Registration Statement Under The Securities Act Of 1933
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 125
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[X]
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Registration Statement Under The Investment Company Act Of 1940
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Amendment No. 125
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[X]
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U.S. Global Investors Funds
Equity Funds All American Equity Fund (GBTFX) Holmes Macro Trends Fund (MEGAX)
Gold and Natural Resources Funds Gold and Precious Metals Fund (USERX) World Precious Minerals Fund (UNWPX) Global Resources Fund (PSPFX) |
Emerging Markets Funds Emerging Europe Fund (EUROX) China Region Fund (USCOX)
Bond Funds Near-Term Tax Free Fund (NEARX) U.S. Government Securities Ultra-Short Bond Fund (UGSDX) |
Table Of Contents
Summary Section Equity Funds |
|
All American Equity Fund |
1 |
Holmes Macro Trends Fund |
5 |
Summary Section Gold and Natural Resources Funds |
|
Gold and Precious Metals Fund |
9 |
World Precious Minerals Fund |
14 |
Global Resources Fund |
19 |
Summary Section Emerging Markets Funds |
|
Emerging Europe Fund |
24 |
China Region Fund |
30 |
Summary Section Bond Funds |
|
Near-Term Tax Free Fund |
35 |
U.S. Government Securities Ultra-Short Bond Fund |
39 |
Investment Objectives, Principal Investment Strategies and Related Risks |
|
All American Equity Fund |
42 |
Holmes Macro Trends Fund |
42 |
Gold and Precious Metals Fund |
46 |
World Precious Minerals Fund |
46 |
Global Resources Fund |
46 |
Emerging Europe Fund |
52 |
China Region Fund |
52 |
Near-Term Tax Free Fund |
59 |
U.S. Government Securities Ultra-Short Bond Fund |
61 |
Common Investment Practices and Related Risks |
62 |
Portfolio Holdings |
65 |
Fund Management |
65 |
Shareholder Information |
67 |
Pricing of Fund Shares |
67 |
Opening an Account |
67 |
Funding an Account |
68 |
Minimum Investments |
68 |
How to Purchase, Redeem and Exchange Shares |
68 |
Important Shareholder Information |
70 |
Distributions and Taxes |
74 |
Financial Highlights |
77 |
Summary Section
All American Equity Fund
Investment Objective
The All American Equity Fund’s primary objective is to seek long-term capital appreciation.
Fees and Expenses of the Fund
The following table describes the fees and expenses that you may pay if you buy and hold Investor Class shares of the fund. These fees are paid directly from your investment.
Shareholder Fees
|
|
Maximum sales charge |
None |
Redemption fee (as a percentage of amount redeemed, as applicable, on fund shares held 7 days or less) |
0.05% |
Annual Fund Operating Expenses
|
|
Management fee |
0.53% |
Distribution and/or service (12b-1) fees |
0.25% |
Other expenses |
1.16% |
Total annual fund operating expenses |
1.94% |
Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Investor Class of the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% annual return and the fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your cost would be:
1 Year |
3 Years |
5 Years |
10 Years |
$197 |
$609 |
$1,047 |
$2,264 |
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes where fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. The fund had a portfolio turnover rate of 109% for the fiscal year ended December 31, 2015.
Principal Investment Strategies
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
The Adviser searches for growth companies that have strong fundamentals and are also trading at reasonable valuations. Shareholder yield is a key factor the Adviser considers when evaluating a company. Shareholder yield is determined by the dividends that a company pays to its shareholders and/or by a company buyback of stock from shareholders. The focus of the stock selection is on large capitalization companies.
Under normal market conditions, the All American Equity Fund will invest substantially all (greater than 80%) of its net assets in equity and equity-related securities defined as “all American.” The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs).
The All American Equity Fund will consider any of the following companies to be “all American”:
1. |
companies offering stock registered on a United States stock exchange; |
1
2. |
companies offering stock traded on Nasdaq or the domestic over-the-counter markets; |
3. |
companies deriving more than 50% of their revenue from operations in the United States at the time of the fund’s investment; |
4. |
companies incorporated in the United States; or |
5. |
companies having their principal place of business or corporate headquarters located in the United States. |
The fund also may purchase call and put options, and enter into covered option writing transactions. In addition, the fund may invest up to 15% of its net assets in illiquid securities.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions.
Principal Risks
● |
Main Risk. As with all mutual funds, loss of money is a risk of investing in the fund. |
● |
Market Risk. The value of the fund’s shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally. |
● |
Portfolio Management Risk. The skill of the Adviser will play a significant role in the fund’s ability to achieve its investment objectives. |
● |
Portfolio Turnover Risk. The fund’s portfolio turnover rates vary from year to year according to market conditions and may exceed 100%. The length of time the fund has held a particular security is not generally a consideration in investment decisions. It is the policy of the fund to effect portfolio transactions without regard to a holding period if, in the judgment of the portfolio managers, such transactions are advisable. Portfolio turnover generally involves some expense, including brokerage commissions, dealer mark-ups, or other transaction costs on the sale of securities and reinvestment in other securities. Such sales may result in realization of taxable capital gains for shareholders. |
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Growth Stock Risk. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. |
● |
Sector Risk. The fund may invest a significant amount of its assets in certain sectors, which exposes the fund to greater market risk than if the fund diversified its assets among various sectors. |
● |
Options Risk. Investing in options, long-term equity anticipation securities (i.e., LEAPS, an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of the fund. An option may expire without value, resulting in a loss of the fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option. |
● |
Illiquidity Risk. Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet. These investments may involve a high degree of business and financial risk. |
● |
Warrants Risk. Warrants can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. If a warrant held by the fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant. |
● |
Depositary Receipts Risk. ADR and GDR risks include, but are not limited to, fluctuations in foreign currencies and foreign investment risks, such |
2
as political and financial instability, less liquidity and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. In addition, ADRs and GDRs may not track the price of the underlying foreign securities, and their value may change materially at times when the U.S. markets are not open for trading. Investments in unsponsored depositary receipts may be subject to additional risks.
● |
Convertible Securities Risk. Convertible securities entail interest rate and credit risks. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, convertible securities held by the fund that are rated below investment grade (i.e., “junk bonds”) are subject to special risks, including the risk of default in interest or principal payments, which could result in a loss of income to the fund or a decline in the market value of the securities. |
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Over-the-Counter Risk. Securities traded in the over-the-counter markets may trade in smaller volumes, and their prices may be more volatile, than securities principally traded on securities exchanges. Such securities may be less liquid than more widely traded securities. In addition, the prices of such securities may include an undisclosed dealer markup, which the fund pays as part of the purchase price. |
Performance Information
The following bar chart and table show the volatility of the fund’s Investor Class share returns, which is one indicator of the risks of investing in the fund. The bar chart shows changes in the fund’s returns from year to year during the period indicated. The table compares the fund’s average annual returns for the last 1-, 5- and 10-year periods to those of a broad-based securities market index. How the fund performed in the past, before and after taxes, is not an indication of how it will perform in the future. You may obtain performance data current to the most recent month end at www.usfunds.com or by calling 1-800-873-8637.
Annual Total Returns (as of December 31 each year)
All American Equity Fund
Best quarter shown in the bar chart above: 12.51% in the third quarter of 2009.
Worst quarter shown in the bar chart above: (21.09)% in the third quarter of 2008.
Average Annual Total Returns
|
1 Year |
5 Years |
10 Years |
All American Equity Fund Return Before Taxes |
(4.20)% |
8.19% |
5.20% |
Return After Taxes on Distributions |
(7.45)% |
6.04% |
3.59% |
Return After Taxes on Distributions and Sale of Fund Shares |
(0.80)% |
6.06% |
3.87% |
S&P 500 Index
|
1.38% |
12.57% |
7.31% |
After-tax returns are calculated using the highest historic marginal individual federal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
3
Fund Management
Investment Adviser: U.S. Global Investors, Inc.
Portfolio Managers: The fund is managed by Mr. Frank E. Holmes and Mr. Ralph Aldis. Mr. Holmes has served as Chief Executive Officer of the fund since 1989 and Chief Investment Officer of the fund since 1999, and Mr. Aldis has served as a portfolio manager of the fund since 2015.
Purchase and Sale of Fund Shares
You may purchase or sell shares of the fund through an authorized broker-dealer or directly from the fund at www.usfunds.com, by telephone at 1-800-873-8637, or by mail at the following addresses:
● |
Regular Mail
|
● |
Overnight Mail
|
Shares may be redeemed on any day the NAV per share is calculated.
Minimum Investment
Initial Purchase
● |
$5,000 |
Additional Purchases
● |
$100 minimum per transaction |
Automatic Investing—ABC Investment Plan ®
● |
$1,000 initial investment if you elect to have monthly automated investments of at least $100 per transaction. The $1,000 initial investment must be made by check or wire. |
Tax Information
The fund intends to make distributions that may be taxed as ordinary income, capital gains or some combination of both, unless you hold fund shares in a tax-advantaged account, in which case your distributions will be taxed upon withdrawal.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and/or its related companies may pay the intermediary revenue sharing payments or a fee for certain servicing and administrative functions. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
4
Holmes Macro Trends Fund
Investment Objective
The Holmes Macro Trends Fund’s primary objective is to seek long-term capital appreciation.
Fees and Expenses of the Fund
The following table describes the fees and expenses that you may pay if you buy and hold Investor Class shares of the fund. These fees are paid directly from your investment.
Shareholder Fees
|
|
Maximum sales charge |
None |
Redemption fee (as a percentage of amount redeemed, as applicable, on fund shares held 7 days or less) |
0.05% |
Annual Fund Operating Expenses
|
|
Management fee |
0.75% |
Distribution and/or service (12b-1) fees |
0.25% |
Other expenses |
0.81% |
Total annual fund operating expenses |
1.81% |
Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Investor Class of the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% annual return and the fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your cost would be:
1 Year |
3 Years |
5 Years |
10 Years |
$184 |
$569 |
$980 |
$2,127 |
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes where fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. The fund had a portfolio turnover rate of 320% for the fiscal year ended December 31, 2015.
Principal Investment Strategies
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in countries, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
The Adviser’s “bottom-up” stock selection approach is generally characterized as growth at a reasonable price, which focuses on three key drivers: revenue growth, earnings growth and return on equity. The Adviser searches for growth companies that have strong fundamentals and are also trading at reasonable valuations. The fund may invest in companies of any market capitalization.
Under normal market conditions, the Holmes Macro Trends Fund invests primarily in a diversified portfolio of equity and equity-related securities. The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs).
The fund may invest up to 25% of its total assets in foreign securities that are not publicly traded in the U.S. The fund may also invest in sponsored or unsponsored American Depository Receipts (ADRs), which represent shares of foreign issuers; however, the ADRs are not included in the 25% limit on foreign issuers. As part of its foreign securities, the fund may invest up to 5% of its total assets in emerging markets.
5
The fund also may purchase call and put options, and enter into covered option writing transactions. In addition, the fund may invest up to 15% of its net assets in illiquid securities.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions.
Principal Risks
● |
Main Risk. As with all mutual funds, loss of money is a risk of investing in the fund. |
● |
Market Risk. The value of the fund’s shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally. |
● |
Portfolio Management Risk. The skill of the Adviser will play a significant role in the fund’s ability to achieve its investment objectives. The Adviser could be incorrect in its analysis of industries, companies and the relative attractiveness of growth and value stocks and other matters. |
● |
Portfolio Turnover Risk. The fund’s portfolio turnover rates vary from year to year according to market conditions and may exceed 100%. The length of time the fund has held a particular security is not generally a consideration in investment decisions. It is the policy of the fund to effect portfolio transactions without regard to a holding period if, in the judgment of the portfolio managers, such transactions are advisable. Portfolio turnover generally involves some expense, including brokerage commissions, dealer mark-ups, or other transaction costs on the sale of securities and reinvestment in other securities. Such sales may result in realization of taxable capital gains for shareholders. |
● |
Growth Stock Risk. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. |
● |
Sector Risk. The fund may invest a significant amount of its assets in certain sectors, which exposes the fund to greater market risk than if the fund diversified its assets among various sectors. |
● |
Foreign Securities Risk/Emerging Markets Risk. The fund’s returns and share prices may be affected to a large degree by several factors, including fluctuations in currency exchange rates; political, social or economic instability; the rule of law with respect to the recognition and protection of property rights; and less stringent accounting, disclosure and financial reporting requirements in a particular country. These risks are generally intensified in emerging markets. The fund’s share prices will reflect the movements of the different stock markets in which it is invested and the currencies in which its investments are denominated. |
● |
Small- and Mid-Sized Companies Risk. The fund may invest in small- and mid-sized companies, which involve greater risk than investing in more established companies. This risk includes difficulty in obtaining reliable information and financial data and low liquidity in the market, making it difficult to dispose of shares when it may be otherwise advisable. |
● |
Options Risk. Investing in options, LEAPS (an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of the fund. An option may expire without value, resulting in a loss of the fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option. |
● |
Illiquidity Risk. Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet. These investments may involve a high degree of business and financial risk. |
6
● |
Warrants Risk. Warrants can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. If a warrant held by the fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant. |
● |
Depositary Receipts Risk. ADR and GDR risks include, but are not limited to, fluctuations in foreign currencies and foreign investment risks, such as political and financial instability, less liquidity and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. In addition, ADRs and GDRs may not track the price of the underlying foreign securities, and their value may change materially at times when the U.S. markets are not open for trading. Investments in unsponsored depositary receipts may be subject to additional risks. |
● |
Convertible Securities Risk. Convertible securities entail interest rate and credit risks. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, convertible securities held by the fund that are rated below investment grade (i.e., “junk bonds”) are subject to special risks, including the risk of default in interest or principal payments, which could result in a loss of income to the fund or a decline in the market value of the securities. |
Performance Information
The following bar chart and table show the volatility of the fund’s Investor Class share returns, which is one indicator of the risks of investing in the fund. The bar chart shows changes in the fund’s returns from year to year during the period indicated. The table compares the fund’s average annual returns for the last 1-, 5- and 10-year periods to those of a broad-based securities market index. How the fund performed in the past, before and after taxes, is not an indication of how it will perform in the future. You may obtain performance data current to the most recent month end at www.usfunds.com or by calling 1-800-873-8637.
Annual Total Returns (as of December 31 each year)
Holmes Macro Trends Fund
Best quarter shown in the bar chart above: 17.02% in the second quarter of 2009.
Worst quarter shown in the bar chart above: (25.35)% in the third quarter of 2008.
Average Annual Total Returns (for the periods ended December 31, 2015) |
1 Year |
5 Years |
10 Years |
Holmes Macro Trends Fund Return Before Taxes |
(0.94)% |
5.37% |
3.48% |
Return After Taxes on Distributions |
(2.67)% |
3.97% |
2.76% |
Return After Taxes on Distributions and Sale of Fund Shares |
0.92% |
4.07% |
2.68% |
S&P Composite 1500 Index
|
1.01% |
12.39% |
7.41% |
After-tax returns are calculated using the highest historic marginal individual federal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
7
Fund Management
Investment Adviser: U.S. Global Investors, Inc.
Portfolio Managers: The fund is managed by a team consisting of Mr. Frank E. Holmes and Mr. Ralph Aldis. Mr. Holmes has served as Chief Executive Officer of the fund since 1994 and Chief Investment Officer of the fund since 1999. Mr. Aldis has served as a portfolio manager of the fund since 2015.
Purchase and Sale of Fund Shares
You may purchase or sell shares of the fund through an authorized broker-dealer or directly from the fund at www.usfunds.com, by telephone at 1-800-873-8637, or by mail at the following addresses:
● |
Regular Mail
|
● |
Overnight Mail
|
Shares may be redeemed on any day the NAV per share is calculated.
Minimum Investment
Initial Purchase
● |
$5,000 |
Additional Purchases
● |
$100 minimum per transaction |
Automatic Investing—ABC Investment Plan ®
● |
$1,000 initial investment if you elect to have monthly automated investments of at least $100 per transaction. The $1,000 initial investment must be made by check or wire. |
Tax Information
The fund intends to make distributions that may be taxed as ordinary income, capital gains or some combination of both, unless you hold fund shares in a tax-advantaged account, in which case your distributions will be taxed upon withdrawal.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and/or its related companies may pay the intermediary revenue sharing payments or a fee for certain servicing and administrative functions. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
8
Gold and Precious Metals Fund
Investment Objective
The Gold and Precious Metals Fund seeks long-term growth of capital plus protection against inflation and monetary instability. The fund also pursues current income as a secondary objective.
Fees and Expenses of the Fund
The following table describes the fees and expenses that you may pay if you buy and hold Investor Class shares of the fund. These fees are paid directly from your investment.
Shareholder Fees
|
|
Maximum sales charge |
None |
Redemption fee (as a percentage of amount redeemed, as applicable, on fund shares held 7 days or less) |
0.05% |
Annual Fund Operating Expenses
|
|
Management fee |
0.98% |
Distribution and/or service (12b-1) fees |
0.25% |
Other expenses |
0.90% |
Acquired fund fees and expenses |
0.07% |
Total annual fund operating expenses |
2.20% |
Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Investor Class of the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% annual return and the fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your cost would be:
1 Year |
3 Years |
5 Years |
10 Years |
$223 |
$688 |
$1,180 |
$2,534 |
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes where fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. The fund had a portfolio turnover rate of 106% for the fiscal year ended December 31, 2015.
Principal Investment Strategies
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in countries, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
Under normal market conditions, the Gold and Precious Metals Fund will invest at least 80% of its net assets in equity and equity-related securities of companies principally involved in the mining, fabrication, processing, marketing or distribution of precious metals including gold, silver, platinum group, palladium and diamonds. The fund may invest in these precious metals directly and/or in equity and equity-related securities, such as exchange-traded funds (“ETFs”) that represent interests in, or related to, these precious metals. The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs). The fund also participates in private placements, initial public offerings (IPOs), and long-term equity anticipation securities (LEAPS).
The fund may invest in warrants to gain exposure to individual securities in the gold and precious metals industry over the long term. Warrants allow the fund to imitate a purchase or sale of a stock for a fraction of its price (premium) and hold that option for a long
9
period of time before it expires. The fund may also receive warrants when it participates in a private placement. The issuer of the private placement may provide a warrant as an incentive for investing in the initial financing of the company.
The fund focuses on selecting companies with established producing mines that have large deposits that create a significant stream of cash flow. Senior mining companies that have proven reserves are more strongly influenced by the price of gold. Although the fund focuses its investments on senior mining companies, the fund may invest in junior and intermediate mining companies. Junior mining companies typically have small market capitalization and no source of steady cash flow, and their growth generally comes from a major mining discovery. Therefore, the risk and opportunities are substantially greater than investing in a senior mining company with proven reserves. The volatility of these smaller mining companies is typically greater than that of senior producers.
The Adviser’s stock selection process for established mining companies looks to identify companies with robust growth profiles and strong cash flows. In making security selections for junior and intermediate mining investments, the Adviser looks for companies with proven management who have a strong track record in developing and producing mining companies and whose potential mining assets and financial structure have upside leverage to rising commodity prices.
Although the fund has greater latitude to invest its assets in different precious metals, it currently has significant investments in the gold sector. Gold companies include mining companies that exploit gold deposits that are supported by co-products and by-products such as copper, silver, lead and zinc, and also diversified mining companies which produce a meaningful amount of gold.
The fund is non-diversified and, therefore, may invest a greater percentage of its assets in a particular issuer in comparison to a diversified fund.
The fund also may purchase call and put options, and enter into covered option writing transactions. In addition, the fund may invest up to 15% of its net assets in illiquid securities.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions.
Principal Risks
● |
Main Risk. As with all mutual funds, loss of money is a risk of investing in the fund. |
● |
Market Risk. The value of the fund’s shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally. |
● |
Portfolio Management Risk. The skill of the Adviser will play a significant role in the fund’s ability to achieve its investment objectives. There is a risk that the investment strategy does not achieve the fund’s objectives or that the Adviser does not implement the strategy properly. |
● |
Foreign Securities Risk/Emerging Markets Risk. The fund’s investments in foreign securities are subject to special risks. The fund’s returns and share price may be affected to a large degree by several factors, including fluctuations in currency exchange rates; political, social or economic instability; the rule of law with respect to the recognition and protection of property rights; and less stringent accounting, disclosure and financial reporting requirements in a particular country. These risks are generally intensified in emerging markets. The fund’s share prices will reflect the movements of the different stock markets in which it is invested and the currencies in which its investments are denominated. |
● |
Industry Concentration Risk. The fund concentrates its investments in gold and other precious metals. The fund may be subject to greater risks and market fluctuations than a portfolio representing a broader range of industries. The fund invests in securities that typically respond to |
10
changes in the price of gold and other precious metals, which can be influenced by a variety of global economic, financial, and political factors; increased environmental and labor costs in mining; and changes in laws relating to mining or gold production or sales; and the price may fluctuate substantially over short periods of time. Therefore, the fund may be more volatile than other types of investments.
● |
Junior and Intermediate Mining Companies Risk. The securities of junior and intermediate exploration gold companies, which are often more speculative in nature, tend to be less liquid and more volatile in price than securities of larger companies. |
● |
Non-Diversification Risk. The fund is non-diversified and may invest a significant portion of its total assets in a small number of companies. This may cause the performance of the fund to be dependent upon the performance of one or more selected companies, which may increase the volatility of the fund. |
● |
Price Volatility Risk. The value of the fund’s shares may fluctuate significantly. |
● |
Growth Stock Risk. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. |
● |
Options Risk. Investing in options, LEAPS (an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of the fund. An option may expire without value, resulting in a loss of the fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option. |
● |
Warrants Risk. Warrants can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. If a warrant held by the fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant. |
● |
Depositary Receipts Risk. ADR and GDR risks include, but are not limited to, fluctuations in foreign currencies and foreign investment risks, such as political and financial instability, less liquidity and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. In addition, ADRs and GDRs may not track the price of the underlying foreign securities, and their value may change materially at times when the U.S. markets are not open for trading. Investments in unsponsored depositary receipts may be subject to additional risks. |
● |
Convertible Securities Risk. Convertible securities entail interest rate and credit risks. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, convertible securities held by the fund that are rated below investment grade (i.e., “junk bonds”) are subject to special risks, including the risk of default in interest or principal payments, which could result in a loss of income to the fund or a decline in the market value of the securities. |
● |
Restricted Security Risk. The fund may make direct equity investments in securities that are subject to contractual and regulatory restrictions on transfer. These investments may involve a high degree of business and financial risk. The restrictions on transfer may cause the fund to hold a security at a time when it may be beneficial to liquidate the security, and the security could decline significantly in value before the fund could liquidate the security. |
● |
Gold and Precious Metals/Minerals Risk. The fund may invest in gold and precious metals directly and/or in equity and equity-related securities, such as ETFs that represent interests in, or related to, these precious metals and, therefore, is subject to the risk that it could fail to qualify as a regulated investment company under the Internal Revenue Code if the fund derives more than 10% of its gross income from these investments in gold and |
11
precious metals. Failure to qualify as a regulated investment company would result in adverse tax consequences to the fund and its shareholders.
● |
Illiquidity Risk. Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet. These investments may involve a high degree of business and financial risk. |
● |
Initial Public Offering Risk. The Fund may purchase securities in an initial public offering (“IPO”), which may be illiquid; thus the Fund may not be able to dispose of them promptly at the price at which they are valued. |
● |
Exchange-Traded Funds Risk. The risks of investment in these securities typically reflect the risks of types of instruments in which the ETFs invest. By investing in an ETF, the Fund becomes a shareholder of that ETF and bears its proportionate share of the fees and expenses of the ETF. In addition, an ETF’s shares may trade above or below its net asset value. |
Performance Information
The following bar chart and table show the volatility of the fund’s Investor Class share returns, which is one indicator of the risks of investing in the fund. The bar charts show changes in the fund’s returns from year to year during the period indicated. The table compares the fund’s average annual returns for the last 1-, 5- and 10-year periods to those of broad-based securities market indexes. How the fund performed in the past, before and after taxes, is not an indication of how it will perform in the future. You may obtain performance data current to the most recent month end at www.usfunds.com or by calling 1-800-873-8637.
Annual Total Returns (as of December 31 each year)
Gold and Precious Metals Fund
Best quarter shown in the bar chart above: 34.95% in the first quarter of 2006.
Worst quarter shown in the bar chart above: (33.37)% in the second quarter of 2013.
Average Annual Total Returns (for the periods ended December 31, 2015) |
1 Year |
5 Years |
10 Years |
Gold and Precious Metals Fund Return Before Taxes |
(4.78)% |
(21.57)% |
(2.91)% |
Return After Taxes on Distributions |
(4.98)% |
(21.98)% |
(3.61)% |
Return After Taxes on Distributions and Sale of Fund Shares |
(2.71)% |
(13.48)% |
(0.76)% |
S&P 500 Index
|
1.38% |
12.57% |
7.31% |
FTSE Gold Mines Index
|
(20.47)% |
(24.95)% |
(7.67)% |
After-tax returns are calculated using highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns
12
shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
Fund Management
Investment Adviser: U.S. Global Investors, Inc.
Portfolio Managers: The fund is managed by a team consisting of Mr. Frank E. Holmes and Mr. Ralph Aldis. Mr. Holmes has served as Chief Executive Officer of the fund since 1989 and Chief Investment Officer of the fund since 1999, and Mr. Aldis has served as a portfolio manager of the fund since 2001.
Purchase and Sale of Fund Shares
You may purchase or sell shares of the fund through an authorized broker-dealer or directly from the fund at www.usfunds.com, by telephone at 1-800-873-8637, or by mail at the following addresses:
● |
Regular Mail
|
● |
Overnight Mail
|
Shares may be redeemed on any day the NAV per share is calculated.
Minimum Investment
Initial Purchase
● |
$5,000 |
Additional Purchases
● |
$100 minimum per transaction |
Automatic Investing—ABC Investment Plan ®
● |
$1,000 initial investment if you elect to have monthly automated investments of at least $100 per transaction. The $1,000 initial investment must be made by check or wire. |
Tax Information
The fund intends to make distributions that may be taxed as ordinary income, capital gains or some combination of both, unless you hold fund shares in a tax-advantaged account, in which case your distributions will be taxed upon withdrawal.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and/or its related companies may pay the intermediary revenue sharing payments or a fee for certain servicing and administrative functions. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
13
World Precious Minerals Fund
Investment Objective
The World Precious Minerals Fund seeks long-term growth of capital plus protection against inflation and monetary instability.
Fees and Expenses of the Fund
The following table describes the fees and expenses that you may pay if you buy and hold Investor Class shares of the fund. These fees are paid directly from your investment.
Shareholder Fees
|
|
Maximum sales charge |
None |
Redemption fee (as a percentage of amount redeemed, as applicable, on fund shares held 7 days or less) |
0.05% |
Annual Fund Operating Expenses
|
|
Management fee |
0.85% |
Distribution and/or service (12b-1) fees |
0.25% |
Other expenses |
0.86% |
Acquired fund fees and expenses |
0.05% |
Total annual fund operating expenses |
2.01% |
Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Investor Class of the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% annual return and the fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your cost would be:
1 Year |
3 Years |
5 Years |
10 Years |
$204 |
$630 |
$1,083 |
$2,338 |
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes where fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. The fund had a portfolio turnover rate of 71% for the fiscal year ended December 31, 2015.
Principal Investment Strategies
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in countries, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
Under normal market conditions, the fund will invest at least 80% of its net assets in equity and equity-related securities of companies principally engaged in the exploration for, or mining and processing of, precious minerals such as gold, silver, platinum group, palladium and diamonds. The fund may invest in these precious minerals directly and/or in equity and equity-related securities, such as exchange-traded funds (“ETFs”) that represent interests in, or related to, these precious minerals. The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs). The fund also participates in private placements, initial public offerings (IPOs), and long-term equity anticipation securities (LEAPS).
The fund may invest in warrants to gain exposure to individual securities in the gold and precious minerals sector over the long term. Warrants allow the fund to imitate a purchase or sale of a stock for a fraction of its price (premium) and hold that option for a long period of time before it expires. The fund may also receive warrants when it participates in a private
14
placement. The issuer of the private placement may provide a warrant as an incentive for investing in the initial financing of the company.
The fund focuses on selecting junior and intermediate exploration companies from around the world. Junior exploration companies typically have small market capitalization and no source of steady cash flow, and their growth generally comes from a major mining discovery. Therefore, the risk and opportunities are substantially greater than investing in a senior mining company with proven reserves. The volatility of these smaller mining companies is typically greater than that of senior producers.
In making security selections for junior and intermediate mining investments, the Adviser looks for companies with proven management who have a strong track record in developing and producing mining companies and whose potential mining assets and financial structure have upside leverage to a rising commodity price. The Adviser’s stock selection process for established mining companies looks to identify companies with robust reserve growth profiles and strong cash flows.
The fund will invest in securities of companies with economic ties to countries throughout the world, including the U.S. Under normal market conditions, the fund will invest at least 40% of its assets in securities of companies that are economically tied to at least three countries other than the U.S. The fund may invest in companies which may be domiciled in one country but have economic ties to another country. In determining if a company is economically tied to a country, the fund will consider various factors, including the country in which the company’s principal operations are located; the country in which the company’s mining or natural resource reserves are located; the country in which at least 50% of the company’s revenues or profits are derived from goods produced or sold, investments made, or services performed; the country in which the principal trading market is located; and the country in which the company is legally organized.
Although the fund has greater latitude to invest its assets in different precious minerals or metals stocks, it currently has significant investments in gold sector stocks. Gold companies include mining companies that exploit gold deposits that are supported by co-products and by-products such as copper, silver, lead and zinc, and also diversified mining companies which produce a meaningful amount of gold.
The fund is non-diversified and, therefore, may invest a greater percentage of its assets in a particular issuer in comparison to a diversified fund.
The fund also may purchase call and put options, and enter into covered option writing transactions. In addition, the fund may invest up to 15% of its net assets in illiquid securities.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions.
Principal Risks
● |
Main Risk. As with all mutual funds, loss of money is a risk of investing in the fund. |
● |
Market Risk. The value of the fund’s shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally. |
● |
Portfolio Management Risk. The skill of the Adviser will play a significant role in the fund’s ability to achieve its investment objectives. There is a risk that the investment strategy does not achieve the fund’s objectives or that the Adviser does not implement the strategy properly. |
● |
Foreign Securities Risk/Emerging Markets Risk. The fund’s investments in foreign securities are subject to special risks. The fund’s returns and share price may be affected to a large degree by several factors, including fluctuations in currency exchange rates; political, social or economic instability; the rule of law with respect to the recognition and protection of property rights; and less stringent accounting, disclosure and financial reporting requirements in a particular country. These risks are generally intensified in emerging markets. The fund’s share prices will reflect the |
15
movements of the different stock markets in which it is invested and the currencies in which its investments are denominated.
● |
Industry Concentration Risk. The fund concentrates its investments in precious minerals. The fund may be subject to greater risks and market fluctuations than a portfolio representing a broader range of industries. The fund invests in securities that typically respond to changes in the price of gold and other precious minerals, which can be influenced by a variety of global economic, financial and political factors; increased environmental and labor costs in mining; and changes in laws relating to mining or gold production or sales; and the price may fluctuate substantially over short periods of time. Therefore, the fund may be more volatile than other types of investments. |
● |
Junior and Intermediate Mining Companies Risk. The fund focuses its investments in junior and intermediate exploration companies. The securities of junior and intermediate exploration gold companies, which are often more speculative in nature, tend to be less liquid and more volatile in price than securities of larger companies. |
● |
Non-Diversification Risk. The fund is non-diversified and may invest a significant portion of its total assets in a small number of companies. This may cause the performance of the fund to be dependent upon the performance of one or more selected companies, which may increase the volatility of the fund. |
● |
Price Volatility Risk. The value of the fund’s shares may fluctuate significantly. |
● |
Growth Stock Risk. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. |
● |
Options Risk. Investing in options, LEAPS (an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of the fund. An option may expire without value, resulting in a loss of the fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option. |
● |
Warrants Risk. Warrants can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. If a warrant held by the fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant. |
● |
Depositary Receipts Risk. ADR and GDR risks include, but are not limited to, fluctuations in foreign currencies and foreign investment risks, such as political and financial instability, less liquidity and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. In addition, ADRs and GDRs may not track the price of the underlying foreign securities, and their value may change materially at times when the U.S. markets are not open for trading. Investments in unsponsored depositary receipts may be subject to additional risks. |
● |
Convertible Securities Risk. Convertible securities entail interest rate and credit risks. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, convertible securities held by the fund that are rated below investment grade (i.e., “junk bonds”) are subject to special risks, including the risk of default in interest or principal payments, which could result in a loss of income to the fund or a decline in the market value of the securities. |
● |
Restricted Security Risk. The fund may make direct equity investments in securities that are subject to contractual and regulatory restrictions on transfer. These investments may involve a high degree of business and financial risk. The restrictions on transfer may cause the fund to hold a security at a time when it may be beneficial to liquidate the security, and the security could decline significantly in value before the fund could liquidate the security. |
16
● |
Gold and Precious Metals/Minerals Risk. The fund may invest in gold and precious metals directly and/or in equity and equity-related securities, ETFs that represent interests in, or related to, these precious metals and, therefore, is subject to the risk that it could fail to qualify as a regulated investment company under the Internal Revenue Code if the fund derives more than 10% of its gross income from these investments in gold and precious metals. Failure to qualify as a regulated investment company would result in adverse tax consequences to the fund and its shareholders. |
● |
Illiquidity Risk. Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet. These investments may involve a high degree of business and financial risk. |
● |
Initial Public Offering Risk. The Fund may purchase securities in an initial public offering (“IPO”), which may be illiquid; thus the Fund may not be able to dispose of them promptly at the price at which they are valued. |
● |
Exchange-Traded Funds Risk. The risks of investment in these securities typically reflect the risks of types of instruments in which the ETFs invest. By investing in an ETF, the Fund becomes a shareholder of that ETF and bears its proportionate share of the fees and expenses of the ETF. In addition, an ETF’s shares may trade above or below its net asset value. |
Performance Information
The following bar chart and table show the volatility of the fund’s Investor Class share returns, which is one indicator of the risks of investing in the fund. The bar charts show changes in the fund’s returns from year to year during the period indicated. The table compares the fund’s average annual returns for the last 1-, 5- and 10-year periods to those of broad-based securities market indexes. How the fund performed in the past, before and after taxes, is not an indication of how it will perform in the future. You may obtain performance data current to the most recent month end at www.usfunds.com or by calling 1-800-873-8637.
Annual Total Returns (as of December 31 each year)
World Precious Minerals Fund
Best quarter shown in the bar chart above: 37.80% in the first quarter of 2006.
Worst quarter shown in the bar chart above: (38.70)% in the third quarter of 2008.
Average Annual Total Returns (for the periods ended December 31, 2015) |
1 Year |
5 Years |
10 Years |
World Precious Minerals Fund Return Before Taxes |
(15.64)% |
(27.16)% |
(6.75)% |
Return After Taxes on Distributions |
(18.99)% |
(28.38)% |
(9.21)% |
Return After Taxes on Distributions and Sale of Fund Shares |
(8.90)% |
(16.82)% |
(3.13)% |
S&P 500 Index (reflects no deduction for fees, expenses or taxes) |
1.38% |
12.57% |
7.31% |
NYSE Arca Gold Miners Index
|
(25.52)% |
(25.88)% |
(8.11)% |
After-tax returns are calculated using highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns
17
shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
Fund Management
Investment Adviser: U.S. Global Investors, Inc.
Portfolio Managers: The fund is managed by a team consisting of Mr. Frank E. Holmes and Mr. Ralph Aldis. Mr. Holmes has served as Chief Executive Officer of the fund since 1989 and Chief Investment Officer of the fund since 1999, and Mr. Aldis has served as a portfolio manager of the fund since 2001.
Purchase and Sale of Fund Shares
You may purchase or sell shares of the fund through an authorized broker-dealer or at www.usfunds.com, by telephone at 1-800-873-8637, or by mail at the following addresses:
● |
Regular Mail
|
● |
Overnight Mail
|
Shares may be redeemed on any day the NAV per share is calculated.
Minimum Investment
Initial Purchase
● |
$5,000 |
Additional Purchases
● |
$100 minimum per transaction |
Automatic Investing—ABC Investment Plan ®
● |
$1,000 initial investment if you elect to have monthly automated investments of at least $100 per transaction. The $1,000 initial investment must be made by check or wire. |
Tax Information
The fund intends to make distributions that may be taxed as ordinary income, capital gains or some combination of both, unless you hold fund shares in a tax-advantaged account, in which case your distributions will be taxed upon withdrawal.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and/or its related companies may pay the intermediary revenue sharing payments or a fee for certain servicing and administrative functions. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
18
Global Resources Fund
Investment Objective
The Global Resources Fund seeks long-term growth of capital plus protection against inflation and monetary instability.
Fees and Expenses of the Fund
The following table describes the fees and expenses that you may pay if you buy and hold Investor Class shares of the fund. These fees are paid directly from your investment.
Shareholder Fees
|
|
Maximum sales charge |
None |
Redemption fee (as a percentage of amount redeemed, as applicable, on fund shares held 7 days or less) |
0.05% |
Annual Fund Operating Expenses
|
|
Management fee |
0.54% |
Distribution and/or service (12b-1) fees |
0.25% |
Other expenses |
0.79% |
Total annual fund operating expenses |
1.58% |
Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Investor Class of the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% annual return and the fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your cost would be:
1 Year |
3 Years |
5 Years |
10 Years |
$161 |
$499 |
$860 |
$1,878 |
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes where fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. The fund had a portfolio turnover rate of 445% for the fiscal year ended December 31, 2015.
Principal Investment Strategies
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in countries, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
Under normal market conditions, the fund will invest at least 80% of its net assets in equity and equity-related securities of companies involved in the natural resources industries, which include, among others, the following industries: natural gas, integrated oil companies, oil and gas drilling, oil and gas exploration and production, oil and gas refining, oilfield equipment/services, aluminum, chemicals, diversified metals and coal mining, gold and precious metals, iron and steel, paper and forest products, and uranium.
The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs). The fund also participates in private placements, initial public offerings (IPOs), and long-term equity anticipation securities (LEAPS).
