REGISTRATION NO. 33-61542
REGISTRATION NO. 811-7662
...............................................................................
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No._____ [ ]
Post-Effective Amendment No. 5 [X]
(Check appropriate box or boxes)
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Pre-Effective Amendment No._____ [ ]
Post-Effective Amendment No. 5 [X]
(Check appropriate box or boxes)
ACCOLADE FUNDS
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(Exact Name of Registrant as Specified in Charter)
7900 Callaghan Road
San Antonio, Texas 78229
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(Address of Principal Executive Office)
(210) 308-1234
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(Registrant's Telephone Number, including Area Code)
Frank E. Holmes, President
Accolade Funds
7900 Callaghan Road
San Antonio, Texas 78229
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(Name and Address of Agent for Service)
...............................................................................
Approximate date of proposed public offering:______________, 1996
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[X] 75 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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 a time as soon as possible.
The Registrant hereby declares, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, that an indefinite number of shares of beneficial interest,
no par value, is being registered by this Registration Statement, with respect
to one sub-trust of Registrant -Leeb Value Fund. The Rule 24f-2 Notice for the
most recent fiscal year, September 30, 1995, was filed on or about November 28,
1995, in respect to another sub-trust of Registrant, the Bonnel Growth Fund.
ACCOLADE FUNDS
LEEB VALUE FUND
FORM N-1A
CROSS REFERENCE SHEET
PART A
FORM N-1A
ITEM NO. CAPTION OR LOCATION IN PROSPECTUS
- - -------- ---------------------------------
1 Cover Page
2 Summary of Fees and Expenses
3 Financial Highlights (also
covered under Item 23 in Part
B)
4 Cover Page; The Trust;
Investment Objectives and
Considerations; Special
Considerations
5 Management of the Fund
5A Management's Discussion of Fund
Performance
6 Cover Page; The Trust;
Dividends and Taxes
7 How to Purchase Shares; How
Shares Are Valued; Special
Considerations - Servicing Fee
8 How to Redeem Shares
9 Management of the Fund--the
Sub-Advisor
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PART A -- THE PROSPECTUS
Included herein is the Prospectus for the
Accolade Funds/Leeb Value Fund
Post-Effective Amendment No. 5
- - --------------------------------------------------------------------------------
ACCOLADE FUNDS
LEEB VALUE FUND
PROSPECTUS
September 20, 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 Leeb Value 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 September 20, 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..................................................4
INVESTMENT OBJECTIVES, INVESTMENT POLICIES, AND RISK
CONSIDERATIONS................................................................6
OTHER INVESTMENT PRACTICES....................................................9
HOW TO PURCHASE SHARES.......................................................10
HOW TO EXCHANGE SHARES.......................................................13
HOW TO REDEEM SHARES.........................................................14
HOW SHARES ARE VALUED........................................................19
DIVIDENDS AND TAXES..........................................................19
THE TRUST....................................................................22
MANAGEMENT OF THE FUND.......................................................21
DISTRIBUTION EXPENSE PLAN....................................................24
PERFORMANCE INFORMATION......................................................24
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
and Accounting Services Fees................................0.71%
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 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
LEEB VALUE 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 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(A)
----------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period............... $ 11.17 $ 10.29 $ 10.84 $ 10.36 $ 10.00
----------- ---------- ---------- --------- ---------
Income from investment operations:
Net investment income .......................... 0.17 0.28 0.19 0.15 0.16
Net realized and unrealized gains (losses)
on investments .............................. 1.72 0.95 (0.35) 0.55 0.51
----------- ---------- ---------- --------- ---------
Total from investment operations .................... 1.89 1.23 (0.16) 0.70 0.67
----------- ---------- ---------- --------- ---------
Dividends and distributions:
Dividends from net investment income(B) ........ (0.17) (0.28) (0.19) (0.15) (0.16)
Distributions from net realized gains(B) ....... (1.61) -- (0.20) (0.07) (0.15)
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%(D)
=========== ========== ========== ========= =========
Net assets at end of period (000's) ................. $ 27,945 $32,976 $45,523 $58,955 $28,340
=========== ========== ========== ========= =========
Ratio of expenses to average net assets(C) .......... 1.50% 1.50% 1.50% 1.50% 1.47%(D)
Ratio of net investment income to average
net assets....................................... 1.30% 2.36% 1.65% 1.60% 2.21%(D)
Portfolio turnover rate ............................. 115% 163% 143% 83% 75%(D)
<FN>
(A) 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.
(B) 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.
(C) 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%(D) for the periods ended June 30, 1996, 1995, 1994, 1993, and 1992, respectively.
(D) Annualized.
[/FN]
</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 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 a
repurchase agreement, the Fund purchases securities subject to the seller's
agreement to repurchase such securities at a specified time (normally one day)
and price. The repurchase price reflects an agreed-upon interest rate during the
time of investment. All repurchase agreements must be collateralized by 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
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 may
be 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 $50. The minimum initial investment for persons enrolled in the
ABC Investment Plan(R) is $1,000 and the minimum subsequent investment pursuant
to such a plan is $100 or more per month per account. There is no minimum
purchase for retirement plan accounts, including IRAs, administered by the
Advisor or its agents and affiliates.
YOU MAY INVEST IN THE FOLLOWING WAYS:
BY MAIL
Send your application and check or money order, made payable to the
Leeb Value 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 Leeb Value
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 $30 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 $1,000
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.
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 U.S. 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 U.S. 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 Funds through a bank in the U.S. 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.
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 Leeb Value 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.")
(4) EXCHANGES OUT OF EQUITY FUNDS IN THE UNITED SERVICES FAMILY OF FUNDS ARE
SUBJECT TO A TRADER'S FEE IF HELD LESS THAN THE PRESCRIBED TIME PERIOD. THE
APPLICABLE TRADER'S FEE IS DESCRIBED UNDER "TRADER'S FEE PAID TO THE FUND."
(5) The exchange privilege may be terminated at any time. The exchange fee and
other terms of the privilege are subject to change.
HOW TO REDEEM SHARES
You may redeem any or all of your shares at will. The Fund redeems
shares at the net asset value next determined after it has received and accepted
a redemption request in proper order. Redemption requests received in proper
order by the Trust's transfer agent or sub-agent prior to 4:00 p.m., Eastern
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.
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.
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, it 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.
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
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 Leeb Value 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 each portfolio
entitle their holder to one vote per share, irrespective of the relative net
asset values of each portfolio's shares. On matters affecting an individual
portfolio, a separate vote of shareholders of the portfolio is required. Each
portfolio's shares are fully paid and non-assessable by the Trust, have no
preemptive or subscription rights, and are fully transferable, with no
conversion rights.
MANAGEMENT OF THE FUND
TRUSTEES
The business affairs of the Fund are managed by the Trust's Board of
Trustees. The Trustees establish policies, as well as review and approve
contracts and their continuance. The Trustees also elect the officers and select
the Trustees to serve as executive and audit committee members.
THE SUB-ADVISOR
Effective October 25, 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, of 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 Leeb Value 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 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 the United
Services Funds, a family of mutual funds with over $1.4 billion in assets.
The Advisor provides to the Trust, and to the funds in the Trust,
management and investment advisory services. The Advisor furnishes an investment
program for the Fund, determines, subject to the overall supervision and review
of the Board of Trustees of the Trust, what investments should be purchased,
sold and held, and makes changes on behalf of the Trust in the investments of
the Fund.
The Advisor provides the Trust with office space, facilities and
business equipment and provides the services of executive and clerical personnel
for administering the affairs of the Trust.
Investment decisions for the Fund are made independently from those of
other investment companies advised by U.S. Global Investors, Inc.
The Advisory Agreement with the Trust provides for the Fund to pay the
Advisor a flat management fee of 1% 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; 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.
ACCOLADE FUNDS
SHARES OF THE FUND ARE SOLD
AT NET ASSET VALUE WITHOUT SALES COMMISSIONS OR
REDEMPTION FEES
Leeb Value 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
- - --------------------------------------------------------------------------------
PART B -- STATEMENT OF ADDITIONAL INFORMATION
Included herein is the Statement of
Additional Information for the
Accolade Funds/Leeb Value Fund
Post-Effective Amendment No. 5
- - --------------------------------------------------------------------------------
CROSS REFERENCE SHEET
PART B
FORM N-1A CAPTION OR LOCATION IN STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION
-------- ------------------------------------------
10 Cover Page
11 Table of Contents
12 General Information
13 Investment Objectives and Policies
14 Management of the Trust
15 Principal Holders of Securities
16 Investment Advisory Services
17 Portfolio Transactions
18 General Information
19 Not Covered in Statement of Additional
Information (Covered under Item 7 in Part A)
20 Tax Status
21 Distribution Plan (also covered under Item 5 in
Part A)
22 Calculation of Performance Data
23 Financial Statements (also covered under Item 3
in Part A)
- - --------------------------------------------------------------------------------
ACCOLADE FUNDS
Leeb Value Fund
(the "Fund")
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus but
should be read in conjunction with the Fund's prospectus dated September 20,
1996 (the "Prospectus"), which may be obtained from United Services U.S. Global
Investors Inc. (the "Advisor"), P.O. Box 29467, San Antonio, Texas 78229-0467.
The date of this Statement of Additional Information is September 20,
1996.
TABLE OF CONTENTS
-----------------
PAGE
GENERAL INFORMATION.........................................................3
INVESTMENT OBJECTIVES AND POLICIES..........................................4
INVESTMENT LIMITATIONS.....................................................10
MANAGEMENT OF THE FUND.....................................................12
PRINCIPAL HOLDERS OF SECURITIES............................................16
INVESTMENT ADVISORY SERVICES...............................................16
TRANSFER AGENCY AND OTHER SERVICES.........................................18
DISTRIBUTION PLAN..........................................................18
CERTAIN PURCHASES OF SHARES OF THE FUND....................................19
ADDITIONAL INFORMATION ON REDEMPTIONS......................................20
CALCULATION OF PERFORMANCE DATA............................................20
TAX STATUS.................................................................22
CUSTODIAN..................................................................23
INDEPENDENT ACCOUNTANTS ...................................................24
FINANCIAL STATEMENTS.......................................................24
GENERAL INFORMATION
Accolade Funds (the "Trust") is an open-end management investment
company and is a business trust organized under the laws of the Commonwealth of
Massachusetts. The Leeb Value Fund (the "Fund") is a series of the Trust and
represents a separate, diversified portfolio of securities (a "Portfolio").
The assets received by the Trust from the issue or sale of shares of
the Fund, and all income, earnings, profits and proceeds thereof, subject only
to the rights of creditors, are separately allocated to such Fund. They
constitute the underlying assets of each fund, are required to be segregated on
the books of accounts, and are to be charged with the expenses with respect to
such Fund. Any general expenses of the Trust, not readily identifiable as
belonging to a particular Fund, shall be allocated by or under the direction of
the Board of Trustees (the "Board" or "Trustees") in such manner as the Board
determines to be fair and equitable.
Each share of the Fund represents an equal proportionate interest in
the Fund with each other share and is entitled to such dividends and
distributions, out of the income belonging to that Fund, as are declared by the
Board. Upon liquidation of the Trust, shareholders of each fund are entitled to
share pro rata in the net assets belonging to the Fund available for
distribution.
As described under "The Trust" in the Prospectus, the Trust's Master
Trust Agreement provides that no annual or regular meeting of shareholders is
required. However, the Trust has a staggered Board with terms such that at least
25% of the Trustees expire every three years. The Trustees serve in that
capacity for six-year terms. Thus, there will ordinarily be no shareholder
meetings unless otherwise required by the Investment Company Act of 1940.
On any matter submitted to shareholders, the holder of each share is
entitled to one vote per share (with proportionate voting for fractional
shares). On matters affecting any individual fund, a separate vote of that fund
would be required. Shareholders of any fund are not entitled to vote on any
matter which does not affect their fund but which requires a separate vote of
another fund.
Shares do not have cumulative voting rights, which means that in
situations in which shareholders elect Trustees, holders of more than 50% of the
shares voting for the election of Trustees can elect 100% of the Trust's
Trustees, and the holders of less than 50% of the shares voting for the election
of Trustees will not be able to elect any person as a Trustee.
Shares have no preemptive or subscription rights and are fully
transferable. There are no conversion rights.
Under Massachusetts law, the shareholders of the Trust could, under
certain circumstances, be held personally liable for the obligations of the
Trust. However, the Master Trust Agreement disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Master Trust Agreement provides for
indemnification out of the Trust's property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations.
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the Fund's
investment objectives and policies discussed in the Fund's Prospectus.
EQUITY PRICE FLUCTUATION. The Fund invests primarily in equity
securities. Equity securities are subject to price fluctuations depending on a
variety of factors, including market, business, and economic conditions.
FOREIGN INVESTMENTS. Subject to the Fund's investment policies and
quality standards, the Fund may invest in the securities of foreign issuers.
Investing in securities issued by companies whose principal business activities
are outside the United States may involve significant risks not present in
domestic investments. For example, there is generally less publicly available
information about foreign companies, particularly those not subject to the
disclosure and reporting requirements of the United States securities laws.
Foreign issuers are generally not bound by uniform accounting, auditing and
financial reporting standards and requirements of practice comparable to those
applicable to domestic issuers. Investments in foreign securities also involve
the risk of possible adverse changes in investment or exchange control
regulations, expropriation or confiscatory taxation, limitation of the removal
of funds or the assets of the Fund, political or financial instability or
diplomatic and other developments which could affect such investment. Further,
economies of particular countries or areas of the world may differ favorably or
unfavorably from the economy of the United States. It is anticipated that in
most cases the best available market for foreign securities will be on exchanges
or in over-the-counter markets located outside of the United States. Foreign
stock markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign issuer
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable United States Companies. In addition,
foreign brokerage commissions are generally higher than commissions on
securities traded in the United States and may be non-negotiable. In general,
there is less overall governmental supervision and regulation of foreign
securities markets, broker/dealer, and issuers than in the United States.
WARRANTS AND RIGHTS. Warrants are options to purchase equity
securities at a specified price and are valid for a specific time period. Rights
are similar to warrants, but normally have a short duration and are distributed
by the issuer to its shareholders. The Fund may realize a loss equal to all or a
portion of the price paid for the warrants or rights if the price of the
underlying security decreases or does not increase by more than the amount paid
for the warrants or rights. The Fund may purchase warrants and rights, provided
that the Fund does not invest more than 5% of its net assets at the time of
purchase in warrants and rights other than those that have been acquired in
units or attached to other securities. Of such 5%, no more than 2% of the Fund's
assets at the time of purchase may be invested in warrants which are not listed
on either the New York Stock Exchange or the American Stock Exchange.
