REGISTRATION NO. 33-83870
REGISTRATION NO. 811-8766
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No.
Post-Effective Amendment No. 1 and/or
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 2 / X /
UNITED SERVICES INSURANCE FUNDS
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(Exact Name of Registrant as Specified in Charter)
7900 Callaghan Road, San Antonio, Texas 78229
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code (210) 308-1234
Bobby D. Duncan, President
United Services Insurance Funds
7900 Callaghan Road
SAN ANTONIO, TEXAS 78229
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(Name and Address of Agent for Service)
Approximate date of proposed public offering: November 19, 1995
It is proposed that this filing will become effective (check appropriate box):
/ / immediately upon filing pursuant to paragraph (b)
/ / on pursuant to paragraph (b)
/ X / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2).
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The Registrant hereby declares, pursuant to Rule 24f-2 under the Investment
Company Act of 1940 that an indefinite number of shares of beneficial interest,
no par value, is being registered by this Registration Statement.
UNITED SERVICES INSURANCE FUNDS WILL NOT BE OPEN TO NEW ACCOUNTS. THE BOARD
OF TRUSTEES HAS VOTED TO LIQUIDATE THE FUND AND THEREFORE THE FUND WILL NOT BE A
VIABLE ENTITY.
Exhibit Index for exhibits filed herewith is at page of .
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<PAGE>
UNITED SERVICES INSURANCE FUNDS
FORM N-1A
CROSS REFERENCE SHEET
FORM N-1A
PART A CAPTION OR
ITEM NO. LOCATION IN PROSPECTUS
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1 ........................................ Cover Page
2 ........................................ Not Applicable
3 ........................................ Not Applicable
4 ........................................ Cover Page; The Trust;
Investment Objectives and
Considerations; Risk Factors
and Special Considerations
5 ........................................ Management of the Fund
6 ........................................ Cover Page; The Trust;
Dividends and Taxes
7 ........................................ How to Purchase Shares;
How Shares Are Valued
8 ........................................ How to Redeem Shares
9 ........................................ Not Applicable
CAPTION OR LOCATION IN
PART B STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION
-------- -----------------------------
10 ........................................ Cover Page
11 ........................................ Table of Contents
12 ........................................ General Information
13 ........................................ Investment Objectives
and Policies
14 ........................................ Management of the Trust
15 ........................................ Principal Holders of
Securities
16 ........................................ Management of the Fund
17 ........................................ Investment Objectives and
Policies
18 ........................................ General Information
19 ........................................ See Prospectus -
"Shareholder's
Manual - Redemptions"
20 ........................................ Tax Status
21 ........................................ Not Applicable
22 ........................................ Calculation of Performance
Data (Covered in
Parts A & B)
23 ........................................ Financial Statements
<PAGE>
PART A -- THE PROSPECTUS
Included herein is the Prospectus for
United Services Insurance Funds
Schabacker Select Fund
<PAGE>
UNITED SERVICES INSURANCE FUNDS
SCHABACKER SELECT FUND
(THE FUND IS CLOSED TO NEW INVESTORS. THE BOARD OF TRUSTEES
MAY CALL A SPECIAL MEETING OF SHAREHOLDERS
TO CONSIDER A PROPOSITION TO LIQUIDATE THE SCHABACKER SELECT FUND
AND DEREGISTER THE TRUST.)
The Schabacker Select Fund (the "Fund"), a series of United Services
Insurance Funds (the "Trust"), is designed to provide an investment vehicle for
the Best of Funds Variable Annuity (the "Annuity").
Please read this Prospectus before investing. It is designed to provide you
with information and to help you decide if the investment objective of the Fund
matches your own. The investment objective of the Fund is to pursue a
safety-first approach of seeking long-term growth of capital while limiting
risk. An investor in the Fund will bear both his proportionate share of the
expenses of the Fund and also, indirectly, similar expenses of the Underlying
Funds (as defined under "Investment Objectives and Considerations") in which the
Fund is invested. Retain this document for future reference.
Shares of the Fund may only be purchased through the separate account of
the Annuity for the purpose of funding the Annuity. Because the Annuity is not
registered in some states due to various insurance regulations, the Fund may not
be available in such states. Please call the toll free number below to determine
whether the Fund or Annuity is available in your state.
This Prospectus should be read in conjunction with the Annuity Prospectus
which accompanies this Prospectus.
A Statement of Additional Information ("SAI"), dated February --, 1996, for
the Fund has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. You can obtain a SAI, free of charge, by
calling 1-800-600-BEST (1-800-600-2378).
For further information and assistance, you should contact Marleau Lemire
(U.S.A.), Inc., 7900 Callaghan Road, San Antonio, Texas 78229. You may also call
the following toll-free number: 1-800-600-BEST (1-800-600-2378).
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 ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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PROSPECTUS DATED FEBRUARY --, 1996
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TABLE OF CONTENTS
PAGE
----
Financial Highlights................. ........................ 3
Investment Objectives and Considerations...................... 4
Risk Factors and Special Considerations....................... 8
Expenses...................................................... 9
Dividends and Taxes........................................... 10
Shareholder's Manual.......................................... 10
The Trust..................................................... 11
Management of the Fund........................................ 11
Performance Information....................................... 13
2
FINANCIAL HIGHLIGHTS
SCHABACKER SELECT FUND
The following per share data and ratios for a share of beneficial interest
outstanding throughout the period from May 19, 1995 (commencement of operations)
through September 30, 1995, have not been audited. The related unaudited
financial statements are available upon request and have been 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 the period May 19,
1995 (commencement of operations) through September 30, 1995, is as follows:
PERIOD
(a)
-------
Per Share Operating Performance:
Net asset value, beginning of
period ............................................ $ .0
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Net investment income(b) ....................... .03
Net realized and unrealized gain
(loss) on investments(c) ...................... .49
-------
Total from investment operations .................... .52
-------
Less dividends from net investment
income .............................................. --
-------
Net asset value, end of period ...................... $ 10.52
=======
Total Investment Return(d) .......................... 5.20%
Ratio/Supplemental Data:
Net assets, end of period (in
thousands) .......................................... $ 406
Ratio of expenses to average net
assets ............................................ 0.00%(e)(f)
Ratio of net income to average net
assets ............................................ 1.75%(e)(f)
Portfolio turnover .................................. 0.00%
(a) For the period from May 19, 1995 (date of commencement of operations) to
September 30, 1995.
(b) Net of expense reimbursements and fee waivers of $0.71 per share.
(c) Includes the effect of capital share transactions throughout the period.
(d) Total return is not annualized.
(e) Annualized; the ratios are not necessarily indicative of twelve months of
operations.
(f) Expense ratio is net of fee waivers. Had such reimbursements not been made,
the annualized expense ratio subject to the most restrictive state
limitation would have been 44.31% and the annualized net investment income
ratio would have been (42.56)%. Fund expenses as a percentage of net assets
are extremely high for a Fund in its start-up phase due to fixed costs and
low asset levels.
INVESTMENT OBJECTIVES AND CONSIDERATIONS
The investment objective of the Fund is to pursue a safety-first approach
of seeking long-term growth of capital while limiting risk. The Fund seeks to
achieve its objective by primarily investing in a broad range of shares of other
open-end investment companies, commonly called "mutual funds," and closed-end
funds (referred to jointly as "Underlying Funds"). This policy involves certain
expenses in addition to those normally applicable to an investment in a mutual
fund that invests in other types of securities. There can be no assurance that
the Fund will achieve its investment objective. The Fund's investment objective
is not a fundamental policy and may be changed by the Board of Trustees without
shareholder approval. However, shareholders will be notified in writing at least
30 days prior to any material change to the Fund's investment objective.
The Fund's Sub-Advisor will advise the Fund's Advisor on the determination
of how the Fund will allocate its assets among the various categories of
Underlying Funds and which specific Underlying Funds to purchase and sell.
INVESTMENT STRATEGY
The Fund will allocate its assets among one or more of four main categories
of Underlying Funds: stock funds, bond funds, hybrid funds and money market
funds. The Fund may also invest in repurchase agreements prior to investing in
mutual funds or as a defensive investment. The Fund may invest in seasoned or
unseasoned Underlying Funds without regard to their net asset value. The Fund is
unlikely at any particular time to have all of its assets invested in any one of
these general categories of Underlying Funds. The Fund will vary the proportion
of its assets invested in each category of Underlying Funds based on the mix of
such funds that may, in the Sub-Advisor's opinion, most likely achieve the
Fund's investment objective.
In allocating assets among the four main categories of Underlying Funds,
the Sub-Advisor will follow a multi-step investment analysis. First, the
Sub-Advisor will consider general political and economic trends and current
financial and market conditions in order to determine the current phase of the
business and investment cycle and to assess the risks and opportunities in the
financial markets. The Sub-Advisor will seek the most likely combination of fund
types which will provide the best opportunity for maximizing total return
consistent with prudent investment risk. The Sub-Advisor will not rely on any
single model in reaching asset allocation decisions, but will make its own
assessments of the relative risk-reward levels of various asset types based on
past experience and analysis of current conditions.
If the Sub-Advisor determines that the values of equity securities are
likely to rise, it may emphasize growth funds. In periods of rising interest
rates, it may emphasize holdings of money market funds or repurchase agreements.
In periods of falling interest rates, it may emphasize fixed income funds,
depending upon the Sub-Advisor's perception of conditions in equity and bond
markets.
The Underlying Funds which are most likely to seek long-term growth of
capital are stock funds, which invest in the equity securities of either
domestic or foreign companies. However, the Fund may also invest in Underlying
Funds which do not seek long-term growth of capital and may or may not invest in
equity securities. The Sub-Advisor may invest in these other funds if it
believes they offer a potential for long-term growth of capital or provide
diversification.
During periods of favorable market conditions, the Fund may invest up to
100% of its assets in stock funds, and when the Sub-Advisor anticipates periods
of market turbulence, the Fund may entirely eliminate its investment in stock
funds. When the Fund reduces its investment in stock funds, it will
proportionately increase its investments in hybrid funds, bond funds, money
market funds and/or repurchase agreements. It is the intention of the Fund to
outperform the Standard and Poors 500 Index ("S&P 500 Index") with less risk
over a full market cycle. There can be no assurance that this intent will be
realized.
4
Second, after determining the relative proportion of assets to be allocated
among the general categories of funds, the Sub-Advisor will identify whether
certain specific categories of funds offer greater potential for positive
returns. For example, the Sub-Advisor may choose to emphasize international
equity funds or funds that concentrate in a particular industry sector; or the
Sub-Advisor may select fixed income funds based on whether they invest primarily
in long-or short-term debt securities.
Finally, the Sub-Advisor will select those funds within the general or more
specific categories, as discussed, that offer the greatest potential for
positive returns in the current environment in the Sub-Advisor's judgment.
DESCRIPTION OF UNDERLYING FUNDS
The following is a brief description of the four main categories of
Underlying Funds in which the Fund will invest: stock funds, bond funds, hybrid
funds and money market funds.
STOCK FUNDS
Stock funds invest primarily in equity securities issued by domestic and
foreign companies. Equities represent an ownership interest in the issuing
corporations. Within the broad universe of stock funds there are many specific
sub-categories seeking different objectives and investing in different
securities. Major sub-categories include: aggressive growth, long-term growth,
growth and income, gold, sector, small capitalization, large capitalization,
value oriented investment styles, growth oriented investment styles, index
funds, global stock, international stock and various geographic regions, such as
Europe or the Pacific Basin.
The net asset value of the stock funds in which the Fund invests will
fluctuate principally in response to changes in the equity markets. In addition,
the value of each individual equity security will be affected by the market's
evaluation of the issuing corporation's future prospects. The Fund seeks to
minimize this latter risk by investing in a diversified portfolio of Underlying
Funds, each of which in turn will diversify its investment portfolio over a
number of equity securities.
BOND FUNDS
Bond funds invest primarily in corporate and government fixed income
securities. Within the broad universe of bond funds, there are many specific
sub-categories seeking different objectives and investing in different
securities. Major sub-categories include: government funds, corporate funds,
high yield funds, mortgage-backed funds, global and international funds.
Two primary characteristics of bonds are the quality of the bond (or of the
corporation or government issuing them) and the maturity (or length of time
before the bond's principal becomes due) of the bond.
The quality of the bonds in which the Underlying Funds may invest can range
from safe government bonds to risky unrated "junk" bonds.
