assets and liabilities to be furnished by it as of
the close of business on the Closing Date for the purpose of
determining the number of shares of MegaTrends Fund shares of
beneficial interest to be issued pursuant to Section 1 of this
Agreement will accurately reflect its net assets and outstanding
shares of beneficial interest as of such date in conformity with
generally accepted accounting principles applied on a consistent
basis;
b. On the Closing Date it will have good and marketable title to all of
the securities and other assets shown on the statement of assets and
liabilities referred to in (a) above free and clear of all liens or
encumbrances of any nature whatever except such imperfections of title
or encumbrances as do not materially detract from the value or use of
the assets subject thereto, or materially affect title thereto;
c. There is no material suit, action or legal or administrative
proceeding pending or threatened against it, other than as disclosed
in the Combined Proxy Statement and prospectus prepared in connection
with the meeting at which action on this Agreement will be taken;
d. By Closing Date, all of its Federal and other tax returns and reports
required by law to be filed shall have been filed, and all Federal and
other taxes shown due on said returns shall have been paid;
e. The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary
corporate action on the part of each Corporation and this Agreement
constitutes the valid and binding obligation of each Corporation
enforceable in accordance with its terms; and
f. The party is not, and the execution, delivery and performance of this
Agreement will not result, in material violation of the party's
Declaration of Trust or By-laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the party is
a party or is bound.
7. COVENANTS OF THE PERSONAL FINANCE FUND AND THE MEGATRENDS FUND
a. The Personal Finance Fund and MegaTrends Fund each covenant to operate
its business in the ordinary course between the date hereof and the
Closing Date.
b. The Personal Finance Fund undertakes that it will not acquire the
MegaTrends Fund shares for the purpose of making any distribution
thereof other than to its own shareholders.
c. The Personal Finance Fund undertakes that it will at its own expense
prepare and file with the Securities and Exchange Commission a Report
on Form N-SAR pursuant to the requirements of the Investment Company
Act of 1940 through the Closing Date.
- - --------------------------------------------------------------------------------
Exhibit No. I - Agreement and Plan of Reorganization
Page 4
<PAGE>
8. CONDITIONS PRECEDENT TO BE FULFILLED BY PERSONAL FINANCE FUND AND
MEGATRENDS FUND
The obligations of each of the parties to effectuate the Plan of
Reorganization hereunder shall be subject to the following conditions:
a. The representations and warranties of each Party contained herein
shall be true as of and at the Closing Date with the same effect as
though made at such date; each Party shall have performed all
obligations required by this Agreement to be performed by it prior to
the Closing Date; and each Party shall have delivered to it a
certificate dated as of the Closing Date and signed by its Chairman of
the Board or President and by its Secretary or Assistant Secretary to
the foregoing effect;
b. Each Party shall have delivered a certified copy of the resolutions
approving this Agreement adopted by at least a majority vote of its
Trustees, including a majority of its Trustees who are not "interested
persons" as defined in the Investment Company Act of 1940;
c. The Securities and Exchange Commission shall not have issued an
unfavorable advisory report under Section 25(b) of the Investment
Company Act of 1940 nor instituted any proceeding seeking to enjoin
consummation of the reorganization under Section 25(c) of the
Investment Company Act of 1940;
d. The holders of at least a majority of the outstanding shares of
beneficial interest of the Personal Finance Fund shall have voted in
favor of the adoption of this Agreement and the reorganization
contemplated hereby at an annual or special meeting;
e. The Personal Finance Fund shall have declared a distribution or
distributions prior to the Closing Date which, together with all
previous distributions, shall have the effect of distributing to its
shareholders all of its net investment income since the close of its
last fiscal year; and
f. The Accolade Trust shall have received the opinion of legal counsel
for the Accolade Trust, dated as of the date of the Closing and
addressed to the Trust, to the effect that:
(i) provided the acquisition is carried out in accordance with the
applicable laws of Massachusetts, the acquisition by the
MegaTrends Fund of substantially all of the assets of the
Personal Finance Fund as provided for herein in exchange for
MegaTrends Fund shares will qualify as a reorganization within
the meaning of Section 368(a) of the Code, and MegaTrends Fund
will each be a party to the respective reorganization within the
meaning of Section 368(b) of the Code; for purposes of this
opinion, "substantially all" means at least 70% of the fair
market of the gross assets and at least 90% of the fair market
value of the net assets;
(ii) no gain or loss will be recognized by the Personal Finance Fund
upon the transfer of substantially all of its assets to the
MegaTrends Fund in exchange solely for voting shares of the
MegaTrends Fund [Code Section 361(a)];
(iii)no gain or loss will be recognized by the MegaTrends Fund upon
the receipt of substantially all of the assets of the Personal
Finance Fund in exchange solely for voting shares of MegaTrends
Fund [Code Section 1032(a)];
(iv) the basis of the assets of the Personal Finance Fund received by
the MegaTrends Fund will be the same as the basis of such assets
to the Personal Finance Fund immediately prior to the exchange
[Code Section 362(b)];
(v) the holding period of the assets of the Personal Finance Fund
received by the MegaTrends Fund will include the period during
which such assets were held by the Personal Finance Fund [Code
Section 1223(2)];
