REGISTRATION NO. 33-61542
REGISTRATION NO. 811-7662
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Post-Effective Amendment No. 8
(Check appropriate box or boxes)
ACCOLADE FUNDS
(Exact Name of Registrant as Specified in Charter)
7900 Callaghan Road
San Antonio, Texas 78229
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: (210) 308-1234
Frank E. Holmes, President
Accolade Funds
7900 Callaghan Road
San Antonio, Texas 78229
(Name and Address of Agent for Service)
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Approximate date of proposed public offering:
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[X] 75 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant hereby declares, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, that an indefinite number of shares of beneficial interest,
no par value, is being registered by this Registration Statement, with respect
to one sub-trust of Registrant, the Adrian Day Global Opportunity Fund.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said section 8(a),
may determine.
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ACCOLADE FUNDS
ADRIAN DAY GLOBAL OPPORTUNITY FUND
FORM N-1A
CROSS REFERENCE SHEET
FORM N-1A
PART A CAPTION OR
ITEM NO. LOCATION IN PROSPECTUS
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1 ............. Cover Page
2 ............. Summary of Fees and Expenses
3 ............. Financial Highlights (also covered under Item
23 in Part B)
4 ............. Cover Page; The Trust; Investment Objectives and
Considerations; Special Considerations
5 ............. Management of the Fund
5A ............ Management's Discussion of Fund Performance
6 ............. Cover Page; The Trust; Dividends and Taxes
7 ............. How to Purchase Shares; How Shares Are Valued;
Special Considerations - Servicing Fee
8 ............. How to Redeem Shares
9 ............. Management of the Fund--the Sub-Advisor
FORM N-1A CAPTION OR LOCATION
PART B IN STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION
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10 ............. Cover Page
11 ............. Table of Contents
12 ............. General Information
13 ............. Investment Objectives and Policies
14 ............. Management of the Trust
15 ............. Principal Holders of Securities
16 ............. Investment Advisory Services
17 ............. Portfolio Transactions
18 ............. General Information
19 ............. Not Covered in Statement of Additional Information
(Covered under Item 7 in Part A)
20 ............. Tax Status
21 ............. Distribution Plan (also covered under Item 5 in Part A)
22 ............. Calculation of Performance Data
23 ............. Financial Statements (also covered under Item 3 in Part A)
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PART A -- THE PROSPECTUS
Included herein is the Prospectus for the
Accolade Funds-Adrian Day Global Opportunity Fund
Post-Effective Amendment No. 8
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ACCOLADE FUNDS
ADRIAN DAY
GLOBAL OPPORTUNITY FUND
1-888-9ADRIAN (1-888-923-7426)
(INFORMATION, SHAREHOLDER SERVICES AND REQUESTS)
INTERNET: HTTP://WWW.USFUNDS.COM
PROSPECTUS
................, 1996
This prospectus presents information that a prospective investor should know
about the Bonnel Growth Fund (the "Fund"), a diversified series of Accolade
Funds (the "Trust"). The Trust is an open-end management investment company.
SHARES OF THE TRUST ARE NOT INSURED, GUARANTEED, SPONSORED, RECOMMENDED OR
APPROVED BY THE UNITED STATES OR ANY AGENCY OR OFFICER THEREOF. Investors are
responsible for determining whether or not an investment in the Fund is
appropriate for their needs. Read and retain this prospectus for future
reference.
A Statement of Additional Information dated ..........., 1996, has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. The Statement of Additional Information is available without charge
from Accolade Funds upon request at the address set forth above or by calling
1-888-9ADRIAN (1-888-923-7426).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
SUMMARY OF FEES AND EXPENSES.................................................3
INVESTMENT OBJECTIVES AND PRACTICES..........................................3
HOW TO PURCHASE SHARES.......................................................7
HOW TO EXCHANGE SHARES.......................................................9
HOW TO REDEEM SHARES........................................................11
HOW SHARES ARE VALUED.......................................................14
DIVIDENDS AND TAXES.........................................................14
THE TRUST...................................................................15
MANAGEMENT OF THE FUND......................................................15
DISTRIBUTION EXPENSE PLAN...................................................17
PERFORMANCE INFORMATION.....................................................17
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SUMMARY OF FEES AND EXPENSES
The following summary is provided to assist you in understanding the various
costs and expenses a shareholder in the Fund could bear directly or indirectly.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load............................................None
Redemption Fee................................................None
Administrative Exchange Fee....................................$ 5
Account Closing Fee (does not apply to exchanges)..............$10
Trader's Fee (shares held less than 30 days).................0.25%
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)(1)
Management and Administrative Fees...........................1.25%
12b-1 Fees...................................................0.25%
Other Expenses, including Transfer Agency
and Accounting Services Fees..............................1.00%
Total Fund Operating Expenses................................2.50%
Except for active ABC Investment Plan(R) accounts, custodial accounts for minors
and retirement accounts, if an account balance falls, for any reason other than
market fluctuations, below $5,000 at any time during a month, that account will
be subject to a monthly small account charge of $1 that will be payable
quarterly. See "Small Accounts."
A shareholder who requests delivery of redemption proceeds by wire transfer will
be subject to a $10 charge. International wires will be higher.
HYPOTHETICAL EXAMPLE OF EFFECT OF FUND EXPENSES(1):
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and redemption at the end of each period.
1 year .................................... $ 35
3 years ................................... $ 88
In conformance with SEC regulations, the example is based upon a $1,000
investment; however, the Fund's minimum investment is $5,000. In practice, a
$1,000 account would be assessed a monthly $1 small account charge, 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.
-------------------------- (1) Annual Fund Operating Expenses are based on
the Fund's projected expenses at average annual net assets of $30,000,000.
Management Fees, Transfer Agency Fees, and Accounting Services Fees are paid to
U.S. Global Investors, Inc. (the "Advisor") and its wholly owned subsidiary. The
Advisor then pays a portion of the management fee to Bonnel, Inc. (the
"Sub-Advisor") for serving as Sub-Advisor. Please refer to the section entitled
"Management of the Funds" for further information.
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INVESTMENT OBJECTIVES AND PRACTICES
The Fund's investment objective is long-term growth of capital. The Fund seeks
to achieve this objective by investing throughout the world in a diversified
portfolio consisting primarily (80% of total assets during normal market
conditions) of marketable common stocks and in securities convertible into
common stocks of global (both international and domestic) blue chip corporations
that the Sub-Advisor believes the market has undervalued.
The Fund is committed to flexible value investing, searching for common stocks
that are selling at substantial discounts to the underlying value of their
assets, earning power, or private market value. Taking a global approach, the
Fund searches for value investments around the world. The Fund seeks first to
build and maintain core investments in the common stock of international blue
chip companies that are well capitalized and well managed and enjoy strong
balance sheets and brand-name recognition in their own markets. The Sub-Advisor
believes such companies are poised to grow and prosper with the continued
development of consumer markets around the world. Supplementing these core
investments, the Fund has the flexibility to purchase a wide variety of
investments that appear to the Sub-Advisor to offer value at any particular
time. The Sub-Advisor searches for a variety of unrecognized contrarian
investment, including at any given time, securities issued by smaller, lesser
known companies, new companies, and companies operating in emerging markets. The
Fund may also invest in debt securities (although income is an incidental
consideration) including high yield, or "junk" bonds, convertible securities,
and commodity-linked securities.
Under normal market conditions the Fund will invest primarily (up to 100% of its
assets) in foreign securities, although investments in United States securities
are permitted and will be emphasized when the Sub-Advisor believes that
opportunities in the United States markets appear more attractive. When deemed
appropriate by the Fund's Sub-Advisor for short-term investment or defensive
purposes, the Fund may hold a portion of its assets (up to 100%) in short-term
debt instruments including commercial paper, certificates of deposit, or
repurchase agreements.
The Fund is not intended to be a complete investment program, and there is no
assurance that its investment objective can be achieved. The Fund's investment
objective is not a fundamental policy and may be changed by the Board of
Trustees without shareholder approval. However, shareholders will be notified in
writing at least thirty days prior to any material change to the Fund's
investment objective. Unless otherwise indicated, all investment practices and
limitations of the Fund are nonfundamental policies that may be changed by the
Board of Trustees without shareholder approval.
OTHER INVESTMENT PRACTICES
INVESTMENT RESTRICTIONS: As a fundamental policy, which cannot be changed
without a vote of shareholders:
(a) the Fund may not invest more than 25% of its total assets in securities
of companies principally engaged in any one industry (other than
obligations issued or guaranteed by the United States Government or any of
its agencies or instrumentalities);
(b) with respect to 75% of its total assets, the Fund will not: (1) invest
more than 5% of the value of its total assets in the securities of any one
issuer (except such limitation will not apply to obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities); nor (2) acquire more than 10% of the outstanding voting
securities of any one issuer;
(c) the Fund may lend portfolio securities with an aggregate market value
of not more than one-third of the Fund's total net assets;
(d) the Fund may borrow up to 33 1/3% of the amount of its total assets
(reduced by the amount of all liabilities and indebtedness other than such
borrowings) when deemed desirable or appropriate to effect
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redemptions, provided, however, that the Fund will not purchase additional
securities while borrowings exceed 5% of the Fund's total assets.
PORTFOLIO TURNOVER: It is the policy of the Fund to seek long-term growth of
capital. The Fund will effect portfolio transactions without regard to its
holding period if, in the judgment of the Advisor and Sub-Advisor, such
transactions are in the best interests of the Fund. Increased portfolio turnover
may result in higher costs for brokerage commissions, dealer mark-ups and other
transaction costs and may also result in taxable capital gains. Certain tax
rules may restrict the Fund's ability to engage in short-term trading if the
security has been held for less than three months. See "Portfolio Turnover" in
the Statement of Additional Information.
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 will 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.
REPURCHASE AGREEMENTS: The Fund may 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 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 consider creditworthy.
STRATEGIC TRANSACTIONS: The Fund may, but is not required to, use various other
investment strategies as described below. Such strategies are generally accepted
as modern portfolio management techniques and are regularly used by many mutual
funds and other institutional investors. Techniques and instruments may change
over time as new instruments and strategies are developed or regulatory changes
occur.
In the course of pursuing these investment strategies, the Fund may purchase and
sell exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other financial instruments, purchase and
sell financial futures contracts and options thereon, and enter into various
currency transactions such as currency forward contracts, currency futures
contracts, or options on currencies or currency futures (collectively, all the
above are called "Strategic Transactions"). The Fund will not sell put options
except in closing transactions.
The Fund may engage in Strategic Transactions for hedging, risk management, or
portfolio management purposes and not for speculation. Strategic Transactions
may be used to attempt to protect against possible changes in the
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market value of securities held in, or to be purchased for, the Fund's
portfolio. Such changes may result from securities markets or currency exchange
rate fluctuations. Strategic Transactions may also be used to attempt to protect
the Fund's unrealized gains or prevent losses in the value of its portfolio
securities, or to establish a position using Strategic Transactions as a
temporary substitute for purchasing or selling particular securities. See
"Investment Objectives and Policies - Risk Considerations of the Fund" in the
Statement of Additional Information. The ability of the Fund to use these
Strategic Transactions successfully will depend upon the Sub- Advisor's ability
to predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when it engages in Strategic
Transactions.
LENDING OF PORTFOLIO SECURITIES: The Fund may lend securities to broker/dealers
or institutional investors for their use in connection with short sales,
arbitrages and other securities transactions. The Fund may receive a fee from
broker/dealers for lending its portfolio securities. The Fund will not lend
portfolio securities unless the loan is secured by collateral (consisting of any
combination of cash, United States Government securities or irrevocable letters
of credit) in an amount at least equal (on a daily market-to-market basis) to
the current market value of the securities loaned. In the event of a bankruptcy
or breach of agreement by the borrower of the securities, the Fund could
experience delays and costs in recovering the securities loaned. The Fund will
not enter into securities lending agreements unless its custodian bank/lending
agent will fully indemnify the Fund against loss due to borrower default. The
Fund may not lend securities with an aggregate market value of more than
one-third of the Fund's total net assets.
RISK FACTORS
The Fund is designed for long-term value investors who can accept international
investment risk. The Fund's share price will tend to reflect the movements of
the different securities markets in which it is invested and, unless hedged, the
foreign currencies in which investments are denominated.
Because the Fund's investments will be subject to the market fluctuations and
risks inherent in all investments, there can be no assurance that the Fund's
stated objective will be realized. The Fund's Advisor and Sub-Advisor will seek
to minimize these risks through professional management and investment
diversification. As with any long-term investment, the value of shares when sold
may be higher or lower than when purchased.
MARKET RISK
Investments in equity and debt securities are subject to inherent market risks
and fluctuations in value due to earnings, economic conditions, quality ratings
and other factors beyond the control of the Advisor or Sub- Advisor. As a
result, the return and net asset value of the Fund will fluctuate.
The Fund may purchase common stock of small and medium size companies which may
be unseasoned and which often fluctuate in price more than common stocks of
larger more mature companies.
Debt securities, including investment grade and high yield bonds, are also
subject to price fluctuations based upon changes in the level of interest rates,
which will generally result in these securities changing in price in the
opposite direction. That is, these securities will experience appreciation when
interest rates decline and will depreciate when interest rates rise.
FOREIGN INVESTMENTS
While investment by the Fund on an international basis will permit shareholders
to participate in economic developments abroad, such investments involve certain
risks not ordinarily associated with investing in securities of United States
issuers. These risks may include political instability of some foreign
governments, fluctuation in foreign exchange rates, the imposition of exchange
control regulations, the possibility of expropriation decrees, more limited
information about foreign issuers, different accounting standards, higher
brokerage costs and foreign
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withholding taxes. Moreover, foreign securities and their markets may not be as
liquid as U.S. securities and their markets.
To the extent the Fund's investments are denominated in and pay interest or
dividends in foreign currencies, and to the extent that the Fund's currency
exposure is unhedged, the value of their investment by the Fund, as measured in
U.S. dollars, may be affected either favorably or unfavorably by movements in
exchange rates between the dollar and those foreign currencies. For more
detailed information see "Foreign Securities" in the Statement of Additional
Information.