The fund may receive warrants when it participates in a private placement. The warrants are provided by the issuer of the private placement as an incentive for investing in the initial financing of the company. The holder of a warrant has the right, until the warrant
19
expires, to sell the warrant or to purchase a given number of shares of a particular issue at a specified price.
For its “bottom-up” selection strategy, the Adviser looks at a company’s relative rankings with respect to expected future growth in reserves, production and cash flow. Additionally, the Adviser also considers relative valuation multiples to earnings and cash flow, expected net asset value, balance sheet quality, working capital needs and overall profitability measured by returns on invested capital.
The fund will invest in securities of companies with economic ties to countries throughout the world, including the U.S. Under normal market conditions, the fund will invest at least 40% of its assets in securities of companies that are economically tied to at least three countries other than the U.S. The fund may invest in companies which may be domiciled in one country but have economic ties to another country. In determining if a company is economically tied to a country, the fund will consider various factors, including the country in which the company’s principal operations are located; the country in which the company’s mining or natural resource reserves are located; the country in which at least 50% of the company’s revenues or profits are derived from goods produced or sold, investments made, or services performed; the country in which the principal trading market is located; and the country in which the company is legally organized.
The fund is non-diversified and, therefore, may invest a greater percentage of its assets in a particular issuer in comparison to a diversified fund.
The fund also may purchase call and put options, and enter into covered option writing transactions. In addition, the fund may invest up to 15% of its net assets in illiquid securities.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions.
Principal Risks
● |
Main Risk. As with all mutual funds, loss of money is a risk of investing in the fund. |
● |
Market Risk. The value of the fund’s shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally. |
● |
Portfolio Management Risk. The skill of the Adviser will play a significant role in the fund’s ability to achieve its investment objectives. There is a risk that the investment strategy does not achieve the fund’s objectives or that the Adviser does not implement the strategy properly. |
● |
Portfolio Turnover Risk. The fund’s portfolio turnover rates vary from year to year according to market conditions and may exceed 100%. The length of time the fund has held a particular security is not generally a consideration in investment decisions. It is the policy of the fund to effect portfolio transactions without regard to a holding period if, in the judgment of the portfolio managers, such transactions are advisable. Portfolio turnover generally involves some expense, including brokerage commissions, dealer mark-ups, or other transaction costs on the sale of securities and reinvestment in other securities. Such sales may result in realization of taxable capital gains for shareholders. |
● |
Foreign Securities Risk/Emerging Markets Risk. The fund’s investments in foreign securities are subject to special risks. The fund’s returns and share price may be affected to a large degree by several factors, including fluctuations in currency exchange rates; political, social or economic instability; the rule of law with respect to the recognition and protection of property rights; and less stringent accounting, disclosure and financial reporting requirements in a particular country. These risks are generally intensified in emerging markets. The fund’s share prices will reflect the movements of the different stock markets in which it is invested and the currencies in which its investments are denominated. |
● |
Industry Concentration Risk. The fund concentrates its investments in the natural resources industries and may be subject to greater risks and market fluctuations than a portfolio representing a broader range of industries. The |
20
fund invests in securities vulnerable to factors affecting the natural resources industries, such as increasing regulation of the environment by both U.S. and foreign governments and production and distribution policies of OPEC (Organization of Petroleum Exporting Countries) and other oil producing countries. Increased environmental regulations and limitations on production may, among other things, increase compliance costs and affect business opportunities for the companies in which the fund invests. The value of these companies is also affected by changing commodity prices, which can be highly volatile and are subject to risks of oversupply and reduced demand.
● |
Non-Diversification Risk. The fund is non-diversified and may invest a significant portion of its total assets in a small number of companies. This may cause the performance of the fund to be dependent upon the performance of one or more selected companies, which may increase the volatility of the fund. |
● |
Price Volatility Risk. The value of the fund’s shares may fluctuate significantly. |
● |
Growth Stock Risk. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. |
● |
Options Risk. Investing in options, LEAPS (an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of the fund. An option may expire without value, resulting in a loss of the fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option. |
● |
Warrants Risk. Warrants can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. If a warrant held by the fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant, if any. |
● |
Depositary Receipts Risk. ADR and GDR risks include, but are not limited to, fluctuations in foreign currencies and foreign investment risks, such as political and financial instability, less liquidity and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. In addition, ADRs and GDRs may not track the price of the underlying foreign securities, and their value may change materially at times when the U.S. markets are not open for trading. Investments in unsponsored depositary receipts may be subject to additional risks. |
● |
Convertible Securities Risk. Convertible securities entail interest rate and credit risks. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, convertible securities held by the fund that are rated below investment grade (i.e., “junk bonds”) are subject to special risks, including the risk of default in interest or principal payments, which could result in a loss of income to the fund or a decline in the market value of the securities. |
● |
Restricted Security Risk. The fund may make direct equity investments in securities that are subject to contractual and regulatory restrictions on transfer. These investments may involve a high degree of business and financial risk. The restrictions on transfer may cause the fund to hold a security at a time when it may be beneficial to liquidate the security, and the security could decline significantly in value before the fund could liquidate the security. |
● |
Illiquidity Risk. Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which |
21
a fund carries them on its balance sheet. These investments may involve a high degree of business and financial risk.
● |
Initial Public Offering Risk. The Fund may purchase securities in an initial public offering (“IPO”), which may be illiquid; thus the Fund may not be able to dispose of them promptly at the price at which they are valued. |
Performance Information
The following bar chart and table show the volatility of the fund’s Investor Class share returns, which is one indicator of the risks of investing in the fund. The bar charts show changes in the fund’s returns from year to year during the period indicated. The table compares the fund’s average annual returns for the last 1-, 5- and 10-year periods to those of broad-based securities market indexes. How the fund performed in the past, before and after taxes, is not an indication of how it will perform in the future. You may obtain performance data current to the most recent month end at www.usfunds.com or by calling 1-800-873-8637.
Annual Total Returns (as of December 31 each year)
Global Resources Fund
Best quarter shown in the bar chart above: 29.10% in the fourth quarter of 2010.
Worst quarter shown in bar chart above: (45.81)% in the third quarter of 2008.
Average Annual Total Returns (for the periods ended December 31, 2015) |
1 Year |
5 Years |
10 Years |
Global Resources Fund Return Before Taxes |
(28.43)% |
(15.13)% |
(4.04)% |
Return After Taxes on Distributions |
(28.78)% |
(15.69)% |
(5.52)% |
Return After Taxes on Distributions and Sale of Fund Shares |
(16.10)% |
(10.44)% |
(2.31)% |
S&P 500 Index
|
1.38% |
12.57% |
7.31% |
S&P Global Natural Resources Index (Net Total Return)
|
(24.50)% |
(9.15)% |
0.37% |
After-tax returns are calculated using highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
Fund Management
Investment Adviser: U.S. Global Investors, Inc.
Portfolio Managers: The fund is managed by a team consisting of Mr. Frank E. Holmes and Mr. Ralph Aldis. Mr. Holmes has served as Chief Executive Officer of the fund since 1989 and Chief Investment Officer of the fund since 1999. Mr. Aldis has served as a portfolio manager of the fund since 2015.
Purchase and Sale of Fund Shares
You may purchase or sell shares of the fund through an authorized broker-dealer or directly from the fund at www.usfunds.com, by telephone at 1-800-873-8637, or by mail at the following addresses:
● |
Regular Mail
|
22
● |
Overnight Mail
|
Shares may be redeemed on any day the NAV per share is calculated.
Minimum Investment
Initial Purchase
● |
$5,000 |
Additional Purchases
● |
$100 minimum per transaction |
Automatic Investing—ABC Investment Plan ®
● |
$1,000 initial investment if you elect to have monthly automated investments of at least $100 per transaction. The $1,000 initial investment must be made by check or wire. |
Tax Information
The fund intends to make distributions that may be taxed as ordinary income, capital gains or some combination of both, unless you hold fund shares in a tax-advantaged account, in which case your distributions will be taxed upon withdrawal.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and/or its related companies may pay the intermediary revenue sharing payments or a fee for certain servicing and administrative functions. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
23
Emerging Europe Fund
Investment Objective
The Emerging Europe Fund seeks long-term growth of capital.
Fees and Expenses of the Fund
The following table describes the fees and expenses that you may pay if you buy and hold Investor Class shares of the fund. These fees are paid directly from your investment.
Shareholder Fees
|
|
Maximum sales charge |
None |
Redemption fee (as a percentage of amount redeemed, as applicable, on fund shares held 7 days or less) |
0.05% |
Annual Fund Operating Expenses
|
|
Management fee |
1.32% |
Distribution and/or service (12b-1) fees |
0.25% |
Other expenses |
1.03% |
Acquired fund fees and expenses |
0.01% |
Total annual fund operating expenses |
2.61% |
Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Investor Class of the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% annual return and the fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your cost would be:
1 Year |
3 Years |
5 Years |
10 Years |
$264 |
$811 |
$1,385 |
$2,944 |
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes where fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. The fund had a portfolio turnover rate of 137% for the fiscal year ended December 31, 2015.
Principal Investment Strategies
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in countries, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
The Adviser’s “bottom-up” stock selection approach is generally characterized as growth at a reasonable price, which focuses on three key drivers: revenue growth, cash flow and return on equity. The Adviser searches for growth companies that have strong fundamentals and are also trading at reasonable valuations.
The Emerging Europe Fund invests, under normal market conditions, at least 80% of its net assets in equity and equity-related securities of companies located in the emerging markets of Eastern Europe. The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs).
In general, Eastern European countries are in the early stages of industrial, economic or capital market development. Eastern European countries may include countries that were, until recently, governed by communist governments or countries that, for any other reason, have failed to achieve levels of industrial
24
production, market activity, or other measures of economic development typical of the developed European countries.
Although the fund may invest in any Eastern European country, it currently focuses its investment in companies located in Russia, Poland, the Czech Republic, Hungary and Turkey. The Adviser considers the following countries to be in Eastern Europe: Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Croatia, the Czech Republic, Estonia, FYR Macedonia, Georgia, Greece, Hungary, Latvia, Lithuania, Moldova, Poland, Romania, Russia, Slovakia, Slovenia, Turkey and Ukraine.
The fund will consider investments in Eastern Europe to be the following:
1. |
securities of issuers that are organized under the laws of any Eastern European country or have a principal office in an Eastern European country; |
2. |
securities of issuers that derive a majority of their revenues from business in Eastern European countries, or have a majority of their assets in Eastern European countries at the time of the fund’s investment; or |
3. |
securities that are traded principally on a securities exchange in an Eastern European country. (For this purpose, investment companies that invest principally in securities of companies located in one or more Eastern European countries will also be considered to be located in an Eastern European country, as will American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) with respect to the securities of companies located in Eastern European countries.) |
The Emerging Europe Fund invests at least 25% of its total assets in securities of companies involved in oil, gas or banking. In determining whether a company is involved in oil, gas or banking, the fund will use the Bloomberg Sector Classification System. For a full list of the Bloomberg-classified industries involving oil, gas or banking, see the discussion of non-fundamental investment restrictions in the statement of additional information (SAI).
However, the fund will invest no more than 25% of its total assets in any one Bloomberg-classified industry involving oil, gas, or banking, such as, among others, Oil Companies—Integrated, Oil Companies—Exploration & Production, Oil Refining & Marketing, Regional Banks—Non-U.S., Commercial Banks—Non-U.S., and Diversified Banking Institutions; provided, however, if at the time of purchase a corresponding industry classification represents 20% or more of the fund’s benchmark, the MSCI Emerging Markets Europe 10/40 Index (Net Total Return), the fund may invest up to 35% of its total assets in the corresponding Bloomberg-classified industry.
The fund may invest up to 20% of its net assets in securities, including debt securities of any credit quality, of governments and companies located anywhere in the world.
The fund is non-diversified and, therefore, may invest a greater percentage of its assets in a particular issuer in comparison to a diversified fund.
The fund also may purchase call and put options, and enter into covered option writing transactions. In addition, the fund may invest up to 15% of its net assets in illiquid securities.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions.
Principal Risks
● |
Main Risk. As with all mutual funds, loss of money is a risk of investing in the fund. |
● |
Market Risk. The value of the fund’s shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally. |
● |
Portfolio Management Risk. The skill of the Adviser will play a significant role in the fund’s ability to achieve its investment objectives. There |
25
is a risk that the investment strategy does not achieve the fund’s objectives or that the Adviser does not implement the strategy properly.
● |
Foreign Securities Risk/Emerging Markets Risk. The fund’s investments in foreign securities are subject to special risks. The fund’s returns and share price may be affected to a large degree by several factors, including fluctuations in currency exchange rates; political, social or economic instability; the rule of law with respect to the recognition and protection of property rights; and less stringent accounting, disclosure and financial reporting requirements in a particular country. These risks are generally intensified in emerging markets. The fund’s share prices will reflect the movements of the different stock markets in which it is invested and the currencies in which its investments are denominated. |
● |
Eastern European Securities Risk. Political and economic structures in many Eastern European countries are in their infancy and developing rapidly, and such countries may lack the social, political and economic stability characteristic of many more developed countries. In addition, unanticipated political or social developments may affect the value of the fund’s investment in Eastern European countries. As a result, the risks normally associated with investing in any foreign country may be heightened in Eastern European countries. For example, the small size and inexperience of the securities markets in Eastern European countries and the limited volume of trading in securities in those markets may make the fund’s investments in such countries illiquid and more volatile than investments in more developed countries and may make obtaining prices on portfolio securities from independent sources more difficult than in other more developed markets. |
● |
Geographic Concentration Risk. The fund concentrates its investments in companies located in Eastern Europe. Because of this, companies in the fund’s portfolio may react similarly to political, social, and economic developments in any of the Eastern European countries. For example, many companies in the same region may be dependent on related government fiscal policies. Companies may be adversely affected by new or unanticipated legislative changes that could affect the value of such companies and, therefore, the fund’s share price. The fund’s return and share price may be more volatile than those of a less concentrated portfolio. |
● |
Industry Concentration Risk. The fund invests more than 25% of its investments in companies principally engaged in the oil, gas or banking industries. Oil & gas companies are a large part of the Russian economy and banks typically are a significant component of emerging market economies, such as those in Russia and other Eastern European countries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile. To the extent that the fund’s assets are invested in the oil & gas industry, the fund would be particularly vulnerable to factors affecting the industry, such as increased governmental regulation of the environment. Increased environmental regulation may, among other things, increase compliance costs and affect business opportunities for companies in which the fund invests. The fund would also be affected by changing commodity prices, which can be highly volatile and are subject to risk of over supply and decreased demand. To the extent that the fund’s assets are invested in companies operating in the banking industry, the fund is subject to legislative or regulatory changes, adverse market conditions, and/or increased competition affecting banking companies. The prices of securities of banking companies also may fluctuate widely due to general economic conditions that could create exposure to credit losses. In determining whether a company is involved in oil, gas or banking, the fund will use the Bloomberg Sector Classification System. |
● |
Sector Risk. The fund may invest a significant amount of its total assets in certain sectors, which may be subject to specific risks. These risks include governmental regulation of the sector and governmental monetary and fiscal policies which may negatively affect a particular sector. In addition, governmental policies towards international trade and tariffs may affect particular sectors. |
26
● |
Growth Stock Risk. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. |
● |
Non-Diversification Risk . The fund is non-diversified and may invest a significant portion of its total assets in a small number of companies. This may cause the performance of the fund to be dependent upon the performance of one or more selected companies, which may increase the volatility of the fund. |
● |
Options Risk. Investing in options, LEAPS (an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of the fund. An option may expire without value, resulting in a loss of the fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option. |
● |
Illiquidity Risk. Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet. These investments may involve a high degree of business and financial risk. |
● |
Warrants Risk. Warrants can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. If a warrant held by the fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant. |
● |
Depositary Receipts Risk. ADR and GDR risks include, but are not limited to, fluctuations in foreign currencies and foreign investment risks, such as political and financial instability, less liquidity and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. In addition, ADRs and GDRs may not track the price of the underlying foreign securities, and their value may change materially at times when the U.S. markets are not open for trading. Investments in unsponsored depositary receipts may be subject to additional risks. |
● |
Convertible Securities Risk. Convertible securities entail interest rate and credit risks. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, convertible securities held by the fund that are rated below investment grade (i.e., “junk bonds”) are subject to special risks, including the risk of default in interest or principal payments, which could result in a loss of income to the fund or a decline in the market value of the securities. |
● |
Restricted Securities Risk. The fund may make direct equity investments in securities that are subject to contractual and regulatory restrictions on transfer. These investments may involve a high degree of business and financial risk. The restrictions on transfer may cause the fund to hold a security at a time when it may be beneficial to liquidate the security, and the security could decline significantly in value before the fund could liquidate the security. |
Performance Information
The following bar chart and table show the volatility of the fund’s Investor Class share returns, which is one indicator of the risks of investing in the fund. The bar charts show changes in the fund’s returns from year to year during the period indicated. The table compares the fund’s average annual returns for the last 1-, 5- and 10-year periods to those of broad-based securities market indexes. How the fund performed in the past, before and after taxes, is not an indication of how it will perform in the future. You may obtain performance data current to the most recent month end at www.usfunds.com or by calling 1-800-873-8637.
27
On November 7, 2008, the Adviser took over the day-to-day management of the Emerging Europe Fund from a subadviser. Consequently, the fund’s prior performance may have been different if the Adviser had been managing the fund.
Annual Total Returns (as of December 31 each year)
Emerging Europe Fund
Best quarter shown in the bar chart above: 40.72% in the second quarter of 2009.
Worst quarter shown in the bar chart above: (48.07)% in the fourth quarter of 2008.
Average Annual Total Returns (for the periods ended December 31, 2015) |
1 Year |
5 Years |
10 Years |
Emerging Europe Fund Return Before Taxes |
(20.73)% |
(12.67)% |
(5.25)% |
Return After Taxes on Distributions |
(20.73)% |
(12.77)% |
(5.77)% |
Return After Taxes on Distributions and Sale of Fund Shares |
(11.73)% |
(8.81)% |
(2.70)% |
S&P 500 Index (reflects no deduction for fees, expenses or taxes) |
1.38% |
12.57% |
7.31% |
MSCI Emerging Markets Europe 10/40 Index (Net Total Return)
|
(14.70)% |
(11.16)% |
(2.43)% |
After-tax returns are calculated using the highest historic marginal individual federal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
Fund Management
Investment Adviser: U.S. Global Investors, Inc.
Portfolio Managers: The fund is managed by Mr. Frank E. Holmes and Mr. Ralph Aldis. Mr. Holmes has served as Chief Executive Officer of the fund since 1997 and Chief Investment Officer of the fund since 1999, and Mr. Aldis has served as a portfolio manager of the fund since 2015.
Purchase and Sale of Fund Shares
You may purchase or sell shares of the fund through an authorized broker-dealer or directly from the fund at www.usfunds.com, by telephone at 1-800-873-8637, or by mail at the following addresses:
● |
Regular Mail
|
● |
Overnight Mail
|
Shares may be redeemed on any day the NAV per share is calculated.
Minimum Investment
Initial Purchase
● |
$5,000 |
Additional Purchases
● |
$100 minimum per transaction |
28
Automatic Investing—ABC Investment Plan ®
● |
$1,000 initial investment if you elect to have monthly automated investments of at least $100 per transaction. The $1,000 initial investment must be made by check or wire. |
Tax Information
The fund intends to make distributions that may be taxed as ordinary income, capital gains or some combination of both, unless you hold fund shares in a tax-advantaged account, in which case your distributions will be taxed upon withdrawal.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and/or its related companies may pay the intermediary revenue sharing payments or a fee for certain servicing and administrative functions. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
29
China Region Fund
Investment Objective
The China Region Fund seeks long-term growth of capital.
Fees and Expenses of the Fund
The following table describes the fees and expenses that you may pay if you buy and hold Investor Class shares of the fund. These fees are paid directly from your investment.
Shareholder Fees
|
|
Maximum sales charge |
None |
Redemption fee (as a percentage of amount redeemed, as applicable, on fund shares held 7 days or less) |
0.05% |
Annual Fund Operating Expenses
|
|
Management fee |
1.13% |
Distribution and/or service (12b-1) fees |
0.25% |
Other expenses |
1.65% |
Acquired fund fees and expenses |
0.05% |
Total annual fund operating expenses |
3.08% |
Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Investor Class of the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% annual return and the fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your cost would be:
1 Year |
3 Years |
5 Years |
10 Years |
$311 |
$951 |
$1,616 |
$3,392 |
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes where fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. The fund had a portfolio turnover rate of 210% for the fiscal year ended December 31, 2015.
Principal Investment Strategies
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in countries, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
The Adviser’s “bottom-up” stock selection approach is generally characterized as growth at a reasonable price, which focuses on three key drivers: revenue growth, cash flow and return on equity. The Adviser searches for growth companies that have strong fundamentals and are also trading at reasonable valuations. The fund may invest in companies of any market capitalization.
Under normal market conditions, the China Region Fund will invest at least 80% of its net assets in equity and equity-related securities of companies located in the China region. The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs).
The China region is defined as any country that either shares a border with China or is located in the South China Sea or the East China Sea and includes: the People’s Republic of China (PRC or China), Bangladesh, Cambodia, Hong Kong, India, Indonesia, Kazakhstan, Korea, Kyrgyzstan, Laos, Malaysia, Mongolia, Myanmar, Nepal, Pakistan, Philippines, Singapore, Taiwan, Tajikistan, Thailand and Vietnam.
30
The fund will consider investments in the China region to be the following:
1. |
securities of issuers organized under the laws of the countries within the China region; |
2. |
securities of issuers that have at least 50% of their assets in one or more China region countries; |
3. |
securities of issuers that derive at least 50% of their gross revenues or profits from providing goods or services to or from one or more China region countries at the time of the fund’s investment; or |
4. |
securities of issuers that are primarily traded on the China, Taiwan or Hong Kong exchanges. |
The China Region Fund will invest in both established and emerging companies registered and operating in China and the China region. These will include wholly Chinese-owned enterprises, wholly foreign-owned enterprises and Sino-foreign joint ventures. While portfolio holdings may be geographically dispersed, the fund anticipates that the trading activities of the fund in People’s Republic of China (PRC) securities will be focused in the authorized China securities market; in particular, the Hong Kong Stock Exchange. Trading activities of the fund in securities other than PRC securities may take place on China region exchanges such as the Taiwan, Korea, Singapore, Malaysia and Indonesia stock exchanges, among others.
The fund is non-diversified and, therefore, may invest a greater percentage of its assets in a particular issuer in comparison to a diversified fund.
The fund also may purchase call and put options, and enter into covered option writing transactions. In addition, the fund may invest up to 15% of its net assets in illiquid securities.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions.
Principal Risks
● |
Main Risk. As with all mutual funds, loss of money is a risk of investing in the fund. |
● |
Market Risk. The value of the fund’s shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally. |
● |
Portfolio Management Risk. The skill of the Adviser will play a significant role in the fund’s ability to achieve its investment objectives. There is a risk that the investment strategy does not achieve the fund’s objectives or that the Adviser does not implement the strategy properly. |
● |
Portfolio Turnover Risk. The fund’s portfolio turnover rates vary from year to year according to market conditions and may exceed 100%. The length of time the fund has held a particular security is not generally a consideration in investment decisions. It is the policy of the fund to effect portfolio transactions without regard to a holding period if, in the judgment of the portfolio managers, such transactions are advisable. Portfolio turnover generally involves some expense, including brokerage commissions, dealer mark-ups, or other transaction costs on the sale of securities and reinvestment in other securities. Such sales may result in realization of taxable capital gains for shareholders. |
● |
Foreign Securities Risk/Emerging Markets Risk. The fund’s investments in foreign securities are subject to special risks. The fund’s returns and share price may be affected to a large degree by several factors including, fluctuations in currency exchange rates; political, social or economic instability; the rule of law with respect to the recognition and protection of property rights; and less stringent accounting, disclosure and financial reporting requirements in a particular country. These risks are generally intensified in emerging markets, which include those countries in which the fund invests. The fund’s share prices will reflect the movements of the different stock markets in which it is invested and the currencies in which its investments are denominated. |
● |
Geographic Concentration Risk. The fund concentrates its investments in companies located in the China region. Because of this, companies in the fund’s portfolio may react similarly to political, |
31
social, and economic developments in any of the China region countries. For example, many companies in the same region may be dependent on related government fiscal policies. Companies may be adversely affected by new or unanticipated legislative changes that could affect the value of such companies and, therefore, a fund’s share price. Additionally, developing countries, such as those in China, may subject the Fund’s investments to a number of tax rules, and the application of many of those rules may be uncertain. China has implemented a number of tax reforms in recent years, and may amend or revise its existing tax laws and/or procedures in the future, possibly with retroactive effect. Uncertainties in Chinese tax rules could result in unexpected tax liabilities for the Fund. A fund’s return and share price may be more volatile than those of a less concentrated portfolio.
● |
Government Relationship Risk. While companies in China may be subject to limitations on their business relationships under Chinese law, these laws may not be consistent with certain political and security concerns of the U.S. As a result, Chinese companies may have material direct or indirect business relationships with governments that are considered state sponsors of terrorism by the U.S. government, or governments that otherwise have policies in conflict with the U.S. government (an “Adverse Government”). If the China Region Fund invests in companies that have or develop a material business relationship with an Adverse Government, then the fund will be subject to the risk that these companies’ reputation and price in the market will be adversely or negatively affected. |
● |
Sector Risk. The fund may invest a significant amount of its total assets in certain sectors, which may be subject to specific risks. These risks include governmental regulation of the sector and governmental monetary and fiscal policies which may negatively affect a particular sector. In addition, governmental policies towards international trade and tariffs may affect particular sectors. |
● |
Growth Stock Risk. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. |
● |
Non-Diversification Risk . The fund is non-diversified and may invest a significant portion of its total assets in a small number of companies. This may cause the performance of the fund to be dependent upon the performance of one or more selected companies, which may increase the volatility of the fund. |
● |
Options Risk. Investing in options, LEAPS (an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of the fund. An option may expire without value, resulting in a loss of the fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option. |
● |
Illiquidity Risk. Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet. These investments may involve a high degree of business and financial risk. |
● |
Warrants Risk . Warrants can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. If a warrant held by the fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant. |
● |
Depositary Receipts Risk. ADR and GDR risks include, but are not limited to, fluctuations in foreign currencies and foreign investment risks, such as political and financial instability, less liquidity |
32
and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. In addition, ADRs and GDRs may not track the price of the underlying foreign securities, and their value may change materially at times when the U.S. markets are not open for trading. Investments in unsponsored depositary receipts may be subject to additional risks.
● |
Convertible Securities Risk. Convertible securities entail interest rate and credit risks. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, convertible securities held by the fund that are rated below investment grade (i.e., “junk bonds”) are subject to special risks, including the risk of default in interest or principal payments, which could result in a loss of income to the fund or a decline in the market value of the securities. |
● |
Restricted Securities Risk. The fund may make direct equity investments in securities that are subject to contractual and regulatory restrictions on transfer. These investments may involve a high degree of business and financial risk. The restrictions on transfer may cause the fund to hold a security at a time when it may be beneficial to liquidate the security, and the security could decline significantly in value before the fund could liquidate the security. |
Performance Information
The following bar chart and table show the volatility of the fund’s Investor Class share returns, which is one indicator of the risks of investing in the fund. The bar charts show changes in the fund’s returns from year to year during the period indicated. The table compares the fund’s average annual returns for the last 1-, 5- and 10-year periods to those of broad-based securities market indexes. How the fund performed in the past, before and after taxes, is not an indication of how it will perform in the future. You may obtain performance data current to the most recent month end at www.usfunds.com or by calling 1-800-873-8637.
Annual Total Returns (as of December 31 each year)
China Region Fund
Best quarter shown in the bar chart above: 32.51% in the third quarter of 2007.
Worst quarter shown in the bar chart above: (24.31)% in the third quarter of 2008.
Average Annual Total Returns (for the periods ended December 31, 2015) |
1 Year |
5 Years |
10 Years |
China Region Fund Return Before Taxes |
(8.60)% |
(4.48)% |
2.26% |
Return After Taxes on Distributions |
(9.05)% |
(4.61)% |
1.41% |
Return After Taxes on Distributions and Sale of Fund Shares |
(4.86)% |
(3.39)% |
1.72% |
Hang Seng Composite Index
|
(4.52)% |
1.91% |
7.84% |
MSCI All Country Far East Free ex Japan Index
|
(9.22)% |
0.45% |
6.42% |
After-tax returns are calculated using highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns
33
shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
Fund Management
Investment Adviser: U.S. Global Investors, Inc.
Portfolio Managers: The fund is managed by a portfolio team consisting of Mr. Frank E. Holmes and Mr. Ralph Aldis. Mr. Holmes has served as Chief Executive Officer of the fund since 1994 and Chief Investment Officer of the fund since 1999. Mr. Aldis has served as portfolio manager of the fund since 2015.
Purchase and Sale of Fund Shares
You may purchase or sell shares of the fund through an authorized broker-dealer or directly from the fund at www.usfunds.com, by telephone at 1-800-873-8637, or by mail at the following addresses:
● |
Regular Mail
|
● |
Overnight Mail
|
Shares may be redeemed on any day the NAV per share is calculated.
Minimum Investment
Initial Purchase
● |
$5,000 |
Additional Purchases
● |
$100 minimum per transaction |
Automatic Investing—ABC Investment Plan ®
● |
$1,000 initial investment if you elect to have monthly automated investments of at least $100 per transaction. The $1,000 initial investment must be made by check or wire. |
Tax Information
The fund intends to make distributions that may be taxed as ordinary income, capital gains or some combination of both, unless you hold fund shares in a tax-advantaged account, in which case your distributions will be taxed upon withdrawal.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and/or its related companies may pay the intermediary revenue sharing payments or a fee for certain servicing and administrative functions. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
34
Near-Term Tax Free Fund
Investment Objective
The Near-Term Tax Free Fund seeks to provide a high level of current income that is exempt from federal income taxation and to preserve capital.
Fees and Expenses of the Fund
The following table describes the fees and expenses that you may pay if you buy and hold Investor Class shares of the fund. These fees are paid directly from your investment.
Shareholder Fees
|
None |
Annual Fund Operating Expenses
|
|
Management fee |
0.50% |
Distribution and/or service (12b-1) fees |
None |
Other expenses |
0.59% |
Total annual fund operating expenses |
1.09% |
Expense waiver* |
(0.64)% |
Total annual expenses after reimbursements |
0.45% |
* |
The Adviser has contractually limited the total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest) to not exceed 0.45% for the Near-Term Tax Free Fund on an annualized basis through April 30, 2017. This arrangement may not be changed or terminated during this period without approval of the fund’s Board of Trustees and may be changed or terminated by the Adviser at any time after April 30, 2017. |
Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Investor Class of the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% annual return and the fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your cost would be:
1 Year |
3 Years |
5 Years |
10 Years |
$46 |
$283 |
$539 |
$1,271 |
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes where fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. The fund had a portfolio turnover rate of 15% for the fiscal year ended December 31, 2015.
Principal Investment Strategies
The Adviser uses a matrix of “top-down” macro models and “bottom-up” fundamental analysis to determine weightings in geographic regions, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks fiscal and monetary policies. The Adviser focuses on historical interest rate cycles and demographic trends.
In selecting investments, the Adviser will consider a bond’s credit analysis, structure (maturity, coupon, redemption features), and yield. The Adviser reviews these factors to determine the relative value of the bond in comparison to its market value and the market value of similar bonds.
Under normal market conditions, the Near-Term Tax Free Fund invests at least 80% of its net assets in investment grade municipal securities whose interest is free from federal income tax, including the federal alternative minimum tax. The fund will maintain a weighted-average portfolio maturity of five years or less. Although the fund intends to invest the majority of its assets in tax free securities, it may invest up to 20% of its assets in securities that pay taxable interest.
The fund invests only in debt securities that, at the time of acquisition, have one of the four highest ratings by Moody’s Investors Services (Aaa, Aa, A, Baa) or by Standard & Poor’s Corporation (AAA, AA, A, BBB) (or, if not rated by Moody’s or S&P, are determined by the Adviser to be of comparable quality). The fund will not invest more than 10% of its total assets in the fourth
35
rating category. Investments in the fourth category may have speculative characteristics and, therefore, may involve higher risks.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels.
Principal Risks
● |
Main Risk. The fund is designed for investors who primarily seek current income that is substantially free from federal income tax. As with all mutual funds, loss of money is a risk of investing in the fund. Although the fund’s policy is to invest in securities whose interest is free from federal income tax, the fund may invest up to 20% of its assets in securities that pay taxable interest. For the fiscal year ended December 31, 2015, 3.34% of the fund’s distributions was from ordinary income. From year to year, this number may vary and there is no assurance that these distributions will continue. |
● |
Interest Rate Risk. Because the fund invests primarily in municipal securities, there is a risk that the value of these securities will fall if interest rates rise. Ordinarily, when interest rates go up, municipal security prices fall. The opposite is also true: municipal security prices usually go up when interest rates fall. The longer a fund’s weighted-average maturity, the more sensitive it is to changes in interest rates. Interest rates have been and are currently at historical lows due to, among other things, governmental intervention, including quantitative easing. There may be less governmental intervention in the near future to maintain low interest rates. If so, it could cause an increase in interest rates, which would have a negative impact on the value of fixed income securities and could negatively affect the fund’s net asset value. |
● |
Call Risk. A municipal security may be prepaid (called) before its maturity. An issuer is more likely to call its securities when interest rates are falling, because the issuer can issue new securities with lower interest payments. If a security is called, a fund may have to replace it with a lower-yielding security. |
● |
Credit Risk. There is a possibility that an issuer of a municipal security cannot make timely interest and principal payments on its debt securities. With municipal securities, state or local law may limit the sources of funds for the payment of principal and interest. |
● |
Income Risk. The fund is subject to income risk, which is the risk that a fund’s dividends (income) will decline due to falling interest rates. |
● |
Municipal Bond Risk. There is generally more public information available for corporate equities or bonds than is available for municipal bonds. |
● |
Liquidity Risk. The secondary market for municipal bonds may be less liquid than other securities markets. A less liquid market may make it difficult for the funds to sell the security at an attractive price, and the value of the security may fall, even during periods of declining interest rates. |
● |
Insured Municipal Bonds. The fund may invest in municipal bonds covered by an insurance policy that guarantees timely payment of principal and interest. The insurance policies do not guarantee the value of the bonds. A downgrade of the bond insurer’s credit rating or a default by the insurer may result in a downgrade of the bond rating and could have a negative effect on the value of the bond. |
● |
Lower Rated Municipal Bonds. A portion of the fund’s investments may be in high risk, lower rated municipal bonds as the result of a downgrade of an investment grade bond subsequent to the fund’s purchase of the bond. Investments in lower rated bonds carry greater credit rate risk, market risk and interest rate risk than an investment in a higher rated bond. |
● |
Recent Market Events. Recent unprecedented turbulence in the financial markets and reduced liquidity in the credit and fixed income market could have an adverse effect on the value of the fund. |
Performance Information
The following bar chart and table show the volatility of the fund’s Investor Class share returns, which is one indicator of the risks of investing in the fund. The bar charts show changes in the fund’s returns from year to year during the period indicated. The table compares the fund’s average annual returns
36
for the last 1-, 5- and 10-year periods to those of a broad-based securities market index. How the fund performed in the past, before and after taxes, is not an indication of how it will perform in the future. You may obtain performance data current to the most recent month end at www.usfunds.com or by calling 1-800-873-8637.
Annual Total Returns (as of December 31 each year)
Near-Term Tax Free Fund
Best quarter shown in the bar chart above: 2.53% in the third quarter of 2009.
Worst quarter shown in the bar chart above: (1.28)% in the second quarter of 2013.
Average Annual Total Returns (for the periods ended December 31, 2015) |
1 Year |
5 Years |
10 Years |
Near-Term Tax Free Fund Return Before Taxes |
1.45% |
2.34% |
3.03% |
Return After Taxes on Distributions |
1.45% |
2.31% |
2.95% |
Return After Taxes on Distributions and Sale of Fund Shares |
1.45% |
2.25% |
2.86% |
Barclays 3-Year Municipal Bond Index
|
1.18% |
1.81% |
3.01% |
After-tax returns are calculated using highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
Fund Management
Investment Adviser: U.S. Global Investors, Inc.
Portfolio Managers: The fund is managed by a portfolio team consisting of Mr. Frank E. Holmes and Mr. Ralph Aldis. Mr. Holmes has served as Chief Executive Officer of the fund since 1990 and Chief Investment Officer of the fund since 1999, and Mr. Aldis has served as a portfolio manager of the fund since 2015.
Purchase and Sale of Fund Shares
You may purchase or sell shares of the fund through an authorized broker-dealer or directly from the fund at www.usfunds.com, by telephone at 1-800-873-8637, or by mail at the following addresses:
● |
Regular Mail
|
● |
Overnight Mail
|
Shares may be redeemed on any day the NAV per share is calculated.
Minimum Investment
Initial Purchase
● |
$5,000 |
Additional Purchases
● |
$100 minimum per transaction |
37
Automatic Investing—ABC Investment Plan ®
● |
$1,000 initial investment if you elect to have monthly automated investments of at least $100 per transaction. The $1,000 initial investment must be made by check or wire. |
Tax Information
The fund intends to make distributions that are exempt from federal income tax, including the alternative minimum tax. Although the fund intends to invest the majority of its assets in tax free securities, it may invest up to 20% of its assets in securities that pay taxable interest. Distributions of the fund’s taxable income, including taxable interest and capital gains realized on the sale of its investments, will be taxable to shareholders as ordinary income or capital gains.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and/or its related companies may pay the intermediary revenue sharing payments or a fee for certain servicing and administrative functions. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the fund over another investment. Ask your sales-person or visit your financial intermediary’s website for more information.
38
U.S. Government Securities Ultra-Short Bond Fund
Investment Objective
The U.S. Government Securities Ultra-Short Bond Fund (Government Securities Ultra-Short Bond Fund) seeks to provide current income and preserve capital.
Fees and Expenses of the Fund
The following table describes the fees and expenses that you may pay if you buy and hold Investor Class shares of the fund. These fees are paid directly from your investment.
