U.S. GLOBAL ACCOLADE FUNDS
BONNEL GROWTH FUND
1-800-US-FUNDS (1-800-873-8637)
(INFORMATION, SHAREHOLDER SERVICES AND REQUESTS)
INTERNET: HTTP://WWW.USFUNDS.COM
PROSPECTUS
FEBRUARY 3, 1997
This prospectus presents information that a prospective investor should know
about the Bonnel Growth Fund (the "Fund"), a diversified series of U.S. Global
Accolade Funds (the "Trust"), formerly Accolade Funds. The Trust is an
open-end management investment company. Investors are responsible for
determining whether or not an investment in the Fund is appropriate for their
needs. Read and retain this prospectus for future reference.
A Statement of Additional Information dated February 3, 1997, has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. The Statement is available free from U.S. Global Accolade Funds upon
request at the address set forth above or by calling 1-800-US-FUNDS
(1-800-873-8637).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY 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......... 2
FINANCIAL HIGHLIGHTS................. 3
INVESTMENT OBJECTIVES AND
CONSIDERATIONS....................... 5
OTHER INVESTMENT PRACTICES........... 6
RISK FACTORS......................... 9
HOW TO PURCHASE SHARES............... 10
HOW TO EXCHANGE SHARES............... 13
HOW TO REDEEM SHARES................. 15
HOW SHARES ARE VALUED................ 20
DIVIDENDS AND TAXES.................. 21
THE TRUST............................ 22
MANAGEMENT OF THE FUND............... 23
DISTRIBUTION EXPENSE PLAN............ 26
PERFORMANCE INFORMATION.............. 27
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..... $ 5.00
Account Closing Fee (does not
apply to exchanges).......... $ 10.00
Trader's Fee (shares held less
than 30 days)................ 0.25%
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET
ASSETS)1
Management and Administrative
Fees......................... 1.00%
12b-1 Fees...................... 0.25%
Other Expenses, including
Transfer Agency
and Accounting Service
Fees......................... 0.58%
Total Fund Operating Expenses
(net of waivers and
reimbursements).............. 1.83%
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Except for active ABC Investment PlanT accounts, custodial accounts for minors
and retirement accounts, if an account balance falls, for any reason other than
market fluctuations, below $5,000 anytime during a month, that account will be
subject to a monthly small account charge of $1 which will be payable quarterly.
See SMALL ACCOUNTS.
A shareholder who requests delivery of redemption proceeds by wire transfer will
be subject to a $10 charge. International wires will be higher.
HYPOTHETICAL EXAMPLE OF EFFECT OF FUND EXPENSES1:
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............................... $ 29
3 years.............................. $ 67
5 years.............................. $ 108
10 years............................. $ 219
The Hypothetical Example is based upon the Fund's historical expenses which are
expected to decline as the Fund's net assets increase. In conformance with SEC
regulations, the example is based upon a $1,000 investment; however, the Fund's
minimum investment is $5,000. In practice, a $1,000 account would be assessed a
monthly $1 small account charge which is not reflected in the example. See SMALL
ACCOUNTS. Included in these estimates is the account closing fee of $10 for each
period. This fee is a flat charge that does not vary with the size of your
investment. Accordingly, for investments larger than $1,000, your total expenses
will be substantially lower in percentage terms than the illustration implies.
The example should not be considered a representation of future expenses. Actual
expenses may be more or less than those shown.
FINANCIAL HIGHLIGHTS
The following per share data and ratios for a share of beneficial interest
outstanding throughout the period ended September 30, 1995, and the year ended
September 30, 1996, have been audited by Price Waterhouse LLP, the Fund's
independent accountants. The related financial statements and
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(1) Annual Fund Operating Expenses are based on the Fund's historical expenses.
Management fees, transfer agency fees, and accounting services fees are paid to
U.S. Global Investors, Inc. (the "Advisor") and its wholly- owned
subsidiaries. The Advisor then pays a part 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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the report of independent accountants are included in the Fund's 1996 Annual
Report to Shareholders and are incorporated by reference into the Statement of
Additional Information ("SAI"). In addition to the data set forth below,
further information about the performance of the Fund is contained in the SAI
which may be obtained without charge.
Selected data for a capital share outstanding throughout each period is as
follows:
FOR THE YEAR OCT. 17, 1994*
ENDED TO
SEPT. 30, 1996 SEPT. 30, 1995
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Per Share Operating Performance:
Net asset value, beginning of
period............................. $ 14.81 $ 10.02
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Net investment loss............. (0.14) (0.07)(a)
Net realized and unrealized gain
on investments............... 3.13 4.91
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Total from investment operations..... 2.99 4.84
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Dividends and distributions:
Dividends in excess of net
investment income............ -- (0.05)
Distributions in excess of net
realized gains............... (0.65) --
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Total dividends and distributions.... (0.65) (0.05)
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Net asset value, end of period....... $ 17.15 $ 14.81
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Total Investment Return(b)........... 21.27% 48.74%
Ratio/Supplemental Data:
Net assets, end of period (in
thousands)......................... $ 90,696 $ 24,673
Ratio of expenses to average net
assets............................. 1.83% 2.48%(c)
Ratio of net income to average net
assets............................. (1.32)% (1.46)%(c)
Portfolio turnover................... 212% 145%
Average commission rate paid......... $ 0.07 N/A
See accompanying notes to Financial Statements.
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(a) Net of expense reimbursements and fee waivers.
(b) Total return does not reflect the effect of account fees.
(c) Annualized ratio is net of fee waivers. Had such reimbursements not been
made, the annualized expense ratio in effect during the period, subject to
the most restrictive state limitation, would have been 2.50% and the
annualized net investment income ratio would have been (1.52)%.
* Commencement of operations.
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INVESTMENT OBJECTIVES AND CONSIDERATIONS
The investment objective of the Bonnel Growth Fund (the "Fund") is long-term
growth of capital. Current income is not an objective and any income received is
incidental. The Fund seeks this growth by investing primarily in the common
stocks of domestic and foreign issuers. The Fund does not intend to invest in
fixed income securities other than money market instruments and convertible
bonds. There is no assurance that the Fund will achieve its investment
objective. Neither the investment objective nor the investment policy is a
fundamental policy, and the Board of Trustees may change them without
shareholder approval. However, shareholders will be notified in writing at least
30 days before any material change to either the Fund's investment objective or
its investment policy.