EMERGING MARKETS
The Fund may invest up to 20% of its assets in emerging markets, but not more
than 5% of its assets in any single country considered to be part of the
emerging market. Any company with a market capitalization of $500 million or
more is excluded from the 20% limitation regardless of whether or not it is
incorporated or primarily operates in an emerging market. The risks of investing
in foreign markets are generally intensified for investments in emerging markets
since their economies are generally smaller, less diverse, and less mature, and
their political systems less stable than those in developed countries. A more
complete description of the risks associated with investing in emerging markets
is contained in the Statement of Additional Information.
CURRENCY HEDGING
The Sub-Advisor may engage in Strategic Transactions in an attempt to hedge the
Fund's foreign securities investments back to the U.S. dollar when, in its
judgment, currency movements affecting particular investments are likely to harm
the performance of the Fund. Possible losses from changes in currency exchange
rates are primarily a risk of unhedged investing in foreign securities. While a
security may perform well in a foreign market, if the local currency declines
against the U.S. dollar, gains from the investment can disappear or become
losses. Typically, currency fluctuations are more extreme than stock market
fluctuations. Accordingly, the strength or weakness of the U.S. dollar against
foreign currencies may account for part of the Fund's performance even when the
Sub-Advisor attempts to minimize currency risk through hedging activities. While
currency hedging may reduce portfolio volatility, there are costs associated
with such hedging, including the loss of potential profits, losses on Strategic
Transactions, and increased transaction expenses.
LOWER-RATED AND UNRATED DEBT SECURITIES
The Fund may invest up to 15% of its assets in debt securities without regard to
credit rating and may therefore invest in instruments that could experience a
default in the payment of principal and interest. The Fund may also purchase
debt securities of which the issuer has defaulted.
Lower-rated or unrated high yield debt securities are commonly known as "junk
bonds" and are often considered to be of speculative grade. They involve greater
risk of default due to changes in economic conditions, changes in the issuer's
creditworthiness or other circumstances. The market for these securities is
generally more limited and their prices may experience greater volatility than
in the case of debt securities with higher ratings. See the Statement of
Additional Information for a more complete discussion of the risks of investing
in lower-rated and unrated debt securities.
COMMODITY LINKED SECURITIES
The Fund may invest up to 10% of its net assets in structured notes and/or
preferred stock, the value of which is linked to the price of gold or other
commodities. Such structured securities have different characteristics and risks
than other types of securities in which the Fund may invest. For example, not
only the coupon and/or dividend but also the redemption amount may be increased
or decreased depending on the change in the price of
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the referenced commodity. See "Commodity Linked Securities" in the Statement of
Additional Information for further information.
ILLIQUID SECURITIES
Disposition of illiquid securities often takes more time than more liquid
securities, may result in higher selling expenses and may not be able to be made
at desirable prices or at the prices at which such securities have been valued
by the Fund. As a non-fundamental policy, the Fund will not invest more than 15%
of its net assets in illiquid securities.
HOW TO PURCHASE SHARES
The minimum initial investment for the Fund is $5,000 for regular accounts or
$1,000 for custodial accounts for minors. The minimum subsequent investment is
$100. The minimum initial investment for persons enrolled in the ABC Investment
Plan(R) (Automatically Building Capital) 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 Adrian Day
Global Opportunity 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 because it is pre-coded. This
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
1-888-9ADRIAN (1-888-923- 7246). 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 Adrian Day Global
Opportunity Fund by wiring money. To do so, call the Fund at 1-888-9ADRIAN
(1-888-923-7246) for a confirmation number and wiring instructions.
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BY ABC INVESTMENT PLAN(R)
The ABC Investment Plan(R) (Automatically Building Capital) is offered as a
special service allowing you to build a position in any of the United Services
family of funds over time without trying to outguess the market. Once your
account is open, you may make investments automatically by completing the ABC
Investment Plan(R) form authorizing United Shareholder Services, Inc. to draw on
your money market or bank account monthly for a minimum of $100 a month
beginning within thirty (30) days after the account is opened. These lower
minimums are a special service bringing to small investors the benefits of
United Services family of funds without requiring a $5,000 minimum initial
investment.
Your investment dollars will automatically buy more shares when the market is
undervalued and fewer shares when the market is overvalued. By investing an
equal amount at regular periodic intervals, you avoid the extremes in the
market. Of course, using the ABC Investment Plan(R) does not guarantee a profit.
If you sell at the bottom, no system will give you a gain.
You may call 1-888-9ADRIAN (1-888 923-7426) 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 United States. As an
accommodation, the Fund's Transfer Agent may accept checks payable in a foreign
currency or drawn on a foreign bank and will attempt to convert such checks into
U.S. dollars and repatriate such amount to the Fund's account in the United
States. Your investment in the Fund will not be considered to have been received
in good order until your foreign check has been converted into U.S. dollars and
is available to the Fund through a bank in the United States. Your investment in
the Fund may be delayed until
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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 of the other fund in the United
Services family of funds which are 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
Adrian Day Global Opportunity Fund
Bonnel Growth Fund
U.S. Real Estate Fund
- 10 -
MODERATE REWARD U.S. All American Equity Fund
MODERATE RISK MegaTrends Fund
U.S. Income Fund
U.S. Tax Free Fund
United Services Near-Term Tax Free Fund
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 1-888-9ADRIAN (1-888-923-7246).
BY TELEPHONE
You will automatically have the privilege to direct the Fund to exchange your
shares between accounts by calling toll-free 1-888-9ADRIAN (1-888-923-7246). 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 between identically
registered accounts. 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 transaction out of
any fund account. 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) An exchange involves both the redemption of shares out of the Fund and
the purchase of shares in a "Separate Fund." Like any other purchase,
shares of the Separate Fund cannot be purchased by exchange until all
conditions of purchase are met, including investable proceeds being
immediately available. Like any other redemption, the Fund reserves the
right to hold exchange proceeds for up to seven days. In general, the Fund
expects to exercise this right on exchanges of $50,000 or more. In such
event, purchase of the Separate Fund shares will be delayed until proceeds
from the redemption are invested. Separate Fund shares will be priced at
their net asset value at the time of purchase. During the period after
redemption and prior to purchase, you will not be invested in either the
Fund or the Separate Fund. You will be notified immediately if the purchase
of Separate Fund shares will be delayed.
(3) 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.
(4) 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.")
- 11 -
(5) 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."
(6) 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. 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, 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 1-888-9ADRIAN (1-888- 923-7246) for more information concerning telephone
redemption and a treasury money market fund prospectus.
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 1-888-9ADRIAN
(1-888-923- 7246). Telephone redemptions are available for Chairman's Circle
accounts.
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)
- 12 -
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, including 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 wired
until the purchase check has cleared, which may take up to seven days. There is
a $10 charge to cover the wire, which is deducted from redemption proceeds.
International wires will be higher.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS
The redemption price may be more or less than your cost, depending on the net
asset value of the Fund's portfolio next determined after your request is
received. A request to redeem shares in an IRA or similar retirement account
must be accompanied by an IRS Form W4-P and a reason for withdrawal as specified
by the IRS. Proceeds from the redemption of shares from a retirement account may
be subject to withholding tax.
The Fund has the authority to redeem existing accounts and to refuse a potential
account holder the privilege of having an account in the Fund if the Fund
reasonably determines that the failure to so redeem, or to so prohibit, would
have a material adverse consequence to the Fund and its shareholders. 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.
- 13 -
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 for small investors, active ABC Investment Plan(R)
accounts, custodial accounts for minors and retirement plan accounts
administered by the Advisor or its agents and affiliates will not be subject to
the small account charge.
In order to reduce expenses of the Fund, the Fund may redeem all shares in any
shareholder account, other than active ABC Investment Plan(R) accounts,
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 ninety (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.
- 14 -
Application forms and brochures describing these plans and services can be
obtained from the Transfer Agent by calling 1-888-9ADRIAN (1-888-923-7246).
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.
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
1-888-9ADRIAN (1-888-923-7246) and press the appropriate codes into your
touch-tone phone.
HOW SHARES ARE VALUED
Shares of the Fund are purchased or redeemed, on a continuing 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 United Shareholder
Services, Inc. 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 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; 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.
Debt securities 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, regardless of the impact of fluctuating
interest rates on the market value of the instrument.
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
- 15 -
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 and 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 a number of separate, diversified portfolios.
The Trust was formed April 16, 1993, as a "business trust" under the laws of the
Commonwealth of Massachusetts. There are numerous series within the Trust, each
of which represents a separate diversified portfolio of securities (a
"portfolio"). The Statement of Additional Information ("SAI") presents important
information concerning the Adrian Day Global Opportunity Fund ("Fund') and
should be read in conjunction with the Fund's prospectus.
Under the Trust's First Amended and Restated 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
- 16 -
expiring every three years. The Trustees serve in that capacity for six year
terms. Thus, there will ordinarily be no shareholder meeting unless otherwise
required by the Investment Company Act of 1940 (the "1940 Act"). The Trust will
call a meeting of shareholders for purposes of voting on the question of removal
of one or more Trustees when requested in writing to do so by record holders of
not less than 10% of the Trust's outstanding shares, and in connection with such
meeting to comply with the provisions of Section 16(c) of the Investment Company
Act of 1940 relating to shareholder communications.
On any matter submitted to shareholders, shares of the portfolio entitle their
holder to one vote per share, irrespective of the relative net asset value of
the portfolio's shares. On matters affecting an individual portfolio, a separate
vote of shareholders of the portfolio is required. The portfolio's shares are
fully paid and non-assessable by the Trust, have no preemptive or subscription
rights, and are fully transferable, with no conversion rights.
MANAGEMENT OF THE FUND
TRUSTEES
The business affairs of the Fund are managed by the Trust's Board of Trustees.
The Trustees establish policies, as well as review and approve contracts and
their continuance. The Trustees also elect the officers and select the Trustees
to serve as executive and audit committee members.
THE SUB-ADVISOR
Effective ................, 1996, the Advisor and the Trust contracted with
Global Strategic Management, Inc. (the "Sub-Advisor"), 900 Bestgate Road, Suite
405, Annapolis, Maryland 21401, to serve as Sub-Advisor for the Fund. Mr. Adrian
Day, president of the Sub-Advisor and its controlling shareholder, is the Fund's
portfolio manager.
Adrian Day has been managing money since the spring of 1991. He is the editor of
the widely acclaimed investment newsletter, ADRIAN DAY'S INVESTMENT ANALYST, and
has been featured in or has written for many prestigious publications and has
been a featured speaker at investment conferences around the world.
The Sub-Advisor manages the composition of the portfolio and furnishes the Fund
advice and recommendations with respect to its investments and its investment
program and strategy, subject to the general supervision and control of the
Advisor and the Trust's Board of Trustees. While the Sub-Advisor does not have
experience managing a mutual fund portfolio, it has experience managing, and
continues to manage, separate accounts for institutions and wealthy individuals.
Investment decisions for the Fund are made independently of investment decisions
made for other clients.
In consideration for such services, the Advisor pays the Sub-Advisor a
sub-advisory fee. The Advisor and the Sub-Advisor share the management fee
equally, except that the Sub-Advisor's fee will be subject to downward
adjustments as described in the Statement of Additional Information. The Fund is
not responsible for paying any portion of the Sub-Advisor's fees.
THE INVESTMENT ADVISOR
U.S. Global Investors, Inc., 7900 Callaghan Road, San Antonio, Texas 78229,
under an Investment Advisory Agreement with the Trust dated September 21, 1994,
furnishes investment advice and is responsible for overall management of the
Trust's business affairs. Frank E. Holmes is Chairman of the Board of Directors
and Chief Executive Officer of the Advisor, as well as President and Trustee of
the Trust. Since October 1989, Mr. Holmes
- 17 -
has owned more than 25% of the voting stock of the Advisor and is its
controlling person. The Advisor was organized in 1968. The Advisor serves as
investment advisor to United Services Funds and Accolade Funds, a family of
funds with over $1.5 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. The Advisor pays the expense of printing
and mailing prospectuses and sales materials used for promotional purposes.
Investment decisions for the Fund are made independently from those of other
investment companies advised by U.S. Global Investors, Inc.
The Advisory Agreement with the Trust provides for the Fund to pay the Advisor a
flat management fee of 1.25% of the Fund's average net assets.
The Advisor may, out of profits derived from its management fee, pay certain
financial institutions (which may include banks, trust companies, securities
dealers and other industry professionals) a "servicing fee" for performing
certain administrative servicing functions for Fund shareholders to the extent
these institutions are allowed to do so by applicable statute, rule or
regulation. These fees will be paid periodically and will generally be based on
a percentage of the value of the institutions' client Fund shares, although such
fees may be account based.
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, as well as the telephone and line charges
(including the toll-free 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.
- 18 -
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
used 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 used 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 use 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.
- 19 -
ACCOLADE FUNDS
SHARES OF THE FUND ARE SOLD
AT NET ASSET VALUE
WITHOUT SALES COMMISSIONS
OR REDEMPTION FEES
Adrian Day Global Opportunity Fund
INVESTMENT ADVISOR
U.S. Global Investors, Inc.
7900 Callaghan Road
Mailing Address: P.O. Box 29467
San Antonio, Texas 78229-0467
INVESTMENT SUB-ADVISOR
Global Strategic Management, Inc.
900 Bestgate Road, Suite 405
Annapolis, Maryland 21401
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, Suite 900
San Antonio, Texas 78205
100% No Load
Be Sure to Retain This Prospectus.
It Contains Valuable Information.
- 20 -
- --------------------------------------------------------------------------------
PART B -- STATEMENT OF ADDITIONAL INFORMATION
Included herein is the Statement of Additional Information
for the
Accolade-Adrian Day Global Opportunity Fund
Post-Effective Amendment No. 8
- --------------------------------------------------------------------------------
ACCOLADE FUNDS
ADRIAN DAY
GLOBAL OPPORTUNITY 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 ................., 1996, (the
"Prospectus"), which may be obtained from U. S. Global Investors, Inc. (the
"Advisor"), P.O. Box 29467, San Antonio, Texas 78229-0467.
The date of this Statement of Additional Information is ............., 1996.