Shareholder Fees
|
None |
Annual Fund Operating Expenses
|
|
Management fee |
0.50% |
Distribution and/or service (12b-1) fees |
None |
Other expenses |
0.63% |
Total annual fund operating expenses |
1.13% |
Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Investor Class of the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% annual return and the fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your cost would be:
1 Year |
3 Years |
5 Years |
10 Years |
$115 |
$359 |
$622 |
$1,375 |
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes where fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. The fund had a portfolio turnover rate of 60% for the fiscal year ended December 31, 2015.
Principal Investment Strategies
Under normal market conditions, the Government Securities Ultra-Short Bond Fund invests at least 80% of its net assets in United States Treasury debt securities and obligations of agencies and instrumentalities of the United States, including repurchase agreements collateralized with such securities.
Although the value of the fund’s shares will fluctuate, the Adviser seeks to manage the magnitude of fluctuations by limiting the fund’s dollar-weighted average effective maturity to two years or less.
In selecting investments, the Adviser’s analysis encompasses an interest rate forecast that considers such factors as economic growth, inflation expectations and expected monetary policy actions. After establishing an interest rate outlook, the Adviser applies a process of selecting bonds for the fund’s portfolio, which analyzes yields, maturities and bond ratings of particular bonds.
Principal Risks
● |
Main Risk. The fund is designed for investors who primarily seek current income. The fund is not intended to be a complete investment program, and there is no assurance that its investment objectives can be achieved. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to manage the magnitude of NAV fluctuations by limiting the fund’s dollar-weighted average effective maturity to two years or less, it is possible to lose money by investing in the fund. |
● |
Risk of Investing In Government Agencies. The Government Securities Ultra-Short Bond Fund invests in various United States government agencies, which, while chartered or sponsored by Acts of Congress, are neither issued nor guaranteed by the United States Treasury. Each of these agencies, which include the Federal Home Loan Bank, the Federal Farm Credit Bank and the Tennessee Valley Authority, is supported by its own credit. However, the Federal Home Loan |
39
Bank is also supported by the ability of the United States Treasury to buy up to $4 billion of debt of the agency. Also, the Tennessee Valley Authority has a credit line of $150 million with the United States Treasury.
● |
Income Risk. The fund is subject to income risk, which is the risk that a fund’s dividends (income) will decline due to falling interest rates. |
● |
Inflation Risk. The fund’s yields will vary as the short-term securities in their portfolios mature and the proceeds are reinvested in securities with different interest rates. Over time, the real value of a fund’s yield may be eroded by inflation. |
● |
Issuer Risk. There is a possibility that an issuer of a security could be unable to make interest payments or repay principal. Changes in an issuer’s financial strength or in a security’s credit rating may affect a security’s value. |
● |
Interest Rate Risk. Debt securities may fluctuate in value due to changes in interest rates. Typically, investments subject to interest rate risk will decrease in value when interest rates rise and increase in value when interest rates decline. The value of securities with relatively longer maturities may fluctuate more in response to interest rate changes than securities with shorter maturities. Interest rates have been and are currently at historical lows due to, among other things, governmental intervention, including quantitative easing. There may be less governmental intervention in the near future to maintain low interest rates. If so, it could cause an increase in interest rates, which would have a negative impact on the value of fixed income securities and could negatively affect the fund’s net asset value. |
Performance Information
The following bar chart and table show the volatility of the fund’s Investor Class share returns, which is one indicator of the risks of investing in the fund. The bar charts show changes in the fund’s returns from year to year during the period indicated. How the fund performed in the past, is not an indication of how it will perform in the future. You may obtain performance data current to the most recent month end at www.usfunds.com or by calling 1-800-873-8637.
Prior to December 20, 2013, the fund was a money market fund. Consequently, prior period performance may have been different if the fund had not been a money market fund.
Annual Total Returns (as of December 31 each year)
Government Securities Ultra-Short Bond Fund
Best quarter shown in the bar chart above: 1.20% in the fourth quarter of 2006.
Worst quarter shown in the bar chart above: -0.45% in the second quarter of 2015.
Average Annual Total Returns (for the periods ended December 31, 2015) |
1 Year |
5 Years |
10 Years |
Government Securities Ultra-Short Bond Fund Return Before Taxes |
0.34% |
0.15% |
1.18% |
Return After Taxes on Distributions |
0.34% |
0.11% |
0.77% |
Return After Taxes on Distributions and Sale of Fund Shares |
0.34% |
0.11% |
0.77% |
Barclays U.S. Treasury Bills 6-9 Months Total Return Index
|
0.15% |
0.15% |
0.46% |
After-tax returns are calculated using highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation
40
and may differ from those shown. After-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
Prior to December 20, 2013, the Adviser had voluntarily agreed to waive fees and/or reimburse expenses for the fund to the extent necessary to maintain a certain minimum net yield for the fund, as determined by the Adviser with respect to the fund (Minimum Yield). The Adviser may recapture any fees waived and/or expenses reimbursed within three years after the end of the fiscal year of such waiver and/or reimbursement to the extent that such recapture would not cause the fund’s net yield to fall below the fund’s previously determined Minimum Yield or the expenses to exceed the overall expense ratio limit in effect at the time of the waiver and/or reimbursement. This recapture could negatively affect the fund’s yield and expenses in the future.
At December 31, 2015, the Adviser may seek reimbursement of previously waived and reimbursed fees of $498,342 from 2013. Based on the fund’s expenses and assuming that the voluntary expense limitation remains in effect, it is unlikely that the Adviser will be able to recapture these amounts.
Fund Management
Investment Adviser: U.S. Global Investors, Inc.
Portfolio Managers: The fund is managed by a portfolio team consisting of Mr. Frank E. Holmes and Mr. Ralph Aldis. Mr. Holmes has served as Chief Executive Officer of the fund since 1989 and Chief Investment Officer of the fund since 1999, and Mr. Aldis has served as a portfolio manager of the fund since 2015.
Purchase and Sale of Fund Shares
You may purchase or sell shares of the fund through an authorized broker-dealer or directly from the fund at www.usfunds.com, by telephone at 1-800-873-8637, or by mail at the following addresses:
● |
Regular Mail
|
● |
Overnight Mail
|
Shares may be redeemed on any day the NAV per share is calculated.
Minimum Investment
Initial Purchase
● |
$5,000 |
Additional Purchases
● |
$100 minimum per transaction |
Automatic Investing—ABC Investment Plan ®
● |
$1,000 initial investment if you elect to have monthly automated investments of at least $100 per transaction. The $1,000 initial investment must be made by check or wire. |
Tax Information
The fund intends to make distributions that may be taxed as ordinary income, unless you hold fund shares in a tax-advantaged account, in which case your distributions will be taxed upon withdrawal.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and/or its related companies may pay the intermediary revenue sharing payments or a fee for certain servicing and administrative functions. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
41
Additional Information About Investment Objectives, Principal Investment Strategies and Related Risks
All American Equity Fund
Holmes Macro Trends Fund
Investment Objective
The All American Equity Fund and Holmes Macro Trends Fund seek long-term capital appreciation.
Principal Investment Strategies
All American Equity Fund
Under normal market conditions, the All American Equity Fund will invest substantially all (greater than 80%) of its net assets in equity and equity-related securities of companies defined as “all American.” The fund will notify you in writing 60 days before making any changes to this policy. The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs).
The All American Equity Fund will consider any of the following companies to be “all American”:
1. |
companies offering stock registered on a United States stock exchange; |
2. |
companies offering stock traded on Nasdaq or the domestic over-the-counter markets; |
3. |
companies deriving more than 50% of their revenue from operations in the United States at the time of the fund’s investment; |
4. |
companies incorporated in the United States; or |
5. |
companies having their principal place of business or corporate headquarters located in the United States. |
The fund may also purchase call and put options, and the fund’s current intention is to purchase only exchange-traded options. The fund may purchase put options to hedge the fund’s portfolio against a possible loss, and the fund may purchase call options as a substitute to purchasing the underlying security. The fund will not purchase any option if, immediately thereafter, the aggregate market value of all outstanding options purchased by the fund would exceed 10% of the fund’s total assets.
In an effort to enhance the fund’s risk-adjusted performance, the fund may enter into covered option writing transactions. The fund will not sell a covered option if, immediately thereafter, the aggregate value of the fund’s securities subject to outstanding covered options would exceed 50% of the value of the fund’s total assets.
Investment Processes
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. Shareholder yield is another factor the Adviser considers when evaluating a company. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
The Adviser’s “bottom-up” stock selection approach is generally characterized as growth at a reasonable price, which focuses on three key drivers: revenue growth, earnings growth and return on equity. The Adviser searches for growth companies that have strong fundamentals and are also trading at reasonable valuations. Shareholder yield is another factor the Adviser considers when evaluating a company. Shareholder yield is determined by the dividends that a company pays to its shareholders and/or company buyback of stock from shareholders. The focus of the stock selection is on large capitalization companies.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels.
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For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a pro-longed general decline, or other adverse conditions. Under these circumstances, the fund may invest up to 100% of its assets in U.S. government securities, short-term indebtedness, repurchase agreements, money market instruments, or other investment grade cash equivalents, each denominated in U.S. dollars, or any other freely convertible currency. When the fund is in a defensive investment position, it may not achieve its investment objective.
Holmes Macro Trends Fund
Under normal market conditions, the Holmes Macro Trends Fund invests primarily in a diversified portfolio of equity and equity-related securities of companies of all sizes. The fund may, from time to time, invest a significant amount of its total assets in one or more of the sectors of the S&P 1500 Index. As a result of the Adviser’s earnings growth investment strategy, concentrations in the sectors may rotate depending on the earnings growth of the underlying companies in each sector.
The fund may invest up to 25% of its total assets in foreign securities that are not publicly traded in the U.S. The fund may invest in sponsored or unsponsored American Depository Receipts (ADRs), which represent shares of foreign issuers, and are not included in the 25% limit on foreign issuers. As part of its foreign investments, the fund may invest up to 5% of its total assets in emerging markets.
The fund may also purchase call and put options, and the fund’s current intention is to purchase only exchange-traded options. The fund may purchase put options to hedge the fund’s portfolio against a possible loss, and the fund may purchase call options as a substitute to purchasing the underlying security. The fund will not purchase any option if, immediately thereafter, the aggregate market value of all outstanding options purchased by the fund would exceed 10% of the fund’s total assets.
In an effort to enhance the fund’s risk-adjusted performance, the fund may enter into covered option writing transactions. The fund will not sell a covered option if, immediately thereafter, the aggregate value of the fund’s securities subject to outstanding covered options would exceed 50% of the value of the fund’s total assets.
Investment Processes
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in countries, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
The Adviser’s “bottom-up” stock selection approach is generally characterized as growth at a reasonable price, which focuses on three key drivers: revenue growth, earnings growth and return on equity. The Adviser searches for growth companies that have strong fundamentals and are also trading at reasonable valuations.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions. Under these circumstances, the fund may invest up to 100% of its assets in U.S. government securities, short-term indebtedness, repurchase agreements, money market instruments, or other investment grade cash equivalents, each denominated in U.S. dollars, or any other freely convertible currency. When the fund is in a defensive investment position, it may not achieve its investment objective.
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Related Risks
Main Risk
The funds are designed for long-term investors who are willing to accept the risks of investing in a portfolio with significant stock holdings. The funds are not intended to be a complete investment program, and there is no assurance that their investment objectives can be achieved. As with all mutual funds, loss of money is a risk of investing in the funds. An investment in the funds is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Market Risk
The value of the funds’ shares will go up and down based on the performance of the companies whose securities they own and other factors affecting the securities market generally.
Portfolio Management Risk
The skill of the Adviser will play a significant role in the funds’ ability to achieve their investment objectives. There is a risk that the investment strategy does not achieve the funds’ objectives or that the Adviser does not implement the strategy properly.
Growth Stock Risk
Because of their perceived growth potential, growth stocks are typically in demand and tend to carry relatively high prices. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. If a fund’s growth stock does not produce the predicted earnings growth, its share price may drop, and the fund’s net asset value may decline.
Sector Risk
From time to time, the funds may invest a significant amount of their total assets in certain sectors, which may be subject to specific risks. These risks include governmental regulation of the sector and governmental monetary and fiscal policies which impact interest rates and currencies and affect corporate funding and international trade. Certain sectors may be more vulnerable than others to these factors. In addition, market sentiment and expectations toward a particular sector could affect a company’s market valuations and access to equity funding.
Foreign Securities Risk/Emerging Markets Risk
The Holmes Macro Trends Fund may invest in foreign securities and may be subject to greater risks than when investing in U.S. securities. The risks of investing in foreign securities are generally greater when they involve emerging markets. These risks include:
Currency Risk. The value of a foreign security will be affected by the value of the local currency relative to the U.S. dollar. When a fund sells a foreign denominated security, its value may be worth less in U.S. dollars even if the security increases in value in its home country. U.S. dollar-denominated securities of foreign companies may also be affected by currency risk.
Political, Social and Economic Risk. Foreign investments may be subject to heightened political, social and economic risks, particularly in emerging markets, which may have relatively unstable governments, immature economic structures, national policies restricting investments by foreigners, different legal systems, and economies based on only a few industries. In some countries, a risk may exist that the government may take over the assets or operations of a company or that the government may impose taxes or limits on the removal of a fund’s assets from that country.
Regulatory Risk. There may be less government supervision of foreign securities markets. As a result, foreign companies may not be subject to the uniform accounting, auditing and financial reporting standards and practices applicable to domestic companies, and there may be less publicly available information about foreign companies.
Market Risk. Foreign securities markets, particularly those of emerging markets, may be less liquid and more volatile than domestic markets. Certain markets may require payment for securities before delivery and delays may be encountered in settling securities transactions. In some foreign markets, there may not be protection against failure by other parties to complete transactions.
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Transaction Costs. Costs of buying, selling and holding foreign securities, including brokerage, tax and custody costs, may be higher than the costs involved in domestic transactions.
Small- and Mid-Sized Companies Risk
The Holmes Macro Trends Fund may invest in small- and mid-sized companies, which involve greater risk than investing in more established companies. This risk includes difficulty in obtaining reliable information and financial data and low liquidity in the market, making it difficult to dispose of shares when it may be otherwise advisable.
Options Risk
Investing in options, LEAPS (an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of a fund. An option may expire without value, resulting in a loss of a fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option.
Illiquidity Risk
Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet. These investments may involve a high degree of business and financial risk. Illiquidity may be the result of, for example, low trading volume, lack of a market maker, or contractual or legal restrictions that limit or prevent a fund from selling securities or closing derivative positions. The values of illiquid investments are often more volatile than the values of more liquid investments. It may be more difficult for a fund to determine a fair value of an illiquid investment than that of a more liquid comparable investment.
Warrants Risk
The funds may invest in warrants. Warrants are different from options in that they are issued by a company as opposed to a broker and typically have a longer life than an option. When the underlying stock goes above the exercise price of the warrant, the warrant is “in the money.” If the exercise price of the warrant is above the value of the underlying stock, it is “out of the money.” Out-of-the-money warrants tend to have different price behaviors than in-the-money warrants. As an example, the value of an out-of-the-money warrant with a long time to expiration generally declines less than a drop in the underlying stock price because the warrant’s value is primarily derived from its time component.
Most warrants are exchange traded. The holder of a warrant has the right, until the warrant expires, to sell an exchange traded warrant or to purchase a given number of shares of a particular issue at a specified price. Such investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. The key driver to the movements in warrants are the fundamentals of the underlying company. Warrants, unlike options, may allow the holder to vote on certain issues and often are issued with certain anti-dilutive rights. Warrants pay no dividends. If a warrant held by a fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant.
Depositary Receipts Risk
Investments in ADRs and GDRs may involve risks relating to political, economic or regulatory conditions in foreign countries. These risks include fluctuations in foreign currencies, political and financial instability, less liquidity and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. The underlying securities are typically denominated (or quoted) in a currency other than U.S. dollars. The securities underlying ADRs and GDRs trade on foreign exchanges at times when the U.S. markets are not open for trading. As a result, the value of ADRs and GDRs may not track the price of the underlying securities and may change materially at times when the U.S. markets are not open for trading. In addition, issuers of unsponsored depositary receipts are not contractually obligated to disclose material information in the U.S. and, therefore, such information may not correlate to the market value of the unsponsored depositary receipt.
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Convertible Securities Risk
Convertible securities entail some of the risks of both equity and debt securities. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, some of the convertible securities which a fund may hold are high-yield/high-risk securities that are subject to special risks, including the risk of default in interest or principal payments which could result in a loss of income from or a decline in the market value of, the securities. In addition, convertible securities often display a degree of market price volatility that is comparable to common stocks. The credit risk associated with convertible securities generally is reflected by their ratings by organizations or a similar determination of creditworthiness by the Adviser. The value of convertible securities tends to decline as interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the underlying securities.
Over-the-Counter Risk (All American Equity Fund only)
Securities traded in the over-the-counter markets may trade in smaller volumes, and their prices may be more volatile, than securities principally traded on securities exchanges. Such securities may be less liquid than more widely traded securities. In addition, the prices of such securities may include an undisclosed dealer markup, which the fund pays as part of the purchase price.
Portfolio Turnover Risk
The funds’ portfolio turnover rates vary from year to year according to market conditions and may exceed 100%. The length of time each fund has held a particular security is not generally a consideration in investment decisions. It is the policy of each fund to effect portfolio transactions without regard to a holding period if, in the judgment of the portfolio managers, such transactions are advisable. Portfolio turnover generally involves some expense, including brokerage commissions, dealer mark-ups, or other transaction costs on the sale of securities and reinvestment in other securities. Such sales may result in realization of taxable capital gains for shareholders.
Other Types of Investments, Related Risks and Other Considerations
While not principal strategies, the fund may invest to a limited extent in other types of investments as discussed under “Common Investment Practices and Related Risks.”
Gold and Precious Metals Fund
World Precious Minerals Fund
Global Resources Fund
Investment Objectives
The Gold and Precious Metals Fund, World Precious Minerals Fund and Global Resources Fund each seek long-term growth of capital plus protection against inflation and monetary instability. The Gold and Precious Metals Fund also pursues current income as a secondary objective.
Principal Investment Strategies
Under normal market conditions, the Gold and Precious Metals Fund will invest at least 80% of its net assets in equity and equity-related securities of companies predominately involved in the mining, fabrication, processing, marketing or distribution of metals including gold, silver, platinum group, palladium and diamonds. The fund will notify you in writing 60 days before making any changes to this policy. The fund may invest in these precious metals directly and/or in equity and equity-related securities, such as exchange-traded funds (“ETFs”) that represent interests in, or related to, these precious metals. The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs). The fund also participates in private placements, initial public offerings (IPOs) and long-term equity anticipation securities (LEAPS).
The Gold and Precious Metals Fund focuses on selecting companies with established producing mines, and although the fund has greater latitude to invest its assets in different precious metals, it currently has significant investments in the gold sector. The fund reserves the right to invest up to 20% of its net assets in the securities of companies principally engaged in natural resources operations.
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Under normal market conditions, the World Precious Minerals Fund will invest at least 80% of its net assets in equity and equity-related securities of companies principally engaged in the exploration for, or mining and processing of, precious minerals such as gold, silver, platinum group, palladium and diamonds. The fund will notify you in writing 60 days before making any changes to this policy. The fund may invest in these precious minerals directly and/or in equity and equity-related securities, such as ETFs that represent interests in, or related to, these precious minerals. The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs). The fund also participates in private placements, initial public offerings (IPOs) and long-term equity anticipation securities (LEAPS).
Although the World Precious Minerals Fund has greater latitude to invest its assets in different precious minerals, it currently has significant investments in the gold sector. Gold companies include mining companies that exploit gold deposits that are supported by co-products and by-products such as copper, silver, lead and zinc, and also diversified mining companies which produce a meaningful amount of gold.
The World Precious Minerals Fund focuses on selecting junior and intermediate exploration companies from around the world. Typically, junior exploration gold companies produce up to 100,000 ounces of gold or other precious metal per year, and intermediate companies produce up to a million ounces of gold or other precious metal. The price performance of junior exploration companies relates to the success of finding and increasing reserves, thus involving both greater opportunity and risk. Stock price performance of intermediate and senior mining companies that have proven reserves is more strongly influenced by the price of gold. The securities of junior and intermediate exploration gold companies, which are often more speculative in nature, tend to be less liquid and more volatile in price than securities of larger companies.
The World Precious Minerals Fund will invest in securities of companies with economic ties to countries throughout the world, including the U.S. Under normal market conditions, the fund will invest at least 40% of its assets in securities of companies that are economically tied to at least three countries other than the U.S. The fund may invest in companies which may be domiciled in one country but have economic ties to another country. In determining if a company is economically tied to a country, the Adviser will consider various factors, including the country in which the company’s principal operations are located; the country in which the company’s mining or natural resource reserves are located; the country in which at least 50% of the company’s revenues or profits are derived from goods produced or sold, investments made, or services performed; the country in which the principal trading market is located; and the country in which the company is legally organized.
Under normal market conditions, the Global Resources Fund normally invests at least 80% of its net assets in equity and equity-related securities of companies involved in the natural resources industries. The fund will notify you in writing 60 days before making any changes to this policy. The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts. The fund also participates in private placements, initial public offerings (IPOs) and long-term equity anticipation securities (LEAPS).
The Global Resources Fund concentrates its investments in the equity securities within the natural resources industries, which include, among others, the following industries:
Energy |
Basic Materials |
Natural gas Integrated oil companies Oil and gas drilling Oil and gas exploration and production Oil and gas refining Oilfield equipment/services |
Aluminum Chemicals Diversified metals and coal mining Gold and precious metals Iron and steel Paper and forest products Uranium |
Consistent with its investment objective, the Global Resources Fund may invest without limitation in equity securities within the natural resources industries and will also invest in multi-capitalization companies.
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Under normal market conditions, the Global Resources Fund will invest at least 40% of its assets in securities of companies that are economically tied to at least three countries other than the U.S. The fund may invest in companies which may be domiciled in one country but have economic ties to another country. In determining if a company is economically tied to a country, the Adviser will consider various factors, including the country in which the company’s principal operations are located; the country in which the company’s mining or natural resource reserves are located; the country in which at least 50% of the company’s revenues or profits are derived from goods produced or sold, investments made, or services performed; the country in which the principal trading market is located; and the country in which the company is legally organized.
The Gold and Precious Metals Fund, World Precious Minerals Fund and Global Resources Fund may also purchase call and put options, and the funds’ current intention is to purchase only exchange-traded options. A fund may purchase put options to hedge the fund’s portfolio against a possible loss, and a fund may purchase call options as a substitute to purchasing the underlying security. A fund will not purchase any option if, immediately thereafter, the aggregate market value of all outstanding options purchased by the fund would exceed 10% of the fund’s total assets. Long-term equity options called LEAPS and warrants allow a fund to imitate a purchase or sale of a stock for a fraction of its price (premium) and hold that option for a long period of time before it expires. The underlying stock can be purchased or sold at a predetermined price for the life of the option or warrant. LEAPS and warrants, therefore, allow a fund to gain exposure to individual securities over the long-term while allowing the funds to preserve some cash for large or unexpected redemptions.
In an effort to enhance the funds’ risk-adjusted performance, the funds may enter into covered option writing transactions. A fund will not sell a covered option if, immediately thereafter, the aggregate value of the fund’s securities subject to outstanding covered options would exceed 50% of the value of the fund’s total assets.
The funds may invest in income and royalty trusts. A rising interest rate environment could adversely impact the performance of income and royalty trusts. Rising interest rates could limit the capital appreciation of income and royalty trusts because of the increased availability of alternative investments at competitive yields with income and royalty trusts.
Investment Processes
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in countries, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
In selecting investments for the funds, the Adviser looks at a company’s relative rankings with respect to expected future growth in reserves, production and cash flow. Additionally, the Adviser also considers relative valuation multiples to earnings and cash flow, expected net asset value, balance sheet quality, working capital needs and overall profitability measured by returns on invested capital. In making security selections for junior and intermediate mining companies, the Adviser looks for companies with proven management who have a strong track record in developing and producing mining companies and whose potential mining assets and financial structure have upside leverage to a rising commodity price.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions. Under these circumstances,
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a fund may invest up to 100% of its assets in U.S. government securities, short-term indebtedness, repurchase agreements, money market instruments, or other investment grade cash equivalents, each denominated in U.S. dollars, or any other freely convertible currency. When a fund is in a defensive investment position, it may not achieve its investment objectives.
Related Risks
Main Risk
The funds are designed for long-term investors who are willing to accept the risks of investing in a portfolio with significant stock holdings. The funds are not intended to be a complete investment program, and there is no assurance that their investment objectives can be achieved. As with all mutual funds, loss of money is a risk of investing in any of the funds. An investment in these funds is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Market Risk
The value of a fund’s shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally.
Portfolio Management Risk
The skill of the Adviser will play a significant role in the funds’ ability to achieve their investment objectives. There is a risk that the investment strategy does not achieve the funds’ objectives or that the Adviser does not implement the strategy properly.
Growth Stock Risk
Because of their perceived growth potential, growth stocks are typically in demand and tend to carry relatively high prices. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. If a fund’s growth stock does not produce the predicted earnings growth, its share price may drop, and the fund’s net asset value may decline.
Foreign Securities Risk/Emerging Markets Risk
The funds may invest in foreign securities and may be subject to greater risks than when investing in U.S. securities. The risks of investing in foreign securities are generally greater when they involve emerging markets. These risks include:
Currency Risk. The value of a foreign security will be affected by the value of the local currency relative to the U.S. dollar. When a fund sells a foreign denominated security, its value may be worth less in U.S. dollars even if the security increases in value in its home country. U.S. dollar-denominated securities of foreign companies may also be affected by currency risk.
Political, Social and Economic Risk. Foreign investments may be subject to heightened political, social, and economic risks, particularly in emerging markets, which may have relatively unstable governments, immature economic structures, national policies restricting investments by foreigners, different legal systems, and economies based on only a few industries. In some countries, a risk may exist that the government may take over the assets or operations of a company or that the government may impose taxes or limits on the removal of the fund’s assets from that country.
Regulatory Risk . There may be less government supervision of foreign securities markets. As a result, foreign companies may not be subject to the uniform accounting, auditing and financial reporting standards and practices applicable to domestic companies, and there may be less publicly available information about foreign companies.
Market Risk. Foreign securities markets, particularly those of emerging markets, may be less liquid and more volatile than domestic markets. Certain markets may require payment for securities before delivery and delays may be encountered in settling securities transactions. In some foreign markets, there may not be protection against failure by other parties to complete transactions.
Transaction Costs. Costs of buying, selling and holding foreign securities, including brokerage, tax and custody costs, may be higher than the costs involved in domestic transactions.
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Industry Concentration Risk
Because the funds concentrate their investments in specific industries, the funds may be subject to greater risks and market fluctuations than a portfolio representing a broader range of industries. The Gold and Precious Metals Fund and World Precious Minerals Fund invest in securities that typically respond to changes in the price of gold. The prices of gold and other precious minerals can be influenced by a variety of global economic, financial and political factors and may fluctuate substantially over short periods of time, and the funds may be more volatile than other types of investments. The Global Resources Fund invests in securities vulnerable to factors affecting the natural resources industries, such as increasing regulation of the environment by both U.S. and foreign governments and production and distribution policies of OPEC (Organization of Petroleum Exporting Countries) and other oil producing countries. Increased environmental regulations may, among other things, increase compliance costs and affect business opportunities for the companies in which the fund invests. The value of these companies is also affected by changing commodity prices, which can be highly volatile and are subject to risks of oversupply and reduced demand.
Non-Diversification Risk
The funds are non-diversified and may invest a significant portion of their total assets in a small number of companies. This may cause the performance of a fund to be dependent upon the performance of one or more selected companies, which may increase the volatility of the fund.
Price Volatility Risk
The value of a fund’s shares may fluctuate significantly.
Options Risk
Investing in options, LEAPS (an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of a fund. An option may expire without value, resulting in a loss of a fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option.
Warrants Risk
The funds may invest in warrants. Warrants are different from options in that they are issued by a company as opposed to a broker and typically have a longer life than an option. When the underlying stock goes above the exercise price of the warrant, the warrant is “in the money.” If the exercise price of the warrant is above the value of the underlying stock, it is “out of the money.” Out-of-the-money warrants tend to have different price behaviors than in-the-money warrants. As an example, the value of an out-of-the-money warrant with a long time to expiration generally declines less than a drop in the underlying stock price because the warrant’s value is primarily derived from its time component.
Most warrants are exchange traded. The holder of a warrant has the right, until the warrant expires, to sell an exchange traded warrant or to purchase a given number of shares of a particular issue at a specified price. Such investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. The key driver to the movements in warrants are the fundamentals of the underlying company. Warrants, unlike options, may allow the holder to vote on certain issues and often are issued with certain anti-dilutive rights. Warrants pay no dividends. If a warrant held by a fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant.
Exchange-Traded Funds Risk (Gold and Precious Metals Fund and World Precious Minerals Fund only)
The risks of investments in ETF securities typically reflect the risks of the types of instruments in which a ETF invests. When a Fund invests in ETFs, shareholders of the Fund bear their proportionate share of the ETF’s fees and expenses, as well as their share of the Fund’s fees and expenses. As a result, an investment by aFund in an ETF could cause the
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Fund’s operating expenses to be higher and, in turn, performance to be lower than if it were to invest directly in the instruments underlying the ETF. In addition, when investing in ETF securities, a Fund may pay brokerage commissions and may buy such securities at a price that is above, at or below the ETF’s NAV. Further, trading in an ETF may be halted, which may make it difficult for a Fund to dispose of a holding at the desired time.
Convertible Securities Risk
Convertible securities entail some of the risks of both equity and debt securities. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, some of the convertible securities which the Fund may hold are high-yield/high-risk securities that are subject to special risks, including the risk of default in interest or principal payments which could result in a loss of income from or a decline in the market value of, the securities. In addition, convertible securities often display a degree of market price volatility that is comparable to common stocks. The credit risk associated with convertible securities generally is reflected by their ratings by organizations or S&P or a similar determination of creditworthiness by the Adviser. The value of convertible securities tends to decline as interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the underlying securities.
Depositary Receipts Risk
Investments in ADRs and GDRs may involve risks relating to political, economic or regulatory conditions in foreign countries. These risks include fluctuations in foreign currencies, political and financial instability, less liquidity and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. The underlying securities are typically denominated (or quoted) in a currency other than U.S. dollars. The securities underlying ADRs and GDRs trade on foreign exchanges at times when the U.S. markets are not open for trading. As a result, the value of ADRs and GDRs may not track the price of the underlying securities and may change materially at times when the U.S. markets are not open for trading. In addition, issuers of unsponsored depositary receipts are not contractually obligated to disclose material information in the U.S. and, therefore, such information may not correlate to the market value of the unsponsored depositary receipt.
Initial Public Offering Risk
The fund may purchase securities of companies in IPOs. Special risks associated with these securities may include illiquidity, unseasoned trading, lack of investor knowledge of the company, limited operating history and substantial price volatility. The limited number of shares available for trading in some IPOs may make it more difficult for the fund to buy or sell significant amounts of shares without an unfavorable impact on prevailing market prices. Some companies whose shares are sold through IPOs are involved in relatively new industries or lines of business, which may not be widely understood by investors. Some of these companies may be undercapitalized or regarded as developmental stage companies without revenues or operating income, or the near-term prospects of achieving them.
Restricted Security Risk
The funds may make direct equity investments in securities that are subject to contractual and regulatory restrictions on transfer. These investments may involve a high degree of business and financial risk. The restrictions on transfer may cause a fund to hold a security at a time when it may be beneficial to liquidate the security, and the security could decline significantly in value before the fund could liquidate these securities.
Portfolio Turnover Risk
The funds’ portfolio turnover rates vary from year to year according to market conditions and may exceed 100%. The length of time a fund has held a particular security is not generally a consideration in investment decisions. It is the policy of the funds to effect portfolio transactions without regard to a holding period if, in the judgment of the portfolio managers, such transactions are advisable. Portfolio turnover generally involves some expense, including brokerage commissions, dealer mark-ups, or other transaction costs on the sale of securities and reinvestment in other securities. Such sales may result in realization of taxable capital gains for shareholders.
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Junior and Intermediate Mining Companies Risk
The World Precious Minerals Fund, and to a lesser extent the Gold and Precious Metals Fund, invest in junior and intermediate exploration companies. The securities of junior and intermediate exploration gold companies, which can be more speculative in nature, tend to be less liquid and more volatile in price than securities of larger companies.
Gold and Precious Metals/Minerals Risk
The Gold and Precious Metals Fund and World Precious Minerals Fund may invest in gold and precious metals or minerals directly and/or in equity and equity-related securities, such as ETFs that represent interests in, or related to, these precious metals and, therefore, are subject to the risk that they could fail to qualify as a regulated investment company under the Internal Revenue Code if the funds derives more than 10% of their gross income from these investments in gold and precious metals or minerals. Failure to qualify as a regulated investment company would result in adverse tax consequences to the funds and their shareholders. In lieu of potential disqualification, the fund is permitted to pay a tax for certain failures to satisfy the income requirement, which, in general, are limited to those due to reasonable cause and not willful neglect.
Illiquidity Risk
Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet. These investments may involve a high degree of business and financial risk. Illiquidity may be the result of, for example, low trading volume, lack of a market maker, or contractual or legal restrictions that limit or prevent a fund from selling securities or closing derivative positions. The values of illiquid investments are often more volatile than the values of more liquid investments. It may be more difficult for a fund to determine a fair value of an illiquid investment than that of a more liquid comparable investment.
Other Types of Investment, Related Risks and Considerations
While not principal strategies, the funds may invest to a limited extent in other types of investments as discussed below under “Common Investment Practices and Related Risks.”
Emerging Europe Fund
China Region Fund
Investment Objectives
The Emerging Europe Fund and China Region Fund seek long-term growth of capital.
Principal Investment Strategies
The Emerging Europe Fund invests, under normal market conditions, at least 80% of its net assets in equity and equity-related securities of companies located in the emerging markets of Eastern Europe. The fund will notify you in writing 60 days before making any changes to this policy. The equity and equity-related securities that the fund primarily invests in are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs).
In general, Eastern European countries are in the early stages of industrial, economic or capital market development. Eastern European countries may include countries that were, until recently, governed by communist governments or countries that, for any other reason, have failed to achieve levels of industrial production, market activity, or other measures of economic development typical of the developed European countries. Although the fund may invest in any Eastern European country, it currently focuses its investment in companies located in Russia, Poland, Czech Republic, Hungary and Turkey. The Adviser considers the following countries to be in Eastern Europe: Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Croatia, the Czech Republic, Estonia, FYR Macedonia, Georgia, Greece, Hungary, Latvia, Lithuania, Moldova, Poland, Romania, Russia, Slovakia, Slovenia, Turkey and Ukraine.
The fund will consider investments in Eastern Europe to be the following:
1. |
securities of issuers that are organized under the laws of any Eastern European country or have a principal office in an Eastern European country; |
2. |
securities of issuers that derive a majority of their revenues from business in Eastern European countries or have a majority of their assets in Eastern European countries at the time of the fund’s investment; or |
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3. |
securities that are traded principally on a securities exchange in an Eastern European country. (For this purpose, investment companies that invest principally in securities of companies located in one or more Eastern European countries will also be considered to be located in an Eastern European country, as will American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) with respect to the securities of companies located in Eastern European countries.) |
The Emerging Europe Fund invests at least 25% of its total assets in securities of companies involved in oil, gas or banking. In determining whether a company is involved in oil, gas or banking, the fund will use the Bloomberg Sector Classification System. For a full list of the Bloomberg-classified industries involving oil, gas or banking, see the discussion of non-fundamental investment restrictions in the SAI.
However, the fund will invest no more than 25% of its total assets in any one Bloomberg-classified industry involving oil, gas, or banking, such as, among others, Oil Companies—Integrated, Oil Companies—Exploration & Production, Oil Refining & Marketing, Regional Banks—Non-U.S., Commercial Banks—Non-U.S., and Diversified Banking Institutions; provided, however, if at the time of purchase a corresponding industry classification represents 20% or more of the fund’s benchmark, the MSCI Emerging Markets Europe 10/40 Index (Net Total Return), the fund may invest up to 35% of its total assets in the corresponding Bloomberg-classified industry.
Under normal market conditions, the China Region Fund will invest at least 80% of its net assets in equity and equity-related securities of companies located in the China region. The fund will notify you in writing 60 days before making any changes to this policy. The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs).
The China region is defined as any country that either shares a border with China or is located in the South China Sea or the East China Sea regions and includes: the People’s Republic of China (PRC or China), Bangladesh, Cambodia, Hong Kong, India, Indonesia, Kazakhstan, Korea, Kyrgyzstan, Laos, Malaysia, Mongolia, Myanmar, Nepal, Pakistan, Philippines, Singapore, Taiwan, Tajikistan, Thailand and Vietnam.
The fund will consider investments in the China region to be the following:
1. |
securities of issuers organized under the laws of the countries within the China region; |
2. |
securities of issuers that have at least 50% of their assets in one or more China region countries; |
3. |
securities of issuers that derive at least 50% of their gross revenues or profits from providing goods or services to or from one or more China region countries at the time of the fund’s investment; or |
4 |
securities of issuers that are primarily traded on the China, Taiwan or Hong Kong exchanges. |
The China Region Fund will invest in both established and emerging enterprises registered and operating in China and the China region. These will include wholly Chinese-owned enterprises, wholly foreign-owned enterprises and Sino-foreign joint ventures. While portfolio holdings may be geographically dispersed, the fund anticipates that the trading activities of the fund in People’s Republic of China (PRC) securities will be focused in the authorized China securities market; in particular, the Hong Kong Stock Exchange. Trading activities of the fund in securities other than PRC securities may take place on China region exchanges such as the Taiwan, Korea, Singapore, Malaysia and Indonesia stock exchanges, among others.
The Emerging Europe Fund and China Region Fund may, from time to time, invest a significant amount of their total assets in certain sectors. A fund may invest up to 20% of its assets in securities, including debt securities, of governments and companies located anywhere in the world.