Common stocks will be selected that meet certain fundamental and technical
selection standards which, in the Sub-Advisor's opinion, have appreciation
potential. The Fund expects to focus its investments on mid-capitalization
companies with market capitalizations of around $1 billion. However, the Fund is
not limited to mid-capitalization stocks and will also invest in large and small
capitalization companies. Fundamental investment criteria include, but are not
limited to, earnings figures, equity ownership by management, market leadership,
strong management, price to earnings ratios, debt to equity ratios, and the
general growth prospects of the issuer. Common stocks will not be eliminated
simply because they do not pay a current dividend. Technical selection
considerations include, but are not limited to, stock price movement and
magnitude of trading volume. These criteria may lead the Fund to invest more or
less of its assets in specific industries as market conditions change, but the
Fund does not focus its investments in any particular industry. The Fund may
invest in securities traded on domestic or foreign exchanges, quoted on NASDAQ
or traded on the domestic or foreign over-the-counter markets. The Sub-Advisor
is not obligated to conform to any particular fundamental or technical standard
of selection or to the ranking of such standards. Standards of selection and
their ranking will vary according to the Sub-Advisor's judgment.
The Sub-Advisor intends to stay fully invested in such stocks, regardless of the
movement of stock prices generally. Under normal market conditions, the Fund is
required to have at least 80% of the value of its total assets in equity
securities. Of that 80%, no more than 5% may consist of preferred stock or bonds
convertible into common stock. The remainder of the portfolio may be invested in
money market instruments to provide liquidity, purchase portfolio securities,
pay redemptions and meet other demands for cash. When the Sub-Advisor determines
that market conditions warrant, the Fund may invest up to 100% of its assets in
money market instruments for temporary defensive purposes.
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The Fund may invest up to 25% of its total assets in common stocks and other
equity securities of foreign issuers, but only if they are listed on a domestic
or foreign exchange, quoted on NASDAQ or traded on the domestic or foreign
over-the-counter market. See RISK FACTORS in this prospectus. As a part of the
25% limitation, no more than 5% of the Fund's net assets will be invested in
securities of issuers domiciled in countries considered by the Advisor to be
emerging markets.
The Fund may invest in sponsored or unsponsored American Depository Receipts
("ADRs") representing shares of foreign issuers. ADRs are typically issued by
a U.S. bank or trust company and evidence ownership of underlying securities
issued by a foreign corporation. Generally, ADRs in registered form are intended
for use in the U.S. securities market, and ADRs in bearer form are intended for
use in securities markets outside the United States. ADRs may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. In addition, the issuers of the securities underlying
unsponsored ADRs are not obligated to disclose material information in the
United States; therefore, there may be less information available regarding such
issuers. There may not be a correlation between such information and the market
value of the ADRs. For purposes of the Fund's investment policies, the Fund's
investment in ADRs will be deemed to be investments in the underlying
securities.
OTHER INVESTMENT PRACTICES
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:
(i) 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 (ii) 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
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such borrowings) when deemed desirable or appropriate to effect
redemptions, provided 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. The Fund's historical portfolio turnover ratio is
presented in the FINANCIAL HIGHLIGHTS section of this prospectus. 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 paid 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 cases, the Board of Trustees will review the
commissions paid by the Fund to determine if the commissions paid over
representative periods are reasonable in relation to the benefits obtained. The
advisory fee of the Advisor would not be reduced because 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.
The Fund executes most of its transactions through a small group of broker-
dealers selected for their ability to provide brokerage and research services.
The Fund may occasionally purchase securities that are not listed on a
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national securities exchange or quoted on NASDAQ, but are instead traded in the
over-the-counter market. With respect to transactions executed in the
over-the-counter market, the Fund will usually deal through its selected
broker-dealers and pay a commission on such transactions. The Fund believes that
the execution and brokerage services it receives justify use of broker-dealers
in these over-the-counter transactions. See PORTFOLIO TRANSACTIONS in the
Statement of Additional Information.
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 marked-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.
REPURCHASE AGREEMENTS
The Fund may invest part 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 before liquidation. To reduce the risk of loss, the Fund will enter
into repurchase agreements only with institutions and dealers which the Board of
Trustees considers creditworthy.
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PUT AND CALL OPTIONS
The Fund may purchase or sell call options and may purchase put options on
individual securities and on equity indexes. The Fund will not purchase any
option if, immediately afterwards, the aggregate market value of all outstanding
options purchased and written by the Fund would exceed 5% of the Fund's total
assets. For a more complete discussion, see PUT AND CALL OPTIONS in the
Statement of Additional Information.
RISK FACTORS
EQUITY PRICE FLUCTUATIONS
Equity securities are subject to price fluctuations depending on a variety of
factors including market, business and economic conditions. Investment in growth
stocks can involve special risks. In seeking long term growth of capital, the
Fund may often purchase common stock of small- and medium-size companies which
may be unseasoned, the stock of which often fluctuates in price more than common
stocks of larger, more mature companies such as many of those included in the
Dow Jones Industrial Average. Therefore, an investor should expect that the
share price of the Fund will often be more volatile, in both "up" and "down"
markets, than most of the popular stock averages.
FOREIGN SECURITIES
Investment in foreign securities may involve risks not present in domestic
investment. These include fluctuating exchange rates; the fact that foreign
issuers may be subject to different, and in some cases, less comprehensive
accounting, financial reporting and disclosure standards than are domestic
issuers; the risk of adverse changes in foreign investment or exchange control
regulations; volatile currency markets; expropriation or confiscatory taxation;
political or financial instability; or other developments which can affect
investments. For more detailed information, see FOREIGN SECURITIES in the
Statement of Additional Information.
PUTS AND CALLS
The Fund may purchase or sell call options and may purchase put options on
individual securities and on equity indexes. If the Fund sells a covered call
option and the securities owned by the Fund appreciate above the option's strike
price, the Fund will generally be asked to deliver the security, which will
prevent the Fund from receiving the benefit of any price appreciation above the
strike price. When purchasing call options the Fund will realize a loss equal to
all or a part of the premium paid for the
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option if the price of the underlying security decreases or does not increase by
more than the premium before the call option's expiration. When purchasing put
options the Fund will realize a loss equal to all or a part of the premium paid
for the option if the price of the underlying security increases or does not
decrease by more than the premium before the put option's expiration.
HOW TO PURCHASE SHARES
The minimum initial investment for the Fund is $5,000 for regular accounts or
$1,000 for custodial accounts for minors. The minimum subsequent investment is
$50. The minimum initial investment for persons enrolled in the ABC Investment
PlanT (Automatically Building Capital) is $1,000, and the minimum subsequent
investment pursuant to such a plan is $100 or more per month per account. No
minimum purchase is required 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, made payable to the Bonnel Growth Fund, to P.O.