The net asset value of the bond funds in which the Fund invests will
fluctuate principally in response to changes in interest rate levels and changes
in the creditworthiness of the parties issuing the bonds. A decline in interest
rates could be expected to cause the bond fund's net asset value to increase,
and conversely, an increase in the level of interest rates could cause the bond
fund's net asset values to decline. A decline in creditworthiness could be
expected to cause the bond fund's net asset value to decline, and conversely, an
increase in creditworthiness could be expected to cause the bond fund's net
asset value to increase.
HYBRID FUNDS
Hybrid funds invest in a mixture of equity, fixed income, money market and
contrarian securities. Within the broad universe of hybrid funds there are
several specific sub-categories seeking different
5
objectives and implementing different investment strategies. Major
sub-categories include: asset allocation funds, balanced funds, flexible funds,
convertible funds and contrarian funds.
The net asset value of hybrid funds investing primarily in stocks and bonds
will fluctuate in response to the same factors which affect stock funds and bond
funds as described above.
Contrarian funds may endeavor to seek long-term growth of capital by
investing in a mixture of non-standard or "contrarian" investments such as gold
bullion, gold mining companies, natural resource companies and put options, and
by taking short positions in indexes or specific securities. Short selling and
purchasing put options are ways to profit from the stock market's decline. The
net asset value of contrarian funds may fluctuate in response to a wide range of
factors other than those affecting stock and bond funds.
MONEY MARKET FUNDS
Money market funds invest in short-term corporate and government money
market instruments. These funds generally purchase money market instruments
which mature in 13 months or less. The average maturity of money market funds
should not be greater than 90 days. The net asset value of the money market
funds which the Fund invests in are expected, but not guaranteed, to maintain a
stable net asset value of $1 per share.
ADDITIONAL INVESTMENT PRACTICES
PORTFOLIO TURNOVER
The investment objective of the Fund is to pursue a safety-first approach
of seeking long-term growth of capital while limiting risk. The Fund seeks to
achieve this objective by investing in a broad range of shares of other funds.
The Fund will affect portfolio transactions without regard to its holding period
if, in the Sub-Advisor's judgement, such transactions are advisable. For the
period from May 19, 1995 (commencement of operations) through September 30, 1995
the Fund's portfolio turnover ratio was 0%. There is no limit on the portfolio
turnover rates of the Underlying Funds in which the Fund may invest. If an
Underlying Fund should experience excessive portfolio turnover, it will increase
the possibility that such Underlying Fund will pay excessive commissions and may
fail to qualify as a regulated investment company, thereby subjecting the
Underlying Fund to taxation. Both excessive commissions and taxes would reduce
the profitability of the Fund's investment in the Underlying Fund.
PORTFOLIO TRANSACTIONS
Pursuant to the Advisory Agreement, the Advisor places orders for the
purchase and sale of Underlying Funds for the Fund's accounts with brokers or
dealers selected by the Advisor in its discretion. With respect to purchases of
no-load or low-load shares, the Advisor may, in its discretion, choose to place
purchase and sale orders for the Fund's account directly with the Underlying
Fund's transfer agent rather than dealing through brokers or dealers.
PORTFOLIO CONCENTRATION AND DIVERSIFICATION
The following policies concerning concentration and diversification are
fundamental policies which cannot be changed without a vote of shareholders.
The Fund is not required to maintain any specified minimum percentage of
its assets in any of the four main categories of Underlying Funds. Moreover, the
Fund is not required to maintain any specified minimum percentage of its assets
in equities, fixed income or cash equivalents. For example, if the Sub-Advisor
anticipates declining equity markets and rising interest rates, the Fund may
allocate up to 100% of its assets in money market funds and repurchase
agreements. When the Fund is primarily invested in cash, the Fund will be
focusing upon preserving principal and will not be pursuing its investment
objective, i.e., seeking principal growth, until it is reinvested in stock
and/or bond funds.
6
During normal market conditions the Fund will concentrate its investments
in the mutual fund industry, meaning that at least 65% of its assets will be
invested in mutual funds. The Fund may not invest more than 25% of its total
assets in the securities of Underlying Funds which concentrate (i.e., invest
more than 25% of their assets) in any one industry or government (other than
obligations issued or guaranteed by the U.S. Government or any of its agencies
or instrumentalities). Nevertheless, through its investment in Underlying Funds,
the Fund may indirectly invest more than 25% of its assets in any one industry
or government.
With respect to 75% of its total assets, the Fund will not invest more than
5% of its assets in the shares of any one Underlying Fund (measured at current
value at the time of purchase).
The Fund shall not purchase or acquire the securities of any single
Underlying Fund if immediately after such purchase or acquisition the Fund and
affiliated persons of the Fund would, in aggregate, own more than three percent
(3%) of the total outstanding stock of such Underlying Fund.
REPURCHASE AGREEMENTS
The Fund may invest a portion of its assets in repurchase agreements or
master 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. In a master repurchase agreement
the Fund would act in concert with other mutual funds to pool their investments
into a single repurchase agreement. Master repurchase agreements allow smaller
funds to achieve economies of scale similar to those available to larger funds.
All repurchase agreements must be collateralized by U.S. Government or
government agency securities, the market values of which equal or exceed 102% of
the principal amount of the repurchase obligation. If an institution enters an
insolvency proceeding, the resulting delay in liquidation of securities serving
as collateral could cause the Fund some loss if the value of the securities
declined prior to liquidation. To minimize the risk of loss, the Fund will enter
into repurchase agreements only with institutions and dealers which the Board of
Trustees considers creditworthy. As a result of entering into repurchase
agreements, the Fund may invest in U.S. Government or agency securities.
LENDING OF PORTFOLIO SECURITIES
At this time, the Fund does not anticipate that it will lend its shares of
Underlying Funds to broker-dealers or institutional investors. Should an
occasion arise, 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 will not lend portfolio securities unless the
loan is secured by collateral (consisting of any combination of cash, U.S.
Government securities or irrevocable letters of credit) in an amount at least
equal (on a daily mark-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 (1/3) of the Fund's total
net assets.
BORROWING
The Fund may borrow from a bank up to a limit of 5% of its total assets for
temporary or emergency purposes; and, it may borrow up to 33 1/3% of its total
assets, reduced by the amount of all liabilities and indebtedness other than
such borrowings, when deemed desirable or appropriate to meet redemption
requests. To the extent that the Fund borrows money prior to selling securities,
the Fund may be leveraged; at such times, the Fund may appreciate or depreciate
in value more rapidly than it would in an unleveraged portfolio. The Fund will
repay any monies borrowed in excess of 5% of the value of its total assets prior
to purchasing additional portfolio securities.
7
INVESTMENT PRACTICES OF UNDERLYING FUNDS
The Underlying Funds in which the Fund invests may, but need not, have the
same investment policies as the Fund. For example, although the Fund will not
borrow money for investment purposes, it may invest a portion of its assets in
an Underlying Fund which borrows money for investment purposes (i.e., engages in
leveraging).
RISK FACTORS AND SPECIAL CONSIDERATIONS
The Fund seeks to minimize certain risks by investing in a diversified
portfolio of Underlying Funds. However, prospective investors should consider
each of the following factors:
a) The Fund's investment performance is directly related to the
investment performance of the Underlying Funds.
b) The Fund's share price will fluctuate with changing market
conditions and the value of the Underlying Funds in which it invests;
therefore, your investment may be worth more or less when redeemed than
when purchased.
c) The Fund may be unable to redeem an investment in an Underlying
Fund in an amount exceeding one percent (1%) of such Underlying Fund's
total outstanding securities during any period of less than thirty days. As
a result, the Fund may not be able to reallocate assets among the
Underlying Funds as efficiently and rapidly as it would in the absence of
this constraint.
d) The Fund may invest up to 25% of its assets in Underlying Funds
which invest principally in unrated "junk" bonds. In addition, other stock,
bond and hybrid funds may invest a portion of their assets in unrated
bonds. As a result, the Fund may be subject to some degree of the risks
resulting from unrated bonds. Bonds rated in the lower grade categories may
have speculative characteristics and are more likely to lead to a weakened
capacity to make principal and interest payments than higher grade bonds.
To the extent that the Fund indirectly invests its assets in unrated bonds,
the Fund will be exposed to a greater risk of default or price changes due
to changes in the issuer's creditworthiness. The market prices of these
securities may fluctuate more than higher quality securities and may
decline significantly in periods of general economic difficulty.
e) The Underlying Funds may invest a portion or all of their assets in
securities of foreign issuers and engage in foreign currency transactions.
As a result, the Fund may be exposed to the risks of investing in foreign
markets, including underdeveloped emerging markets and volatile currency
markets.
f) The Underlying Funds may trade their portfolios actively, which
results in higher brokerage commissions, and/or invest in companies whose
securities are subject to more erratic market movements.
g) The Fund's Sub-Advisor has had no previous experience in advising
an investment company. However, the Fund's Advisor has over 20 years
experience in advising investment companies.
h) As a result of the Fund's policies of investing in Underlying
Funds, shareholders may receive capital gain distributions to a greater
extent than would be the case if they invested directly in the Underlying
Funds.
i) In addition to their principal investments, the Underlying Funds in
which the Fund invests may: invest up to 15% of their net assets in
restricted or illiquid securities; lend their portfolio securities; sell
securities short; borrow money in amounts for investment purposes (i.e.,
leverage their portfolios); write (sell) or purchase call or put options on
securities or on stock indexes; enter futures contracts and options on
futures contracts; concentrate more than 25% of their assets in one
industry; and engage in various other investment practices.
8
EXPENSES
EXPENSES UNIQUE TO FUND INVESTING IN A PORTFOLIO OF UNDERLYING FUNDS
To offset potentially higher costs that an investor in the Fund might bear,
the Sub-Advisor attempts to identify and invest in Underlying Funds that have
shown historically superior performance and low operating costs. If, however, in
the Sub-Advisor's opinion an Underlying Fund has strong growth potential, the
Fund may purchase the Underlying Fund regardless of its historical performance,
lack of history or its operating costs.
DUPLICATION OF OPERATING EXPENSES
An investor in the Fund should recognize that he may have the option of
investing directly in the Underlying Funds. By choosing to invest in the
Underlying Funds indirectly through the Fund, some expenses will be duplicated.
As a result, an investor will bear not only his proportionate share of the
expenses of the Fund, including operation costs and management fees, but also
indirectly share in a portion of similar expenses of the Underlying Funds.
SALES LOADS
The Fund will purchase shares of both load and no-load Underlying Funds.
However, the Fund will not invest in shares of Underlying Funds which are sold
with a contingent deferred sales charge which is greater than 1/2 of 1%. A Fund
shareholder will indirectly bear his proportionate share of any sales charges
incurred by the Fund related to the purchase of shares of the Underlying Funds.
Since sales loads affect the Fund's performance in much the same manner as
paying a brokerage commission, excessive loads would reduce the Fund's
investment performance. Under the Investment Company Act of 1940 ("1940 Act") a
fund must sell its shares at the price (including sales load, if any) as
described in its prospectus, and current rules under the 1940 Act do not permit
negotiation of sales charges. Therefore, the Fund currently is not able to
negotiate the level of the sales charges at which it will purchase shares of
load funds, which may be as great as 8.5% of the public offering price (or 9.29%
of the net amount invested). Nevertheless, when appropriate, the Fund will
purchase such shares pursuant to (i) letters of intent, permitting it to obtain
reduced sales charges by aggregating its intended purchases over time (generally
thirteen months from the initial purchase under the letter); (ii) rights of
accumulation, permitting it to obtain reduced sales charges as it purchases
additional shares of an Underlying Fund; (iii) the right to obtain reduced sales
charges by aggregating its purchases of several funds within a "family" of
mutual funds; and (iv) the right to obtain reduced sales charges by investing in
Underlying Funds offering reduced sales charges to funds that invest in shares
of other mutual funds. Due to these privileges, it is expected that, in the
majority of cases, the sales charges paid by the Fund on a load fund purchase
will not exceed 5% of the public offering price (5.26% of the net amount
invested).
In addition to any sales loads, Fund shareholders indirectly bear expenses
which may be paid by an Underlying Fund related to the distribution of its
shares. The payment of Rule 12b-1 fees by the Underlying Funds will not prevent
them from being considered for investment by the Fund. However, the Sub-Advisor
will consider such expenses as a portion of total expenses paid by the
Underlying Fund in considering it for investment, but in no event will receipt
of such a fee be considered in selection or retention of Underlying Fund shares.
OTHER EXPENSES
For a discussion of other expenses, see "Other Expenses" under "Management
of the Fund" in this Prospectus.