The funds may also purchase call and put options. A fund may purchase put options to hedge the fund’s portfolio against a possible loss, and a fund may purchase call options as a substitute to purchasing the underlying security. A fund will not purchase any option if, immediately thereafter, the aggregate market value of all outstanding options purchased by the fund would exceed 10% of the fund’s total assets.
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In an effort to enhance the funds’ risk-adjusted performance, the funds may enter into covered option writing transactions. A fund will not sell a covered option if, immediately thereafter, the aggregate value of the fund’s securities subject to outstanding covered options would exceed 50% of the value of the fund’s total assets.
Investment Processes
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in countries, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
The Adviser’s “bottom-up” stock selection approach is generally characterized as growth at a reasonable price, which focuses on three key drivers: revenue growth, cash flow and return on equity. The Adviser searches for growth companies that have strong fundamentals and are also trading at reasonable valuations.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the funds may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions. Under these circumstances, a fund may invest up to 100% of its assets in U.S. government securities, short-term indebtedness, repurchase agreements, money market instruments, or other investment grade cash equivalents, each denominated in U.S. dollars, or any other freely convertible currency. When a fund is in a defensive investment position, it may not achieve its investment objectives.
Related Risks
Main Risk
The funds are designed for investors who are willing to accept the risks of investing in portfolios with significant stock holdings. The funds are not intended to be a complete investment program, and there is no assurance that their investment objectives can be achieved. As with all mutual funds, loss of money is a risk of investing in any of the funds. An investment in these funds is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Given the limited number of issuers in Eastern European countries, along with liquidity and capacity constraints in certain markets, as the asset size of the Emerging Europe Fund grows it may be more difficult for the Adviser to locate attractive securities to purchase, and the ability of the Adviser to efficiently trade into or out of particular securities or markets may become more limited.
Market Risk
The value of a fund’s shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally.
Portfolio Management Risk
The skill of the Adviser will play a significant role in the funds’ ability to achieve their investment objectives. There is a risk that the investment strategies will not achieve the funds’ objectives or that the Adviser will not implement the strategies properly.
Depositary Receipts Risk
Investments in ADRs and GDRs may involve risks relating to political, economic or regulatory conditions in foreign countries. These risks include fluctuations in foreign currencies, political and financial instability, less liquidity and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. The underlying securities are typically denominated (or quoted) in a currency other than U.S. dollars. The securities underlying ADRs and GDRs trade on foreign exchanges at times when the U.S. markets are not open for trading. As a result, the value of ADRs and GDRs may not track
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the price of the underlying securities and may change materially at times when the U.S. markets are not open for trading. In addition, issuers of unsponsored depositary receipts are not contractually obligated to disclose material information in the U.S. and, therefore, such information may not correlate to the market value of the unsponsored depositary receipt.
Convertible Securities Risk
Convertible securities entail some of the risks of both equity and debt securities. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, some of the convertible securities which the Fund may hold are high-yield/high-risk securities that are subject to special risks, including the risk of default in interest or principal payments which could result in a loss of income from or a decline in the market value of, the securities. In addition, convertible securities often display a degree of market price volatility that is comparable to common stocks. The credit risk associated with convertible securities generally is reflected by their ratings by organizations or S&P or a similar determination of creditworthiness by the Adviser. The value of convertible securities tends to decline as interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the underlying securities.
Non-Diversification Risk
The funds are classified as “non-diversified” funds, and, as such, the funds’ portfolios may include the securities of a smaller total number of issuers than if the funds were classified as “diversified.” Because the funds may invest a greater proportion of their assets in the obligations of a small number of issuers, changes in the financial condition or market assessment of a single issuer may cause greater fluctuation and volatility in the funds’ total returns or asset values than if the funds were required to hold smaller positions of the securities or a larger number of issuers.
Growth Stock Risk
Because of their perceived growth potential, growth stocks are typically in demand and tend to carry relatively high prices. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. If a fund’s growth stock does not produce the predicted earnings growth, its share price may drop, and the fund’s net asset value may decline.
Geographic Concentration Risk
The Emerging Europe Fund and China Region Fund concentrate their investments in companies located in Eastern Europe and the China region, respectively. Because of this, companies in each fund’s portfolio may react similarly to political, social and economic developments in any of the Eastern European or China region countries. For example, many companies in the same region may be dependent on related government fiscal policies. Companies may be adversely affected by new or unanticipated legislative changes, including tax law changes that may have retroactive effect, that could affect the value of such companies and, therefore, a fund’s share price. A fund’s return and share price may be more volatile than those of a less concentrated portfolio.
Government Relationship Risk
(China Region Fund only)
While companies in China may be subject to limitations on their business relationships under Chinese law, these laws may not be consistent with certain political and security concerns of the U.S. As a result, Chinese companies may have material direct or indirect business relationships with governments that are considered state sponsors of terrorism by the U.S. government, or governments that otherwise have policies in conflict with the U.S. government (an “Adverse Government”). If the fund invests in companies that have or develop a material business relationship with an Adverse Government, then the fund will be subject to the risk that these companies’ reputation and price in the market may be adversely or negatively affected.
Industry Concentration Risk
The Emerging Europe Fund invests more than 25% of its investments in companies principally engaged in the oil, gas or banking industries. Oil & gas companies are a large part of the Russian economy and banks typically are a significant component of emerging market economies, such as those in Russia and other Eastern European countries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an
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industry and may make the fund’s performance more volatile. To the extent that the fund’s assets are invested in the oil & gas industry, the fund would be particularly vulnerable to factors affecting the industry, such as increased governmental regulation of the environment. Increased environmental regulation may, among other things, increase compliance costs and affect business opportunities for companies in which the fund invests. The fund would also be affected by changing commodity prices, which can be highly volatile and are subject to risk of over supply and decreased demand. To the extent that the fund’s assets are invested in companies operating in the banking industry, the fund is subject to legislative or regulatory changes, adverse market conditions, and/or increased competition affecting banking companies. The prices of securities of banking companies also may fluctuate widely due to general economic conditions that could create exposure to credit losses. In determining whether a company is involved in oil, gas or banking, the fund will use the Bloomberg Sector Classification System.
Sector Risk
From time to time, the funds may invest a significant amount of their total assets in certain sectors, which may be subject to specific risks. These risks include governmental regulation of the sector and governmental monetary and fiscal policies which may negatively affect a particular sector. In addition, governmental policies towards international trade and tariffs may affect particular sectors.
Foreign Securities Risk/Emerging Markets Risk
The funds may invest in foreign securities and may be subject to greater risks than when investing in U.S. securities. The risks of investing in foreign securities are generally greater when they involve emerging markets. These risks include:
Currency Risk. The value of a foreign security will be affected by the value of the local currency relative to the U.S. dollar. When a fund sells a foreign denominated security, its value may be worth less in U.S. dollars even if the security increases in value in its home country. U.S. dollar-denominated securities of foreign companies may also be affected by currency risk.
Political, Social and Economic Risk. Foreign investments may be subject to heightened political, social and economic risks, particularly in emerging markets, which may have relatively unstable governments, immature economic structures, national policies restricting investments by foreigners, different legal systems and economies based on only a few industries. In some countries, a risk may exist that the government may take over the assets or operations of a company or that the government may impose taxes or limits on the removal of the fund’s assets from that country.
Regulatory Risk. There may be less government supervision of foreign securities markets. As a result, foreign companies may not be subject to the uniform accounting, auditing and financial reporting standards and practices applicable to domestic companies, and there may be less publicly available information about foreign companies.
Market Risk. Foreign securities markets, particularly those of emerging markets, may be less liquid and more volatile than domestic markets. Certain markets may require payment for securities before delivery and delays may be encountered in settling securities transactions. In some foreign markets, there may not be protection against failure by other parties to complete transactions.
Transaction Costs. Costs of buying, selling and holding foreign securities, including brokerage, tax and custody costs, may be higher than the costs involved in domestic transactions.
Eastern European Securities Risk
Political and economic structures in many Eastern European countries are in their infancy and developing rapidly, and such countries may lack the social, political and economic stability characteristic of many more developed countries. In addition, unanticipated political or social developments may affect the value of the fund’s investment in Eastern European countries. As a result, the risks normally associated with investing in any foreign country may be heightened in Eastern European countries. For example, the small size and inexperience of the securities markets in Eastern European countries and the limited volume of trading in securities in those markets may make the fund’s investments in such countries illiquid and more volatile than investments in more developed countries and may make obtaining prices on portfolio securities from
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independent sources more difficult than in other more developed markets. In addition, Eastern European countries have failed in the past to recognize private property rights and at times have nationalized or expropriated the assets of private companies. There may also be little financial or accounting information available with respect to companies located in certain Eastern European countries and it may be difficult, as a result, to assess the value or prospects of an investment in such companies.
In addition to the special risks common to most Eastern European countries described above, each individual Eastern European country also necessarily involves special risks that may be unique to that country. Following is a brief description of special risks that may be incurred when the fund invests in Russia, Poland, Greece, Hungary, the Czech Republic and Turkey, which are some of the countries in which the fund focuses its investment.
Russia. After the collapse of the Soviet Union, Russia has experienced and continues to experience political and social change. Russia is undergoing market-oriented reforms including a movement from centrally controlled ownership to privatization. The fund is subject to the risk that Russia may have unfavorable political developments, social instability, and/or changes in government policies. For example, the Ukrainian crisis has prompted the United States and the European Union to impose economic sanctions on certain Russian individuals and Russian companies, and Russia has responded with sanctions against a number of countries, including a total ban on food imports from the European Union, United States, Norway, Canada and Australia. These current sanctions, or the threat of further sanctions, may result in the decline of the value or liquidity of Russian securities, a weakening of the ruble or other adverse consequences to the Russian economy, any of which could negatively impact the fund’s investments in Russian securities. These economic sanctions also could result in the immediate freeze of Russian securities, which could impair the ability of the fund to buy, sell, receive or deliver those securities. Both these current and potential future sanctions also could result in Russia taking further counter measures or retaliatory actions, which may impair further the value or liquidity of Russian securities, and therefore may negatively impact the fund.
Poland. The security market in Poland is relatively new, and therefore, investors may be subject to new or amended laws and regulations. Legal reforms have been instituted and laws regarding investments are published on a routine basis. However, important court decisions are not always accessible to practitioners. While there are currently no obstacles to foreign ownership of securities and profits may be repatriated, these laws may be changed anytime without notice.
Greece. Greece joined the EU in 1981 and adopted the euro in 2002. In recent years, Greece was downgraded from a Developed Market to an Emerging Market by MSCI, Russell Indexes, and S&P Dow Jones, and the FTSE Index has Greece on its developed market watch list. Current political risk may present excess volatility in the Greek market.
Hungary. Hungary’s market-oriented reforms are relatively recent and leave many uncertainties regarding economic and legal issues. Privatization in Hungary has been substantial but is not yet complete. Owners and managers of Hungarian enterprises are often less experienced with market economies than owners and managers of companies in Western European and U.S. markets. The securities markets on which the securities of these companies are traded are in their infancy. Laws governing taxation, bankruptcy, restrictions on foreign investments and enforcement of judgments are subject to change.
The Czech Republic. The Czech Republic joined the European Union (EU) in 2004, which has resulted in a convergence with Western European standards and a modernization of the Czech Republic’s regulatory environment. The market-oriented economy in the Czech Republic is young in comparison to the United States and Western European countries. The Czech Republic has instituted substantial privatization since 1992, when the first wave of privatization began. Information suggests that dominant or majority shareholders now control many of the larger privatized companies. Bankruptcy laws have been liberalized, giving creditors more power to force bankruptcies. Laws exist that regulate direct and indirect foreign investment, as well as repatriation of profits and income. Tax laws include provisions for both value-added taxes and income taxes. Courts of law are expected to, but may not, enforce the legal rights of private parties.
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Turkey. Turkey is currently undergoing substantial change in its efforts to join the European Union. The availability of investment opportunities and the ability to liquidate investments profitably may depend on the continued pursuit by government of certain current economic liberalization policies. Political climates may change, sometimes swiftly. There is no assurance that government will continue with such policies in their present form. Investing in equities and fixed income obligations in Turkey involves certain considerations not usually associated with investing in securities in more developed capital markets. The securities market in Turkey is less liquid and more volatile than securities markets in the United States and Western Europe. Consequently, the fund’s investment portfolio may experience greater price volatility and significantly lower liquidity than a portfolio invested in public and private debt and other fixed income obligations of more developed countries. There may also be less state regulation and supervision of the securities markets, less reliable information available to brokers and investors and enforcement of regulations may be different from those in the United States, Western Europe and other more developed countries. Consequently, there may be less investor protection. Disclosure, accounting and regulatory standards are in most respects less comprehensive and stringent than in developed markets. In addition, brokerage commissions and other transaction costs and related taxes on securities transactions in Turkey are generally higher than those in more developed markets.
Options Risk
Investing in options, LEAPS (an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of a fund. An option may expire without value, resulting in a loss of a fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option.
Illiquidity Risk
Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet. These investments may involve a high degree of business and financial risk. Illiquidity may be the result of, for example, low trading volume, lack of a market maker, or contractual or legal restrictions that limit or prevent a fund from selling securities or closing derivative positions. The values of illiquid investments are often more volatile than the values of more liquid investments. It may be more difficult for a fund to determine a fair value of an illiquid investment than that of a more liquid comparable investment.
Warrants Risk
The funds may invest in warrants. Warrants are different from options in that they are issued by a company as opposed to a broker and typically have a longer life than an option. When the underlying stock goes above the exercise price of the warrant, the warrant is “in the money.” If the exercise price of the warrant is above the value of the underlying stock, it is “out of the money.” Out-of-the-money warrants tend to have different price behaviors than in-the-money warrants. As an example, the value of an out-of-the-money warrant with a long time to expiration generally declines less than a drop in the underlying stock price because the warrant’s value is primarily derived from its time component.
Most warrants are exchange traded. The holder of a warrant has the right, until the warrant expires, to sell an exchange traded warrant or to purchase a given number of shares of a particular issue at a specified price. Such investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. The key driver to the movements in warrants are the fundamentals of the underlying company. Warrants, unlike options, may allow the holder to vote on certain issues and often are issued with certain anti-dilutive rights. Warrants pay no dividends. If a warrant held by a fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant.
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Restricted Security Risk
The funds may make direct equity investments in securities that are subject to contractual and regulatory restrictions on transfer. These investments may involve a high degree of business and financial risk. The restrictions on transfer may cause a fund to hold a security at a time when it may be beneficial to liquidate the security, and the security could decline significantly in value before the fund could liquidate these securities.
Portfolio Turnover Risk
( China Region Fund only)
The funds’ portfolio turnover rates vary from year to year according to market conditions and may exceed 100%. The length of time each fund has held a particular security is not generally a consideration in investment decisions. It is the policy of each fund to effect portfolio transactions without regard to a holding period if, in the judgment of the portfolio managers, such transactions are advisable. Portfolio turnover generally involves some expense, including brokerage commissions, dealer mark-ups, or other transaction costs on the sale of securities and reinvestment in other securities. Such sales may result in realization of taxable capital gains for shareholders.
Other Types of Investment, Related Risks and Considerations
While not principal strategies, the funds may invest to a limited extent in other types of investments as discussed below under “Common Investment Practices and Related Risks.”
Near-Term Tax Free Fund
Investment Objectives
The Near-Term Tax Free Fund seeks to provide a high level of current income that is exempt from federal income taxation and to preserve capital.
Principal Investment Strategies
Under normal market conditions, the fund invests at least 80% of its net assets in investment grade municipal securities whose interest is free from federal income tax, including the federal alternative minimum tax. The fund will notify you in writing 60 days before making any changes to this policy.
Municipal securities are issued by state and local governments, their agencies and authorities, as well as by the District of Columbia and U.S. territories and possessions, to borrow money for various public and private projects. These debt securities generally include general obligation bonds, revenue bonds, industrial development bonds, municipal lease obligations, single state bonds and similar instruments.
The issuer’s authority to levy taxes backs general obligation bonds. Since revenue bonds are issued to finance public works such as bridges or tunnels, they are supported by the revenues of the projects. Industrial development bonds are typically issued by municipal issuers on behalf of private companies. Because these bonds are backed only by income from a certain source and may not be an obligation of the issuer itself, they may be less creditworthy than general obligation bonds. Municipal lease obligations generally are issued to finance the purchase of public property. The property is leased to a state or local government and the lease payments are used to pay the interest on the obligations. These differ from other municipal securities because the money to make the lease payments must be set aside each year or the lease can be canceled without penalty. If this happens, investors who own the obligations may not be paid. A single state bond is issued by only one state and is not diversified. If the state that issues the bond has a financial setback, the market value of the bond may fall.
The fund invests only in debt securities that, at the time of acquisition, have one of the four highest ratings by Moody’s Investors Services (Aaa, Aa, A, Baa) or by Standard & Poor’s Corporation (AAA, AA, A, BBB) (or, if not rated by Moody’s or S&P, are determined by the Adviser to be of comparable quality). The fund will not invest more than 10% of its total assets in the fourth rating category. Investments in the fourth category may have speculative characteristics and, therefore, may involve higher risks.
The fund will maintain a weighted-average portfolio maturity of five years or less. A weighted-average maturity of a fund is the average of the remaining maturities of all the debt securities the fund owns, with each maturity weighted by the relative value of the security.
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Although the fund tries to invest the majority of its assets in tax free securities, it is possible that up to 20% of its assets may be in securities that pay taxable interest. Taxable investments by the fund may generate ordinary income that will be distributed to shareholders as taxable income.
Investment Processes
The Adviser uses a matrix of “top-down” macro models and “bottom-up” fundamental analysis to determine weightings in geographic regions, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks fiscal and monetary policies. The Adviser focuses on historical interest rate cycles and demographic trends.
In selecting investments, the Adviser will consider a bond’s credit analysis, structure (maturity, coupon, redemption features), and yield. The Adviser reviews these factors to determine the relative value of the bond in comparison to its market value and the market value of similar bonds.
Related Risks
Main Risks
The fund is designed for investors who primarily seek current income that is substantially free from federal income tax. The fund is not intended to be a complete investment program, and there is no assurance that its investment objective can be achieved. As with all mutual funds, loss of money is a risk of investing in the fund. Although the fund’s policy is to invest in securities whose interest is free from federal income tax, the fund may invest up to 20% of its assets in securities that pay taxable interest. For the fiscal year ended December 31, 2015, 3.34% of the Near-Term Tax Free Fund’s distributions were from ordinary income. From year to year, these numbers may vary and there is no assurance that these distributions will continue. An investment in the fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Interest Rate Risk
Because the fund invests primarily in municipal securities, there is a risk that the value of these securities will fall if interest rates rise. Ordinarily, when interest rates go up, municipal security prices fall. The opposite is also true: municipal security prices usually go up when interest rates fall. The longer a fund’s weighted-average maturity, the more sensitive it is to changes in interest rates. Interest rates have been and are currently at historical lows due to, among other things, governmental intervention, including quantitative easing. There may be less governmental intervention in the near future to maintain low interest rates. If so, it could cause an increase in interest rates, which would have a negative impact on the value of fixed income securities and could negatively affect the fund’s net asset value.
Call Risk
A municipal security may be prepaid (called) before its maturity. An issuer is more likely to call its securities when interest rates are falling, because the issuer can issue new securities with lower interest payments. If a security is called, a fund may have to replace it with a lower-yielding security.
Credit Risk
There is a possibility that an issuer of a municipal security cannot make timely interest and principal payments on its debt securities. With municipal securities, state, or local law may limit the sources of funds for the payment of principal and interest.
Income Risk
The fund is subject to income risk, which is the risk that the fund’s dividends (income) will decline due to falling interest rates.
Municipal Bond Risk
There is generally more public information available for corporate equities or bonds than is available for municipal bonds.
Liquidity Risk
The secondary market for municipal bonds may be less liquid than other securities markets. A less liquid market may make it difficult for the funds to sell the security at an attractive price, and the value of the security may fall, even during periods of declining interest rates.
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Insured Municipal Bonds
The fund may invest in municipal bonds covered by an insurance policy that guarantees timely payment of principal and interest. The insurance policies do not guarantee the value of the bonds. A downgrade of the bond insurer’s credit rating or a default by the insurer may result in a downgrade of the bond rating and could have a negative effect on the value of the bond.
Lower Rated Municipal Bonds
A portion of the fund’s investments may be in high risk, lower rated municipal bonds as the result of a downgrade of an investment grade bond subsequent to the fund’s purchase of the bond. Investments in lower rated bonds carry greater credit rate risk, market risk and interest rate risk than an investment in a higher rated bond.
Recent Market Events
Recent unprecedented turbulence in the financial markets and reduced liquidity in the credit and fixed income market could have an adverse effect on the value of the fund.
Other Types of Investment, Related Risks and Considerations
While not principal strategies, the fund may invest to a limited extent in other types of investments as discussed below under “Common Investment Practices and Related Risks.”
Government Securities Ultra-Short Bond Fund
Investment Objectives
The Government Securities Ultra-Short Bond Fund seeks to achieve a total return with current income.
Principal Investment Strategies
Under normal market conditions, the Government Securities Ultra-Short Bond Fund invests at least 80% of its net assets in United States Treasury debt securities and obligations of agencies and instrumentalities of the United States, including repurchase agreements collateralized with such securities. The fund will notify you in writing 60 days before making any changes to this policy.
Under federal law, the income received from obligations issued by the United States government and some of its agencies and instrumentalities may be exempt from state and local income taxes. Many states that tax personal income allow mutual funds to pass this tax exemption through to shareholders. To maximize the taxable equivalent yield for shareholders under normal circumstances, the Government Securities Ultra-Short Bond Fund will attempt to invest primarily in obligations that qualify for the exemption from state taxation.
The Government Securities Ultra-Short Bond Fund may invest in fixed-rate and floating-rate securities issued by the United States Treasury and various United States government agencies, including the Federal Home Loan Bank, the Federal Farm Credit Bank and the Tennessee Valley Authority. While fixed-rate securities have a set interest rate, floating-rate securities have a variable interest rate that is closely tied to a money market index such as Treasury Bill rates. Floating rate securities provide holders with protection against rises in interest rates, but typically pay lower yields than fixed-rate securities of the same maturity.
Investment Processes
In selecting investments, the Adviser’s analysis encompasses an interest rate forecast that considers such factors as economic growth, inflation expectations and expected monetary policy actions. After establishing an interest rate outlook, the Adviser applies a process of selecting bonds for a fund’s portfolio, which analyzes yields, maturities and bond ratings of particular bonds.
Related Risks
Main Risks
The Government Securities Ultra-Short Bond Fund invests in various United States government agencies, which while chartered or sponsored by Acts of Congress, are neither issued nor guaranteed by the United States Treasury. Each of these agencies, which include the Federal Home Loan Bank, the Federal Farm Credit Bank and the Tennessee Valley Authority, is supported by its own credit. However, the Federal Home Loan Bank is also supported by the ability of the United States Treasury to buy up to
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$4 billion of debt of the agency. Also, the Tennessee Valley Authority has a credit line of $150 million with the United States Treasury.
The fund is designed for investors who primarily seek current income. The fund is not intended to be a complete investment program, and there is no assurance that its investment objective can be achieved. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to manage the magnitude of NAV fluctuations by limiting the fund’s dollar-weighted average effective maturity to two years or less, it is possible to lose money by investing in the fund.
Income Risk
The fund may invest substantially all of its assets in short-term debt securities, and, as a result, the fund is subject to income risk, which is the risk that the fund’s dividends (income) will decline due to falling interest rates.
Inflation Risk
The fund’s yield will vary as the short-term securities in its portfolio mature and the proceeds are reinvested in securities with different interest rates. Over time, the real value of the fund’s yield may be eroded by inflation.
Issuer Risk
There is a possibility that an issuer of a security could be unable to make interest payments or repay principal. Changes in an issuer’s financial strength or in a security’s credit rating may affect a security’s value.
Interest Rate Risk
Debt securities may fluctuate in value due to changes in interest rates. Typically, investments subject to interest rate risk will decrease in value when interest rates rise and increase in value when interest rates decline. The value of securities with relatively longer maturities may fluctuate more in response to interest rate changes than securities with shorter maturities. Interest rates have been and are currently at historical lows due to, among other things, governmental intervention, including quantitative easing. There may be less governmental intervention in the near future to maintain low interest rates. If so, it could cause an increase in interest rates, which would have a negative impact on the value of fixed income securities and could negatively affect the fund’s net asset value.
Risk of Investing In Government Agencies
The Fund’s investments in securities issued or guaranteed by the U.S. Treasury or its agencies and instrumentalities may be backed only by the credit of the agency or instrumentality and not by the full faith and credit of the United States. No assurance can be given that the U.S. government would provide financial support to its agencies and instrumentalities.
Other Types of Investment, Related Risks and Considerations
While not principal strategies, the fund may invest to a limited extent in other types of investments as discussed below under “Common Investment Practices and Related Risks.”
Common Investment Practices and Related Risks
While not principal strategies or risks for each fund, the funds may invest to a limited extent in other types of investments as discussed below.
Illiquid Securities
Each fund may invest up to 15% of its net assets in illiquid securities. Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet.
Repurchase Agreements
Each fund may enter into repurchase agreements. A repurchase agreement is a transaction in which a fund purchases a security from a commercial bank or recognized securities dealer and has a simultaneous commitment to sell it back at an agreed upon price on an agreed upon date. This date is usually not more than seven days from the date of purchase. The resale price reflects the original purchase price plus an agreed upon market rate of interest, which is unrelated to the coupon rate or maturity of the purchased security.
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In effect, a repurchase agreement is a loan by a fund collateralized with securities, usually securities issued by the U.S. Treasury or a government agency. The repurchase agreements entered into by each money market fund are collateralized with cash and securities of the type in which that fund may otherwise invest.
Repurchase agreements carry several risks, including the risk that the counterparty defaults on its obligations. For example, if the seller of the securities underlying a repurchase agreement fails to pay the agreed resale price on the agreed delivery date, a fund may incur costs in disposing of the collateral and may experience losses if there is any delay in its ability to do so.
When-Issued and Delayed-Delivery Securities
Each fund may purchase securities on a when-issued or delayed-delivery basis. This means the fund purchases securities for delivery at a later date and at a stated price or yield. There is a risk that the market price at the time of delivery may be lower than the agreed upon purchase price. In that case, the fund could suffer an unrealized loss at the time of delivery.
Borrowing
Each fund may not borrow money except for temporary or emergency purposes in an amount not exceeding 331/3% of the fund’s total assets (including the amount borrowed) less liabilities (other than borrowings). To the extent that a fund borrows money before selling securities, the fund may be leveraged. At such times, the fund may appreciate or depreciate more rapidly than an unleveraged portfolio.
Securities Ratings
The Adviser will use the ratings provided by independent rating agencies in evaluating the credit quality of a debt security and in determining whether a security qualifies as eligible for purchase under a fund’s investment policies. If a security is not rated, the Adviser may determine that the security is comparable in quality to a rated security for purposes of determining eligibility. In the event that an agency downgrades the rating of a security below the quality eligible for purchase by a fund, the fund reserves the right to continue holding the security if the Adviser believes such action is in the best interest of the fund.
The following investment practices and related risks apply only to the All American Equity Fund, Holmes Macro Trends Fund, Gold and Precious Metals Fund, World Precious Minerals Fund, Global Resources Fund, Emerging Europe Fund and China Region Fund.
Small- and Mid-Sized Companies Risk
A fund may invest in small- and mid-sized companies, which involve greater risk than investing in more established companies. This risk includes difficulty in obtaining reliable information and financial data and low liquidity in the market, making it difficult to dispose of shares when it may otherwise be advisable.
Derivative Securities
A fund may, but is not required to, invest in derivative securities, which include purchasing and selling exchange-listed and over-the-counter put and call options or LEAPS on securities, equity and fixed-income indexes, and other financial instruments. In an effort to enhance a fund’s risk-adjusted performance, a fund may enter into covered option writing transactions. A fund will primarily implement this risk reduction strategy by selling covered call options, but may also sell covered puts as part of this strategy. A fund will not sell a covered option if, immediately thereafter, the aggregate value of the fund’s securities subject to outstanding covered options would exceed 50% of the value of the fund’s total assets. A fund will not purchase an option if, immediately thereafter, the aggregate market value of all options purchased by the fund would exceed 10% of the fund’s total assets.
In addition, each fund may purchase and sell financial futures contracts and options thereon, and enter into various currency transactions such as currency forward contracts, or options on currencies or currency futures. Each fund may, but is not required to, invest in derivative securities for hedging, risk management or portfolio management purposes. Derivative securities may be used to attempt to protect against possible changes in the market value of securities held in, or to be purchased for, the portfolio. The ability of a fund to use derivative securities successfully will depend upon the Adviser’s ability to predict pertinent market movements, which cannot be assured. Investing in derivative securities will increase transaction expenses and may result in a loss that exceeds the principal invested in the transaction. Each fund will comply with
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applicable regulatory requirements when investing in derivative securities. For more information on derivative securities and specific fund limitations, see the SAI.
In addition, a fund may invest in warrants. Warrants are different from options in that they are issued by a company as opposed to a broker and typically have a longer life than an option. When the underlying stock goes above the exercise price of the warrant, the warrant is “in the money.” If the exercise price of the warrant is above the value of the underlying stock, it is “out of the money.” Out-of-the-money warrants tend to have different price behaviors than in-the-money-warrants. As an example, the value of an out-of-the-money warrant with a long time to expiration generally declines less than a drop in the underlying stock price because the warrant’s value is primarily derived from its time component.
Most warrants are exchange traded. The holder of a warrant has the right, until the warrant expires, to sell an exchange traded warrant or to purchase a given number of shares of a particular issue at a specified price. Such investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. The key driver to the movements in warrants are the fundamentals of the underlying company. Warrants, unlike options, may allow the holder to vote on certain issues and often are issued with certain anti-dilutive rights. Warrants pay no dividends. If a warrant held by a fund were not exercised by the date of its expiration, a fund would incur a loss in the amount of the cost of the warrant.
Currency Risk and Hedging
The value of a foreign security will be affected by the value of the local currency relative to the U.S. dollar. When a fund sells a foreign denominated security, its value may be worth less in U.S. dollars even if the security increases in value in its home country. U.S. dollar-denominated securities of foreign companies may also be affected by currency risk.
The funds may, but are not required to, invest in derivative securities in an attempt to hedge a particular fund’s foreign securities investments back to the U.S. dollars when, in the Adviser’s judgment, currency movements affecting particular investments are likely to harm performance. Possible losses from changes in currency exchange rates are a primary risk of unhedged investing in foreign securities. While a security may perform well in a foreign market, if the local currency declines against the U.S. dollar, gains from the investment can decline or become losses. Typically, currency fluctuations are more extreme than stock market fluctuations. Accordingly, the strength or weakness of the U.S. dollar against foreign currencies may account for part of a fund’s performance even when the Adviser attempts to reduce currency risk through hedging activities. While currency hedging may reduce portfolio volatility, there are costs associated with such hedging, including the loss of potential profits, losses on derivative securities and increased transaction expenses.
Investments in Exchange-Traded Funds (ETFs) or Other Investment Companies
The funds may invest in ETFs or other investment companies. If a fund invests in an ETF or other investment company, the fund will pay its proportionate share of expenses of the ETF or other investment company (including management and administrative fees) as well as the fund’s own management and administrative expenses. The funds may rely on certain Securities and Exchange Commission (SEC) exemptive orders or rules that permit funds meeting various conditions to invest in an ETF in amounts exceeding limits set forth in the Investment Company Act of 1940 that would otherwise be applicable. ETFs in which the Fund invests may borrow money for investment purposes, a practice commonly referred to as “leveraging.” An ETF may also seek to employ leverage through the use of derivatives, such as futures, options or swaps. The use of leverage by the ETFs may increase exposure to fluctuations in the prices of the leveraged ETF’s assets thereby making any change in the leveraged ETF’s net asset value greater than without the use of leverage. Leverage could result in increased volatility of returns. A leveraged ETF will also be expected to comply with asset coverage requirements which could force the leveraged ETF to sell certain portfolio holdings or reduce its derivatives positions at a time which may be disadvantageous to the leveraged ETF.
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Portfolio Holdings
A description of the funds’ policies and procedures with respect to the disclosure of the funds’ portfolio securities is available in the funds’ SAI and on the funds’ website (www.usfunds.com).
Fund Management
Investment Adviser
U.S. Global Investors, Inc., 7900 Callaghan Road, San Antonio, Texas 78229, furnishes investment advice and manages the business affairs of U.S. Global Investors Funds (Trust). The Adviser was organized in 1968. Each fund will pay the following percentages of its average net assets to the Adviser for advisory services:
Base
|
Benchmark |
Hurdle
|
Base Advisory
|
|
All American Equity Fund |
0.80% |
S&P 500 Index |
+/- 5% |
0.55%-1.05% |
Holmes Macro Trends Fund |
1.00% |
S&P Composite 1500 Index |
+/- 5% |
0.75%-1.25% |
Gold and Precious Metals Fund |
0.90% |
FTSE Gold Mines Index |
+/- 5% |
0.65%-1.15% |
World Precious Minerals Fund |
1.00% |
NYSE Arca Gold Miners Index |
+/- 5% |
0.75%-1.25% |
Global Resources Fund |
0.95% |
S&P Global Natural Resources Index (Net Total Return) |
+/- 5% |
0.70%-1.20% |
Emerging Europe Fund |
1.25% |
MSCI Emerging Markets Europe 10/40 Index (Net Total Return) |
+/- 5% |
1.00%-1.50% |
China Region Fund |
1.25% |
Hang Seng Composite Index |
+/- 5% |
1.00%-1.50% |
Near-Term Tax Free Fund |
0.50% |
n/a |
||
Government Securities Ultra-Short
|
0.50% |
n/a |
A performance fee, or fulcrum fee, is designed to reward the Adviser for Investor Class fund performance that exceeds a fund’s designated benchmark or penalize the Adviser for fund performance which is lower than a fund’s designated benchmark. A fund’s cumulative performance is compared to that of its designated benchmark over a 12-month rolling period. When the difference between a fund’s performance and the performance of its designated benchmark is less than 5% (this is known as the hurdle rate), there will be no adjustment to the base advisory fee. This is often referred to as the null zone. If a fund’s cumulative performance exceeds by 5% or more (hurdle rate) the performance of its designated benchmark, the base advisory fee will be increased by 0.25%. If a fund’s cumulative performance falls below its designated benchmark by 5% or more, the base advisory fee will be decreased by 0.25%. The chart reflects the minimum and maximum advisory fee applicable to each fund. See each fund’s fee table for the actual management fee for the most recent fiscal year. Certain funds are subject to breakpoints in the advisory fee. Please see the funds’ SAI for more information on the breakpoints.
The following example illustrates the application of the performance adjustment to the World Precious Minerals Fund:
For the rolling 12-month period |
Fund’s investment performance |
Index’s cumulative change |
Fund’s performance relative to the index |
January 1 |
$50.00 |
$100.00 |
|
December 31 |
$57.60 |
$110.20 |
|
Absolute change |
+$7.60 |
+$10.20 |
|
Actual change |
+15.20% |
+10.20% |
+5.00% |
Based on these assumptions, the Adviser’s management fee for World Precious Minerals Fund for the month ended December 31 would be calculated as follows:
● |
The portion of the annual basic fee rate of 1.00% applicable to that month is multiplied by the fund’s average daily net assets for the month. This results in the dollar amount of the base fee. |
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● |
The 0.25% rate (adjusted for the number of days in the month) is multiplied by the fund’s average daily net assets for the performance period. This results in the dollar amount of the performance adjustment. |
● |
The dollar amount of the performance adjustment is added to the dollar amount of the basic fee, producing the adjusted management fee. |
The Adviser or its affiliates may pay compensation, out of profits derived from the Adviser’s management fee and not as an additional charge to the funds, to certain financial institutions (which may include banks, securities dealers and other industry professionals) for the sale and/or distribution of fund shares or the retention and/or servicing of fund investors and fund shares (“revenue sharing”). These payments are in addition to any record keeping or sub-transfer agency fees, which may be payable by the funds, or other fees described in the fee table or elsewhere in the prospectus or SAI. Examples of “revenue sharing” payments include, but are not limited to, payment to financial institutions for “shelf space” or access to a third party platform or fund offering list or other marketing programs, including, but not limited to, inclusion of the funds on preferred or recommended sales lists, mutual fund “supermarket” platforms and other formal sales programs; granting the Adviser access to the financial institution’s sales force; granting the Adviser access to the financial institution’s conferences and meetings; assistance in training and educating the financial institution’s personnel; and obtaining other forms of marketing support. The level of revenue sharing payments made to financial institutions may be a fixed fee or based upon one or more of the following factors: gross sales, current assets and/or number of accounts of the fund attributable to the financial institution, or other factors as agreed to by the Adviser and the financial institution or any combination thereof. The amount of these revenue sharing payments is determined at the discretion of the Adviser from time to time, may be substantial, and may be different for different financial institutions depending upon the services provided by the financial institution. Such payments may provide an incentive for the financial institution to make shares of the funds available to its customers and may allow the funds greater access to the financial institution’s customers.
A discussion regarding the basis for the board of trustees’ approval of the investment advisory contract of the funds is available in the funds’ annual report to shareholders.
Fund Expenses
The Adviser has voluntarily limited total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments, if any) to not exceed 2.20% for the All American Fund, 2.20% for the Holmes Macro Trends Fund, 1.90% for the Gold and Precious Metals Fund, 1.90% for the World Precious Minerals Fund, 1.90% for the Global Resources Fund, 2.85% for the Emerging Europe Fund, 2.55% for the China Region Fund and 0.45% for the Government Securities Ultra-Short Bond Fund. These expense limitations will continue on a voluntary basis at the Adviser’s discretion.
The following table shows the effect that the current voluntary limitation had for those funds for which total annual fund operating expenses exceeded their respective limitation. The table below does not include the effect of any additional reimbursements that may be made from time to time to the Government Securities Ultra-Short Bond Fund.