Box 781234, San Antonio, Texas 78278-1234.
When making subsequent investments, enclose your check with the return
remittance section of the confirmation statement, or write your name, address
and account number on your check or a separate piece of paper and mail to the
address mentioned above. Do not use the remittance part 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 Trust reserves the right to refuse to
accept second party checks.
BY TELEPHONE
Once your account is open, you may make investments by telephone by calling
1-800-US-FUNDS (1-800-873-8637). Investments by telephone are not available in
money market funds or any retirement account administered by the Advisor or its
agents. The maximum telephone purchase is ten times the value of the shares
owned, calculated at the last available net asset value. Payment for shares
purchased by telephone is due within seven business days after the date of the
transaction. You cannot exchange shares
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purchased by telephone until after payment has been received and accepted by the
Trust.
BY WIRE
You may make your initial or subsequent investments in U.S. Global Accolade
Funds by wiring funds. To do so, call U.S. Global Accolade Funds at
1-800-US-FUNDS (1-800-873-8637) for a confirmation number and wiring
instructions.
BY ABC INVESTMENT PLANT
The ABC Investment PlanT (Automatically Building Capital) is offered as a
special service allowing you to build a position in any of the U.S. Global
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 PlanT form authorizing U.S. Global Accolade Funds to draw on your
money market or bank account 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 U.S. Global Accolade Funds
without requiring a $5,000 minimum initial investment.
Your investment dollars will automatically buy more shares when the market is
undervalued and fewer shares when the market is overvalued. By investing an
equal amount at regular, periodic intervals, you avoid the extremes in the
market. Of course, using the ABC Investment PlanT does not guarantee a profit.
If you sell at the bottom, no system will give you a gain.
You may call 1-800-873-8637 to open a treasury money market fund or you could
ask 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 anytime by letter received by
U.S. Global Accolade Funds 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 Trust and are not
binding until accepted. U.S. Global Accolade Funds reserves the right to reject
any application or investment. Orders received by the Fund's transfer agent or a
subagent 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. If the NYSE and other
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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 Trust because of such cancellation.
If a check is returned unpaid due to nonsufficient funds, stop payment or other
reasons, the Trust will charge $20, and you will be responsible for any loss
incurred by the Trust with respect to canceling the purchase.
To recover any such loss or charge, the Trust 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. Such a purchaser may be
prohibited from placing additional orders unless investments are accompanied by
full payment by wire or cashier's check.
U.S. Global Accolade Funds charges no sales commissions or "loads" of any
kind. However, investors may purchase and sell shares through registered
broker-dealers who may charge fees for their services.
CHECKS DRAWN ON FOREIGN BANKS. To be received in good order, an investment must
be made in U.S. dollars payable through a bank in the U.S. As an accommodation,
the 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 U.S. Your
investment in the Fund will not be considered to have been received in good
order until your foreign check has been converted into U.S. dollars and is
available to the Fund through a bank in the U.S. Your investment in the Fund may
be delayed until your foreign check has been converted into U.S. dollars and
cleared the normal collection process. Any amounts charged to the Fund for
collection procedures will be deducted from the amount invested.
If the Trust 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 part 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 tax identification number. To avoid this
withholding requirement, you must
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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, U.S. Global Accolade Funds will send you a
confirmation statement that will be your evidence that you have opened an
account with U.S. Global Accolade Funds. 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, U.S. Global
Accolade Funds will issue negotiable stock certificates. Unless your shares are
purchased with wired funds, a certificate will not be issued until 15 days have
elapsed from the time of purchase or U.S. Global Accolade Funds 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 funds in the U.S.
Global family of funds. An exchange involves the redemption (sale) of shares of
one fund and purchase of shares of another fund at the respective closing net
asset value and is a taxable transaction.
FUNDS IN THE U.S. GLOBAL FAMILY
Investing involves balancing potential rewards against potential risks. 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
PlanT. The list below is a reward and risk guide to all of the mutual funds in
the U.S. Global family of funds. This guide may help you decide if a fund is
suitable for your investment goals.
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HIGH REWARD China Region Opportunity Fund
HIGH RISK U.S. Gold Shares Fund
U.S. World Gold Fund
U.S. Global Resources Fund
Bonnel Growth Fund
U.S. Real Estate Fund
MODERATE REWARD U.S. All American Equity Fund
MODERATE RISK MegaTrends Fund
U.S. Income Fund
U.S. Tax Free Fund
United Services Near-Term Tax Free Fund
LOW REWARD U.S. Government Securities Savings Fund
LOW RISK U.S. Treasury Securities Cash Fund
If you have additional questions, one of our professional investor
representatives will personally assist you. Call 1-800-US-FUNDS.
BY TELEPHONE
You will be able to automatically direct U.S. Global Accolade Funds to exchange
your shares by calling toll free 1-800-US-FUNDS (1-800-873-8637). In connection
with such exchanges, neither the Fund nor the transfer agent will be responsible
for acting upon any instructions reasonably believed by them to be genuine. The
shareholder, because of this policy, will bear the risk of loss. The Fund and/or
its transfer agent will, however, use reasonable procedures to confirm that
telephone instructions are genuine (including requiring some form of personal
identification, providing written confirmation and tape recording
conversations). If either party does not employ reasonable procedures, it may be
liable for losses due to unauthorized or fraudulent transactions.
BY MAIL
You may direct U.S. Global Accolade Funds in writing to exchange your shares
between identically registered accounts in the U.S. Global family of funds. 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) A $5 charge will be paid to United Shareholder Services, Inc. ("USSI" or
the "Transfer Agent") for each exchange out of any fund account. Retirement
accounts administered by the Advisor or its agents are charged $5 for each
exchange exceeding three per quarter. Exchange fees cover administrative costs
associated with handling these exchanges.
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(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 also be delayed. Separate Fund shares will be priced at their net
asset value at the time of purchase. Redemption proceeds will not be invested in
either fund during this period. Fund shares will always be redeemed immediately;
however, Separate Fund shares will not be purchased until investable proceeds
are available. You will be notified immediately if the purchase will be delayed.
(3) If a negotiable stock certificate represents the shares you wish to
exchange, you must return the certificate before the exchange can be effected.
(4) Shares may not be exchanged unless you have furnished U.S. Global Accolade
Funds with your tax identification number, certified as required 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.
(5) Exchanges out of the Bonnel Growth Fund of shares held less than 30 days
are subject to a trader's fee. See TRADERS FEE PAID TO FUNDS.
