MEGATRENDS FUND
SEMI-ANNUAL REPORT DECEMBER 31, 1996
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Portfolio of Investments
December 31, 1996
Shares Value
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COMMON STOCKS 89.83%
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AEROSPACE 1.71 %
The Boeing Company ............................... 4,000 $ 425,500
----------
AUTO & TRUCK EQUIPMENT 1.96%
Wabash National Corporation ...................... 26,500 486,938
----------
BUILDING PRODUCTS 3.00%
Royal Plastics Group, Ltd. ....................... 40,000 745,000
----------
BUSINESS SERVICES 5.48%
Sotheby's Holdings, Inc., Class A ................ 73,000 1,359,625
----------
CONGLOMERATE 1.99%
General Electric Company ......................... 5,000 494,375
----------
CONSUMER PRODUCTS 2.64%
Sony Corporation, ADR ............................ 10,000 656,250
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DIVERSIFIED OPERATIONS 3.72%
Trizec Hahn Corporation .......................... 42,000 924,000
----------
ENGINEERING & CONSTRUCTION 3.54%
Fluor Corporation ................................ 14,000 878,500
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ENTERTAINMENT 3.65%
The Walt Disney Company .......................... 13,000 905,125
----------
HEALTH PRODUCTS/CARE 4.84%
ThermoTrex Corporation ........................... 35,000 958,125
Trex Medical Corporation ......................... 18,730 243,490*
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1,201,615
INSURANCE & FINANCE 8.91%
American International Group, Inc. ............... 6,400 692,800
ITT Hartford Group, Inc. ......................... 12,000 810,000
Federal National Mortgage Association ............ 19,000 707,750
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2,210,550
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5
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MEGATRENDS FUND
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Portfolio of Investments
December 31, 1996
Shares Value
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COMMON STOCKS (CONTINUED)
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METALS & MINING 6.81%
Cypress Amax Minerals Company .................... 43,000 $1,005,125
LTV Corporation .................................. 20,000 237,500
Newmont Mining Corporation ....................... 10,000 447,500
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1,690,125
OIL & GAS 21.70%
Apache Corporation ............................... 24,000 849,000
Chevron Corporation .............................. 20,000 1,300,000
Global Marine, Inc. .............................. 33,200 684,750*
Oryx Energy Company .............................. 10,000 247,500*
Rowan Companies, Inc. ............................ 40,000 905,000*
Schlumberger, Ltd. ............................... 14,000 1,398,250
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5,384,500
REAL ESTATE INVESTMENT TRUSTS 5.72%
BRE Properties, Inc. ............................. 42,000 1,039,500
New Plan Realty Trust ............................ 15,000 380,625
----------
1,420,125
SCIENTIFIC INSTRUMENTS 3.53%
Dionex Corporation ............................... 25,000 875,000*
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SEMICONDUCTORS 1.85%
Intel Corporation ................................ 3,500 458,281
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TELEPHONE COMMUNICATIONS 4.09%
Telephone and Data Systems, Inc. ................. 28,000 1,015,000
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MISCELLANEOUS 4.69%
Chrysler Corporation
(motor vehicles) ................................. 10,000 330,000
The Coca-Cola Company
(beverages) ...................................... 8,000 421,000
Microsoft Corporation
(computer software) .............................. 5,000 413,125*
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1,164,125
TOTAL COMMON STOCKS (cost $17,743,612) ........... 22,294,634
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6
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MEGATRENDS FUND
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Portfolio of Investments
December 31, 1996
Principal
Amount Value
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REPURCHASE AGREEMENT 10.23%
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Joint Repurchase Agreement, 6.25% 12/31/96,
due 1/2/97, repurchase price $2,539,243,
collateralized by $2,526,071 U.S. Treasury
Note, 6%, 8/15/99 plus accrued interest
held in a joint repurchase account
(cost $2,538,362) .............................. $ 2,538,362 $ 2,538,362
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TOTAL INVESTMENTS 100.06%
(cost $20,281,975) ............................... $24,832,996
===========
* Non-income producing security.
The percentages shown represent the percentage of investments to net assets.
See accompanying notes to financial statements.