9
DIVIDENDS AND TAXES
For a discussion of the tax status of the Annuity, refer to the Annuity's
prospectus accompanying this Prospectus. It is suggested you keep all statements
you receive to assist in your personal recordkeeping.
It is expected that shares of the Fund will be held under the terms of the
Annuity. Under current tax law, dividends or capital gain distributions from the
Fund are not currently taxable when accumulated within the Annuity. Withdrawals
from the Annuity may be subject to ordinary income tax and, in addition, a 10%
penalty tax on withdrawals before age 59 1/2.
The Fund is a separate entity for federal income tax purposes. The Fund
intends to distribute all of its net investment income and net realized capital
gain each year to the Annuity. The Fund expects to distribute dividends and
capital gain distributions, if any, on an annual basis. Such dividends and
capital gains are automatically reinvested in additional shares of the Fund.
SHAREHOLDER'S MANUAL
OPENING AN ACCOUNT
Since you may not purchase shares of the Fund directly, you should read the
Annuity's prospectus to obtain instructions for investing in the Fund.
SHARE PRICE
The term "net asset value" or NAV refers to the worth of one share of the
Fund. The NAV is computed by adding the value of the Fund's investment, cash and
other assets, deducting liabilities and dividing the result by the number of
shares outstanding. The Fund is open for business each day the New York Stock
Exchange is open. The price of one share is the NAV which United Shareholder
Services, Inc. ("USSI") calculates as of the close of business of the New York
Stock Exchange (normally 4:00 p.m. Eastern time).
PURCHASES
Investments in the Fund may be made only by the Annuity. Please refer to
the Annuity's prospectus accompanying this Prospectus for information on how to
invest in the Fund.
The Annuity's investment in the Fund is expressed in terms of full and
fractional shares of the Fund. All investments in the Fund are credited
immediately upon acceptance of the investment by the Fund, investments will be
processed at the next NAV calculated after an order is received and accepted by
the Fund.
The offering of shares of the Fund may be suspended for a period of time
and the Fund reserves the right to reject any specific purchase order. Purchase
orders may be refused if, in the Advisor's opinion, they are of a size that
would disrupt management of the Fund.
REDEMPTIONS
The Fund's shares may be redeemed on any business day. Redemptions are
affected at the per share NAV next determined after receipt of the redemption
request has been accepted by the Fund. Redemption proceeds will normally be
wired to Integrity Life Insurance Company ("Integrity") on the next business day
after receipt of the redemption instructions by the Fund; but, in no event later
than 7 days following receipt of instructions. The Best of Funds Variable
Annuity is offered through Integrity Life Insurance Company and National
Integrity Life Insurance Co. The Fund may suspend redemptions or postpone
payment dates on days when the New York Stock Exchange is closed (other than
weekends or holidays), when trading on the New York Stock Exchange is
restricted, or as permitted by the Securities and Exchange Commission.
Please refer to the Annuity's prospectus accompanying this Prospectus for
information on how you may withdraw your funds from the Annuity which will then
redeem shares from the Fund.
10
SHAREHOLDERS
Individual variable annuity contract holders are not the "shareholders" of
the Fund. Rather, the participating insurance companies and their separate
accounts are the shareholders or investors (the "Shareholders"), although such
companies may pass through voting rights to their variable annuity contract
policyholders.
THE TRUST
The Fund is a series of United Services Insurance Funds (the "Trust"). The
Trust is an open-end management investment company.
The Trust was formed June 8, 1994, as a "business trust" under the laws of
the Commonwealth of Massachusetts. It is a "series" company which is authorized
to issue shares without par value in separate series of the same class. The
Board of Trustees of the Trust has the power to create additional portfolios,
each of which would have its own investment objectives and policies, at any time
without a vote of shareholders of the Trust.
Under the Trusts Master Trust Agreement, no annual or regular meeting of
shareholders is required; however, the Trustees may call meetings to take action
on matters which require shareholder vote and other matters which Trustees
determine shareholder vote is necessary or desirable.
Shareholders elect the Trustees of the Trust. Subject to Section 16(a) of
the 1940 Act, the Trustees may elect their own successors and may appoint
Trustees to fill vacancies, including vacancies caused by an increase in the
number of Trustees by action of the Board of Trustees.
Whether appointed or elected, a Trustee serves as Trustee of the Trust for
a period of six years. Notwithstanding the foregoing, the Trustees' terms are
staggered so that the terms of at least 25% of the Board of Trustees will expire
every three years. A Trustee whose term is expiring may be re-elected.
On any matter submitted to shareholders, shares of the portfolio entitle
their holder to one vote per share, irrespective of the relative net asset
values of each portfolios shares. On matters affecting an individual portfolio,
a separate vote of shareholders of that portfolio is required. The portfolio's
shares are fully paid and non-assessable by the Trust, have no preemptive or
subscription rights and are fully transferable, with no conversion rights.
When the Fund votes upon matters concerning the Underlying Funds, it will
vote its shares of the Underlying Funds in the same proportion as the vote of
all other shareholders of such Underlying Funds.
MANAGEMENT OF THE FUND
TRUSTEES
The business affairs of the Fund are managed by the Trust's Board of
Trustees. The Trustees establish policies, as well as review and approve
contracts and their continuance. The Trustees also elect the officers and select
the Trustees to serve as executive and audit committee members.
THE INVESTMENT ADVISOR
United Services Advisors, Inc. ("the Advisor"), 7900 Callaghan Road, San
Antonio, Texas 78229, pursuant to an advisory agreement with the Trust in effect
through December 8, 1996, manages the Fund's investments and business affairs,
subject to the general supervision and control of the Trust's Board of Trustees.
Frank E. Holmes is President and Chairman of the Board of Directors of the
Advisor. 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.
In addition to providing advisory services to the Fund, the Advisor also
provides investment advisory and/or administrative services to United Services
Funds and other funds.
11
In overseeing the Fund's investments and business affairs, the Advisor
utilizes a team approach with no person(s) primarily responsible for making
recommendations to the team. The Advisor provides the Trust with office space,
facilities and business equipment and provides the services of executive and
clerical personnel for administering the affairs of the Trust. As compensation
for its services, the Fund pays the Advisor a monthly fee based upon the monthly
average net assets of the Fund. The Fund is solely responsible for the Advisor's
fee. On an annual basis, the advisory fee will be 1.25% with no minimum fee.
This fee is higher than that paid by most other investment companies.
The Advisor or the Sub-Advisor may, out of profits derived from fees, 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.
Additionally, the Advisor is reimbursed certain costs for in-house legal
services pertaining to the Fund, which reimbursement is subject to the Advisor's
and Sub-Advisor's assumption of expenses for the Fund.
THE SUB-ADVISOR
The Advisor and the Trust have contracted with Schabacker Investment
Management, Inc. ("the Sub-Advisor") to serve as sub-advisor for the Fund.
The Sub-Advisor, located at 8945 Shady Grove Court, Gaithersburg, Maryland
20877, is a Maryland corporation. James Martin Schabacker ("Jay Schabacker"),
founder and president of the Sub-Advisor, is the majority shareholder and is its
controlling person. Although the Sub-Advisor has no prior experience in advising
investment companies, Jay Schabacker is a nationally recognized authority on
investing in mutual funds. He has 28 years of investment and financial
experience and is the editor of MUTUAL FUND INVESTING, an award-winning
financial advisory letter. The Sub-Advisor has been managing investments for
individuals and institutions for 20 years.
The Sub-Advisor advises the Advisor as to the composition of the Fund's
portfolio and makes recommendations with respect to the Fund's investments,
investment program and strategy. In connection with providing such services, the
Sub-Advisor utilizes a team approach, with no person(s) primarily responsible
for making recommendations to the team. As compensation for its services, the
Advisor pays the Sub-Advisor a monthly fee based upon the monthly average net
assets of the Fund. The Advisor is solely responsible for the Sub-Advisor's fee.
On an annual basis, the sub-advisory fee will be 0.625% with no minimum fee.
FUND EXPENSES CAPPED
The Advisor and the Sub-Advisor have jointly guaranteed that the Fund's
Total Fund Operating Expenses (as a percentage of average net assets) will not
exceed 1.30% on an annualized basis through June 30, 1996, and until such later
date as the Advisor and the Sub-Advisor may determine. The Advisor and the
Sub-Advisor will bear the burden of capping the Fund's expenses equally. To the
extent that assets are sufficient to cover other expenses, the advisory fees may
be paid provided the 1.30% limitation is not exceeded. For the period from May
19, 1995 (commencement of operations) through September 30, 1995 the Fund paid
the Advisor 0% of average net assets.
PORTFOLIO ACCOUNTING AND OTHER SERVICES
USSI performs bookkeeping and accounting services and determines the daily
net asset value for the Fund. Bookkeeping and accounting services are provided
to the Fund for an asset based fee of .05% of the first $150 million average net
assets, .04% of the next $150 million average net assets, .03% of the next $200
million average net assets, .02% of the next $250 million average net assets and
.01% of average net assets in excess of $750 million -- subject to an annual
minimum fee of $28,000.
12
For additional information see the Section entitled "Portfolio Accounting and
Other Services in the Statement of Additional Information."
Additionally, USSI provides transfer agent services to the Fund for an
estimated annual fee of $40.
OTHER EXPENSES
The Fund bears all costs of its operations other than expenses specifically
assumed by the Advisor or the Sub-Advisor pursuant to the Advisory or
Sub-Advisory Agreements. These costs include any direct charges related to the
purchase and sale of portfolio securities, interest charges, fees and expenses
of independent attorneys and auditors, taxes and governmental fees, cost of
share certificates and other expenses of issue, sale, repurchase or redemption
of shares, expenses of registering and qualifying shares for sale, expenses of
printing and distributing reports, notices and proxy materials to shareholders,
fees and expenses of data processing, recordkeeping and financial accounting
services rendered to the Trust, expenses of printing and filing reports and
other documents with governmental agencies, expenses of typesetting, printing
and distributing prospectuses to the existing shareholders of the separate
accounts, expenses of annual and special shareholder meetings, charges of
custodians, fees and expenses of Trustees of the Trust who are not employees or
consultants to the Sub-Advisor, the Advisor, or their affiliates, membership
dues in the Investment Company Institute or other industry associations,
insurance premiums and extraordinary expenses such as litigation expense and the
expense of compliance with any government regulation.
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 indexes.
For example, the Fund may compare its performance to rankings prepared by Lipper
Analytical Services, Inc. ("Lipper"), a widely recognized independent service
which monitors the performance of mutual funds, to Morningstar's Mutual Fund
Values, to the S&P 500 Index, or to the Consumer Price Index. Performance
information and rankings as reported in financial publications such as Changing
Times, Business Week, Institutional Investor, The Wall Street Journal, Mutual
Fund Forecaster, Financial World Magazine, No-Load Investor, Money Magazine,
Forbes, Fortune and Barron's may also be used in comparing performance of the
Fund. Performance comparisons shall not be considered as representative of the
future performance of the Fund.
The Fund's average annual total return is computed by determining the
average annual compounded rate of return for a specified period that, if applied
to a hypothetical $1,000 initial investment, would produce the redeemable value
of that investment at the end of the period, assuming reinvestment of all
dividends and distributions and with recognition of all recurring charges. The
Fund may also utilize a total return for differing periods computed in the same
manner but without annualizing the total return.
13
APPENDIX
DESCRIPTION OF VARIOUS SECURITIES PURCHASED BY AND INVESTMENT TECHNIQUES
EMPLOYED BY MUTUAL FUNDS IN WHICH THE SCHABACKER SELECT FUND MAY INVEST
EQUITY SECURITIES
Equity securities may include common stocks, preferred stocks, convertible
securities, and warrants. Common stocks, the most familiar type, represent an
equity (ownership) interest in a corporation. Although equity securities have a
history of long-term growth in value, their prices fluctuate, based on changes
in a company's financial condition and on overall market and economic
conditions. Smaller companies are especially sensitive to these factors.
DEBT SECURITIES
Bonds and other debt instruments are used by issuers to borrow money from
investors. The issuer pays the investor a fixed or variable rate of interest and
must repay the amount borrowed at maturity. Some debt securities, such as zero
coupon bonds, do not pay current interest but are purchased at a discount from
their face values. Debt securities, loans, and other direct debt have varying
degrees of quality and varying levels of sensitivity to changes in interest
rates. Longer-term bonds are generally more sensitive to interest rate changes
than short-term bonds.
U.S. Government securities are high-quality instruments issued or
guaranteed by the U.S. Treasury or by an agency or instrumentality of the U.S.
Government. Not all U.S. Government securities are backed by the full faith and
credit of the United States. Some are supported only by the credit of the agency
that issued them.