(vi) no gain or loss will be recognized to the shareholders of the
Personal Finance Fund upon the exchange of their shares in the
Personal Finance Fund for voting shares of the MegaTrends Fund
(including fractional shares to which they may be entitled) [Code
Section 354(a)(1)];
- - --------------------------------------------------------------------------------
Exhibit No. I - Agreement and Plan of Reorganization
Page 5
<PAGE>
(vii)the basis of the MegaTrends Fund voting shares received by the
Personal Finance Fund shareholders (including fractional shares
to which they may be entitled) will be the same as the basis of
the shares of the Personal Finance Fund surrendered in exchange
therefor [Code Section 358(a)(1)];
(viii) the holding period of the MegaTrends Fund voting shares
received by the Personal Finance Fund shareholders (including
fractional shares to which they may be entitled) will include the
holding period of Personal Finance Fund shares surrendered in
exchange therefor, provided that Personal Finance Fund shares
were held as a capital asset on the date of the exchange [Code
Section 1223(1)];
(ix) pursuant to Section 381(a) of the Code and Treasury Regulation
Section 1.381-1(a), the MegaTrends Fund will succeed to and take
into account as of the date of the proposed transfer [as defined
in Treasury Regulation (S)1.381(b)-1(b)] the items of described
in Section 381(c) of the Code, including any "pro-change capital
loss" of the Personal Finance Fund within the meaning of Treasury
Regulation (S)1.383-1(c)(2), subject to the conditions and
limitations specified in Sections 381(b) and (c), 382, 383 and
384 of the Code; and
(x) where a dissenting shareholder of the Personal Finance Fund
receives cash solely in exchange for his or her share, such cash
will be treated as having been received by the shareholder as a
distribution in redemption of his or her share subject to the
provisions and limitations of Section 302 of the Code.
In rendering such opinion, such legal counsel may rely on an opinion of
Ohio and/or Massachusetts counsel reasonably acceptable to the Accolade Trust
with respect to matters of Ohio and/or Massachusetts law, and on certificates of
officers or Trustees of the Accolade Trust and/or Leeb Trust, in each case
reasonably acceptable to the Accolade Trust.
9. BROKERAGE FEES AND EXPENSES
a. The Personal Finance Fund and the MegaTrends Fund each represent and
warrant to the other that there are no brokers' or finders' fees
payable in connection with the transactions provided for herein.
b. The Personal Finance Fund and the MegaTrends Fund shall each bear such
expenses of entering into and carrying out the provisions of this
Agreement as have been separately incurred by it. No Party shall pay
expenses, if any, of its shareholders arising out of the
reorganization.
10. TERMINATION WAIVER ORDER
a. Anything contained in this Agreement to the contrary notwithstanding,
this Agreement may be terminated and the reorganization abandoned at
any time whether before or after adoption hereof by the shareholders
of the Personal Finance Fund prior to the Closing Date:
(i) by mutual consent of the Parties;
(ii) by either of the Parties if any condition set forth in Section 8
hereof has not been fulfilled or waived by it;
b. An election by a Party to terminate this Agreement and abandon the
reorganization shall be exercised by its Board of Trustees;
c. In the event of termination of this Agreement pursuant to the
provisions hereof, the same shall become void and have no effect
without any liability on the part of either of the Parties or persons
who are its trustees, officers or shareholders in respect of this
Agreement, provided that this provision shall not protect any trustee
or officer of either of the Parties against any liability to such
Party or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office;
d. At any time prior to the filing of the Articles of Transfer with the
States of Ohio and Massachusetts, any of the terms or conditions of
this Agreement may be waived by the Party entitled to the benefit
thereof by action taken by its Board of Trustees, or its Chairman of
the Board, if, in the judgment of the Board of Trustees or Chairman of
the Board taking such action, such waiver will not have material
adverse effect on the benefits intended under this Agreement to the
shareholders of the Party on behalf of which such action is taken;
- - --------------------------------------------------------------------------------
Exhibit No. I - Agreement and Plan of Reorganization
Page 6
<PAGE>
e. The respective representations and warranties of the Parties contained
in Sections 4 through 7 hereof shall expire with, and be terminated
by, the reorganization contemplated by this Agreement, and neither the
respective Parties nor any of their trustees shall be under any
liability with respect to any such representations or warranties after
the Closing Date. This provision shall not protect any trustee or
officer of a business trust against any liability to such business
trust or to its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office; and
f. If any order or orders of the Securities and Exchange Commission with
respect to this Agreement shall impose any terms or conditions which
are acceptable to both the Personal Finance Fund and the Acquiring
Fund, such terms and conditions shall be binding as if a part of this
Agreement without further vote or approval of the shareholders of the
Personal Finance Fund, unless such terms and conditions shall result
in a change in the method of computing the number of shares of
MegaTrends Fund to be issued to the Personal Finance Fund, in which
event, unless such terms and conditions shall have been included in
the Combined Proxy Statement and prospectus solicitation materials
furnished to the shareholders of the Personal Finance Fund prior to
the meeting at which the transactions contemplated by this Agreement
shall have been approved, this Agreement shall not be consummated and
shall terminate unless the Personal Finance Fund shall promptly call a
Special Meeting of Shareholders at which conditions so imposed shall
be submitted for approval.