QUALITY RATINGS OF CORPORATE BONDS. The ratings of Moody's Investors
Service, Inc. and Standard & Poor's Ratings Group for corporate bonds in which
the Fund may invest are as follows:
MOODY'S INVESTORS SERVICE, INC.
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
STANDARD & POOR'S RATINGS GROUP
AAA - Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for bonds in this category than for bonds in higher rated categories.
BB and B - Bonds rated BB and B are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and B the higher degree of speculation. While such
bonds will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
RISK FACTORS OF LOWER-RATED SECURITIES:
Lower-rated debt securities (commonly called "junk bonds") may be
subject to certain risk factors to which other securities are not subject to the
same degree. An economic downturn tends to disrupt the market for lower-rated
bonds and adversely affect their values. Such an economic downturn may be
expected to result in increased price volatility of lower-rated bonds and of the
value of the Fund's shares, and an increase in issuers' defaults on such bonds.
Also, many issuers of lower-rated bonds are substantially leveraged,
which may impair their ability to meet their obligations. In some cases, the
securities in which the Fund invests are subordinated to the prior payment of
senior indebtedness, thus potentially limiting the Fund's ability to recover
full principal or to receive payments when senior securities are in default.
The credit rating of a security does not necessarily address its
market value risk. Also, ratings may, from time to time, be changed to reflect
developments in the issuer's financial condition. Lower- rated securities held
by the Fund have speculative characteristics which are apt to increase in number
and significance with each lower rating category.
When the secondary market for lower-rated bonds becomes increasingly
illiquid, or in the absence of readily available market quotations for
lower-rated bonds, the relative lack of reliable, objective data makes the
responsibility of the Trustees to value such securities more difficult, and
judgment plays a greater role in the valuation of portfolio securities. Also,
increased illiquidity of the market for lower-rated bonds may affect the Fund's
ability to dispose of portfolio securities at a desirable price.
In addition, if the Fund experiences unexpected net redemptions, it
could be forced to sell all or a portion of its lower-rated bonds without regard
to their investment merits, thereby decreasing the asset base upon which the
Fund's expenses can be spread and possibly reducing the Fund's rate of return.
Also, prices of lower-rated bonds have been found to be less sensitive to
interest rate changes and more sensitive to adverse economic changes and
individual corporate developments than more highly rated investments. Certain
laws or regulations may have a material effect on the Fund's investments in
lower-rated bonds.
COMMERCIAL PAPER AND OTHER MONEY MARKET INSTRUMENTS. Commercial paper
consists of short-term (usually from one to two hundred-seventy days) unsecured
promissory notes issued by corporations in order to finance their current
operations. The Fund will only invest in commercial paper rated A-1 by Standard
& Poor's Ratings Group or Prime-1 by Moody's Investors Service, Inc. or unrated
paper of issuers who have outstanding unsecured debt rated AA or better by
Standard & Poor's or Aa or better by Moody's. Certain notes may have floating or
variable rates. Variable and floating rate notes with a demand notice period
exceeding seven days will be subject to the Fund's restriction on illiquid
investments (see "Investment Limitations") unless, in the judgment of the
Advisor, such note is liquid.
The rating of Prime-1 is the highest commercial paper rating assigned
by Moody's Investors Service, Inc. Among the factors considered by Moody's in
assigning ratings are the following: valuation of the management of the issuer;
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; evaluation of the
issuer's products in relation to competition and customer acceptance; liquidity;
amount and quality of long-term debt; trend of earnings over a period of 10
years; financial strength of the parent company and the relationships which
exist with the issuer; and, recognition by the management of obligations which
may be present or may arise as a result of public interest questions and
preparations to meet such obligations. These factors are all considered in
determining whether the commercial paper is rated Prime-1. Commercial paper
rated A (highest quality) by Standard & Poor's Ratings Group has the following
characteristics: liquidity ratios are adequate to meet cash requirements;
long-term senior debt is rated "A" or better, although in some cases "BBB"
credits may be allowed; the issuer has access to at least two additional
channels of borrowing; basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances; typically, the issuer's industry is
well established and the issuer has a strong position within the industry; and,
the reliability and quality of management are unquestioned. The relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated A-1.
The Fund may invest in short-term bank debt instruments such as
certificates of deposit, bankers' acceptances and time deposits issued by
national banks and state banks, trust companies and mutual savings banks, or by
banks or institutions the accounts of which are insured by the Federal Deposit
Insurance Corporation or the Federal Savings and Loan Insurance Corporation. The
Fund will only invest in bankers' acceptances of banks having a short-term
rating of A-1 by Standard & Poor's Ratings Group or Prime-1 by Moody's Investors
Service, Inc. The Fund will not invest in time deposits maturing in more than
seven days if, as a result thereof, more than 10% of the value of its net assets
would be invested in such securities and other illiquid securities.
As described more fully in the Prospectus, the Fund may invest a
portion of its assets in repurchase agreements with domestic broker/dealers,
banks and other financial institutions.
WHEN-ISSUED SECURITIES. The Fund will only make commitments to
purchase securities on a when-issued basis with the intention of actually
acquiring the securities. In addition, the Fund may purchase securities on a
when-issued basis only if delivery and payment for the securities takes place
within 120 days after the date of the transaction. In connection with these
investments, the Fund will direct the custodian to place cash, U.S. Government
obligations or high-grade debt instruments in a segregated account in an amount
sufficient to make payment for the securities to be purchased. When a segregated
account is maintained because the Fund purchases securities on a when-issued
basis, the assets deposited in the segregated account will be valued daily at
market for the purpose of determining the adequacy of the securities in the
account. If the market value of such securities declines, additional cash or
securities will be placed in the account on a daily basis so that the market
value of the account will equal the amount of the Fund's commitments to purchase
securities on a when-issued basis. To the extent funds are in a segregated
account, they will not be available for new investment or to meet redemptions.
Securities purchased on a when-issued basis and the securities held in the
Fund's portfolio are subject to changes in market value based upon changes in
the level of interest rates (which will generally result in all of those
securities changing in value in the same way, i.e., all those securities
experiencing appreciation when interest rates decline and depreciation when
interest rates rise). Therefore, if in order to achieve higher returns, the Fund
remains substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a possibility that the market
value of the Fund's assets will experience greater fluctuation. The purchase of
securities on a when-issued basis may involve a risk of loss if the
broker-dealer selling the securities fails to deliver after the value of the
securities has risen.
When the time comes for the Fund to make payment for securities
purchased on a when-issued basis, the Fund will do so by using then available
cash flow, by sale of the securities held in the segregated account, by sale of
other securities or, although it would not normally expect to do so, by
directing the sale of the securities purchased on a when-issued basis themselves
(which may have a market value greater or less than the Fund's payment
obligation). Although the Fund will only make commitments to purchase securities
on a when-issued basis with the intention of actually acquiring the securities,
the Fund may sell these securities before the settlement date if it is deemed
advisable by the Advisor or Sub-Advisor as a matter of investment strategy.
LOANS OF PORTFOLIO SECURITIES. The Fund may make short-term loans of
its portfolio securities to banks, brokers and dealers. Lending portfolio
securities exposes the Fund to the risk that the borrower may fail to return the
loaned securities or may not be able to provide additional collateral or that
the Fund may experience delays in recovery of the loaned securities or loss of
rights in the collateral if the borrower fails financially. To minimize these
risks, the borrower must agree to maintain collateral marked to market daily, in
the form of cash or U.S. Government obligations, with the Fund's custodian in an
amount at least equal to the market value of the loaned securities. It is the
Fund's policy, which may not be changed without the affirmative vote of a
majority of its outstanding shares, that such loans will not be made if as a
result the aggregate of all outstanding loans exceeds 25% of the value of the
Fund's total assets.
Under applicable regulatory requirements (which are subject to
change), the loan collateral must, on each business day, at least equal the
value of the loaned securities. To be acceptable as collateral, letters of
credit must obligate a bank to pay amounts demanded by the Fund if the demand
meets the terms of the letter. Such terms and the issuing bank must be
satisfactory to the Fund. The Fund receives amounts equal to the dividends or
interest on loaned securities and also receives one or more of (a) negotiated
loan fees, (b) interest on securities used as collateral, or (c) interest on
short-term debt securities purchased with such collateral; either type of
interest may be shared with the borrower. The Fund may also pay fees to placing
brokers as well as custodian and administrative fees in connection with loans.
Fees may only be paid to a placing broker provided that the Trustees determine
that the fee paid to the placing broker is reasonable and based solely upon
services rendered, that the Trustees separately consider the propriety of any
fee shared by the placing broker with the borrower, and that the fees are not
used to compensate the Advisor or any affiliated person of the Fund or an
affiliated person of the Advisor or other affiliated person. The terms of the
Fund's loans must meet applicable tests under the Internal Revenue Code and
permit the Fund to reacquire loaned securities on five days' notice or in time
to vote on any important matter.
PORTFOLIO TURNOVER. The Fund's management buys and sells securities
for the Fund to accomplish investment objectives. The Fund's investment policy
may lead to frequent changes in investments, particularly in periods of rapidly
fluctuating interest rates. The Fund's investments may also be traded to take
advantage of perceived short-term disparities in market values.
A change in the securities held by the Fund is known as "portfolio
turnover." For the fiscal years ended June 30, 1996 and 1995, the Fund's
portfolio turnover rate was 115% and 163%, respectively. A high portfolio
turnover rate may cause the Fund to pay higher transaction expenses, including
more commissions and markups, and also result in quicker recognition of capital
gains, resulting in more capital gain distributions which may be taxable to
shareholders. Any short-term gain realized on securities will be taxed to
shareholders as ordinary income. See "Tax Status."
PORTFOLIO TRANSACTIONS. Decisions to buy and sell securities for the
Fund and the placing of the Fund's securities transactions and negotiation of
commission rates, where applicable, are made by Money Growth Institute, Inc.
(the "Sub-Advisor") and are subject to review by the Fund's Advisor and Board of
Trustees of the Fund. In the purchase and sale of portfolio securities, the
Sub-Advisor seeks best execution for the 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 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 Fund paid brokerage commissions of
$120,408, $95,561, and $135,045 , respectively.
Generally, the 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 Fund may be purchased
directly from the issuer.
The Advisor and Sub-Advisor are specifically authorized to select
brokers who also provide brokerage and research services to the Fund and/or
other accounts over which the Advisor or Sub-Advisor exercises investment
discretion and to pay such brokers a commission in excess of the commission
another broker would charge if the Advisor or Sub-Advisor 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 particular transaction or the Advisor's or Sub-Advisor's overall
responsibilities with respect to the Fund and to accounts over which they
exercise 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 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 Fund and the
Advisor or Sub-Advisor, 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 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 Fund.
INVESTMENT LIMITATIONS
The Leeb Value Fund will not change any of the following investment
restrictions without the affirmative vote of a majority of the outstanding
voting securities of the Fund, which, as used herein, means the lesser of (1)
67% of the Fund's outstanding shares present at a meeting at which more than 50%
of the outstanding shares of the Fund are represented either in person or by
proxy, or (2) more than 50% of the Fund's outstanding shares.
THE FUND MAY NOT:
1. Invest in securities of any one issuer if immediately after and as a
result of such investment more than 5% of the total assets of the
Fund, at market value, would be invested in the securities of such
issuer. This restriction does not apply to investments in securities
of the United States Government, its agencies or instrumentalities.
2. Purchase more than 10% of the outstanding voting securities, or any
class of securities, of any one issuer. This restriction does not
apply to investments in securities of the United States Government,
its agencies or instrumentalities.
3. Invest more than 25% of its total assets in the securities of issuers
in any particular industry. This restriction does not apply to
investments in securities of the United States Government, its
agencies or instrumentalities.
4. Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or
reorganization.
5. Purchase or sell commodities or real estate. However, the Fund may
invest in publicly traded securities secured by real estate or issued
by companies which invest in real estate or real estate interests.
6. Purchase securities on margin, make short sales of securities or
maintain a short position, except that the Fund may obtain such
short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities. This restriction on short sales
does not apply to short sales "against the box" (i.e., when the Fund
owns or is long on the securities sold short).
7. Lend money, except by engaging in repurchase agreements or by
purchasing publicly distributed or privately placed debt obligations
in which the Fund may invest consistent with its investment objectives
and policies. The Fund may make loans of its portfolio securities in
an aggregate amount not exceeding 25% of its total assets, provided
that such loans are collateralized by cash or cash equivalents or U.S.
Government obligations in an amount equal to the market value of the
securities loaned, marked to market on a daily basis.
8. Borrow money, except for i) temporary bank borrowings not in excess of
5% of the value of the Fund's total assets for emergency or
extraordinary purposes, or ii) short-term credits not in excess of 5%
of the value of the Fund's total assets as may be necessary for the
clearance of securities transactions.
9. Issue senior securities as defined in the Investment Company Act of
1940, as amended, or mortgage, pledge, hypothecate or in any way
transfer as security for indebtedness any securities owned or held by
the Fund except as may be necessary in connection with borrowings
described in (8) above, and then not exceeding 10% of the Fund's total
assets, taken at the lesser of cost or market value.
10. Underwrite securities of other issuers except to the extent the Fund
may be deemed an underwriter under the Securities Act of 1933, as
amended, in selling portfolio securities.
11. Invest more than 10% of its net assets in securities which are
illiquid.
12. Invest in oil, gas or other mineral leases.
13. Invest more than 5% of its net assets in warrants and will not invest
more than 2% of its net assets in warrants which are not listed on the
New York or American Stock Exchange. This restriction does not apply
to investment in warrants acquired in units or attached to securities.
The following investment restrictions may be changed by the Board of
Trustees without a shareholder vote.
THE FUND MAY NOT:
1) Pledge, mortgage or hypothecate the assets of the Fund.
2) Engage in short sales of securities except for "against the box" as
described in investment limitation 6.
3) Loan its portfolio securities.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage, resulting from a change in values of
portfolio securities or amount of net assets, will not be considered a violation
of any of the foregoing restrictions.
MANAGEMENT OF THE FUND
The Trustees and Officers of the Trust and their principal occupations
during the past five years are set forth below. Except as otherwise indicated,
the business address of each is 7900 Callaghan Road, San Antonio, Texas 78229.
TRUST
NAME AND ADDRESS POSITION PRINCIPAL OCCUPATION
RICHARD E. HUGHS Trustee Professor at the School of Business of the
11 Dennin Drive State University of New York at Albany
Menands, NY 12204 from 1990 to present; Dean, School of
Business 1990-1994; Director of the
Institute for the Advancement of Health
Care Management, 1994 - present. Corporate
Vice President, Sierra Pacific Resources,
Reno, NV, 1985-1990. Dean and Professor,
College of Business Administration,
University of Nevada, Reno, 1977-1985.