Lower-quality debt securities (sometimes called "junk bonds") are often
considered to be speculative and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness, or they may already be
in default. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of general
economic difficulty.
MONEY MARKET INSTRUMENTS
Money market instruments are high-quality instruments that present minimal
credit risk. They may include U.S. Government obligations, commercial paper and
other short-term corporate obligations, and certificates of deposit, bankers'
acceptances, bank deposits, and other financial institution obligations. These
instruments may carry fixed or variable interest rates.
FOREIGN SECURITIES
Foreign securities and foreign currencies may involve additional risks.
These include currency fluctuations, risks relating to political or economic
conditions in the foreign country, and the potentially less stringent investor
protection and disclosure standards of foreign markets. In addition to the
political and economic factors that can affect foreign securities, a
governmental issuer may be unwilling to repay principal and interest when due,
and may require that the conditions for payment be renegotiated. These factors
could make foreign investments, especially those in developing countries, more
volatile.
An Underlying Fund may invest up to 100% of its assets in securities of
foreign issuers. There may be less publicly available information about these
issuers than is available about companies in the U.S. and foreign auditing,
accounting, and financial reporting requirements may not be comparable to those
in the U.S. In addition, the value of the underlying fund's foreign securities
may be adversely affected by fluctuations in the exchange rates between foreign
currencies and the U.S. dollar, as well as other political and economic
developments, including the possibility of expropriation, confiscatory or other
taxation, exchange controls or other foreign governmental restrictions. Many
foreign securities markets, while growing in volume, have for the most part,
substantially less volume than U.S. markets. Securities of many foreign
companies are less liquid and their prices more volatile than securities of
comparable U.S. companies. Transactional costs in non-U.S. securities markets
are generally higher
A-1
than in U.S. securities markets. There is generally less governmental
supervision and regulation of exchanges, brokers and issuers than there is in
the U.S. In addition, transactions in foreign securities may involve greater
time from the trade date until settlement than domestic securities transactions
and involve the risk of possible losses through the holding of securities by
custodians and securities depositories in foreign countries. In addition,
foreign securities, and dividends and interest payable on those securities, may
be subject to foreign taxes, including taxes withheld from payments on those
securities.
The Underlying Funds will generally calculate their net asset values and
complete orders to purchase, exchange or redeem shares only on a Monday through
Friday basis (excluding holidays on which the New York Stock Exchange is
closed). Foreign securities in which the underlying funds may invest may be
listed primarily on foreign stock exchanges which may trade on other days (such
as saturday). As a result, the net asset value of an Underlying Fund's portfolio
may be significantly affected by such trading on days when the Manager does not
have access to the underlying funds and shareholders do not have access to the
Fund.
FOREIGN CURRENCY TRANSACTIONS
In connection with its portfolio transactions in securities traded in a
foreign currency, an Underlying Fund may enter into forward contracts to
purchase or sell an agreed-upon amount of a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. Although such
contracts tend to minimize the risk of loss due to a decline in the value of the
subject currency, they tend to limit commensurately any potential gain which
might result should the value of such currency increase during the contract
period.
ASSET-BACKED AND MORTGAGE SECURITIES
Asset-backed mortgage securities may include interest in pools of
lower-rated debt securities or consumer loans or mortgages, such as
collateralized mortgage obligations and stripped mortgage-backed securities. The
value of these securities may be significantly affected by changes in interest
rates, the market's perception of the issuers and the creditworthiness of the
parties involved. These securities may also be subject to prepayment risk.
STRIPPED SECURITIES
Stripped securities are the separate income or principal components of a
debt instrument. These involve risks that are similar to those of other debt
securities, although they may be more volatile.
REAL ESTATE-RELATED INSTRUMENTS
Real estate-related instruments include real estate investment trusts,
commercial and residential mortgage-backed securities and real estate financing.
Real estate-related instruments are sensitive to factors such as changes in real
estate values and property taxes, interest rates, cash flow of underlying real
estate assets, overbuilding and the management skill and creditworthiness of the
issuer. Real estate-related instruments may also be affected by tax and
regulatory requirements, such as those relating to the environment.
WARRANTS
An Underlying Fund may invest in warrants, which are options to purchase
equity securities at specific prices valid for a specific period of time. The
prices of the warrants do not necessarily move parallel to the prices of the
underlying securities. Warrants have no voting rights, receive no dividends and
have no rights with respect to the assets of the issuer. If a warrant is not
exercised within the specified time period, it will become worthless and the
fund will lose the purchase price and the right to purchase the underlying
security.
A-2
ADJUSTING INVESTMENT EXPOSURE
An Underlying Fund can use various techniques to increase or decrease its
exposure to changing security prices, interest rates, currency exchange rates,
commodity prices or other factors that affect security values. These techniques
may involve derivative transactions, such as buying and selling options and
futures contracts, entering into currency exchange contracts or swap agreements,
purchasing indexed securities and selling securities short.
Underlying funds can use these practices to adjust the risk and return
characteristics of a fund's portfolio of investments. If an Underlying Fund
judges market conditions incorrectly or employs a strategy that does not
correlate well with the Fund's investments, these techniques could result in a
loss, regardless of whether the intent was to reduce risk or increase return.
These techniques may increase the volatility of a Fund and may involve a small
investment of cash relative to the magnitude of the risk assumed. In addition,
these techniques could result in a loss if the counterparty to the transaction
does not perform as promised.
OPTIONS
Certain Underlying Funds may purchase and write call and put options on
securities, securities indexes, and on foreign currencies. The purchase and
writing of options involves certain risks. During the option period, the covered
call writer has, in return for the premium for the option, given up the
opportunity to profit from a price increase in the underlying securities above
the exercise price, but, as long as its obligation as a writer continues, has
retained the risk of loss should the price of the underlying security decline.
The writer of an option has no control over the time when it may be required to
fulfill its obligation as a writer of the option. Once an option writer has
received an exercise notice, it cannot effect a closing purchase transaction in
order to terminate its obligation under the option and must deliver the
underlying securities at the exercise price. If a put or call option purchased
by a mutual fund is not sold when it has remaining value, and if the market
price of the underlying security, in the case of a put, remains equal to or
greater than the exercise price, or in the case of a call, remains less than or
equal to the exercise price, the fund will lose its entire investment in the
option. Also, where a put or call option on a particular security is purchased
to hedge against price movements in a related security, the price of the put or
call option may move more or less than the price of the related security. There
can be no assurance that a liquid market will exist when a mutual fund seeks to
close out an option position. Furthermore, if trading restrictions or
suspensions are imposed on the options market a fund may be unable to close out
a position. If a mutual fund cannot effect a closing transaction, it will not be
able to sell the underlying security while the previously written option remains
outstanding, even if it might otherwise be advantageous to do so.
SHORT SALES
An Underlying Fund may sell securities short. The Underlying Fund will
incur a loss as a result of the short sale if the price of the security
increases between the date of the short sale and the date on which the fund
replaces the borrowed security. The Fund will realize a gain if the security
declines in price between those dates. The amount of any gain will be decreased
and the amount of any loss increased by the amount of any premium, dividends or
interest the fund may be required to pay in connection with a short sale.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
An Underlying Fund may invest in financial futures contacts such as
interest rate futures contracts, stock index futures contracts and others, and
may purchase and write options on such futures contracts. Generally,
transactions in futures contracts, and options thereon by a mutual fund, must
constitute bona fide hedging or other permissible transactions under regulations
promulgated by the Commodities Futures Trading Commission (the "CFTC"), under
which a fund engaging in such transactions would not be a "commodity pool."
There are several risks associated with the use of futures contracts. While
a mutual fund's use of futures contracts for hedging may protect a fund against
adverse movements in the general level of interest rates or securities prices,
such transactions could also preclude the opportunity to benefit from
A-3
favorable movements in the level of interest rates or securities prices. There
can be no guarantee that there will be a correlation between price movements in
the hedging vehicle and in the securities being hedged. An incorrect correlation
could result in a loss on both the hedged securities in a mutual fund and the
hedging vehicle so that the fund's return might have been better had hedging not
been attempted.
There can be no assurance that a liquid market will exist at a time when a
mutual fund seeks to close out a futures contract or futures option position.
Most Futures Exchanges and Boards of Trade limit the amount of fluctuation
permitted in futures contract prices during a single day; once the daily limit
has been reached on a particular contract, no trades may be made that day at a
price beyond that limit. In addition, some of these instruments are relatively
new and without a significant trading history. As a result, there is no
assurance that an active secondary market will develop or continue to exist.
Lack of a liquid market for any reason may prevent the fund from liquidating an
unfavorable position and the fund would remain obligated to meet margin
requirements until the position is closed.
DIRECT DEBT
Loans and other direct debt instruments are interests in amounts owed to
another party by a company, government or other borrower. They have additional
risks beyond conventional debt securities because they may entail less legal
protection for a Fund, or there may be a requirement that a Fund supply
additional cash to a borrower on demand.
PRECIOUS METALS
The prices of gold and other commodities can change rapidly, and generally
do not move in tandem with prices of equity or debt securities. If a fund
invests in commodities, its share price will be affected by changes in commodity
prices.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS
When-Issued and Delayed-Delivery transactions are trading practices in
which payment and delivery for the securities take place at a future date. The
market value of a security could change during this period, which could affect
the market value of a Fund's assets.
REPURCHASE AGREEMENTS
In a repurchase agreement, a fund buys a security at one price and
simultaneously agrees to sell it back at a higher price. Delays or losses could
result if the other party to the agreement defaults or becomes insolvent.
Underlying Funds, particularly money market funds, may enter into
repurchase agreements with banks and broker-dealers under which they acquire
securities subject to an agreement with the seller to repurchase the securities
at an agreed-upon time and price. The Fund also may enter into repurchase
agreements. These agreements are considered under the 1940 Act to be loans by
the purchaser, collateralized by the underlying securities. If the seller should
default on its obligation to repurchase the securities, the Underlying Fund may
experience delays or difficulties in exercising its right to realize a gain upon
the securities held as collateral and might incur a loss if the value of the
securities should decline.
FOREIGN REPURCHASE AGREEMENTS
Foreign repurchase agreements may be less well secured than U.S. repurchase
agreements, and may be denominated in foreign currencies. They also may involve
greater risk of loss if the counterparty defaults. Some counterparties in these
transactions may be less creditworthy than those in U.S. markets.
ILLIQUID AND RESTRICTED SECURITIES.
Some investments may be determined by the Underlying Funds, under the
supervision of their Board of Trustees, to be illiquid, which means that they
may be difficult to sell promptly at an acceptable price. The sale of other
securities, including illiquid securities, may be subject to legal restrictions.
Difficulty in selling securities may result in a loss or may be costly to a
fund.
A-4
An Underlying Fund may invest not more than 15% of its total assets in
securities for which there is no readily available market ("illiquid
securities"), which would include securities that are illiquid because their
disposition is subject to legal restrictions (so-called "restricted securities")
and repurchase agreements having more than seven days to maturity. A
considerable period of time may elapse between an Underlying Fund's decision to
dispose of such securities and the time when the Underlying Fund is able to
dispose of them, during which time the value of the securities (and therefore
the value of the Underlying Fund's shares held by a Fund) could decline.
DIVERSIFICATION AND INDUSTRY CONCENTRATION.
Diversifying a Fund's investment portfolio can reduce the risks of
investing. This may include limiting the amount of money invested in any one
issuer or, on a broader scale, in any one industry.
An Underlying Fund may concentrate its investments within one industry.
Because the scope of investment alternatives within an industry is limited, the
value of the shares of such Underlying Fund may be subject to greater market
fluctuation than an investment in a Fund which invests in a broader range of
securities.
LEVERAGE THROUGH BORROWING
An Underlying Fund may borrow from banks or from other funds, or through
reverse repurchase agreements. If a Fund borrows money, its share price may be
subject to greater fluctuation until the borrowing is paid off. If the Fund
makes additional investments while borrowings are outstanding, this may be
considered a form of leverage.
An Underlying Fund may borrow a percentage of the value of its net assets
on an unsecured basis from banks to increase its holding of portfolio
securities. Under the 1940 Act, the Fund is required to maintain continuous
asset coverage of 300% with respect to such borrowings and to sell (within three
days) sufficient portfolio holdings to restore such coverage if it should
decline to less than 300% due to market fluctuations or otherwise, even if it is
disadvantageous from an investment standpoint. Leveraging will exaggerate the
effect of any increase or decrease in the value of portfolio securities on the
Fund's net asset value, and money borrowed will be subject to interest costs
(which may include commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the interest and option premiums
received from the securities purchased with borrowed funds.