11. ENTIRE AGREEMENT AND AMENDMENTS
This Agreement embodies the entire agreement between the Parties and there
are no agreements, understandings, restrictions or warranties among the Parties
other than those set forth herein or herein provided for.
12. COUNTERPARTS
This Agreement may be executed in any number of counterparts each of which
shall be deemed to be an original but all such counterparts together shall
constitute but one instrument.
13. NOTICES
Any notice, report or demand required or permitted by any provision of this
Agreement shall be in writing and shall be deemed to have been given if
delivered or mailed, first class postage postpaid, addressed to the Personal
Finance Fund at 45 Rockefeller Plaza, Suite 2570, New York, New York 10111, or
the MegaTrends Fund, at P. O. Box 781234, San Antonio, Texas 78278-1234.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement and Plan
of Reorganization to be executed on its behalf by its President or a Vice
President and its seal to be affixed hereto and attested by its Secretary or
Assistant Secretary, all as of the day and year first above written.
LEEB PERSONAL FINANCE TRUST
Attest:
By:
- - --------------------------------- ---------------------------------------
Secretary President
ACCOLADE FUNDS
Attest:
By:
- - --------------------------------- ---------------------------------------
Secretary President
Exhibit I - Agreement and Plan of Reorganization
Page 7
[EXHIBIT NO. III TO COMBINED PROSPECTUS AND PROXY STATEMENT - ADVISORY AGREEMENT
AND ADDENDUM]
ADVISORY AGREEMENT
AGREEMENT made as of the 21st day of September, 1994 between UNITED
SERVICES ADVISORS, INC., a corporation organized under the laws of the State of
Texas and having its principal place of business in San Antonio, Texas (the
"Advisor"), and ACCOLADE FUNDS, a Massachusetts business trust having its
principal place of business in San Antonio, Texas (the "Trust").
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is registered under the Investment Company Act of 1940
(the "1940 Act"); and
WHEREAS, the Advisor is engaged principally in the business of rendering
investment management services and is registered under the Investment Advisors
Act of 1940; and
WHEREAS, the Trust intends to initially offer shares in SIF Government
Money Fund and SIF Government Short-Term Fund [such series (the "Initial Funds")
together with all other series subsequently established by the Trust with
respect to which the Trust desires to retain the Advisor to render investment
advisory services hereunder the Advisor is willing so to do (collectively
referred to as the "Funds")];
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. APPOINTMENT OF ADVISOR.
(a) Initial Funds. The Trust hereby appoints the Advisor to act as
Advisor and investment advisor to each of the Initial Funds for
the period and on the terms herein set forth. The Advisor accepts
such appointment and agrees to render the services herein set
forth, for the compensation herein provided.
(b) Additional Funds. In the event that the Trust establishes one or
more series of shares other than the Initial Funds with respect
to which it desires to retain the Advisor to render management
and investment advisory services hereunder, it shall so notify
the Advisor in writing, indicating the advisory fee which will be
payable with respect to the additional series of shares. If the
Advisor is willing to render such services, it shall so notify
the Trust in writing, whereupon such series of shares shall
become a Fund hereunder.
2. DUTIES OF ADVISOR.
The Advisor, at its own expense, shall furnish the following services
and facilities to the Trust:
(a) Investment Program. The Advisor will (i) furnish continuously an
investment program of each Fund, (ii) determine (subject to the
overall supervision and review of the Board of Trustees of the
Trust) what investments shall be purchased, held sold or
exchanged by each Fund and what portion, if any, of the assets of
each Fund shall be held uninvested, and (iii) make changes on
behalf of the Trust in the investments of each Fund. The Advisor
will also manage, supervise and conduct the other affairs and
business of the Trust of each Fund thereof and matters incidental
thereto, subject always to the control of the Board of Trustees
of the Trust and to the provisions of the Declaration of Trust
and By-laws and the 1940 Act.
(b) Office Space and Facilities. The Advisor shall furnish the Trust
office space in the offices of the Advisor, or in such other
place or places as may be agreed upon from time to time, and all
necessary office facilities, simple business equipment, supplies,
utilities, and telephone service for managing the affairs and
investments of the Trust. These services are exclusive of the
necessary services and records of any dividend disbursing agent,
transfer agent, registrar or custodian, and accounting and
bookkeeping services to provided by the Trust's transfer agent,
record keeping service or custodian.
- - --------------------------------------------------------------------------------
Exhibit III - Advisory Agreement
Page 1
<PAGE>
(c) Personnel. The Advisor shall provide all necessary executive and
clerical personnel for administering the affairs of the Trust,
and shall compensate all personnel, officers and Trustees of the
Trust if such persons are also employees of the Advisor or its
affiliates, except as provided in Paragraph 3(f) hereof.
