[GRAPHIC: FULL-LENGTH PHOTO OF ART BONNEL W/NEWSPAPER FUND TABLE IN THE
BACKGROUND]
BONNEL GROWTH FUND
---------------------------------
SEMI-ANNUAL REPORT MARCH 31, 1997
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<PAGE>
U.S. Global Investors
------------------
Bonnel Growth Fund
Semi-Annual Report
------------------
March 31, 1997
(Unaudited)
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TABLE OF CONTENTS
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Letter to Shareholders ............ 1
Investment Manager Perspective .... 2
Portfolio of Investments .......... 5
Statement of Assets and Liabilities 9
Statement of Operations ........... 10
Statement of Changes in Net Assets 11
Notes to Financial Statements ..... 12
Financial Highlights .............. 16
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For more information, including charges and expenses, call 1-800-US-FUNDS or
visit us on the Web at www.usfunds.com. Please read the prospectus carefully
before investing; it details the special risks, including political, currency
and economic risks, of investing in emerging markets. U.S. stands for United
Services. Past performance is no guarantee of future results. Investment returns
and principal of accounts in non-money market funds may fluctuate so that you
have a gain or loss when you sell shares.
Lipper Analytical Services ranked the U.S. Government Securities Savings Fund #5
and #1 for the one-and five-year periods ended 3/31/97 out of 115 and 79
government money market funds, respectively. Like all other mutual funds, Fund
shares are not backed by the U.S. government or its agencies; however, the
securities it invests in are. The Fund is managed to maintain a stable $1 per
share value, though there is no assurance it will be able to do so.
Must be preceded or accompanied by a current prospectus.
<PAGE>
[GRAPHIC: PHOTO OF FRANK E. HOLMES, CEO ON UPPER RIGHT CORNER]
Dear Shareholder,
Thank you for investing with the Bonnel Growth Fund, one of the exciting and
dynamic funds in the U.S. Global Investors family. On the following pages, Art
Bonnel shares with you his insights on the markets and his Fund's performance.
As new opportunities have opened up worldwide, we have expanded our investment
focus and changed our name accordingly. Our company and our fund family, once
known as United Services, have taken the new name U.S. Global Investors. The
names of the individual funds will remain the same.
These new opportunities have inspired us to open several new funds for you. The
Adrian Day Global Opportunity Fund invests for growth in blue-chip and emerging
companies throughout the world. And the Regent Eastern European Fund seeks out
the most promising investments in Eastern Europe and the former Soviet Union.
It's easy to open a new account in these funds or to exchange into them. It's
just as easy to open a new account in the U.S. Government Securities Savings
Fund, which is again ranked #1 by Lipper for five-year performance. In today's
market environment, a fund like this can help protect your profits and savings
from market downturns while still earning you one of the highest money market
yields available in America.
Ideal for the long-term investor, the Bonnel Growth Fund has great potential for
superior long-term performance. Remember that its growth strategy works best for
patient investors willing to stay invested through inevitable short-term
corrections.
If you would like to add to your account, it takes no more than a phone call to
do so. Just call 1-800-US-FUNDS or 1-800-873-8637 to make a telephone purchase.
Thank you for investing with U.S. Global Investors.
Sincerely yours,
/s/ FRANK HOLMES
Frank Holmes
Chairman & CEO
P.S. Another way to temper market corrections is the ABC Investment Plan(R).
This dollar-cost averaging method helps you buy more shares when they are "on
sale," and it removes the necessity and the risk of timing your purchase
properly. Of course, no investment program can guarantee a profit. If you sell
at bottom, no system will give you a gain. The ABC Investment Plan(R), however,
works best in times like these by assuring that you purchase more shares when
they cost less.
1
<PAGE>
BONNEL GROWTH FUND SEMI-ANNUAL REPORT
FOR THE PERIOD ENDED MARCH 31, 1997
The past six months have been turbulent for both the stock market and the Bonnel
Growth Fund. For the six months ended March 31, 1997, the Fund's total return
was -9.41% vs. +11.24% for the S&P 500 and -0.24% for the Russell 2000 index. It
appears that most of the dollars flowing into mutual funds are going into index
or large-cap funds and not growth funds. Growth may be out of favor for now, but
it will come back.