Associate Dean, Stern School of Business,
New York University, New York City,
1970-1977.
CLARK R. MANDIGO Trustee Business consultant since 1991. From 1985
1250 N.E. Loop 410 to 1991, President, Chief Executive
Suite 900 Officer, and Director of Intelogic Trace,
San Antonio, Texas Inc., a nationwide company which sells,
78209 leases and maintains computers and
telecommunications systems and equipment.
Prior to 1985, President of BHP Petroleum
(Americas), Ltd., an oil and gas
exploration and development company.
Director of Palmer Wireless, Inc., Lone
Star Steakhouse & Saloon, Inc. and
Physician Corporation of America. Formerly
a Director of Datapoint Corporation.
Trustee for Pauze/Swanson United Services
Funds from November 1993 to February 1996.
FRANK E. HOLMES* Trustee, Chairman of the Board of Directors, and
President Chief Executive Officer of the Advisor
and Chief since October 27, 1989. President from
Executive October 1989 to September 1995. Director
Officer of Security Trust & Financial Company
("ST&FC"), a wholly-owned subsidiary of
Advisor, since November 1991. President,
Chief Executive Officer and Trustee of
Accolade Funds, a Massachusetts business
trust consisting of no-load mutual funds,
since April 1993. Director of U.S.
Advisors (Guernsey) Limited, a
wholly-owned subsidiary of the Advisor,
and of the Guernsey Funds managed by that
Company since August 1993. Director of
Marleau, Lemire Inc. from January 1995 to
December 1995. Director of Franc-Or
Resources Corp since November 1994.
Director of United Services Canada, Inc.
(formerly United Services Advisors Wealth
Management Corp.) since February 1995 and
Chief Executive Officer from February to
August 1995. Trustee of Pauze'/Swanson
United Services Funds from November 1993
to February 1996. Independent business
consultant and financial adviser from July
1978 to October 1989. From July 1978 to
October 1989, held various positions with
Merit Investment Corporation, a Canadian
investment dealer, including the latest
position as Executive Vice
President-Corporate Finance. Formerly a
member of the Toronto Stock Exchange
Listing Committee, Registered Portfolio
Manager with the Toronto Stock Exchange,
and former President and Chairman of the
Toronto Society of Investment Dealers
Association. Formerly a Director of Merit
Investment Corporation.
* This Trustee may be deemed an
"interested person" of the Trust as
defined in the Investment Company Act of
1940.
BOBBY D. DUNCAN Executive President of the Advisor since September
Vice 1995 and Chief Financial Officer since
President, August 1996. Executive Vice President and
Chief Chief Financial Officer of the Advisor
Operating from October 27, 1989 to September 1995.
Officer, Chief Operating Officer since November 1,
Chief 1993. President, Chief Executive Officer,
Financial Chief Operating Officer, Chief Financial
Officer Officer and Treasurer of the Advisor from
January 1, 1989 to October 27, 1989. Prior
to January 1990 held various positions
with the Trust, including Executive Vice
President, Treasurer, Chief Operating
Officer and Chief Financial Officer.
Served as sole Director and Chief
Executive Officer of USSI from September
1988 to November 1989. Director of A&B
Mailers, Inc. since February 1988 and
Chairman since July 1991. Chief Executive
Officer, President, Chief Operating
Officer, Chief Financial Officer, and a
Director of USSI. Director of the Advisor
since 1986. President of ST&FC since
January 1996. Director, Executive Vice
President, and Chief Financial Officer of
ST&FC from November 1991 to March 1994.
Executive Vice President, Chief Financial
Officer of Accolade Funds since April
1993. Vice President, Chief Financial
Officer, and Trustee of Pauze'/Swanson
United Services Funds from November 1,
1993 to February 1996. President, Chief
Executive Officer and Trustee of United
Services Insurance Fund since July 22,
1994. Director and Chief Financial Officer
of United Services Canada Inc. (formerly
United Services Advisors Wealth Management
Corp.) since February 1995.
Victor Flores Executive Executive Vice President, Chief Investment
Vice Officer of the Funds since February 1994.
President, Portfolio Manager U.S. Gold Shares Fund
Chief since February 1995. Chief November 1992
Investment and U.S. World Gold Fund since Investment
Officer January 1990. Portfolio Manager, U.S.
Global Resources Fund, from January 1990
to November 1992. Vice President, Chief
Investment Officer and Director of U.S.
Global Investors, Inc. (formerly United
Services Advisors, Inc.) since February
1994. Formerly Vice President, Portfolio
Manager of U.S. Global Investors,
Inc.(July 1993- February 1994). Served as
Resource Analyst for United Services Funds
and U.S. Global Investors, Inc. from
January 1988 to December 1989.
SUSAN B. MCGEE Vice Vice President and Secretary of the Trust
President, from September 1995. Vice President and
Secretary Secretary of the Advisor since September
1995. Vice President and Secretary of USSI
since September 1995. Vice President and
Assistant Secretary of Accolade Funds
since September 1995. Vice
President-Operations, Secretary and
Associate Counsel of ST&FC since September
1992 to present; Vice President-Operations
of ST&FC from May 1993 to December 1994.
Associate Counsel from August 1994 to
present.
THOMAS D. TAYS Vice Vice President - Special Counsel,
President, Securities Specialist, Director of
Securities Compliance, Assistant Secretary of the
Specialist, Advisor from September 1995 to present;
Director of Associate Counsel, Assistant Secretary of
Compliance the Advisor from September 1993 to
September 1995. Vice President, Securities
Specialist, Director of Compliance and
Assistant Secretary of USF since September
1995. Vice President and Secretary of
Accolade Funds since September 1995, was
Assistant Secretary from September 1994 to
September 1995. Vice President, Secretary
of United Services Insurance Funds from
June 1994 to present. Private practice of
law from 1990 to August 1993.
TERESA G. WALTERS Chief Vice President, Mutual Fund Accounting of
Accounting the Advisor from February 1995 August
Officer 1996. Vice President, Chief Financial
Officer of USF from September 1995 to
August 1996 and Chief Accounting Officer
since September 1995. Served as Vice
President, Chief Accounting
Officer, Treasurer, and Controller of USF
from March 3, 1995 to September 1995. Vice
President, Mutual Fund Accounting of USSI
since March 13, 1995. Vice President and
Treasurer of Pauze'/Swanson United
Services Funds from March 8, 1995, and
Chief Financial Officer from September
1995 to February 1996., Chief Accounting
Officer from March 1995 to September 1995.
Vice President, Chief Financial Officer,
Chief Accounting Officer, Chief Treasurer
of Accolade Funds since September 1995.
Employee of the Advisor from October 1986
to present.
PRINCIPAL HOLDERS OF SECURITIES
As of August 31, 1996 the Officers and Trustees of the Trust, as a
group, owned approximately 1% of the outstanding shares of the Fund. Management
is unaware of any shareholders beneficially owning 5% or more of the outstanding
shares of the Fund.
INVESTMENT ADVISORY SERVICES
The investment adviser to Accolade Funds is U.S. Global Investors,
Inc. (the "Advisor"), a Texas corporation, pursuant to an advisory agreement
dated September 21, 1994 and amended October 25, 1996. Frank E. Holmes, Chief
Executive Officer and a Director of the Advisor, as well as a Trustee, President
and Chief Executive Officer of the Trust, beneficially owns more than 25% of the
outstanding voting stock of the Advisor and may be deemed to be a controlling
person of the Advisor.
In addition to the services described in the Fund's Prospectus, the
Advisor will provide the Trust with office space, facilities and simple business
equipment, and will provide the services of executive and clerical personnel for
administering the affairs of the Trust. It will compensate all personnel,
Officers, and Trustees of the Trust, if such persons are employees of the
Advisor or its affiliates, except that the Trust will reimburse the Advisor for
a portion of the compensation of the Advisor's employees who perform certain
legal services for the Trust, including state securities law regulatory
compliance work, based upon the time spent on such matters for the Trust.
The Trust pays all other expenses for its operations and activities.
Each of the funds of the Trust pays its allocable portion of these expenses. The
expenses borne by the Trust include the charges and expenses of any transfer
agents and dividend disbursing agents, custodian fees, legal and auditing
expenses, bookkeeping and accounting expenses, brokerage commissions for
portfolio transactions, taxes, if any, the advisory fee, extraordinary expenses,
expenses of issuing and redeeming shares, expenses of shareholder and trustee
meetings, and of preparing, printing and mailing proxy statements, reports and
other communications to shareholders, expenses of registering and qualifying
shares for sale, fees of Trustees who are not "interested persons" of the
Advisor, expenses of attendance by Officers and Trustees at professional
meetings of the Investment Company Institute, the No-Load Mutual Fund
Association or similar organizations, and membership or organization dues of
such organizations, expenses of preparing and setting in type Prospectuses and
periodic reports and expenses of mailing them to current shareholders, fidelity
bond premiums, cost of maintaining the books, and records of the Trust, and any
other charges and fees not specifically enumerated.
The Trust and the Advisor, in connection with the Fund, have entered
into a sub-advisory agreement with another firm as discussed in the Prospectus.
The Sub-Advisor's compensation is set forth in the Prospectus and is paid by the
Advisor. The Fund is not responsible for the Sub-Advisor's fee.
The Advisor may, out of profits derived from its management fee, pay
certain financial institutions (which may include banks, securities dealers, and
other industry professionals) a "servicing fee" for performing certain
administrative servicing functions for Fund shareholders to the extent these
institutions are allowed to do so by applicable statute, rule or regulation.
These fees will be paid periodically and will generally be based on a percentage
of the value of the institutions' client Fund shares. The Glass-Steagall Act
prohibits banks from engaging in the business of underwriting, selling or
distributing securities. However, in the Advisor's opinion, such laws should not
preclude a bank from performing shareholder administrative and servicing
functions as contemplated herein.
The securities laws of certain states in which shares of the Trust
may, from time to time, be qualified for sale require that the Advisor reimburse
the Trust for any excess of the Fund's expenses over prescribed percentages of
the Fund's average net assets to the extent of the Advisor's and Sub- Advisor's
compensation. Thus, the Advisor's compensation (and the Advisor's payments to
the Sub- Advisor) under the Advisory Agreement is subject to reduction in any
fiscal year to the extent that total expenses of the Fund for such year
(including the Advisor's compensation but exclusive of taxes, brokerage
commission, extraordinary expenses, and other permissible expenses) exceed the
most restrictive applicable expense limitation prescribed by any state in which
the Fund's shares are qualified for sale. The Advisor may obtain waivers of
these state expense limitations from time to time. Such limitation is currently
2.5% of the first $30 million of average net assets, 2% of the next $70 million
of average net assets and 1.5% of the remaining average net assets.
The Advisory Agreement was approved by the Board of Trustees of the
Trust (including a majority of the "disinterested Trustees") with respect to the
Fund and was approved by shareholders of the Fund on October 25, 1996. The
Advisory Agreement provides that it will continue initially for two years, and
from year to year thereafter, with respect to each fund, as long as it is
approved at least annually both (i) by a vote of a majority of the outstanding
voting securities of such fund (as defined in the Investment Company Act of 1940
[the "Act"]) or by the Board of Trustees of the Trust, and (ii) by a vote of a
majority of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any party thereto cast in person at a meeting called for
the purpose of voting on such approval. The Advisory Agreement may be terminated
on 60 days' written notice by either party and will terminate automatically if
it is assigned.
The Advisor and the Sub-Advisor provide investment advise to a variety
of clients, including other mutual funds. Investment decisions for each client
are made with a view to achieving their respective investment objectives.
Investment decisions are the product of many factors in addition to
basic suitability for the particular client involved. Thus, a particular
security may be bought or sold for certain clients even though it could have
been bought or sold for other clients at the same time. Likewise, a particular
security may be bought for one or more clients when one or more other clients
are selling the security. In some instances, one client may sell a particular
security to another client. It also sometimes happens that two or more clients
simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as possible, averaged as to price and
allocated between such clients in a manner which in the Advisor's or
Sub-Advisor's opinion is equitable to each and in accordance with the amount
being purchased or sold by each. There may be circumstances when purchases or
sales of portfolio securities for one or more clients will have an adverse
effect on other clients. The Advisor employs a professional staff of portfolio
managers who draw upon a variety of resources for research information for the
clients.
In addition to advising client accounts, the Advisor invests in
securities for its own account. The Advisor has adopted policies and procedures
intended to minimize or avoid potential conflicts with its clients when trading
for its own account. The Advisor's investment objective and strategies are not
the same as its clients, emphasizing venture capital investing, private
placement arbitrage, and speculative short-term trading. The Advisor utilizes a
diversified approach to venture capital investing. Investments typically involve
early-stage businesses seeking initial financing as well as more mature
businesses in need of capital for expansion, acquisitions, management buyouts,
or recapitalizations. In general, the Advisor invests in start-up companies in
the natural resources or technology fields.
TRANSFER AGENCY AND OTHER SERVICES
In addition to the services performed for the Fund and the Trust under
the Advisory Agreement, the Advisor, through its subsidiary United Shareholder
Services, Inc ("USSI"), provides transfer agent and dividend disbursement agent
services pursuant to the Transfer Agency Agreement as described in the Fund's
Prospectus under "Management of the Fund -- The Investment Advisor." In
addition, lockbox and statement printing services are provided by USSI. The
Board of Trustees recently approved the Transfer Agency and related agreements
through March 8, 1997.
USSI also maintains the books and records of the Trust and of each
fund of the Trust and _calculates their daily net asset value as described in
the Fund's Prospectus under "Management of the Funds -- The Investment Advisor."
A & B Mailers, Inc., a corporation wholly owned by the Advisor,
provides the Trust with certain mail handling services. The charges for such
services have been negotiated by the Audit Committee and A & B Mailers, Inc.
Each service is priced separately.
DISTRIBUTION PLAN
As described under "Service Fee" in the Prospectus, on May 22, 1996,
the Fund adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act (the
"Distribution Plan"). The Distribution Plan allows the Fund to pay for or
reimburse expenditures in connection with sales and promotional services related
to the distribution of Fund shares, including personal services provided to
prospective and existing Fund shareholders, which includes the costs of printing
and distribution of prospectuses and promotional materials, making slides and
charts for presentations, assisting shareholders and prospective investors in
understanding and dealing with the Fund, and travel and out-of-pocket expenses
(e.g., copy and long distance telephone charges) related thereto.
The total amount expended pursuant to the Distribution Plan may not
exceed 0.25% of the Fund's net assets on an annual basis. Distribution expenses
paid by the Advisor or other third parties in prior periods that exceeded 0.25%
of net assets may be paid by the Fund with distribution expenses accrued
pursuant to the 12b-1 plan in the current or future periods, so long as the
0.25% limitation is never exceeded.