(d) Distribution Expenses. Except as may be provided in distribution
expense plans as contemplated by Rule 12b-1 under the 1940 Act,
the Advisor shall bear all sales, promotions or distribution
expenses in connection with the distribution of shares of any
Fund and shall be the sole judge of the extent to which sales or
promotion expenses shall be incurred; provided however, that the
Advisor shall not be obligated to pay for any portion of the cost
of prospectuses or periodic reports provided to shareholders.
Expenses incurred in complying with laws regulating the issue or
sale of securities shall not be deemed to be sales, promotion or
distribution expenses.
(e) Portfolio Transactions. The Advisor shall place all orders for
the purchase and sale of portfolio securities for the account of
each Fund with brokers or dealers selected by the Advisor,
although the Trust will pay the actual brokerage commissions on
portfolio transactions in accordance with Paragraph 3(c). In
executing portfolio transactions and selecting brokers or
dealers, the Advisor will use its best efforts to seek on behalf
of the Trust or any Fund thereof the best overall terms
available. In assessing the best overall terms available for any
transaction, the Advisor shall consider all factors it deems
relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the
commission, if any (for the specific transaction and on a
continuing basis). In evaluating the best overall terms
available, and in selecting the broker or dealer to execute a
particular transaction, the Advisor may also consider the
brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided to
any Fund and/or other accounts over which the Advisor or an
affiliate of the Advisor exercises investment discretion. The
Advisor is authorized to pay to a broker or dealer who provides
such brokerage and research services a commission for executing a
portfolio transaction for any fund which is in excess of the
amount of commission another broker or dealer would have charged
for effecting that transaction if, but only if, the Advisor
determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of that
particular transaction or in terms of all of the accounts over
which investment discretion is so exercised.
3. ALLOCATION OF EXPENSES.
Except for the services and facilities to be provided by the Advisor
as set forth in Paragraph 2 above, the Trust assumes and shall pay all
expenses for all other Trust operations and activities and shall
reimburse the Advisor for any such expenses incurred by the Advisor.
The expenses to be borne by the Trust shall include, without
limitation:
(a) The charges and expenses of any registrar, stock transfer or
dividend disbursing agent, custodian, or depository appointed by
the Trust for the safekeeping of its cash, portfolio securities
and other property;
(b) The charges and expenses of auditors;
(c) Brokerage commissions for transactions in the portfolio
securities of the Trust;
(d) All taxes, including issuance and transfer taxes, and corporate
fees payable by the Trust to Federal, state or other governmental
agencies;
(e) The cost of stock certificates (if any) representing shares of
the Trust;
(f) Expenses involved in registering and maintaining registrations of
the Trust and of its shares with the Securities and Exchange
Commission and various states and other jurisdictions,
- - --------------------------------------------------------------------------------
Exhibit III - Advisory Agreement
Page 2
<PAGE>
including reimbursement of actual expenses incurred by the
Advisor in performing such functions for the Trust, and including
compensation of persons who are Advisor employees in proportion
to the relative time spent on such matters;
(g) All expenses of shareholders' and Trustees' meetings, including
meetings of committees, and of preparing, printing and mailing
proxy statements, quarterly reports, semi-annual reports, annual
reports and other communications to shareholders;
(h) All expenses of preparing and setting in type prospectuses, and
expenses of printing and mailing the same to shareholders [but
not expenses of printing and mailing of prospectuses and
literature used for promotional purposes in accordance with
Paragraph 2(d) above];
(i) Compensation and travel expenses of Trustees who are not
"interest persons" within the meaning of the 1940 Act;
(j) The expense of furnishing, or causing to be furnished, to each
shareholder a statement of his account, including the expense of
mailing;
(k) Charges and expenses of legal counsel and internal
audit/compliance personnel in connection with matters relating to
the Trust, including, without limitations, legal services
rendered in connection with the Trust's corporate and financial
structure and relations with its shareholders, issuance of Trust
shares, and registration and qualification of securities under
Federal, state and other laws;
(l) The expenses of attendance at professional meetings of
organizations such as the Investment Company Institute, the No
Load Mutual Fund Association, or Commerce Clearing House by
officers and Trustees of the Trust, and the membership or
association dues of such organizations;
(m) The cost and expense of maintaining the books and records of the
Trust, including general ledger accounting;
(n) The expense of obtaining and maintaining a fidelity bond as
required by Section 17(g) of the 1940 Act;
(o) Interest payable on Trust borrowings; and
(p) Postage.
4. ADVISORY FEE.
(a) For the services and facilities to be provided to each of the
Funds by the Advisor as provided in Paragraph 2 hereof, the Trust
shall pay the Advisor a monthly fee with respect to each of the
Funds as soon as practical after the last day of each calendar
month, which fee shall be paid at the rate set forth below based
upon the Monthly Average Net Assets [as defined in subparagraph
(c) below] of such Fund for such calendar month:
ADVISORY FEE SCHEDULE
---------------------
MONTHLY
FEE RATE
--------
Bonnel Growth Fund 1/12 of 1.00%
(b) In the case of termination of this Agreement with respect to any
Fund during any calendar month, the fee with respect to such Fund
for that month shall be
- - --------------------------------------------------------------------------------
Exhibit III - Advisory Agreement
Page 3
<PAGE>
reduced proportionately based upon the number of calendar days
during which it is in effect and the fee shall be computed upon
the average net assets of such Fund for the business days which
it is so in effect.