LOANS OF PORTFOLIO SECURITIES
Lending securities to broker/dealers and institutions is a means of earning
income. This practice could result in a loss or delay in recovering a fund's
securities.
An Underlying Fund may lend its portfolio securities provided: (1) that the
loan is secured continuously by collateral consisting of U.S. Government
securities or cash or cash equivalents maintained on a daily mark-to-market
basis in an amount at least equal to the current market value of the securities
loaned; (2) the fund may at any time call the loan and obtain the return of the
securities loaned; (3) the fund will receive any interest or dividends paid on
the loaned securities: and (4) the aggregate market value of the securities
loaned will not at any time exceed one-third of the total assets of the fund.
Loans of securities involve a risk that the borrower may fail to return the
securities or may fail to provide additional collateral.
OTHER INSTRUMENTS
Other instruments may include depository receipts and rights and securities
of closed-end investment companies.
A-5
UNITED SERVICES INSURANCE FUNDS
SCHABACKER SELECT FUND
SHARES OF THE FUND ARE SOLD
AT NET ASSET VALUE WITHOUT SALES COMMISSIONS,
REDEMPTION FEES OR 12b-1 FEES
Schabacker Select Fund
ADVISOR
United Services Advisors, Inc.
7900 Callaghan Road
Mailing Address: P.O. Box 29467
San Antonio, Texas 78229-0467
SUB-ADVISOR
Schabacker Investment Management, Inc.
8945 Shady Grove Court
Gaithersburg, Maryland 20877
TRANSFER AGENT
United Shareholder Services, Inc.
P.O. Box 781234
San Antonio, Texas 78278-1234
CUSTODIAN
Bankers Trust Company
16 Wall Street
New York, NY 10005
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
One Riverwalk Place, Suite 900
San Antonio, Texas 78205
SERVICING AGENT
Marleau Lemire (U.S.A.), Inc.
7900 Callaghan Road
San Antonio, Texas 78229
1-800-600-BEST (1-800-600-2378)
Be Sure to Retain This Prospectus;
It Contains Valuable Information.
<PAGE>
PART B -- THE STATEMENT OF ADDITIONAL INFORMATION
Included herein is the
Statement of Additional Information
for
United Services Insurance Funds
Schabacker Select Fund
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
UNITED SERVICES INSURANCE FUNDS
SCHABACKER SELECT FUND
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Fund's prospectus dated February --, 1996
(the"prospectus") which may be obtained from United Services Advisors, Inc.,
P.O. Box 29467, San Antonio, Texas 78229-0467.
The date of this Statement of Additional Information is February --, 1996.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
GENERAL INFORMATION...........................................................3
INVESTMENT OBJECTIVES AND POLICIES............................................3
Investment Restrictions..................................................4
PORTFOLIO TURNOVER............................................................5
PORTFOLIO TRANSACTIONS........................................................5
MANAGEMENT OF THE FUND........................................................6
PRINCIPAL HOLDERS OF SECURITIES...............................................8
INVESTMENT ADVISORY SERVICES..................................................8
PORTFOLIO ACCOUNTING AND OTHER SERVICES......................................10
ADDITIONAL INFORMATION ON REDEMPTIONS........................................10
Suspension of Redemption Privileges.....................................10
CALCULATION OF PERFORMANCE DATA..............................................10
TAX STATUS...................................................................11
CUSTODIAN....................................................................12
INDEPENDENT ACCOUNTANTS......................................................12
FINANCIAL STATEMENTS.........................................................12
2
<PAGE>
GENERAL INFORMATION
United Services Insurance Funds (the "Trust") is an open-end management
investment company and is a voluntary association of the type known as a
"business trust" organized under the laws of the Commonwealth of Massachusetts.
The Schabacker Select Fund (the "Fund") is a series of the Trust, which
represents a diversified portfolio of securities (such series are referred to
herein as the "Portfolio").
The assets received by the Trust from the issue or sale of shares of the
Portfolio, and all income, earnings, profits and proceeds thereof, subject only
to the rights of creditors, are allocated to the Portfolio. They constitute the
underlying assets of the Portfolio, are required to be segregated on the books
of accounts, and are to be charged with the expenses with respect to the
Portfolio. In the event additional portfolios are created, any general expenses
of the Trust, not readily identifiable as belonging to the Portfolio, shall be
allocated by or under the direction of the Board of Trustees (the "Trustees") in
such manner as the Trustees determine to be fair and equitable.
Shares of the Portfolio represent an equal proportionate interest in the
Portfolio and are entitled to such dividends and distributions, out of the
income belonging to the Portfolio, as are declared by the Trustees. Upon
liquidation of the Trust, shareholders of the Portfolio are entitled to share
pro rata in the net assets belonging to the Portfolio available for
distribution.
As more fully described under "The Trust" in the prospectus, under the
Trust's Master Trust Agreement, no annual or regular meeting of shareholders is
required; however, the Trustees may call meetings to take action on matters
which require shareholder vote and other matters which Trustees determine
shareholder vote is necessary or desirable. Whether appointed by prior Trustees
or elected by shareholders, an "Independent" Trustee serves as Trustee of the
Trust for a period of six years. However, the Trustees' terms are staggered so
that the terms of at least 25% of the Board of Trustees will expire every three
years. Trustees who are not "interested persons" will stand for election in
1996. A Trustee whose term is expiring may be re-elected. Thus, shareholder
meetings will ordinarily be held only once every three years unless otherwise
required by the 1940 Act.
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 a fund are not entitled to vote on any matter
which does not affect their fund but which
requires a separate vote of another fund.
Shares do not have cumulative voting rights, which means that in situations
in which shareholders elect Trustees, holders of more than 50% of the shares
voting for the election of Trustees can elect 100% of the Trust's Trustees, and
the holders of less than 50% of the shares voting for the election of Trustees
will not be able to elect any person as a Trustee.
Shares have no preemptive or subscription rights and are fully
transferable. There are no conversion rights.
Under Massachusetts law, the shareholders of the Trust could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Master Trust Agreement disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or the Trustees. The Master Trust Agreement provides for indemnification out of
the Trust's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Trust itself would be unable to meet its
obligations.
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the Fund's
investment objectives and policies in the Fund's Prospectus.
3
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions which limit the
Fund's ability to directly engage in any of the below listed activities.
However, these investment restrictions do not limit the Fund's ability to invest
in Underlying Funds (as defined in the Prospectus) which engage in the below
listed activities.
The Fund will not change any of the following investment restrictions,
without, in either case, the affirmative vote of a majority of the outstanding
voting securities of the Fund, which, as used herein, means the lesser of (1)
67% of the Fund's outstanding shares present at a meeting at which more than 50%
of the outstanding shares of the Fund are represented either in person or by
proxy, or (2) more than 50% of the Fund's outstanding shares.
THE FUND MAY NOT:
(1) Issue senior securities.
(2) Borrow money, except that the Fund may borrow not in excess of 33 1/3%
of the total assets of that Fund from banks as a temporary measure for
extraordinary purposes.
(3) Underwrite the securities of other issuers.
(4) Purchase or sell real property (including limited partnership
interests, but excluding readily marketable interests in real estate
investment trusts or readily marketable securities or companies which
invest in real estate).
(5) Engage in the purchase or sale of commodities.
(6) Lend its assets, except that purchases of debt securities in
furtherance of the Fund's investment objectives will not constitute
lending of assets and except that the Fund may lend portfolio
securities with an aggregate market value of not more than one-third
of the Fund's total net assets. (Accounts receivable for shares
purchased by telephone shall not be deemed loans.)
(7) Purchase any security on margin, except that it may obtain such
short-term credits as are necessary for clearance of securities
transactions.
(8) Make short sales.
(9) Invest more than 25% of its total assets in securities of the mutual
funds or closed-end funds in which it invests (the "Underlying Funds")
which themselves concentrate (i.e., invest more than 25% of their
assets) in any one industry or government (other than obligations
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities). Nevertheless, through its investment in Underlying
Funds, the Fund indirectly may invest more than 25% of its assets in
one industry or government.
(10) (a) With respect to 75% of its total assets, the Fund will not invest
more than 5% of its assets in the shares of any one Underlying Fund
(measured at current value at the time of purchase). (b) The Fund
shall not purchase or acquire the securities of any single Underlying
Fund if immediately after such purchase or acquisition the Fund and
affiliated persons of the Fund would, in aggregate, own more then 3
percent of the total outstanding stock of such Underlying Fund.
The following investment restrictions may be changed by the Board of
Trustees without a shareholder vote.
THE FUND MAY NOT:
(11) Invest in warrants to purchase common stock.
(12) Invest in companies for the purpose of exercising control or
management.
(13) Hypothecate, pledge, or mortgage any of its assets, except to secure
loans as a temporary measure for extraordinary purposes and except as
may be required to collateralize letters of credit to secure state
surety bonds.
(14) Participate on a joint or joint and several basis in any trading
account.
(15) Invest in any foreign securities. This does not limit the Fund's
ability to investment in Underlying Funds which invest in foreign
securities.
4
(16) Invest more than 15% of its total net assets in illiquid securities.
(17) Invest in oil, gas or other mineral leases.
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.
PORTFOLIO TURNOVER
The Fund's investment advisor buys and sells securities for the Fund to
accomplish investment objectives. The Fund's investment policies may lead to
frequent changes in investments, particularly in periods of volatile stock and
bond markets.
A change in the securities held by the Fund is known as "portfolio
turnover." It is anticipated that portfolio turnover will be less than 100%.
PORTFOLIO TRANSACTIONS
The Advisory Agreement between the Fund and United Services Advisors, Inc.
(the "Advisor") requires that the Advisor, in executing portfolio transactions
and selecting brokers or dealers, seek the best overall terms available.
Underlying Funds, which are mutual funds, offer their shares continuously and
the price and terms of such offers are dictated by their current prospectuses.
Such price will be based upon their current net asset value and may include a
sales charge. Underlying Funds which are closed-end funds are purchased and sold
on the open market in a similar manner to other equity securities. Prices and
terms are subject to negotiation and market factors.
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 and the financial condition and execution capability of the
broker or dealer (for a specified transaction and on a continuing basis). When
transactions are executed in the over-the-counter market, it is intended
generally to seek first to deal with the primary market makers. However, the
services of brokers will be utilized if it is anticipated that the best overall
terms can thereby be obtained. Purchases of newly issued securities for the Fund
usually are placed with those dealers from which it appears that the best price
or execution will be obtained. Those dealers may be acting as either agents or
principals.
The Fund paid a total of $0.00 in brokerage fees and $467 in load fees for
the period from May 19, 1995 (commencement of operations) through September 30,
1995.
5
MANAGEMENT OF THE FUND
The Trustees and Officers of the Trust and their principal occupations
during the past five years are set forth below. Except as otherwise indicated,
the business address of each is 7900 Callaghan Road, San Antonio, Texas 78229.
TRUST
NAME AND ADDRESS POSITION PRINCIPAL OCCUPATION
- ---------------- -------- --------------------
DAVE ANDERS Trustee Vice President of Marketing for The
200 E. Wilson Bridge Rd. A.R.M. Financial Inc., since December
Worthington, Ohio 43085 1993. Vice President of Variable
Products for Integrity and National
Integrity and National Integrity Life
Insurance Companies between October 1992
and December 1993 (currently wholly
owned subsidiaries of The A.R.M.
Financial Group, Inc). Vice President of
Client Services for Integrity and
National Integrity Life Insurance
Companies from September 1987 to October
1992. Vice President & Product Engineer
for Integrity and National Integrity
Life Insurance Companies from January
1986 to September 1987. Vice President
of Group Pension Systems for Equitable
Life, 1285 Avenue of the Americas, New
York, New York 10019 from March 1983 to
January 1986. Assistant Vice President
of Group Pension Benefit Administration
for Equitable Life from June 1980 to
March 1983. Manager Group Pensions and
Individual Life & Annuities for
Equitable Life from June 1970 to June
1980.
Member and former Chairman of the Life
Office Management Association's Equity
Products & Annuity Committee. A
Chartered Life Underwriter and a
Chartered Financial Consultant. A Series
26 Registered Principal and a Series 7
Registered Representative with the
National Association of Securities
Dealers.
CLARK R. MANDIGO Trustee Business consultant since 1991. From
1250 N.E. Loop 410 1985 to 1991 President, Chief Executive
Suite 900 Officer and Director of Intelogic Trace,
San Antonio, Texas 78290 Inc., a nationwide company which sells,
leases and maintains computers and
telecommunications systems and
equipment. Prior to 1985, President BHP
Petroleum (Americas) Ltd., an oil and
gas exploration and development company.