(6) The exchange privilege may be canceled anytime. 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. Requests received in proper
order by the Trust's transfer agent or a subagent before 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 the
delivery of the following to the transfer agent:
(1) 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;
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(2) negotiable stock certificates for any shares to be redeemed if
certificates were issued;
(3) signature guarantees when required; and
(4) 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 U.S. Global
treasury money market fund ($1,000 minimum initial investment). You may then
write a check against your treasury money market fund account. See HOW TO
EXCHANGE SHARES for a description of exchanges, including the $5 exchange fee.
Call 1-800-873-8637 for more information concerning telephone redemptions and a
treasury money market fund prospectus.
SPECIAL REDEMPTION ARRANGEMENTS
Institutional investors, brokers, advisers, banks or similar institutions
(whether acting for themselves or on behalf of a client) may make special
arrangements to have redemption proceeds transferred by wire to pre-established
accounts upon telephone instructions. For additional information, call the Trust
at 1-800-873-8637. Telephone redemptions are available for Chairman's Circle
accounts.
SIGNATURE GUARANTEE
Redemptions of more than $15,000 require a signature guarantee. A signature
guarantee is required for all redemptions, regardless of the amount involved, if
(a) proceeds are to be paid to someone other than the registered owner of the
shares or (b) proceeds are to be mailed to an address other than the registered
address of record. When a signature guarantee is required, each signature must
be guaranteed by: (a) a federally insured bank or thrift institution; (b) a
broker or dealer (general securities, municipal, or government) or clearing
agency registered with the U.S. Securities and Exchange Commission that
maintains net capital of at least $100,000; or (c) a national securities
exchange or national securities association. The guarantee must: (i) include the
statement "Signature(s) Guaranteed"; (ii) be signed in the name of the
guarantor by an authorized person, including the person's
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<PAGE>
printed name and position with the 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 Trust reserves the
right to hold redemptions for up to seven days. If the shares to be redeemed
were purchased by check, the redemption proceeds will not be mailed or wired
until the purchase check has cleared, which may take up to seven days. A $10
charge will be deducted from redemption proceeds to cover the wire.
International wire charges 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 IRS Form W4-P and a reason for withdrawal as required by the IRS.
Proceeds from the redemption of shares from a retirement account may be subject
to withholding tax.
The Trust has the authority to redeem existing accounts and to refuse a
potential account the privilege of having an account in the Trust if the Trust
reasonably determines that the failure to redeem or prohibit would have a
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<PAGE>
material adverse consequence to the Trust and its shareholders. No account
closing fee or redemption 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) calendar 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 on Fund expenses. The Fund has
reserved the right to refuse investments from shareholders who engage in
short-term trading that may be disruptive to the Fund.
ACCOUNT CLOSING FEE
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; the transfer agent 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. Account closing fees do not apply to exchanges between the
funds in the U.S. Global family of funds nor does it apply to any account which
is involuntarily redeemed.
SMALL ACCOUNTS
Fund accounts which fall, for any reason other than market fluctuations, below
$5,000 anytime 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 PlanT 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.
To reduce Fund expenses, the Trust may redeem all shares in any shareholder
account, other than active ABC Investment PlanT accounts, custodial
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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 give those shareholders an
opportunity to increase their accounts by investing enough assets 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 will normally 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 Trust offers a number of plans and services to meet the special needs of
certain investors. Plans include:
(1) payroll deduction plans, including military allotments;
(2) custodial accounts for minors;
(3) flexible, systematic withdrawal plans; and
(4) various retirement plans such as IRA, SEP/IRA, 403(b)(7), 401(k) and
employer-adopted defined contribution plans.
There is an annual charge for each retirement plan fund account for which
Security Trust & Financial Company ("ST&FC"), a wholly-owned subsidiary of the
Advisor, acts as custodian. If the administrative charge is not paid separately
before the last business day of a calendar year or before a total redemption, it
will be deducted from the shareholder's account. Application forms and brochures
describing these plans and services can be obtained from the transfer agent by
calling 1-800-US-FUNDS (1-800-873-8637).
SHAREHOLDER SERVICES
United Shareholder Services, Inc., a wholly-owned subsidiary of the Advisor,
acts as transfer and dividend paying agent for all fund accounts. Simply write
or call 1-800-US-FUNDS for prompt service on any questions about your account.
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24-HOUR ACCOUNT INFORMATION
Shareholders can access current information 24 hours a day on yields, share
prices, latest dividends, account balances, deposits and redemptions. Just call
1-800-US-FUNDS 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. United
Shareholder Services, Inc. calculates the net asset value per share of the Fund.
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 when the
NYSE is closed, by dividing the aggregate net assets of the Fund by the total
number of outstanding shares of the Fund. If 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 will 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 (market other
than those in the United States or Canada), either on an exchange or over-
the-counter, is valued at the last reported sales price before the time when
assets are valued. A portfolio security listed or traded in the domestic market
(market in the United States or Canada), either on an exchange or
over-the-counter, is valued at the latest reported sale price before 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 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.
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Debt securities with maturities of 60 days or less at the time of purchase are
valued based on 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, the Fund will not be subject to
Federal income tax on its net investment income and capital gain net income
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 capital gain distributions and income
dividends 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. Undeliverable dividend checks returned to the
Fund and dividend checks not cashed after 180 days will automatically be
reinvested at the price of the Fund on the day returned (on or about the 181st
day), and the distribution option will be changed to "reinvest."
At the time of purchase, the share price of the Fund may reflect undistributed
income, capital gains or unrealized appreciation of securities. Any dividend or
capital gain distribution paid to a shareholder shortly after a purchase of
shares will reduce the per share net asset value by the amount of the
distribution. Although in effect a return of capital to the shareholder, these
distributions are fully taxable.
The Fund generally pays dividends quarterly and distributes capital gains, if
any, annually.
Mutual funds are potentially 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. Part of
these dividends may qualify for the 70% dividends
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<PAGE>
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 shareholders will receive a report of their Federal tax status of
dividends and distributions paid or declared by the Fund during the preceding
calendar year. This statement will also show whether and to what extent
distributions qualify for the 70% dividends received deduction available to
corporations.
This 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
U.S. Global Accolade Funds (the "Trust") is an open-end management investment
company consisting of several separate, diversified portfolios.
The Trust was formed April 16, 1993, as a business trust under the laws of the
Commonwealth of Massachusetts. It is a series company authorized to issue shares
without par value in separate series. Shares of the series have been authorized;
each share represents an interest in a separate portfolio. The Board of Trustees
of the Trust has the power to create additional portfolios anytime without a
vote of shareholders of the Trust.