Expenses which the Fund incurs pursuant to the Distribution Plan are
reviewed quarterly by the Board of Trustees. On an annual basis the Distribution
Plan is reviewed by the Board of Trustees as a whole, and by the Trustees who
are not "interested persons" as that term is defined in the 1940 Act and who
have no direct or indirect financial interest in the operation of the
Distribution Plan ("Qualified Trustees"). In their review of the Distribution
Plan the Board of Trustees, as a whole, and the Qualified Trustees determine
whether, in their reasonable business judgment and in light of their fiduciary
duties under state law and under Section 36(a) and (b) of the 1940 Act, there is
a reasonable likelihood that the Distribution Plan will benefit the Fund and its
shareholders. The Distribution Plan may be terminated at any time by vote of a
majority of the Qualified Trustees, or by vote of a majority of the outstanding
voting securities of the Fund.
The Fund is unaware of any Trustee or any interested person of the
Fund who had a direct or indirect financial interest in the operations of the
Distribution Plan.
The Fund expects that the Distribution Plan will be used primarily to
pay a "service fee" to persons who provide personal services to prospective and
existing Fund shareholders. Shareholders of the Fund will benefit from these
personal services and the Fund expects to benefit from economies of scale as
more shareholders are attracted to the Fund.
CERTAIN PURCHASES OF SHARES OF THE FUND
Shares of the Fund are continuously offered by the Trust at their net
asset value next determined after an order is accepted. The methods available
for purchasing shares of the Fund are described in the Prospectus. In addition,
shares of the Fund may be purchased using stock, as long as the securities
delivered to the Trust meet the investment objectives and concentration policies
of the Fund, and are otherwise acceptable to the Advisor, which reserves the
right to reject all or any part of the securities offered in exchange for shares
of the Fund. On any such "in kind" purchase, the following conditions will
apply:
(1) the securities offered by the investor in exchange for shares of the
Fund must not be in any way restricted as to resale or otherwise be
illiquid;
(2) securities of the same issuer must already exist in the Fund's
portfolio;
(3) the securities must have a value which is readily ascertainable (and
not established only by evaluation procedures) as evidenced by a
listing on the American Stock Exchange ("AMEX"), the New York Stock
Exchange ("NYSE"), or National Association of Securities Dealers
Automated Quotation System ("NASDAQ");
(4) any securities so acquired by the fund shall not comprise over 5% of
that fund's net assets at the time of such exchange;
(5) no over-the-counter securities will be accepted unless the principal
over-the-counter market is in the United States; and,
(6) the securities are acquired for investment and not for resale.
The Trust believes that this ability to purchase shares of the Fund
using securities provides a means by which holders of certain securities may
obtain diversification and continuous professional management of their
investments without the expense of selling those securities in the public
market.
An investor who wishes to make an "in kind" purchase should furnish
(either in writing or by telephone) to the Trust a list with a full and exact
description of all of the securities which he or she proposes to deliver. The
Trust will advise him or her as to those securities which it is prepared to
accept and will provide the investor with the necessary forms to be completed
and signed by the investor. The investor should then send the securities, in
proper form for transfer, with the necessary forms to the Trust and certify that
there are no legal or contractual restrictions on the free transfer and sale of
the securities. The securities will be valued as of the close of business on the
day of receipt by the Trust in the same manner as portfolio securities of the
Fund are valued. See the section entitled "How Shares Are Valued" in the
Prospectus. The number of shares of the Fund, having a net asset value as of the
close of business on the day of receipt equal to the value of the securities
delivered by the investor, will be issued to the investor, less applicable stock
transfer taxes, if any.
The exchange of securities by the investor pursuant to this offer will
constitute a taxable transaction and may result in a gain or loss for Federal
income tax purposes. Each investor should consult his or her tax adviser to
determine the tax consequences under Federal and state law of making such an "in
kind" purchase.
ADDITIONAL INFORMATION ON REDEMPTIONS
SUSPENSION OF REDEMPTION PRIVILEGES. The Trust may suspend redemption
privileges or postpone the date of payment for up to seven days, but cannot do
so for more than seven days after the redemption order is received except during
any period (1) when the NYSE is closed, other than customary weekend and holiday
closings, or trading on the Exchange is restricted as determined by the
Securities and Exchange Commission ("SEC"); (2) when an emergency exists, as
defined by the SEC, which makes it not reasonably practicable for the Trust to
dispose of securities owned by it or to fairly determine the value of its
assets; or, (3) as the SEC may otherwise permit.
CALCULATION OF PERFORMANCE DATA
The performance quotations described below are based on historical
earnings and are not intended to indicate future performance.
TOTAL RETURN
The Fund may advertise performance in terms of average annual total
return for 1-, 5- and 10-year periods, or for such lesser periods as the Fund
has been in existence. Average annual total return is computed by finding the
average annual compounded rates of return over the periods that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1-, 5- or
10-year periods at the end of the year or period.
The calculation assumes all charges are deducted from the initial
$1,000 payment and assumes all dividends and distributions by the Fund are
reinvested at the price stated in the Prospectus on the reinvestment dates
during the period, and includes all recurring fees that are charged to all
shareholder accounts.
The average annual Total Return for the Fund for the periods ended
June 30, 1996 are as follows:
1 year...................................... 17.10%
Since Inception (October 21, 1991)........... 8.37%
NONSTANDARDIZED TOTAL RETURN
The Fund may provide the above described standard total return results
for a period which ends as of not earlier than the most recent calendar quarter
end and which begins either twelve months before or at the time of commencement
of the Fund's operations. In addition, the Fund may provide nonstandardized
total return results for differing periods, such as for the most recent six
months. Such nonstandardized total return is computed as otherwise described
under "Total Return" except that no annualization is made.
SECURITIES AND EXCHANGE COMMISSION THIRTY DAY YIELD
From time to time, the Fund may advertise its yield. A yield quotation
is based on a 30-day (or one month) period and is computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period, according to the following
formula:
Yield = 2[(a-b/cd + 1)6 - 1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends
d = the maximum offering price per share on the last day of the period.
Solely for the purpose of computing yield, dividend income is recognized by
accruing 1/360 of the stated dividend rate of the security each day that the
Fund owns the security. Generally, interest earned (for the purpose of "a"
above) on debt obligations is computed by reference to the yield to maturity of
each obligation held based on the market value of the obligation (including
actual accrued interest) at the close of business day prior to the start of the
30-day (or one month) period for which yield is being calculated, or, with
respect to obligations purchased during the month, the purchase price (plus
actual accrued interest). The yield of the Fund for June 1996 was 0.59%.
EFFECT OF FEE WAIVER AND EXPENSE REIMBURSEMENT
From inception through June 30, 1996, the Fund's expense have been
subsidized such that its expense ratio has not exceeded 1.50% on a fiscal year
bases. If the Fund's expenses had not been subsidized, the expense ratio subject
to the most restrictive state limitation would have been 2.50%. Because its
expenses were subsidized, the Fund's investment performance, including annual
compound rate of return, was improved.
TAX STATUS
TAXATION OF THE FUND -- IN GENERAL
As stated in its Prospectus, the Fund intends to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). Accordingly, the Fund will not be liable for
Federal income taxes on its taxable net investment income and capital gain net
income that are distributed to shareholders, provided that the Fund distributes
at least 90% of its net investment income and net short-term capital gain for
the taxable year.
To qualify as a regulated investment company, the Fund must, among
other things, (a) derive in each taxable year at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies, or
other income derived with respect to its business of investing in such stock,
securities or currencies (the "90% test"); (b) derive in each taxable year less
than 30% of its gross income from the sale or other disposition of stock or
securities held less than three months (the "30% test"); and, (c) satisfy
certain diversification requirements at the close of each quarter of the Fund's
taxable year.
The Code imposes a non-deductible 4% excise tax on a regulated
investment company that fails to distribute during each calendar year an amount
equal to the sum of (1) at least 98% of its ordinary income for the calendar
year, (2) at least 98% of its capital gain net income for the twelve-month
period ending on October 31 of the calendar year and (3) any portion (not
taxable to the Fund) of the respective balance from the preceding calendar year.
The Fund intends to make such distributions as are necessary to avoid imposition
of this excise tax.
TAXATION OF THE FUND'S INVESTMENTS
The Fund's ability to make certain investments may be limited by
provisions of the Code that require inclusion of certain unrealized gains or
losses in the Fund's income for purposes of the 90% test, the 30% test, and the
distribution requirements of the Code, and by provisions of the Code that
characterize certain income or loss as ordinary income or loss rather than
capital gain or loss. Such recognition, characterization and timing rules
generally apply to investments in certain forward currency contracts, foreign
currencies and debt securities denominated in foreign currencies.
TAXATION OF THE SHAREHOLDER
Taxable distributions generally are included in a shareholder's gross
income for the taxable year in which they are received. However, dividends
declared in October, November, or December and made payable to shareholders of
record in such a month, will be deemed to have been received on December 31, if
a Fund pays the dividends during the following January.
Distributions by the Fund will result in a reduction in the fair
market value of the Fund's shares. Should a distribution reduce the fair market
value below a shareholder's cost basis, such distribution nevertheless would be
taxable to the shareholder as ordinary income or long-term capital gain, even
though, from an investment standpoint, it may constitute a partial return of
capital. In particular, investors should be careful to consider the tax
implications of buying shares of the Fund just prior to a distribution. The
price of such shares purchased at that time includes the amount of any
forthcoming distribution. Those investors purchasing the Fund's shares
immediately prior to a distribution may receive a return of investment upon
distribution which will nevertheless be taxable to them.
A shareholder of the Fund should be aware that a redemption of shares
(including any exchange into other funds offered, affiliated or administered by
U.S. Global Investors, Inc.) is a taxable event and, accordingly, a capital gain
or loss may be recognized. If a shareholder of the Fund receives a distribution
taxable as long-term capital gain with respect to shares of the Fund and redeems
or exchanges shares before he has held them for more than six months, any loss
on the redemption or exchange (not otherwise disallowed as attributable to an
exempt-interest dividend) will be treated as long-term capital loss to the
extent of the long-term capital gain recognized.
CUSTODIAN
Bankers Trust Company acts as custodian for the Fund. Services with
respect to the retirement accounts will be provided by Security Trust and
Financial Company of San Antonio, Texas, a wholly-owned subsidiary of the
Advisor.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, One Riverwalk Place, San Antonio, Texas 78205 is
the independent accountant for the Trust.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended June 30, 1996, as
audited by Arthur Andersen LLP, are hereby incorporated by reference from the
Annual Report to Shareholders of that date which has been delivered with the
Statement of Additional Information [unless previously provided, in which event
the Trust will promptly provide another copy free of charge, upon request to:
U.S. Global Investors, Inc., P.O. Box 29467, San Antonio, Texas 78229-0467,
1-800-524-LEEB or (210) 308-1234].
- - --------------------------------------------------------------------------------
PART C -- OTHER INFORMATION
Included herein is Part C for
Accolade Funds
Leeb Value Fund
Post-Effective Amendment No. 5
- - --------------------------------------------------------------------------------
ACCOLADE FUNDS
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
(1) The audited financial highlights for the period from June
30, 1991 through June 30, 1996 has been audited by Arthur
Andersen LLP.
(2) The audited financial statements for the period from June
30,1996 are found in part B.
(b) EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
(1) Amended and Restated Master Trust Agreement incorporated by
reference to Post-Effective Amendment No. 5 dated May 30,
1996 to the Registration Statement.
(2) By-laws of Accolade Funds (incorporated by reference to
initial registration dated April 15, 1993).
(3) Not Applicable
(4) Specimen certificate for Accolade Funds (incorporated by
reference to Post-Effective Amendment No. 1 to the
Registration Statement, dated March 20, 1995).
(5)
(a) Advisory Agreement between Accolade Funds and United
Services Advisors, Inc., dated September 21, 1994
(incorporated by reference to Pre-Effective Amendment
No. 3 to the Registration Statement, dated October 17,
1994).
(b) Sub-Advisory Agreement between Accolade Funds, United
Services Advisors , Inc. and Bonnel, Inc., dated
September 21, 1994 (incorporated by reference to Pre-
Effective Amendment No. 3 to the Registration
Statement, dated October 17, 1994).
(c) Amendment to Advisory Agreement between Accolade Funds
and United Services Advisors 1996 incorporated by
reference to Post-Effective Amendment No. 5 dated May
30, 1996 to the Registration Statement.
(d) Sub-Advisory Agreement among Accolade Funds, United
Services Advisors, Inc. and Money Growth Institute,
Inc. incorporated by reference to Post-Effective
Amendment No. 5 dated May 30, 1996 to the Registration
Statement.
(6) Not Applicable
(7) Not Applicable
(8)
(a) Custodian Agreement between Accolade Funds and Bankers
Trust Company of New York (incorporated by reference to
Pre-Effective Amendment No. 3 to the Registration
Statement, dated October 17, 1994).
(b)* Letter agreement with Custodian, Bankers Trust Company
of New York, adding Leeb Value Fund and original
Agreement dated Octobewr 17, 1994
(9)
(a) Transfer Agency Agreement between United Shareholder
Services, Inc. and Accolade Funds, dated September 21,
1994 (incorporated by reference to Pre-Effective
Amendment No. 3 to the Registration Statement, dated
October 17, 1994).
(b) Bookkeeping and Accounting Agreement between United
Shareholder Services, Inc. and Accolade Funds, dated
September 21, 1994 (incorporated by reference to Pre-
Effective Amendment No. 3 to the Registration
Statement, dated October 17, 1994).
(c) Lockbox Service Agreement between United Shareholder
Services, Inc. and Accolade Funds, dated September 21,
1994 (incorporated by reference to Pre-Effective
Amendment No. 3 to the Registration Statement, dated
October 17, 1994).
(d) Printing Agreement between United Shareholder Services,
Inc. and Accolade Funds, dated September 21, 1994
(incorporated by reference to Pre-Effective Amendment
No. 3 to the Registration Statement, dated October 17,
1994).
(e) Letter agreement between United Shareholder Services,
Inc. and Accolade Funds adding Leeb Value Fund to the
Transfer Agent Agreement, dated May 22, 1996.
(10)
(a)* Opinion and consent of counsel to the Registrant
(11)
(a)* Consent of Independent Accountant, Arthur Andersen LLP
with respect to the Leeb Value Fund.
(b) Power of Attorney (incorporated by reference to
Pre-Effective Amendment No. 3 to the Registration
Statement, dated October 17, 1994).
(c) Power of Attorney incorporated by reference to
Post-Effective Amendment No. 2 to the Registration
Statement, dated January 15, 1996.