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STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION..........................................................3
INVESTMENT OBJECTIVES AND POLICIES...........................................3
RISK FACTORS.................................................................4
PORTFOLIO TURNOVER..........................................................11
MANAGEMENT OF THE FUND......................................................11
INVESTMENT ADVISORY SERVICES................................................13
TRANSFER AGENCY AND OTHER SERVICES..........................................14
DISTRIBUTION PLAN...........................................................15
CERTAIN PURCHASES OF SHARES OF THE FUND.....................................15
ADDITIONAL INFORMATION ON REDEMPTIONS.......................................16
CALCULATION OF PERFORMANCE DATA.............................................16
TAX STATUS..................................................................17
INDEPENDENT ACCOUNTANTS ....................................................18
FINANCIAL STATEMENTS........................................................18
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GENERAL INFORMATION
Accolade Funds (the "Trust") is an open-end management investment company and is
a business trust organized under the laws of the Commonwealth of Massachusetts.
There are numerous series within the Trust, each of which represents a separate
diversified portfolio of securities (a "Portfolio"). This Statement of
Additional Information ("SAI") presents important information concerning the
Adrian Day Global Opportunity Fund ("Fund") and should be read in conjunction
with the prospectus.
The assets received by the Trust from the issue or sale of shares of the Fund,
and all income, earnings, profits and proceeds thereof, subject only to the
rights of creditors, are separately allocated to such Fund. They constitute the
underlying assets of each fund, are required to be segregated on the books of
accounts, and are to be charged with the expenses with respect to such fund. Any
general expenses of the Trust, not readily identifiable as belonging to a
particular fund, shall be allocated by or under the direction of the Board of
Trustees in such manner as the Board determines to be fair and equitable.
Each share of 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.
INVESTMENT RESTRICTIONS
If a percentage investment restriction is adhered to at the time of investment,
a later increase or decrease in percentage, resulting from a change in values of
portfolio securities or amount of net assets, will not be considered a violation
of any of the foregoing restrictions.
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FUNDAMENTAL INVESTMENT RESTRICTIONS
The Fund will not change any of the following investment restrictions, without
the affirmative vote of a majority of the outstanding voting securities of the
Fund, which, as used herein, means the lesser of (1) 67% of that Fund's
outstanding shares present at a meeting at which more than 50% of the
outstanding shares of that Fund are represented either in person or by proxy, or
(2) more than 50% of that Fund's outstanding shares.
The Fund may not:
(1) Issue senior securities.
(2) Borrow money, except that the Fund may borrow not in excess of 5% of its
total assets from banks as a temporary measure for extraordinary purposes,
may borrow up to 331/3% of the amount of its total assets (reduced by the
amount of all liabilities and indebtedness other than such borrowing) when
deemed desirable or appropriate to effect redemptions, provided, however,
that the Fund will not purchase additional securities while borrowings
exceed 5% of the total assets of the Fund.
(3) Underwrite the securities of other issuers.
(4) Invest in real estate.
(5) Engage in the purchase or sale of commodities or commodity futures
contracts, except that the Fund may invest in futures contracts, forward
contracts, options, and other derivative investments in conformance with
policies disclosed in the Fund's then current prospectus and/or Statement
of Additional Information.
(6) Lend its assets, except that the Fund may purchase money market debt
obligations and repurchase agreements secured by money market obligations,
and except for the purchase or acquisition of bonds, debentures or other
debt securities of a type customarily purchased by institutional investors
and except that any fund may lend portfolio securities with an aggregate
market value of not more than one-third of such fund's total net assets.
(Accounts receivable for shares purchased by telephone shall not be deemed
loans.)
(7) Purchase any security on margin, except that it may obtain such short-term
credits as are necessary for clearance of securities transactions.
(8) Sell short more than 5% of its total assets.
(9) Invest more than 25% of its total assets in securities of companies
principally engaged in any one industry. For the purposes of determining
industry concentration, the Fund relies on the Standard Industrial
Classification as complied by Standard & Poor's Compustat Services, Inc. as
in effect from time to time
(10) With respect to 75% of its total assets the Fund will not: (a) Invest more
than 5% of the value of its total assets in securities of any one issuer,
except such limitation shall not apply to obligations issued or guaranteed
by the United States ("U.S.") Government, its agencies or
instrumentalities, or (b) acquire more than 10% of the voting securities of
any one issuer.
(11) Invest more than 10% of its total net assets in open-end investment
companies. To the extent that the Fund shall invest in open-end investment
companies, the Fund's Advisor and Sub-Advisor shall waive a proportional
amount of their management fee.
RISK FACTORS
The following information supplements the discussion of the Fund's risk factors
discussed in the Fund's prospectus. The following are among the most significant
risks associated with an investment in the Fund.
EQUITY PRICE FLUCTUATION. Equity securities are subject to price fluctuations
depending on a variety of factors, including market, business, and economic
conditions.
FOREIGN INVESTMENTS. Investing in securities issued by companies whose principal
business activities are outside the United States may involve significant risks
not present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those not
subject to the disclosure and reporting requirements of the United States
securities laws. Foreign issuers are generally not bound by uniform accounting,
auditing, and financial reporting requirements and standards of practice
comparable to those applicable to domestic issuers. Investments in foreign
securities also involve the risk of possible adverse changes in investment or
exchange control regulations, expropriation or confiscatory taxation, limitation
of the removal of funds or other assets of the Fund, political or financial
instability or diplomatic and other developments which could affect such
investment. Further, economies of particular countries or areas
- 4 -
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 issuers (particularly those located in developing
countries) may be less liquid and more volatile than securities of comparable
United States companies. In addition, foreign brokerage commissions are
generally higher than commissions on securities traded in the United States and
may be non-negotiable. In general, there is less overall governmental
supervision and regulation of foreign securities markets, broker/dealers, and
issuers than in the United States.
EMERGING MARKETS. The Fund may invest up to 20% of its total assets in countries
considered by the Sub-Advisor to represent emerging markets. However, the Fund
may not invest more than 5% of its total assets in any single emerging market
country. The Sub-Advisor determines which countries are emerging market
countries by considering various factors, including development of securities
laws and market regulation, total number of issuers, total market
capitalization, and perceptions of the investment community. Generally, emerging
markets are those other than North America, Western Europe, and Japan. For
example, the Sub-Advisor currently considers the following countries to be among
the emerging markets in which it might invest: Argentina, Brazil, China,
Columbia, Czech Republic, Indonesia, Malaysia, Peru, Philippines, Singapore,
Thailand, Turkey, and Zimbabwe.
Investing in emerging markets involves risks and special considerations not
typically associated with investing in other more established economies or
securities markets. Investors should carefully consider their ability to assume
the below listed risks before making an investment in the Fund. Investing in
emerging markets is considered speculative and involves the risk of total loss.
Risks of investing in emerging markets include:
(1) the risk that the Fund's assets may be exposed to nationalization,
expropriation, or confiscatory taxation;
(2) the fact that emerging market securities markets are substantially smaller,
less liquid and more volatile than the securities markets of more developed
nations The relatively small market capitalization and trading volume of
emerging market securities may cause the Fund's investments to be
comparatively less liquid and subject to greater price volatility than
investments in the securities markets of developed nations. Many emerging
markets are in their infancy and have yet to be exposed to a major
correction. In the event of such an occurrence, the absence of various
market mechanisms which are inherent in the markets of more developed
nations may lead to turmoil in the market place, as well as the inability
of the Fund to liquidate its investments;
(3) greater social, economic and political uncertainty (including the risk of
war);
(4) greater price volatility, substantially less liquidity and significantly
smaller market capitalization of securities markets;
(5) currency exchange rate fluctuations and the lack of available currency
hedging instruments;
(6) higher rates of inflation;
(7) controls on foreign investment and limitations on repatriation of invested
capital and on the Fund's ability to exchange local currencies for U.S.
dollars;
(8) greater governmental involvement in and control over the economy;
(9) the fact that emerging market companies may be smaller, less seasoned and
newly organized;
(10) the difference in, or lack of, auditing and financial reporting standards
which may result in unavailability of material information about issuers;
- 5 -
(11) the fact that the securities of many companies may trade at prices
substantially above book value, at high price/earnings ratios, or at prices
which do not reflect traditional measures of value;
(12) the fact that statistical information regarding the economy of many
emerging market countries may be inaccurate or not comparable to
statistical information regarding the United States or other economies;
(13) less extensive regulation of the securities markets;
(14) certain considerations regarding the maintenance of Fund portfolio
securities and cash with foreign subcustodians and securities depositories;
(15) the risk that it may be more difficult, or impossible, to obtain and/or
enforce a judgment than in other countries;
(16) the risk that the Fund may be subject to income or withholding taxes
imposed by emerging market counties or other foreign governments. The Fund
intends to elect, when eligible, to "pass through" to the Fund's
shareholders the amount of foreign income tax and similar taxes paid by the
Fund. The foreign taxes passed through to a shareholder would be included
in the shareholder's income and may be claimed as a deduction or credit.
Other taxes, such as transfer taxes, may be imposed on the Fund, but would
not give rise to a credit or be eligible to be passed through to the
shareholders;
(17) the fact that the Fund also is permitted to engage in foreign currency
hedging transactions and to enter into stock options on stock index futures
transactions, each of which may involve special risks, although these
strategies cannot at the present time be used to a significant extent by
the Fund in the markets in which the Fund will principally invest;
(18) enterprises in which the Fund invests may be or become subject to unduly
burdensome and restrictive regulation affecting the commercial freedom of
the invested company and thereby diminishing the value of the Fund's
investment in it. Restrictive or over regulation may therefore be a form of
indirect nationalization;
(19) businesses in emerging markets only have a very recent history of operating
within a market-oriented economy. In general, relative to companies
operating in western economies, companies in emerging markets are
characterized by a lack of (i) experienced management, (ii) modern
technology and (iii) a sufficient capital base with which to develop and
expand their operations. It is unclear what will be the effect on companies
in emerging markets, if any, of attempts to move towards a more
market-oriented economy;
(20) investments in equity securities are subject to inherent market risks and
fluctuations in value due to earnings, economic conditions, quality ratings
and other factors beyond the control of the Advisor or Sub-Advisor. As a
result, the return and net asset value of the Fund will fluctuate;
(21) the Sub-Advisor may engage in hedging transactions in an attempt to hedge
the Fund's foreign securities investments back to the U.S. dollar when, in
its judgment, currency movements affecting particular investments are
likely to harm the performance of the Fund. Possible losses from changes in
currency exchange rates are primarily a risk of unhedged investing in
foreign securities. While a security may perform well in a foreign market,
if the local currency declines against the U.S. dollar, gains from the
investment can disappear or become losses. Typically, currency fluctuations
are more extreme than stock market fluctuations. Accordingly, the strength
or weakness of the U.S. dollar against foreign currencies may account for
part of the Fund's performance even when the Sub-Advisor attempts to
minimize currency risk through hedging activities. While currency hedging
may reduce portfolio volatility, there are costs associated with such
hedging, including the loss of potential profits, losses on hedging
transactions, and increased transaction expenses; and
(22) disposition of illiquid securities often takes more time than for more
liquid securities, may result in higher selling expenses and may not be
able to be made at desirable prices or at the prices at which such
securities have been valued by the Fund. As a non-fundamental policy the
Fund will not invest more than 15% of its net assets in illiquid
securities.
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LOWER-RATED AND UNRATED DEBT SECURITIES. The Fund may invest up to 15% of its
total assets in debt rated less than investment grade (or unrated) by Standard &
Poor's Corporation (Chicago), Moody's Investors Service (New York), Duff &
Phelps (Chicago), Fitch Investors Service (New York), Thomson Bankwatch (New
York), Canadian Bond Rating Service (Montreal), Dominion Bond Rating Service
(Toronto), IBCA (London), The Japan Bond Research Institute (Tokyo), Japan
Credit Rating Agency (Tokyo), Nippon Investors Service (Tokyo), or S&P-ADEF
(Paris). In calculating the 15% limitation, a debt security will be considered
investment grade if any one of the above listed credit rating agencies rates the
security as investment grade.
In general, the market for lower-rated or unrated bonds may be thinner and less
active, such bonds may be less liquid and their market prices may fluctuate more
than those of higher-rated bonds, particularly in times of economic change and
market stress. In addition, because the market for lower-rated or unrated
corporate debt securities has in recent years experienced a dramatic increase in
the large-scale use of such securities to fund highly leveraged corporate
acquisitions and restructuring, past experience may not provide an accurate
indication of the future performance of that market or of the frequency of
default, especially during periods of economic recession. Reliable objective
pricing data for lower-rated or unrated bonds may tend to be more limited; in
that event, valuation of such securities in the Fund's portfolio may be more
difficult and will require greater reliance on judgment.
Since the risk of default is generally higher among lower-rated or unrated
bonds, the Sub-Advisor's research and analysis are especially important in the
selection of such bonds, which are often described as "high yield bonds" because
of their generally higher yields and referred to figuratively as "junk bonds"
because of their greater risks.
In selecting lower-rated bonds for investment by the Fund, the Sub-Advisor does
not rely exclusively on ratings, which in any event evaluate only the safety of
principal and interest, not market value risk, and which furthermore, may not
accurately reflect an issuer's current financial condition. The Fund does not
have any minimum rating criteria for its investments in bonds. Through portfolio
diversification, good credit analysis and attention to current developments and
trends in interest rates and economic conditions, investment risk can be
reduced, although there is no assurance that losses will not occur.
ZERO COUPON SECURITIES. The Fund may invest in zero coupon securities which pay
no cash income and are sold at substantial discounts from their value at
maturity. When held from issuance to maturity, their entire income, which
consists of accretion of discount, comes from the difference between the issue
price and their value at maturity. Zero coupon securities are subject to greater
market value fluctuations from changing interest rates than debt obligations of
comparable maturities which make current cash distributions of interest.
RESTRICTED SECURITIES. The Fund may, from time to time, purchase securities
which are subject to restrictions on resale. While such purchases may be made at
an advantageous price and offer attractive opportunities for investment not
otherwise available on the open market, the Fund may not have the same freedom
to dispose of such securities as in the case of the purchase of securities in
the open market or in a public distribution. These securities may often be
resold in a liquid dealer or institutional trading market, but the Fund may
experience delays in its attempts to dispose of such securities. If adverse
market conditions develop, the Fund may not be able to obtain as favorable a
price as that prevailing at the time the decision is made to sell. In any case,
where a thin market exists for a particular security, public knowledge of a
proposed sale of a large block may have the effect of depressing the market
price of such securities.