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 expiring every three years. The Trustees serve in that capacity for
six-year terms. Therefore, no shareholder meeting will ordinarily be held unless
otherwise required by the Investment Company Act of 1940 (the "1940 Act"). The
Trust will call a meeting of shareholders for purposes of voting on the question
of removal of one or more Trustees when requested in writing to do so by record
holders of not less than 10% of the Trust's outstanding shares, and in
connection with such meeting to comply with the provisions of Section 16(c) of
the Investment Company Act of 1940 relating to shareholder communications.
On any matter submitted to shareholders, shares of each portfolio entitle their
holder to one vote per share, regardless of the relative net asset value of each
portfolio's shares. On matters affecting an individual portfolio, a separate
vote of shareholders is required. Each portfolio's shares are fully
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<PAGE>
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 Trust's Board of Trustees manages the business affairs of the Trust. The
Trustees establish policies and review and approve contracts and their
continuance. Trustees also elect the officers and select the Trustees to serve
as executive and audit committee members.
THE SUB-ADVISOR
Effective September 21, 1994, the Advisor and the Trust contracted with Bonnel,
Inc. to serve as Sub-Advisor for the Fund. Mr. Arthur Bonnel formed the
Sub-Advisor, a registered investment advisor. Mr. Bonnel, who serves as the
Fund's portfolio manager, has been managing money since 1970 and was previously
the portfolio manager of a successful mutual fund for more than five years.
The Sub-Advisor, located at P.O. Box 649, Reno, Nevada, 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. The Advisor and Sub-Advisor share the management fee equally, subject
to a minimum sub-advisory fee and various offsetting adjustments. The Fund is
not responsible for paying the Sub-Advisor's fee.
Mr. Bonnel served as the portfolio manager of the MIM Stock Appreciation Fund
from August 1987 through May 1994. On February 28, 1994, that fund had $60.1
million in net assets. However, the MIM Stock Appreciation Fund is no longer in
existence. As portfolio manager of the MIM Stock Appreciation Fund, Mr. Bonnel
had full discretionary authority over the selection of investments for that
fund. Average annual returns for the one-year, three-year and five-year periods
ended February 28, 1994, compared
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with the performance of the Standard & Poor's 500 Composite Stock Price Index
were:
THE MIM STOCK
APPRECIATION S&P 500
FUND(A)(B) INDEX(C)
------------- --------
One Year................................ 21.58% 8.31%
Three Years............................. 20.80 11.61
Five Years.............................. 20.64 13.64
- ------------
(a) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(b) The expense ratio of the MIM Stock Appreciation Fund from 1988 through 1993
ranged from a high of 3.05% in 1988 to a low of 2.47% in 1993. The expense
ratio of the Bonnel Growth Fund for the year ended September 30, 1996, was
1.83%.
(c) The Standard & Poor's 500 Composite Stock Price Index is an unmanaged index
of common stocks generally representative of the United States stock
market. The index is adjusted to reflect reinvestment of dividends.
Historical performance is not an indication of future performance. The MIM Stock
Appreciation Fund was a separate fund, and its historical performance is not
indicative of the potential performance of the Bonnel Growth Fund. Share prices
and investment returns will fluctuate reflecting market conditions and also
changes in company-specific fundamentals of portfolio securities.
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, and President and Trustee of the
Trust. Since October 1989, Mr. Holmes has owned more than 25% of the voting
stock of the Advisor and is its controlling person. The Advisor was organized in
1968 and serves as investment advisor to U.S. Global Investors Funds (formerly
United Services Funds), a family of mutual funds with more than $1.5 billion in
assets.
The Advisor provides management and investment advisory services to the Trust
and to the Funds in the Trust. The Advisor furnishes an investment program for
the Fund; determines, subject to the overall supervision and review of the Board
of Trustees, what investments should be purchased,
24
<PAGE>
sold and held; and makes changes on behalf of the Trust in the investments of
the Fund.
Investment decisions for the Fund are made independently from those of other
investment companies advised by U.S. Global Investors, Inc.
The Advisor also 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 expenses of
printing and mailing prospectuses and sales materials used for promotional
purposes.
The Advisory Agreement with the Trust provides for the Fund to pay the Advisor a
flat management fee of 1% of the Fund's average net assets.
The Advisor may, out of profits derived from its management fee, pay certain
financial institutions (which may include banks, 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 Transfer Agency Agreement with the Trust provides for the Fund to pay USSI
an annual fee of $23.00 per account ( 1/12 of $23.00 monthly). In connection
with obtaining/providing administrative services to the beneficial owners of
Fund shares through broker-dealers, banks, trust companies and similar
institutions that provide such services and maintain an omnibus account with the
transfer agent, the Fund will 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 will not exceed
$1.92 multiplied by the average daily number of accounts holding Fund shares at
the institution. These fees cover the usual transfer agency functions. In
addition, the Fund bears certain other transfer agent expenses such as the costs
of records retention, postage, 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 paid to the transfer
agent. For the fiscal year ending September 30, 1996, the Fund paid USSI a total
of $115,740 for transfer agency, lock box and printing services.
USSI performs bookkeeping and accounting services and determines the daily net
asset value for the Fund for 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
25
<PAGE>
to an annual minimum fee of $24,000. For the fiscal year ending September 30,
1996, the Fund paid USSI a total of $24,271 for portfolio accounting services.
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, among others, the charges and expenses of any
shareholder servicing agents; custodian fees; legal and auditor expenses;
brokerage commissions for portfolio transactions; the advisory fee;
extraordinary expenses; expenses of shareholders and trustee meetings; expenses
for preparing, printing, and mailing proxy statements, reports and other
communications to shareholders; and expenses of registering and qualifying
shares for sale.
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 annually.
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.
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<PAGE>
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.
Performance comparisons will 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 (the 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 that month. This income is then "annualized."
That is, the income generated by the investment during the 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. 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 elected by certain shareholders;
e.g., nominal fees like the $5 exchange fee.These fees reduce the actual return
realized by shareholders.
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<PAGE>
U.S. GLOBAL ACCOLADE FUNDS
SHARES OF THE FUND ARE SOLD
AT NET ASSET VALUE WITHOUT SALES COMMISSIONS OR
REDEMPTION FEES
Bonnel Growth 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
Bonnel, Inc.
P.O. Box 649
Reno, Nevada 89504
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 ACCOUNTANTS
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.