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15)
(a) Accolade Funds/Bonnel Growth Fund Plan Pursuant to Rule
12b-1, approved September 21, 1994 (incorporated by
reference to Pre-Effective Amendment No. 2 to the
Registration Statement, dated May 11, 1994).
(b) Accolade Funds/Leeb Value Fund Plan Pursuant to Rule
12b-1, approved May 22, 1996 and incorporated by
reference to Post-Effective Amendment No. 5 dated May
30, 1996 to the Registration Statement.
(16)
(a) Schedule for computation of each performance quotation
provided in response to Item 22 (incorporated by
reference to initial registration statement dated April
15, 1993).
* Filed Herewith
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Information pertaining to persons controlled by or under common
control with Registrant is incorporated by reference to the Prospectus contained
in Part A of this Registration Statement at the Section entitled "Management of
the Funds" and to the Statement of Additional Information contained in Part B of
this Registration Statement at the section entitled "Principal Holders of
Securities."
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The number of record holders, as of August 30, 1996 of each class of
securities of the Registrant:
Bonnel Growth Fund ....... 5,563
Leeb Value Fund .......... 0
ITEM 27. INDEMNIFICATION
Under Article VI of the Registrant's Master Trust Agreement, each of
its Trustees and officers or person serving in such capacity with another entity
at the request of the Registrant (a "Covered Person") shall be indemnified (from
the assets of the Sub-Trust or Sub-Trusts in question) against all liabilities,
including, but not limited to, amounts paid in satisfaction of judgments, in
compromises or as fines or penalties, and expenses, including reasonable legal
and accounting fees, incurred by the Covered Person in connection with the
defense or disposition of any action, suit or other proceeding, whether civil or
criminal before any court or administrative or legislative body, in which such
Covered Person may be or may have been involved as a party or otherwise or with
which such person may be or may have been threatened, while in office or
thereafter, by reason of being or having been such a Trustee or officer,
director or trustee, except with respect to any matter as to which it has been
determined that such Covered Person (i) did not act in good faith in the
reasonable belief that such Covered Person's action was in or not opposed to the
best interests of the Trust or (ii) had acted with wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office (either and both of the conduct
described in (i) and (ii) being referred to hereafter as "Disabling Conduct"). A
determination that the Covered Person is not entitled to indemnification may be
made by (i) a final decision on the merits by a court or other body before whom
the proceeding was brought that the person to be indemnified was not liable by
reason of Disabling Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for insufficiency of evidence
of Disabling Conduct, or (iii) a reasonable determination, based upon a review
of the facts, that the indemnitee was not liable by reason of Disabling Conduct
by (a) a vote of the majority of a quorum of Trustees who are neither
"interested persons" of the Trust as defined in Section 1(a)(19) of the 1940 Act
nor parties to the proceeding, or (b) as independent legal counsel in a written
opinion.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
Information pertaining to business and other connections of
Registrant's investment advisor is incorporated by reference to the Prospectus
and Statement of Additional Information contained in Parts A and B of this
Registration Statement at the sections entitled "Management of the Fund" in the
Prospectus and "Management of the Fund" and "Investment Advisory Services" in
the Statement of Additional Information.
ITEM 29. PRINCIPAL UNDERWRITERS
None. The Registrant is currently comprised of no-load funds which
acts as distributor of their own shares.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records maintained by the Registrant are kept at the
Registrant's office located at 7900 Callaghan Road, San Antonio, Texas 78229.
All accounts and records maintained by Bankers Trust Company as custodian for
Accolade Funds are maintained at 16 Wall Street, New York, New York 10005.
ITEM 31. NOT APPLICABLE
ITEM 32. UNDERTAKINGS
Registrant undertakes to call a meeting of shareholders for purposes
of voting upon the question of removal of one or more trustees when requested in
writing to do so by the holders of at least 10% of the Trust's outstanding
record 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.
- - --------------------------------------------------------------------------------
EXHIBIT INDEX
- - --------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
8 (a) Letter agreement with custodian, Bankers Trust Company
of New York, adding Leeb Value Fund, and original Agreement.
10 (a) Opinion and consent of counsel to the Registrant.
11 (a) Consent of Independent Accountant, Arthur Andersen LLP with
respect to the Leeb Value Fund.
ACCOLADE FUNDS
BONNEL GROWTH FUND
LEEB VALUE FUND
Leeb Value Fund
July 18, 1996
Bankers Trust Company
31st Floor
130 Liberty Street
New York, New York 10005
Gentlemen:
Pursuant to the Custodian Agreement between Bankers Trust Company and Accolade
Funds, a Massachusetts business trust, this is notification that one new
Sub-Trust has been created, namely the Leeb Value Fund. This new portfolio will
become effective with the Securities and Exchange Commission in the near future.
Accolade Funds will consist of two separate portfolios. Bankers Trust Company
currently serves as Custodian for the portfolios.
We hereby request that Bankers Trust Company act as Custodian for the Leeb Value
Fund and that an authorized officer of Bankers Trust Company execute both copies
of this letter as agreement to include the new portfolio under the Custodian
Agreement -- as contemplated in Paragraph 2 and subject to the execution of the
appropriate amendments.
Please retain one executed copy for your records and return one copy to the
Secretary of the Trust of Accolade Funds. In addition, please prepare and
forward an amended Schedule A to the Custodian Agreement for our signature.
ACCOLADE FUNDS
/S/ BOBBY D. DUNCAN
Bobby D. Duncan
Executive Vice President
Chief Operating Officer
Bankers Trust Company hereby agrees to act as Custodian for the Leeb Value Fund.
BANKERS TRUST COMPANY
By: /S/ BARRY KLAYMAN Date: July 26, 1996
---------------------------
BARRY KLAYMAN, VICE PRESIDENT
Print Name and Title
...............................................................................
7900 Callaghan Road
Mail Address: P.O. Box 781234, San Antonio, TX 78278-1234
Tel (210) 308-1234 1-800-4-BONNEL Fax (210) 308-1220
E-mail:[email protected]
- - --------------------------------------------------------------------------------
Appendix A
To Custodian Account Agreement
Dated as of January 10, 1994
Between Accolade Funds ("Company")
and Bankers Trust Company ("Custodian")
(Paragraph 1(k))
LIST OF PORTFOLIOS
96911 BONNEL GROWTH FUND
96887 LEEB VALUE FUND
ACCOLADE FUNDS BANKERS TRUST COMPANY
By /S/ Susan B. McGee By /S/ Barry Klayman
---------------------------- --------------------------
Title: Vice President Title: Vice President
Date: July 30, 1996 Date: July 26, 1996
================================================================================
CUSTODIAN ACCOUNT AGREEMENT
THIS CUSTODIAN ACCOUNT AGREEMENT, dated as of October 4, 1994, is entered
into by and between ACCOLADE FUNDS, a business trust organized under the laws of
the Commonwealth of Massachusetts ("Company"), on behalf of each of the
Portfolios (hereinafter defined), and BANKERS TRUST COMPANY, a New York banking
Corporation ("Custodian").
Witnesseth:
In consideration of the mutual covenants herein contained and other
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. DEFINITIONS.
Whenever used in this Agreement, or in any appendices, schedules or
exhibits hereto or amendments hereof, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
(a) "Account Securities" means the Securities, other property and cash held
by Custodian in the Custodian Account on behalf of a Portfolio, and shall
include all income generated by or the proceeds of any sale of such Securities.
(b) "Authorized Person" means any Person or Persons jointly or severally
authorized from time to time, in a writing, in substantially the form of
Appendix B attached hereto and made a part hereof, delivered to Custodian and
accepted by Custodian, to act on behalf of Company or an Investment Adviser with
respect to any action required or permitted to be taken by Company or such
Investment Adviser under this Agreement. Such writing shall clearly indicate the
scope of authority of each Authorized Person. As used herein, the term
Authorized Person means a Person authorized with respect to the action or matter
described.
(c) "Custodian Account" means the one or more custodianship and safekeeping
accounts established and maintained pursuant to this Agreement by Custodian for
Company and/or one or more of the Portfolios.
(d) "Depository" means any centralized securities depository system,
domestic or foreign, whether presently or hereafter organized, in which
Custodian participates and which is registered with the Securities and Exchange
Commission ("SEC") under Section 17A of the Securities Exchange Act of 1934 (or
as may otherwise be authorized by the SEC to serve in the capacity of depository
or clearing agency for the securities or other assets of investment companies),
and shall include (i) the Depository Trust Company, (ii) the Federal Reserve
Book-Entry System, or (iii) any other centralized securities depository system
meeting the requirements of Rule 17f-4 under the 1940 Act (hereinafter defined),
selected by Custodian in its discretion and approved for use by Company in
Instructions, subject to any required approval by regulatory authorities
applicable to Custodian in the conduct of its business as Custodian.
(e) The term "hold" shall include Custodian's authority to deposit part or
all of the Account Securities with a Depository.
(f) "Instructions" means a communication received by Custodian from one or
more Authorized Persons directing action or delivering information pursuant
hereto. Instructions may be oral or written and may be delivered (i) by
telephone, (ii) in hard copy, or (iii) by computer, electronic instruction
system or telecommunications terminals, (including but not limited to telex,
TWXS, facsimile transmission, bank wire or Custodian's proprietary POL*ARIS
Service), PROVIDED THAT the parties hereto or Custodian and Investment Adviser,
as the case may be, shall have agreed herein or in another manually signed
writing to the form, the means of transmission and the means of identification
of such Instructions. Instructions shall conform to operating procedures
communicated from time to time by Custodian to Company.
(g) "Investment Adviser" means a bank, insurance company or registered
investment adviser duly appointed as investment adviser by Company as further
described in paragraph 7.
(h) "1940 Act" refers to the Investment Company Act of 1940, and the Rules
and Regulations thereunder, all as amended from time to time.
(i) "Paragraph" means a paragraph of this Agreement.
(j) "Person" means a natural person, trust, estate, corporation,
association, partnership, joint venture, employee organization, committee,
board, participant, beneficiary, trustee, partner, or venturer, including but
not limited to Company and Investment Advisers, as the context may require.
(k) "Portfolio" means any of the entities named on Appendix A, attached
hereto and, as amended from time to time, made a part hereof.
(l) "Security" or "Securities" includes bonds, debentures, notes, stocks,
shares, rights, beneficial interests, evidences of indebtedness and other
securities, assets, and property.
The plural of any terms shall have a meaning corresponding to the singular
thereof as so defined and any neuter pronoun used herein shall include the
masculine or feminine as the context may require.
Any references in this Agreement to any provision of any statute, code or
regulation shall be deemed to incorporate any amended, substitute or successor
provisions, whenever adopted.
2. APPOINTMENT OF CUSTODIAN.
(a) APPOINTMENT. Subject to the provisions hereof, Company hereby employs,
appoints and authorizes Custodian to act as Custodian of all the Securities and
monies at the time owned by a Portfolio or in the possession of a Portfolio or
Company on behalf of a Portfolio and specifically allocated to such Portfolio
during the period of this Agreement and to hold same in the Custodian Account
for the benefit of such Portfolio.
(b) ESTABLISHMENT OF CUSTODIAN ACCOUNT. Custodian hereby agrees to
establish the Custodian Account in the name of Company, or such other name or
names as Company and Custodian may agree upon from time to time, and to hold in
the Custodian Account all Securities or other property and cash deposited with,
delivered to or received by Custodian for deposit in the Custodian Account and
allocated to one or more Portfolios in accordance with Instructions, PROVIDED
THAT Custodian shall have the right, in its sole discretion, to refuse to accept
any Securities or other property that are not in proper form for deposit for any
reason. Custodian shall have no responsibility or liability for or on account of
Securities or other property or cash not delivered to Custodian or not delivered
in proper form.
(c) CUSTODIAN'S PERSONNEL. The individual personnel of Custodian duly
authorized to have access to Account Securities, to receive Instructions and to
act thereon are listed in the certification annexed hereto as Appendix C and,
as. amended, from time to time, made a part thereof. Custodian shall advise
Company of any change in the individuals so authorized by written notice to
Company.
(d) SCOPE OF DUTIES. Custodian's duties and responsibilities shall be
limited to those expressly set forth in this Agreement and such others as may be
necessary to the carrying out of those duties and responsibilities set forth
herein.
3. FORM OF CUSTODY AND SAFEKEEPING.
(a) FORM OF CUSTODY. Custodian shall be responsible for safekeeping Account
Securities. Custodian, in its sole discretion, is authorized to (i) retain
physical possession of Account Securities, and/or (ii) deposit Account
Securities with a Depository or Sub-Custodian selected by Custodian pursuant to
paragraph 8(b).
(b) PHYSICAL CUSTODY. If Custodian retains physical possession of Account
Securities, Custodian shall ensure that Account Securities are at all times
properly identified as belonging solely to a Portfolio. In this regard Custodian
shall physically segregate Account Securities from any property owned by
Custodian. Custodian shall not be required to physically segregate Account
Securities (other than bearer securities which shall be so segregated) from
other securities or property held by Custodian for third parties, but Custodian
shall maintain adequate records showing the true ownership of Account
Securities.
(c) DEPOSITORY CUSTODY. If Custodian deposits Account Securities with a
Depository, Custodian shall maintain adequate records showing the location and
true ownership of such property.
(d) REGISTRATION IN NOMINEE NAME. Custodian is authorized to reregister
securities received in registered form in the name of its nominee, or the
nominee of a Depository, unless alternate registration Instructions are
furnished; provided that Account Securities are held in an account of Custodian
or such Depository containing only assets, held by Custodian or such Depository
in a fiduciary capacity. In consideration of Custodian's registration of Account
Securities in the name of its nominee, Company agrees to pay on demand to
Custodian or its nominee the amount of any loss or liability for stockholders'
assessments, or otherwise, claimed or asserted against such nominee by reason of
such registration. Securities may also be held in the Custodian Account in
coupon bearer form, where, in the judgment of Custodian, it is not practicable
or possible to register such securities.