Trustee of Accolade Funds since April
1993. Trustee of Pauze/Swanson United
Services Funds since November 1993.
Director Datapoint Corporation, Lone
Star Steakhouse & Saloon, Inc. and
Physician Corporation of America.
6
TRUST
NAME AND ADDRESS POSITION PRINCIPAL OCCUPATION
- ---------------- -------- --------------------
MACRAE ROSS Trustee From February 1986 to December 1989, Mr.
P.O. Box 76103 Ross was Vice President of Phillips
Arlington, VA 22207 Publishing, Inc., Potomac, Maryland
where he was Director of Special
Products for the Consumer Division.
Since January of 1990, he has been the
principal of Ross & Co., a publishing,
marketing and consulting firm
concentrating in financial and
investment arenas as well as up-scale
consumer products and services. He has
been engaged in the creation, direction
and management of marketing and
publishing ventures and programs for his
own company as well as for clients and
joint venture partners. He has also been
called upon to provide strategic
consultation for a variety of business
clients. He has also been a primary
speaker and trainer at business strategy
seminars conducted by Abraham Business
Seminars in Los Angeles, California for
over 1000 companies.
JAMES M. SCHABACKER Trustee James M. "Jay" Schabacker has served as
2 Peach Leaf Court Chairman and Chief Investment Officer
Gaithersburg, MD 20878 for Schabacker Investment Management,
Inc. which he founded twenty years ago.
Mr. Schabacker and FundMinder Inc.
established a new wholly-owned
registered investment adviser known as
Schabacker Investment Advisors, Inc. Mr.
Schabacker will be retained as an
employee of Schabacker Investment
Advisors, Inc. Mr. Schabacker is also
the editor of the newsletter MUTUAL FUND
INVESTING.
BOBBY D. DUNCAN President, President of the Advisor since September
Chief 1995. Executive Vice President and Chief
Executive Financial Officer of the Advisor from
Officer, October 27, 1989 to September 1995.
Trustee Chief Operating Officer since November
1, 1993. President, Chief Executive
Officer, Chief Operating Officer, Chief
Financial Officer and Treasurer of the
Advisor from January 1, 1989 to October
27, 1989. Prior to January 1990 held
various positions with the Trust,
including Executive Vice President,
Treasurer, Chief Operating Officer and
Chief Financial Officer. Served as sole
Director and Chief Executive Officer of
USSI from September 1988 to November
1989. Director of A&B Mailers, Inc.
since February 1988 and Chairman since
July 1991. Chief Executive Officer,
President, Chief Operating Officer,
Chief Financial Officer, and a Director
of USSI. Director of the Advisor since
1986. Director, Executive Vice
President, and Chief Financial Officer
of ST&FC from November 1991 to March
1994. Executive Vice President, Chief
Financial Officer of Accolade Funds
since April 1993. Vice President, Chief
Financial Officer, and Trustee of
Pauze/Swanson United Services Funds
since November 1, 1993. President, Chief
Executive Officer and Trustee of United
Services Insurance Fund since July 22,
1994. Director and Chief Financial
Officer of United Services Advisors
Wealth Management Corp. since February
1995.
7
TRUST
NAME AND ADDRESS POSITION PRINCIPAL OCCUPATION
- ---------------- -------- --------------------
THOMAS D. TAYS Vice Vice President - Special Counsel,
President, Securities Specialist, Director of
Secretary Compliance, Assistant Secretary of the
Advisor from September 1995 to present;
Associate Counsel, Assistant Secretary
of the Advisor from September 1993 to
September 1995. Vice President,
Securities Specialist, Director of
Compliance and Assistant Secretary of
USF since September 1995. Vice President
and Secretary of Accolade Funds since
September 1995, was Assistant Secretary
from September 1994 to September 1995.
Vice President, Secretary of United
Services Insurance Funds from June 1994
to present. Private practice of law from
1990 to August 1993.
TERESA G. ROWAN Vice Vice President, Mutual Fund Accounting
President, of the Advisor since February 1995. Vice
Chief President, Chief Financial Officer and
Accounting Chief Accounting Officer of USF since
Officer, September 1995. Served as Vice
Treasurer President, Chief Accounting Officer,
Treasurer, and Controller of USF from
March 3, 1995 to September 1995. Vice
President, Mutual Fund Accounting of
USSI since March 13, 1995. Vice
President and Treasurer of Pauze/Swanson
United Services Funds since March 8,
1995, Chief Financial Officer since
September 1995, Chief Accounting Officer
from March 1995 to September 1995. Vice
President, Chief Financial Officer,
Chief Accounting Officer, Treasurer of
Accolade Funds since September 1995.
Employee of the Company from October
1986 to present.
PRINCIPAL HOLDERS OF SECURITIES
Other than indicated below, as of September 30, 1995 Officers and Trustees
of the Trust, as a group, owned less than 1% of the outstanding shares of the
Fund. The Trust is aware of the following persons who owned of record, or
beneficially, more than 5% of the outstanding shares of the Fund at September
30, 1995:
NAME AND ADDRESS TYPE OF
FUND OF OWNER % OWNED OWNERSHIP
---- ---------------- ------- ---------
Schabacker Select Fund United Services Advisors, Inc. 26% Record
7900 Callaghan Rd.
San Antonio, Texas 78230
Integrity Life Insurance 74% Record
200 East Wilson Bridge Road
Worthington, Ohio 43085
INVESTMENT ADVISORY SERVICES
The investment adviser to the Funds is United Services Advisors, Inc. (the
"Advisor"), a Texas corporation, pursuant to an Advisory Agreement dated
December 8, 1994. Frank E. Holmes, President and a Director of the Advisor,
8
beneficially owns more than 25% of the outstanding voting stock of the Advisor
and may be deemed to be a controlling person of the Advisor.
In addition to the services described in the Fund's prospectus, the Advisor
will provide the Trust with office space, facilities and simple business
equipment, and will provide the services of executive and clerical personnel for
administering the affairs of the Trust. It will compensate all personnel,
Officers and Trustees of the Trust if such persons are employees of the Advisor
or its affiliates, except that the Trust will reimburse the Advisor for a
portion of the compensation of the Advisor's employees who perform certain legal
services for the Trust, including state securities law regulatory compliance
work, based upon the time spent on such matters for the Trust. The Advisor pays
the expense of printing and mailing prospectuses and sales materials used for
promotional purposes.
The Trust pays all other expenses for its operations and activities. Each
of the Funds of the Trust pays its allocable portion of these expenses. The
expenses borne by the Trust include the charges and expenses of any transfer
agents and dividend disbursing agents, custodian fees, legal and auditors'
expenses, bookkeeping and accounting expenses, brokerage commissions for
portfolio transactions, taxes, if any, the advisory fee, extraordinary expenses,
expenses of issuing and redeeming shares, expenses of shareholder and trustee
meetings, and 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 and setting in type prospectuses and
periodic reports and expenses of mailing them to current shareholders, fidelity
bond premiums, cost of maintaining the books and records of the Trust, and any
other charges and fees not specifically enumerated.
For the services and facilities provided to the Fund by the Advisor, the
Fund may pay to the Advisor a monthly fee at the rate based upon the monthly
average net assets of the Fund for such calendar month, of 1/12 of 1.25%. The
Advisor and Sub-Advisor have voluntarily agreed to bear certain Fund expenses.
See the Prospectus Section - "The Investment Advisor."
The Trust and the Advisor, in connection with the Fund, have entered into a
sub-advisory agreement with another firm as discussed in the prospectus. The
Sub-Advisor's compensation is set forth in the prospectus and is paid by the
Advisor. For the period from May 19, 1995 (commencement of operations) through
September 30, 1995 the Fund paid advisory fees (net of expenses paid by the
Advisor or Sub-Advisor or voluntarily waived) of $0.00. Out of this sum the
Advisor paid the Sub-Advisor fees of $0.00. The Fund will not be responsible for
the Sub-Advisor's fee.
The Advisor and Sub-Advisor may, out of profits derived from its management
fee, pay certain financial institutions (which may include banks, securities
dealers and other industry professionals) a "servicing fee" for performing
certain administrative servicing functions for Fund shareholders to the extent
these institutions are allowed to do so by applicable statute, rule or
regulation. These fees will be paid periodically and will generally be based on
a percentage of the value of the institutions' client Fund shares. The
Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing securities. However, in the Advisor's
opinion, such laws should not preclude a bank from performing shareholder
administrative and servicing functions as contemplated herein.
The Advisor and Sub-Advisor have jointly guaranteed that the Fund's total
operating expenses (as a percentage of average net assets) will not exceed 1.30%
on an annualized basis through June 30, 1996. Thus, the Advisor's compensation
under the Advisory Agreement is subject to reduction in any fiscal year to the
extent that total expenses of the Fund for such year (including the
sub-advisor's compensation but exclusive of taxes, brokerage commissions,
extraordinary expenses, and other permissible expenses) exceed 1.30%. The
Advisor and sub-advisor are not obligated to guarantee expenses beyond June 30,
1996. The Fund's shares are not registered under the securities laws of any
state and therefore the Fund is not subject to any state limitation of expense
ratios.
For a more complete description, including fees paid to the Sub-Advisor,
see "Management" in the prospectus.
9
Both the Advisory Agreement and the Sub-Advisory Agreement provide that
they will continue initially for two years, and from year to year thereafter,
with respect to the Fund, as long as they are approved at least annually both
(i) by a vote of a majority of the outstanding voting securities of the Fund (as
defined in the Investment Company Act of 1940 [the "Act"]) or by the Board of
Trustees of the Trust, and (ii) by a vote of a majority of the Trustees who are
not parties to the Advisory Agreement or "interested persons" of any party
thereto, cast in person at a meeting called for the purpose of voting on such
approval. Both the Advisory Agreement and Sub-Advisory Agreement may be
terminated on 60 days' written notice by either party and will terminate
automatically if it is assigned.
PORTFOLIO ACCOUNTING AND OTHER SERVICES
For the period from May 19, 1995 (commencement of operations) through
September 30, 1995 the Fund paid USSI a total of $0.00 for portfolio accounting
services and a total of $0.00 for transfer agent services.
A & B Mailers, Inc., a wholly-owned subsidiary of the Advisor, provides the
Trust with certain mail handling services. The charges for its services are
compared to bids from competitive services on a periodic basis by the Board of
Trustees. Each service is priced separately.
MARKETING EXPENSES
The Fund is sold without a front-end load, a back-end load or a
distribution plan under Rule 12b-1 of the 1940 Act. The Fund does not pay the
expense of printing and mailing prospectuses and sales materials used for
promotional purposes.
The Advisor, Sub-Advisor, Integrity Life Insurance Company, National
Integrity Life Insurance Co. or other parties may jointly or separately bear the
burden of marketing the Fund's shares and bear distribution expenses.
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 New York Stock Exchange is closed, other than customary
weekend and holiday closings, or trading on the Exchange is restricted as
determined by the Securities and Exchange Commission ("SEC"), (2) when an
emergency exists, as defined by the SEC, which makes it not reasonably
practicable for the Trust to dispose of securities owned by it or fairly to
determine the value of its assets, or (3) as the SEC may otherwise permit.
CALCULATION OF PERFORMANCE DATA
Because of the charges and deductions imposed by the separate accounts that
invest in the Fund, the total return and yield realized by Annuity owners will
be lower than the total return and yield for the Fund.
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:
10
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a
hypothetical $1,000 payment made at the
beginning of the 1, 5 or 10 year periods
at the end of the year or period;
The calculation assumes all charges are deducted from the initial $1,000
payment and assumes all dividends and distributions by the Fund are reinvested
at the price stated in the Prospectus on the reinvestment dates during the
period, and includes all recurring fees that are charged to all shareholder
accounts.
The average annual Total Return for the Fund for the period from May 19,
1995 (commencement of operations) through September 30, 1995 was 5.20%
NONSTANDARDIZED TOTAL RETURN
The Fund may provide the above described standard total return results for
a period which ends as of not earlier than the most recent calendar quarter end
and which begins either twelve months before or at the time of commencement of
the Fund's operations. In addition, the Fund may provide nonstandardized total
return results for differing periods, such as for the most recent six months.
Such nonstandardized total return is computed as otherwise described under
"Total Return" except that no annualization is made.