================================================================================
<PAGE>
U.S. GLOBAL ACCOLADE FUNDS
BONNEL GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a prospectus. It should be read
WITH the prospectus (the "Prospectus") dated February 3, 1997, which may be
obtained from U.S. Global Investors, Inc. (the "Advisor"), P.O. Box 29467, San
Antonio, Texas 78229-0467 or 1-800-US-FUNDS (1-800-873-8637).
This date of this Statement of Additional Information is February 3, 1997.
<PAGE>
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION..........................................................3
INVESTMENT OBJECTIVES AND POLICIES...........................................3
RISK FACTORS.................................................................5
PUT AND CALL OPTIONS.........................................................5
PORTFOLIO TURNOVER...........................................................6
MANAGEMENT OF THE FUND.......................................................6
INVESTMENT ADVISORY SERVICES.................................................8
TRANSFER AGENCY AND OTHER SERVICES...........................................9
DISTRIBUTION PLAN............................................................9
CERTAIN PURCHASES OF SHARES OF THE FUND.....................................10
ADDITIONAL INFORMATION ON REDEMPTIONS.......................................11
CALCULATION OF PERFORMANCE DATA.............................................11
TAX STATUS..................................................................12
INDEPENDENT ACCOUNTANTS ....................................................13
FINANCIAL STATEMENTS........................................................13
<PAGE>
GENERAL INFORMATION
U.S. Global Accolade Funds (the "Trust"), formerly Accolade Funds, is an
open-end management investment company and a business trust organized under the
laws of the Commonwealth of Massachusetts. There are several 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 Bonnel Growth Fund (the "Fund") and should
be read in conjunction with the Fund's prospectus.
The assets received by the Trust from the issue or sale of shares of the Fund
and all income, earnings, profits and proceeds, subject only to the rights of
creditors, are separately allocated to the appropriate fund in the Trust. They
constitute the underlying assets of the fund, are required to be segregated on
the books of accounts and are to be charged with the expenses with respect to
such fund. Any general expenses of the Trust not readily identifiable as
belonging to a particular fund will be allocated as directed by the Board of
Trustees in the manner 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 that does not
affect their 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 because 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
Neither the investment objective nor the investment policy of Bonnel Growth Fund
is a fundamental policy, and they may be changed by the Board of Trustees
without shareholder approval. The shareholders will be notified in writing at
least 30 days prior to any material change to either the Fund's investment
objective or its investment policy.
Under normal market conditions, the Fund will have at least 80% of the value of
its total assets in common stocks and securities convertible into common stocks.
The remainder of the portfolio may be invested in money market instruments; for
temporary defensive purposes, the Fund may invest up to 100% of its assets in
money market instruments. The Fund may
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invest in common stocks and other equity securities of foreign issuers but only
if they are listed on a domestic or foreign exchange, quoted on NASDAQ or traded
on the domestic or foreign over-the-counter market. No more than 25% of the
value of the Fund's total net assets will be invested in such foreign
securities.
Bonnel Growth 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 not borrow more than 5% of its
total assets from banks as a temporary measure for extraordinary
purposes, and 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 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 and
options thereon on equity securities indexes in conformance with rules
and regulations issued by the Securities and Exchange Commission.
(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 will 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) Make short sales.
(9) Invest more than 15% of its total assets in illiquid securities,
including securities that are subject to legal or contractual
restrictions on resale.
(10) 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.
(11) 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 will not apply to obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities, or (b) acquire more than 10% of the voting
securities of any one issuer.
(12) Invest more than 10% of its total net assets in open-end investment
companies. To the extent that the Fund will invest in open-end
investment companies, the Fund's advisor and sub-advisor will waive a
proportional amount of their management fees.
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If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage, resulting from a change in values of
portfolio securities or amount of net assets, will not be considered a violation
of any of the foregoing restrictions.
RISK FACTORS
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. In addition, economies of particular countries or areas of the world
may differ favorably or unfavorably from the economy of the United States. It is
anticipated that in most cases the best available market for foreign securities
will be on exchanges or in over-the-counter markets located outside 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 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. Overall, there
is less overall governmental supervision and regulation of foreign securities
markets, broker-dealer, and issuers than in the United States.
The Fund may invest up to 5% of its total assets in countries considered by the
Advisor to represent emerging markets. The Advisor decides 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. Currently, the Advisor considers the following countries
to be among the emerging markets: Malaysia, Mexico, Hong Kong, Greece, Portugal,
Turkey, Argentina, Brazil, Indonesia, Philippines, Singapore, Thailand, and
China.
PUT AND CALL OPTIONS
SELLING (OR WRITING) COVERED CALL OPTIONS. The Fund may sell (or write) covered
call options on portfolio securities to hedge against adverse movements in the
prices of these securities. A call option gives the buyer of the option, upon
payment of a premium, the right to call upon the writer to deliver a security on
or before a fixed date at a predetermined price, called the strike price. If the
price of the hedged security falls or remains below the strike price, the Fund
will not be asked to deliver the security; and the Fund will retain the premium
received for the option as additional income, offsetting all or part of any
decline in the value of the security. The hedge provided by writing covered call
options is limited to a price decline in the security of no more than the option
premium received by the Fund for writing the option. If the security owned by
the Fund appreciates above the options strike price, the Fund will generally be
called upon to deliver the security, which will prevent the Fund from receiving
the benefit of any price appreciation above the strike price.
BUYING CALL OPTIONS. The Fund may establish an anticipatory hedge by purchasing
call options on securities that the Fund intends to purchase to take advantage
of anticipated positive movements in the prices of these securities. When
establishing an anticipatory hedge, the Fund will deposit cash or cash
equivalents into a segregated account equal to the call option's exercise price.
The Fund will realize a gain from the exercise of a call option if, during the
option period, the price of the underlying security to be purchased increases by
more than the amount of the premium paid. A Fund will realize a loss equal to
all or a part of the premium paid for the option if the price of the underlying
security decreases or does not increase by more than the premium.
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PUT OPTIONS. The Fund may purchase put options on portfolio securities to hedge
against adverse movements in the prices of these securities. A put option gives
the buyer of the option, upon payment of a premium, the right to sell a security
to the writer of the option on or before a fixed date at a predetermined price.
The Fund will realize a gain from the exercise of a put option if, during the
option period, the price of the security declines by an amount greater than the
premium paid. The Fund will realize a loss equal to all or a part of the premium
paid for the option if the price of the security increases or does not decrease
by more than the premium.