4. LIABILITY FOR SAFEKEEPING.
LIMITATION OF LIABILITY. Custodian's safekeeping responsibility under
paragraph 3 shall be limited to exercising the care and diligence usually
accorded by Custodian to the safekeeping of its own property; provided, however,
Custodian's responsibility under paragraph 3 is limited to losses occasioned
directly by the negligence or misconduct of its employees or by robbery,
burglary, theft or destruction while the securities are in Custodian's physical
possession. With respect to deliveries of securities to a third party other than
a Depository, agent or Sub-Custodian, Custodian shall be deemed no more than an
"intermediary" as defined in Section 8(3)06(3) of the New York Uniform
Commercial Code. Custodian shall not be under any obligation to any Person to
insure Custodian or the Custodian Account against loss. Custodian shall not be
liable under any circumstances for loss or damage due to war, insurrection,
hurricane, cyclone, tornado, earthquake, volcanic eruption, nuclear fusion or
fission, radioactivity or similar occurrence. Custodian shall not be liable for
loss or damage due to equipment failure, except such as is due to its own
negligence, willful misconduct, or bad faith. Notwithstanding any provision of
this Agreement to the contrary, in the event of any failure or delay in the
performance or non-performance by Custodian of any act or thing which is
required by this Agreement arising out of circumstances set forth in the
preceding two sentences, Custodian shall take reasonable steps under the
circumstances to minimize the effects of any failure or delay and to avoid
continuing harm to Company.
5. TRANSACTIONS.
(a) INSTRUCTIONS. Company may from time to time give Custodian, or appoint
an Investment Adviser to give Custodian, Instructions concerning purchases and
sales and other transactions with respect to Account Securities and Custodian
shall effect such transactions subject to the provisions and undertakings of
this paragraph 5. No person shall have access to Account Securities or the right
to order or effect transactions in Account Securities except as set forth in
this Agreement or in Instructions.
(i) AUTHORIZATION TO ACT ON INSTRUCTIONS. Custodian is authorized to
accept, act upon and rely upon Instructions that Custodian reasonably
believes in good faith to have been given by an Authorized Person, or
that are transmitted with proper testing or authentication in
accordance with procedures specified by Custodian, or that are
transmitted electronically through Custodian's POL*ARIS communications
system or any similar electronic instruction system acceptable to
Custodian.
(ii) RELIANCE ON INSTRUCTIONS. As long as and to the extent that it
exercises reasonable care and acts without negligence, misconduct or
bad faith, Custodian shall incur no liability to Company or otherwise
and shall be fully protected in acting in reliance on, and in omitting
to act in the absence of, Instructions that Custodian reasonably
believes in good faith to be genuine and to be signed, sent or made by
an Authorized Person.
(iii)ERRORS IN INSTRUCTIONS. Custodian shall not be responsible for any
errors or inaccuracies contained in Instructions or, except where due
to its own negligence, misconduct or bad faith, for any delays or
failures in transmissions of Instructions caused by equipment
breakdown or unavailability.
(b) DELIVERIES AND RECEIPTS. In accordance with Instructions, Custodian
shall deliver specified Account Securities (including cash in the Custodian
Account) to the Person designated in such Instructions and shall receive in
exchange therefor the Securities and/or cash and/or other property specified
therein. Account Securities may be delivered "free" if the Instructions so
specify.
If cash is to be delivered by Custodian, the Custodian Account shall be
charged by Custodian on the actual settlement date. Receipts of cash by
Custodian shall be effected in accordance with paragraph 5(c). Custodian shall
exercise reasonable care and diligence in examining and verifying the
certificates or other indicia of ownership of the securities or other property
received before accepting or paying for same. If Instructions direct Custodian
to deliver certificates or other physical evidence of ownership of Account
Securities to any Person other than a Depository, Custodian's sole
responsibility shall be to exercise care and diligence in effecting the delivery
as instructed. Notwithstanding the foregoing, if the delivery and/or receipt is
effected through the facilities of a Depository, Custodian's responsibilities
shall be limited to using reasonable care and diligence in verifying proper
consummation of the transaction by the Depository. Upon completion of a delivery
in accordance with Instructions to any Person other than a Depository, agent or
Sub-Custodian, Custodian shall be discharged completely of any further liability
or responsibility with respect to the safekeeping and custody of Account
Securities so delivered.
(c) DELIVERY AGAINST PAYMENT. Company acknowledges familiarity with the
current securities industry practice of delivering physical Securities against
later payment on delivery date. Notwithstanding Instructions to deliver Account
Securities against payment, Custodian is authorized to make delivery against a
temporary receipt (sometimes called a "window ticket") in lieu of payment.
Custodian agrees to use its best efforts to obtain payment therefor during the
same business day, but Company confirms its sole assumption of all risks of
payment for such deliveries. Custodian may accept checks, whether or not
certified, in payment for Securities. Custodian assumes no responsibility for
the collectability of such checks. The foregoing, to the contrary
notwithstanding, in the event that Company makes special arrangements with the
party to whom Account Securities are to be delivered for actual payment to be
made upon the delivery of such Account Securities and specifies such
arrangements in Instructions, and if such arrangements are reasonably acceptable
to Custodian, Custodian shall make the delivery in accordance with such
Instructions.
(d) TIMELY INSTRUCTIONS. Company, or its Investment Adviser, as the case
may be, shall be responsible for ensuring that Custodian receives timely,
correct and complete Instructions to enable Custodian to effect settlement of
any purchase of Securities or sale of Account Securities on the contract
settlement date. If Custodian does not receive such Instructions within a
reasonable time prior to the contract settlement date, or if for any other
reason Custodian is unable with reasonable diligence to effect settlement on
such date, Custodian shall have no liability of any kind to any Person for
failing to effect settlement on the contract settlement date.
(e) LIMIT OF RESPONSIBILITY. Custodian, in its capacity as such, shall have
no responsibility to manage or recommend investments of Account Securities or to
initiate or effect any purchase, sale, or other investment transaction in the
absence of Instructions from Company or the Investment Adviser. Custodian shall
hold cash in the Custodian Account, subject to receipt of such Instructions,
without liability for interest thereon. As long as and to the extent that it
exercises reasonable care and acts without negligence, misconduct or bad faith,
Custodian shall in no event be responsible or liable for:
(i) the validity of the issue of any Securities purchased by Company, the
legality of the purchase thereof, or the propriety of the amount paid
therefor;
(ii) the legality of the sale of any Securities by Company, or the
propriety of the amount for which the same are sold;
(iii) the legality or propriety of any borrowing or loan by Company; or
(iv) any money, whether or not represented by any check, draft or other
instrument for the payment of money, received by it on behalf of
Company until Custodian actually receives and collects such money
directly by the final crediting of the Custodian Account or the
account representing Company's interest in the Depository.
(f) CORPORATE ACTIONS. In no event shall Custodian be responsible to
ascertain or to take any action concerning, any maturities, puts, calls,
conversions, exchanges, reorganizations, voting of proxies, offers, tenders or
similar matters relating to Account Securities, whether physically held by
Custodian or on deposit with a Depository, other than to deliver to Company and,
if directed by Company, to its Investment Adviser, notices and information
relating to any such corporate action received by Custodian from any issuers,
offerors, or otherwise. Custodian's sole responsibility in this regard shall be
to deliver such notices within a reasonable time after Custodian receives them,
and Custodian shall not otherwise act with respect to any such notice unless and
until Custodian has received appropriate Instructions from Company or the
Investment Adviser, as the case may be. Company agrees and will instruct its
Investment Adviser that any Instructions to Custodian with respect to any such
corporate actions must be delivered to Custodian within sufficient time for
Custodian to act thereon if any action by Custodian is required. As used herein,
"sufficient time" shall mean at any time up to the last permissible hour on the
date for action specified by Custodian in Custodian's written notice hereunder
and Custodian shall have no liability to any person for Custodian's failure to
act upon any such Instructions for the Custodian Account received by Custodian
at any time after such hour and date.
(g) ALLOCATION OF PARTIAL REDEMPTION. Should any Account Securities held in
a Depository be called for a partial redemption by the issuer of such
securities, Custodian is authorized to accept allocation as determined pursuant
to the program therefor then in effect at such Depository or, in the absence of
any such program, in Custodian's sole discretion to allot the called portion to
the respective holders in any manner deemed to be fair and equitable in its
judgment.
(h) FOREIGN SECURITIES. With respect to Account Securities issued by
foreign entities or other Account Securities for which adequate corporate
information is not readily available, Custodian's responsibility is limited as
expressively set forth in paragraph 5(f). With respect to such Account
Securities, Custodian assumes no responsibility for following such Account
Securities or their issuers for coupon payments, redemptions, exchanges or
similar matters affecting such Account Securities. Collections of monies in
foreign currency, to the extent possible, will be converted into U.S. dollars at
customary rates in accordance with Custodian's normal procedures. All risks and
expenses incident to such foreign collections and conversions are assumed by the
applicable Portfolio, and Custodian shall have no responsibility for
fluctuations in exchange rates affecting such collections or conversions.
(i) PROCEEDS. Unless Company is informed otherwise in writing by Custodian,
the proceeds of sales, redemptions, collections, and other receipts, and
dividend and interest income will be credited by Custodian to the Custodian
Account in accordance with the schedule specified from time to time in
Custodian's Standards Manual.
(j) EXCHANGES. Custodian is authorized, without Instructions, to exchange
temporary for definitive certificates and old certificates for new or
overstamped certificates evidencing a change therein.
(k) DEPOSITORY DELIVERIES. In complying with Instructions for delivery of
eligible transactions, Custodian will make deliveries of eligible transactions,
Custodian will make deliveries through (i) the Federal Reserve System, pursuant
to Subpart O of the Treasury Department Circular #300 (31 Code of Federal
Regulations Part 306), and operating circulars of the Federal Reserve Bank of
New York, or (ii) the facilities of any other Depository pursuant to Section
8320 of the New York Uniform Commercial Code and the Rules and Procedures of
such Depository.
(1) AVAILABLE FUNDS. Custodian is not obligated to effect any transaction
or make any payment in connection therewith unless there are sufficient
available funds on deposit in the Custodian Account or funds have otherwise been
make available to Custodian therefor to its satisfaction. The amount by which
payments made by Custodian with respect to property in, or to be received for,
the Custodian Account, or with respect to other transactions pursuant to this
Agreement, exceed available funds and result in an account overdraft shall be
deemed a loan from Custodian to Company, payable on demand and bearing interest
at the then current rate customarily charged by Custodian on similar loans to
the extent permitted by applicable law. All such loans shall be based on
Custodian's sole determination to make the underlying advance in each case.
(m) MANDATORY EXCHANGES. Anything in paragraph 5(f) to the contrary
notwithstanding, Custodian may, without Instructions, surrender and exchange
Account Securities for other Securities in connection with any reorganization,
recapitalization, or similar transaction in which the owner of the Account
Securities is not given an option; PROVIDED, HOWEVER, Custodian has no
responsibility to effect any such exchange unless it has received actual notice
of the event permitting or requiring such exchange at its office designated for
such purpose pursuant to this Agreement. To facilitate any such exchange,
Custodian is authorized to surrender against payment maturing obligations and
obligations called for redemption.
(n) RECEIPT OF PAYMENTS. Subject to the provisions of this Agreement, and
unless and until it receives Instructions to the contrary, Custodian is
authorized to:
(i) present for payment all coupons and other income items held in the
Custodian Account;
(ii) receive payments of interest and principal, dividends, warrants, and
other things of value in connection with Account Securities and hold
such payments in the Custodian Account, with notice thereof to
Company;
(iii)sign for Company all declarations, affidavits, certificates or other
documents that may be required to collect or receive payments or
distributions with respect to Account Securities and disclose, without
further consent of Company, Company's identity to issuers of Account
Securities, or the agents of such issuers, who may request such
disclosure.
Recapitalization and stock distributions will be credited to the Custodian
Account within five (5) business days after the Stock Exchange due bill
redeemable date (ten business days after payable date) in order to comply with
the normal course of settling Custodian's position at a Depository and to allow
sufficient time to allocate these shares to the Custodian Account.
(o) LENDING OF ACCOUNT SECURITIES. Custodian shall have the power and
authority to lend Account Securities only in accordance with the terms of a
separate securities lending agreement, if any, entered into between Custodian
and Company.
(p) STANDARDS. Custodian's Policies and Standards manual has been delivered
toCompany and when accepted in writing by Company such manual, as amended from
time to time by written agreement of Custodian and Company, shall be deemed to
be incorporated in and made a part of this Agreement.
(q) SEGREGATED ACCOUNTS. The Custodian shall, in accordance with
Instructions, establish and maintain one or more segregated accounts for and on
behalf of a Portfolio, into which accounts may be transferred cash and/or
securities of the Portfolio, (i) in accordance with the provisions of any
agreement among the Company, the Custodian and a broker-dealer registered under
the Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities exchange
(or the Commodity Futures Trading Commission or any registered contract market),
or of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Company on behalf of the
Portfolio and (ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Company on behalf of
the Portfolio or commodity futures contracts or options thereon purchased or
sold by the Company on behalf of the Portfolio.
6. REPORTS, BOOKS AND RECORDS.
(a) REPORTS AND STATEMENTS. Books and records prepared and maintained by
Custodian pursuant to this Agreement shall allocate each transaction to the
appropriate portfolio, as specified in Instructions. Promptly after the close of
business each day, Custodian shall make available to Company, by POL*ARIS or in
the manner otherwise agreed upon, transaction reports and a summary of the
transfers to or from the Custodian Account during said day. Custodian shall make
available to Company, by POL*ARIS or in the manner otherwise agreed upon, a
statement of transactions and holdings in the Custodian Account on a monthly
basis or at such other intervals as Custodian and Company shall mutually agree.
(b) ADDITIONAL BOOKS AND RECORDS. In addition to its internal record
requirements, Custodian shall create and maintain such books and records and
provide such reports with respect to the Custodian Account as Custodian and
Company shall agree upon from time to time. Custodian is not the fund accountant
for Company or any of the Portfolios. Custodian shall cooperate with the fund
accountant and shall make available to the fund accountant the transaction
reports and statements referred to in paragraph 6(a) above, but Custodian shall
not be responsible for reconciling its books and records with those of the fund
accountant or for keeping books and records normally by the fund accountant.
(c) INSPECTION. The books and records of Custodian pertaining to the
Custodian Account shall be open to inspection and audit at reasonable times by
duly authorized officers, employees and auditors employed by Company and by
employees and agents of the Securities and Exchange Commission. The costs
incurred by Custodian in connection with routine periodic inspections and audits
shall be borne by Custodian. Any such costs incurred in connection with
extraordinary inspections and audits shall be charged to and paid by Company in
accordance with paragraph 13.
(d) OPINION OF COMPANY'S INDEPENDENT ACCOUNTANT. Custodian shall take all
reasonable actions, as Company may from time to time request, to obtain from
year to year favorable opinions from Company's independent accountants with
respect to Custodian's activities hereunder.
(e) REPORTS BY CUSTODIAN'S INDEPENDENT PUBLIC ACCOUNTANTS. Custodian shall
provide Company from time to time with reports by independent public accountants
on Custodian's system of internal accounting control relating to the services
provided by Custodian under this Agreement.Such reports shall state that such
system is sufficient to meet the objective of providing management with
reasonable, but not absolute, assurance that assets for which Custodian has
responsibility are safeguarded against loss from authorized use or disposition,
and that transactions are executed in accordance with appropriate authorizations
and in conformity with the governing instruments and are recorded properly to
permit the preparation of the required financial reports.