COMMODITY LINKED SECURITIES. The Fund may invest in structured notes and/or
preferred stock, the value of which is linked to the price of a referenced
commodity. Structured notes and/or preferred stock differ from other types of
securities in which the Fund may invest in several respects. For example, not
only the coupon but also the redemption amount at maturity may be increased or
decreased depending on the change in the price of the referenced commodity.
Investment in commodity linked securities involves certain risks. In addition to
the credit risk of the security's issuer and the normal risks of price changes
in response to changes in interest rates, the redemption amount may decrease as
a result of changes in the price of the referenced commodity. Further, in
certain cases the coupon and/or dividend may be reduced to zero, and any further
decline in the value of the security may then reduce the redemption amount
payable on maturity. Finally, commodity linked securities may be more volatile
than the price of the referenced commodity.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities, that is,
bonds, notes, debentures, preferred stocks and other securities which are
convertible into or exchangeable for another security, usually common stock.
Convertible debt securities and convertible preferred stocks, until converted,
have general characteristics similar to both debt and equity securities.
Although to a lesser extent than with debt securities generally, the market
value of convertible securities tends
- 7 -
to decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion or exchange
feature, the market value of convertible securities typically increases or
declines as the market value of the underlying common stock increases or
declines, although usually not to the same extent. Convertible securities
generally offer lower yields than non-convertible fixed income securities of
similar quality because of their conversion or exchange features. Convertible
bonds and convertible preferred stock typically have lower credit ratings than
similar non-convertible securities because they are generally subordinated to
other similar but non-convertible fixed income securities of the same issuer.
OTHER RIGHTS TO ACQUIRE SECURITIES. The Fund may also invest in other rights to
acquire securities, such as options and warrants. These securities represent the
right to acquire a fixed or variable amount of a particular issue of securities
at a fixed or formula price either during specified periods or only immediately
prior to termination. These securities are generally exercisable at premiums
above the value of the underlying securities at the time the right is issued.
These rights are more volatile than the underling stock and will result in a
total loss of the Fund's investment if they expire without being exercised
because the value of the underlying security does not exceed the exercise price
of the right.
STRATEGIC TRANSACTIONS
The Fund may purchase and sell exchange-listed and over-the-counter put and call
options on securities, equity and fixed-income indices and other financial
instruments, purchase and sell financial futures contracts and options thereon,
and enter into various currency transactions such as currency forward contracts,
currency futures contracts, options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions"). The Fund may
engage in Strategic Transactions for hedging, risk management, or portfolio
management purposes and not for speculation.
Strategic Transactions may be used to attempt (1) to protect against possible
changes in the market value of securities held in or to be purchased for the
Fund's portfolio resulting from securities markets or currency exchange rate
fluctuations, (2) to protect the Fund's unrealized gains in the value of its
portfolio securities, (3) to facilitate the sale of such securities for
investment purposes, (4) to manage the effective maturity or duration of the
Fund's portfolio, or (5) to establish a position in the derivatives markets as a
temporary substitute for purchasing or selling particular securities. The Fund's
ability to successfully use these Strategic Transactions will depend upon the
Sub-Advisor's ability to predict pertinent market movements, and cannot be
assured. Engaging in Strategic Transactions will increase transaction expenses
and may result in a loss which exceeds the principal invested in the
transactions. The Fund will comply with applicable regulatory requirements when
implementing these strategies, techniques and instruments.
Strategic Transactions have risk associated with them including possible default
by the other party to the transaction, illiquidity and, to the extent the
Sub-Advisor's view as to certain market movements is incorrect, the risk that
the use of such Strategic Transactions could result in losses greater than if
they had not been used. Use of put and call options may result in losses to the
Fund. For example, selling call options may force the sale of portfolio
securities at inopportune times or for lower prices than current market values.
Selling call options may also limit the amount of appreciation the Fund can
realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements, or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and option markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction, and if it is, substantial losses might be incurred. Although the
use of futures and options transactions for hedging should tend to minimize the
risk of loss due to a decline in the value of a hedged position. At the same
time they tend to limit any potential gain which might result from an increase
in value of such position. Finally, the daily variation margin requirement for
futures contracts would create a greater on going potential financial risk than
would purchases of options, where the exposure is limited to the cost of the
initial premium. Losses resulting from the use of Strategic Transactions would
reduce net asset value, and possibly income, and such losses can be greater than
if the Strategic Transactions had not been used.
The Fund's activities involving Strategic Transactions may be limited by the
requirements of Subchapter M of the Internal Revenue Code for qualification as a
regulated investment company.
- 8 -
PUT AND CALL OPTIONS. The Fund may purchase and sell (issue) both put and call
options. The Fund may also enter into transactions to close out its investment
in any put or call options.
A put option gives the purchaser of the option, upon payment of a premium, the
right to sell, and the issuer the obligation to buy, the underlying security,
commodity, index, currency or other instrument at the exercise price. For
instance, the Fund's purchase of a put option on a security might be designed to
protect its holdings in the underlying instrument (or, in some cases, a similar
instrument) against a substantial decline in the market value by giving the Fund
the right to sell such instrument at the option exercise price. A call option,
upon payment of a premium, gives the purchaser of the option the right to buy,
and the issuer the obligation to sell, the underling instrument at the exercise
price. The Fund's purchase of a call option on a security, financial future,
index currency or other instrument might be intended to protect the Fund against
an increase in the price of the underlying instrument that it intends to
purchase in the future by fixing the price at which it may purchase such
instrument. An "American style" put or call option may be exercised at any time
during the option period while a "European style" put or call option may be
exercised only upon expiration or during a fixed period prior thereto.
The Fund is authorized to purchase and sell both exchange listed options and
over-the-counter options ("OTC options"). Exchange listed options are issued by
a regulated intermediary such as the Options Clearing Corporation ("OCC"), which
guarantees the performance of the obligations of the parties to such options.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ["Counterparty(ies)"] through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option are set by negotiation of the parties. Unless the parties provide for
it, there is no central clearing or guaranty function in an OTC option.
The Fund's ability to close out its position as a purchaser or seller of a put
or call option is dependent, in part, upon the liquidity of the market for that
particular option. Exchange listed options, because they are standardized and
not subject to Counterparty credit risk, are generally more liquid than OTC
options. There can be no guarantee that the Fund will be able to close out an
option position, whether in exchange listed options or OTC options, when
desired. An inability to close out its options positions may reduce the Fund's
anticipated profits or increase its losses.
If the Counterparty to an OTC option fails to make or take delivery of the
security, currency or other instrument underlying an OTC option it has entered
into with the Fund, or fails to make a cash settlement payment due in accordance
with the terms of that option, the Fund may lose any premium it paid for the
option as well as any anticipated benefit of the transaction. Accordingly, the
Sub-Advisor must assess the creditworthiness of each such Counterparty or any
guarantor or credit enhancement of the Counterparty's credit to determine the
likelihood that the terms of the OTC option will be satisfied.
The Fund will realize a loss equal to all or a portion of the premium paid for
an option if the price of the underlying security, commodity, index, currency or
other instrument security decreases or does not increase by more than the
premium (in the case of a call option), or if the price of the underlying
security, commodity, index, currency or other instrument increases or does not
decrease by more than the premium (in the case of a put option). The Fund will
not purchase any option if, immediately thereafter, the aggregate market value
of all outstanding options purchased by the Fund would exceed 5% of the Fund's
total assets.
If the Fund sells (i.e., issues) a call option, the premium that it receives may
serve as a partial hedge, to the extent of the option premium, against a
decrease in the value of the underlying securities or instruments in its
portfolio, or may increase the Fund's income. If the Fund sells (i.e. issues) a
put option, the premium that it receives may serve to reduce the cost of
purchasing the underlying security, to the extent of the option premium, or may
increase the Fund's income. All options sold by the Fund must be "covered"
(i.e., the Fund must either be long (when selling a call option) or short (when
selling a put option), the securities or futures contract subject to the calls
or must meet the asset segregation requirements described below as long as the
option is outstanding. Even though the Fund will receive the option premium to
help protect it against loss or reduce its cost basis, an option sold by the
Fund exposes the Fund during the term of the option to possible loss. When
selling a call, the Fund is exposed to the loss of opportunity to realize
appreciation in the market price of the underlying security or instrument, and
the transaction may require the Fund to hold a security or instrument which it
might otherwise have sold. When selling a put, the Fund is exposed to
possibility of being required to pay greater than current market value to
purchase the underlying security, and the transaction may require the Fund to
maintain a short position in a security or instrument which it might otherwise
not have maintained. The Fund will not write any call or put options if,
immediately thereafter, the aggregate value of the Fund's securities subject to
outstanding call or put options would exceed 25% of the value of the Fund's
total assets.
- 9 -
FUTURES CONTRACTS. The Fund may enter into financial futures contracts or
purchase or sell put and call options on such futures as a hedge against
anticipated interest rate, currency or equity market changes, for duration
management and for risk management purposes. Futures are generally bought and
sold on the commodities exchange where they are listed with payment of an
initial variation margin as described below. The sale of a futures contract
creates a firm obligation by the Fund, as seller, to deliver to the buyer the
specific type for financial instrument called for in the contract at a specific
future time for a specified price (or, with respect to index futures and
Eurodollar instruments, the net cash amount). Options on futures contracts are
similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such
position.
The Fund's use of financial futures and options thereon will in all cases be
consistent with applicable regulatory requirements and in particular the rules
and regulations of the CFTC and will be entered into only for bonafide hedging,
risk management (including duration management) or other portfolio management
purposes. Typically, maintaining a futures contract or selling an option thereon
requires the Fund to deposit with a financial intermediary as security for its
obligations an amount of cash or other specified assets (initial margin) which
initially is typically 1% to 10% of the face amount of the contract (but may be
higher in some circumstances). Additional cash or assets (variation margin) may
be required to be deposited thereafter on a daily basis as the mark-to-market
value of the contract fluctuates. The purchase of an option on financial futures
involves payment of a premium for the option without any further obligation on
the part of the purchaser. If the Fund exercises an option on a futures
contract, it will be obligated to post initial margin (and potentially
subsequent variation margin) for the resulting futures position just as it would
for any futures position. Futures contracts and options thereon are generally
settled by entering into an offsetting transaction, but there can be no
assurance that the position can be offset prior to settlement at an advantageous
price, nor that delivery will occur.
The Fund will not enter into a futures contract or related option (except for
closing transactions) if, immediately thereafter, the sum of the amount of its
initial margin and premiums on open futures contracts and options thereon would
exceed 5% of the Fund's total assets (taken at current value). However, in the
case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The
segregation requirements with respect to futures contracts and options thereon
are described below.
FOREIGN CURRENCY TRANSACTIONS. The Fund may engage in currency transactions with
Counterparties in an attempt to hedge an investment in an issuer incorporated or
operating in a foreign country or in a security denominated in the currency of a
foreign country against a devaluation of that country's currency. Currency
transactions include forward currency contracts, exchange listed currency
futures, and exchange listed and OTC options on currencies. The Fund's dealing
in forward currency contracts and other currency transactions such as futures,
options, and options on futures generally will be limited to hedging involving
either specific transactions or portfolio positions. Transaction hedging is
entering into a currency transaction with respect to specific assets or
liabilities of the Fund, which will generally arise in connection with the
purchase or sale of its portfolio securities or the receipt of income therefrom.
Position hedging is entering into a currency transaction with respect to
portfolio security positions denominated or generally quoted in that currency.
The Fund may cross-hedge currencies by entering into transactions to purchase or
sell one or more currencies that are expected to decline in value relative to
other currencies in which the Fund has (or expects to have) portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings or portfolio securities, the Fund may engage in proxy
hedging. Proxy hedging may be used when the currency to which the Fund's
portfolio is exposed is difficult to hedge. Proxy hedging entails entering into
a forward contract to sell a currency whose changes in value are generally
considered to be linked to a currency in which some or all of the Fund's
portfolio securities are, or are expected to be denominated, and to buy U.S.
dollars.
To hedge against a devaluation of a foreign currency, the Fund may enter into a
forward market contract to sell to banks a set amount of such currency at a
fixed price and at a fixed time in the future. If, in foreign currency
transactions, the foreign currency sold forward by the Fund is devalued below
the price of the forward market contract and more than any devaluation of the
U.S. dollar during the period of the contract, the Fund will realize a gain as a
result of the currency transaction. In this way, the Fund might reduce the
impact of any decline in the market value of its foreign investments
attributable to devaluation of foreign currencies.
The Fund may sell foreign currency forward only as a means of protecting its
foreign investments or to hedge in connection with the purchase and sale of
foreign securities, and may not otherwise trade in the currencies of foreign
countries.
- 10 -
Accordingly, the Fund may not sell forward the currency of a particular country
to an extent greater than the aggregate market value (at the time of making such
sale) of the securities held in its portfolio denominated in that particular
foreign currency (or issued by companies incorporated or operating in that
particular foreign country) plus an amount equal to the value of securities
which it anticipates purchasing less the value of securities which it
anticipates selling, denominated in that particular currency.
As a result of hedging through selling foreign currencies forward, in the event
of a devaluation, it is possible that the value of the Fund's portfolio would
not depreciate as much as the portfolio of a fund holding similar investments
which did not sell foreign currencies forward. Even so, the forward market
contract is not a perfect hedge against devaluation because the value of the
Fund's portfolio securities may decrease more than the amount realized by reason
of the foreign currency transaction. To the extent that the Fund sells forward
currencies which are thereafter revalued upward, the value of the Fund's
portfolio would appreciate to a lesser extent than the comparable portfolio of a
fund which did not sell those foreign currencies forward. If, in anticipation of
a devaluation of a foreign currency, the Fund sells the currency forward at a
price lower than the price of that currency on the expiration date of the
contract, the Fund will suffer a loss on the contract if the currency is not
devalued, during the contract period, below the contract price. Moreover, it
will not be possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
in the future at a price above the devaluation level it anticipates. It is
possible that, under certain circumstances, the Fund may have to limit its
currency transactions to permit the Fund to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code").
Foreign currency transactions would involve a cost to the Fund, which would vary
with such factors as the currency involved, the length of the contact period and
the market conditions then prevailing.
The Fund will not attempt to hedge all its foreign investments by selling
foreign currencies forward and will do so only to the extent deemed appropriate
by the Sub-Advisor.