We are pleased to report that the Fund had assets of $84.3 million as of March
31 and our expense ratio is now down to an annualized 1.75%. This is very
positive for shareholders, since fixed costs are being spread out over a larger
asset base, thus reducing the cost to each investor.
The Fund has a high weighting in growth-oriented technology, retailing and
healthcare issues. We seek out companies which, in our opinion, have strong
growth potential and because of that our analysis continues to uncover stocks in
these dynamic industries. Sears Roebuck, which we have held since April 1995,
has continued to reward us. The Fund received the Allstate spin-off and the
stock of Sears is still near its high. Merck & Co. has been in the portfolio
since October 1995 and is also continuing to do well. Merck's prospects look
good because of new drugs coming to market and the aging of the U.S. population.
Then of course there is technology. One of our larger holdings, Intel, was
initially purchased in October 1996 and still shows great earnings and prospects
for the future. It also is a very liquid stock which other institutional
investors are seeking out in this market environment.
The Fund looks at most industries in an effort to capitalize on what we believe
are undervalued situations. As an example, in January of this year we purchased
some shares of McDonald's. A fast-food company with international exposure, it
is one of the best long-term growth companies in the market. As you look through
the report you will see some of the other diversification the Fund has taken.
Remember that while our focus has generally been on technology, healthcare and
retail, our objective is growth. We look at all companies, large and small, with
a focus on mid-cap companies to achieve that objective to the greatest extent
possible.
2
<PAGE>
[GRAPHIC: PIE CHART CREATED WITH THE FOLLOWING DATA]
TOP SECTORS BASED ON TOTAL INVESTMENTS
INDUSTRY PERCENT
Technology .................................................... 37.35%
Chemicals, Pharmaceuticals, & Health Care ..................... 20.17%
Retailing ..................................................... 6.38%
Other ......................................................... 36.10%
Total Investments ............................................. 100.00%
[END OF CHART]
The volatility in 1997 has made investing difficult and has made diversification
and risk management even more important. The Dow Jones Industrial Average peaked
at 7085.16 on March 11 and then fell almost 10% by early April. The NASDAQ did
even worse, peaking in January at 1388.06 and falling to 1206.90 in early
April--a 13.05% decline. Yet when the market corrects, some stocks can become
the bargains of the next bull market. We will continue to search for these
bargains. The important thing to remember is no one knows exactly where the
bottom will be, so it is important to take advantage of low-priced, high-value
stocks and not try to get them at their very lowest. Time will work in favor of
the patient investor.
You have a large choice of funds to choose from in today's marketplace, and I
would like to thank you for choosing us and for placing your confidence in U.S.
Global Investors. We will continue to work hard in our effort to find what we
consider good quality investments for the portfolio. Thank you again for your
support.
/s/ ARTHUR J. BONNEL
Arthur J. Bonnel
Portfolio Manager
3
<PAGE>
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TOP 10 HOLDINGS BASED ON TOTAL INVESTMENTS
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EXXON CORPORATION ........ 3.84%
Petroleum Refining
..........................................
THE CLOROX COMPANY ....... 3.33%
Chemical & Allied Prod
..........................................
COLGATE-PALMOLIVE COMPANY 2.96%
Chemical & Allied Prod
..........................................
ELI LILLY AND COMPANY .... 2.93%
Chemical & Allied Prod
..........................................
MICROSOFT CORPORATION .... 2.72%
Business Services
..........................................
AVERY-DENNISON CORPORATION 2.51%
Chemical & Allied Prod
..........................................
MERCK & COMPANY, INC. .... 2.50%
Chemical & Allied Prod
..........................................
CHEVRON CORPORATION ...... 2.48%
Petroleum Refining
..........................................
INTEL CORPORATION ........ 2.48%
Electronics/Elect. Equip
..........................................