All American Equity Fund |
Gold and
|
World
|
Global Resources
|
China
|
Government Securities
|
|
Total annual fund operating expenses* |
1.94% |
2.13% |
1.96% |
1.58% |
3.03% |
1.13% |
Voluntary expense waiver |
(0.02)% |
(0.08)% |
(0.15)% |
(0.06)% |
(0.51)% |
(0.68)% |
Total annual expenses after reimbursement |
1.92% |
2.05% |
1.81% |
1.52% |
2.52% |
0.45% |
* |
Excluding acquired fund fees and expenses, if any. |
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The Adviser has contractually limited the total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest) to not exceed 0.45% for the Near-Term Tax Free Fund on an annualized basis through April 30, 2017. This arrangement may not be changed or terminated during this period without approval of the fund’s Board of Trustees and will become a voluntary limitation that may be changed or terminated by the Adviser at any time after April 30, 2017. The effect of the contractual limitation has been reflected in the Fees and Expenses of the Fund in the Summary Section.
Portfolio Managers
The All American Equity Fund, Emerging Europe Fund, Gold and Precious Metals Fund, Government Securities Ultra-Short Bond Fund, Near-Term Tax Free Fund, World Precious Minerals Fund, Holmes Macro Trends Fund, Global Resources Fund and China Region Fund are managed by a team consisting of Mr. Frank Holmes and Mr. Ralph Aldis. Mr. Holmes has served as Chief Executive Officer of the Adviser since 1989 and Chief Investment Officer of the Adviser since 1999, and Mr. Aldis has served as a portfolio manager of the Adviser from 1989-1999 and from 2001 to the present.
Adviser personnel may invest in securities for their own accounts according to a code of ethics that establishes procedures for personal investing and restricts certain transactions.
The SAI provides additional information about the portfolio managers’ compensation, other accounts managed and ownership of securities in the funds they manage.
Shareholder Information
Pricing of Fund Shares
When you make a purchase, redemption, or exchange, the value of your transaction will be the next calculated NAV per share after we receive your request in good order (which generally means that the funds have received your instructions and any necessary documents or amounts in the form required by the funds’ policies and procedures). A fund’s NAV is determined as of the close of the regular trading session (generally 4 p.m. Eastern Time) of the New York Stock Exchange (NYSE) each day the NYSE is open. If we receive your request in good order prior to that time, your transaction price will be the NAV per share determined for that day. If we receive your request or payment after that time, your transaction will be effective on the next day the funds are open for business.
Opening an Account
You may open an account by calling an Investor Representative at 800-873-8637 and requesting an application or by downloading an application from our website at www.usfunds.com. Mail a signed, completed application with your initial investment to U.S. Global Investors to open your initial account. You will not need to fill out another application to invest in another U.S. Global Investors Fund unless the account registration is different or we need further information to verify your identity. You may also open an account online by visiting our website at www.usfunds.com.
In compliance with the USA Patriot Act of 2001, please note that the transfer agent will verify certain information on your account application as part of the fund’s Anti-Money Laundering Program. As requested on the application, you must supply your full name, date of birth, social security number and permanent street address. Mailing addresses containing only a P.O. Box will not be accepted. Please contact the transfer agent at 1-800-873-8637 if you need additional assistance when completing your application.
If we do not have a reasonable belief of the identity of a customer, the account will be rejected or the customer will not be allowed to perform a transaction on the account until such information is received. The fund reserves the right to close the account within 5 business days if clarifying information/documentation is not received.
Shares of the funds have not been registered for sale outside of the United States. The U.S. Global Investors Funds generally do not sell shares to investors residing outside the United States, even if they are United States citizens or lawful permanent residents, except to investors with United States military APO or FPO addresses.
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Funding an Account
All checks must be in U.S. dollars drawn on a domestic bank. The funds will not accept payment in cash, coins, or money orders. The funds also do not accept post-dated checks or any conditional order or payment. To prevent check fraud, the funds will not accept third party checks, Treasury checks, credit card checks, traveler’s checks or starter checks for the purchase of shares. Exceptions to this policy may be made in limited circumstances. Please make checks payable to: U.S. Global Investors
The transfer agent will charge a $25 fee against a shareholder’s account, in addition to any loss sustained by the fund, for any payment that is returned. It is the policy of the fund not to accept applications under certain circumstances or in amounts considered disadvantageous to shareholders. The fund reserves the right to reject any application.
If you are making your first investment in the funds, before you wire funds, the transfer agent must have a completed account application. You may mail or overnight deliver your account application to the transfer agent. Upon receipt of your completed account application, the transfer agent will establish an account for you. An Investor Representative will contact you within 24 hours with your account number and to provide the proper wiring instruction. The account number assigned will be required as part of the instruction that should be provided to your bank to send the wire. Your bank must include the name of the fund you are purchasing, the account number, and your name so that monies can be correctly applied.
Wired funds must be received prior to 4:00 p.m. Eastern time to be eligible for same day pricing. The fund and U.S. Bank, N.A. are not responsible for the consequences of delays resulting from the banking or Federal Reserve wire system, or from incomplete wiring instructions.
Minimum Investments
Initial Purchase
● |
$5,000 |
Additional Purchases
● |
$100 minimum per transaction, per fund account |
Automatic Investing—ABC Investment Plan ®
● |
$1,000 initial investment if you elect to have monthly automated investments of at least $100 per transaction, per fund account. The $1,000 initial investment must be made by check or wire. |
How to Purchase, Redeem and Exchange Shares
Payment for shares redeemed will be mailed to you typically within one or two business days, but no later than the seventh calendar day after receipt of the redemption request by the transfer agent, U.S. Bancorp Fund Services, LLC. If any portion of the shares to be redeemed represents an investment made by check, the funds may delay the payment of the redemption proceeds until the transfer agent is reasonably satisfied that the check has been collected. This may take up to 15 calendar days from the purchase date.
For federal income tax purposes, redemptions are a taxable event; as such, you may realize a capital gain or loss. Such capital gains or losses are based upon the difference between your cost basis in the shares originally purchased and the redemption proceeds received. Shareholders who have an IRA or other retirement plan must indicate on their redemption request whether or not to withhold federal income tax. Redemption requests failing to indicate an election not to have tax withheld will generally be subject to 10% withholding.
A signature guarantee from either a Medallion program member or a non-Medallion program member, is required in the following situations:
● |
For all redemptions in excess of $50,000 from any shareholder account; |
● |
When redemption proceeds are payable or sent to any person, address or bank account not on record; |
● |
If a change of address was received by the transfer agent within the last 15 calendar days; and |
● |
If ownership is being changed on your account. |
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In addition to the situations described above, the funds and/or the transfer agent reserve the right to require a signature guarantee in other instances based on the circumstances relative to the particular situation. The funds may waive any of the above requirements in certain instances. Signature guarantees will generally be accepted from domestic banks, brokers, dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations, as well as from participants in the New York Stock Exchange Medallion Signature Program and the Securities Transfer Agents Medallion Program (“STAMP”). A notary public is not an acceptable signature guarantor.
Non-financial transactions, including establishing or modifying certain services on an account, may require a signature guarantee, signature verification from a Signature Validation Program member, or other acceptable form of authentication from a financial institution source.
Additional documents may be required for redemptions by corporations, executors, administrators, trustees and guardians. For instructions, please call an Investor Representative at 800-873-8637.
The exchange and redemption privilege is automatic when you complete your application unless you elected to opt out of these privileges. If you elected to not have these privileges and wish to add them to your profile of accounts, you can complete an Account Options Form or call an Investor Representative at 800-873-8637 for additional information or instructions. The investment minimums applicable to share purchases also apply to exchanges, and exchanges can only be performed between identically registered accounts. For federal income tax purposes, an exchange between funds is a taxable event; as such, you may realize a capital gain or loss. Such capital gains or losses are based on the difference between your cost basis in the shares originally purchased and the price of the shares received upon exchange.
By Internet Access—www.usfunds.com
You may access your account online by visiting our website at www.usfunds.com. After establishing access, you will be able to review account activity and balances, perform transactions, sign up for electronic delivery of statements, confirmations, financial reports, tax forms and/or prospectuses, and change certain account options. A signature guarantee may be required if you wish to make a redemption from your fund account into your bank account and you have changed your banking information or account address in the past 15 calendar days.
By Telephone—800-873-8637
Any registered account owner can call toll free to speak with an Investor Representative. Our hours of operation are Monday – Friday, 8:30 a.m. to 7 p.m. Central Time.
Telephone transaction privileges are automatically established when you complete your application. Before any discussion regarding your account, we will obtain certain information from you to verify your identity. As long as we take reasonable steps to ensure that an order to purchase, redeem or exchange your shares is genuine, we are not responsible for any losses that may occur. If an account has more than one owner or authorized person, the fund will accept telephone instructions from any one owner or authorized person. We recommend you verify the accuracy of your confirmation statements immediately after you receive them. Once a telephone transaction has been placed, it cannot be canceled or modified. Telephone trades must be received by or prior to market close. During periods of high market activity, shareholders may encounter higher than usual call waits. Please allow sufficient time to place your telephone transaction.
By Mail
To add to your account, send your check made payable to U.S. Global Investors and the appropriate investment slip that accompanies your fund’s transaction confirmation to U.S. Global Investors.
For purchases into a new fund in which you are not currently invested, please mail your check for the initial investment amount and note the fund name in which you would like to open an account.
For redemptions or exchanges, send your written instructions or redemption authorization form to the address below. Each registered shareholder(s) must sign the request, with the signature(s) appearing exactly as on your account application.
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● |
Regular Mail
|
● |
Overnight Mail
|
The funds do not consider the U.S. Postal Service or other independent delivery services to be its agents. Therefore, deposit in the mail or with such services, or receipt at U.S. Bancorp Fund Services, LLC post office box, of purchase orders and/or redemption requests does not constitute receipt by the transfer agent of the funds.
By Automated Clearing House (ACH) or By Bank Wire
To add to or redeem from your account via wire or ACH, visit our website at www.usfunds.com to download an Account Options Form or call 800-873-8637 to speak with an Investor Representative.
The funds will charge you $25 if a check or ACH investment is returned unpaid due to insufficient funds, stop payment or other reasons, and you will be responsible for any loss incurred by the fund. To recover any such loss or charge, the funds reserve the right to redeem shares of any U.S. Global Investors Funds that you own.
Retirement Account Distributions
For any distribution from a retirement account [traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA], please mail a completed and signed IRA/Qualified Plan Distribution Request Form to the address above.
You may also request a distribution by calling an Investor Representative at 800-873-8637.
The funds do not accept purchase, redemption or exchange instructions via email.
Important Shareholder Information
If your fund shares are purchased, exchanged or redeemed through a broker-dealer or other financial intermediary, the policies and procedures on these purchases, exchanges or redemptions may vary and additional fees or different account minimums may apply. For more information on these fees, check with your broker-dealer or financial intermediary.
Funds’ Rights
The funds reserve the right to:
● |
Reject or restrict purchase, redemption or exchange orders when in the best interest of a fund; |
● |
Limit or discontinue the offering of shares of a fund without notice to the shareholders; |
● |
Calculate the NAV per share and accept purchases, exchange and redemption orders on a business day that the NYSE is closed; |
● |
Require a signature guarantee, from either a Medallion program member or a non-Medallion program member, for transactions or changes in account information; |
● |
Redeem an account with less than the required fund account minimum; |
● |
Restrict or liquidate an account when necessary or appropriate to comply with federal law; |
● |
Charge a fee for any historical information request regarding your fund account. Please call an Investor Representative at 800-873-8637 for more information regarding this fee; |
● |
Accept purchase orders for fund shares; and |
● |
To restrict, or charge fees for, check writing privileges. |
Converting Shares
If you hold Investor Class shares of the World Precious Minerals Fund or the Global Resources Fund (or the Gold and Precious Metals Fund or the Emerging Europe Fund after their Institutional Class Shares open to new investments) and meet the minimum investment requirement for the Institutional Class shares of these funds, you may be eligible to convert your Investor Class shares to Institutional Class
70
shares of the same fund, subject to the discretion of U.S. Global Investors Funds to permit or reject such conversion. Please call an Investor Representative at 1-800-873-8637.
Effective Time and Date
When you make a purchase, redemption or exchange, your transaction price will be the next calculated NAV per share after we receive your transaction request in good order. A fund’s NAV is determined as of the close of the regular trading session (generally 4 p.m. Eastern Time) of the New York Stock Exchange (NYSE) each day it is open. If we receive your transaction request prior to that time, your purchase price will be the NAV per share determined for that day. If we receive your transaction request after that time, the purchase will be effective on the next day the funds are open for business.
When a fund calculates its NAV, it values the securities it holds at market value. Foreign securities are usually valued on the basis of the most recent closing price of the foreign markets on which such securities principally trade. When market quotes are not available or do not fairly represent market value, or if a security’s value has been materially affected by events occurring after the close of a foreign market on which the security principally trades, the securities may be fair valued. Fair value will be determined in good faith using consistently applied procedures that have been approved by the trustees. Money market instruments maturing within 60 days may be valued at amortized cost, if this is determined to approximate market value. Assets and liabilities expressed in foreign currencies are converted into U.S. dollars at the prevailing market rates quoted by one or more banks or dealers at the close of the NYSE.
Certain funds invest in portfolio securities that are primarily listed on foreign exchanges or other markets that trade on weekends and other days when the funds do not price their shares. As a result, the market value of these investments may change on days when you will not be able to purchase or redeem shares.
Transactions received prior to the close of the NYSE by a financial intermediary that has been authorized to accept orders on the funds’ behalf will be deemed accepted by a fund the same day and will be executed at that day’s closing share price. Each financial intermediary’s agreement with the funds permits the financial intermediary to transmit orders received by the financial intermediary prior to the close of regular trading on the NYSE to the funds after that time and allows those orders to be executed at the closing share price calculated on the day the order was received by the financial intermediary.
Purchases of shares require payment by check, wire or ACH at the time the transaction is received in good order.
Use of Fair Value Pricing
When market quotations are readily available for portfolio securities which trade on an exchange or market within the Western Hemisphere, the market values used to price these securities will generally be the closing prices of the securities on the exchange or market on which the securities principally trade. Equity securities primarily traded on an exchange or market outside the Western Hemisphere are generally valued at the price that is an estimate of fair value, as provided by an independent third party.
When market quotations are not readily available or when the Adviser believes that a readily available market quotation is not reliable, fair value pricing procedures will be used to determine the fair valuation. In particular, the funds’ board has determined to fair value certain securities when necessary to, among other things, avoid stale prices and make the funds less attractive to short-term trading. When a security is fair valued, there is no guarantee that the security will be sold at the price at which the fund is carrying the security.
While fair value pricing cannot eliminate the possibility of short-term trading, the Adviser and the board believe it helps protect the interests of the funds.
The Adviser will monitor domestic and foreign markets and news information for any developing events that may have an impact on the valuation of fund securities.
Account Balance
Each fund may assess a quarterly small balance fee of $6 to each shareholder fund account with a balance of less than $5,000 at the time of assessment (except for Government Securities Ultra-Short Bond Fund
71
accounts opened prior to May 1, 2014, which are subject to the small balance fee only if an account has a balance of less than $1,000). Accounts exempt from this fee include: (1) any fund account regularly purchasing additional shares each month through an automatic investment plan (ABC Investment Plan ® ); and (2) any fund account whose registered owner has an aggregate balance of $25,000 or more invested in the funds.
The funds reserve the right to waive, modify or eliminate the small account fees at any time.
Confirmations and Statements
You will receive confirmation after any transaction. The confirmation includes the per share price and the dollar amount and number of shares purchased, redeemed or exchanged. Additionally, you will receive a quarterly statement on all fund accounts.
If you think that your confirmation or statement is incorrect or if you need more information about a transaction on the confirmation or statement, contact us promptly by mail or phone at the address or phone number indicated on the front of the confirmation or statement. To dispute any transaction on your confirmation or statement, you must contact us no later than 60 days after we send you the first confirmation or statement on which the disputed transaction occurred.
Purchase Orders
Investors may purchase additional shares of the funds in the amount of $100 or more by calling 1-800-873-8637. If your account has been open for at least 15 days, telephone orders will be accepted via electronic funds transfer from your bank account through the Automated Clearing House (ACH) network. You must have banking information established on your account prior to making a purchase. If your order is received prior to 4 p.m. Eastern time, your shares will be purchased at the net asset value calculated on that day. If your payment is rejected by your bank, the transfer agent will charge a $25 fee against your account, in addition to any loss sustained by the funds.
Excessive Short-Term Trading
The funds are not intended as short-term investment vehicles but are designed for long-term investing. However, some investors may use short-term trading strategies in an attempt to take an unfair advantage of mutual funds. These investors may trade in and out of strategically targeted mutual funds over a short time period in order to take advantage of the way those funds are managed and/or priced or simply as a trading vehicle that has lower transaction costs.
Mutual fund arbitrage may occur, for example, when a fund has in its portfolio particular holdings, such as foreign or thinly traded securities, that are valued on a basis that does not include the most updated information available. Frequent purchases and redemptions of fund shares may be detrimental to long-term fund investors in numerous ways:
● |
It may lower overall fund performance; |
● |
It may create increased transaction costs to the fund, which are passed along to long-term shareholders; |
● |
Frequent redemptions by market timers may increase taxable capital gains; and |
● |
It may disrupt a portfolio manager’s ability to effectively manage fund assets. |
The funds’ board has adopted policies and procedures with respect to frequent purchases and redemptions of fund shares by fund shareholders. The policies and procedures are designed to discourage, to the extent possible, frequent purchases and redemptions of fund shares by fund shareholders in the funds.
Short-Term Trading Fee
The funds charge a 0.05% fee on the redemption and exchange of fund shares held for 7 days or less. The “first-in first-out” (FIFO) method is used to determine the holding period; this means that if you bought shares on different days, the shares purchased first will be redeemed first for the purpose of determining whether the redemption fee applies. The short-term trading fee is deducted from your proceeds and is retained by each fund.
The short-term trading fees are applicable to fund shares purchased either directly or through a financial intermediary, such as a broker-dealer. Transactions
72
through financial intermediaries typically are placed with a fund on an omnibus basis and include both purchase and sale transactions placed on behalf of multiple investors. These purchase and sale transactions are generally netted against one another and placed on an aggregate basis; consequently, the identities of the individuals on whose behalf the transactions are placed generally are not known to a fund. For this reason, each fund has undertaken to notify financial intermediaries of their obligation to assess the short-term trading fee on customer accounts and to collect and remit the proceeds to the fund. However, there can be no assurance that intermediaries will properly track, calculate or remit the fee in accordance with the fund’s requirements. In addition, the fund may approve a waiver of short-term trading fees in the following circumstances: (i) redemptions of shares held in certain omnibus accounts, including retirement, pension, profit sharing and other qualified plans, as well as bank or trust company accounts; (ii) redemptions of shares held through firm-sponsored, discretionary asset allocation or wrap programs that utilize a regularly scheduled automatic rebalancing of assets and that the fund determines are not designed to facilitate short-term trading; (iii) redemptions of shares due to the death or disability of a shareholder; (iv) redemptions of shares in connection with required distributions and certain other transactions in an individual retirement account or qualified retirement plan; and (v) redemptions of shares by certain other accounts in the absolute discretion of the fund when a shareholder can demonstrate hardship. The funds reserve the right to modify or eliminate these waivers at any time. In addition to the circumstances noted above, the funds reserve the right to grant additional waivers based on such factors as operational limitations, contractual limitations and further guidance from the Securities and Exchange Commission or other regulators.
Omnibus Account
The Adviser has implemented procedures to monitor shareholder activity, including activity at the sub-account and account level for omnibus relationships, to identify potential market timers and to determine whether further action is warranted. There can be no assurance that these monitoring activities will successfully detect or prevent all excessive short-term trading.
It may be difficult to identify whether particular orders placed through banks, brokers, investment representatives or other financial intermediaries may be excessive in frequency and/or amount or otherwise potentially disruptive to an affected fund.
Accordingly, the Adviser may consider all the trades placed in a combined order through a financial intermediary on an omnibus basis as a part of a group and such trades may be restricted in whole or in part.
The Adviser will seek the cooperation of broker-dealers and other third-party intermediaries by requesting information from them regarding the identity of investors who are trading in the funds and by requesting that the intermediary restrict access to a fund by a particular investor.
The Adviser may reject any purchase or exchange from any investor it believes has a history of market timing, or whose trading, in its judgment, has been or may be disruptive to the funds. The Adviser may consider the trading history of accounts under common ownership or control at U.S. Global or at other mutual fund companies to determine whether to restrict future transactions. The delivery of a known market timer’s redemption proceeds may be delayed for up to seven business days or the redemption may be honored with securities rather than cash.
Householding
Unless you instruct the funds otherwise, the funds will mail only one prospectus or shareholder report(s) to your household even if more than one person in your household has an account. If you do not want the mailing of the prospectus and the shareholder report(s) to be combined with other members of your household, please call 1-800-873-8637.
Lost Accounts
It is important that the funds maintain a correct address for each investor. An incorrect address may cause an investor’s account statements and other mailings to be returned to the funds. Based upon statutory requirements for returned mail, the funds will attempt to locate the investor or rightful owner of the account. If the funds are unable to locate the investor, then they will determine whether the investor’s account can legally be considered abandoned. The funds are
73
legally obligated to escheat (or transfer) abandoned property to the appropriate state’s unclaimed property administrator in accordance with statutory requirements. The investor’s last known address of record determines which state has jurisdiction.
All fund shares in an account that has been deemed a lost account may be transferred to the appropriate state if no activity occurs in the account within the time period specified by state escheatment or unclaimed property laws. The fund and the transfer agent will not be liable to the shareholders or their representatives for compliance in good faith with these laws. A signature guarantee, from either a Medallion program member or a non-Medallion program member, may be required to update an account from lost status.
Retirement Plans
The funds are offered through the following Adviser sponsored IRA plans. Shareholders will be charged an annual custodial fee as follows:
Annual Custodial Fee |
|
Traditional IRA |
$15 |
Roth IRA |
$15 |
SEP IRA |
$15 |
SIMPLE IRA |
$15 |
The funds offer many other services, such as payroll deductions, direct deposit and systematic withdrawal plans. Please call an Investor Representative at 800-873-8637 for more information.
Distributions and Taxes
Distributions will automatically be reinvested in fund shares unless you elect to have your distributions paid in cash by check or directly deposited to your bank account of record. The equity funds generally distribute capital gains and income dividends, if any, annually in December, although certain equity funds may at times make distributions on a more frequent basis, such as quarterly or monthly. The Near-Term Tax Free and Government Securities Ultra-Short Bond Funds generally distribute income dividends monthly and capital gains, if any, annually in December.
Dividends and capital gains will automatically be reinvested in your account unless requested to be paid in cash. If you elect to have dividends and/or capital gains distributions paid in cash, the fund will automatically reinvest all distributions under $10 in additional fund shares.
If you elect to receive distributions and/or capital gains paid in cash, and the U.S. Postal Service cannot deliver the check, or if a check remains outstanding for six months, the funds reserve the right to reinvest the distribution check in your account, at the fund’s current net asset value, and to reinvest all subsequent distributions. You will not receive interest on amounts represented by uncashed distribution checks. You may change your distribution option by writing or calling the transfer agent five days prior to the next distribution date.
Taxes to You
Unless you hold your shares in a tax-advantaged account, you will generally owe federal income taxes on amounts paid or distributed to you by the funds (other than distributions of exempt-interest dividends) whether you reinvest the distributions in additional shares or receive them in cash.
Distributions of gains from the sale of assets held by the funds for more than a year generally are taxable to you for federal income tax purposes at the applicable long-term capital gains rate, regardless of how long you have held fund shares. Distributions from other sources, except qualified dividend income and exempt interest, generally are taxed as ordinary income. Distributions of qualified dividend income generally will be taxable to individuals and other noncorporate shareholders at rates applicable to long-term capital gains, provided certain holding period and other requirements are satisfied. Income from the Near-Term Tax Free Fund and the U.S. Government Securities Ultra-Short Bond Fund primarily is derived from investments earning interest rather than dividend income, therefore, generally none or only a small portion of the income dividends paid to shareholders by the fund is anticipated to be qualified dividend income. Additionally, dividends received by the funds from certain foreign corporations are not expected to qualify for treatment as qualified dividend income.
74
It is anticipated that the distributions from the Near-Term Tax Free Fund will primarily consist of interest income that is generally exempt from federal income tax, including the federal alternative minimum tax, although a portion of the fund’s distributions may not be exempt. Even if distributions are exempt from federal income tax, they may be subject to state and local taxes. You also may be subject to tax on any net capital gains realized by the fund.
Dividends declared in October, November or December to shareholders of record as of a date in such month and paid during the following January are treated as if received on December 31 of the calendar year declared. Each year the fund will send you a statement (Form 1099) that will detail distributions made to you for that year.
Dividends, interest and some capital gains received by the funds on foreign securities may be subject to foreign withholding or other foreign taxes. If a fund has more than 50% of the value of its total assets at the close of a taxable year in stock or securities of foreign corporations, the fund may make an election for the year to pass through a shareholder’s pro rata share of such taxes paid by the fund. Shareholders generally will be able to claim a credit or deduction (subject to certain limitations) on their federal income tax returns for, and will be required to treat as part of the amounts distributed to them, their pro rata portion of the foreign taxes paid by the fund. If such an election is not made, any foreign taxes paid or accrued by the fund will represent an expense to the fund.
If you purchase shares of a fund just before the fund declares a dividend or distribution, you will pay the full price for the shares and receive a portion of the purchase price back as a taxable distribution. This is referred to as “buying a dividend.”
Unless you are investing through a tax-advantaged account, a redemption of fund shares is generally considered a taxable event for federal income tax purposes. Depending on the purchase price and the sale price of the shares you redeem, you may have a gain or loss on the transaction. The gain or loss will generally be treated as a long-term capital gain or loss if you held your shares for more than one year. If you held your shares for one year or less, the gain or loss will generally be treated as a short-term capital gain or loss. Short-term capital gain is taxable at ordinary federal income tax rates. Long-term capital gains are taxable to individuals and other noncorporate shareholders at a maximum federal income tax rate of 20%. Shareholders may be limited in their ability to utilize capital losses. Exchanges are treated as a redemption and purchase for federal income tax purposes. Therefore, you will also have a taxable gain or loss upon an exchange unless the exchange is in a tax-advantaged account.
Shareholders should consult with their own tax advisors concerning the federal, state, local and foreign tax consequences of owning fund shares in light of their particular tax situation.
Compared to other types of investments, derivatives may be less tax efficient. For example, the use of derivatives by a fund may cause the fund to realize higher amounts of ordinary income or short-term capital gain, distributions from which are taxable to individual shareholders at ordinary income tax rates rather than at the more favorable tax rates for long-term capital gains. Changes in government regulation of derivative instruments could affect the character, timing and amount of a fund’s taxable income or gains, and may limit or prevent the fund from using certain types of derivative instruments as a part of its investment strategy. A fund’s use of derivatives also may be limited by the requirements for taxation of the fund as a regulated investment company.
An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from a fund and net gains from redemptions or other taxable dispositions of fund shares) of U.S. individuals, estates and trusts to the extent that such person’s “modified adjusted gross income” (in the case of an individual) or “adjusted gross income” (in the case of an estate or trust) exceeds a threshold amount. Net investment income does not include exempt-interest dividends. This Medicare tax, if applicable, is reported by you on and paid with your federal income tax return.
Tax regulations require that cost basis information be provided to you and the Internal Revenue Service (IRS) when shares that are purchased on or after January 1, 2012 (known as covered shares) are sold from taxable accounts. Unless you instruct otherwise,
75
we will use our default method of average cost to report the cost basis and will sell uncovered shares (shares purchased on or before December 31, 2011) before covered shares. Pursuant to IRS regulations, changes to or from the average cost method must be submitted in writing or online via our website, www.usfunds.com. Once a redemption occurs, you must contact us no later than 60 days after we send you the first confirmation or statement to dispute the method used to report the transaction.
When you open an account, IRS regulations require that you provide your taxpayer identification number (TIN), certify that it is correct and certify that you are not subject to backup withholding under IRS regulations. If you fail to provide your TIN or the proper tax certifications, each fund is required to withhold 28% of all the distributions (including dividends—which includes exempt-interest dividends—and capital gain distributions) and redemption proceeds paid to you. Each fund is also required to begin backup withholding on your account if the IRS instructs it to do so. Amounts withheld may be applied to your federal income tax liability and you may obtain a refund from the IRS if withholding results in an overpayment of federal income tax for such year.
Non-U.S. investors may be subject to U.S. withholding tax at a 30% or lower treaty rate and U.S. estate tax and are subject to special U.S. tax certification requirements to avoid backup withholding and claim any treaty benefits. Exemptions from U.S. withholding tax are provided for certain capital gain dividends paid by a fund from net long-term capital gains, exempt interest dividends, interest-related dividends and short-term capital gain dividends, if such amounts are reported by a fund. However, notwithstanding such exemptions from U.S. withholding at the source, any such dividends and distributions of income and capital gains will be subject to backup withholding at a rate of 28% if you fail to properly certify that you are not a U.S. person.
Under the Foreign Account Tax Compliance Act (“FATCA”), a fund will be required to withhold a 30% tax on the following payments or distributions made by the fund to certain foreign entities, referred to as foreign financial institutions or non-financial foreign entities, that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts: (a) income dividends and (b) after Dec. 31, 2018, certain capital gain distributions, return of capital distributions and the proceeds arising from the sale of fund shares. A fund may disclose the information that it receives from its shareholders to the IRS, non-U.S. taxing authorities or other parties as necessary to comply with FATCA or similar laws. Withholding also may be required if a foreign entity that is a shareholder of a fund fails to provide the fund with appropriate certifications or other documentation concerning its status under FATCA.
Distribution Plan
The U.S. Global Investors Funds have adopted Rule 12b-1 plans with respect to the Investor Class shares for the following funds: All American Equity Fund, Holmes Macro Trends Fund, Gold and Precious Metals Fund, World Precious Minerals Fund, Global Resources Fund, Emerging Europe Fund and China Region Fund. The 12b-1 plan provides 0.25% to be paid by a fund’s Investor Class shares to the Distributor to pay the Distributor, its affiliates and others for distribution and promotional expenses. Because this fee is continually paid out of the assets of each fund’s Investor Class shares, over time it will increase the cost of your investment and may potentially cost you more than other types of sales charges.
76
Financial Highlights
The tables below are intended to show you each fund’s financial performance for the Investor Class for the past five years. Some of the information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned (or lost) on an investment in each fund. It assumes that all dividends and capital gains have been reinvested.
The information presented below has been audited by KPMG LLP, an independent registered public accounting firm. Their report and each fund’s financial statements are included in the annual report, which is available upon request.