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS. Many Strategic Transactions, in
addition to other requirements, require that the Fund segregate liquid high
grade assets with its custodian to the extent that the Fund's obligations are
not otherwise "covered" through ownership of the underlying security, financial
instrument or currency. In general, either the full amount of any obligation of
the Fund to pay or deliver securities or assets must be covered at all times by
the securities, instruments or currency required to be delivered, or subject to
any regulatory restrictions, an amount of cash or liquid high grade debt
securities at least equal to the current amount of the obligation must either be
identified as being restricted in the Fund's accounting records or physically
segregated in a separate account at the Fund's custodian. The segregated assets
cannot be sold or transferred unless equivalent assets are substituted in their
place or it is no longer necessary to segregate them. For the purpose of
determining the adequacy of the liquid securities which have been restricted,
the securities will be valued at market or fair value. If the market or fair
value of such securities declines, additional cash or liquid securities will be
restricted on a daily basis so that the value of the restricted cash or liquid
securities, when added to the amount deposited with the broker as margin, equals
the amount of such commitments by the Fund.
PORTFOLIO TURNOVER
The Fund's management buys and sell securities for the Fund to accomplish
investment objectives. The Fund's investment policy may lead to frequent changes
in investments, particularly in periods of rapidly changing markets. The Fund's
investments may also be traded to take advantage of perceived short-term
disparities in market values.
A change in the securities held by the Fund is known as "portfolio turnover." A
high portfolio turnover rate may cause the Fund to pay higher transaction
expenses, including more commissions and markups, and also result in quicker
recognition of capital gains, resulting in more capital gain distributions which
may be taxable to shareholders. Any short term gain realized on securities will
be taxed to shareholders as ordinary income. See "Tax Status."
MANAGEMENT OF THE FUND
The Trustees and Officers of the Trust and their principal occupations during
the past five years are set forth below. Except as otherwise indicated, the
business address of each is 7900 Callaghan Road, San Antonio, Texas 78229.
- 11 -
NAME AND ADDRESS TRUST POSITION PRINCIPAL OCCUPATION
- ---------------- --------------- -------------------------------------
Frank E. Holmes(1) Trustee Chairman of the Board of Directors
President, and Chief Executive Officer of the
Chief Executive Advisor. Since October 1989 Mr.
Officer Holmes has served and continues to
serve in various positions with the
Advisor, its subsidiaries, and the
investment companies which it
sponsors. Director of Franc-Or
Resource Corp. from November 1994 to
November 1996. Director of Marleau,
Lemire Inc. from January 1995 to
December 1995.
----------------------------
(1) This Trustee may be deemed an
"interested person" of the Trust as
defined in the Investment Company Act
of 1940.
Richard E. Hughs Trustee Professor at the School of Business
11 Dennin Drive of the State University of New York
Menands, NY 12204 at Albany from 1990 to present; Dean,
School of Business 1990-1994;
Director of the Institute for the
Advancement of Health Care
Management, 1994-present. Corporate
Vice President, Sierra Pacific
Resources, Reno, NV, 1985-1990. Dean
and Professor, College of Business
Administration, University of Nevada,
Reno, 1977-1985. Associate Dean,
Stern School of Business, New York
University, New York City, 1970-1977.
Clark R. Mandigo Trustee Business consultant since 1991. From
1250 N.E. Loop 410 1985 to 1991, President, Chief
Suite 900 Executive Officer, and Director of
San Antonio, Texas Intelogic Trace, Inc., a nationwide
78209 company which sells, leases and
maintains computers and
telecommunications systems and
equipment. Prior to 1985, President
BHP Petroleum (Americas), Ltd., an
oil and gas exploration and
development company. Director Lone
Star Steakhouse & Saloon, Inc. and
Physician Corporation of America.
Bobby D. Duncan Executive Vice President, Chief Financial Officer,
President, and Chief Operating Officer of the
Chief Operating Advisor. Since January 1985 Mr.
Officer Duncan has served and continues to
serve in various positions with the
Advisor, its subsidiaries, and the
investment companies which it
sponsors.
Thomas D. Tays Vice President Vice President and Securities
Secretary Specialist of the Advisor. Since
September 1993 Mr. Tays has served
and continues to serve in various
positions with the Advisor, its
subsidiaries, and the investment
companies which it sponsors. Prior to
September 1993 Mr. Tays was an
attorney in private practice.
Susan B. McGee Vice President Vice President and Secretary of the
Assistant Advisor. Since September 1992 Ms.
Secretary McGee has served and continues to
serve in various positions with the
Advisor, its subsidiaries, and the
investment companies which it
sponsors. Prior to September 1992 Ms.
McGee was a student at St. Mary's Law
School.
- 12 -
Kevin C. White Chief Accounting Chief Accounting Officer of the
Officer Advisor. Since November 1995 Mr.
White has served and continues to
serve in various positions with the
Advisor, its subsidiaries, and the
investment companies which it
sponsors. Closing Manager for World
Savings and Loan from January 1995 to
November 1995. Controller of
Swearingen Aircraft from December
1991 to January 1995. Financial
Analyst for Fox Photo from February
1991 to December 1991.
PRINCIPAL HOLDERS OF SECURITIES
As of ..............., 1996, shares of the Fund had not yet been offered to the
public and ........ owned 100% of the Fund's outstanding shares.
INVESTMENT ADVISORY SERVICES
The investment adviser to the Fund is U. S. Global Investors, Inc. (the
"Advisor"), a Texas corporation, pursuant to an advisory agreement dated
September 21, 1994. Frank E. Holmes, President 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.
In consideration for such services, the Advisor pays the Sub-Advisor a
sub-advisory fee. The Advisor and the Sub-Advisor share the management fee
equally, except that the Sub-advisor's fee will be subject to downward
adjustments for: 1) the Advisor's incurred costs and expenses of marketing the
Fund that exceed the 0.25% 12b-1 fee charged to the Fund for such marketing
purposes; 2) for any monies advanced by the Advisor on behalf of the
Sub-Advisor; 3) the unrecovered costs of organizing the Fund up to $40,000 (the
Advisor will be responsible for bearing costs of organization of the Fund in
excess of $40,000); and 4) if a decision is made with respect to placing a cap
on expenses, to the extend that actual expenses of the Fund exceed the cap, and
the Advisor is required to pay or absorb any of the excess expenses, by the
amount of the excess expenses paid or absorbed by the Advisor through such
downward adjustments. To the extent that the Sub-Advisor has advanced monies to
the Advisor to pay for Fund distribution or organizational expenses, such
advances shall serve to offset the reductions enumerated above. The Fund is not
responsible for paying any portion of the Sub-Advisor's fees.
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.
- 13 -
The Trust and the Advisor, in connection with the Fund, have entered into a
sub-advisory agreement with another firm as discussed in the prospectus. The
Sub-Advisor's compensation is set forth in the prospectus and is paid by the
Advisor. The Fund will not be responsible for the Sub-Advisor's fee.
The Advisor may, out of profits derived from its management fee, pay certain
financial institutions (which may include banks, securities dealers, and other
industry professionals) a "servicing fee" for performing certain administrative
servicing functions for Fund shareholders to the extent these institutions are
allowed to do so by applicable statute, rule or regulation. These fees will be
paid periodically and will generally be based on a percentage of the value of
the institutions' client Fund shares. The Glass-Steagall Act 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. 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 will be submitted for approval by shareholders of the Fund at the initial
meeting of shareholders. The Advisory Agreement provides that it will continue
initially for two years, and from year to year thereafter, with respect to each
fund, as long as it is approved at least annually both (i) by a vote of a
majority of the outstanding voting securities of such fund [as defined in the
Investment Company Act of 1940 (the "Act")] or by the Board of Trustees of the
Trust, and (ii) by a vote of a majority of the Trustees who are not parties to
the Advisory Agreement or "interested persons" of any party thereto cast in
person at a meeting called for the purpose of voting on such approval. The
Advisory Agreement may be terminated on 60 days' written notice by either party
and will terminate automatically if it is assigned.
Both the Advisor and Sub-Advisor provide investment advise to a variety of
clients (the Advisor also provides investment advise to other mutual funds).
Investment decisions for each client are made with a view to achieving their
respective investment objectives. Investment decisions are the product of many
factors in addition to basic suitability for the particular client involved.
Thus, a particular security may be bought or sold for certain clients even
though it could have been bought or sold for other clients at the same time.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In some instances, one client
may sell a particular security to another client. It also sometimes happens that
two or more clients simultaneously purchase or sell the same security, in which
event each day's transactions in such security are, insofar as possible,
averaged as to price and allocated between such clients in a manner which in the
Advisor's or Sub-Advisor's opinion is equitable to each and in accordance with
the amount being purchased or sold by each. There may be circumstances when
purchases or sales of portfolio securities for one or more clients will have an
adverse effect on other clients. The Advisor and Sub-Advisor employ professional
staffs of portfolio managers who draw upon a variety of resources for research
information for the clients.
In addition to advising client accounts, the Advisor invests in securities for
its own account. The Advisor has adopted policies and procedures intended to
minimize or avoid potential conflicts with its clients when trading for its own
account. The Advisor's investment objective and strategies are not the same as
its clients, emphasizing venture capital investing, private placement arbitrage,
and speculative short-term trading. The Advisor uses a diversified approach to
venture capital investing. Investments typically involve early-stage businesses
seeking initial financing as well as more mature businesses in need of capital
for expansion, acquisitions, management buyouts, or recapitalization. In
general, the Advisor invests in start-up companies in the natural resources or
technology fields.
TRANSFER AGENCY AND OTHER SERVICES
In addition to the services performed for the Funds and the Trust under the
Advisory Agreement, the Advisor, through its subsidiary USSI, provides transfer
agent and dividend disbursement agent services pursuant to the Transfer Agency
- 14 -
Agreement as described in the Fund's prospectus under "Management of the Fund --
The Investment Advisor." In addition, lockbox and statement printing services
are provided by USSI.
USSI also maintains the books and records of the Trust and of each fund of the
Trust and calculates their daily net asset value as described in the Fund's
prospectus under "Management of the Funds -- The Investment Advisor."
A & B Mailers, Inc., a corporation wholly owned by the Advisor, provides the
Trust with certain mail handling services. The charges for such services have
been negotiated by the Audit Committee of the Trust and A & B Mailers, Inc. Each
service is priced separately.
DISTRIBUTION PLAN
As described under "Service Fee" in the prospectus, the Fund has adopted a
Distribution Plan pursuant to Rule 12b-1 of the 1940 Act (the "Distribution
Plan"). The Distribution Plan allows the Fund to pay for or reimburse
expenditures in connection with sales and promotional services related to the
distribution of Fund shares, including personal services provided to prospective
and existing Fund shareholders, and includes the costs of: printing and
distribution of prospectuses and promotional materials, making slides and charts
for presentations, assisting shareholders and prospective investors in
understanding and dealing with the Fund, and travel and out-of-pocket expenses
(e.g., copy and long distance telephone charges) related thereto.
The total amount expended pursuant to the Distribution Plan may not exceed 0.25%
of the Fund's net assets on an annual basis. Distribution expenses paid by the
Advisor or other third parties in prior periods that exceeded 0.25% of net
assets may be paid by the Fund with distribution expenses accrued pursuant to
the 12b-1 plan in the current or future periods, so long as the 0.25% limitation
is never exceeded.
Expenses which the Fund incurs pursuant to the Distribution Plan are reviewed
quarterly by the Board of Trustees. On an annual basis the Distribution Plan is
reviewed by the Board of Trustees as a whole, and the Trustees who are not
"interested persons" as that term is defined in the 1940 Act and who have no
direct or indirect financial interest in the operation of the Distribution Plan
("Qualified Trustees"). In their review of the Distribution Plan the Board of
Trustees, as a whole, and the Qualified Trustees determine whether, in their
reasonable business judgment and in light of their fiduciary duties under state
law and under Section 36(a) and (b) of the 1940 Act that there is a reasonable
likelihood that the Distribution Plan will benefit the Fund and its
shareholders. The Distribution Plan may be terminated at any time by vote of a
majority of the Qualified Trustees, or by vote of a majority of the outstanding
voting securities of the Fund.
The Fund is unaware of any Trustee or any interested person of the Fund who had
a direct or indirect financial interest in the operations of the Distribution
Plan.
The Fund expects that the Distribution Plan will be used primarily to pay a
"service fee" to persons who provide personal services to prospective and
existing Fund shareholders. Shareholders of the Fund will benefit from these
personal services and the Fund expects to benefit from economies of scale as
more shareholders are attracted to the Fund.
CERTAIN PURCHASES OF SHARES OF THE FUND
Shares of the Fund are continuously offered by the Trust at their net asset
value next determined after an order is accepted. The methods available for
purchasing shares of the Fund are described in the Prospectus. In addition,
shares of the Fund may be purchased using stock, so long as the securities
delivered to the Trust meet the investment objectives and concentration policies
of the Fund, and are otherwise acceptable to the Advisor, which reserves the
right to reject all or any part of the securities offered in exchange for shares
of the Fund. On any such "in kind" purchase, the following conditions will
apply:
(1) the securities offered by the investor in exchange for shares of the Fund
must not be in any way restricted as to resale or otherwise be illiquid;
(2) securities of the same issuer must already exist in the Fund's
portfolio;
(3) the securities must have a value which is readily ascertainable (and not
established only by evaluation procedures) as evidenced by a listing on the
AMEX, the NYSE, or NASDAQ;
- 15 -
(4) any securities so acquired by any 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 fairly to determine the value of its assets; or, (3)
as the SEC may otherwise permit.
REDEMPTION IN KIND. The Trust reserves the right to redeem shares of the Fund in
cash or in kind. However, the Trust has elected to be governed by Rule 18f-1
under the Investment Company Act of 1940, pursuant to which the Trust is
obligated to redeem shares of the Fund solely in cash up to the lesser of
$250,000 or one percent of the net asset value of the Fund during any 90-day
period for any one shareholder. Any shareholder of the Fund receiving a
redemption in kind would then have to pay brokerage fees in order to convert his
Fund investment into cash. All redemption in kind will be make in marketable
securities of the Fund.
CALCULATION OF PERFORMANCE DATA
TOTAL RETURN
The Fund may advertise performance in terms of average annual total return for
1-, 5- and 10-year periods, or for such lesser periods as the Fund has been in
existence. Average annual total return is computed by finding the average 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.