DELL COMPUTER CORPORATION 2.41%
Industrial/Computer Equip
..........................................
OTHER .................... 71.84%
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4
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<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
MARCH 31, 1997
SHARES VALUE
COMMON STOCKS 99.09%
<S> <C> <C>
APPAREL & OTHER FINISHED PRODUCTS 1.83%
Dress Barn, Inc. ........................ 10,000 $ 168,750*
Jones Apparel Group, Inc. ............... 30,000 1,113,750*
Tommy Hilfiger Corporation .............. 5,000 261,250*
-----------
1,543,750
BUSINESS SERVICES 8.81%
Activision, Inc. ........................ 15,000 168,750*
Boole & Babbage, Inc. ................... 20,000 475,000*
DSP Group Inc. .......................... 10,000 92,500*
Electronics for Imaging, Inc. ........... 10,000 398,750*
Hyperion Software Corporation ........... 20,000 330,000*
Keane, Inc. ............................. 5,000 164,375*
Manugistics Group, Inc. ................. 5,000 182,500*
Microsoft Corporation ................... 25,000 2,292,188*
Project Software & Development .......... 30,000 960,000*
Seattle Filmworks Inc. .................. 15,000 165,000*
Shared Medical Systems .................. 10,000 465,000
Sun Microsystems, Inc. .................. 50,000 1,443,750*
Systems & Computer Technology Corporation 15,000 290,625*
-----------
7,428,438
CHEMICAL & ALLIED PRODUCTS 17.31%
Avery-Dennison Corporation .............. 55,000 2,117,500
Avon Products, Inc. ..................... 35,000 1,837,500
Colgate-Palmolive Company ............... 25,000 2,490,625
Eli Lilly and Company ................... 30,000 2,467,500
Helen of Troy Ltd. ...................... 5,000 118,750*
Medco Research Inc. ..................... 15,000 120,000*
Merck & Company, Inc. ................... 25,000 2,106,250
NBTY, Inc. .............................. 35,000 529,375*
The Clorox Company ...................... 25,000 2,803,125
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14,590,625
DURABLE GOODS-WHOLESALE 3.78%
Act Manufacturing Inc. .................. 40,000 830,000*
Borg-Warner Automotive, Inc. ............ 5,000 213,125
Harmonic Lightwaves, Inc. ............... 20,000 275,000*
Martin Marietta Materials, Inc. ......... 15,000 386,250
W.W. Grainger, Inc. ..................... 20,000 1,480,000
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3,184,375
EATING AND DRINKING PLACES 1.99%
Cracker Barrel Old Country Store ........ 10,000 261,250
McDonald's Corporation .................. 30,000 1,417,500
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1,678,750
5
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PORTFOLIO OF INVESTMENTS MARCH 31, 1997
SHARES VALUE
ELECTRIC, GAS & SANITARY SERVICES 1.19%
AES Corporation ......................... 10,000 $ 560,000*
Superior Services, Inc. ................. 20,000 445,000*
-----------
1,005,000
ELECTRONICS/ELECTRICAL EQUIPMENT 13.93%
ADC Telecommunications, Inc. ............ 70,000 1,881,250*
American Power Conversion Corp. ......... 20,000 432,500*
ANADIGICS, Inc. ......................... 30,000 810,000*
Boston Technology, Inc. ................. 40,000 755,000*
Coherent Communications System .......... 50,000 862,500*
Detection Systems, Inc. ................. 5,000 87,500*
ECI Telecommunications .................. 5,000 92,500
ESS Technology, Inc. .................... 30,000 727,500*
Hutchinson Technology, Inc. ............. 51,000 1,453,500*
Intel Corporation ....................... 15,000 2,086,875
Micrel, Inc. ............................ 10,000 290,000*
Moog, Inc. .............................. 3,000 70,125*
MRV Communications Inc. ................. 5,000 111,250*