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7
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MEGATRENDS FUND
STATEMENT OF ASSETS AND LIABILITIES
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DECEMBER 31, 1996
ASSETS
Investments, at value
(identified cost of $20,281,975) ........................... $ 24,832,996
Cash ........................................................... 3,192
Receivables:
Dividends ................................................... 31,085
Interest .................................................... 441
Other .......................................................... 11,130
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Total Assets ........................................... 24,878,844
------------
LIABILITIES
Payables:
Capital shares redeemed ..................................... 2,361
To manager and affiliates ................................... 28,131
Accounts payable and accrued expenses ....................... 20,173
Dividends on capital shares ................................. 11,001
------------
Total Liabilities ...................................... 61,666
------------
NET ASSETS ....................................... $ 24,817,178
============
NET ASSETS CONSIST OF:
Paid-in capital ................................................ $ 20,161,400
Undistributed net investment income (loss) ..................... (18,342)
Accumulated net realized gain (loss) from investments .......... 123,099
Net unrealized appreciation (depreciation) of investments ...... 4,551,021
------------
Net assets applicable to outstanding capital shares ............ $ 24,817,178
============
Capital shares outstanding ..................................... 2,066,327
============
NET ASSET VALUE, per share...................................$ . 12.01
============
See accompanying notes to financial statements.
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MEGATRENDS FUND
STATEMENT OF OPERATIONS
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FOR THE SIX MONTHS ENDED DECEMBER 31, 1996
NET INVESTMENT INCOME:
Income:
Dividends ................................................... $ 162,426
Interest and other .......................................... 85,860
-----------
Total Income ............................................. 248,286
-----------
Expenses:
Management fees ............................................. 109,160
Transfer agent fees and expenses ............................ 24,418
Accounting service fees and expenses ........................ 18,441
Legal and professional fees ................................. 30,714
Distribution plan expenses .................................. 7,410
Custodian fees .............................................. 696
Shareholder reports and notices ............................. 3,903
Registration fees ........................................... 7,768
Trustees' fees and expenses ................................. 7,500
Amortization of organization costs .......................... 2,534
Miscellaneous ............................................... 14,285
-----------
Total expenses before reductions ............................ 226,829
Short-term trading fee ..................................... (121)
Reimbursed fees and expenses ............................... (20,988)
-----------
Net Expenses ............................................ 205,720
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NET INVESTMENT INCOME (LOSS) ................................. 42,566
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NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) from securities .......................... 527,487
Net change in unrealized appreciation (depreciation) of
investments ................................................... 1,465,859
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ........ 1,993,346
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NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS . $ 2,035,912
===========
See accompanying notes to financial statements.
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9
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MEGATRENDS FUND
STATEMENTS OF CHANGES IN NET ASSETS
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FOR THE SIX MONTHS ENDED DECEMBER 31, 1996
AND THE YEAR ENDED JUNE 30, 1996
DECEMBER 31, JUNE 30,
1996 1996
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income (loss).................. $ 42,566 $ 396,853
Net realized gain (loss) on investments ...... 527,487 4,277,995
Net change in unrealized appreciation
(depreciation) ............................... 1,465,859 133,795
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
INVESTMENT OPERATIONS .................... 2,035,912 4,808,643
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DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income ......... (60,908) (399,897)
Distributions from net capital gains ....... (385,751) (3,618,910)
In excess of net capital gains ............... -- (18,637)
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TOTAL DISTRIBUTIONS TO SHAREHOLDERS ........ (446,659) (4,037,444)
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FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .................... 380,768 1,464,215
Distributions reinvested ..................... 435,276 3,933,064
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816,044 5,397,279
Cost of shares redeemed ...................... (5,533,404) (11,199,062)
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NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS ............... (4,717,360) (5,801,783)
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NET INCREASE (DECREASE) IN NET ASSETS .......... (3,128,107) (5,030,584)
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NET ASSETS
Beginning of period ............................ 27,945,285 32,975,869
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END OF PERIOD [including undistributed net
investment income of $(18,342) and $-0-,
respectively] ................................ $ 24,817,178 $ 27,945,285
============ ============
See accompanying notes to financial statements.