CLOSING TRANSACTIONS. The Fund may dispose of an option written by the Fund by
entering into a "closing purchase transaction" for an identical option and may
dispose of an option purchased by the Fund by entering into a "closing sale
transaction" for an identical option. In each case, the closing transaction will
terminate the rights of the option holder and the obligations of the option
purchaser and will result in a gain or loss to the Fund based upon the relative
amount of the premiums paid or received for the original option and the closing
transaction. The Fund may sell (or write) put options solely for the purpose of
entering into closing sale transactions.
INDEX OPTIONS. The Fund may purchase and sell call options and purchase put
options on stock indices to manage cash flow, reduce equity exposure, or to
remain fully invested in equity securities. Options on securities indices are
similar to options on a security except that, upon the exercise of an option on
a securities index, settlement is made in cash rather than in specific
securities.
LIMITATIONS. The Fund will purchase and sell only options listed on a securities
exchange. The Fund will not purchase any option if, immediately afterwards, the
aggregate market value of all outstanding options purchased and written by the
Fund would exceed 5% of the Fund's total assets. The Fund will not write any
call options if, immediately afterwards, the aggregate value of the Fund's
securities subject to outstanding call options would exceed 25% of the value of
the Fund's total assets.
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 fluctuating interest rates.
The Fund's investments may also be traded to take advantage of perceived
short-term disparities in market values.
A change in the securities held by the Fund is known as "portfolio
turnover." High portfolio turnover may cause the Fund to pay higher
transaction expenses, including more commissions and markups, and may also
result in quicker recognition of capital gains, resulting in more capital gains
distributions that may be taxable to shareholders. Any short-term gain realized
on securities will be taxed to shareholders as ordinary income. See "Tax
Status."
PORTFOLIO TRANSACTIONS
For the year ended September 30, 1996, and the period beginning October 17,
1994, (initial public offering) and ending September 30, 1995, the Fund paid
brokerage fees of $613,522 and $99,587, respectively. For a fuller discussion of
the Fund's portfolio trading practices see "Portfolio Transactions" in the
prospectus.
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.
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NAME AND ADDRESS TRUST POSITION PRINCIPAL OCCUPATION
- --------------------------------------------------------------------------------
Frank E. Holmes(1) Trustee Chairman of the Board of Directors and
President, Chief Executive Officer of the Advisor.
Chief Since October 1989 Mr. Holmes has served
Executive and continues to serve in various
Officer 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 of
11 Dennin Drive the State University of New York at
Menands, NY Albany from 1990 to present; Dean, School
12204 of Business 1990-1994; Director of the
Institute for the Advancement of Health
Care Management, 1994-present. Corporate
Vice President, Sierra Pacific Resources,
Reno, NV, 1985-1990. Dean and Professor,
College of Business Administration,
University of Nevada, Reno, 1977-1985.
Associate Dean, Stern School of Business,
New York University, New York City,
1970-1977.
Clark R. Mandigo Trustee Business consultant since 1991. From 1985
1250 N.E. Loop 410 to 1991, President, Chief Executive
Suite 900 Officer, and Director of Intelogic Trace,
San Antonio, TX Inc., a nationwide company which sells,
78209 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, and
President, Chief Operating Officer of the Advisor.
Chief Since January 1985 Mr. Duncan has served
Operating and continues to serve in various
Officer positions with the Advisor, its
subsidiaries, and the investment
companies which it sponsors.
Thomas D. Tays Vice President Vice President and Securities Specialist
and of the Advisor. Since September 1993 Mr.
Secretary of Tays has served and continues to serve in
the Trust 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. McGee
Secretary has served and continues to serve in
various positions with the Advisor, its
subsidiaries, and the investment
companies which it sponsors. Prior to
September 1992 Ms. McGee was a student at
St. Mary's Law School.
Kevin C. White Chief Chief Accounting Officer of the Advisor.
Accounting Since November 1995 Mr. White has served
Officer 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.
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PRINCIPAL HOLDERS OF SECURITIES
As of November 20, 1996, the officers and Trustees of the Trust, as a group,
owned less than 1% of the outstanding shares of the Fund. The Fund is aware of
the following person(s) owning of record, or beneficially, more than 5% of the
outstanding shares of the Fund as of November 20, 1996.
NAME AND ADDRESS TYPE OF
FUND OF OWNER % OWNED OWNERSHIP
- ------------------ ------------------------------- ------- ---------
BONNEL GROWTH FUND Charles Schwab & Co. Inc. 15.73% Record
101 Montgomery Street
San Francisco, California 94104
INVESTMENT ADVISORY SERVICES
The investment adviser to the Funds is U.S. Global Investors, Inc. (the
"Advisor"), a Texas corporation, pursuant to an advisory agreement dated
September 21, 1994. Frank E. Holmes, Chief Executive Officer and a Director of
the Advisor, and 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 part of the compensation of the Advisor's employees who perform certain legal
services for the Trust, including state securities law regulatory compliance
work, based upon the time spent on such matters for the Trust.
The Trust pays all other expenses for its operations and activities. The Fund
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, expenses 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, typesetting and
mailing prospectuses and periodic reports to current shareholders, fidelity bond
premiums, cost of maintaining the books and records of the Trust, and any other
charges and fees not specified.
The Trust and the Advisor, in connection with the Fund, have entered into a
sub-advisory agreement with Bonnel, Inc. (the "Sub-Advisor"). In
connection with such services, the Advisor pays the Sub-Advisor a minimum
sub-advisory fee of $150,000 per year. When the Fund's assets exceed $30
million, the Advisor and the Sub-Advisor will 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 previously received as a result of the minimum sub-advisory fee set forth
above and paid by the Advisor or the Trust before the Securities and Exchange
Commission declared the Fund's registration statement effective; 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 greater than $40,000);
and (4) if a decision is made with respect to placing a cap on expenses, to the
extent 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. The Fund is not responsible for the Sub-Advisor's fee.
The Advisor may, out of profits derived from its management fee, pay certain
financial institutions (which may include banks, securities dealers, and other
industry professionals) a "servicing fee" for performing certain administrative
servicing functions for Fund shareholders to the extent these institutions are
allowed to do so by applicable statute, rule or regulation. These fees
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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 Advisory Agreement was approved by the Board of Trustees of the Trust
(including a majority of the "interested 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 by (i) 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) 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-day written notice by either party and will
terminate automatically if it is assigned.