- 16 -
The calculation assumes all charges are deducted from the initial $1,000 payment
and assumes all dividends and distributions by the Fund are reinvested at the
price stated in the prospectus on the reinvestment dates during the period, and
includes all recurring fees that are charged to all shareholder accounts.
NONSTANDARDIZED TOTAL RETURN
The Fund may provide the above described standard total return results for a
period which ends as of not earlier than the most recent calendar quarter end
and which begins either twelve months before or at the time of commencement of
the Fund's operations. In addition, the Fund may provide nonstandardized total
return results for differing periods, such as for the most recent six months.
Such nonstandardized total return is computed as otherwise described under
"Total Return" except that no annualization is made.
TAX STATUS
TAXATION OF THE FUND -- IN GENERAL
As stated in its Prospectus, the Fund intends to qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, the Fund will not be liable for Federal
income taxes on its taxable net investment income and capital gain net income
that are distributed to shareholders, provided that the Fund distributes at
least 90% of its net investment income and net short-term capital gain for the
taxable year.
To qualify as a regulated investment company, the Fund must, among other things,
(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.
- 17 -
A shareholder of the Fund should be aware that a redemption of shares (including
any exchange into other funds offered, affiliated or administered by U. S.
Global Investors, Inc.) is a taxable event and, accordingly, a capital gain or
loss may be recognized. If a shareholder of the Fund receives a distribution
taxable as long-term capital gain with respect to shares of the Fund and redeems
or exchanges shares before he has held them for more than six months, any loss
on the redemption or exchange (not otherwise disallowed as attributable to an
exempt-interest dividend) will be treated as long-term capital loss to the
extent of the long-term capital gain recognized.
CUSTODIAN
Bankers Trust Company acts as Custodian for the Fund. Services with respect to
the retirement accounts will be provided by Security Trust and Financial Company
of San Antonio, Texas, a wholly-owned subsidiary of the Advisor.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, One Riverwalk Place, San Antonio, Texas 78205 is the
independent accountant for the Trust.
FINANCIAL STATEMENTS
The Fund was established as a separate series of the Trust on November 21, 1996,
and as of yet does not have any operating history. Shareholders will be provided
with annual and semi-annual reports as they become available.
- 18 -
- --------------------------------------------------------------------------------
PART C -- OTHER INFORMATION
Included herein is Part C for
Accolade Funds-Adrian Day Global Opportunity Fund
Post-Effective Amendment No. 8
- --------------------------------------------------------------------------------
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The Fund was established as a separate series of the
Trust and does not yet have any operating history.
(b) Exhibits
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
(1) (a) First Amended and Restated Master Trust Agreement,
dated May 22, 1996, incorporated by reference to Post-
Effective Amendment No. 5 dated May 28, 1996.
(2) By-laws of Accolade Funds, incorporated by reference to
initial registration dated April 15, 1993.
(3) Not applicable
(4) Specimen certificate for Accolade Funds incorporated by
reference to Post-Effective Amendment No. 1 dated March
20, 1995.
(5) (a) Advisory Agreement between United Services Advisors,
Inc. and Accolade Funds dated September 21, 1994
incorporated by reference to Pre-Effective Amendment
No. 3 dated October 17, 1994.
(b) Sub-Advisory Agreement among Accolade Funds, United
Services Advisors, Inc. and Bonnel, Inc. dated
September 21, 1994, incorporated by reference to
Pre-Effective Amendment No. 3 dated October 17, 1994.
(c) Amendment dated May 22, 1996, to Advisory Agreement
between Accolade Funds and United Services Advisors,
Inc. incorporated by reference to Post-Effective
Amendment No. 5 dated May 28, 1996.
(d) Sub-Advisory Agreement among Accolade Funds, United
Services Advisors, Inc. and Money Growth Institute,
Inc. incorporated by reference to Post-Effective
Amendment No. 5 dated May 28, 1996.
(e) * Amendment dated ...................., 1996, to Advisory
Agreement between Accolade Funds and U.S. Global
Investors, Inc. (formerly United Services Advisors,
Inc.).
(f) * Sub-Advisory Agreement dated .........................,
1996, among Accolade Funds, U.S. Global Investors, Inc.
and Global Strategic Management, Inc.
( 6) Not applicable
( 7) Not applicable
( 8) (a) Custodian Agreement dated October 4, 1994, between
Accolade Funds and Bankers Trust Company of New York
incorporated by reference to Pre-Effective Amendment
No. 3 dated October 17, 1994.
(b) Amendment dated July 18, 1996, to Custodian Agreement
with Bankers Trust Company of New York adding
MegaTrends Fund to the Agreement, incorporated by
reference to Post-Effective Amendment No. 6 dated
October 10, 1996.
(c) * Amendment dated ................., 1996, to Custodian
Agreement with Bankers Trust Company of New York adding
Adrian Day Global Opportunity Fund to the Agreement.
( 9) (a) Transfer Agent Agreement between United Shareholder
Services, Inc. and Accolade Funds dated September 21,
1994, incorporated by reference to Pre-Effective
Amendment No. 3 dated October 17, 1994.
(b) Bookkeeping and Accounting Agreement between United
Shareholder Services, Inc. and Accolade Funds dated
September 21, 1994, incorporated by reference to
Pre-Effective Amendment No. 3 dated October 17, 1994.
(c) Lockbox Service Agreement between United Shareholder
Services, Inc. and Accolade Funds dated September 21,
1994, incorporated by reference to Pre-Effective
Amendment No. 3 dated October 17, 1994.
(d) Printing Agreement between United Shareholder Services,
Inc. and Accolade Funds dated September 21, 1994,
incorporated by reference to Pre-Effective Amendment
No. 3 dated October 17, 1994.
(e) Amendment dated May 22, 1996, to Transfer Agent
Agreement between United Shareholder Services, Inc. and
Accolade Funds adding MegaTrends Fund to the Agreement,
incorporated by reference to Post-Effective Amendment
No. 5 dated May 28, 1996.
(f) * Amendment dated ................., 1996, to the
Transfer Agent Agreement between United Shareholder
Services, Inc. and Accolade Funds adding Adrian Day
Global Opportunity Fund to the Agreement.
(g) * Amendment dated ................., 1996, to the
Bookkeeping and Accounting Agreement between United
Shareholder Services, Inc. and Accolade Funds adding
Adrian Day Global Opportunity Fund to the Agreement.
(h) * Amendment dated ................., 1996, to the
Printing Agreement between United Shareholder Services,
Inc. and Accolade Funds adding MegaTrends Fund and
Adrian Day Global Opportunity Fund to the Agreement.
(i) * Amendment dated ................., 1996, to the Lockbox
Service Agreement between United Shareholder Services,
Inc. and Accolade Funds adding MegaTrends Fund and
Adrian Day Global Opportunity Fund to the Agreement.
(10) (a) Opinion and consent of Thomas D. Tays, Esq., counsel to
the Registrant, incorporated by reference to
Pre-Effective Amendment No. 3 dated October 17, 1994.
(b) Opinion and consent of Thomas D. Tays, Esq., counsel to
the Registrant, incorporated by reference to
Post-Effective Amendment No. 6 dated October 8, 1996.
(11) (a) Consent of Independent Accountant, Arthur Andersen LLP,
dated October 8, 1996, with respect to MegaTrends Fund
incorporated by reference to Post-Effective Amendment
No. 6 dated October 8, 1996.
(b) Power of Attorney incorporated by reference to
Pre-Effective Amendment No. 3 dated October 17, 1994.
(c) Power of Attorney incorporated by reference to
Post-Effective Amendment No. 2 dated January 15, 1996.
(d) Power of Attorney incorporated by reference to
Post-Effective Amendment No. 6 dated October 8, 1996.
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15) (a) Accolade Funds/Bonnel Growth Fund Distribution Plan
pursuant to Rule 12b-1 approved September 21, 1994,
incorporated by reference to Pre-Effective Amendment
No. 2 dated May 11, 1994.
(b) Accolade Funds/MegaTrends Fund Distribution Plan
pursuant to Rule 12b-1 approved May 22, 1996,
incorporated by reference to Post-Effective Amendment
No. 5 dated May 28, 1996.
(c) * Accolade Funds/Adrian Day Global Opportunity Fund
Distribution Plan pursuant to Rule 12b-1 approved
................., 1996.
(16) (a) Schedule for computation of each performance quotation
provided in the Registration Statement in response to
Item 22 incorporated by reference to initial
registration statement dated April 15, 1993.
* Filed Herein
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Information pertaining to persons controlled by or under common control
with Registrant is incorporated by reference to the Statement of Additional
Information contained in Part B of this Registration Statement at the
section entitled "Principal Holders of Securities."
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The number of record holders, as of December 4, 1996, of each class of
securities of the Registrant.
TITLE OF CLASS NUMBER OF RECORD HOLDERS
------------------ ------------------------
Bonnel Growth Fund 6195
MegaTrends Fund 1955
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 adviser is incorporated by reference to the Prospectus and
Statement of Additional Information contained in Parts A and B of this
Registration Statement at the sections entitled "Management of the Funds"
in the Prospectus and "Investment Advisory Services" in the Statement of
Additional Information.
ITEM 29. PRINCIPAL UNDERWRITERS
The Registrant is currently comprised of a single no-load fund which acts
as distributor of its own shares.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records maintained by the Registrant are kept at the
Registrant's office located at 7900 Callaghan Road, San Antonio, Texas. All
accounts and records maintained by Bankers Trust Company as custodian for
Accolade Funds are maintained at 16 Wall Street, New York, New York 10005.
ITEM 31. Not applicable
ITEM 32. Not applicable
- --------------------------------------------------------------------------------
SIGNATURE PAGE
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(a) under the Securities Act of 1933
and that it has duly caused this Amendment to the Registration Statement on Form
N-1A to be signed on its behalf by the undersigned, thereunto duly authorized in
the city of San Antonio, State of Texas, on this 2nd of December, 1996.
ACCOLADE FUNDS
By: * /s/ Frank E. Holmes
-----------------------------------------------
FRANK E. HOLMES, President, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
* /s/ Frank E. Holmes President December 2, 1996
- --------------------- Chief Executive Officer
FRANK E. HOLMES Trustee
* /s/ Clark R. Mandigo Trustee December 2, 1996
- ---------------------- Audit Committee
CLARK R. MANDIGO
* /s/ Richard E. Hughs Trustee December 2, 1996
- ---------------------- Audit Committee
RICHARD E. HUGHS
* /s/ Bobby D. Duncan Executive Vice President December 2, 1996
- --------------------- Chief Operating Officer
BOBBY D. DUNCAN
* /s/ Kevin C. White Principal Accounting Officer December 2, 1996
- --------------------
KEVIN C. WHITE
/s/ Thomas D. Tays Vice President December 2, 1996
- ------------------- Secretary
THOMAS D. TAYS
* BY: /s/ Thomas D. Tays Vice President December 2, 1996
- ------------------------ Secretary
THOMAS D. TAYS Power of Attorney
- --------------------------------------------------------------------------------
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
(5)(e) Amendment dated .........................., 1996, to Advisory
Agreement between Accolade Funds and U.S. Global Investors, Inc.
(5)(f) Sub-Advisory Agreement dated ........................., 1996, among
Accolade Funds, U.S. Global Investors, Inc. and Global Strategic
Management, Inc.
(8)(c) Amendment dated ......................, 1996, to Custodian
Agreement with Bankers Trust Company of New York adding Adrian Day
Global Opportunity Fund to the Agreement.
(9)(f) Amendment dated ......................, 1996, to the Transfer Agent
Agreement between United Shareholder Services, Inc. and Accolade
Funds adding Adrian Day Global Opportunity Fund to the Agreement.
(9)(g) Amendment dated ....................., 1996, to Bookkeeping and
Accounting Agreement between United Shareholder Services, Inc. and
Accolade Funds adding Adrian Day Global Opportunity Fund to the
Agreement.
(9)(h) Amendment dated ....................., 1996, to Printing Agreement
between United Shareholder Services, Inc. and Accolade Funds adding
MegaTrends Fund and Adrian Day Global Opportunity Fund to the
Agreement.
(9)(i) Amendment dated ....................., 1996, to Lockbox Service
Agreement between United Shareholder Services, Inc. and Accolade
Funds adding MegaTrends Fund and Adrian Day Global Opportunity Fund
to the Agreement.
(15)(c) Accolade Funds/Adrian Day Global Opportunity Fund Distribution Plan
pursuant to Rule 12b-1 approved ...................., 1996.
- --------------------------------------------------------------------------------
[GRAPHIC: ACCOLADE FUNDS LOGO]
ACCOLADE FUNDS
Bonnel Growth Fund
MegaTrends Fund
Adrian Day Global Opportunity Fund
November ..............., 1996
U.S. Global Investors, Inc.
7900 Callaghan Road
San Antonio, Texas 78229
Gentlemen:
Pursuant to Section 1(b) of the Advisory Agreement dated September 21, 1994
between Accolade Funds (the "Trust") and U.S. Global Investors, Inc. (the
"Advisor"), please be advised that the Trust has established one new series of
its shares, namely, the Adrian Day Global Opportunity Fund, and please be
further advised that the Trust desires to retain the Advisor to render
management and investment advisory services under the Advisory Agreement to this
Fund at the fees stated below:
ADRIAN DAY GLOBAL OPPORTUNITY FUND
Monthly Average Net Assets 1/12 of 1.25%
Please state below whether you are willing to render such services at the fees
stated above.
ACCOLADE FUNDS
Attest: By:
- --------------------------- ---------------------------
Secretary Executive Vice President
Date:
- ---------------------------
................................................................................
We are willing to render management and investment advisory services to the
Adrian Day Global Opportunity Fund at the fee stated above.
U.S. GLOBAL INVESTORS, INC.
Attest: By:
- --------------------------- ---------------------------
Secretary President
................................................................................
7900 Callaghan Road
Mail Address: P.O. Box 781234, San Antonio, TX 78278-1234
................................................................................
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the ...... day of .............., 199...... among U.S.
GLOBAL INVESTORS, INC., a corporation organized under the laws of the State of
Texas (the "Advisor"), ACCOLADE FUNDS, a Massachusetts business trust having its
principal place of business in San Antonio, Texas (the "Trust"), on behalf of
the Adrian Day Global Opportunity Fund (the "Fund"), a series of shares of the
Trust, and GLOBAL STRATEGIC MANAGEMENT, INC. , a corporation organized under the
laws of the State of Maryland (the "Sub-Advisor"), of Annapolis, Maryland.