P-COM, Inc. ............................. 40,000 1,040,000*
Plexus Corporation ...................... 30,000 885,000*
Vari-L Company, Inc. .................... 20,000 160,000*
-----------
11,745,500
FABRICATED METALS 4.24%
Illinois Tool Works, Inc. ............... 20,000 1,632,500
Snap-On, Inc. ........................... 30,000 1,162,500
Tower Automotive, Inc. .................. 20,000 780,000*
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3,575,000
HEALTH SERVICES 2.97%
Columbia/HCA Healthcare Corp. ........... 20,000 672,500
Express Scripts, Inc. Class "A" ......... 5,000 178,750*
Patterson Dental Company ................ 5,000 170,000*
Pediatrix Medical Group Inc. ............ 20,000 657,500*
RehabCare Group, Inc. ................... 35,000 826,875*
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2,505,625
INDUSTRIAL/COMPUTER EQUIPMENT 14.59%
Applied Magnetics Corp. ................. 35,000 988,750*
Baker Hughes, Inc. ...................... 10,000 383,750
Compaq Computer Corporation ............. 25,000 1,915,625*
Comverse Technology, Inc. ............... 15,000 592,500*
DT Industries, Inc. ..................... 20,000 525,000
Dell Computer Corporation ............... 30,000 2,028,750*
Digital Link Corporation ................ 10,000 125,000*
ENCAD, Inc. ............................. 20,000 597,500*
6
<PAGE>
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
SHARES VALUE
INDUSTRIAL/COMPUTER EQUIPMENT 14.59% (continued)
Minnesota Mining & Manufacturing Co. .... 20,000 $ 1,690,000
Selas Corporation of America ............ 3,000 48,000
Smart Modular Tech Inc. ................. 10,000 237,500*
Smith International Inc. ................ 25,000 1,140,625*
Valmont Industries ...................... 20,000 780,000
Varco International Inc. ................ 50,000 1,250,000*
-----------
12,303,000
MEASURING INSTRUMENTS/PHOTO GOODS 2.78%
Datum, Inc. ............................. 25,000 362,500*
II-VI, Inc. ............................. 70,000 1,732,500*
MTS Systems Corporation ................. 5,000 110,000
Wireless Telecom Group .................. 15,000 140,625
-----------
2,345,625
PETROLEUM REFINING 6.31%
Chevron Corporation ..................... 30,000 2,088,750
Exxon Corporation ....................... 30,000 3,232,500
-----------
5,321,250
PRIMARY METAL INDUSTRIES 1.05%
AFC Cable Systems ....................... 10,000 207,500*
Engelhard Corporation ................... 5,000 105,000
Lone Star Technologies, Inc. ............ 30,000 570,000*
-----------
882,500
PRINTING/PUBLISHING 3.71%
Analytical Surveys, Inc. ................ 10,000 106,250*
Consolidated Graphics Inc. .............. 70,000 2,003,750*
McGraw-Hill Companies, Inc. ............. 20,000 1,022,500
-----------
3,132,500
RETAIL 6.38%
Alberto-Culver Company .................. 20,000 445,000
Amerisource Health Corporation .......... 20,000 875,000*
Dollar Tree Stores, Inc. ................ 25,000 925,000*
Safeway, Inc. ........................... 35,000 1,623,125*
Sears, Roebuck and Company .............. 30,000 1,507,500
-----------
5,375,625
SECURITY & COMMODITY BROKERS 1.88%
Bear Stearns Companies, Inc. ............ 15,750 413,437
Charles Schwab Corporations ............. 35,000 1,115,625
Investment Technology Group ............. 3,000 57,000*
-----------
1,586,062
7
<PAGE>
PORTFOLIO OF INVESTMENTS MARCH 31, 1997
SHARES VALUE
TEXTILE MILL PRODUCTS 1.36%
Interface Inc. .......................... 3,000 $ 75,188
Russel Corporation ...................... 30,000 1,072,500
-----------
1,147,688
MISCELLANEOUS 4.98%
Anchor Gaming
(Amusement & Recreation Services) .... 35,000 975,625*
Brightpoint, Inc.
(Communications) ..................... 12,500 203,125*
DeVry, Inc.