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10
<PAGE>
MEGATRENDS FUND
Notes to Financial Statements
December 31, 1996
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NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
MegaTrends Fund is a diversified, open-end management investment company
registered under the Investment Company Act of 1940. Effective November 18,
1996, the Fund was reorganized as a portfolio of U.S. Global Accolade Funds (the
"Trust"), a Massachusetts business trust. The reorganization was a tax-free
exchange, whereby shareholders received one share of MegaTrends for each of
their shares of The Leeb Personal Finance Fund, the predecessor fund.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. SECURITY VALUATIONS
Investments traded on national securities exchanges and NASDAQ quoted securities
are valued at the last sales price reported by the security's primary exchange
at the time of daily valuation. Listed and NASDAQ securities for which no sale
was reported, over-the-counter securities and corporate bonds are valued at the
mean between the last reported bid and asked prices, certain of which are
obtained from one or more dealers that make markets in the securities.
Short-term investments with effective maturities of sixty days or less at the
date of purchase are valued at amortized cost, which approximates market value.
Long-term U. S. Government obligations are valued by an independent pricing
service which uses a system based on such factors as credit rating, maturity,
coupon and type of security to determine fair value. Securities for which market
quotations are not readily available and securities which are subject to legal
or contractual restrictions on resale are valued at fair value as determined by
the Trustees.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on trade date. Certain transaction costs
are capitalized and included in the cost basis of securities. Realized gains and
losses from security transactions are determined on an identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, accretion
of discount and amortization of premium are recorded on an accrual basis.
C. REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with recognized financial
institutions or registered broker/dealers and, in all instances, hold underlying
securities with a value exceeding the total repurchase price, including accrued
interest. The Fund participates, with other funds managed by the Manager, in a
joint repurchase agreement account where uninvested cash is collectively
invested in repurchase agreements for which each fund has its respective
percentage of an undivided interest in the account.
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11
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MEGATRENDS FUND
Notes to Financial Statements
December 31, 1996
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D. FEDERAL INCOME TAXES
The Fund intends to continue to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to shareholders. Accordingly, no provision for federal
income taxes is required.
E. ORGANIZATIONAL COSTS
Costs incurred in organizing the Fund have been capitalized and are being
amortized on a straight-line basis over a 60 month period.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions to shareholders are recorded by the Fund on the
ex-dividend date. Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles,
accordingly, periodic reclassifications are made within the Fund's capital
accounts to reflect income and gains available for distribution under income tax
regulations.
The Fund makes distributions from net investment income semi-annually and from
realized capital gains at least annually.
G. EXPENSES
Each fund bears expenses incurred specifically on its behalf as well as an
allocation of Trust level expenses. Short-term trading fees, which are collected
from temporary investors in the fund, are applied as a reduction to expenses to
the extent of such related cost; any excess is credited as paid-in capital.
Expense offset arrangements have been made with the Fund's custodian whereby the
custodian fees are paid indirectly by credits earned on the Fund's cash
balances. Such deposit arrangement is an alternative to overnight investments.
H. USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 RELATED PARTY TRANSACTIONS
Effective with the reorganization on November 18, 1996, the Fund entered into
new contracts with its investment manager and its affiliated service providers.
U.S. Global Investors, Inc. (the "Manager"), under an investment advisory
agreement with the Trust in effect through October 30, 1997, furnishes
management and investment advisory services and, subject to the supervision of
the Trustees, directs the investments of the Fund in accordance with its
investment objective, policies and limitations. The Manager also furnishes
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MEGATRENDS FUND
Notes to Financial Statements
December 31, 1996
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all necessary office facilities, business equipment and personnel for
administering the affairs of the Trust. Frank E. Holmes, a Trustee of the Funds,
is a controlling owner of the Manager.
For the services of the Manager, the Fund pays a management fee of 1% per annum
of average net assets. Fees are accrued daily and paid monthly.
United Shareholder Services, Inc. ("USSI"), a wholly-owned subsidiary of the
Manager, is transfer agent and accounting service agent for the Fund. The Fund
pays an annual fee based on number of shareholder accounts for transfer agency
services. Certain account fees are paid directly by shareholders to the transfer
agent, which, in turn, reduces its charge to the Fund. For maintaining the books
and records of the Fund and calculating its daily net asset values, USSI is paid
a fee based upon the level of Fund net assets, subject to a minimum fee.