(c) The "Monthly Average Net Assets" of any Fund of the Trust for any
calendar month shall be equal to the quotient produced by
dividing (i) the sum of the net assets of such Fund, determined
in accordance with procedures established from time to time by or
under the direction of the Board of Trustees of the Trust in
accordance with the Declaration of Trust of the Trust, as of the
close of business on each day during such month that such Fund
was open for business, by (ii) the number of such days.
5. EXPENSE LIMITATION.
The Advisor agrees that for any fiscal year of the Trust during which the
total of all expenses of the Trust (including investment advisory fees
under this agreement, but excluding interest, portfolio brokerage
commissions and expenses, taxes and extraordinary items) exceeds the lowest
expense limitation imposed in any state in which the Trust is then making
sales of its shares or in which its shares are then qualified for sale, the
Advisor will reimburse the Trust for such expenses not otherwise excluded
from reimbursement by this Paragraph 5 to the extent that they exceed such
expense limitation.
6. TRUST TRANSACTIONS.
The Advisor agrees that neither it nor any of its officers or Directors
will take any long or short term position in the shares of the Trust;
provided, however, that such prohibition:
(a) shall not prevent the Advisor from purchasing shares of the Trust
if orders to purchase such shares are placed upon the receipt by
the Advisor of purchase orders for such shares and are not in
excess of such purchase orders received by the Advisor; and
(b) shall not prevent the purchase of shares of the Trust by any of
the persons above described for their account and for investment
at the price at which such shares are available to the public at
the time of purchase or as part of the initial capital of the
Trust.
7. RELATIONS WITH TRUST.
Subject to and in accordance with the Declaration of Trust and By-laws of
the Trust and the Articles of Incorporation and By-laws of the Advisor,
respectively, it is understood that Trustees, officers, agents and
shareholders of the Trust are or may be interested in the Advisor (or any
successor thereof) as directors, officers, or otherwise; that directors,
officers, agents and shareholders of the Advisor are or may be interested
in the Trust as Trustees, officers, shareholders, or otherwise; that the
Advisor (or any such successor) is or may be interested in the Trust as a
shareholder or otherwise; and that the effect of any such adverse interests
shall be governed by said Declaration of Trust, Articles of Incorporation
and By-laws.
8. LIABILITY OF ADVISOR AND OFFICERS AND TRUSTEES OF THE TRUST.
No provision of this Agreement shall be deemed to protect the Advisor
against any liability to the Trust or its shareholders to which it might
otherwise be subject by reason of any willful misfeasance, bad faith or
gross negligence in the performance of its duties or the reckless disregard
of its obligations and duties under this Agreement. Nor shall any provision
hereof be deemed to protect any Trustee or officer of the Trust against any
such liability to which he might otherwise be subject by reason of any
willful misfeasance, bad faith or gross negligence in the performance of
his duties or the reckless disregard of his obligations and duties. If any
provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby.
9. DURATION AND TERMINATION OF THIS AGREEMENTS.
(a) Duration. This Agreement shall become effective with respect to
each Initial Fund on the date hereof and, with respect to any
additional Fund, on the date of receipt by the Trust of notice
from the Advisor in accordance with Paragraph 1(b) hereof that
the Manager is willing
- - --------------------------------------------------------------------------------
Exhibit III - Advisory Agreement
Page 4
<PAGE>
to serve as Advisor with respect to such Fund. Unless terminated
as herein provided, this Agreement shall remain in full force and
effect until September 21, 1995 with respect to the Initial Funds
and, with respect to each additional Fund, until one year
following the date on which such Fund becomes a Fund hereunder,
and shall continue in full force and effect for period on one
year thereafter with respect to each Fund so long as such
continuance with respect to any such Fund is approved at least
annually (i) by either the Trustees of the Trust or by vote of a
majority of the outstanding voting shares (as defined in the 1940
Act) of such Fund, and (ii) in either event by the vote of a
majority of the Trustees of the Trust who are not parties to this
Agreement or "interested persons" (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the
purpose of voting on such approval.
Any approval of this Agreement by the holders of a majority of
the outstanding shares (as defined in the 1940 Act) of any Fund
shall be effective to continue this Agreement with respect to any
such Fund notwithstanding (i) that this Agreement has not been
approved by the holders of a majority of the outstanding shares
of any other Fund affected thereby, and (ii) that this Agreement
has not been approved by the vote of a majority of the
outstanding shares of the Trust, unless approval shall be
required by any other applicable law or otherwise.
(b) Termination. This Agreement may be terminated at any time,
without payment of any penalty, by vote of the Trustees of the
Trust or by vote of a majority of the outstanding shares (as
defined in the 1940 Act), or by the Advisor on sixty (60) days'
written notice to the other party.