(f) OTHER REPORTS. Custodian shall provide Company with any report received
byCustodian on the system of internal accounting control of any Depository or
Sub-Custodian and with such reports on its own systems of internal or other
accounting control as Company may reasonably request from time to time if and to
the extent that such reports are readily available and are not required by law
or by the practice of any regulatory agency to be kept in confidence by
Custodian.
(g) POL*ARIS(R). Company has the option to elect to participate in
Custodian's POL*ARIS Service, an electronic communications service that
provides, on a daily basis, the ability to view on-line or to print out hard
copy of all transactions involving the delivery in and out of Account Securities
on a free or payment basis, payments of principal and interest or dividends,
pending transactions and fails, and schedules of Custodian Account holdings.
(i) SECURITY OF TERMINAL. In the event that Company subscribes to the
POL*ARIS Service, Company shall be fully responsible for the security
of its connecting terminal(s), access thereto and the proper and
authorized use thereof and Company's initiation and application of
continuing effective safeguards. In this connection, except for any
instance involving Custodian's own negligence or misconduct, and in
addition to any other undertakings by Company in this Agreement,
Company agrees to defend and indemnify Custodian and to hold Custodian
harmless from and against any and all third party suits, actions,
proceedings at law or in equity, claims (groundless or otherwise),
liabilities, losses, damages, payments, settlements, penalties, fines,
costs (including fees and disbursements of counsel selected by
Custodian) and every other expense of every nature asserted against or
incurred by Custodian as a result of any improper or unauthorized use
of such terminal(s), whether on the premises of Company, an Investment
Adviser, or the agent of either.
(ii) PRICING SERVICES. To the extent that the POL*ARIS Service provided
hereunder shall include market values of the Custodian Account
holdings, Custodian may, at its discretion, obtain such information
from outside sources that Custodian deems to be reliable. Custodian
does not verify, represent or warrant either the accuracy or the
completeness of any such information transmitted through the POL*ARIS
Service.
7. INVESTMENT ADVISERS AND INVESTMENTS.
(a) APPOINTMENT OF INVESTMENT ADVISERS. Company may appoint one or more
Investment Advisers to manage the assets held in the Custodian Account. The
terms and conditions of appointment and authority of any Investment Adviser
shall be the sole responsibility of Company. Company shall promptly notify
Custodian by means of Instructions of the appointment and removal of an
Investment Adviser, the portion of the Custodian Account's and/or each
Portfolio's assets that is subject to the investment control of such Investment
Adviser and all other facts pertinent to such Investment Adviser's authority to
give Instructions, including a designation of the Authorized Persons of such
Investment Adviser.
(b) INVESTMENT REVIEW. Custodian shall be under no duty or obligation to
review any investment or reinvestment made or received upon the Instructions of
Company or any Investment Adviser. Without limiting the generality of the
foregoing, with respect to each transaction, the Authorized Person giving the
Instructions shall have the entire responsibility for assuring that the
transaction does not violate the prohibitions of any applicable state or federal
law or court order or judgment affecting the administration of the Custodian
Account or adversely affect the tax treatment of the Custodian Account.
(c) AFFILIATION BETWEEN CUSTODIAN AND ADVISER AND COMPANY. It is understood
that the trustees, officers, employees, agents and shareholders of Company, and
the officers, directors, employees, agents and shareholders of Company's
Investment Adviser, Bankers Trust Company ("Adviser"), are or may be interested
in Custodian as directors, officers, employees, agents, stockholders, or
otherwise, and that the directors, officers, employees, agents or stockholders
of Custodian may be interested in Company as trustees, officers, employees,
agents, shareholders, or otherwise, or in Adviser as officers, directors,
employees, agents, shareholders or otherwise.
(i) No trustee, officer, employee or agent of Company, and no officer,
director, employee or agent of Adviser acting pursuant to any
provision of the Investment Advisory Agreement (the "Advisory
Agreement") between Company and Adviser, shall have physical access to
the assets of Company held by Custodian or be authorized or permitted
to withdraw any investments of Company, nor shall Custodian deliver
any assets of Company to any such person. No officer, director,
employee or agent of Custodian who holds any similar position with
Company or who performs duties under the Advisory Agreement shall have
access to the assets of Company.
(ii) Subject to paragraph 5(a) hereof, nothing in this paragraph 7(c) shall
prohibit any officer, employee or agent of Company, or any officer,
employee or agent of Adviser, from giving Instructions to Custodian as
long as no such Instruction results in delivery of or access to assets
of Company prohibited by subparagraph (i) of this paragraph 7(c).
8. AGENTS AND SUB-CUSTODIANS.
(a) AGENTS. Custodian may at any time or from time to time appoint (and may
at any time remove) any other bank, trust company or responsible commercial
agent that is itself qualified under the 1940 Act to act as a custodian as its
agent to carry out such of the provisions of this Agreement as Custodian may
from time to time direct, PROVIDED that the appointment of any such agent shall
not relieve Custodian of any of its responsibilities or liabilities under this
Agreement.
(b) SUB-CUSTODIANS. Custodian may appoint one or more domestic or foreign
banking institutions or Depositories that is itself qualified under the 1940 Act
to act as custodian (and with respect to foreign banking institutions or
Depositories, meets the requirements of Rule 17f-5 under the 1940 Act) to act as
Sub-Custodian of Account Securities, PROVIDED that Company shall have informed
Custodian by means of Instructions that such entity has been approved by all
requisite action as Sub-Custodian for Account Securities and Custodian shall
have received no subsequent Instructions rescinding such approval, and FURTHER
PROVIDED THAT Custodian shall have no more responsibility or liability to
Company on account of any actions or omissions of any Sub-Custodian so appointed
than any such Sub-Custodian has to Custodian.
9. LEGAL PROCEEDINGS.
Custodian shall not be required to initiate, appear in or defend any legal
proceedings or take any other similar action with respect to the Custodian
Account or Account Securities unless Custodian has been indemnified to its
satisfaction against any loss and expense (including attorneys' fees) likely to
be suffered or incurred thereby. Company shall have, at its election, the right
to enforce Custodian's rights against any Sub-Custodian, agent or Depository for
loss, damage or expenses caused Company or any Portfolio by such Sub-Custodian,
agent or Depository and shall be entitled to be subrogated to the rights of
Custodian with respect to any claim against such Sub Custodian; agent or
Depository or any other person, which Custodian may have as a consequence of any
such loss, damage or expenses if and to the extent that Company or a Portfolio
has not been made whole for any such loss or damage.
10. INDEMNIFICATION OF CUSTODIAN.
(a) INDEMNIFICATION. In its capacity as Custodian, Custodian shall not be
liable for any act or failure to act of Company, any Investment Adviser or any
officer, director, employee or agent of any of them. Custodian shall not be
liable for any error of judgment or mistake of law or, except as expressly
provided to the contrary in paragraph 4, for any loss suffered by the Custodian
Account unless resulting from misconduct, bad faith or negligence on the part of
Custodian in the performance of its duties or from the breach or reckless
disregard by Custodian of its obligations and duties under this Agreement.
Except as otherwise expressly provided to the contrary in the preceding
sentence, Custodian shall be indemnified against and held harmless from any and
all third party suits, actions, proceedings at law or in equity, claims
(groundless or otherwise), liabilities, losses, damages, payments, settlements,
penalties, fines, costs (including fees and disbursements of counsel selected by
Custodian and reasonably satisfactory to Company) and every other expense of
every nature incurred by Custodian or asserted against Custodian by any third
party in connection with Custodian's performance of its obligations under this
Agreement. If amounts due Custodian pursuant to this paragraph 10 are not paid
out of the Custodian Account for any reason, they shall be paid by Company.
Custodian agrees to inform Company in writing of any event which comes to its
notice as a result of which the Custodian Account or Company might become liable
to indemnify Custodian under these provisions, provided that any delay in so
doing shall not in any way affect the Custodian Account's or Company's
obligation to Custodian hereunder. Custodian's right to indemnification shall
survive the termination of this Agreement.
(b) PARTICIPATION IN LITIGATION. In the event any action or proceeding
shall be brought against Custodian, in its capacity as such, and it shall notify
Company of the commencement thereof, Company shall be entitled to participate
therein and, subject to all provisions hereof and to the extent that it shall
wish, to assume the defense thereof, with counsel reasonably satisfactory to
Custodian (who shall not, except with the consent of Custodian, be counsel to
Company). After notice from Company to Custodian of its election so to assume
the defense of such action or proceeding and to pay all fees and expenses of
such counsel, Company shall not be liable to Custodian for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by
Custodian, in connection with the defense thereof other than reasonable costs of
investigation, unless either Company or Custodian shall have been advised at any
time by counsel that the assumption or continuation of such defense by Company
would be inappropriate under applicable standards of professional conduct on
account of actual or potential differing interests between Company and Custodian
or under fiduciary principles applicable to the Custodian Account. Custodian
may, at any time, waive its right to indemnification hereunder and assume its
own defense.
(c) SEVERAL OBLIGATIONS. Notwithstanding any provision of this Agreement to
the contrary, Custodian shall be limited in any claim for indemnity or payment
from the Company to the extent that Custodian may only recover from the
Portfolio to which the assessment, tax, cost, liability or expense relates or on
behalf of which Portfolio the disbursement was made or the charge or expense
giving rise to the claim was incurred.
11. REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents, warrants and covenants to Custodian that:
(a) the employment of Custodian and the allocation of fees, expenses and
other charges to the Custodian Account as herein provided, is not prohibited by
law or any governing documents or contracts relating to the Custodian Account or
the maintenance of custodian accounts for Company as contemplated herein;
(b) the terms of this Agreement do not violate any obligation by which
Company is bound, whether arising by contract, operation of law or otherwise;
(c) this Agreement has been duty authorized by appropriate action and when
executed and delivered will be binding upon Company in accordance with its
terms;
(d) Company will deliver to Custodian such evidence of such authorization
as Custodian may reasonably require, whether by way of a certified resolution,
opinion of counsel or otherwise;
(e) Custodian, in its capacity as such, is not required to maintain any
fidelity bond insurance with respect to Account Securities pursuant to the
requirements of any law applicable to Company;
(f) Company has furnished Custodian the names and original or facsimile
signatures of all Authorized Persons currently authorized to act on behalf of
Company pursuant to this Agreement; and
(g) with respect to matters covered by this Agreement, Custodian shall be
entitled to assume any document delivered herewith remains in effect and any
Authorized Person or Investment Adviser named herein or pursuant hereto
continues to be authorized to act hereunder until Custodian is notified by means
of Instructions of any amendment, change or substitute.
12. REPRESENTATION AND WARRANTIES OF CUSTODIAN.
Custodian hereby represents, warrants and covenants to Company that:
(a) the terms of this Agreement do not violate any obligation by which
Custodian is bound, whether arising by contract, operation of law or otherwise;
(b) this Agreement has been duly authorized by appropriate action and when
executed and delivered will be binding upon Custodian in accordance with its
terms;
(c) Custodian will deliver to Company such evidence of such authorization
as Company may reasonably require, whether by way of a certified resolution,
opinion of counsel or otherwise;
(d) Custodian, in its capacity as such, is not required to maintain any
fidelity bond insurance with respect to Account Securities pursuant to the
requirements of any law applicable to Custodian;
(e) Custodian has furnished Company the names of all Persons currently
authorized to act on behalf of Custodian hereunder; and
(f) with respect to any matters covered by this Agreement, Company shall be
entitled to assume any document delivered herewith remains in effect and any
Person named herein or pursuant hereto continues to be authorized to act
hereunder until it is notified of any amendment, change or substitute.
(g) Custodian is qualified as a custodian under Section 26(a) of the 1940
Act and covenants that it will remain so qualified or upon ceasing to be so
qualified shall promptly notify Company in writing.
13. FEES, EXPENSES AND OTHER CHARGES.
(a) FEE SCHEDULES. For the services provided hereunder, Company shall pay
Custodian monthly in arrears for the existing Portfolios a fee calculated and
accrued in accordance with Custodian's applicable fee schedule set forth in
Appendix D, attached hereto and as amended from time to time made a part hereof.
Such fee schedule does not include out-of-pocket disbursements of Custodian for
which Custodian shall be entitled to be reimbursed by Company. Reimbursable
out-of-pocket disbursements shall include but shall not be limited to the items
specified in Appendix E, attached hereto and as amended from time to time made a
part hereof. Appendix E may be modified by Custodian upon not less than thirty
days prior written notice to Company.
(i) The parties hereto will agree upon the compensation for acting as
custodian for any Portfolio hereafter established and designated to
Custodian at the time that Custodian is asked to commence serving as
such for said Portfolio, and such agreement shall be reflected in a
fee schedule for that Portfolio, dated and signed by an officer of
each party hereto, which shall be attached to Appendix D of this
Agreement, and/or by such other amendments to this Agreement as the
parties shall deem necessary and appropriate.
(b) PAYMENT. All fees and expenses payable or reimbursable to Custodian
under this Agreement shall be paid in full without set-off, deduction or
withholding for any taxes, duties or other charges. Custodian will invoice
Company as soon as practicable after the end of each calendar month and said
invoices will be detailed in accordance with the applicable fee schedule(s) and
will include reimbursable out-of pocket disbursements. If Company does not
object to an invoice within fifteen (15) days after the date thereof, Custodian
shall charge the Custodian Account for the full amount of such invoice.
Custodian shall also be entitled to charge the Custodian Account for the amount
of (i) any indemnification obligation pursuant to paragraph 9 or paragraph 10
that has been either acknowledged in writing by Company or determined by a court
or other tribunal having jurisdiction over the parties and the subject matter to
be owed to Custodian, and (ii) other expenses or liabilities incurred or
assessed against it in connection with the performance of this Agreement,
including but not limited to, the expenses of Sub-Custodians and foreign
branches of Custodian or Sub-Custodians incurred in settling transactions
outside of the United States involving the purchase and sale of Account
Securities. All charges made to the Custodian Account under this paragraph 13(c)
will be allocated to the Portfolio with respect to which such charges were
incurred.
(c) OBTAINING PAYMENT. To obtain payment of all fees and expenses payable
to Custodian hereunder, including but not limited to amounts payable pursuant to
indemnification provisions and to paragraph 5(l), Custodian shall be entitled to
take such other action(s) or exercise such other options, powers and rights as
Custodian now or hereafter has under the New York Uniform Commercial Code or any
other applicable law.
(d) SURVIVAL. Custodian's right to payment and reimbursement hereunder
shall survive the termination of this Agreement.