Additionally, the Manager is reimbursed certain costs for in-house legal
services pertaining to the Fund.
A & B Mailers, Inc., a wholly-owned subsidiary of the Manager, provides mailing
services to the Fund. No fees were charged during the period.
For the period from July 1, 1996 through November 17, 1996, the former manager
reimbursed the Fund $20,988 for fees and expenses. The former administrative
services agent, shareholder servicing and transfer agent and the accounting
services agent for the Fund were affiliates of the former manager.
NOTE 3 INVESTMENT ACTIVITY
For the period ended December 31, 1996, purchases and sales of long-term
investments were $5,881,592 and $8,388,651, respectively.
The federal income tax basis of the securities owned at December 31, 1996 was
$20,281,975. The tax basis components of net unrealized appreciation and
depreciation were $5,098,145 and $547,124, respectively.
NOTE 4 CAPITAL SHARE ACTIVITY
The Fund has an unlimited number of shares authorized with no par value. The
following is a summary of capital share activity for the periods indicated:
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1996 JUNE 30, 1996
Shares sold ........................... 32,843 123,208
Shares reinvested ..................... 36,243 344,965
Shares redeemed ....................... (482,092) (941,635)
-------- --------
Net share activity ..... (413,006) (473,462)
======== ========
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13
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<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
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MEGATREMDS FUND
-------------------------------------------------------------------------------------
FOR A CAPITAL SHARE OUTSTANDING DURING THE SIX MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED) AND EACH YEAR ENDED JUNE 30,
-------------------------------------------------------------------------------------
12/96 1996 1995 1994 1993 1992*
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of period ...... $ 11.27 $ 11.17 $ 10.29 $ 10.84 $ 10.36 $ 10.00(b)
---------- ---------- ---------- ---------- ---------- ----------
INVESTMENT ACTIVITIES
Net investment income ................... .02 .17 .28 .19 .15 .16
Net realized and unrealized gain (loss) .94 1.72 .95 (.35) .55 .51
---------- ---------- ---------- ---------- ---------- ----------
Total from investment activities .......... .96 1.89 1.23 (.16) .70 .67
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
From net investment income .............. (.03) (.17) (.28) (.19) (.15) (.16)
From net realized gains ................. (.19) (1.61) -- (.20) (.07) (.15)
In excess of net realized gains ......... -- (.01) (.07) -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions ....................... (.22) (1.79) (.35) (.39) (.22) (.31)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, end of period ............ $ 12.01 $ 11.27 $ 11.17 $ 10.29 $ 10.84 $ 10.36
========== ========== ========== ========== ========== ==========
TOTAL RETURN (excluding account fees) ..... 8.52% 17.10% 12.20% (1.50)% 6.79% 7.94%
Ratios to Average Net Assets (a):
Net investment income ................... .33% 1.30% 2.36% 1.65% 1.60% 2.21%
Total expenses .......................... 1.76% 2.10% 1.98% 1.81% 1.95% 2.71%
Expenses reimbursed or offset ........... (.16)% (.60)% (.48)% (.31)% (.45)% (1.24)%
Net expenses ............................ 1.60% 1.50% 1.50% 1.50% 1.50% 1.47%
Portfolio turnover rate ................... 26% 115% 163% 143% 83% 75%
Net assets, end of period (in thousands) .. $ 24,817 $ 27,945 $ 32,976 $ 45,523 $ 58,955 $ 28,340
*Represents the period from the date of public offering (October 21, 1991) through June 30, 1992. No income was earned or expenses
incurred from the start of business through the date of public offering.
(a) Ratios are annualized for periods of less than one year. Expenses reimbursed or offset reflect reductions to total expenses, as
discussed in the notes to the financial statements. Such amounts would decrease the net investment income ratio had such reductions
not occurred.
(b) For 1992, the per share data was calculated using average shares outstanding throughout the period. Actual distributions per
share from net investment income and from net realized gains amounted to $.11 and $.08, respectively.
</TABLE>
See accompanying notes to financial statements.
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14