TAX STATUS
TAXATION OF THE FUND -- IN GENERAL
The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, the Fund will not be liable for federal income taxes on its taxable
net investment income and capital gain net income that are distributed to
shareholders, provided that the Fund distributes at least 90% of its net
investment income and net 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 net capital gain for the twelve-month period ending on October
31 of the calendar year and (3) any portion (not taxable to the Fund) of the
respective balance from the preceding calendar year. The Fund intends to make
such distributions as are necessary to avoid imposition of this excise tax.
TAXATION OF THE FUND'S INVESTMENTS
For federal income tax purposes, it is anticipated that the Underlying
Funds which the Fund invests in will themselves qualify as regulated investment
companies under Subchapter M of the Code. Accordingly, the Underlying Funds are
expected to distribute at least 90% of their net investment income and net
capital gain for the taxable year. If any Underlying Fund should fail to qualify
as a regulated investment company they would be subject to income and other
taxes, thereby reducing the profitability of the Fund's investment in such
Underlying Fund.
11
All shareholders will be notified annually regarding the tax status of
distributions received from the Fund.
TAXATION OF THE SHAREHOLDER
As discussed in the prospectus, it is expected that shares of the Fund will
be held under the terms of the Best of Funds Variable Annuity (the "Annuity").
Under current tax law, dividends or capital gain distributions from the Fund are
not currently taxable when accumulated within the Annuity. For a discussion of
the tax status of the Annuity, shareholders should refer to the Annuity's
prospectus.
CUSTODIAN
Bankers Trust Company of New York, New York acts as Custodian for the Fund.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, One Riverwalk Place, Ste. 900, San Antonio, Texas
78205, serves as the independent accountants for the Trust.
FINANCIAL STATEMENTS
The Trust was established on June 8, 1994. The Statement of Assets and
Liabilities as of May 12, 1995 has been audited by Price Waterhouse LLP.
Financial statements for the period from May 19, 1995 (commencement of
operations) through September 30, 1995 are unaudited. Both are included in this
Statement of Additional Information. Shareholders will be provided with Annual
and Semiannual Reports as they become available.
12
<PAGE>
SCHABACKER SELECT FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 12, 1995
ASSETS
Cash ................................................ $100,000
LIABILITIES
Commitments (Note 2) --
TOTAL NET ASSETS ......................................... $100,000
SUMMARY OF SHAREHOLDER'S EQUITY
Paid-in capital (indefinite number
of no par value shares authorized) .................. $100,000
Shares outstanding .................................. 10,000
NET ASSET VALUE, REDEMPTION PRICE
AND OFFERING PRICE PER SHARE ............................. $ 10.00
NOTE 1. ORGANIZATION.
The Schabacker Select Fund (the "Fund") was organized as a Massachusetts
Business Trust on June 13, 1994. The Fund has been inactive except for matters
relating to its organization as a diversified open-end investment company under
the Investment Company Act of 1940. The initial capital of the Fund was
contributed by United Services Advisors, Inc. (the "Advisor") on May 12, 1995.
NOTE 2. COMMITMENTS AND CONTRACTUAL ARRANGEMENTS.
Pursuant to agreements entered into on December 8, 1994, the advisor will
serve as the Fund's investment adviser for which it will receive an annual
management fee of $1.25%. The management fee is based upon monthly average net
assets of the Fund and is paid monthly. United Shareholder Services, Inc., a
wholly owned subsidiary of the Advisor, will serve as the Fund's transfer agent
and accounting service agent. Bankers Trust Company serves as custodian to the
Fund.
The Fund and the Advisor have entered into a sub-advisory agreement with
Schabacker Investment Management, Inc. (the "Sub-Advisor"). The Sub-Advisor will
receive an annual fee of 0.625%. The fee is based upon monthly average net
assets of the Fund and is paid monthly by the Advisor. The Fund is not
responsible for the Sub-Advisor's fee.
The Advisor has agreed to bear all costs related to organizing the Fund.
<PAGE>
(PRICE WATERHOUSE LETTERHEAD)
[PRICE WATERHOUSE LOGO]
PRICE WATERHOUSE LLP
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
Schabacker Select Fund
In our opinion, the accompanying statement of assets and liabilities present
fairly, in all material respects, the financial position of Schabacker Select
Fund (the "Fund") at May 12, 1995, in conformity with generally accepted
accounting principles. This financial statement is the responsibility of the
Fund's management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial statement
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
/S/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Antonio, Texas
May 15, 1995
<PAGE>
UNITED SERVICES INSURANCE FUNDS
SCHABACKER SELECT FUND
--------------------------------------
Portfolio of Investments in Securities
September 30, 1995
(unaudited)
MUTUAL FUNDS (91.32%) SHARES VALUE
--------------------- ------ -----
EQUITY GROWTH FUNDS (45.45%)
----------------------------
Fidelity Low-Priced Stock Fund ............ 380.370$ 7,219
Fidelity Market Index Fund ................ 111.387 4,824
Harbor Capital Appreciation Fund .......... 216.169 5,006
The Kaufmann Fund, Inc. ................... 1,517.672 7,664
Mutual Beacon Fund ........................ 484.800 18,330
Mutual Discovery Fund ..................... 1,194.775 18,710
Mutual Qualified Fund ..................... 555.384 18,022
Mutual Shares Fund ........................ 185.338 18,024
Royce Value Fund .......................... 1,677.540 18,117
Seven Seas Series S&P 500
Index Fund .............................. 365.025 4,848
T. Rowe Price Capital
Appreciation Fund ....................... 321.376 4,621
T. Rowe Price Equity Index Fund ........... 1,134.575 18,868
T. Rowe Price New Era Fund ................ 192.598 4,486
T. Rowe Price OTC Fund .................... 440.024 7,824
T. Rowe Price Small-Cap Fund .............. 1,103.156 18,654
Vanguard Index Trust
Capitalization Stock Portfolio .......... 258.974 4,889
Vanguard Specialized Portfolios
Energy Portfolio ........................ 263.813 4,316
--------
184,422
EQUITY INCOME FUNDS (23.03%)
----------------------------
Benham Utilities Income Fund .............. 1,715.920 18,120
Fidelity Utilities Income Fund ............ 1,168.073 18,199
Invesco Industrial Income Funds, Inc. ..... 369.805 4,597
Janus Flexible Income Fund ................ 472.656 4,457
Linder Dividend Funds, Inc. ............... 667.892 18,013
Northeast Investors Trust ................. 1,109.466 11,461
Vanguard Wellesley Income Fund ............ 942.147 18,626
--------
93,473
FIXED INCOME FUNDS (1.08%)
--------------------------
Vanguard Bond Index Fund
Total Bond Market Portfolio ............. 445.064 4,393
--------
INTERNATIONAL/
EMERGING MARKETS FUNDS (11.85%)
-------------------------------
Fidelity Emerging Markets Fund ............. 266.72$ 4,241
Founders Worldwide Growth Fund ............. 359.25 7,354
Montgomery Emerging Markets Fund ........... 323.77 4,164
Scudder Global Small Company Fund .......... 420.02 7,569
Scudder International Fund ................. 102.35 4,639
T. Rowe Price International Funds, Inc. ....
International Stock Fund ................. 366.66 4,503
Tweedy, Browne Global Value Fund ........... 905.16 11,496
Vanguard International Equity Index Fund
Emerging Markets Portfolio ............... 377.49 4,126
--------
48,092
MONEY MARKET FUNDS (2.17%)
--------------------------
Fidelity Cash Reserves ..................... 4,400.98 4,401
Vanguard Money Market Reserves
Prime Portfolio .......................... 4,403.29 4,403
--------
8,804
STRATEGIC PORTFOLIOS (7.74%)
----------------------------
Invesco Strategic Portfolios, Inc. .........
Financial Services ....................... 929.83 18,076
Invesco Strategic Portfolios, Inc. .........
Health Sciences .......................... 265.36 13,332
--------
31,408
TOTAL INVESTMENTS (91.32%)
(COST $363,754)(A) ....................... $370,592
========
(a) The percentage shown represents the percentage of investment to total
net assets.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
(UNAUDITED)
ASSETS
Investments in securities of unaffiliated
issuers, at value: (identified cost of
$363,754) (note 2a) ................................. $370,592
Cash ..................................................... 29,845
Dividends receivable ..................................... 39
Due from manager ......................................... 5,336
--------
Total Assets ........................................ $405,812
LIABILITIES
Total Liabilities ................................... --
--------
Net Assets ..................................... $405,812
========
NET ASSETS
Paid-in capital (NOTE 5) ................................. $397,916
Accumulated undistributed net investment income ..... 1,058
Accumulated undistributed net realized
gain from investments ............................... --
Net unrealized depreciation
in value of investments ............................. 6,838
--------
Net assets applicable to outstanding capital shares ...... $405,812
========
Capital shares outstanding, no par value,
indefinite shares authorized (NOTE 5)Z ................... 38,565
========
Net asset value, redemption price and offering
price per share ........................................ $ 10.52
========
See accompanying notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MAY 19, 1995* TO SEPTEMBER 30, 1995
(UNAUDITED)
NET INVESTMENT INCOME:
Dividend income ..................................... $ 1,058
--------
Expenses:
Paid to manager (NOTE 6):
Management fees ........................... 755
Transfer agency fees ...................... 13
Accounting service fees ................... 10,500
Paid to others:
Custodian fees ................................. 903
Professional fees .............................. 6,750
Trustee fees and expenses ...................... 6,857
Miscellaneous expenses ......................... 1,812
--------
Total expenses before waivers ............. 27,590
Waived fees (NOTE 6) ................. (27,590)
--------
Total expenses ....................... --
--------
Net investment income ........... 1,058
========
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENTS:
Realized gain from security transactions ............ --
Net change in unrealized appreciation of investments 6,838
--------
Net realized and unrealized gain on investments 6,838
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... $ 7,896
========
*Commencement of Operations.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM MAY 19, 1995* TO SEPTEMBER 30, 1995
(UNAUDITED)
FROM OPERATIONS:
Net investment income .............................. $ 1,058
Net realized gain from investments ................. --
Net change in unrealized appreciation of investments 6,838
---------
Net increase in net assets
resulting from operations ................... 7,896
---------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income ........... --
Distributions from net capital gains ............... --
---------
Total distributions to shareholders ........... --
---------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Net proceeds from sale of shares ................... 408,025
Net asset value of shares issued to shareholders
in reinvestment of distributions ................. --
---------
408,025
Cost of shares redeemed ............................ (10,109)
---------
Increase in net assets derived
from capital shares transactions ............ 397,916
---------
NET INCREASE IN NET ASSETS .............................. 405,812
NET ASSETS AT BEGINNING OF PERIOD ....................... --
---------
NET ASSETS AT END OF PERIOD [INCLUDING
ACCUMULATED UNDISTRIBUTED NET
INVESTMENT INCOME OF $1,058] .......................... $ 405,812
=========
*Commencement Of Operations.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
NOTE 1 - ORGANIZATION
United Services Insurance Funds (the "Trust") is a diversified, open-end
management investment company registered under the Investment Company Act
of 1940, as amended. The Trust was organized as a Massachusetts business
trust on June 13, 1994. The initial capital of the Fund was contributed by
United Services Advisors, Inc. (the "Advisor") on May 12, 1995. The
Schabacker Select Fund (the "Fund"), a separate Fund of the Trust,
commenced operations on May 19, 1995.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in preparation of its financial statements.
(a) SECURITIES VALUATION
All securities (except U.S. Government securities less than 60 days to
maturity and repurchase agreements) held by the Fund are valued at the
closing net asset value of the mutual fund. Short-term investments
with maturities of sixty days or less at the date of purchase are
valued at amortized cost, which approximates market value.
(b) SECURITIES TRANSACTIONS AND RELATED INVESTMENT INCOME
Securities transactions are accounted for on a trade date basis.
Realized gain (loss) from security transactions is calculated on the
identified cost basis. Dividend income is recorded on the ex-dividend
date or when the information becomes available to the Fund. Interest
income is recorded on the accrual basis.
(c) REPURCHASE AGREEMENTS
The Fund follows a "delivery vs. payment" policy, whereby payment will
not be made for the repurchase agreement until delivery of the
underlying collateral, by way of the Federal Reserve book-entry
system, has occurred. The Board of Trustees has established the
following directives to ensure the Fund is adequately protected in the
event of default by the counterparty: 1) the Fund's custodian must
always obtain securities serving as underlying collateral, and 2) the
market value of securities serving as collateral must always equal or
exceed 102% of the principal amount of the repurchase obligation.
(d) FEDERAL INCOME TAXES
It is the policy of the Fund to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
to distribute all of its taxable income to its shareholders.