(Educational Services) ............... 15,000 330,000*
Ducommun Inc.
(Transportation Equipment) .......... 10,000 243,750*
Home Depot, Inc.
(Building Materials) ................ 30,000 1,605,000
Oceaneering International, Inc.
(Oil and Gas Extraction) ............ 20,000 312,500*
Owens-Illinois, Inc.
(Stone, Clay, Glass, Concrete) ...... 20,000 492,500*
Southwall Technologies Inc.
(Rubber & Miscellaneous Plastics) ... 5,000 33,125*
-----------
4,195,625
-----------
TOTAL COMMON STOCKS (cost $85,029,512) .. 83,546,938
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT .87%
Joint Repurchase Agreement Account,
6.50% 3/31/97, due 4/1/97,
repurchase price $729,692,
collateralized by $752,660 of
allocated portions of U.S. Treasury
Note, 5%, 1/31/99 and U.S. Treasury
Bonds, 6.625% to 7.625%, 2/15/25 to
2/15/27, plus the associated
interest, (cost $729,692) $ 729,692 729,692
TOTAL INVESTMENTS 99.96%
(cost $85,759,204) 84,276,630
Other assets and liabilities, net .04% 30,617
-----------
NET ASSETS 100% $84,307,247
===========
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* Non-income producing security.
See accompanying notes to financial statements.
8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1997
ASSETS
Investments, at value (identified cost of $85,759,204) ..... $ 84,276,630
Cash ....................................................... 3,033
Receivables:
Dividends ............................................... 24,700
Interest ................................................ 132
Capital shares sold ..................................... 486,789
Other ...................................................... 10,982
------------
Total Assets ............................................... 84,802,266
------------
LIABILITIES
Payables:
Capital shares redeemed ................................. 374,785
To manager and affiliates ............................... 17,065
Accounts payable and accrued expenses ................... 103,169
------------
Total Liabilities .......................................... 495,019
------------
NET ASSETS .................................................... $ 84,307,247
============
NET ASSETS CONSIST OF:
Paid-in capital ............................................ $ 80,839,247
Undistributed net investment income (loss) ................. (496,663)
Accumulated net realized gain (loss) from investments ...... 5,447,237
Net unrealized appreciation (depreciation) of investments .. (1,482,574)
------------
Net assets applicable to capital shares outstanding ........ $ 84,307,247
============
Capital shares outstanding ................................. 5,478,648
============
NET ASSET VALUE, PER SHARE .................................... $15.39
======
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See accompanying notes to financial statements.
9
<PAGE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1997
NET INVESTMENT INCOME
Income:
Dividends ............................................... $ 322,379
Interest and other ...................................... 22,676
------------
Total Income .......................................... 345,055
------------
Expenses:
Management fees ......................................... 479,734
Transfer agent fees and expenses ........................ 110,799
Accounting service fees and expenses .................... 21,874
Legal and professional fees ............................. 16,198
Distribution plan expenses .............................. 119,639
Custodian fees .......................................... 10,906
Shareholder reports and notices ......................... 19,155
Registration fees ....................................... 36,606
Trustee's fees and expenses ............................. 15,434
Miscellaneous ........................................... 12,286
------------
Total expenses before reductions ........................ 842,631
Expenses reimbursed or offset ........................... (913)
------------
Net Expenses .......................................... 841,718
------------
NET INVESTMENT INCOME (LOSS) .................................. (496,663)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain from securities .............................. 7,518,884
Net change in unrealized appreciation
(depreciation) of investments .............................. (16,276,796)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ........ (8,757,912)
------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .................................. $ (9,254,575)
============
</TABLE>
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See accompanying notes to financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30,
1997 1996
------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS:
Net investment income (loss) ....................... $ (496,663) $ (740,292)
Net realized gain (loss) on investments ............ 7,518,884 (728,847)
Net change in unrealized appreciation (depreciation) (16,276,796) 11,257,430
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NET INCREASE (DECREASE) IN NET ASSETS FROM
INVESTMENT OPERATIONS ........................... (9,254,575) 9,788,291
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized capital gains .................... (896,933) --