(c) Automatic Termination. This Agreement shall automatically and
immediately terminate in the event of its assignment.
10. SERVICES NOT EXCLUSIVE.
The services of the Advisor to the Trust hereunder are not to be deemed
exclusive, and the Advisor shall be free to render similar services to
others so long as its services hereunder are not impaired thereby.
11. LIMITATION OF LIABILITY.
(a) THE TRUST The term "Accolade Funds" means and refers to the
Trustees from time to time serving under the Master Trust
Agreement of the Trust dated April 15, 1993, as the same may
subsequently thereto have been, or subsequently hereto be
amended. It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents or employees of the
Trust, personally, but bind only the assets and property of the
Trust, as provided in the Master Trust Agreement of the Trust.
The execution and delivery of this Agreement have been authorized
by the Trustees and shareholders of the Trust and signed by an
authorized officer of the Trust, acting as such, and neither such
authorization by such Trustees and shareholders nor such
execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the assets and
property of the Trust as provided in its Master Trust Agreement.
(b) THE ADVISOR It is expressly agreed that the oblations of the
Advisor hereunder shall not be binding upon any of the
shareholders, nominees, officers, agents or employees of the
Advisor, personally, but bind only the assets and property of the
Advisor, respectively. The execution and delivery of the
Agreement have been authorized by the directors and officers of
the Advisor and signed by an authorized officer of the Advisor,
acting as such, and neither such authorization by such directors
and officers nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind
only the assets and property of the Advisor, respectively. This
limitation of liability shall not be deemed to protect the
shareholders, nominees, officers, agents or employees of the
Advisor against any liability to the Trust or its shareholders to
which they might otherwise be subject by reason of any willful
misfeasance, bad faith or gross negligence in the performance of
their duties or the reckless disregard of their obligations and
duties under this Agreement.
- - --------------------------------------------------------------------------------
Exhibit III - Advisory Agreement
Page 5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
ACCOLADE FUNDS UNITED SERVICES ADVISORS, INC.
By ---------------------- By -------------------------
Executive Vice President Executive Vice President
Attest: Attest:
- - -------------------------- -----------------------------
Secretary Secretary
================================================================================
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 United Services Advisors, Inc. (the
"Advisor"), please be advised that the Trust has established one new series of
its shares, namely, the MegaTrends 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:
MEGATRENDS FUND
Monthly Average Net Assets 1/12 of 1.00%
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
MegaTrends Fund at the fee stated above.
U.S. GLOBAL INVESTORS, INC.
Attest: By:
------------------------------- --------------------------------
Secretary President
- - --------------------------------------------------------------------------------
Exhibit III - Advisory Agreement
Page 7
[EXHIBIT NO. 4 TO COMBINED PROSPECTUS AND PROXY STATEMENT - SUB-ADVISORY
AGREEMENT]
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the ....... day of .........., 1996 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 MegaTrends Fund (the "Fund"), a series of shares of the Trust, and MONEY
GROWTH INSTITUTE, INC., a corporation organized under the laws of the State of
New York (the "Sub-Advisor"), of New York, New York.
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 objective 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 in the circumstances appear most
appropriate to the achievement of the investment objective of the
Fund as stated in the aforesaid Prospectus, (ii) to provide
research and analysis relative to the investment program and
investments of the Fund, (iii) to determine what securities
should be purchased and sold and what portion of the assets of
the Fund should be held in cash or cash equivalents and (iv) to
monitor on a continuing basis the performance of the portfolio
securities of the Fund. The Sub-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
- - --------------------------------------------------------------------------------
Exhibit IV - Sub-Advisory Agreement
Page 1
<PAGE>
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 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 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, is 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.
- - --------------------------------------------------------------------------------
Exhibit IV - Sub-Advisory Agreement
Page 2
<PAGE>
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 percent management fee to the Advisor;
(ii) The Advisor will pay to the Sub-Advisor the one percent
management fee received net of all mutually agreed upon fee
waivers, expense caps and reimbursements and reimbursements
required by applicable law for one year from the anniversary
date of the Sub-Advisory Agreement provided assets of the
Fund are equal to or less than $40 million. On assets
exceeding $40 million, but less than $50 million, the
Advisor will pay to the Sub-Advisor 75 percent of the
management fee received net of all applicable fee waivers,
expense caps and reimbursements for one year from the
anniversary date of the Sub-Advisory Agreement. On assets
equaling or exceeding $50 million, the Advisor will pay to
the Sub-Advisor 50 percent of the management fee received
net of all applicable fee waivers, expense caps and
reimbursements for one year from the anniversary date of the
Sub-Advisory Agreement.
(iii)After the first anniversary of the Sub-Advisory Agreement,
the Advisor will pay to the Sub-Advisor 50 percent of the
management fee received net of all mutually agreed upon
applicable fee waivers, expense caps and reimbursements and
reimbursements required by applicable law.