All American Equity Fund
For a capital share outstanding during the
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Net asset value, beginning of year |
$ |
27.84 |
$ |
32.18 |
$ |
25.40 |
$ |
22.72 |
$ |
22.72 |
||||||||||
Investment Activities |
||||||||||||||||||||
Net investment income (loss) |
.09 |
(.16 |
) |
(.12 |
) |
.07 |
(.07 |
) |
||||||||||||
Net realized and unrealized gain (loss) |
(1.23 |
) |
.84 |
9.08 |
2.61 |
.10 |
||||||||||||||
Total from investment activities |
(1.14 |
) |
.68 |
8.96 |
2.68 |
.03 |
||||||||||||||
Distributions |
||||||||||||||||||||
From net investment income |
(.06 |
) |
— |
(.07 |
) |
— |
(.03 |
) |
||||||||||||
From net realized gains |
(3.04 |
) |
(5.02 |
) |
(2.11 |
) |
— |
— |
||||||||||||
Total distributions |
(3.10 |
) |
(5.02 |
) |
(2.18 |
) |
— |
(.03 |
) |
|||||||||||
Short -Term Trading Fees* (a) |
— |
— |
— |
— |
— |
|||||||||||||||
Net asset value, end of year |
$ |
23.60 |
$ |
27.84 |
$ |
32.18 |
$ |
25.40 |
$ |
22.72 |
||||||||||
Total Return (excluding account fees) (b) |
(4.20 |
)% |
1.94 |
% |
35.55 |
% |
11.80 |
% |
0.14 |
% |
||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Net investment income (loss) |
.31 |
% |
(.54 |
)% |
(.45 |
)% |
.28 |
% |
(.32 |
)% |
||||||||||
Total expenses |
1.94 |
% |
2.16 |
% |
2.44 |
% |
2.72 |
% |
2.42 |
% |
||||||||||
Expenses waived or reimbursed (c) |
(.02 |
)% |
(.03 |
)% |
(.28 |
)% |
(.52 |
)% |
(.24 |
)% |
||||||||||
Net expenses (d) |
1.92 |
% |
2.13 |
% |
2.16 |
% |
2.20 |
% |
2.18 |
% |
||||||||||
Portfolio turnover rate |
109 |
%(f) |
253 |
% |
150 |
% |
221 |
% |
223 |
% |
||||||||||
Net assets, end of year (in thousands) |
$ |
19,117 |
$ |
21,936 |
$ |
23,388 |
$ |
16,846 |
$ |
16,399 |
* |
Based on average monthly shares outstanding. |
(a) |
The per share amount does not round to a full penny. |
(b) |
Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. |
(c) |
Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, and decrease total returns had such reductions not occurred. |
77
(d) |
The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income (loss) ratio had such reductions not occurred. The effect of expenses offset are as follows: |
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Expense offset (e) |
— |
— |
— |
— |
— |
(e) |
Effect on the expense ratio was not greater than 0.005%. |
(f) |
Excludes option transactions. |
78
Holmes Macro Trends Fund
For a capital share outstanding during the
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Net asset value, beginning of year |
$ |
20.25 |
$ |
24.24 |
$ |
18.51 |
$ |
17.62 |
$ |
18.65 |
||||||||||
Investment Activities |
||||||||||||||||||||
Net investment loss |
(.11 |
) |
(.26 |
) |
(.18 |
) |
(.10 |
) |
(.26 |
) |
||||||||||
Net realized and unrealized gain (loss) |
(.06 |
) |
(1.36 |
) |
7.42 |
1.29 |
(.77 |
) |
||||||||||||
Total from investment activities |
(.17 |
) |
(1.62 |
) |
7.24 |
1.19 |
(1.03 |
) |
||||||||||||
Distributions from net realized gains |
(1.49 |
) |
(2.37 |
) |
(1.51 |
) |
(.30 |
) |
— |
|||||||||||
Short -Term Trading Fees*(a) |
— |
— |
— |
— |
— |
|||||||||||||||
Net asset value, end of year |
$ |
18.59 |
$ |
20.25 |
$ |
24.24 |
$ |
18.51 |
$ |
17.62 |
||||||||||
Total Return (excluding account fees) (b) |
(.94 |
)% |
(6.74 |
)% |
39.38 |
% |
6.77 |
% |
(5.52 |
)% |
||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Net investment loss |
(.55 |
)% |
(1.17 |
)% |
(1.11 |
)% |
(.51 |
)% |
(1.25 |
)% |
||||||||||
Total expenses |
1.81 |
% |
1.94 |
% |
2.00 |
% |
1.85 |
% |
2.00 |
% |
||||||||||
Expenses waived or reimbursed (c) |
— |
— |
(.04 |
)% |
—(e |
) |
— |
|||||||||||||
Net expenses (d) |
1.81 |
% |
1.94 |
% |
1.96 |
% |
1.85 |
% |
2.00 |
% |
||||||||||
Portfolio turnover rate |
320 |
%(f) |
183 |
%(f) |
109 |
% |
214 |
% |
210 |
% |
||||||||||
Net assets, end of year (in thousands) |
$ |
41,135 |
$ |
46,250 |
$ |
55,926 |
$ |
34,639 |
$ |
35,316 |
* |
Based on average monthly shares outstanding. |
(a) |
The per share amount does not round to a full penny. |
(b) |
Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. |
(c) |
Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, and decrease total returns had such reductions not occurred. |
(d) |
The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income ratio had such reductions not occurred. The effect of expenses offset are as follows: |
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Expense offset (e) |
— |
— |
— |
— |
— |
(e) |
Effect on the expense ratio was not greater than 0.005%. |
(f) |
Excludes option transactions. |
79
Gold and Precious Metals Fund
For a capital share outstanding during the
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Net asset value, beginning of year |
$ |
5.16 |
$ |
6.00 |
$ |
11.78 |
$ |
12.61 |
$ |
19.60 |
||||||||||
Investment Activities |
||||||||||||||||||||
Net investment loss |
(.04 |
) |
(.05 |
) |
(.06 |
) |
(.09 |
) |
(.17 |
) |
||||||||||
Net realized and unrealized loss |
(.21 |
) |
(.79 |
) |
(5.72 |
) |
(.72 |
) |
(4.28 |
) |
||||||||||
Total from investment activities |
(.25 |
) |
(.84 |
) |
(5.78 |
) |
(.81 |
) |
(4.45 |
) |
||||||||||
Distributions |
||||||||||||||||||||
From net investment income |
(.02 |
) |
— |
— |
(.02 |
) |
— |
|||||||||||||
From net realized gains |
— |
— |
— |
— |
(2.54 |
) |
||||||||||||||
Total distributions |
(.02 |
) |
— |
— |
(.02 |
) |
(2.54 |
) |
||||||||||||
Short -Term Trading Fees* (a) |
— |
— |
— |
— |
— |
|||||||||||||||
Net asset value, end of year |
$ |
4.89 |
$ |
5.16 |
$ |
6.00 |
$ |
11.78 |
$ |
12.61 |
||||||||||
Total Return (excluding account fees) (b) |
(4.78 |
)% |
(14.00 |
)% |
(49.07 |
)% |
(6.44 |
)% |
(23.97 |
)% |
||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Net investment loss |
(.83 |
)% |
(.67 |
)% |
(.48 |
)% |
(.60 |
)% |
(1.06 |
)% |
||||||||||
Total expenses |
2.13 |
% |
1.93 |
% |
2.12 |
% |
1.61 |
% |
1.56 |
% |
||||||||||
Expenses waived or reimbursed (c) |
(.08 |
)% |
(.05 |
)% |
(.06 |
)% |
— |
— |
||||||||||||
Net expenses (d) |
2.05 |
% |
1.88 |
% |
2.06 |
% |
1.61 |
% |
1.56 |
% |
||||||||||
Portfolio turnover rate |
106 |
%(f) |
99 |
%(f) |
64 |
% |
95 |
% |
155 |
% |
||||||||||
Net assets, end of year (in thousands) |
$ |
58,298 |
$ |
62,777 |
$ |
74,627 |
$ |
166,524 |
$ |
195,087 |
* |
Based on average monthly shares outstanding. |
(a) |
The per share amount does not round to a full penny. |
(b) |
Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. |
(c) |
Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, and decrease total returns had such reductions not occurred. |
(d) |
The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment loss ratio had such reductions not occurred. The effect of expenses offset are as follows: |
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Expense offset (e) |
— |
— |
— |
— |
— |
(e) |
Effect on the expense ratio was not greater than 0.005%. |
(f) |
Excludes option transactions. |
80
World Precious Minerals Fund
For a capital share outstanding during the
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Net asset value, beginning of year |
$ |
4.75 |
$ |
5.69 |
$ |
11.70 |
$ |
13.18 |
$ |
22.28 |
||||||||||
Investment Activities |
||||||||||||||||||||
Net investment loss |
(.03 |
)* |
(.06 |
)* |
(.07 |
)* |
(.11 |
)* |
(.32 |
) |
||||||||||
Net realized and unrealized loss |
(.72 |
)* |
(.88 |
)* |
(5.94 |
)* |
(1.37 |
)* |
(6.76 |
) |
||||||||||
Total from investment activities |
(.75 |
) |
(.94 |
) |
(6.01 |
) |
(1.48 |
) |
(7.08 |
) |
||||||||||
Distributions from net investment income |
(.36 |
) |
— |
— |
— |
(2.02 |
) |
|||||||||||||
Short -Term Trading Fees*(a) |
— |
— |
— |
— |
— |
|||||||||||||||
Net asset value, end of year |
$ |
3.64 |
$ |
4.75 |
$ |
5.69 |
$ |
11.70 |
$ |
13.18 |
||||||||||
Total Return (excluding account fees) (b) |
(15.64 |
)% |
(16.52 |
)% |
(51.37 |
)% |
(11.23 |
)% |
(32.58 |
)% |
||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Net investment loss |
(.71 |
)% |
(.91 |
)% |
(.90 |
)% |
(.85 |
)% |
(1.43 |
)% |
||||||||||
Total expenses |
1.96 |
% |
1.99 |
% |
1.85 |
% |
1.45 |
% |
1.67 |
% |
||||||||||
Expenses waived or reimbursed (c) |
(.15 |
)% |
(.03 |
)% |
(.02 |
)% |
— |
— |
||||||||||||
Net expenses (d) |
1.81 |
% |
1.96 |
% |
1.83 |
% |
1.45 |
% |
1.67 |
% |
||||||||||
Portfolio turnover rate (f) |
71 |
%(g) |
61 |
%(g) |
34 |
% |
44 |
% |
96 |
% |
||||||||||
Net assets, end of year (in thousands) |
$ |
78,150 |
$ |
103,413 |
$ |
134,065 |
$ |
319,052 |
$ |
436,504 |
* |
Based on average monthly shares outstanding. |
(a) |
The per share amount does not round to a full penny. |
(b) |
Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. |
(c) |
Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, and decrease total returns had such reductions not occurred. |
(d) |
The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income ratio had such reductions not occurred. The effect of expenses offset are as follows: |
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Expense offset (e) |
— |
— |
— |
— |
— |
(e) |
Effect on the expense ratio was not greater than 0.005%. |
(f) |
Portfolio turnover rate is calculated at the fund level. |
(g) |
Excludes option transactions. |
81
Global Resources Fund
For a capital share outstanding during the
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Net asset value, beginning of year |
$ |
6.67 |
$ |
9.36 |
$ |
9.79 |
$ |
9.36 |
$ |
11.91 |
||||||||||
Investment Activities |
||||||||||||||||||||
Net investment income (loss) |
.10 |
* |
.04 |
* |
.02 |
* |
.04 |
* |
(.19 |
) |
||||||||||
Net realized and unrealized gain (loss) |
(2.00 |
)* |
(2.73 |
)* |
(.10 |
)* |
.61 |
* |
(2.02 |
) |
||||||||||
Total from investment activities |
(1.90 |
) |
(2.69 |
) |
(.08 |
) |
.65 |
(2.21 |
) |
|||||||||||
Distributions from net investment income |
(.05 |
) |
— |
(.35 |
) |
(.22 |
) |
(.34 |
) |
|||||||||||
Short -Term Trading Fees*(a) |
— |
— |
— |
— |
— |
|||||||||||||||
Net asset value, end of year |
$ |
4.72 |
$ |
6.67 |
$ |
9.36 |
$ |
9.79 |
$ |
9.36 |
||||||||||
Total Return (excluding account fees) (b) |
(28.43 |
)% |
(28.74 |
)% |
(.72 |
)% |
6.93 |
% |
(18.69 |
)% |
||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Net investment income (loss) |
1.72 |
% |
.44 |
% |
.16 |
% |
.44 |
% |
(.79 |
)% |
||||||||||
Total expenses |
1.58 |
% |
1.45 |
% |
1.59 |
% |
1.57 |
% |
1.72 |
% |
||||||||||
Expenses waived or reimbursed (c) |
(.06 |
)% |
—(e |
) |
— |
— |
— |
|||||||||||||
Net expenses (d) |
1.52 |
% |
1.45 |
% |
1.59 |
% |
1.57 |
% |
1.72 |
% |
||||||||||
Portfolio turnover rate (f) |
445 |
%(g) |
444 |
%(g) |
138 |
% |
117 |
% |
232 |
% |
||||||||||
Net assets, end of year (in thousands) |
$ |
98,126 |
$ |
171,673 |
$ |
326,320 |
$ |
438,372 |
$ |
551,793 |
* |
Based on average monthly shares outstanding. |
(a) |
The per share amount does not round to a full penny. |
(b) |
Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. |
(c) |
Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, and decrease total returns had such reductions not occurred. |
(d) |
The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income ratio had such reductions not occurred. The effect of expenses offset are as follows: |
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Expense offset (e) |
— |
— |
— |
— |
— |
(e) |
Effect on the expense ratio was not greater than 0.005%. |
(f) |
Portfolio turnover is calculated at the fund level. |
(g) |
Excludes option transactions. |
82
Emerging Europe Fund
For a capital share outstanding during the
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Net asset value, beginning of year |
$ |
6.56 |
$ |
8.82 |
$ |
9.23 |
$ |
7.79 |
$ |
10.81 |
||||||||||
Investment Activities |
||||||||||||||||||||
Net investment income |
.04 |
.06 |
.19 |
.15 |
.03 |
|||||||||||||||
Net realized and unrealized gain (loss) |
(1.40 |
) |
(2.11 |
) |
(.46 |
) |
1.35 |
(3.05 |
) |
|||||||||||
Total from investment activities |
(1.36 |
) |
(2.05 |
) |
(.27 |
) |
1.50 |
(3.02 |
) |
|||||||||||
Distributions from net investment income |
— |
(.21 |
) |
(.14 |
) |
(.06 |
) |
— |
||||||||||||
Short -Term Trading Fees*(a) |
— |
— |
— |
— |
— |
|||||||||||||||
Net asset value, end of year |
$ |
5.20 |
$ |
6.56 |
$ |
8.82 |
$ |
9.23 |
$ |
7.79 |
||||||||||
Total Return (excluding account fees) (b) |
(20.73 |
)% |
(23.22 |
)% |
(2.93 |
)% |
19.27 |
% |
(27.94 |
)% |
||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Net investment income |
.63 |
% |
.23 |
% |
1.59 |
% |
1.39 |
% |
.25 |
% |
||||||||||
Total expenses |
2.60 |
% |
2.28 |
% |
2.13 |
% |
2.15 |
% |
1.98 |
% |
||||||||||
Expenses waived or reimbursed (c) |
— |
— |
— |
— |
— |
|||||||||||||||
Net expenses (d) |
2.60 |
% |
2.28 |
% |
2.13 |
% |
2.15 |
% |
1.98 |
% |
||||||||||
Portfolio turnover rate |
137 |
%(f) |
93 |
%(f) |
74 |
% |
85 |
% |
85 |
% |
||||||||||
Net assets, end of year (in thousands) |
$ |
44,666 |
$ |
69,066 |
$ |
122,570 |
$ |
173,687 |
$ |
193,599 |
* |
Based on average monthly shares outstanding. |
(a) |
The per share amount does not round to a full penny. |
(b) |
Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. |
(c) |
Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, and decrease total returns had such reductions not occurred. |
(d) |
The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income (loss) ratio had such reductions not occurred. The effect of expenses offset are as follows: |
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Expense offset (e) |
— |
— |
— |
— |
— |
(e) |
Effect on the expense ratio was not greater than 0.005%. |
(f) |
Excludes option transactions. |
83
China Region Fund
For a capital share outstanding during the
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Net asset value, beginning of year |
$ |
8.20 |
$ |
8.28 |
$ |
7.61 |
$ |
6.81 |
$ |
9.47 |
||||||||||
Investment Activities |
||||||||||||||||||||
Net investment income (loss) |
.02 |
— |
(a) |
(.01 |
) |
.04 |
(.08 |
) |
||||||||||||
Net realized and unrealized gain (loss) |
(.72 |
) |
(.08 |
) |
.70 |
.78 |
(2.59 |
) |
||||||||||||
Total from investment activities |
(.70 |
) |
(.08 |
) |
.69 |
.82 |
(2.67 |
) |
||||||||||||
Distributions from net investment income |
(.09 |
) |
— |
(.02 |
) |
(.02 |
) |
— |
||||||||||||
Short -Term Trading Fees* |
— |
(a) |
— |
(a) |
— |
(a) |
— |
(a) |
.01 |
|||||||||||
Net asset value, end of year |
$ |
7.41 |
$ |
8.20 |
$ |
8.28 |
$ |
7.61 |
$ |
6.81 |
||||||||||
Total Return (excluding account fees) (b) |
(8.60 |
)% |
(.97 |
)% |
9.07 |
% |
12.00 |
% |
(28.09 |
)% |
||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Net investment income (loss) |
.24 |
% |
.08 |
% |
(.12 |
)% |
.60 |
% |
(.64 |
)% |
||||||||||
Total expenses |
3.03 |
% |
2.94 |
% |
2.75 |
% |
2.64 |
% |
2.49 |
% |
||||||||||
Expenses waived or reimbursed (c) |
(.51 |
)% |
(.43 |
)% |
(.37 |
)% |
(.39 |
)% |
(.08 |
)% |
||||||||||
Net expenses (d) |
2.52 |
% |
2.51 |
% |
2.38 |
% |
2.25 |
% |
2.41 |
% |
||||||||||
Portfolio turnover rate |
210 |
%(f) |
235 |
%(f) |
201 |
% |
374 |
% |
426 |
% |
||||||||||
Net assets, end of year (in thousands) |
$ |
16,183 |
$ |
21,008 |
$ |
26,386 |
$ |
29,160 |
$ |
30,635 |
* |
Based on average monthly shares outstanding. |
(a) |
The per share amount does not round to a full penny. |
(b) |
Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. |
(c) |
Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, and decrease total returns had such reductions not occurred. |
(d) |
The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income ratio had such reductions not occurred. The effect of expenses offset are as follows: |
Investor Class |
|||||
Year Ended December 31, |
|||||
2015 |
2014 |
2013 |
2012 |
2011 |
|
Ratios to Average Net Assets: |
|||||
Expense offset (e) |
— |
— |
— |
— |
— |
(e) |
Effect on the expense ratio was not greater than 0.005%. |
(f) |
Excludes option transactions. |
84
Near-Term Tax Free Fund
For a capital share outstanding during the
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Net asset value, beginning of year |
$ |
2.25 |
$ |
2.23 |
$ |
2.27 |
$ |
2.26 |
$ |
2.22 |
||||||||||
Investment Activities |
||||||||||||||||||||
Net investment income |
.03 |
.05 |
.05 |
.05 |
.05 |
|||||||||||||||
Net realized and unrealized gain (loss) |
— |
(f) |
.02 |
(.04 |
) |
.01 |
.04 |
|||||||||||||
Total from investment activities |
.03 |
.07 |
.01 |
.06 |
.09 |
|||||||||||||||
Distributions from net investment income |
(.03 |
) |
(.05 |
) |
(.05 |
) |
(.05 |
) |
(.05 |
) |
||||||||||
Net asset value, end of year |
$ |
2.25 |
$ |
2.25 |
$ |
2.23 |
$ |
2.27 |
$ |
2.26 |
||||||||||
Total Return (excluding account fees) (a) |
1.45 |
% |
3.07 |
% |
0.31 |
% |
2.67 |
% |
4.24 |
% |
||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Net investment income |
1.52 |
% |
2.13 |
% |
2.08 |
% |
2.21 |
% |
2.39 |
% |
||||||||||
Total expenses |
1.09 |
% |
1.08 |
% |
1.21 |
% |
1.25 |
% |
1.26 |
% |
||||||||||
Expenses waived or reimbursed (b) |
(.64 |
)% |
(.63 |
)% |
(.76 |
)% |
(.80 |
)% |
(.81 |
)% |
||||||||||
Net expenses (c) |
.45 |
% |
.45 |
% |
.45 |
% |
.45 |
% |
.45 |
% |
||||||||||
Portfolio turnover rate |
15 |
% |
12 |
% |
6 |
% |
7 |
% |
— |
(d) |
||||||||||
Net assets, end of year (in thousands) |
$ |
106,769 |
$ |
89,595 |
$ |
61,884 |
$ |
44,509 |
$ |
35,014 |
(a) |
Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. |
(b) |
Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, and decrease total returns had such reductions not occurred. |
(c) |
The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income ratio had such reductions not occurred. The effect of expenses offset are as follows: |
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Expense offset (e) |
— |
— |
— |
— |
— |
(d) |
Portfolio turnover rate was not greater than 0.5%. |
(e) |
Effect on the expense ratio was not greater than 0.005%. |
(f) |
The per share amount does not round to a full penny. |
85
U.S. Government Securities Ultra-Short Bond Fund
For a capital share outstanding during the
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
* |
2012 |
* |
2011 |
* |
|||||||||||||
Net asset value, beginning of year |
$ |
2.00 |
$ |
2.00 |
$ |
2.00 |
$ |
2.00 |
$ |
2.00 |
||||||||||
Investment Activities |
||||||||||||||||||||
Net investment income |
.01 |
.01 |
— |
(a) |
— |
(a) |
— |
(a) |
||||||||||||
Net realized and unrealized gain |
— |
(a) |
— |
(a) |
— |
(a) |
— |
— |
||||||||||||
Total from investment activities |
.01 |
.01 |
— |
— |
— |
|||||||||||||||
Distributions |
||||||||||||||||||||
From net investment income |
(.01 |
) |
(.01 |
) |
— |
(a) |
— |
(a) |
— |
(a) |
||||||||||
From net realized gains |
— |
(a) |
— |
— |
— |
— |
||||||||||||||
Net asset value, end of year |
$ |
2.00 |
$ |
2.00 |
$ |
2.00 |
$ |
2.00 |
$ |
2.00 |
||||||||||
Total Return (excluding account fees) (b) |
.34 |
% |
.36 |
% |
.02 |
% |
.01 |
% |
.01 |
% |
||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Net investment income |
.33 |
% |
.35 |
% |
.01 |
% |
.01 |
% |
.01 |
% |
||||||||||
Total expenses |
1.13 |
% |
1.07 |
% |
.97 |
% |
.87 |
% |
.81 |
% |
||||||||||
Expenses waived or reimbursed (c) |
(.68 |
)% |
(.74 |
)% |
(.91 |
)% |
(.74 |
)% |
(.74 |
)% |
||||||||||
Net expenses (d) |
.45 |
% |
.33 |
% |
.06 |
% |
.13 |
% |
.07 |
% |
||||||||||
Portfolio turnover rate (e) |
60 |
% |
33 |
% |
||||||||||||||||
Net assets, end of year (in thousands) |
$ |
62,562 |
$ |
64,020 |
$ |
75,227 |
$ |
140,425 |
$ |
171,664 |
* |
The per share amounts for the periods have been adjusted to reflect a 1-for-2 reverse stock split, which was effective December 20, 2013. In addition, on December 20, 2013, the Fund changed from a constant $1.00 net asset value per share money market fund to a U.S. Government ultra-short bond fund (that is not a money market fund) with an objective of total return with current income. |
(a) |
The per share amount does not round to a full penny. |
(b) |
Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. |
(c) |
Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, and decrease total returns had such reductions not occurred. During 2011, 2012 and 2013, the Adviser waived fees and/or reimbursed expenses under the Minimum Yield Agreement in the amount of $736,531, $509,874 and $498,342, respectively. The waivers/reimbursements from 2013 are subject to recapture in 2016. |
(d) |
The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income ratio had such reductions not occurred. The effect of expenses offset are as follows: |
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
* |
2012 |
* |
2011 |
* |
|||||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Expense offset (f) |
— |
— |
— |
— |
— |
(e) |
Portfolio turnover is not shown for periods that the Fund was a money market fund. |
(f) |
Effect on the expense ratio was not greater than 0.005%. |
86
Additional Information about the Indexes
Returns for indexes reflect no deduction for fees, expenses or taxes, unless noted.
The Barclays U.S. Treasury Bills 6-9 Months Total Return Index tracks the performance of U.S. Treasury Bills with a maturity of six to nine months.
The Barclays 3-Year Municipal Bond Index is a total return benchmark designed for municipal assets. The index includes bonds with a minimum credit rating of BAA3, are issued as part of a deal of at least $50 million, have an amount outstanding of at least $5 million and have a maturity of two to four years.
The FTSE Gold Mines Index encompasses all gold mining companies that have a sustainable and attributable gold production of at least 300,000 ounces a year and that derive 75% or more of their revenue from mined gold.
The Hang Seng Composite Index is a market-capitalization weighted index that covers about 95% of the total market capitalization of companies listed on the Main Board of the Hong Kong Stock Exchange.
The MSCI All Country Far East Free ex Japan Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of the Far East, excluding Japan. The index consists of the following developed and emerging market country indices: China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand.
The MSCI Emerging Markets Europe 10/40 Index (Net Total Return) is a free float-adjusted market capitalization index that is designed to measure equity performance in the emerging market countries of Europe (Czech Republic, Greece, Hungary, Poland, Russia and Turkey). The index is calculated on a net return basis (i.e., reflects the minimum possible dividend reinvestment after deduction of the maximum rate withholding tax). The index is periodically rebalanced relative to the constituents’ weights in the parent index.
The NYSE Arca Gold Miners Index is a modified market capitalization-weighted index comprised of publicly-traded companies involved primarily in the mining for gold and silver.
The S&P Global Natural Resources Index (Net Total Return) includes 90 of the largest publicly-traded companies in natural resources and commodities businesses that meet specific investability requirements, offering investors diversified and investable equity exposure across 3 primary commodity-related sectors: agribusiness, energy, and metals & mining. The index is calculated on a net return basis (i.e., reflects the minimum possible dividend reinvestment after deduction of the maximum rate withholding tax).
The S&P 500 Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.
The S&P Composite 1500 Index is a broad-based capitalization-weighted index of 1500 U.S. companies and is comprised of the S&P 400, S&P 500 and the S&P 600.
87
More information on the funds is available at no charge, upon request:
Annual/Semi-Annual Report
Additional information about the funds’ investments is available in the funds’ annual and semi-annual reports to shareholders, which are available free of charge on the funds’ website at www.usfunds.com. These reports describe the funds’ performance, list holdings, and describe recent market conditions, fund investment strategies and other factors that had a significant impact on each fund’s performance during the last fiscal year.
Statement of Additional Information (SAI)
More information about the funds, their investment strategies, and related risks is provided in the SAI. The SAI and the funds’ website (www.usfunds.com) include a description of the funds’ policy with respect to the disclosure of portfolio holdings. There can be no guarantee that the funds will achieve their objectives. The current SAI is on file with the SEC and is legally considered a part of this prospectus and is available free of charge on the funds’ website at www.usfunds.com.
To Request Information:
BY PHONE |
1-800-873-8637 |
BY MAIL |
●
Regular Mail
●
Overnight Mail
|
BY INTERNET |
www.usfunds.com |
The SEC also maintains an EDGAR database at http://www.sec.gov that contains the Statement of Additional Information, material incorporated by reference and other information that the funds file electronically with the SEC. You may also visit or call the SEC’s Public Reference Room in Washington, D.C. (1-202-551-8090) or send a request plus a duplicating fee to the SEC, Public Reference Section, Washington, D.C. 20549-1520 or by electronic request at the following e-mail address: publicinfo@sec.gov.
|
U.S. GLOBAL INVESTORS FUNDS
U.S. GLOBAL INVESTORS, INC.
|
88
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|
Fund Services, LLC
|
|
Institutional Class Shares
Prospectus |
|
May 1, 2016 |
||
These securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. |
U.S. Global Investors Funds
Gold and Natural Resources Funds Gold and Precious Metals Fund (USEIX) World Precious Minerals Fund (UNWIX) Global Resources Fund (PIPFX) |
Emerging Market Fund Emerging Europe Fund (EURIX) |
Table Of Contents
Summary Section Gold and Natural Resources Funds |
|
Gold and Precious Metals Fund* |
1 |
World Precious Minerals Fund |
7 |
Global Resources Fund |
12 |
Summary Section Emerging Market Fund |
|
Emerging Europe Fund* |
17 |
Investment Objectives, Principal Investment Strategies and Related Risks |
|
Gold and Precious Metals Fund |
23 |
World Precious Minerals Fund |
23 |
Global Resources Fund |
23 |
Emerging Europe Fund |
29 |
Common Investment Practices and Related Risks |
35 |
Portfolio Holdings |
37 |
Fund Management |
37 |
Shareholder Information |
|
Opening an Account |
39 |
Funding an Account |
40 |
Minimum Investment |
40 |
How to Purchase, Redeem and Exchange Shares |
40 |
Important Shareholder Information |
42 |
Distributions and Taxes |
45 |
Financial Highlights |
48 |
* The Institutional Class shares of the Gold and Precious Metals and Emerging Europe Funds have not commenced operations and currently are closed to investors. A notice will be issued when each class commences operations and opens to investors.
Summary Section
Gold and Precious Metals Fund
Investment Objective
The Gold and Precious Metals Fund seeks long-term growth of capital plus protection against inflation and monetary instability. The fund also pursues current income as a secondary objective.
Fees and Expenses of the Fund
The following table describes the fees and expenses that you may pay if you buy and hold Institutional Class shares of the fund.
Shareholder Fees
|
|
Maximum sales charge |
None |
Redemption fee (as a percentage of amount redeemed, as applicable, on fund shares held 7 days or less) |
0.05% |
Annual Fund Operating Expenses
|
|
Management fee (a) |
0.90% |
Distribution and/or service (12b-1) fees |
None |
Other expenses (b) |
0.62% |
Acquired fund fees and expenses |
0.07% |
Total annual fund operating expenses |
1.59% |
(a) |
A performance fee adjustment may increase or decrease the management fee by up to +/- 0.25% of the average net assets of the fund during a rolling 12-month period. The performance adjustment is calculated by comparing the performance of the Institutional Class shares of the fund during the relevant performance period to that of the FTSE Gold Mines Index. For purposes of calculating the performance adjustment, the performance will include the performance of the Investor Class shares of the fund for the first 12 months after the commencement of operations of the Institutional Class shares of the fund. |
(b) |
Other expenses are based on estimates for the current fiscal year. |
Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Institutional Class of the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% annual return and the fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your cost would be:
1 Year |
3 Years |
5 Years |
10 Years |
$162 |
$502 |
$866 |
$1,889 |
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes where fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. The Institutional Class shares of the fund have no operating history. The Investor Class shares of the fund, which are invested in the same portfolio of securities, had a portfolio turnover rate of 106% for the fiscal year ended December 31, 2015.
Principal Investment Strategies
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in countries, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
Under normal market conditions, the Gold and Precious Metals Fund will invest at least 80% of its net assets in equity and equity-related securities of companies principally involved in the mining, fabrication, processing, marketing or distribution of precious metals including gold, silver, platinum group, palladium and diamonds. The fund may invest in these precious metals directly and/or in equity and
1
equity-related securities, such as exchange-traded funds (“ETFs”) that represent interests in, or related to, these precious metals. The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs). The fund also participates in private placements, initial public offerings (IPOs), and long-term equity anticipation securities (LEAPS).
The fund may invest in warrants to gain exposure to individual securities in the gold and precious metals industry over the long term. Warrants allow the fund to imitate a purchase or sale of a stock for a fraction of its price (premium) and hold that option for a long period of time before it expires. The fund may also receive warrants when it participates in a private placement. The issuer of the private placement may provide a warrant as an incentive for investing in the initial financing of the company.
The fund focuses on selecting companies with established producing mines that have large deposits that create a significant stream of cash flow. Senior mining companies that have proven reserves are more strongly influenced by the price of gold. Although the fund focuses its investments on senior mining companies, the fund may invest in junior and intermediate mining companies. Junior mining companies typically have small market capitalization and no source of steady cash flow, and their growth generally comes from a major mining discovery. Therefore, the risk and opportunities are substantially greater than investing in a senior mining company with proven reserves. The volatility of these smaller mining companies is typically greater than that of senior producers.
The Adviser’s stock selection process for established mining companies looks to identify companies with robust growth profiles and strong cash flows. In making security selections for junior and intermediate mining investments, the Adviser looks for companies with proven management who have a strong track record in developing and producing mining companies and whose potential mining assets and financial structure have upside leverage to rising commodity prices.
Although the fund has greater latitude to invest its assets in different precious metals, it currently has significant investments in the gold sector. Gold companies include mining companies that exploit gold deposits that are supported by co-products and by-products such as copper, silver, lead and zinc, and also diversified mining companies which produce a meaningful amount of gold.
The fund is non-diversified and, therefore, may invest a greater percentage of its assets in a particular issuer in comparison to a diversified fund.
The fund also may purchase call and put options, and enter into covered option writing transactions. In addition, the fund may invest up to 15% of its net assets in illiquid securities.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions.
Principal Risks
● |
Main Risk. As with all mutual funds, loss of money is a risk of investing in the fund. |
● |
Market Risk. The value of the fund’s shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally. |
● |
Portfolio Management Risk. The skill of the Adviser will play a significant role in the fund’s ability to achieve its investment objectives. There is a risk that the investment strategy does not achieve the fund’s objectives or that the Adviser does not implement the strategy properly. |
● |
Foreign Securities Risk/Emerging Markets Risk. The fund’s investments in foreign securities are subject to special risks. The fund’s returns and share price may be affected to a large degree by several factors, including fluctuations in currency exchange rates; political, social or economic instability; the rule of law with respect to the recognition and protection of property rights; and less stringent accounting, disclosure and financial |
2
reporting requirements in a particular country. These risks are generally intensified in emerging markets. The fund’s share prices will reflect the movements of the different stock markets in which it is invested and the currencies in which its investments are denominated.
● |
Industry Concentration Risk. The fund concentrates its investments in gold and other precious metals. The fund may be subject to greater risks and market fluctuations than a portfolio representing a broader range of industries. The fund invests in securities that typically respond to changes in the price of gold and other precious metals, which can be influenced by a variety of global economic, financial, and political factors; increased environmental and labor costs in mining; and changes in laws relating to mining or gold production or sales; and the price may fluctuate substantially over short periods of time. Therefore, the fund may be more volatile than other types of investments. |
● |
Junior and Intermediate Mining Companies Risk. The securities of junior and intermediate exploration gold companies, which are often more speculative in nature, tend to be less liquid and more volatile in price than securities of larger companies. |
● |
Non-Diversification Risk. The fund is non-diversified and may invest a significant portion of its total assets in a small number of companies. This may cause the performance of the fund to be dependent upon the performance of one or more selected companies, which may increase the volatility of the fund. |
● |
Price Volatility Risk. The value of the fund’s shares may fluctuate significantly. |
● |
Growth Stock Risk. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. |
● |
Options Risk. Investing in options, long-term equity anticipation securities (i.e., LEAPS, an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of the fund. An option may expire without value, resulting in a loss of the fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option. |
● |
Warrants Risk. Warrants can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. If a warrant held by the fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant. |
● |
Depositary Receipts Risk. ADR and GDR risks include, but are not limited to, fluctuations in foreign currencies and foreign investment risks, such as political and financial instability, less liquidity and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. In addition, ADRs and GDRs may not track the price of the underlying foreign securities, and their value may change materially at times when the U.S. markets are not open for trading. Investments in unsponsored depositary receipts may be subject to additional risks. |
● |
Convertible Securities Risk. Convertible securities entail interest rate and credit risks. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, convertible securities held by the fund that are rated below investment grade (i.e., “junk bonds”) are subject to special risks, including the risk of default in interest or principal payments, which could result in a loss of income to the fund or a decline in the market value of the securities. |
● |
Restricted Security Risk. The fund may make direct equity investments in securities that are subject to contractual and regulatory restrictions on transfer. These investments may involve a high degree of business and financial risk. The restrictions on transfer may cause the fund to |
3
hold a security at a time when it may be beneficial to liquidate the security, and the security could decline significantly in value before the fund could liquidate the security.
● |
Gold and Precious Metals/Minerals Risk. The fund may invest in gold and precious metals directly and/or in equity and equity-related securities, such as ETFs that represent interests in, or related to, these precious metals and, therefore, is subject to the risk that it could fail to qualify as a regulated investment company under the Internal Revenue Code if the fund derives more than 10% of its gross income from these investments in gold and precious metals. Failure to qualify as a regulated investment company would result in adverse tax consequences to the fund and its shareholders. |
● |
Illiquidity Risk. Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet. These investments may involve a high degree of business and financial risk. |
● |
Initial Public Offering Risk. The Fund may purchase securities in an initial public offering (“IPO”), which may be illiquid; thus the Fund may not be able to dispose of them promptly at the price at which they are valued. |
● |
Exchange-Traded Funds Risk. The risks of investment in these securities typically reflect the risks of types of instruments in which the ETFs invest. By investing in an ETF, the Fund becomes a shareholder of that ETF and bears its proportionate share of the fees and expenses of the ETF. In addition, an ETF’s shares may trade above or below its net asset value. |
Performance Information
Institutional Class shares have no operating history. The returns shown for all periods are the returns of Investor Class shares of the Fund. Investor Class shares, which are not offered in this prospectus, would have annual returns substantially similar to those of Institutional Class Shares because they are invested in the same portfolio of securities. The returns shown have not been adjusted to reflect any differences in expenses between Institutional Class shares and Investor Class shares. If differences in expenses had been reflected, the returns shown would be higher.
The following bar chart and table show the volatility of the fund’s Investor Class share returns, which is one indicator of the risks of investing in the fund. The bar charts show changes in the fund’s returns from year to year during the period indicated. The table compares the fund’s average annual returns for the last 1-, 5- and 10-year periods to those of broad-based securities market indexes. How the fund performed in the past, before and after taxes, is not an indication of how it will perform in the future. You may obtain performance data current to the most recent month end at www.usfunds.com or by calling 1-800-873-8637.
Annual Total Returns (as of December 31 each year)
Gold and Precious Metals Fund
Best quarter shown in the bar chart above: 34.95% in the first quarter of 2006.
Worst quarter shown in the bar chart above: (33.37)% in the second quarter of 2013.
4
Average Annual Total Returns (for the periods ended December 31, 2015) |
1 Year |
5 Years |
10 Years |
Gold and Precious Metals Fund Return Before Taxes |
(4.78)% |
(21.57)% |
(2.91)% |
Return After Taxes on Distributions |
(4.98)% |
(21.98)% |
(3.61)% |
Return After Taxes on Distributions and Sale of Fund Shares |
(2.71)% |
(13.48)% |
(0.76)% |
S&P 500 Index
|
1.38% |
12.57% |
7.31% |
FTSE Gold Mines Index
|
(20.47)% |
(24.95)% |
(7.67)% |
After-tax returns are calculated using highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
Fund Management
Investment Adviser: U.S. Global Investors, Inc.
Portfolio Managers: The fund is managed by a team consisting of Mr. Frank E. Holmes and Mr. Ralph Aldis. Mr. Holmes has served as Chief Executive Officer of the fund since 1989 and Chief Investment Officer of the fund since 1999, and Mr. Aldis has served as a portfolio manager of the fund from 1989-1999 and from 2001 to the present.
Purchase and Sale of Fund Shares
If you are an eligible investor, you may purchase shares of the fund through an authorized broker-dealer or directly from the fund at www.usfunds.com or by mail at the following addresses:
● |
Regular Mail
|
● |
Overnight Mail
|
Shares may be redeemed on any day the NAV per share is calculated.
Eligible investors for the Institutional Class include the following:
● |
Institutional and individual retail investors with a minimum investment of $1 million who purchase through certain broker-dealers or directly from the fund; and |
● |
Registered investment advisors investing directly with the fund or who trade through platforms approved by the Adviser and whose clients’ assets in the aggregate meet the $1 million minimum investment. |
You are not an eligible investor if you do not independently meet the minimum investment amount. If you are holding shares through an omnibus account, you may not aggregate your shares with the shares of other omnibus account shareholders in order to meet the Institutional Class eligibility requirements.
Minimum Initial Investment
● |
$1 million |
Minimum Subsequent Investment
● |
None |
The fund reserves the right to waive or modify the above eligibility and minimum investment requirements at any time.
The fund also reserves the right to redeem or to convert your Institutional Class shares to Investor Class shares if your account falls below the minimum initial purchase amount due to shareholder transactions. Please note that you may incur a tax liability as a result of a redemption.
5
Tax Information
The fund intends to make distributions that may be taxed as ordinary income, capital gains or some combination of both, unless you hold fund shares in a tax-advantaged account, in which case your distributions will be taxed upon withdrawal.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and/or its related companies may pay the intermediary revenue sharing payments or a fee for certain servicing and administrative functions. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
6
World Precious Minerals Fund
Investment Objective
The World Precious Minerals Fund seeks long-term growth of capital plus protection against inflation and monetary instability.
Fees and Expenses of the Fund
The following table describes the fees and expenses that you may pay if you buy and hold Institutional Class shares of the fund.
Shareholder Fees
|
|
Maximum sales charge |
None |
Redemption fee (as a percentage of amount redeemed, as applicable, on shares held 7 days or less) |
0.05% |
Annual Fund Operating Expenses
|
|
Management fee |
0.63% |
Distribution and/or service (12b-1) fees |
None |
Other expenses |
19.88% |
Acquired fund fees and expenses |
0.05% |
Total annual fund operating expenses |
20.56% |
Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. It is based on net expenses before giving effect to any performance adjustment. The example assumes that you invest $10,000 in the Institutional Class of the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% annual return and the fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your cost would be:
1 Year |
3 Years |
5 Years |
10 Years |
$1,896 |
$4,849 |
$6,954 |
$9,940 |
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes where fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. The fund had a portfolio turnover rate of 71% for the fiscal year ended December 31, 2015.
Principal Investment Strategies
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in countries, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
Under normal market conditions, the fund will invest at least 80% of its net assets in equity and equity-related securities of companies principally engaged in the exploration for, or mining and processing of, precious minerals such as gold, silver, platinum group, palladium and diamonds. The fund may invest in these precious minerals directly and/or in equity and equity-related securities, such as exchange-traded funds (“ETFs”) that represent interests in, or related to, these precious minerals. The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs). The fund also participates in private placements, initial public offerings (IPOs), and long-term equity anticipation securities (LEAPS).
The fund may invest in warrants to gain exposure to individual securities in the gold and precious minerals sector over the long term. Warrants allow the fund to imitate a purchase or sale of a stock for a fraction of its price (premium) and hold that option for a long period of time before it expires. The fund may also
7
receive warrants when it participates in a private placement. The issuer of the private placement may provide a warrant as an incentive for investing in the initial financing of a company.
The fund focuses on selecting junior and intermediate exploration companies from around the world. Junior exploration companies typically have small market capitalization and no source of steady cash flow, and their growth generally comes from a major mining discovery. Therefore, the risk and opportunities are substantially greater than investing in a senior mining company with proven reserves. The volatility of these smaller mining companies is typically greater than that of senior producers.
In making security selections for junior and intermediate mining investments, the Adviser looks for companies with proven management who have a strong track record in developing and producing mining companies and whose potential mining assets and financial structure have upside leverage to a rising commodity price. The Adviser’s stock selection process for established mining companies looks to identify companies with robust reserve growth profiles and strong cash flows.
The fund will invest in securities of companies with economic ties to countries throughout the world, including the U.S. Under normal market conditions, the fund will invest at least 40% of its assets in securities of companies that are economically tied to at least three countries other than the U.S. The fund may invest in companies which may be domiciled in one country but have economic ties to another country. In determining if a company is economically tied to a country, the fund will consider various factors, including the country in which the company’s principal operations are located; the country in which the company’s mining or natural resource reserves are located; the country in which at least 50% of the company’s revenues or profits are derived from goods produced or sold, investments made, or services performed; the country in which the principal trading market is located; and the country in which the company is legally organized.
Although the fund has greater latitude to invest its assets in different precious minerals or metals stocks, it currently has significant investments in gold sector stocks. Gold companies include mining companies that exploit gold deposits that are supported by co-products and by-products such as copper, silver, lead and zinc, and also diversified mining companies which produce a meaningful amount of gold.
The fund is non-diversified and, therefore, may invest a greater percentage of its assets in a particular issuer in comparison to a diversified fund.
The fund also may purchase call and put options, and enter into covered option writing transactions. In addition, the fund may invest up to 15% of its net assets in illiquid securities.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions.
Principal Risks
● |
Main Risk. As with all mutual funds, loss of money is a risk of investing in the fund. |
● |
Market Risk. The value of the fund’s shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally. |
● |
Portfolio Management Risk. The skill of the Adviser will play a significant role in the fund’s ability to achieve its investment objectives. There is a risk that the investment strategy does not achieve the fund’s objectives or that the Adviser does not implement the strategy properly. |
● |
Foreign Securities Risk/Emerging Markets Risk. The fund’s investments in foreign securities are subject to special risks. The fund’s returns and share price may be affected to a large degree by several factors, including fluctuations in currency exchange rates; political, social or economic instability; the rule of law with respect to the recognition and protection of property rights; and less stringent accounting, disclosure and financial reporting requirements in a particular country. These risks are generally intensified in emerging markets. The fund’s share prices will reflect the |
8
movements of the different stock markets in which it is invested and the currencies in which its investments are denominated.