In excess of net ralized capital gains ............. -- (1,492,448)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ............. (896,933) (1,492,448)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .......................... 36,827,946 116,765,133
Distributions reinvested ........................... 863,247 1,437,680
Paid-in capital portion of short-term trading fee .. 16,242 25,613
------------- -------------
37,707,435 118,228,426
Cost of shares redeemed ............................ (33,944,233) (60,501,758)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS ...................... 3,763,202 57,726,668
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS ................. (6,388,306) 66,022,511
------------- -------------
NET ASSETS
Beginning of period ................................... 90,695,553 24,673,042
------------- -------------
END OF PERIOD [including undistributed net investment
income (loss) of $(496,663) and $-0-, respectively] $ 84,307,247 $ 90,695,553
============= =============
</TABLE>
- ----------
See accompanying notes to financial statements.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
Bonnel Growth Fund is a diversified, open-end management investment company
registered under the Investment Company Act of 1940. The Fund, which commenced
operations on October 17, 1994, is one of four portfolios of U.S. Global
Accolade Funds (the "Trust"), a Massachusetts business trust.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. SECURITY VALUATIONS
Investments traded on national securities exchanges and NASDAQ quoted securities
are valued at the last sales price reported by the security's primary exchange
at the time of daily valuation. Listed and NASDAQ securities for which no sale
was reported, over-the-counter securities and corporate bonds are valued at the
mean between the last reported bid and asked prices, certain of which are
obtained from one or more dealers that make markets in the securities.
Short-term investments with effective maturities of sixty days or less at the
date of purchase are valued at amortized cost, which approximates market value.
Securities for which market quotations are not readily available and securities
which are subject to legal or contractual restrictions on resale are valued at
fair value as determined by the Trustees.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on trade date. Realized gains and losses
from security transactions are determined on an identified cost basis. Dividend
income is recorded on the ex-dividend date or, in the case of certain foreign
securities, as soon as the information becomes available to the Fund. Interest
income, accretion of discount and amortization of the premium are recorded on an
accrual basis.
C. REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with recognized financial
institutions or registered broker/dealers and, in all instances, holds
underlying securities with a value exceeding the total repurchase price,
including accrued interest. The Fund participates, with other funds managed by
the Manager, in a joint repurchase agreement account where uninvested cash is
collectively invested in repurchase agreements for which each fund has its
respective percentage of an undivided interest in the account.
12
<PAGE>
D. FEDERAL INCOME TAXES
The Fund intends to continue to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income to shareholders. Accordingly, no provision for federal
income taxes is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends and distributions to shareholders are recorded by the Fund on the
ex-dividend date. Distributions are determined in accordance with income tax
regulations that may differ from generally accepted accounting principles;
accordingly, periodic reclassifications are made within the Fund's capital
accounts to reflect income and gains available for distribution under income tax
regulations.
The Fund makes distributions from net investment income and realized capital
gains at least annually.
F. EXPENSES
Each Fund bears expenses incurred specifically on its behalf as well as an
allocation of Trust level expenses. Short-term trading fees, that are collected
from temporary investors in the Fund, are applied as a reduction to expenses to
the extent of such related cost; any excess is credited as paid-in capital.
Expense offset arrangements have been made with the Fund's custodian whereby the
custodian fees are paid indirectly by credits earned on the Fund's cash
balances. Such deposit arrangements are an alternative to overnight investments.
G. USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
13
<PAGE>
NOTE 2 RELATED PARTY TRANSACTIONS
U.S. Global Investors, Inc. (the "Manager"), under an investment advisory
agreement with the Trust in effect through March 8, 1998, furnishes management
and investment advisory services and, subject to the supervision of the
Trustees, directs the investments of the Fund in accordance with its investment
objectives, policies and limitations. The Manager also furnishes all necessary
office facilities, business equipment and personnel for administering the
affairs of the Trust. Frank E. Holmes, a Trustee of the Fund, is a controlling
owner of the Manager.