The Advisor provides investment advice to a variety of clients, including other
mutual funds. Investment decisions for each client are made with a view to
achieving their respective investment objectives. Investment decisions are the
product of many factors in addition to basic suitability for the particular
client involved. Thus, a particular security may be bought or sold for certain
clients even though it could have been bought or sold for other clients at the
same time. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling the security. In some instances, one
client may sell a particular security to another client. It also sometimes
happens that two or more clients simultaneously purchase or sell the same
security, in which event each day's transactions in such security are, as far as
possible, averaged as to price and allocated between such clients in a way that
in the Advisor's opinion is equitable to each and in accordance with the amount
being purchased or sold by each. There may be circumstances when purchases or
sales of portfolio securities for one or more clients will have an adverse
effect on other clients. The Advisor employs 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 different from
those of 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
recapitalizations. In general, the Advisor invests in start-up companies in the
natural resources or technology fields.
TRANSFER AGENCY AND OTHER SERVICES
In addition to the services performed for the Funds and the Trust under the
Advisory Agreement, the Advisor, through its subsidiary USSI, provides transfer
agent and dividend disbursement agent services pursuant to the Transfer Agency
Agreement as described in the Fund's prospectus under "Management of the Fund --
The Investment Advisor." Also, lockbox and statement printing services are
provided by USSI. For the year ended September 30, 1996, the Fund paid USSI a
total of $124,307 for transfer agency, lockbox, and printing fees.
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 Fund -- The Investment Advisor." For the
year ended September 30, 1996, the Fund paid USSI a total of $24,271 for
portfolio accounting services.
A&B Mailers, Inc., a corporation wholly owned by the Advisor, provides the Trust
with certain mail handling services. The charges for such services have been
negotiated by the Audit Committee and A&B Mailers, Inc. Each service is priced
separately.
DISTRIBUTION PLAN
As described under "Service Fee" in the prospectus, in September 1994, the Fund
adopted a Distribution Plan pursuant to Rule 12b-1 of the 1940 Act (the
"Distribution Plan"). The Distribution Plan allows the Fund to pay for or
reimburse expenditures in connection with sales and promotional services related
to the distribution of Fund shares, including personal
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services provided to prospective and existing Fund shareholders, which includes
the costs of: printing and distribution of prospectuses and promotional
materials, making slides and charts for presentations, assisting shareholders
and prospective investors in understanding and dealing with the Fund, and travel
and out-of-pocket expenses (e.g., copy and long distance telephone charges)
related thereto.
The total amount expended pursuant to the Distribution Plan may not exceed 0.25%
of the Fund's net assets annually. For the year ended September 30, 1996,
the Fund paid a total of $140,059 in distribution fees. 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 Distribution Plan in the current or future periods if the
0.25% limitation is never exceeded.
Expenses that the Fund incurs pursuant to the Distribution Plan are reviewed
quarterly by the Board of Trustees. The Distribution Plan is reviewed annually
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 considering their fiduciary duties under state
law and under Section 36(a) and (b) of the 1940 Act, there is reasonable
likelihood that the Distribution Plan will benefit the Fund and its
shareholders. The Distribution Plan may be terminated anytime by a majority vote
of the Qualified Trustees, or by a majority vote 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 it
attracts more shareholders.
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 restricted in any way as to resale or be otherwise
illiquid;
(2) securities of the same issuer must already exist in the Fund's
portfolio;
(3) the securities must have a value that is readily ascertainable (and
not established only by evaluation procedures) as evidenced by a
listing on the AMEX, the NYSE, or NASDAQ;
(4) any securities so acquired by any fund will not comprise more than 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.
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An investor who wishes to make an "in kind" purchase should furnish (either in
writing or by telephone) a list to the Trust with a full and exact description
of all of the securities he or she proposes to deliver. The Trust will advise
him or her as to those securities 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 is 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 practicable for the Trust to dispose of securities owned
by it or to determine fairly the value of its assets; or (3) as the SEC may
otherwise permit.
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.
The calculation assumes that (a) all charges are deducted from the initial
$1,000 payment, (b) all dividends and distributions by the Fund are reinvested
at the price stated in the prospectus on the reinvestment dates during the
period and (c) all recurring fees charged to all shareholder accounts are
included.
The average annual total return for the Fund for the year ended September 30,
1996, and from October 17, 1994 (initial public offering) through September 30,
1995, was 21.27% and 48.74% (not annualized), respectively.
NONSTANDARDIZED TOTAL RETURN
The Fund may provide the above described standard total return results for a
period that ends not earlier than the most recent calendar quarter end and
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.
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EFFECT OF FEE WAIVER AND EXPENSE REIMBURSEMENT
From October 17, 1994 (initial public offering), through September 30, 1995, the
Fund's expense ratio was 2.48%. If the Advisor had not subsidized the Fund's
expenses, the expense ratio subject to the most restrictive state limitation
would have been 2.50%. Because its expenses were subsidized, the Fund's
investment performance, including annual compound rate of return, was improved.
The Advisor is not obligated to continue subsidizing the Fund's expenses in the
future.
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
distributed to shareholders if 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
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 paid to shareholders of record in such a
month, will be deemed to have been received 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 before a distribution. The price of shares
purchased then includes the amount of any forthcoming distribution. Investors
purchasing the Fund's shares immediately before a distribution may receive a
return of investment upon distribution that will nevertheless be taxable to
them.
A shareholder of the Fund should be aware that a redemption of shares (including
any exchange into other funds offered, affiliated or administered by U.S. Global
Investors, Inc.) is a taxable event and, accordingly, a capital gain or loss may
be recognized. If a shareholder of the Fund receives a distribution taxable as
long-term capital gain with respect to shares of the Fund and redeems or
exchanges shares before he has held them for more than six months, any loss on
the redemption
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or exchange (not otherwise disallowed as attributable to an exempt-interest
dividend) will be treated as long-term capital loss to the extent of the
long-term capital gain recognized.
CUSTODIAN
Bankers Trust Company acts as Custodian for the Fund. Services with respect to
the retirement accounts will be provided by Security Trust and Financial Company
of San Antonio, Texas, a wholly-owned subsidiary of the Advisor.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, One Riverwalk Place, San Antonio, Texas 78205 is the
independent accountant for the Trust.
FINANCIAL STATEMENTS
The financial statements for the year ended September 30, 1996, are hereby
incorporated by reference from the Annual Report to Shareholders of that date
that accompanies this Statement of Additional Information. If not included, the
Trust will promptly provide a copy, free of charge, upon request to: U.S. Global
Investors, Inc., P.O. Box 29467, San Antonio, Texas 78229-0467, 1-800-873-8637
or (210) 308-1234.
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