(iv) Further, the Advisor and the Sub-Advisor will share expenses
associated with marketing the Fund's shares equally to the
extent such marketing expenses shall exceed and 12b-1 plan
expenditures by the Fund. The Sub-Advisor shall have the
right to pre-approve any such marketing expenditures which
exceed 12b-1 plan expenditures by $5,000 in any given month.
This clause will be renegotiated one year from the
anniversary date of the Sub-Advisory Agreement.
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 Advisory Agreement, dated as of
.............., 1996, 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.
- - --------------------------------------------------------------------------------
Exhibit IV - Sub-Advisory Agreement
Page 3
<PAGE>
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.
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 statues and regulations and that the
Fund qualifies as a regulated investment company under Subchapter M of
the Internal Revenue Code. No provision of this Agreement shall be
deemed to protect the Sub-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
- - --------------------------------------------------------------------------------
Exhibit IV - Sub-Advisory Agreement
Page 4
<PAGE>
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 deemed to have
been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the assets and
property of the Trust as provided in its Master Trust Agreement.
(b) THE ADVISOR AND SUB-ADVISOR It is expressly agreed that the
oblations of the Advisor and Sub-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.
- - --------------------------------------------------------------------------------
Exhibit IV - Sub-Advisory Agreement
Page 5
<PAGE>
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 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:
---------------------------
MONEY GROWTH INSTITUTE, INC.
By:
---------------------------
[EXHIBIT NO. V TO COMBINED PROSPECTUS AND PROXY STATEMENT - DISTRIBUTION PLAN]
PLAN PURSUANT TO RULE 12b-1
for
MEGATRENDS 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. MegaTrends 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 in connection
with action taken pursuant to a registration statement on Form N-14 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.
- - --------------------------------------------------------------------------------
Exhibit V - Distribution Plan
Page 1
<PAGE>
(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.
- - --------------------------------------------------------------------------------
Exhibit V - Distribution Plan
Page 2
Lynch, Brewer, Hoffman & Sands, LLP
Attorneys at Law
101 Federal Street, 22nd Floor
Boston, Massachusetts 02110-1800
-------------------------
Telephone (617) 951-0800
Fax (617) 951-0811
July 9, 1996
Accolade Funds
7900 Callaghan Road
San Antonio, TX 78229
Ladies and Gentlemen:
As counsel to Accolade Funds, a Massachusetts business trust (the "Trust"),
we have been asked to render our opinion with respect to the issuance of an
indefinite number of shares of beneficial interest in the Trust (the "Shares")
representing interests in the MegaTrends Fund, the shares of such Fund being a
series of the Trust, as more fully described in the Prospectus and Statement of
Additional Information in the form contained in the Trust's Registration
Statement on Form N-1A, to which this opinion is an exhibit, to be filed with
the Securities and Exchange Commission.
We have examined the Master Trust Agreement of the Trust, dated April 15,
1993 as amended to the date hereof, the Prospectus and Statement of Additional
Information contained in such Registration Statement, and such other documents,
records and certificates as we have deemed necessary for the purposes of this
opinion. In rendering this opinion, we have, with your approval, relied, as to
all questions of act material to this opinion, upon certain certificates of
public officials and of your officers and assumed the genuineness of the
signatures on, and the authenticity of, all documents furnished to us, which
facts we have not independently verified.
Based upon the foregoing, we are of the opinion that the Shares, when
issued, delivered and paid for in accordance with the terms of the Prospectus
and Statement of Additional Information, will be legally issued, fully paid and
non-assessable by the Trust.
We hereby consent to your filing this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission.
Very truly yours,
/S/ Lynch, Brewer, Hoffman & Sands, LLP
LYNCH, BREWER, HOFFMAN & SANDS, LLP
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
1101 Pennsylvania Ave. N.W., Suite 800
Washington, D.C. 20004-2505
(202) 6393-7000
September ..... , 1996
PRIVILEGED AND CONFIDENTIAL
ATTORNEY WORK PRODUCT
Accolade Funds
7900 Callaghan Road
San Antonio, Texas 78229
Re: Certain Federal Income Tax Consequences of Transaction
Between Leeb Personal Finance Fund
and the MegaTrends Fund
Ladies and Gentlemen:
You requested our advice as to whether the acquisition by the MegaTrends
Fund of all of the property, assets and goodwill of the Leeb Personal Finance
Fund (the "Personal Finance Fund") in exchange solely for shares of beneficial
interest in the MegaTrends Fund, followed immediately by the Personal Finance
Fund's transfer of such shares to the shareholders of the Personal Finance Fund
in exchange for and in cancellation of the stock of the Personal Finance Fund,
will qualify as a "reorganization" within the meaning of section 368(a) of the
Internal Revenue Code of 1986, as presently in force (the "Code"). Our opinion
does not address any other question of federal tax law, nor does it address the
characterization of the transaction for state or local income tax purposes.
The opinions expressed below are based upon the Code, the Income Tax
Regulations issued thereunder, existing judicial authority, and current
administrative rulings, and practice, all of which are subject to change,
prospectively or retroactively, at any time. We assume no obligation to modify
or supplement this opinion if any applicable laws change after the date hereof
or if we become aware of any facts that might change the opinions expressed
herein after the date hereof.