Accordingly, no Federal income tax provision has been made.
(e) ORGANIZATIONAL COSTS
Costs incurred in organizing the Fund have been borne by the Advisor.
(f) DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS
Dividends and distributions to shareholders are recorded by the Fund
on ex-dividend date. The Fund generally pays dividends and capital
gains distributions, if any, annually. The Fund distributes tax basis
earnings in accordance with the minimum distribution requirements of
the Internal Revenue Code, which may result in dividends or
distributions in excess of financial statement (book) earnings. Income
dividends and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles.
NOTE 3 - FEDERAL INCOME TAXES
For federal income tax purposes, the identified cost of investments owned
at September 30, 1995 was $363,754, and net unrealized appreciation of
investments aggregated $6,838.
NOTE 4 - INVESTMENT SECURITIES TRANSACTIONS
During the period from May 19, 1995 to September 30, 1995, the cost of
purchases and proceeds from sales/maturities of investments, excluding
short- term investments, were $363,754 and $-0-, respectively.
NOTE 5 - CAPITAL SHARES TRANSACTIONS
Following is a summary of capital share activity for the period from May
19, 1995 to September 30, 1995:
Shares sold ........................... 39,542
Reinvestment of dividends ............. --
Shares redeemed ....................... (977)
------
Net increase ...................... 38,565
======
NOTE 6 - TRANSACTIONS WITH THE MANAGER AND AFFILIATES
United Services Advisors, Inc. (the "Advisor" or the "Manager"), under an
Investment Advisory Agreement with the Trust in effect through December 8,
1996, furnishes management and investment advisory services and, subject to
the supervision of the Trust's Board of Trustees, directs the investments
of the Fund in accordance with the Fund's 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, President, Chief Executive Officer and
Chairman of the Board of Directors of the Advisor has, since October 1989,
owned more than 25% of the voting stock of the Advisor and is its
controlling person.
The Advisory Agreement with the Trust provides for the Fund to pay the
Advisor an annual management fee of 1.25% of the Fund's average net assets.
The Manager and the Trust have contracted with Schabacker Investment
Management, Inc. ("Sub-Advisor") to serve as Sub-Advisor for the Fund. The
Sub-Advisor manages the composition of the portfolio of the Fund 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 Manager and the Trustees. As compensation
for its services, the Advisor will pay the Sub-Advisor an annual
sub-advisory fee of .625% of average net assets of the Fund. The Fund is
not responsible for the Sub-Advisor's fee.
United Shareholder Services, Inc. ("USSI"), a wholly owned subsidiary of
the Advisor, is transfer and accounting service agent for the Fund. The
Fund pays an annual fee of $40 for transfer agent services. For maintaining
the books and records of the Fund and calculating the daily net asset
value, USSI is paid an asset based fee with a minimum of $28,000 annually.
In addition, the Advisor is reimbursed certain costs for in-house legal and
compliance services pertaining to the Fund.
The Manager, the Sub-Advisor, and their affiliates have voluntarily agreed
to waive all fees to the extent necessary so that operating expenses (as a
percentage of average net assets) will not exceed 1.30% on an annualized
basis until June 30, 1996 or until such later date as determined by the
Manager.
Certain Officers and Trustees of the Trust are Officers and Directors of
the Manager, the Sub-Advisor and the Transfer Agent.
Expenses incurred by the Fund, exclusive of interest, brokerage fees and
commissions, taxes, and extraordinary items, which exceed the lowest
expense limitation imposed in any state in which shares of the Trust are
registered, are reimbursed by the Manager up to the amount of the
management fee. Such limitation is currently 2.5% of the first $30 million
of average net assets, 2% of the next $70 million of average net assets and
1.5% of the remaining average net assets. For the period ended September
30, 1995, no expenses were required to be reimbursed because of such
limitation due to the Manager's voluntary waiver.
During the period ended September 30, 1995, the independent Trustees earned
$4,000 as compensation for serving as Trustees.
NOTE 7 - SELECTED PER SHARE DATA AND RATIOS
Selected data for a capital share outstanding throughout each period as
follows:
PERIOD ENDED
(a)
------------
Per Share Operating Performance:
Net asset value, beginning of period ............. $ 10.00
-------
Net investment income (B) ...................... .03
Net realized and unrealized gain (loss)
on investments (C) ........................... .49
-------
Total from investment operations ................. .52
-------
Less dividends from net investment income ........ --
-------
Net asset value, end of period ................... $ 10.52
=======
Total Investment Return (D) ...................... 5.20%
Ratio/Supplemental Data:
Net assets, end of period (in thousands) ......... $ 406
Ratio of expenses to average net assets .......... 0.00%(e)(f)
Ratio of net income to average net assets ........ 1.75%(e)(f)
Portfolio turnover ............................... 0.00%
(a) For the period from May 19, 1995 (date of commencement of operations)
to September 30, 1995.
(b) Net of expense reimbursements and fee waivers of $0.71 per share.
(c) Includes the effect of capital share transactions throughout the
period.
(d) Total return is not annualized.
(e) Annualized; the ratios are not necessarily indicative of twelve months
of operations.
(f) Expense ratio is net of fee waivers. Had such reimbursements not been
made, the annualized expense ratio subject to the most restrictive
state limitation would have been 44.31% and the annualized net
investment income ratio would have been (42.56)%. Fund expenses as a
percentage of net assets are extremely high for a Fund in its start-up
phase due to fixed costs and low asset levels.
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Amendment to the Registration Statement on Form N-1A to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of San Antonio,
State of Texas, on the 14th day of November 1995.
UNITED SERVICES INSURANCE FUNDS
By: /s/ Bobby D. Duncan
-------------------------------------------------------
BOBBY D. DUNCAN
President, Chairman, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ David Anders
- ----------------------------- Trustee November 14, 1995
DAVID ANDERS
/s/ Bobby D. Duncan
- ----------------------------- Trustee, Chairman November 14, 1995
BOBBY D. DUNCAN Chief Executive Officer
President
/s/ James M. Shabacker
- ----------------------------- Trustee November 14, 1995
JAMES M. SHABACKER
/s/ MacRae Ross
- ----------------------------- Trustee November 14, 1995
MACRAE ROSS
/s/ Clark R. Mandigo
- ----------------------------- Trustee November 14, 1995
CLARK R. MANDIGO
/s/ Teresa G. Rowan
- ----------------------------- Vice President, Chief November 14, 1995
TERESA G. ROWAN Accounting Officer and
Treasurer
<PAGE>
PART C -- OTHER INFORMATION
Included herein is Part C for
United Services Insurance Funds
Schabacker Select Fund
<PAGE>
UNITED SERVICES INSURANCE FUNDS
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Unaudited Financial Highlights for the period from May 19, 1995
(commencement of operations) to September 30, 1995 found in Part
A.
(b) Financial Statements included in Part B (Statement of Additional
Information of this Registration Statement:
1. Audited financials as of May 12, 1995.
2. Unaudited financials from May 19, 1995 (commencement of
operations) to September 30, 1995.
(b) EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
(1) Declaration of Trust, Master Trust Agreement,
dated June 8, 1994 (incorporated by reference to
Initial Registration Statement filed September
9, 1994).
(2) By-laws of Registrant (incorporated by reference
to Initial Registration Statement filed
September 9, 1994).
(3) Not Applicable.
(4) Not Applicable.
(5) (a) Advisory Agreement between Registrant and United
Services Advisors, Inc., dated December 8, 1994
(incorporated by reference to Pre-Effective
Amendment #1 filed in May 1995).
(b) Sub-Advisory Agreement among Registrant, Advisor
and Schabacker Investment Management, Inc.,
dated December 8, 1994 (incorporated by
reference to Pre-Effective Amendment #1 filed in
May 1995).
(6) Not Applicable.
(7) Not Applicable.
(8) Form of Custodian Agreement between Registrant
and Bankers Trust Company of New York
(incorporated by reference to Initial
Registration Statement filed September 9, 1994).
(9) (a) Transfer Agency Agree.
(9) (a) Transfer Agency Agreement between Registrant and
United Shareholder Services, Inc., dated
December 8, 1994 (incorporated by reference to
Pre- Effective Amendment #1 filed in May 1995).
(b) Bookkeeping and Accounting Agreement between
Registrant and United Shareholder Services,
Inc., dated December 8, 1994 (incorporated by
reference to Pre-Effective Amendment #1 filed in
May 1995).
(10) Opinion and Consent of Counsel (incorporated by
reference to Initial Registration Statement
filed September 9, 1994).
(11) Not Applicable.
(12) Not Applicable.
(13) Not Applicable.
(14) Not Applicable.
(15)* Consent of Independent Public Accountants.
(16) Schedule for computation of performance
quotation provided in the Registration Statement
in response to Item 22 (incorporated by
reference to Pre-Effective Amendment #1 filed in
May 1995).
(17) Not Applicable.
(18) Not Applicable.
(19) Power of Attorney (incorporated by reference to
Pre-Effective Amendment #1 filed in May 1995).
* Filed herewith
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Information pertaining to persons controlled by or under common control
with Registrant is incorporated by reference to the Statement of Additional
Information contained in Part B of this Registration Statement at the
section entitled "Principal Holders of Securities."
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The number of record holders, as of October 27, 1995, of each class of
securities of the Registrant.
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Schabacker Select Fund 27
ITEM 27. INDEMNIFICATION
Under Article VI of the Registrant's Master Trust Agreement, each of its
Trustees and officers or person serving in such capacity with another
entity at the request of the Registrant (a "Covered Person") shall be
indemnified (from the assets of the Sub-Trust or Sub-Trusts in question)
against all liabilities, including, but not limited to, amounts paid in
satisfaction of judgments, in compromises or as fines or penalties, and
expenses, including reasonable legal and accounting fees, incurred by the
Covered Person in connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal before any court or
administrative or legislative body, in which such Covered Person may be or
may have been involved as a party or otherwise or with which such person
may be or may have been threatened, while in office or thereafter, by
reason of being or having been such a Trustee or officer, director or
trustee, except with respect to any matter as to which it has been
determined that such Covered Person (i) did not act in good faith in the
reasonable belief that such Covered Person's action was in or not opposed
to the best interests of the Trust or (ii) had acted with wilful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office (either and
both of the conduct described in (i) and (ii) being referred to hereafter
as "Disabling Conduct"). A determination that the Covered Person is not
entitled to indemnification may be made by (i) a final decision on the
merits by a court or other body before whom the proceeding was brought that
the person to be indemnified was not liable by reason of Disabling Conduct,
(ii) dismissal of a court action or an administrative proceeding against a
Covered Person for insufficiency of evidence of Disabling Conduct, or (iii)
a reasonable determination, based upon a review of the facts, that the
indemnitee was not liable by reason of Disabling Conduct by (a) a vote of
the majority of a quorum of Trustees who are neither "interested persons"
of the Trust as defined in Section 1(a)(19) of the 1940 Act nor parties to
the proceeding, or (c) as independent legal counsel in a written opinion.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR AND INVESTMENT
ADMINISTRATOR
Information pertaining to business and other connections of Registrant's
investment advisor and investment administrator is incorporated by
reference to the Prospectus and Statement of Additional Information
contained in Parts A and B of this Registration Statement at the sections
entitled "Management of the Fund" in the Prospectus, and "Investment
Advisory Services" and "Portfolio Accounting and Other Services" in the
Statement of Additional Information.
ITEM 29. PRINCIPAL UNDERWRITERS
The Registrant is currently comprised of one fund which acts as distributor
of its own shares. The fund is being submitted herein for registration.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records maintained by the Registrant are kept at the
Administrator's office located at 7900 Callaghan Road, San Antonio, Texas.
All accounts and records maintained by Bankers Trust Company as custodian
for Registrant are maintained in Newu York.
ITEM 31. Not Applicable.
ITEM 32. UNDERTAKINGS
None
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF EXHIBIT NUMBERED PAGES
(15) Consent of Independent Public Accountant
(PRICE WATERHOUSE LETTERHEAD)
[PRICE WATERHOUSE LOGO]
PRICE WATERHOUSE LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 1 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated May
15, 1995, relating to the statement of assets and liabilities of Schabacker
Select Fund at May 12, 1995, which appears in such Statement of Additional
Information. We also consent to the references to us under the headings
"Financial Statements" and "Independent Accountants" in the Statement of
Additional Information and to the reference to us under the heading "Independent
Accountants" in the Prospectus which constitutes part of this Registration
Statement.
/S/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
San Antonio, Texas
November 17, 1995