14. TERM AND TERMINATION.
(a) TERM. This Agreement shall become effective on the date first set forth
above.
(b) NOTICE OF TERMINATION. Either party may terminate this Agreement and
the Custodian Account upon sixty (60) days' written notice to the other party,
PROVIDED THAT Company may terminate this Agreement and the Custodian Account
upon less notice if it receives notice from Custodian pursuant to paragraph
12(g) or in the event of the appointment of a conservator or receiver for
Custodian or upon the happening of a like event at the direction of an
appropriate regulatory agency or court.
(i) In the event that a notice of termination is given by Company, it
shall be accompanied by a certificate of Company electing to terminate
this Agreement with respect to any Portfolio and designating a
successor custodian or custodians, which shall be a person qualified
to so act under the 1940 Act.
(ii) In the event a notice of termination is given by Custodian, Company
shall, on or before the specified termination date, deliver to
Custodian a certificate of Company designating a successor custodian
or custodians. In the absence of such designation by Company,
Custodian may, but shall not be required to, designate a successor
custodian that shall be an entity qualified to so act under the 1940
Act.
(iii)If Company fails to, and Custodian does not, designate a successor
custodian for any Portfolio, Company shall, upon the date specified in
the notice of termination and upon the delivery by Custodian of all
Account Securities (other than Account Securities held in Depositories
that cannot be delivered to Company) and moneys then owned by such
Portfolio, be deemed to be its own custodian and Custodian shall
thereby be relieved of all duties and responsibilities pursuant to
this Agreement, other than duties with respect to Account Securities
held in Depositories that cannot be delivered to Company.
(iv) The execution and delivery of an amended Appendix A that deletes one
or more Portfolios shall constitute a termination of this Agreement
with respect to such deleted Portfolios only and shall not affect the
Portfolios remaining on Appendix A.
(c) DELIVERY OF ACCOUNT SECURITIES AND OTHER PROPERTY. Upon termination,
Custodian shall deliver in proper form for transfer all Account Securities
allocated to the Portfolio(s) specified in the notice of termination, or cause
such to be delivered, to a successor custodian designated by Company or, if a
successor custodian has not accepted an appointment by the effective date of
termination of the Custodian Account, to Company; PROVIDED. HOWEVER, Custodian
shall make such delivery only after deducting all fees, expenses and other
amounts for the payment or reimbursement of which it is entitled hereunder with
respect to such Portfolio(s). Upon completion of such delivery, Custodian shall
be discharged completely of any further liability or responsibility with respect
to the Account Securities and other property so delivered. Custodian shall be
entitled to be reimbursed from the Custodian Account for any expenses incurred
in connection with such delivery unless such termination is at Custodian's
request. Custodian agrees to cooperate with Company and any substitute or
successor custodian appointed by Company during a reasonable transition period.
15. TAXES.
(a) FILINGS. Custodian shall have no responsibility to file any tax returns
regarding the Custodian Account or the Account Securities. Custodian is
authorized and empowered to execute any certificates of ownership or other
reports, declarations or affidavits that it is or may hereafter be required to
execute and furnish under any regulation of the Internal Revenue Service, or by
or under any other authority of the United States or any jurisdiction, domestic
or foreign, which are required in correction with any property that is now or
may hereafter be held in the Custodian Account. Company agrees to notify
Custodian immediately in writing of any material change in status that may
affect any such certificates, reports or other required documents or the
contents thereof. Custodian may withhold from income generated by the Account
Securities, or from the principal thereof, all amounts required to be paid
pursuant to withholding requirements of the taxing authorities of any applicable
jurisdiction, domestic or foreign.
(b) INDEMNIFICATION. Company agrees to indemnify Custodian and any nominee
in whose name Account Securities or other property of Company is registered
against any liability Custodian or such nominee may incur by reason of taxes
assessed to Custodian or such nominee or other costs, liability or expense
incurred by Custodian or such nominee resulting from the fact that Account
Securities or other property of Company are registered in the name of Custodian
or such nominee. Custodian's right to indemnification as aforesaid shall survive
the termination of this Agreement.
16. ADVICE.
Custodian may from time to time consult with counsel to Company or with an
Authorized Person in connection with its obligations arising hereunder and shall
be fully protected in acting upon the written advice or instructions of such
counsel or Authorized Person, as the case may be.
17. ADDRESSES.
Except as provided to the contrary with respect to Instructions and until
further notice from either party, any notices delivered pursuant to this
Agreement, and all other communications shall be in writing and shall be
delivered or sent in hard copy or by facsimile transmission to the following
addresses or such other addresses as from time to time may be specified
hereunder:
If to Company:
Accolade Funds
7900 Callaghan Road
San Antonio, TX 78229
Attn: Vice President,
Chief Financial Officer
If to Custodian:
Bankers Trust Company
14 Wall Street
New York, NY 10015
Attn: Manager, Mutual Fund Custody
All notices and other communications shall be effective when received. The
party seeking to rely on notice having been given under this paragraph 17 shall
be responsible for ascertaining the facts thereof.
18. MISCELLANEOUS.
(a) INFORMATION TO AND CONSENT OF CUSTODIAN. During the term of this
Agreement, Company shall furnish to Custodian at its office, prior to any
distribution thereof, copies of any prospectus, advertising or promotional
materials prepared for distribution to any Persons who are not Parties hereto
that refer in any way to Custodian. Company shall not distribute or permit the
distribution of such materials if Custodian reasonably objects in writing within
five (5) business days (or such other time as may be mutually agreed) after
receipt thereof. In the event of termination of this Agreement, Company will
continue to furnish to Custodian copies of any of such materials that refer in
any way to Custodian in its role as such. Company shall furnish or otherwise
make available to Custodian such other information relating to the business
affairs of Company as Custodian at any time, or from time to time, reasonably
requests in order to discharge its obligations hereunder.
(b) CONFIDENTIALITY. Each party hereto agrees that it shall treat
confidentially the terms and conditions of this Agreement and all information
provided by the other party to such party regarding its business and operations.
All confidential information provided by Company shall be used by Custodian
solely for the purpose of rendering services pursuant to this Agreement and,
except as may be required in carrying out this Agreement, shall not be disclosed
to any third party without the prior consent of Company. The foregoing shall not
be applicable to any information that is publicly available when provided or
thereafter becomes publicly available other than through a breach of this
Agreement, or that is required to be disclosed by judicial or administrative
process or otherwise by applicable law. The provisions of this paragraph shall
survive any termination of this Agreement.
(c) SCOPE OF THE AGREEMENT. This Agreement contains the whole of the
understanding between the parties with respect to the subject matter hereof.
(d) AMENDMENT. This Agreement may be amended at any time by a written
instrument signed by an Authorized Person of Company by a duly authorized
officer of Custodian.
(e) SEVERABILITY. If any provision of this Agreement is determined to be
invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other provisions of this Agreement.
(f) NO WAIVER. No term or provision hereof shall be deemed waived and no
breach excused unless such waiver or consent shall be in writing and signed by
the party claimed to have waived or consented. No waiver of any term or
provision hereof shall be deemed a continuing waiver unless it is so designated.
Any consent by any party to a breach by the other, whether express or implied,
shall not constitute a consent to or excuse for any other breach.
(g) CAPTIONS. The captions of this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(h) ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, successors, and assigns;
PROVIDED, HOWEVER, this Agreement shall not be assignable by Company without the
written consent of Custodian, or by Custodian without the written consent of
Company, and any attempted assignment without such written consent shall be null
and void.
(i) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(j) LIMITATION OF LIABILITY. This Agreement is an agreement entered into
between Custodian and Company on behalf of each Portfolio and is expressly not
an agreement among all of the Portfolios. No other Portfolio shall receive any
rights nor have any liabilities arising from any action or inaction of any other
Portfolio under this Agreement. Custodian is hereby expressly put on notice of
the limitation of liability set forth in the Declaration of Trust of Company and
agrees that the obligations assumed by any Portfolio hereunder shall be limited
in all cases to the Portfolio and its assets only, and neither Custodian nor its
agents or assigns shall seek satisfaction of any such obligation from the
Directors, Trustees, shareholders or partners of any such Portfolio.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
ACCOLADE
By: /S/ BOBBY D. DUNCAN
------------------------------------
Name: Bobby D. Duncan
Title: Executive Vice President
Chief Financial Officer
Chief Operating Officer
Attest:
/S/ Thomas Tays
- - ---------------------
BANKERS TRUST COMPANY
(Custodian)
By /S/ KAREN EPHRAIMSON
-------------------------------------------
Name: Karen Ephraimson
Title: Vice President
Attest:
- - ------------------------------
(Title)
<PAGE>
Appendix A
To Custodian Account Agreement
Dated as of October 4,1994
Between ACCOLADE Funds ("Company")
and Bankers Trust Company ("Custodian")
(Paragraph l(k))
LIST OF PORTFOLIOS
- - ------- -------------------------------------------------------------
96911 Bonnel Growth Fund
ACCOLADE FUNDS BANKERS TRUST COMPANY
By: /S/ BOBBY D. DUNCAN By: /S/ KAREN EPHRAIMSON
------------------------------- ----------------------------
Title Executive Vice President, Chief Title Vice President
Financial Officer, and
Chief Operating Officer
Date September 21, 1994 Date October 12, 1994
<PAGE>
Appendix B
To Custodian Account Agreement
Dated as of October 4, 1994
Between ACCOLADE Funds ("Company")
and Bankers Trust Company ("Custodian")
(Paragraph 13(a))
We, the undersigned, do hereby certify that:
The following individuals have been duly authorized as Authorized Persons
to give Instructions on behalf of the Company, the signatures set forth opposite
their respective names arc their true and correct signatures, and each
individual has been duly elected or appointed to and currently serves in the
position following his/her name:
NAME POSITION SIGNATURE
- - --------------------------- -------------------------- ---------------------
Frank E. Holmes President, Chief Executive /S/ FRANK E. HOLMES
Officer
Bobby D. Duncan Executive Vice President, /S/ BOBBY D. DUNCAN
Chief Financial Officer,
and Chief Operating
Officer
Kelli D. Shomaker Vice President, Treasurer, /S/ KELLI D. SHOMAKER
Chief Accounting Officer,
and Controller
Dated: October 12, 1994
<PAGE>
Appendix C
To Custodian Account Agreement
Dated as of October 4,1994
Between ACCOLADE Funds ("Company")
and Bankers Trust Company ("Custodian")
(Paragraph 2(c))
The following employees of Bankers Trust Company have been duly authorized
to have access to Account Securities, to receive Instructions and to act
thereon:
- - ------------------------- -------------------------------------------------
Genie Dominguez Vice President (212) 618-2298
William D. Christian Assistant Vice President (212) 618-3662
Bob Ralph Account Administrator (212) 618-3462
Johnson Shum Account Administrator (212) 618-3411
Michael Terracciano Account Administrator (212) 618-2155
Erica Longenhagen Assistant Treasurer (212) 618-3176
ACCOLADE FUNDS BANKERS TRUST COMPANY
(Custodian)
By: By: /S/ KAREN EPHRAIMSON
---------------- -------------------------
Title: Title: Vice President
---------------- -------------------------
Date: Date: October 12, 1994
---------------- -------------------------
<PAGE>
Appendix D
To Custodian Account Agreement
Dated as of October 4, 1994
Between ACCOLADE Funds ("Company")
and Bankers Trust Company ("Custodian")
(Paragraph 13(a))
DOMESTIC CUSTODIAN FEE SCHEDULE*
Monthly Maintenance $100.00
Monthly Safekeeping
Book Entry Issues 2.00
Vault Issues 3.50
Transactions
DTC/ID 6.50
DTC Book Entry/Non-ID 10.00
FBE Book Entry 10.00
PTC Book Entry 18.00
Physical 25.00
P&I Paydowns 6.00
Maturities (Short-term Money Markets 6.00
Instructions)
Reorganizations 40.00
Private Placement Income 15.00
Money Movements 3.00
Euro CD/Cedel Transactions 50.00
Euro CD/Cedel Asset Value .0333%
Foreign Custody Transaction 50.00
Foreign Custody Asset Value .0667%
<PAGE>
Appendix D
To Custodian Account Agreement
Dated as of October 4,1994
between ACCOLADE Funds ("Company")
and Bankers Trust Company ("Custodian")
(Paragraph 13(a))
DOMESTIC CUSTODIAN FEE SCHEDULE*
(continued)
POL*ARIS FEE SCHEDULE
$200.00 Per Month Maintenance
$ 1.15 Per Record for Confirms
$ .40 Per Record Without Pricing
$ .45 Per Record With Pricing
* Assumes instruction entry by client. There is a $5.00 surcharge when
entered by Bankers Trust.
* DTC SDFS surcharge $5.00
* Company is entitled to use the value of its cash balances to offset fees in
accordance with the formula agreed upon by Custodian and Company from time
to time.
- - ---------------------------------
* Excludes out-of-pocket expenses (e.g., postage and insurance, transfer
agent fees).
ACCOLADE FUNDS BANKERS TRUST COMPANY
By /S/ BOBBY D. DUNCAN By /S/ KAREN EPHRAIMSON
-------------------------------- -------------------------
Title Executive Vice President Title Vice President
Chief Financial Officer
Chief Operating Officer
Date September 21, 1994 Date October 12, 1994
<PAGE>
Appendix E
To Custodian Account Agreement
Dated as of October 4,1994
Between ACCOLADE Funds ("Company")
and Bankers Trust Company ("Custodian")
(Paragraph 13(a))
REIMBURSABLE OUT-OF-POCKET DISBURSEMENTS
Out-of-Pocket Expenses include but arc not limited to:
1. Federal Express charges
2. Transfer Fees
3. Postage Fees/Courier Services
4. Private Placement Fees
5. Messenger Services
- - -------------------------
* Company is entitled to use the value of its cash balances to offset such
charges in accordance with the formula agreed upon by Custodian and Company
from time to time.
ACCOLADE FUNDS BANKERS TRUST COMPANY
By /S/ BOBBY D. DUNCAN By /S/ KAREN EPHRAIMSON
-------------------------------- ---------------------------
Title Executive Vice President Title Vice President
Chief Financial Officer
Chief Operating Officer
Date September 21, 1994 Date October 12, 1994
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 Leeb Value 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
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 incorporation by
reference in Accolade Funds' Registration Statement on Form N-1A, Post-Effective
Amendment No. 5 (the Registration Statement), of our report dated July 19, 1996
included in the June 30, 1996 Annual Report of Leeb Personal Finance Fund of
Leeb Personal Finance Investment Trust, and to all references to our Firm
included in this Registration Statement.
/s/ Arthur Andersen LLP
-----------------------------
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
September 10, 1996