In connection with the rendering of this opinion, we have reviewed, and our
conclusions herein are based upon, the Agreement and Plan of Reorganization,
dated as of May 16, 1996 (the "Agreement"), a copy of which is attached as
Exhibit A, and the combined Leeb Personal Finance Fund and MegaTrends Fund Proxy
Statement and Prospectus dated September ...... , 1996, a copy of which is
attached as exhibit B. We have also relied upon an Officer's Certificate, dated
September ..... , 1996, of Frank E. Holmes, the Chief Executive Officer and a
Director of United Services Advisors, Inc., a copy of which is attached as
exhibit C, and an Officer's Certificate, dated September ..... ,1996, of Dr.
Stephen Leeb, the Chief Investment Officer of Leeb Investment Advisors and the
President of Leeb Personal Finance Investment Trust, a copy of which is attached
as exhibit D. Any inaccuracy in, or breach of, any such representation or
assumption could adversely affect our opinion. Capitalized terms used herein and
not otherwise defined shall have the meanings given to them in the Agreement.
Based on and subject to the foregoing, we are of the following opinions:
(i) The acquisition by the MegaTrends Fund of all of the assets of
the Personal Finance Fund as provided for in the Agreement in
exchange for MegaTrends Fund shares will quality as a
reorganization within the meaning of Section 368(a) of the Code.
The Personal Finance Fund and MegaTrends Fund will each be a
party to the reorganization within the meaning of Section 368(b)
of the Code;
(ii) no gain or loss will be recognized by the Personal Finance Fund
upon the transfer of all of its assets to the MegaTrends Fund in
exchange solely for voting shares of the MegaTrends Fund;
(iii)no gain or loss will be recognized by the MegaTrends Fund upon
the receipt of all of the assets of the Personal Finance Fund in
exchange solely for voting shares of the MegaTrends Fund;
(iv) the basis of the assets of the Personal Finance Fund received by
the MegaTrends Fund will be the same as the basis of such assets
to the Personal Finance Fund immediately prior to the exchange;
(v) the holding period of the assets of the Personal Finance Fund
received by the MegaTrends Fund will include the period during
which such assets were held by the Personal Finance Fund;
(vi) no gain or loss will be recognized to the shareholders of the
Personal Finance Fund upon the exchange of their shares in the
Personal Finance Fund for voting shares of the MegaTrends Fund;
(vii)the basis of the MegaTrends Fund voting shares received by the
Personal Finance Fund shareholders will be the same as the basis
of the shares of the Personal Finance Fund surrendered in
exchange therefor; and
(viii) the holding period of the MegaTrends Fund voting shares
received by the Personal Finance Fund shareholders will include
the holding period of Personal Finance Fund shares surrendered in
exchange therefor, provided that Personal Finance Fund shares
were held as a capital asset on the date of the exchange.
This opinion is solely for your information and it is not to be quoted in
whole or in part, summarized or otherwise referred to, nor is it to be filed
with or supplied to or relied upon by any governmental agency or other person
without the written consent of this firm. We understand for purposes of this
transaction it will be necessary to file this opinion as an exhibit to SEC Form
N-14.
Very truly yours,
------------------------------------
ARTHUR
ANDERSEN
------------------------
Arthur Andersen LLP
------------------------
425 Walnut Street
Cincinnati OH 45202-3912
513-381-6900
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of Accolade
Funds/MegaTrends Fund Registration Statement on Form N-14.
/s/Arthur Andersen LLP
-----------------------------
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
October 8, 1996
POWER OF ATTORNEY
We the undersigned officers and Trustees of Accolade Funds (the "Trust"),
do hereby severally constitute and appoint Bobby D. Duncan, Frank E. Holmes,
Susan B. McGee, and Thomas D. Tays, and each of them acting singularly, as our
true and lawful attorneys, with full powers to them and each of them to sign for
us, in our names in the capacities indicated below, any Amendment to the
Registration Statement of the Trust on Form N-14 to be filed with the Securities
and Exchange Commission and to take such further action in respect thereto as
they, in their sole discretion, deem necessary to enable the Trust to comply
with the provisions of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, and all requirements and regulations
of the Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys to any and all documents
related to said amendment to the Registration Statement.
IN WITNESS WHEREOF, we have hereunto set our hands on the dates indicated
below.
SIGNATURE TITLE DATE
- - ---------------------- -------------------------- ------------------
/S/ FRANK E. HOLMES President, Principle October 8, 1996
- - ---------------------- Executive Officer
Frank E. Holmes Trustee
/S/ CLARK R. MANDIGO Trustee October 8, 1996
- - ----------------------
Clark R. Mandigo
/S/ RICHARD E. HUGHS Trustee October 8, 1996
- - ----------------------
Richard E. Hughs
/S/ BOBBY D. DUNCAN Vice President October 8, 1996
- - ---------------------- Chief Operating Officer and
Bobby D. Duncan Chief Financial Officer
/S/ KEVIN WHITE Principal Accounting Officer October 8, 1996
- - ----------------------
Kevin White