● |
Industry Concentration Risk. The fund concentrates its investments in precious minerals. The fund may be subject to greater risks and market fluctuations than a portfolio representing a broader range of industries. The fund invests in securities that typically respond to changes in the price of gold and other precious minerals, which can be influenced by a variety of global economic, financial and political factors; increased environmental and labor costs in mining; and changes in laws relating to mining or gold production or sales; and the price may fluctuate substantially over short periods of time. Therefore, the fund may be more volatile than other types of investments. |
● |
Junior and Intermediate Mining Companies Risk. The fund focuses its investments in junior and intermediate exploration companies. The securities of junior and intermediate exploration gold companies, which are often more speculative in nature, tend to be less liquid and more volatile in price than securities of larger companies. |
● |
Non-Diversification Risk. The fund is non-diversified and may invest a significant portion of its total assets in a small number of companies. This may cause the performance of the fund to be dependent upon the performance of one or more selected companies, which may increase the volatility of the fund. |
● |
Price Volatility Risk. The value of the fund’s shares may fluctuate significantly. |
● |
Growth Stock Risk. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. |
● |
Options Risk. Investing in options, LEAPS (an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of the fund. An option may expire without value, resulting in a loss of the fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option. |
● |
Warrants Risk. Warrants can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. If a warrant held by the fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant. |
● |
Depositary Receipts Risk. ADR and GDR risks include, but are not limited to, fluctuations in foreign currencies and foreign investment risks, such as political and financial instability, less liquidity and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. In addition, ADRs and GDRs may not track the price of the underlying foreign securities, and their value may change materially at times when the U.S. markets are not open for trading. Investments in unsponsored depositary receipts may be subject to additional risks. |
● |
Convertible Securities Risk. Convertible securities entail interest rate and credit risks. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, convertible securities held by the fund that are rated below investment grade (i.e., “junk bonds”) are subject to special risks, including the risk of default in interest or principal payments, which could result in a loss of income to the fund or a decline in the market value of the securities. |
● |
Restricted Security Risk. The fund may make direct equity investments in securities that are subject to contractual and regulatory restrictions on transfer. These investments may involve a high degree of business and financial risk. The restrictions on transfer may cause the fund to hold a security at a time when it may be beneficial to liquidate the security, and the security could decline significantly in value before the fund could liquidate the security. |
9
● |
Gold and Precious Minerals Risk. The fund may invest in gold and precious minerals directly and/or in equity or equity-related securities, such as ETFs that represent interests in, or related to, these precious metals and, therefore, is subject to the risk that it could fail to qualify as a regulated investment company under the Internal Revenue Code if the fund derives more than 10% of its gross income from these investments in gold and precious metals. Failure to qualify as a regulated investment company would result in adverse tax consequences to the fund and its shareholders. |
● |
Illiquidity Risk. Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet. These investments may involve a high degree of business and financial risk. |
● |
Initial Public Offering Risk. The Fund may purchase securities in an initial public offering (“IPO”), which may be illiquid; thus the Fund may not be able to dispose of them promptly at the price at which they are valued. |
● |
Exchange-Traded Funds Risk. The risks of investment in these securities typically reflect the risks of types of instruments in which the ETFs invest. By investing in an ETF, the Fund becomes a shareholder of that ETF and bears its proportionate share of the fees and expenses of the ETF. In addition, an ETF’s shares may trade above or below its net asset value. |
Performance Information
The following bar chart and table show the volatility of the fund’s Institutional Class share returns since the commencement of the Institutional Class on March 1, 2010. This is one indicator of the risks of investing in the fund. The bar chart shows the fund’s returns during the period indicated. The table compares the fund’s average annual returns for the 1-year and since commencement periods to those of broad-based securities market indexes. How the fund performed in the past, before and after taxes, is not an indication of how it will perform in the future. You may obtain performance data current to the most recent month end at www.usfunds.com or by calling 1-800-873-8637.
Annual Total Returns (as of December 31 each year)
World Precious Minerals Fund
Best quarter shown in the bar chart above: 24.21% in the third quarter of 2012.
Worst quarter shown in the bar chart above: (36.80)% in the second quarter of 2013.
Average Annual Total Returns (for the periods ended December 31, 2015) |
1 Year |
5 Years |
Since
|
World Precious Minerals Fund Return Before Taxes |
(15.07)% |
(26.82)% |
(18.29)% |
Return After Taxes on Distributions |
(18.79)% |
(28.15)% |
(20.18)% |
Return After Taxes on Distributions and Sale of Fund Shares |
(8.58)% |
(16.67)% |
(11.34)% |
S&P 500 Index
|
1.38% |
12.57% |
13.29% |
NYSE Arca Gold Miners Index
|
(25.52)% |
(25.88)% |
(18.19)% |
After-tax returns are calculated using highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns
10
shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
Fund Management
Investment Adviser: U.S. Global Investors, Inc.
Portfolio Managers: The fund is managed by a team consisting of Mr. Frank E. Holmes and Mr. Ralph Aldis. Mr. Holmes has served as Chief Executive Officer of the fund since 1989 and Chief Investment Officer of the fund since 1999. Mr. Aldis has served as a portfolio manager of the fund since 2001.
Purchase and Sale of Fund Shares
If you are an eligible investor, you may purchase shares of the fund through an authorized broker-dealer or directly from the fund at www.usfunds.com or by mail at the following addresses:
● |
Regular Mail
|
● |
Overnight Mail
|
Shares may be redeemed on any day the NAV per share is calculated.
Eligible investors for the Institutional Class include the following:
● |
Institutional and individual retail investors with a minimum investment of $1 million who purchase through certain broker-dealers or directly from the fund; and |
● |
Registered investment advisors investing directly with the fund or who trade through platforms approved by the Adviser and whose clients’ assets in the aggregate meet the $1 million minimum investment. |
You are not an eligible investor if you do not independently meet the minimum investment amount. If you are holding shares through an omnibus account, you may not aggregate your shares with the shares of other omnibus account shareholders in order to meet the Institutional Class eligibility requirements.
Minimum Initial Investment
● |
$1 million |
Minimum Subsequent Investment
● |
None |
The fund reserves the right to waive or modify the above eligibility and minimum investment requirements at any time.
The fund also reserves the right to redeem or to convert your Institutional Class shares to Investor Class shares if your account falls below the minimum initial purchase amount due to shareholder transactions. Please note that you may incur a tax liability as a result of a redemption.
Tax Information
The fund intends to make distributions that may be taxed as ordinary income, capital gains or some combination of both, unless you hold fund shares in a tax-advantaged account, in which case your distributions will be taxed upon withdrawal.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and/or its related companies may pay the intermediary revenue sharing payments or a fee for certain servicing and administrative functions. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
11
Global Resources Fund
Investment Objective
The Global Resources Fund seeks long-term growth of capital plus protection against inflation and monetary instability.
Fees and Expenses of the Fund
The following table describes the fees and expenses that you may pay if you buy and hold Institutional Class shares of the fund.
Shareholder Fees
|
|
Maximum sales charge |
None |
Redemption fee (as a percentage of amount redeemed, as applicable, on shares held 7 days or less) |
0.05% |
Annual Fund Operating Expenses
|
|
Management fee |
0.30% |
Distribution and/or service (12b-1) fees |
None |
Other expenses |
1.05% |
Total annual fund operating expenses |
1.35% |
Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. It is based on net expenses before giving effect to any performance adjustment. The example assumes that you invest $10,000 in the Institutional Class of the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% annual return and the fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your cost would be:
1 Year |
3 Years |
5 Years |
10 Years |
$137 |
$428 |
$739 |
$1,624 |
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes where fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. The fund had a portfolio turnover rate of 445% for the fiscal year ended December 31, 2015.
Principal Investment Strategies
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in countries, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population.
The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
Under normal market conditions, the fund will invest at least 80% of its net assets in equity and equity-related securities of companies involved in the natural resources industries, which include, among others, the following industries: natural gas, integrated oil companies, oil and gas drilling, oil and gas exploration and production, oil and gas refining, oilfield equipment/services, aluminum, chemicals, diversified metals and coal mining, gold and precious metals, iron and steel, paper and forest products, and uranium.
The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs). The fund also participates in private placements, initial public offerings (IPOs) and long-term equity anticipation securities (LEAPS).
The fund may receive warrants when it participates in a private placement. The warrants are provided by the issuer of the private placement as an incentive for investing in the initial financing of the company.
12
The holder of a warrant has the right, until the warrant expires, to sell the warrant or to purchase a given number of shares of a particular issue at a specified price.
For its “bottom-up” selection strategy, the Adviser looks at a company’s relative rankings with respect to expected future growth in reserves, production and cash flow. Additionally, the Adviser also considers relative valuation multiples to earnings and cash flow, expected net asset value, balance sheet quality, working capital needs and overall profitability measured by returns on invested capital.
The fund will invest in securities of companies with economic ties to countries throughout the world, including the U.S. Under normal market conditions, the fund will invest at least 40% of its assets in securities of companies that are economically tied to at least three countries other than the U.S. The fund may invest in companies which may be domiciled in one country but have economic ties to another country. In determining if a company is economically tied to a country, the fund will consider various factors, including the country in which the company’s principal operations are located; the country in which the company’s mining or natural resource reserves are located; the country in which at least 50% of the company’s revenues or profits are derived from goods produced or sold, investments made, or services performed; the country in which the principal trading market is located; and the country in which the company is legally organized.
The fund is non-diversified and, therefore, may invest a greater percentage of its assets in a particular issuer in comparison to a diversified fund.
The fund also may purchase call and put options, and enter into covered option writing transactions. In addition, the fund may invest up to 15% of its net assets in illiquid securities.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions.
Principal Risks
● |
Main Risk. As with all mutual funds, loss of money is a risk of investing in the fund. |
● |
Market Risk. The value of the fund’s shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally. |
● |
Portfolio Management Risk. The skill of the Adviser will play a significant role in the fund’s ability to achieve its investment objectives. There is a risk that the investment strategy does not achieve the fund’s objectives or that the Adviser does not implement the strategy properly. |
● |
Foreign Securities Risk/Emerging Markets Risk. The fund’s investments in foreign securities are subject to special risks. The fund’s returns and share prices may be affected to a large degree by several factors, including fluctuations in currency exchange rates; political, social or economic instability; the rule of law with respect to the recognition and protection of property rights; and less stringent accounting, disclosure and financial reporting requirements in a particular country. These risks are generally intensified in emerging markets. The fund’s share prices will reflect the movements of the different stock markets in which it is invested and the currencies in which its investments are denominated. |
● |
Industry Concentration Risk. The fund concentrates its investments in the natural resources industries and may be subject to greater risks and market fluctuations than a portfolio representing a broader range of industries. The fund invests in securities vulnerable to factors affecting the natural resources industries, such as increasing regulation of the environment by both U.S. and foreign governments and production and distribution policies of OPEC (Organization of Petroleum Exporting Countries) and other oil producing countries. Increased environmental regulations and limitations on production may, among other things, increase compliance costs and affect business opportunities for the companies in which the fund invests. The value of these companies is also affected by changing commodity prices, which can be highly volatile and are subject to risks of oversupply and reduced demand. |
13
● |
Non-Diversification Risk. The fund is non-diversified and may invest a significant portion of its total assets in a small number of companies. This may cause the performance of the fund to be dependent upon the performance of one or more selected companies, which may increase the volatility of the fund. |
● |
Portfolio Turnover Risk. The fund’s portfolio turnover rates vary from year to year according to market conditions and may exceed 100%. The length of time the fund has held a particular security is not generally a consideration in investment decisions. It is the policy of the fund to effect portfolio transactions without regard to a holding if, in the judgement of the portfolio managers, such transactions are advisable. Portfolio turnover generally involves some expense, including brokerage commissions, dealer mark-ups, or other transaction costs on the sale of securities and reinvestment in other securities. Such sales may result in realization of taxable capital gains for shareholders. |
● |
Price Volatility Risk. The value of the fund’s shares may fluctuate significantly. |
● |
Growth Stock Risk. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. |
● |
Options Risk. Investing in options, LEAPS (an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of the fund. An option may expire without value, resulting in a loss of the fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option. |
● |
Warrants Risk. Warrants can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. If a warrant held by the fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant, if any. |
● |
Depositary Receipts Risk. ADR and GDR risks include, but are not limited to, fluctuations in foreign currencies and foreign investment risks, such as political and financial instability, less liquidity and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. In addition, ADRs and GDRs may not track the price of the underlying foreign securities, and their value may change materially at times when the U.S. markets are not open for trading. Investments in unsponsored depositary receipts may be subject to additional risks. |
● |
Convertible Securities Risk. Convertible securities entail interest rate and credit risks. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, convertible securities held by the fund that are rated below investment grade (i.e., “junk bonds”) are subject to special risks, including the risk of default in interest or principal payments, which could result in a loss of income to the fund or a decline in the market value of the securities. |
● |
Restricted Security Risk. The fund may make direct equity investments in securities that are subject to contractual and regulatory restrictions on transfer. These investments may involve a high degree of business and financial risk. The restrictions on transfer may cause the fund to hold a security at a time when it may be beneficial to liquidate the security, and the security could decline significantly in value before the fund could liquidate the security. |
● |
Illiquidity Risk. Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet. These investments may involve a high degree of business and financial risk. |
14
● |
Initial Public Offering Risk. The Fund may purchase securities in an initial public offering (“IPO”), which may be illiquid; thus the Fund may not be able to dispose of them promptly at the price at which they are valued. |
Performance Information
The following bar chart and table show the volatility of the fund’s Institutional Class share returns since the commencement of the Institutional Class on March 1, 2010. This is one indicator of the risks of investing in the fund. The bar chart shows the fund’s returns during the period indicated. The table compares the fund’s average annual returns for the 1-year and since commencement periods to those of broad-based securities market indexes. How the fund performed in the past, before and after taxes, is not an indication of how it will perform in the future. You may obtain performance data current to the most recent month end at www.usfunds.com or by calling 1-800-873-8637.
Annual Total Returns (as of December 31 each year)
Global Resources Fund
Best quarter shown in the bar chart above: 10.55% in the third quarter of 2012.
Worst quarter shown in bar chart above: (25.81)% in the fourth quarter of 2014.
Average Annual Total Returns (for the periods ended December 31, 2015) |
1 Year |
5 Years |
Since Commencement (3/1/10) |
Global Resources Fund Return Before Taxes |
(27.73)% |
(14.57)% |
(7.63)% |
Return After Taxes on Distributions |
(28.25)% |
(15.31)% |
(8.43)% |
Return After Taxes on Distributions and Sale of Fund Shares |
(15.70)% |
(10.08)% |
(5.39)% |
S&P 500 Index
|
1.38% |
12.57% |
13.29% |
S&P Global Natural Resources Index (Net Total Return)
|
(24.50)% |
(9.15)% |
(5.25)% |
After-tax returns are calculated using highest historical individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
Fund Management
Investment Adviser: U.S. Global Investors, Inc.
Portfolio Managers: The fund is managed by a team consisting of Mr. Frank E. Holmes and Mr. Ralph Aldis. Mr. Holmes has served as Chief Executive Officer of the fund since 1989 and Chief Investment Officer of the fund since 1999. Mr. Aldis has served as a portfolio manager of the fund since 2015.
Purchase and Sale of Fund Shares
If you are an eligible investor, you may purchase shares of the fund through an authorized broker-dealer or directly from the fund at www.usfunds.com or by mail at the following addresses:
● |
Regular Mail
|
15
● |
Overnight Mail
|
Shares may be redeemed on any day the NAV per share is calculated.
Eligible investors for the Institutional Class include the following:
● |
Institutional and individual retail investors with a minimum investment of $1 million who purchase through certain broker-dealers or directly from the fund; and |
● |
Registered investment advisors investing directly with the fund or who trade through platforms approved by the Adviser and whose clients’ assets in the aggregate meet the $1 million minimum investment. |
You are not an eligible investor if you do not independently meet the minimum investment amount. If you are holding shares through an omnibus account, you may not aggregate your shares with the shares of other omnibus account shareholders in order to meet the Institutional Class eligibility requirements.
Minimum Initial Investment
● |
$1 million |
Minimum Subsequent Investment
● |
None |
The fund reserves the right to waive or modify the above eligibility and minimum investment requirements at any time.
The fund also reserves the right to redeem or to convert your Institutional Class shares to Investor Class shares if your account falls below the minimum initial purchase amount due to shareholder transactions. Please note that you may incur a tax liability as a result of a redemption.
Tax Information
The fund intends to make distributions that may be taxed as ordinary income, capital gains or some combination of both, unless you hold fund shares in a tax-advantaged account, in which case your distributions will be taxed upon withdrawal.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and/or its related companies may pay the intermediary revenue sharing payments or a fee for certain servicing and administrative functions. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
16
Emerging Europe Fund
Investment Objective
The Emerging Europe Fund seeks long-term growth of capital.
Fees and Expenses of the Fund
The following table describes the fees and expenses that you may pay if you buy and hold Institutional Class shares of the fund.
Shareholder Fees
|
|
Maximum sales charge |
None |
Redemption fee (as a percentage of amount redeemed, as applicable, on fund shares held 7 days or less) |
0.05% |
Annual Fund Operating Expenses
|
|
Management fee (a) |
1.25% |
Distribution and/or service (12b-1) fees |
None |
Other expenses (b) |
0.76% |
Acquired fund fees and expenses |
0.01% |
Total annual fund operating expenses |
2.02% |
(a) |
A performance fee adjustment may increase or decrease the management fee by up to +/- 0.25% of the average net assets of the fund during a rolling 12-month period. The performance adjustment is calculated by comparing the performance of the Institutional Class shares of the fund during the relevant performance period to that of the MSCI Emerging Markets Europe 10/40 Index (Net Total Return). For purposes of calculating the performance adjustment, the performance will include the performance of the Investor Class shares of the fund for the first 12 months after the commencement of operations of the Institutional Class shares of the fund. |
(b) |
Other expenses are based on estimates for the current fiscal year. |
Example
This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Institutional Class of the fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% annual return and the fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your cost would be:
1 Year |
3 Years |
5 Years |
10 Years |
$205 |
$634 |
$1,088 |
$2,348 |
Portfolio Turnover
The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes where fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. The Institutional Class shares of the Fund have no operating history. The Investor Class shares of the fund, which are invested in the same portfolio of securities, had a portfolio turnover rate of 137% for the fiscal year ended December 31, 2015.
Principal Investment Strategies
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in countries, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
The Adviser’s “bottom-up” stock selection approach is generally characterized as growth at a reasonable price, which focuses on three key drivers: revenue growth, cash flow and return on equity. The Adviser searches for growth companies that have strong fundamentals and are also trading at reasonable valuations.
The Emerging Europe Fund invests, under normal market conditions, at least 80% of its net assets in equity and equity-related securities of companies located in the emerging markets of Eastern Europe. The equity and equity-related securities in which the
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fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs).
In general, Eastern European countries are in the early stages of industrial, economic or capital market development. Eastern European countries may include countries that were, until recently, governed by communist governments or countries that, for any other reason, have failed to achieve levels of industrial production, market activity, or other measures of economic development typical of the developed European countries. Although the fund may invest in any Eastern European country, it currently focuses its investment in companies located in Russia, Poland, the Czech Republic, Hungary and Turkey. The Adviser considers the following countries to be in Eastern Europe: Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Croatia, the Czech Republic, Estonia, FYR Macedonia, Georgia, Greece, Hungary, Latvia, Lithuania, Moldova, Poland, Romania, Russia, Slovakia, Slovenia, Turkey and Ukraine.
The fund will consider investments in Eastern Europe to be the following:
1. |
securities of issuers that are organized under the laws of any Eastern European country or have a principal office in an Eastern European country; |
2. |
securities of issuers that derive a majority of their revenues from business in Eastern European countries, or have a majority of their assets in Eastern European countries at the time of the fund’s investment; or |
3. |
securities that are traded principally on a securities exchange in an Eastern European country. (For this purpose, investment companies that invest principally in securities of companies located in one or more Eastern European countries will also be considered to be located in an Eastern European country, as will American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) with respect to the securities of companies located in Eastern European countries.) |
The Emerging Europe Fund invests at least 25% of its total assets in securities of companies involved in oil, gas or banking. In determining whether a company is involved in oil, gas or banking, the fund will use the Bloomberg Sector Classification System. For a full list of the Bloomberg-classified industries involving oil, gas or banking, see the discussion of non-fundamental investment restrictions in the statement of additional information (SAI).
However, the fund will invest no more than 25% of its total assets in any one Bloomberg-classified industry involving oil, gas, or banking, such as, among others, Oil Companies–Integrated, Oil Companies–Exploration & Production, Oil Refining & Marketing, Regional Banks–Non-U.S., Commercial Banks–Non-U.S., and Diversified Banking Institutions; provided, however, if at the time of purchase a corresponding industry classification represents 20% or more of the fund’s benchmark, the MSCI Emerging Markets Europe 10/40 Index (Net Total Return), the fund may invest up to 35% of its total assets in the corresponding Bloomberg-classified industry.
The fund may invest up to 20% of its net assets in securities, including debt securities of any credit quality, of governments and companies located anywhere in the world.
The fund is non-diversified and, therefore, may invest a greater percentage of its assets in a particular issuer in comparison to a diversified fund.
The fund also may purchase call and put options, and enter into covered option writing transactions. In addition, the fund may invest up to 15% of its net assets in illiquid securities.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions.
Principal Risks
● |
Main Risk. As with all mutual funds, loss of money is a risk of investing in the fund. |
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● |
Market Risk. The value of the fund’s shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally. |
● |
Portfolio Management Risk. The skill of the Adviser will play a significant role in the fund’s ability to achieve its investment objectives. There is a risk that the investment strategy does not achieve the fund’s objectives or that the Adviser does not implement the strategy properly. |
● |
Foreign Securities Risk/Emerging Markets Risk. The fund’s investments in foreign securities are subject to special risks. The fund’s returns and share price may be affected to a large degree by several factors, including fluctuations in currency exchange rates; political, social or economic instability; the rule of law with respect to the recognition and protection of property rights; and less stringent accounting, disclosure and financial reporting requirements in a particular country. These risks are generally intensified in emerging markets. The fund’s share prices will reflect the movements of the different stock markets in which it is invested and the currencies in which its investments are denominated. |
● |
Eastern European Securities Risk. Political and economic structures in many Eastern European countries are in their infancy and developing rapidly, and such countries may lack the social, political and economic stability characteristic of many more developed countries. In addition, unanticipated political or social developments may affect the value of the fund’s investment in Eastern European countries. As a result, the risks normally associated with investing in any foreign country may be heightened in Eastern European countries. For example, the small size and inexperience of the securities markets in Eastern European countries and the limited volume of trading in securities in those markets may make the fund’s investments in such countries illiquid and more volatile than investments in more developed countries and may make obtaining prices on portfolio securities from independent sources more difficult than in other more developed markets. |
● |
Geographic Concentration Risk. The fund concentrates its investments in companies located in Eastern Europe. Because of this, companies in the fund’s portfolio may react similarly to political, social, and economic developments in any of the Eastern European countries. For example, many companies in the same region may be dependent on related government fiscal policies. Companies may be adversely affected by new or unanticipated legislative changes that could affect the value of such companies and, therefore, the fund’s share price. The fund’s return and share price may be more volatile than those of a less concentrated portfolio. |
● |
Industry Concentration Risk. The fund invests more than 25% of its investments in companies principally engaged in the oil, gas or banking industries. Oil & gas companies are a large part of the Russian economy and banks typically are a significant component of emerging market economies, such as those in Russia and other Eastern European countries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile. To the extent that the fund’s assets are invested in the oil & gas industry, the fund would be particularly vulnerable to factors affecting the industry, such as increased governmental regulation of the environment. Increased environmental regulation may, among other things, increase compliance costs and affect business opportunities for companies in which the fund invests. The fund would also be affected by changing commodity prices, which can be highly volatile and are subject to risk of over supply and decreased demand. To the extent that the fund’s assets are invested in companies operating in the banking industry, the fund is subject to legislative or regulatory changes, adverse market conditions, and/or increased competition affecting banking companies. The prices of securities of banking companies also may fluctuate widely due to general economic conditions that could create exposure to credit losses. In determining whether a company is involved in oil, gas or banking, the fund will use the Bloomberg Sector Classification System. |
● |
Sector Risk. The fund may invest a significant amount of its total assets in certain sectors, which may be subject to specific risks. These risks include governmental regulation of the sector and governmental monetary and fiscal policies which may negatively affect a particular |
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sector. In addition, governmental policies towards international trade and tariffs may affect particular sectors.
● |
Growth Stock Risk. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. |
● |
Non-Diversification Risk . The fund is non-diversified and may invest a significant portion of its total assets in a small number of companies. This may cause the performance of the fund to be dependent upon the performance of one or more selected companies, which may increase the volatility of the fund. |
● |
Options Risk. Investing in options, LEAPS (an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of the fund. An option may expire without value, resulting in a loss of the fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option. |
● |
Illiquidity Risk. Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet. These investments may involve a high degree of business and financial risk. |
● |
Warrants Risk. Warrants can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. If a warrant held by the fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant. |
● |
Depositary Receipts Risk. ADR and GDR risks include, but are not limited to, fluctuations in foreign currencies and foreign investment risks, such as political and financial instability, less liquidity and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. In addition, ADRs and GDRs may not track the price of the underlying foreign securities, and their value may change materially at times when the U.S. markets are not open for trading. Investments in unsponsored depositary receipts may be subject to additional risks. |
● |
Convertible Securities Risk. Convertible securities entail interest rate and credit risks. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, convertible securities held by the fund that are rated below investment grade (i.e., “junk bonds”) are subject to special risks, including the risk of default in interest or principal payments, which could result in a loss of income to the fund or a decline in the market value of the securities. |
● |
Restricted Security Risk. The fund may make direct equity investments in securities that are subject to contractual and regulatory restrictions on transfer. These investments may involve a high degree of business and financial risk. The restrictions on transfer may cause the fund to hold a security at a time when it may be beneficial to liquidate the security, and the security could decline significantly in value before the fund could liquidate the security. |
Performance Information
Institutional Class shares have no operating history. The returns shown for all periods are the returns of Investor Class shares of the Fund. Investor Class shares, which are not offered in this prospectus, would have annual returns substantially similar to those of Institutional Class Shares because they are invested in the same portfolio of securities. The returns shown have not been adjusted to reflect any differences in expenses between Institutional Class shares and Investor Class shares. If differences in expenses had been reflected, the returns shown would be higher.
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The following bar chart and table show the volatility of the fund’s Investor Class share returns, which is one indicator of the risks of investing in the fund. The bar charts show changes in the fund’s returns from year to year during the period indicated. The table compares the fund’s average annual returns for the last 1-, 5- and 10-year periods to those of broad-based securities market indexes. How the fund performed in the past, before and after taxes, is not an indication of how it will perform in the future. You may obtain performance data current to the most recent month end at www.usfunds.com or by calling 1-800-873-8637.
On November 7, 2008, the Adviser took over the day-today management of the Emerging Europe Fund from a subadviser. Consequently, the fund’s prior performance may have been different if the Adviser had been managing the fund.
Annual Total Returns (as of December 31 each year)
Emerging Europe Fund
Best quarter shown in the bar chart above: 40.72% in the second quarter of 2009.
Worst quarter shown in the bar chart above: (48.07)% in the fourth quarter of 2008.
Average Annual Total Returns
|
1 Year |
5 Years |
10 Years |
Emerging Europe Fund Return Before Taxes |
(20.73)% |
(12.67)% |
(5.25)% |
Return After Taxes on Distributions |
(20.73)% |
(12.77)% |
(5.77)% |
Return After Taxes on Distributions and Sale of Fund Shares |
(11.73)% |
(8.81)% |
(2.70)% |
S&P 500 Index
|
1.38% |
12.57% |
7.31% |
MSCI Emerging Markets Europe 10/40 Index (Net Total Return)
|
(14.70)% |
(11.16)% |
(2.43)% |
After-tax returns are calculated using the highest historic marginal individual federal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.
Fund Management
Investment Adviser: U.S. Global Investors, Inc.
Portfolio Managers: The fund is managed by Mr. Frank E. Holmes and Ralph Aldis. Mr. Holmes has served as Chief Executive Officer of the fund since 1997 and Chief Investment Officer of the fund since 1999, and Mr. Aldis has served as a portfolio manager of the fund since 2015.
Purchase and Sale of Fund Shares
If you are an eligible investor, you may purchase shares of the fund through an authorized broker-dealer or directly from the fund at www.usfunds.com or by mail at the following addresses:
● |
Regular Mail
|
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● |
Overnight Mail
|
Shares may be redeemed on any day the NAV per share is calculated.
Eligible investors for the Institutional Class include the following:
● |
Institutional and individual retail investors with a minimum investment of $1 million who purchase through certain broker-dealers or directly from the fund; and |
● |
Registered investment advisors investing directly with the fund or who trade through platforms approved by the Adviser and whose clients’ assets in the aggregate meet the $1 million minimum investment. |
You are not an eligible investor if you do not independently meet the minimum investment amount. If you are holding shares through an omnibus account, you may not aggregate your shares with the shares of other omnibus account shareholders in order to meet the Institutional Class eligibility requirements.
Minimum Initial Investment
● |
$1 million |
Minimum Subsequent Investment
● |
None |
The fund reserves the right to waive or modify the above eligibility and minimum investment requirements at any time.
The fund also reserves the right to redeem or to convert your Institutional Class shares to Investor Class shares if your account falls below the minimum initial purchase amount due to shareholder transactions. Please note that you may incur a tax liability as a result of a redemption.
Tax Information
The fund intends to make distributions that may be taxed as ordinary income, capital gains or some combination of both, unless you hold fund shares in a tax-advantaged account, in which case your distributions will be taxed upon withdrawal.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase the fund through a broker-dealer or other financial intermediary (such as a bank), the fund and/or its related companies may pay the intermediary revenue sharing payments or a fee for certain servicing and administrative functions. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
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Additional Information About Investment Objectives, Principal Investment Strategies and Related Risks
Gold and Precious Metals Fund
World Precious Minerals Fund
Global Resources Fund
Investment Objectives
The Gold and Precious Metals Fund, World Precious Minerals Fund and Global Resources Fund each seek long-term growth of capital plus protection against inflation and monetary instability. The Gold and Precious Metals Fund also pursues current income as a secondary objective.
Principal Investment Strategies
Under normal market conditions, the Gold and Precious Metals Fund will invest at least 80% of its net assets in equity and equity-related securities of companies predominately involved in the mining, fabrication, processing, marketing or distribution of metals including gold, silver, platinum group, palladium and diamonds. The fund will notify you in writing 60 days before making any changes to this policy. The fund may invest in these precious metals directly and/or in equity and equity-related securities, such as exchange-traded funds (“ETFs”) that represent interests in, or related to, these precious metals. The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs). The fund also participates in private placements, initial public offerings (IPOs) and long-term equity anticipation securities (LEAPS).
The Gold and Precious Metals Fund focuses on selecting companies with established producing mines, and although the fund has greater latitude to invest its assets in different precious metals, it currently has significant investments in the gold sector. The fund reserves the right to invest up to 20% of its net assets in the securities of companies principally engaged in natural resources operations.
Under normal market conditions, the World Precious Minerals Fund will invest at least 80% of its net assets in equity and equity-related securities of companies principally engaged in the exploration for, or mining and processing of, precious minerals such as gold, silver, platinum group, palladium and diamonds. The fund will notify you in writing 60 days before making any changes to this policy. The fund may invest in these precious minerals directly and/or in equity and equity-related securities, such as ETFs that represent interests in, or related to, these precious minerals. The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts. The fund also participates in private placements, initial public offerings (IPOs) and long-term equity anticipation securities (LEAPS).
Although the World Precious Minerals Fund has greater latitude to invest its assets in different precious minerals, it currently has significant investments in the gold sector. Gold companies include mining companies that exploit gold deposits that are supported by co-products and by-products such as copper, silver, lead and zinc, and also diversified mining companies which produce a meaningful amount of gold.
The World Precious Minerals Fund focuses on selecting junior and intermediate exploration companies from around the world. Typically, junior exploration gold companies produce up to 100,000 ounces of gold or other precious metal per year, and intermediate companies produce up to a million ounces of gold or other precious metal. The price performance of junior exploration companies relates to the success of finding and increasing reserves, thus involving both greater opportunity and risk. The stock price performance of intermediate and senior mining companies that have proven reserves is more strongly influenced by the price of gold. The securities of junior and intermediate exploration gold companies, which are often more speculative in nature, tend to be less liquid and more volatile in price than securities of larger companies.
The World Precious Minerals Fund will invest in securities of companies with economic ties to countries throughout the world, including the U.S. Under normal market conditions, the fund will invest at least 40% of its assets in securities of companies that are economically tied to at least three countries
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other than the U.S. The fund may invest in companies which may be domiciled in one country but have economic ties to another country. In determining if a company is economically tied to a country, the fund will consider various factors, including the country in which the company’s principal operations are located; the country in which the company’s mining or natural resource reserves are located; the country in which at least 50% of the company’s revenues or profits are derived from goods produced or sold, investments made, or services performed; the country in which the principal trading market is located; and the country in which the company is legally organized.
Under normal market conditions, the Global Resources Fund normally invests at least 80% of its net assets in equity and equity-related securities of companies involved in the natural resources industries. The fund will notify you in writing 60 days before making any changes to this policy. The equity and equity-related securities in which the fund primarily invests are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs). The fund also participates in private placements, IPOs and LEAPS.
The Global Resources Fund concentrates its investments in the equity securities within the natural resources industries, which include, among others, the following industries:
Energy |
Basic Materials |
Natural gas Integrated oil companies Oil and gas drilling Oil and gas exploration and production Oil and gas refining Oilfield equipment/services |
Aluminum Chemicals Diversified metals and coal mining Gold and precious metals Iron and steel Paper and forest products Uranium |
Consistent with its investment objective, the Global Resources Fund may invest without limitation in equity securities within the natural resources industries and will also invest in multi-capitalization companies.
Under normal market conditions, the Global Resources Fund will invest at least 40% of its assets in securities of companies that are economically tied to at least three countries other than the U.S. The fund may invest in companies which may be domiciled in one country but have economic ties to another country. In determining if a company is economically tied to a country, the fund will consider various factors, including the country in which the company’s principal operations are located; the country in which the company’s mining or natural resource reserves are located; the country in which at least 50% of the company’s revenues or profits are derived from goods produced or sold, investments made, or services performed; the country in which the principal trading market is located; and the country in which the company is legally organized.
The Gold and Precious Metals Fund, World Precious Minerals Fund and Global Resources Fund may also purchase call and put options, and the funds’ current intention is to purchase only exchange-traded options. A fund may purchase put options to hedge the fund’s portfolio against a possible loss, and a fund may purchase call options as a substitute to purchasing the underlying security. A fund will not purchase any option if, immediately thereafter, the aggregate market value of all outstanding options purchased by the fund would exceed 10% of the fund’s total assets. Long-term equity options called LEAPS and warrants allow a fund to imitate a purchase or sale of a stock for a fraction of its price (premium) and hold that option for a long period of time before it expires. The underlying stock can be purchased or sold at a predetermined price for the life of the option or warrant. LEAPS and warrants, therefore, allow a fund to gain exposure to individual securities over the long-term while allowing the funds to preserve some cash for large or unexpected redemptions.
In an effort to enhance the funds’ risk-adjusted performance, the funds may enter into covered option writing transactions. A fund will not sell a covered option if, immediately thereafter, the aggregate value of the fund’s securities subject to outstanding covered options would exceed 50% of the value of the fund’s total assets.
The funds may invest in income and royalty trusts. A rising interest rate environment could adversely impact the performance of income and royalty trusts. Rising interest rates could limit the capital appreciation
24
of income and royalty trusts because of the increased availability of alternative investments at competitive yields with income and royalty trusts.
Investment Processes
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in countries, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
In selecting investments for the funds, the Adviser looks at a company’s relative rankings with respect to expected future growth in reserves, production and cash flow. Additionally, the Adviser also considers relative valuation multiples to earnings and cash flow, expected net asset value, balance sheet quality, working capital needs and overall profitability measured by returns on invested capital. In making security selections for junior and intermediate mining companies, the Adviser looks for companies with proven management who have a strong track record in developing and producing mining companies and whose potential mining assets and financial structure have upside leverage to a rising commodity price.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions. Under these circumstances, a fund may invest up to 100% of its assets in U.S. government securities, short-term indebtedness, repurchase agreements, money market instruments, or other investment grade cash equivalents, each denominated in U.S. dollars or any other freely convertible currency. When a fund is in a defensive investment position, it may not achieve its investment objectives.
Related Risks
Main Risk
The funds are designed for long-term investors who are willing to accept the risks of investing in a portfolio with significant stock holdings. The funds are not intended to be a complete investment program, and there is no assurance that their investment objectives can be achieved. As with all mutual funds, loss of money is a risk of investing in any of the funds. An investment in these funds is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Market Risk
The value of a fund’s shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally.
Portfolio Management Risk
The skill of the Adviser will play a significant role in the funds’ ability to achieve their investment objectives. There is a risk that the investment strategies will not achieve the funds’ objectives or that the Adviser will not implement the strategies properly.
Growth Stock Risk
Because of their perceived growth potential, growth stocks are typically in demand and tend to carry relatively high prices. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. If a fund’s growth stock does not produce the predicted earnings growth, its share price may drop, and the fund’s net asset value may decline.
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Foreign Securities Risk/Emerging Markets Risk
The funds may invest in foreign securities and may be subject to greater risks than when investing in U.S. securities. The risks of investing in foreign securities are generally greater when they involve emerging markets. These risks include:
Currency Risk. The value of a foreign security will be affected by the value of the local currency relative to the U.S. dollar. When a fund sells a foreign denominated security, its value may be worth less in U.S. dollars even if the security increases in value in its home country. U.S. dollar-denominated securities of foreign companies may also be affected by currency risk.