WHEREAS, the Advisor is engaged in the business of rendering investment
management services to the Trust; and
WHEREAS, the Trust is an open-end management investment company and is so
registered under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Trust is operated as a "series company" within the meaning of
Rule 18f-2 under the 1940 Act and has four separate series of shares of
beneficial interest, one of which series is the Fund.
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF SUB-ADVISOR.
The Sub-Advisor is hereby appointed to provide investment advisory
services to the Fund for the period and on the terms herein set forth.
The Sub-Advisor accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided. To
enable Sub-Advisor to exercise fully its discretion and authority as
provided in this Section 1, the Trust hereby constitutes and appoints
Sub- Advisor as the Trust's agent and attorney-in-fact with full power
and authority for the Trust and on the Trust's behalf to buy, sell and
otherwise deal in securities and contracts relating to same for the
Fund.
2. DUTIES OF SUB-ADVISOR.
(a) The Sub-Advisor is hereby authorized and directed and hereby
agrees, subject to the stated investment objectives and policies
of the Fund as set forth in the Fund's Prospectus (as defined
below) and subject to the supervision of the Advisor and the
Board of Trustees of the Trust, (i) to develop, recommend and
implement such investment program and strategy for the Fund as
may from time to time under the circumstances appears most
appropriate to the achievement of the investment objective of the
Fund as stated in the aforesaid Prospectus, (ii) to provide
research and analysis relative to the investment program and
investments of the Fund, (iii) to determine which securities
should be purchased and sold and what portion of the assets of
the Fund should be held in cash or cash equivalents, and (iv) to
monitor on a continuing basis the performance of the portfolio
securities of the Fund. The Sub-Advisor will advise the Trust's
custodian and the Advisor on a prompt basis of each purchase and
sale of a portfolio security specifying the name of the issuer,
the description and amount or number of shares of the security
purchased, the market price, commission and gross or net price,
trade date, settlement date and identity of the effecting broker
or dealer; and will review the accuracy of the pricing of
portfolio securities in accordance with Trust procedures. From
time to time, as the Trustees of the Trust or the Advisor may
reasonably request, the Sub-Advisor will furnish to the Trust's
officers and to each of its Trustees reports on portfolio
transactions and reports on issues of securities held in the
portfolio, all in such detail as the Trust or the Advisor may
reasonably request. The Sub- Advisor will also inform the Trust's
officers and Trustees on a current basis of changes in investment
strategy or tactics. The Sub-Advisor will make its officers and
employees available to meet with the Trust's officers and
Trustees on due notice to review the investments and investment
program of the Fund in the light of current and prospective
economic and market conditions.
The Sub-Advisor shall place all orders for the purchase and sale
of portfolio securities for the account of the Fund with brokers
or dealers selected by the Sub-Advisor, although the Trust will
pay the actual brokerage commissions and any transfer taxes with
respect to transactions in the
1
portfolio securities of the Trust. The Sub-Advisor is authorized
to submit any such order collectively with orders on behalf of
other accounts under its management, provided that the
Sub-Advisor shall have determined that such action is in the best
interest of the Fund and is in accordance with applicable law,
including, without limitation, Rule 17d-1 under the 1940 Act. In
executing portfolio transactions and selecting brokers or
dealers, the Sub-Advisor will use its best efforts to seek on
behalf of the Fund the best overall terms available. In assessing
the best overall terms available for any transaction, the
Sub-Advisor shall consider all factors it deems relevant,
including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission,
if any (for the specific transaction and on a continuing basis).
In evaluating the best overall terms available, and in selecting
the broker or dealer to execute a particular transaction, the
Sub-Advisor may also consider the brokerage and research services
[as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934] provided to the Fund and/or other accounts
over which the Sub-Advisor or an affiliate of the Sub-Advisor
exercises investment discretion. The Sub-Advisor is authorized to
pay to a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio
transaction for the Fund which is in excess of the amount of
commission another broker or dealer would have charged for
effecting that transaction if, but only if, the Sub-Advisor
determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of that
particular transaction or in terms of all of the accounts over
which investment discretion is so exercised. An affiliated person
of the Sub-Advisor may provide brokerage services to the Fund
provided that the Sub- Advisor shall have determined that such
action is consistent with its obligation to seek the best overall
terms available and is in accordance with applicable law,
including, without limitation, Section 17(e) of the 1940 Act. The
foregoing shall not be deemed to authorize an affiliated person
of the Sub-Advisor to enter into transactions with the Fund as
principal.
In the performance of its duties hereunder, the Sub-Advisor is
and shall be an independent contractor and unless otherwise
expressly provided or authorized shall have no authority to act
for or represent the Trust in any way or otherwise be deemed to
be an agent of the Trust or of the Advisor.
(b) Delivery of Documents. The Advisor will furnish upon request or
has previously furnished the Sub-Advisor with true copies of each
of the following:
(i) The Trust's Master Trust Agreement dated April 15, 1993 as
filed with the Secretary of State of the Commonwealth of
Massachusetts and all amendments thereto (such Master Trust
Agreement, as presently in effect and as it shall from time
to time be amended, is herein called the "Master Trust
Agreement");
(ii) The Trust's By-Laws and amendments thereto (such By-Laws, as
presently in effect and as it shall from time to time be
amended, are herein called the "By-Laws");
(iii)Resolutions of the Trust's Board of Trustees authorizing
the appointment of the Advisor and Sub-Advisor and approving
the Advisory Agreement and this Agreement;
(iv) The most recent Post-Effective Amendment to the Trust's
Registration Statement on Form N-1A under the Securities Act
of 1933 as amended ("1933 Act") and the 1940 Act as filed
with the Securities and Exchange Commission;
(v) The Fund's most recent prospectus (such prospectus, as
presently in effect and all amendments and supplements
thereto being referred to herein as the "Prospectus"); and
(vi) All resolutions of the Board of Trustees of the Trust
pertaining to the management of the assets of the Fund.
2
During the term of this Agreement, the Advisor shall not use or
implement any amendment or supplement that relates to or affects the
obligations of the Sub-Advisor hereunder if the Sub-Advisor reasonably
objects in writing within five business days after delivery thereof
(or such shorter period of time as the Advisor shall specify upon
delivery, if such shorter period of time is reasonable under the
circumstances).
3. ADVISORY FEE.
(a) For the services to be provided to the Fund by the Sub-Advisor as
provided in Paragraph 2 hereof, the Advisor will pay the
Sub-Advisor in accordance with the following:
(i) Subject to shareholder approval the initial term of the
advisory agreement will be for two years, and the Fund will
pay a one and one quarter percent (1.25%) annual management
fee to the Advisor;
(ii) The Advisor will pay to the Sub-Advisor 50 percent of the
management fee received reduced by: 1) the Advisor's
incurred costs and expenses of marketing the Fund that
exceed the .25% 12b-1 fee charged to the Fund for such
marketing purposes; 2) for any monies advanced by the
Advisor on behalf of the Sub-Advisor; 3) the unrecovered
costs of organizing the Fund up to $40,000 (the Advisor will
be responsible for bearing costs of organization of the Fund
in excess of $40,000); and 4) if a decision is made with
respect to placing a cap on expenses, to the extend that
actual expenses of the Fund exceed the cap, and the Advisor
is required to pay or absorb any of the excess expenses, by
the amount of the excess expenses paid or absorbed by the
Advisor through such downward adjustments.
(iii)To the extent that the Sub-Advisor has advanced monies to
the Advisor to pay for Fund distribution or organizational
expenses, such advances shall serve to offset the reductions
enumerated above.
(iv) The Fund is not responsible for paying any portion of the
Sub-Advisor's fees.
(v) The fee is payable in monthly installments in arrears. The
"Management Fee" means the management fee paid by the Trust
to the Advisor under the Addendum to the Advisory Agreement,
dated as of .............., 1996, between the Trust and the
Advisor with respect to the management of the Fund.
(b) In the case of termination of the Agreement during any calendar
month, the fee with respect to that month shall be reduced
proportionately based upon the number of calendar days during
which it is in effect and the fee shall be computed upon the
average net assets of the Fund for the days during which it is so
in effect.
(c) The "Monthly Average Net Assets" of the Fund for any calendar
month shall be equal to the quotient produced by dividing (i) the
sum of the net assets of the Fund, determined in accordance with
procedures established from time to time by or under the
direction of the Board of Trustees of the Trust in accordance
with the Master Trust Agreement, as of the close of business on
each day during such month that the Fund was open for business,
by (ii) the number of such days.
4. EXPENSES.
During the term of this Agreement, the Sub-Advisor will bear all
expenses incurred by it in the performance of its duties hereunder.
3
5. FUND TRANSACTIONS.
The Sub-Advisor agrees that neither it nor any of its employees,
officers or directors will take any long- or short-term position in
the shares of the Fund or portfolio securities of the Fund for trading
purposes; provided, however, that such prohibition shall not prevent
the purchase of shares of the Fund by any of the persons above
described for their account and for investment at the price at which
such shares are available to the public at the time of purchase.
6. REPRESENTATION AND WARRANTY.
The Sub-Advisor hereby represents and warrants to the Advisor that it
is duly registered as an investment Advisor, or is exempt from
registration, under the Investment Advisor's Act of 1940, as amended,
and that it shall maintain such registration or exemption at all times
during which this Agreement is in effect.
7. LIABILITY OF SUB-ADVISOR.
In the performance of its duties under this Agreement, the Sub-Advisor
shall act in conformity with and in compliance with the requirements
of the 1940 Act and all other applicable U.S. Federal and state laws
and regulations and shall not cause the Fund to take any action that
would require the Fund or any affiliated person thereof to register as
a commodity pool operator under the terms of the U.S. Commodity
Exchange Act, as amended (it being understood by the Sub-Advisor that
a notice of eligibility may be filed on behalf of the Trust pursuant
to Rule 4.5 promulgated under said Act). The Sub-Advisor shall be
responsible for maintaining such procedures as may be reasonably
necessary to ensure that the investment and reinvestment of the Fund's
assets are made in compliance with its investment objectives and
policies and with all applicable statutes and regulations and that the
Fund qualifies as a regulated investment company under Subchapter M of
the Internal Revenue Code. No provision of this Agreement shall be
deemed to protect the Sub-Advisor against any liability to the Trust
or its shareholders to which it might otherwise be subject by reason
of any willful misfeasance, bad faith or gross negligence in the
performance of its duties or the reckless disregard of its obligations
and duties under this Agreement.
8. REPORTS.
The Sub-Advisor shall render to the Board of Trustees of the Trust
such periodic and special reports as the Board of Trustees may
reasonably request with respect to matters relating to duties of the
Sub-Advisor set forth herein.
9. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. With respect to the Trust, this Agreement shall become
effective upon the date hereof and shall continue in full force
and effect for two years from the date of shareholder approval
and from year to year thereafter so long as such continuance is
approved at least annually (i) by either the Trustees of the
Trust or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund, and (ii) in
either event by the vote of a majority of the Trustees of the
Trust who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such
approval.
(b) Termination. With respect to the Trust, this Agreement may be
terminated at any time, without payment of any penalty (i) by
vote of the Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940
Act) on sixty (60) days' written notice to the other parties,
(ii) by the Advisor on sixty (60) days' written notice to the
other parties or (iii) by the Sub-Advisor on ninety (90) days'
written notice to the other parties.
(c) Automatic Termination. With respect to the Trust, this Agreement
shall automatically and immediately terminate in the event of its
assignment or upon expiration of the Advisory Agreement now or
hereafter in effect between the Advisor and the Trust with
respect to the Fund.
10. SERVICES NOT EXCLUSIVE.
The services of the Sub-Advisor of the Fund hereunder are not to be
deemed exclusive, and the Sub- Advisor shall be free to render similar
services to others.
11. LIMITATION OF LIABILITY.
(a) The Trust. The term "Accolade Funds" means and refers to the
Trustees from time to time serving under the Master Trust
Agreement. It is expressly agreed that the obligations of the
Trust hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents or employees of the
Trust, personally, but bind only the assets and property of the
Trust, as provided in the Master Trust Agreement. The execution
and delivery of the Agreement have been authorized by the
Trustees and shareholders of the Trust and signed by an
authorized officer of the Trust, acting as such, and neither such
authorization by such Trustees and shareholders nor such
execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability
on any of them personally, but shall bind only the assets and
property of the Trust as provided in its Master Trust Agreement.
(b) The Advisor and Sub-Advisor. It is expressly agreed that the
obligations of the Advisor and Sub- Advisor hereunder shall not
be binding upon any of the shareholders, nominees, officers,
agents or employees of the Advisor or Sub-Advisor, personally,
but bind only the assets and property of the Advisor and
Sub-Advisor, respectively. The execution and delivery of the
Agreement have been authorized by the directors and officers of
the Advisor and Sub-Advisor and signed by an authorized officer
of the Advisor and Sub-Advisor, acting as such, and neither such
authorization by such directors and officers nor such execution
and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of
them personally, but shall bind only the assets and property of
the Advisor and Sub-Advisor, respectively. This limitation of
liability shall not be deemed to protect the shareholders,
nominees, officers, agents or employees of the Advisor and
Sub-Advisor against any liability to the Trust or its
shareholders to which they might otherwise be subject by reason
of any willful misfeasance, bad faith or gross negligence in the
performance of their duties or the reckless disregard of their
obligations and duties under this Agreement.
12. MISCELLANEOUS.
(a) Notice. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
parties at such address as such other parties may designate in
writing for the receipt of such notices.
(b) Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder shall not be thereby affected.
(c) Applicable Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Texas.
(d) This Agreement constitutes the entire agreement of the parties
and supersedes all prior or contemporaneous written or oral
negotiations, correspondence, agreements and understandings,
regarding the subject matter hereof.