For the services of the Manager, the Fund pays a management fee at an annual
rate of 1% of average net assets. Fees are accrued daily and paid monthly.
United Shareholder Services, Inc. ("USSI"), a wholly-owned subsidiary of the
Manager, is transfer agent and accounting service agent for the Fund. The Fund
pays an annual fee based on number of shareholder accounts for transfer agency
services. For maintaining the books and records of the Fund and calculating its
daily net asset value, USSI is paid a fee based upon the level of Fund net
assets, subject to a minimum fee. Additionally, the Manager is reimbursed
certain costs for in-house legal services pertaining to the Fund.
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940 which allows an annual fee of up to .25% of its
average net assets to be used for or to reimburse the Manager for expenditures
in connection with sales and promotional services related to the distribution of
Fund shares.
During the period ended March 31, 1997, A & B Mailers, Inc., a wholly-owned
subsidiary of the Manager, was paid $1,048 for mailing services provided to the
Fund.
NOTE 3 INVESTMENT ACTIVITY
For the period ended March 31, 1997, purchases and sales of long-term
investments were $116,752,520 and $114,498,726, respectively.
The federal income tax basis of the securities owned at March 31, 1997, was
$85,759,204. The tax basis components of net unrealized appreciation and
depreciation were $5,800,179 and $7,282,753, respectively. The Fund had capital
losses of $1,174,714, which occurred prior to October 31, 1995, that, for tax
purposes, are deemed to have occurred on October 1, 1996.
14
<PAGE>
NOTE 4 CAPITAL SHARE ACTIVITY
The Fund has an unlimited number of no par value shares authorized. The
following is a summary of capital share activity:
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1997 SEPTEMBER 30, 1996
Shares sold ............................. 2,120,845 7,483,138
Shares reinvested ....................... 49,413 104,558
Shares redeemed ......................... (1,979,267) (3,965,534)
----------- -----------
Net share activity ................ 190,991 3,622,162
=========== ===========
15
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
For a capital share outstanding during the six months ended March 31, 1997
(unaudited) and each year ended September 30,
<CAPTION>
1997 1996 1995*
-------- -------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ..... $ 17.15 $ 14.81 $ 10.02
------- ------- -------
INVESTMENT ACTIVITIES
Net investment income ................. (.09) (.14) (.07)
Net realized and unrealized gain (loss) (1.50) 3.13 4.91
------- ------- -------
Total from investment activities ......... (1.59) 2.99 4.84
------- ------- -------
DISTRIBUTIONS
From net investment income ............ -- -- --
In excess of net investment income .... -- -- (.05)
From net realized gains ............... (.17) -- --
In excess of net realized gains ....... -- (.65) --
------- ------- -------
Total distributions ...................... (.17) (.65) (.05)
------- ------- -------
NET ASSET VALUE, END OF PERIOD ........... $ 15.39 $ 17.15 $ 14.81
======= ======= =+=====
TOTAL RETURN (excluding account fees) .... (9.41)% 21.27% 48.74%
Ratios to Average Net Assets (a):
Net investment income ................. (1.04)% (1.32)% (1.46)%
Total expenses ........................ 1.75% 1.83% 2.50%
Expenses reimbursed or offset ......... -- -- (.02)%
Net expenses .......................... 1.75% 1.83% 2.48%
Average commission rate paid ............. $ .0685 $ .0708 N/A
Portfolio turnover rate .................. 123% 212% 145%
Net assets, end of period (in thousands) . $84,307 $90,696 $24,673
</TABLE>
- ----------
* From October 17, 1994 (commencement of operations).
(a) Ratios are annualized for periods of less than one year. Expenses reimbursed
or offset reflect reductions to total expenses, as discussed in the notes to the
financial statements. Such amounts would decrease the net investment income
ratio had such reductions not occurred.
See accompanying notes to financial statements.
16
<PAGE>
[GRAPHIC: U.S. GLOBAL INVESTORS LOGO]
U.S. Global Investors
P.O. Box 781234
San Antonio, Texas 78278-1234