13. STANDARD OF CARE.
To the extent permitted under applicable law (including section 36 of
the 1940 Act), the Sub-Advisor will not be liable to the Trust or the
Advisor for any losses incurred by the Trust, the Fund or the Advisor
that arise out of or are in any way connected with any recommendation
or other act or failure to act of the Sub- Advisor under this
Agreement, including, but not limited to, any error in judgment with
respect to the Fund, so long as such recommendation or other act or
failure to act does not constitute a breach of the Sub-Advisor's
fiduciary duty to the Trust, the Fund or the Advisor. Anything in this
section 13 or otherwise in this Agreement to the contrary
notwithstanding, however, nothing herein shall constitute a waiver or
limitation of any rights that the Trust, the Advisor or the Fund may
have under any Federal or state securities laws.
IN WITNESS WHEREOF, the Advisor, the Trust and the Sub-Advisor have caused this
Agreement to be executed on the day and year first above written.
U.S. GLOBAL INVESTORS, INC.
By:
---------------------------------
ACCOLADE FUNDS
By:
---------------------------------
GLOBAL STRATEGIC MANAGEMENT, INC.
By:
---------------------------------
[GRAPHIC: ACCOLADE FUNDS LOGO]
ACCOLADE FUNDS
Bonnel Growth Fund
MegaTrends Fund
Adrian Day Global Opportunity Fund
December ..............., 1996
Bankers Trust Company
16 Wall Street
New York, New York 10005
Gentlemen:
Pursuant to the Custodian Agreement between Bankers Trust Company and Accolade
Funds, a Massachusetts business trust, this is notification that one new
Sub-Trust has been created, namely the Adrian Day Global Opportunity Fund. This
new portfolio will become effective with the Securities and Exchange Commission
in the near future.
Accolade Funds will consist of three separate portfolios. Bankers Trust Company
currently serves as Custodian for the portfolios.
We hereby request that Bankers Trust Company act as Custodian for the Adrian Day
Global Opportunity Fund and that an authorized officer of Bankers Trust Company
execute both copies of this letter as agreement to include the new portfolio
under the Custodian Agreement - as contemplated in Paragraph 2 and subject to
the execution of the appropriate amendments.
Please retain one executed copy for your records and return one copy to the
Secretary of the Trust of Accolade Funds. In addition, please prepare and
forward an amended Schedule A to the Custodian Agreement for our signature.
ACCOLADE FUNDS
Bobby D. Duncan
Executive Vice President
Chief Operating Officer
- --------------------------------------------------------------------------------
Bankers Trust Company hereby agrees to act as Custodian for the Adrian Day
Global Opportunity Fund.
BANKERS TRUST COMPANY
By: Date:
- --------------------------------------- -----------------------------
Print Name and Title
................................................................................
7900 Callaghan Road
Mail Address: P.O. Box 781234, San Antonio, TX 78278-1234
................................................................................
[GRAPHIC: ACCOLADE FUNDS LOGO]
ACCOLADE FUNDS
Bonnel Growth Fund
MegaTrends Fund
Adrian Day Global Opportunity Fund
November 14, 1996
United Shareholder Services, Inc.
7900 Callaghan Road
San Antonio, TX 78229
Gentlemen:
Pursuant to Section 1(b) of the Transfer Agency Agreement dated September 21,
1994, between Accolade Fund (the "Trust") and United Shareholder Services, Inc.
(the "Transfer Agent"), please be advised that the Trust has established a new
series of its shares, namely the Adrian Day Global Opportunity Fund, and be
further advised that the Trust desires to retain the Transfer Agent to render
services under the Transfer Agency Agreement to this Fund at the fee stated in
Amendment No. 1 to the fee schedule of the Transfer Agency Agreement.
Please state below whether you are willing to render such services at the fee
stated above.
ACCOLADE FUNDS
Attest: By:
- -------------------------- ---------------------------
THOMAS D. TAYS, SECRETARY FRANK E. HOLMES, PRESIDENT
Date:
- --------------------------
................................................................................
We are willing to render services to the Leeb Value Fund at the fee stated
above.
UNITED SHAREHOLDER SERVICES, INC.
Attest: By:
- ---------------------------- ---------------------------------
SUSAN B. MCGEE, SECRETARY BOBBY D. DUNCAN, PRESIDENT
................................................................................
7900 Callaghan Road
Mail Address: P.O. Box 781234, San Antonio, TX 78278-1234
................................................................................
[GRAPHIC: ACCOLADE FUNDS LOGO]
ACCOLADE FUNDS
Bonnel Growth Fund
MegaTrends Fund
Adrian Day Global Opportunity Fund
November ....., 1996
U.S. Global Investors, Inc.
7900 Callaghan Road
San Antonio, Texas 78229
Gentlemen:
Pursuant to the COMPENSATION Section of the Bookkeeping and Accounting Agreement
dated September 21, 1994 between Accolade Funds (the "Trust") and U.S. Global
Investors, Inc. (the "Advisor"), please be advised that the Trust has
established one new series of its shares, namely, the Adrian Day Global
Opportunity Fund, and please be further advised that the Trust desires to retain
United Shareholder Services, Inc. to render bookkeeping and accounting services
under the Bookkeeping and Accounting Agreement to this Fund.
NAME OF FUND: ADRIAN DAY GLOBAL OPPORTUNITY FUND
DATE SUBJECT TO AGREEMENT: .................., 1996
Please state below whether you are willing to render such services.
ACCOLADE FUNDS
Attest: By:
- -------------------------------- ----------------------------------
Secretary Executive Vice President
Date:
- --------------------------------
................................................................................
We are willing to render bookkeeping and accounting services to the Adrian Day
Global Opportunity Fund.
UNITED SHAREHOLDER SERVICES, INC.
Attest: By:
- -------------------------------- ----------------------------------
Secretary President
................................................................................
7900 Callaghan Road
Mail Address: P.O. Box 781234, San Antonio, TX 78278-1234
................................................................................
[GRAPHIC: ACCOLADE FUNDS LOGO AND LETTERHEAD]
ACCOLADE FUNDS
Bonnel Growth Fund
MegaTrends Fund
Adrian Day Global Opportunity Fund
December 4, 1996
United Shareholder Services, Inc.
7900 Callaghan Road
San Antonio, TX 78229
Gentlemen:
Pursuant to the EFFECTIVE DATE Section of the Printing Agreement dated September
21, 1994, between Accolade Fund (the "Trust") and United Shareholder Services,
Inc. (the "Transfer Agent"), please be advised that the Trust has established
two new series of its shares, namely the MegaTrends Fund and the Adrian Day
Global Opportunity Fund, and be further advised that the Trust desires to retain
the Transfer Agent to render services under the Printing Agreement to these
Funds at the fee stated in the COMPENSATION Section of the Printing Agreement.
NAME OF FUND: ADRIAN DAY GLOBAL OPPORTUNITY FUND
DATE SUBJECT TO AGREEMENT: .................., 1996
Please state below whether you are willing to render such services.
ACCOLADE FUNDS
Attest: By:
------------------------- --------------------------
THOMAS D. TAYS, SECRETARY FRANK E. HOLMES, PRESIDENT
Date:
-----------------------
................................................................................
We are willing to render services to the Leeb Value Fund and the Adrian Day
Global Opportunity Fund at the fee stated in the COMPENSATION Section of the
Printing Agreement.
UNITED SHAREHOLDER SERVICES, INC.
Attest: By:
-------------------------- --------------------------
SUSAN B. MC GEE, SECRETARY BOBBY D. DUNCAN, PRESIDENT
Date:
-----------------------
................................................................................
7900 Callaghan Road
Mail Address: P.O. Box 781234, San Antonio, TX 78278-1234
................................................................................
[GRAPHIC: ACCOLADE FUNDS LOGO AND LETTERHEAD]
ACCOLADE FUNDS
Bonnel Growth Fund
MegaTrends Fund
Adrian Day Global Opportunity Fund
December 4, 1996
United Shareholder Services, Inc.
7900 Callaghan Road
San Antonio, TX 78229
Gentlemen:
Pursuant to the EFFECTIVE DATE Section of the Lockbox Service Agreement dated
September 21, 1994, between Accolade Fund (the "Trust") and United Shareholder
Services, Inc. (the "Transfer Agent"), please be advised that the Trust has
established two new series of its shares, namely the MegaTrends Fund and the
Adrian Day Global Opportunity Fund, and be further advised that the Trust
desires to retain the Transfer Agent to render services under the Lockbox
Service Agreement to these Funds at the fee stated in Exhibit A of the Lockbox
Service Agreement.
NAME OF FUND: ADRIAN DAY GLOBAL OPPORTUNITY FUND
DATE SUBJECT TO AGREEMENT: .................., 1996
Please state below whether you are willing to render such services.
ACCOLADE FUNDS
Attest: By:
------------------------- --------------------------
THOMAS D. TAYS, SECRETARY FRANK E. HOLMES, PRESIDENT
Date:
-----------------------
................................................................................
We are willing to render services to the Leeb Value Fund and the Adrian Day
Global Opportunity Fund at the fee stated in Exhibit A of the Lockbox Service
Agreement.
UNITED SHAREHOLDER SERVICES, INC.
Attest: By:
-------------------------- --------------------------
SUSAN B. MC GEE, SECRETARY BOBBY D. DUNCAN, PRESIDENT
Date:
-----------------------
................................................................................
7900 Callaghan Road
Mail Address: P.O. Box 781234, San Antonio, TX 78278-1234
................................................................................
DISTRIBUTION PLAN PURSUANT TO RULE 12B-1
FOR
ADRIAN DAY GLOBAL OPPORTUNITY FUND
Adopted................. , 1996
RECITALS
1. ACCOLADE FUNDS, an unincorporated business trust organized under the
laws of the Commonwealth of Massachusetts (the "Trust") is engaged in business
as an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act").
2. The Trust operates as a "series company" within the meaning of Rule
18f-2 under the Act and is authorized to issue shares of beneficial interest in
various series or sub-trusts (collectively the "Funds").
3. Funds of the Trust may utilize Fund assets to pay for, or reimburse
payment for, sales or promotional services or activities that have been or will
be provided in connection with distribution of shares of the Funds if such
payments are made pursuant to a Plan adopted and continued in accordance with
Rule 12b-1 under the Act.
4. Adrian Day Global Opportunity Fund, a series of the Trust (the "Fund")
by virtue of such arrangement may be deemed to act as a distributor of its
shares as provided in Rule 12b-1 under the Act and desires to adopt a Plan
pursuant to such Rule (the "Plan").
5. The Trustees as a whole, and the Trustees who are not interested persons
of the Trust (as defined in the Act) and who have no direct or indirect
financial interest in the operation of this Plan and any agreements relating to
it (the "Qualified Trustees"), having determined, in the exercise of reasonable
business judgment and in light of their fiduciary duties under state law and
under Section 36(a) and (b) of the Act, that there is a reasonable likelihood
that this Plan will benefit the Fund and its shareholders, have approved the
Plan by votes cast in person at a meeting called for the purpose of voting on
this Plan and agreements related thereto.
6. Shareholder approval of the Plan was initially obtained on ...........,
1996.
PLAN PROVISIONS
SECTION 1. EXPENDITURES
a. PURPOSES. Fund assets may be utilized to pay for or reimburse
expenditures in connection with sales and promotional services related to the
distribution of Fund shares, including personal services provided to prospective
and existing Fund shareholders, which include the costs of: printing and
distribution of prospectuses and promotional materials; making slides and charts
for presentations; assisting shareholders and prospective investors in
understanding and dealing with the Fund; and travel and out-of-pocket expenses
(E.G. copy and long distance telephone charges) related thereto.
b. AMOUNTS. Fund assets may be utilized to pay for or reimburse
expenditures in connection with sales and promotional services related to the
distribution of Fund shares, including personal services provided to prospective
and existing Fund shareholders, provided the total amount expended pursuant to
this Plan does not exceed 0.25% of net assets on an annual basis.
SECTION 2. TERM AND TERMINATION
(a) INITIAL TERM. This Plan shall become effective upon effective
registration of the Fund and shall continue in effect for a period of one year
thereafter unless terminated or otherwise continued or discontinued as provided
in this Plan.
(b) CONTINUATION OF THE PLAN. The Plan and any related agreements shall
continue in effect for periods of one year thereafter for so long as such
continuance is specifically approved at least annually by votes of a majority of
both (a) the
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Trustees of the Trust and (b) the Qualified Trustees, cast in person at a
meeting called for the purpose of voting on this Plan and such related
agreements.
(c) TERMINATION OF THE PLAN. This Plan may be terminated at any time by
vote of a majority of the Qualified Trustees, or by vote of a majority of the
outstanding voting securities of the Fund.
SECTION 3. AMENDMENTS
This Plan may not be amended to increase materially the amount of
distribution expenditures provided for in Section 1 hereof unless such amendment
is approved by a vote of the majority of the outstanding voting securities of
the Fund, and no material amendment to the Plan shall be made unless approved in
the manner provided for annual renewal in Section 2(b) hereof.
SECTION 4. INDEPENDENT TRUSTEES
While this Plan is in effect with respect to the Fund, the selection and
nomination of Trustees who are not interested persons of the Trust (as defined
in the Act) shall be committed to the discretion of the Trustees who are not
interested persons.
SECTION 5. QUARTERLY REPORTS
The Treasurer of the Trust shall provide to the Trustees and the Trustees
shall review, at least quarterly, a written report of the amounts accrued and
the amounts expended under this Plan for distribution, along with the purposes
for which such expenditures were made.
SECTION 6. RECORDKEEPING
The Trust shall preserve copies of this Plan and any related agreements and
all reports made pursuant to Section 5 hereof, for a period of not less than six
years from the date of this Plan, the agreements or such report, as the case may
be; the first two years in an easily accessible place.
SECTION 7. AGREEMENTS RELATED TO THIS PLAN
Agreements with persons providing distribution services to be paid for or
reimbursed under this Plan shall provide that:
(a) the agreement will continue in effect for a period of one year and will
continue thereafter only if specifically approved by vote of a majority of
the Trustees of the Trust;
(b) the agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of (i) the Qualified Trustees or (ii) the
outstanding voting securities of the Fund, on not more than sixty (60)
days' written notice to any other party to the agreement;
(c) the agreement will terminate automatically in the event of an
assignment;
(d) in the event the agreement is terminated or otherwise discontinued, no
further payments or reimbursements will be made by the Fund after the
effective date of such action; and
(e) payments and/or reimbursements may only be made for the specific sales
or promotional services or activities identified in Section 1 of this Plan
and must be made on or before the last day of the one-year period
commencing on the last day of the calendar quarter during which the service
or activity was performed.
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