Political, Social and Economic Risk. Foreign investments may be subject to heightened political, social, and economic risks, particularly in emerging markets, which may have relatively unstable governments, immature economic structures, national policies restricting investments by foreigners, different legal systems, and economies based on only a few industries. In some countries, a risk may exist that the government may take over the assets or operations of a company or that the government may impose taxes or limits on the removal of the fund’s assets from that country.
Regulatory Risk . There may be less government supervision of foreign securities markets. As a result, foreign companies may not be subject to the uniform accounting, auditing and financial reporting standards and practices applicable to domestic companies, and there may be less publicly available information about foreign companies.
Market Risk. Foreign securities markets, particularly those of emerging markets, may be less liquid and more volatile than domestic markets. Certain markets may require payment for securities before delivery and delays may be encountered in settling securities transactions. In some foreign markets, there may not be protection against failure by other parties to complete transactions.
Transaction Costs. Costs of buying, selling and holding foreign securities, including brokerage, tax and custody costs, may be higher than the costs involved in domestic transactions.
Industry Concentration Risk
Because the funds concentrate their investments in specific industries, the funds may be subject to greater risks and market fluctuations than a portfolio representing a broader range of industries. The Gold and Precious Metals Fund and World Precious Minerals Fund invest in securities that typically respond to changes in the price of gold. The prices of gold and other precious minerals can be influenced by a variety of global economic, financial and political factors and may fluctuate substantially over short periods of time, and the fund may be more volatile than other types of investments. The Global Resources Fund invests in securities vulnerable to factors affecting the natural resources industries, such as increasing regulation of the environment by both U.S. and foreign governments and production and distribution policies of OPEC (Organization of Petroleum Exporting Countries) and other oil producing countries. Increased environmental regulations may, among other things, increase compliance costs and affect business opportunities for the companies in which the fund invests. The value of these companies is also affected by changing commodity prices, which can be highly volatile and are subject to risks of oversupply and reduced demand.
Non-Diversification Risk
The funds are non-diversified and may invest a significant portion of their total assets in a small number of companies. This may cause the performance of a fund to be dependent upon the performance of one or more selected companies, which may increase the volatility of the fund.
Price Volatility Risk
The value of a fund’s shares may fluctuate significantly.
Options Risk
Investing in options, LEAPS (an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of a fund. An option may expire without value, resulting in a loss of a fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option)
26
or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option.
Warrants Risk
The funds may invest in warrants. Warrants are different from options in that they are issued by a company as opposed to a broker and typically have a longer life than an option. When the underlying stock goes above the exercise price of the warrant, the warrant is “in the money.” If the exercise price of the warrant is above the value of the underlying stock, it is “out of the money.” Out-of-the-money warrants tend to have different price behaviors than in-the-money warrants. As an example, the value of an out-of-the-money warrant with a long time to expiration generally declines less than a drop in the underlying stock price because the warrant’s value is primarily derived from its time component.
Most warrants are exchange traded. The holder of a warrant has the right, until the warrant expires, to sell an exchange traded warrant or to purchase a given number of shares of a particular issue at a specified price. Such investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. The key driver to the movements in warrants are the fundamentals of the underlying company. Warrants, unlike options, may allow the holder to vote on certain issues and often are issued with certain anti-dilutive rights. Warrants pay no dividends. If a warrant held by a fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant, if any.
Depositary Receipts Risk
Investments in ADRs and GDRs may involve risks relating to political, economic or regulatory conditions in foreign countries. These risks include fluctuations in foreign currencies, political and financial instability, less liquidity and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. The underlying securities are typically denominated (or quoted) in a currency other than U.S. dollars. The securities underlying ADRs and GDRs trade on foreign exchanges at times when the U.S. markets are not open for trading. As a result, the value of ADRs and GDRs may not track the price of the underlying securities and may change materially at times when the U.S. markets are not open for trading. In addition, issuers of unsponsored depositary receipts are not contractually obligated to disclose material information in the U.S. and, therefore, such information may not correlate to the market value of the unsponsored depositary receipt.
Convertible Securities Risk
Convertible securities entail some of the risks of both equity and debt securities. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, some of the convertible securities which the Fund may hold are high-yield/high-risk securities that are subject to special risks, including the risk of default in interest or principal payments which could result in a loss of income from or a decline in the market value of, the securities. In addition, convertible securities often display a degree of market price volatility that is comparable to common stocks. The credit risk associated with convertible securities generally is reflected by their ratings by organizations or S&P or a similar determination of creditworthiness by the Adviser. The value of convertible securities tends to decline as interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the underlying securities.
Exchange-Traded Fund Risk (Gold and Precious Metals Fund and World Precious Minerals Fund only)
The risks of investments in ETF securities typically reflect the risks of the types of instruments in which a ETF invests. When a Fund invests in ETFs, shareholders of the Fund bear their proportionate share of the ETF’s fees and expenses, as well as their share of the Fund’s fees and expenses. As a result, an investment by a Fund in an ETF could cause the Fund’s operating expenses to be higher and, in turn, performance to be lower than if it were to invest directly in the instruments underlying the ETF. In addition, when investing in ETF securities, a Fund may pay brokerage commissions and may buy such securities at a price that is above, at or below the ETF’s NAV. Further, trading in an ETF may be halted, which may make it difficult for a Fund to dispose of a holding at the desired time.
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Restricted Security Risk
The funds may make direct equity investments in securities that are subject to contractual and regulatory restrictions on transfer. These investments may involve a high degree of business and financial risk. The restrictions on transfer may cause a fund to have to hold a security at a time when it may be beneficial to liquidate the security, and the security could decline significantly in value before the fund could liquidate these securities.
Gold and Precious Metals/Minerals Risk
The Gold and Precious Metals Fund and World Precious Minerals Fund may invest in gold and precious minerals directly and/or in equity or equity-related securities, such as ETFs that represent interests in, or related to, these precious metals and, therefore, are subject to the risk that they could fail to qualify as a regulated investment company under the Internal Revenue Code if the funds derive more than 10% of their gross income from these investments in gold and precious metals or minerals. Failure to qualify as a regulated investment company would result in adverse tax consequences to the funds and their shareholders.
Portfolio Turnover Risk
The funds’ portfolio turnover rates vary from year to year according to market conditions and may exceed 100%. The length of time a fund has held a particular security is not generally a consideration in investment decisions. It is the policy of the funds to effect portfolio transactions without regard to a holding period if, in the judgment of the portfolio managers, such transactions are advisable. Portfolio turnover generally involves some expense, including brokerage commissions, dealer mark-ups, or other transaction costs on the sale of securities and reinvestment in other securities. Such sales may result in realization of taxable capital gains for shareholders.
Junior and Intermediate Mining Companies Risk
The World Precious Minerals Fund, and to a lesser extent the Gold and Precious Metals Fund, invest in junior and intermediate exploration companies. The securities of junior and intermediate exploration gold companies, which can be more speculative in nature, tend to be less liquid and more volatile in price than securities of larger companies.
Illiquidity Risk
Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet. These investments may involve a high degree of business and financial risk. Illiquidity may be the result of, for example, low trading volume, lack of a market maker, or contractual or legal restrictions that limit or prevent a fund from selling securities or closing derivative positions. The values of illiquid investments are often more volatile than the values of more liquid investments. It may be more difficult for a fund to determine a fair value of an illiquid investment than that of a more liquid comparable investment.
Initial Public Offering Risk
The fund may purchase securities of companies in IPOs. Special risks associated with these securities may include illiquidity, unseasoned trading, lack of investor knowledge of the company, limited operating history and substantial price volatility. The limited number of shares available for trading in some IPOs may make it more difficult for the fund to buy or sell significant amounts of shares without an unfavorable impact on prevailing market prices. Some companies whose shares are sold through IPOs are involved in relatively new industries or lines of business, which may not be widely understood by investors. Some of these companies may be undercapitalized or regarded as developmental stage companies without revenues or operating income, or the near-term prospects of achieving them.
Other Types of Investment, Related Risks and Considerations
While not principal strategies, the funds may invest to a limited extent in other types of investments as discussed below under “Common Investment Practices and Related Risks.”
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Emerging Europe Fund
Investment Objectives
The Emerging Europe Fund seeks long-term growth of capital.
Principal Investment Strategies
The Emerging Europe Fund invests, under normal market conditions, at least 80% of its net assets in equity and equity-related securities of companies located in the emerging markets of Eastern Europe. The fund will notify you in writing 60 days before making any changes to this policy. The equity and equity-related securities that the fund primarily invests in are common stocks, preferred stocks, convertible securities, rights and warrants, and depository receipts (ADRs and GDRs).
In general, Eastern European countries are in the early stages of industrial, economic or capital market development. Eastern European countries may include countries that were, until recently, governed by communist governments or countries that, for any other reason, have failed to achieve levels of industrial production, market activity, or other measures of economic development typical of the developed European countries. Although the fund may invest in any Eastern European country, it currently focuses its investment in companies located in Russia, Poland, Czech Republic, Hungary and Turkey. The Adviser considers the following countries to be in Eastern Europe: Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Croatia, the Czech Republic, Estonia, FYR Macedonia, Georgia, Greece, Hungary, Latvia, Lithuania, Moldova, Poland, Romania, Russia, Slovakia, Slovenia, Turkey and Ukraine.
The fund will consider investments in Eastern Europe to be the following:
1. |
securities of issuers that are organized under the laws of any Eastern European country or have a principal office in an Eastern European country; |
2. |
securities of issuers that derive a majority of their revenues from business in Eastern European countries or have a majority of their assets in Eastern European countries at the time of the fund’s investment; or |
3 |
securities that are traded principally on a securities exchange in an Eastern European country. (For this purpose, investment companies that invest principally in securities of companies located in one or more Eastern European countries will also be considered to be located in an Eastern European country, as will American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) with respect to the securities of companies located in Eastern European countries.) |
The Emerging Europe Fund invests at least 25% of its total assets in securities of companies involved in oil, gas or banking. In determining whether a company is involved in oil, gas or banking, the fund will use the Bloomberg Sector Classification System. For a full list of the Bloomberg-classified industries involving oil, gas or banking, see the discussion of non-fundamental investment restrictions in the SAI.
However, the fund will invest no more than 25% of its total assets in any one Bloomberg-classified industry involving oil, gas, or banking, such as, among others, Oil Companies–Integrated, Oil Companies–Exploration & Production, Oil Refining & Marketing, Regional Banks–Non-U.S., Commercial Banks–Non-U.S., and Diversified Banking Institutions; provided, however, if at the time of purchase a corresponding industry classification represents 20% or more of the fund’s benchmark, the MSCI Emerging Markets Europe 10/40 Index (Net Total Return), the fund may invest up to 35% of its total assets in the corresponding Bloomberg-classified industry.
The Emerging Europe Fund may, from time to time, invest a significant amount of its total assets in certain sectors. The fund may invest up to 20% of its assets in securities, including debt securities, of governments and companies located anywhere in the world.
The fund may also purchase call and put options. The fund may purchase put options to hedge the fund’s portfolio against a possible loss, and the fund may purchase call options as a substitute to purchasing the underlying security. The fund will not purchase any option if, immediately thereafter, the aggregate market value of all outstanding options purchased by the fund would exceed 10% of the fund’s total assets.
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In an effort to enhance the fund’s risk-adjusted performance, the fund may enter into covered option writing transactions. The fund will not sell a covered option if, immediately thereafter, the aggregate value of the fund’s securities subject to outstanding covered options would exceed 50% of the value of the fund’s total assets.
Investment Processes
The Adviser uses a matrix of “top-down” macro models and “bottom-up” micro stock selection models to determine weighting in countries, sectors and individual securities. The Adviser believes government policies are a precursor to change, and as a result, it monitors and tracks the fiscal and monetary policies of the world’s largest countries both in terms of economic stature and population. The Adviser focuses on historical and socioeconomic cycles, and it applies both statistical and fundamental models, including “growth at a reasonable price” (GARP), to identify companies with superior growth and value metrics. The Adviser overlays these explicit knowledge models with the tacit knowledge obtained by domestic and global travel for first-hand observation of local and geopolitical conditions, as well as specific companies and projects.
The Adviser’s “bottom-up” stock selection approach is generally characterized as growth at a reasonable price, which focuses on three key drivers: revenue growth, cash flow and return on equity. The Adviser searches for growth companies that have strong fundamentals and are also trading at reasonable valuations.
The Adviser uses a matrix of statistical models to monitor market volatility and money flows, and as a result, the fund may at times maintain higher than normal cash levels. For example, the Adviser may take a temporary defensive position when the securities trading markets or the economy are experiencing excessive volatility, a prolonged general decline, or other adverse conditions. Under these circumstances, the fund may invest up to 100% of its assets in U.S. government securities, short-term indebtedness, repurchase agreements, money market instruments, or other investment grade cash equivalents, each denominated in U.S. dollars, or any other freely convertible currency. When the fund is in a defensive investment position, it may not achieve its investment objectives.
Related Risks
Main Risk
The fund is designed for investors who are willing to accept the risks of investing in portfolios with significant stock holdings. The fund is not intended to be a complete investment program, and there is no assurance that its investment objective can be achieved. As with all mutual funds, loss of money is a risk of investing in the fund. An investment in the fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Given the limited number of issuers in Eastern European countries, along with liquidity and capacity constraints in certain markets, as the asset size of the Emerging Europe Fund grows it may be more difficult for the Adviser to locate attractive securities to purchase, and the ability of the Adviser to efficiently trade into or out of particular securities or markets may become more limited.
Market Risk
The value of the fund’s shares will go up and down based on the performance of the companies whose securities it owns and other factors affecting the securities market generally.
Portfolio Management Risk
The skill of the Adviser will play a significant role in the funds’ ability to achieve their investment objectives. There is a risk that the investment strategies will not achieve the funds’ objectives or that the Adviser will not implement the strategies properly.
Non-Diversification Risk
The fund is classified as a “non-diversified” fund, and, as such, the fund’s portfolio may include the securities of a smaller total number of issuers than if the fund was classified as “diversified.” Because the fund may invest a greater proportion of its assets in the obligations of a small number of issuers, changes in the financial condition or market assessment of a single issuer may cause greater fluctuation and volatility in the fund’s total returns or asset values than if the fund was required to hold smaller positions of the securities or a larger number of issuers.
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Growth Stock Risk
Because of their perceived growth potential, growth stocks are typically in demand and tend to carry relatively high prices. Growth stocks generally experience share price fluctuations as the market reacts to changing perceptions of the underlying companies’ growth potentials and broader economic activities. If a fund’s growth stock does not produce the predicted earnings growth, its share price may drop, and the fund’s net asset value may decline.
Geographic Concentration Risk
The Emerging Europe Fund concentrates its investments in companies located in Eastern Europe. Because of this, companies in the fund’s portfolio may react similarly to political, social and economic developments in any of the Eastern European countries. For example, many companies in the same region may be dependent on related government fiscal policies. Companies may be adversely affected by new or unanticipated legislative changes that could affect the value of such companies and, therefore, the fund’s share price. The fund’s return and share price may be more volatile than those of a less concentrated portfolio.
Industry Concentration Risk
The Emerging Europe Fund invests more than 25% of its investments in companies principally engaged in the oil, gas or banking industries. Oil & gas companies are a large part of the Russian economy and banks typically are a significant component of emerging market economies, such as those in Russia and other Eastern European countries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile. To the extent that the fund’s assets are invested in the oil & gas industry, the fund would be particularly vulnerable to factors affecting the industry, such as increased governmental regulation of the environment. Increased environmental regulation may, among other things, increase compliance costs and affect business opportunities for companies in which the fund invests. The fund would also be affected by changing commodity prices, which can be highly volatile and are subject to risk of over supply and decreased demand. To the extent that the fund’s assets are invested in companies operating in the banking industry, the fund is subject to legislative or regulatory changes, adverse market conditions, and/or increased competition affecting banking companies. The prices of securities of banking companies also may fluctuate widely due to general economic conditions that could create exposure to credit losses. In determining whether a company is involved in oil, gas or banking, the fund will use the Bloomberg Sector Classification System.
Sector Risk
From time to time, the fund may invest a significant amount of its total assets in certain sectors, which may be subject to specific risks. These risks include governmental regulation of the sector and governmental monetary and fiscal policies which may negatively affect a particular sector. In addition, governmental policies towards international trade and tariffs may affect particular sectors.
Foreign Securities Risk/Emerging Markets Risk
The fund may invest in foreign securities and may be subject to greater risks than when investing in U.S. securities. The risks of investing in foreign securities are generally greater when they involve emerging markets. These risks include:
Currency Risk. The value of a foreign security will be affected by the value of the local currency relative to the U.S. dollar. When a fund sells a foreign denominated security, its value may be worth less in U.S. dollars even if the security increases in value in its home country. U.S. dollar-denominated securities of foreign companies may also be affected by currency risk.
Political, Social and Economic Risk. Foreign investments may be subject to heightened political, social and economic risks, particularly in emerging markets, which may have relatively unstable governments, immature economic structures, national policies restricting investments by foreigners, different legal systems and economies based on only a few industries. In some countries, a risk may exist that the government may take over the assets or operations of a company or that the government may impose taxes or limits on the removal of the fund’s assets from that country.
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Regulatory Risk. There may be less government supervision of foreign securities markets. As a result, foreign companies may not be subject to the uniform accounting, auditing and financial reporting standards and practices applicable to domestic companies, and there may be less publicly available information about foreign companies.
Market Risk. Foreign securities markets, particularly those of emerging markets, may be less liquid and more volatile than domestic markets. Certain markets may require payment for securities before delivery and delays may be encountered in settling securities transactions. In some foreign markets, there may not be protection against failure by other parties to complete transactions.
Transaction Costs. Costs of buying, selling and holding foreign securities, including brokerage, tax and custody costs, may be higher than the costs involved in domestic transactions.
Eastern European Securities
Political and economic structures in many Eastern European countries are in their infancy and developing rapidly, and such countries may lack the social, political and economic stability characteristic of many more developed countries. In addition, unanticipated political or social developments may affect the value of the fund’s investment in Eastern European countries. As a result, the risks normally associated with investing in any foreign country may be heightened in Eastern European countries. For example, the small size and inexperience of the securities markets in Eastern European countries and the limited volume of trading in securities in those markets may make the fund’s investments in such countries illiquid and more volatile than investments in more developed countries and may make obtaining prices on portfolio securities from independent sources more difficult than in other more developed markets. In addition, Eastern European countries have failed in the past to recognize private property rights and at times have nationalized or expropriated the assets of private companies. There may also be little financial or accounting information available with respect to companies located in certain Eastern European countries and it may be difficult, as a result, to assess the value or prospects of an investment in such companies.
In addition to the special risks common to most Eastern European countries described above, each individual Eastern European country also necessarily involves special risks that may be unique to that country. Following is a brief description of special risks that may be incurred when the fund invests in Russia, Poland, Greece, Hungary, the Czech Republic and Turkey, which are some of the countries in which the fund focuses its investment.
Russia. After the collapse of the Soviet Union, Russia has experienced and continues to experience political and social change. Russia is undergoing market-oriented reforms including a movement from centrally controlled ownership to privatization. The fund is subject to the risk that Russia may have unfavorable political developments, social instability, and/or changes in government policies. For example, the Ukrainian crisis has prompted the United States and the European Union to impose economic sanctions on certain Russian individuals and Russian companies, and Russia has responded with sanctions against a number of countries, including a total ban on food imports from the European Union, United States, Norway, Canada and Australia. These current sanctions, or the threat of further sanctions, may result in the decline of the value or liquidity of Russian securities, a weakening of the ruble or other adverse consequences to the Russian economy, any of which could negatively impact the fund’s investments in Russian securities. These economic sanctions also could result in the immediate freeze of Russian securities, which could impair the ability of the fund to buy, sell, receive or deliver those securities. Both these current and potential future sanctions also could result in Russia taking further counter measures or retaliatory actions, which may impair further the value or liquidity of Russian securities, and therefore may negatively impact the fund.
Poland. The security market in Poland is relatively new, and therefore, investors may be subject to new or amended laws and regulations. Legal reforms have been instituted and laws regarding investments are published on a routine basis. However, important court decisions are not always accessible to practitioners. While there are currently no obstacles to foreign ownership of securities and profits may be repatriated, these laws may be changed anytime without notice.
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Greece. Greece joined the EU in 1981 and adopted the euro in 2002. In recent years, Greece was downgraded from a Developed Market to an Emerging Market by MSCI, Russell Indexes, and S&P Dow Jones, and the FTSE Index has Greece on its developed market watch list. Current political risk may present excess volatility in the Greek market.
Hungary. Hungary’s market-oriented reforms are relatively recent and leave many uncertainties regarding economic and legal issues. Privatization in Hungary has been substantial but is not yet complete. Owners and managers of Hungarian enterprises are often less experienced with market economies than owners and managers of companies in Western European and U.S. markets. The securities markets on which the securities of these companies are traded are in their infancy. Laws governing taxation, bankruptcy, restrictions on foreign investments and enforcement of judgments are subject to change.
The Czech Republic. The Czech Republic joined the European Union (EU) in 2004, which has resulted in a convergence with Western European standards and a modernization of the Czech Republic’s regulatory environment. The market-oriented economy in the Czech Republic is young in comparison to the United States and Western European countries. The Czech Republic has instituted substantial privatization since 1992, when the first wave of privatization began. Information suggests that dominant or majority shareholders now control many of the larger privatized companies. Bankruptcy laws have been liberalized, giving creditors more power to force bankruptcies. Laws exist that regulate direct and indirect foreign investment, as well as repatriation of profits and income. Tax laws include provisions for both value-added taxes and income taxes. Courts of law are expected to, but may not, enforce the legal rights of private parties.
Turkey. Turkey is currently undergoing substantial change in its efforts to join the European Union. The availability of investment opportunities and the ability to liquidate investments profitably may depend on the continued pursuit by government of certain current economic liberalization policies. Political climates may change, sometimes swiftly. There is no assurance that government will continue with such policies in their present form. Investing in equities and fixed income obligations in Turkey involves certain considerations not usually associated with investing in securities in more developed capital markets. The securities market in Turkey is less liquid and more volatile than securities markets in the United States and Western Europe.
Consequently, the fund’s investment portfolio may experience greater price volatility and significantly lower liquidity than a portfolio invested in public and private debt and other fixed income obligations of more developed countries. There may also be less state regulation and supervision of the securities markets, less reliable information available to brokers and investors and enforcement of regulations may be different from those in the United States, Western Europe and other more developed countries. Consequently, there may be less investor protection. Disclosure, accounting and regulatory standards are in most respects less comprehensive and stringent than in developed markets. In addition, brokerage commissions and other transaction costs and related taxes on securities transactions in Turkey are generally higher than those in more developed markets.
Options Risk
Investing in options, LEAPS (an option that has an expiration date of up to two and one half years), and other instruments with option-type elements may increase the volatility and/or transaction expenses of the fund. An option may expire without value, resulting in a loss of the fund’s initial investment and may be less liquid and more volatile than an investment in the underlying securities. As the writer of an option, the Fund may have no control over when the underlying instruments must be sold (in the case of a call option) or purchased (in the case of a put option) because the option purchaser may notify the Fund of exercise at any time prior to the expiration of the option.
Warrants Risk
The fund may invest in warrants. Warrants are different from options in that they are issued by a company as opposed to a broker and typically have a longer life than an option. When the underlying stock goes above the exercise price of the warrant, the warrant is “in the money.” If the exercise price of the warrant is above the value of the underlying stock, it is “out of the money.” Out-of-the-money warrants tend
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to have different price behaviors than in-the-money warrants. As an example, the value of an out-of-the-money warrant with a long time to expiration generally declines less than a drop in the underlying stock price because the warrant’s value is primarily derived from its time component.
Most warrants are exchange traded. The holder of a warrant has the right, until the warrant expires, to sell an exchange traded warrant or to purchase a given number of shares of a particular issue at a specified price. Such investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. The key driver to the movements in warrants are the fundamentals of the underlying company. Warrants, unlike options, may allow the holder to vote on certain issues and often are issued with certain anti-dilutive rights. Warrants pay no dividends. If a warrant held by the fund were not exercised by the date of its expiration, the fund would incur a loss in the amount of the cost of the warrant.
Depositary Receipts Risk
Investments in ADRs and GDRs may involve risks relating to political, economic or regulatory conditions in foreign countries. These risks include fluctuations in foreign currencies, political and financial instability, less liquidity and greater volatility, lack of uniform accounting, auditing and financial reporting standards and increased price volatility. The underlying securities are typically denominated (or quoted) in a currency other than U.S. dollars. The securities underlying ADRs and GDRs trade on foreign exchanges at times when the U.S. markets are not open for trading. As a result, the value of ADRs and GDRs may not track the price of the underlying securities and may change materially at times when the U.S. markets are not open for trading. In addition, issuers of unsponsored depositary receipts are not contractually obligated to disclose material information in the U.S. and, therefore, such information may not correlate to the market value of the unsponsored depositary receipt.
Convertible Securities Risk
Convertible securities entail some of the risks of both equity and debt securities. While fixed-income securities generally have a priority claim on a corporation’s assets over that of common stock, some of the convertible securities which the Fund may hold are high-yield/high-risk securities that are subject to special risks, including the risk of default in interest or principal payments which could result in a loss of income from or a decline in the market value of, the securities. In addition, convertible securities often display a degree of market price volatility that is comparable to common stocks. The credit risk associated with convertible securities generally is reflected by their ratings by organizations or S&P or a similar determination of creditworthiness by the Adviser. The value of convertible securities tends to decline as interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the underlying securities.
Restricted Security Risk
The fund may make direct equity investments in securities that are subject to contractual and regulatory restrictions on transfer. These investments may involve a high degree of business and financial risk. The restrictions on transfer may cause the fund to hold a security at a time when it may be beneficial to liquidate the security, and the security could decline significantly in value before the fund could liquidate these securities.
Other Types of Investment, Related Risks and Considerations
While not principal strategies, the fund may invest to a limited extent in other types of investments as discussed below under “Common Investment Practices and Related Risks.”
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Common Investment Practices and Related Risks
Illiquid Securities
Each fund may invest up to 15% of its net assets in illiquid securities. Illiquid securities are those securities that cannot be disposed of in seven days or less at approximately the value at which a fund carries them on its balance sheet.
Repurchase Agreements
Each fund may enter into repurchase agreements. A repurchase agreement is a transaction in which a fund purchases a security from a commercial bank or recognized securities dealer and has a simultaneous commitment to sell it back at an agreed upon price on an agreed upon date. This date is usually not more than seven days from the date of purchase. The resale price reflects the original purchase price plus an agreed upon market rate of interest, which is unrelated to the coupon rate or maturity of the purchased security.
In effect, a repurchase agreement is a loan by a fund collateralized with securities, usually securities issued by the U.S. Treasury or a government agency.
Repurchase agreements carry several risks, including the risk that the counterparty defaults on its obligations. For example, if the seller of the securities underlying a repurchase agreement fails to pay the agreed resale price on the agreed delivery date, a fund may incur costs in disposing of the collateral and may experience losses if there is any delay in its ability to do so.
When-Issued and Delayed-Delivery Securities
Each fund may purchase securities on a when-issued or delayed-delivery basis. This means the fund purchases securities for delivery at a later date and at a stated price or yield. There is a risk that the market price at the time of delivery may be lower than the agreed upon purchase price. In that case, the fund could suffer an unrealized loss at the time of delivery.
Borrowing
Each fund may not borrow money except for temporary or emergency purposes in an amount not exceeding 33 1/3% of the fund’s total assets (including the amount borrowed) less liabilities (other than borrowings). To the extent that a fund borrows money before selling securities, the fund may be leveraged. At such times, the fund may appreciate or depreciate more rapidly than an unleveraged portfolio.
Small-and Mid-Sized Companies Risk
A fund may invest in small-and mid-sized companies, which involve greater risk than investing in more established companies. This risk includes difficulty in obtaining reliable information and financial data and low liquidity in the market, making it difficult to dispose of shares when it may otherwise be advisable.
Derivative Securities
A fund may, but is not required to, invest in derivative securities, which include purchasing and selling exchange-listed and over-the-counter put and call options or LEAPS on securities, equity and fixed-income indexes, and other financial instruments. In an effort to enhance a fund’s risk-adjusted performance, a fund may enter into covered option writing transactions. A fund will primarily implement this risk reduction strategy by selling covered call options, but may also sell covered puts as part of this strategy. A fund will not sell a covered option if, immediately thereafter, the aggregate value of the fund’s securities subject to outstanding covered options would exceed 50% of the value of the fund’s total assets. A fund will not purchase an option if, immediately thereafter, the aggregate market value of all options purchased by the fund would exceed 10% of the fund’s total assets.
In addition, each fund may purchase and sell financial futures contracts and options thereon, and enter into various currency transactions such as currency forward contracts, or options on currencies or currency futures. Each fund may, but is not required to, invest in derivative securities for hedging, risk management or portfolio management purposes. Derivative securities may be used to attempt to protect against possible changes in the market value of securities held in, or to be purchased for, the portfolio. The ability of a fund to use derivative securities successfully will depend upon the Adviser’s ability to predict pertinent market
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movements, which cannot be assured. Investing in derivative securities will increase transaction expenses and may result in a loss that exceeds the principal invested in the transaction. Each fund will comply with applicable regulatory requirements when investing in derivative securities. For more information on derivative securities and specific fund limitations, see the Statement of Additional Information (SAI).
In addition, each fund may invest in warrants. Warrants are different from options in that they are issued by a company as opposed to a broker and typically have a longer life than an option. When the underlying stock goes above the exercise price of the warrant, the warrant is “in the money.” If the exercise price of the warrant is above the value of the underlying stock, it is “out of the money.” Out-of-the-money warrants tend to have different price behaviors than in-the-money-warrants. As an example, the value of an out-of-the-money warrant with a long time to expiration generally declines less than a drop in the underlying stock price because the warrant’s value is primarily derived from its time component.
Most warrants are exchange traded. The holder of a warrant has the right, until the warrant expires, to sell an exchange traded warrant or to purchase a given number of shares of a particular issue at a specified price. Such investments can provide a greater potential for profit or loss than an equivalent investment in the underlying security. Prices of warrants do not necessarily move, however, in tandem with prices of the underlying securities, particularly for shorter periods of time, and, therefore, may be considered speculative investments. The key driver to the movements in warrants are the fundamentals of the underlying company. Warrants, unlike options, may allow the holder to vote on certain issues and often are issued with certain anti-dilutive rights. Warrants pay no dividends. If a warrant held by a fund were not exercised by the date of its expiration, a fund would incur a loss in the amount of the cost of the warrant.
Currency Risk and Hedging
The value of a foreign security will be affected by the value of the local currency relative to the U.S. dollar. When a fund sells a foreign denominated security, its value may be worth less in U.S. dollars even if the security increases in value in its home country. U.S. dollar-denominated securities of foreign companies may also be affected by currency risk.
The funds may, but are not required to, invest in derivative securities in an attempt to hedge a particular fund’s foreign securities investments back to the U.S. dollars when, in their judgment, currency movements affecting particular investments are likely to harm performance. Possible losses from changes in currency exchange rates are a primary risk of unhedged investing in foreign securities. While a security may perform well in a foreign market, if the local currency declines against the U.S. dollar, gains from the investment can decline or become losses. Typically, currency fluctuations are more extreme than stock market fluctuations. Accordingly, the strength or weakness of the U.S. dollar against foreign currencies may account for part of a fund’s performance even when the Adviser attempts to reduce currency risk through hedging activities. While currency hedging may reduce portfolio volatility, there are costs associated with such hedging, including the loss of potential profits, losses on derivative securities and increased transaction expenses.
Investments in Exchange-Traded Funds (ETFs) or Other Investment Companies
The funds may invest in ETFs or other investment companies. If a fund invests in an ETF or other investment company, the fund will pay its proportionate share of expenses of the ETF or other investment company (including management and administrative fees) as well as the fund’s own management and administrative expenses. The funds may rely on certain Securities and Exchange Commission (SEC) exemptive orders or rules that permit funds meeting various conditions to invest in an ETF in amounts exceeding limits set forth in the Investment Company Act of 1940 that would otherwise be applicable. ETFs in which the Fund invests may borrow money for investment purposes, a practice commonly referred to as “leveraging.” An ETF may also seek to employ leverage through the use of derivatives, such as futures, options or swaps. The use of leverage by the ETFs may increase exposure to fluctuations in the prices of the leveraged ETF’s assets thereby making any change in the leveraged ETF’s net asset value greater than without the use of leverage. Leverage
36
could result in increased volatility of returns. A leveraged ETF will also be expected to comply with asset coverage requirements which could force the leveraged ETF to sell certain portfolio holdings or reduce its derivatives positions at a time which may be disadvantageous to the leveraged ETF.
Portfolio Holdings
A description of the funds’ policies and procedures with respect to the disclosure of the funds’ portfolio securities is available in the funds’ SAI and on the funds’ website (www.usfunds.com).
Fund Management
Investment Adviser
U.S. Global Investors, Inc., 7900 Callaghan Road, San Antonio, Texas 78229, furnishes investment advice and manages the business affairs of the Trust. The Adviser was organized in 1968. Each fund will pay the following percentages of its average net assets to the Adviser for advisory services:
Base
|
Benchmark |
Hurdle
|
Base Advisory
|
|
Gold and Precious Metals Fund |
0.90% |
FTSE Gold Mines Index |
+/- 5% |
0.65%-1.15% |
World Precious Minerals Fund |
1.00% |
NYSE Arca Gold Miners Index |
+/- 5% |
0.75%-1.25% |
Global Resources Fund |
0.95% |
S&P Global Natural Resources Index (Net Total Return) |
+/- 5% |
0.70%-1.20% |
Emerging Europe Fund |
1.25% |
MSCI Emerging Markets Europe 10/40 Index (Net Total Return) |
+/- 5% |
1.00%-1.50% |
The funds are subject to a performance fee. A performance fee, or fulcrum fee, is designed to reward the Adviser for fund performance that exceeds a fund’s designated benchmark or penalize the Adviser for fund performance which is lower than a fund’s designated benchmark. A fund’s cumulative performance is compared to that of its designated benchmark over a 12-month rolling period. For purposes of calculating the performance adjustment for the Gold and Precious Metals and Emerging Europe Funds, the performance will include the performance of the Investor Class shares of the funds for the first 12 months after the commencement of operations of the Institutional Class shares of the Funds. After such time, the performance will be calculated based on the Institutional Class shares of the fund. When the difference between a fund’s performance and the performance of its designated benchmark is less than 5% (this is known as the hurdle rate), there will be no adjustment to the base advisory fee. This is often referred to as the null zone. If a fund’s cumulative performance exceeds by 5% or more (hurdle rate) the performance of its designated benchmark, the base advisory fee will be increased by 0.25%. If a fund’s cumulative performance falls below its designated benchmark by 5% or more, the base advisory fee will be decreased by 0.25%. The chart reflects the minimum and maximum advisory fee applicable to each fund. See each fund’s fee table for the actual management fee for the most recent fiscal year. Certain funds are subject to breakpoints in the advisory fee. Please see the funds’ SAI for more information on the breakpoints. The performance will be calculated based on the Institutional Class shares of the fund.
The following example illustrates the application of the performance adjustment to the World Precious Minerals Fund:
For the rolling 12-month period |
Fund’s investment performance |
Index’s cumulative change |
Fund’s performance relative to the index |
January 1 |
$50.00 |
$100.00 |
|
December 31 |
$57.60 |
$110.20 |
|
Absolute change |
+$7.60 |
+$10.20 |
|
Actual change |
+15.20% |
+10.20% |
+5.00% |
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Based on these assumptions, the Adviser’s management fee for World Precious Minerals Fund for the month ended December 31 would be calculated as follows:
● |
The portion of the annual basic fee rate of 1.00% applicable to that month is multiplied by the fund’s average daily net assets for the month. This results in the dollar amount of the base fee. |
● |
The 0.25% rate (adjusted for the number of days in the month) is multiplied by the fund’s average daily net assets for the performance period. This results in the dollar amount of the performance adjustment. |
● |
The dollar amount of the performance adjustment is added to the dollar amount of the basic fee, producing the adjusted management fee. |
The Adviser or its affiliates may pay compensation, out of profits derived from the Adviser’s management fee and not as an additional charge to the funds, to certain financial institutions (which may include banks, securities dealers and other industry professionals) for the sale and/or distribution of fund shares or the retention and/or servicing of fund investors and fund shares (“revenue sharing”). These payments are in addition to any record keeping or sub-transfer agency fees, which may be payable by the funds, or other fees described in the fee table or elsewhere in the prospectus or SAI. Examples of “revenue sharing” payments include, but are not limited to, payment to financial institutions for “shelf space” or access to a third party platform or fund offering list or other marketing programs, including, but not limited to, inclusion of the funds on preferred or recommended sales lists, mutual fund “supermarket” platforms and other formal sales programs; granting the Adviser access to the financial institution’s sales force; granting the Adviser access to the financial institution’s conferences and meetings; assistance in training and educating the financial institution’s personnel; and obtaining other forms of marketing support. The level of revenue sharing payments made to financial institutions may be a fixed fee or based upon one or more of the following factors: gross sales, current assets and/or number of accounts of the fund attributable to the financial institution, or other factors as agreed to by the Adviser and the financial institution or any combination thereof. The amount of these revenue sharing payments is determined at the discretion of the Adviser from time to time, may be substantial, and may be different for different financial institutions depending upon the services provided by the financial institution. Such payments may provide an incentive for the financial institution to make shares of the funds available to its customers and may allow the funds greater access to the financial institution’s customers.
A discussion regarding the basis for the board of trustees’ approval of the investment advisory contract of the funds is available in the funds’ annual report to shareholders.
Fund Expenses
Pursuant to a voluntary arrangement, the Adviser has agreed to waive all class specific expenses of the Gold and Precious Metals Fund, the World Precious Minerals Fund, the Global Resources Fund, and the Emerging Europe Fund including, but not limited to, administrative services fees and transfer agency fees and expenses. The Adviser can modify or terminate this arrangement at any time. The expense waiver is exclusive of performance fees, acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest.
The following table shows the effect that the current voluntary limitation had for the World Precious Minerals Fund and the Global Resources Fund:
World Precious
|
Global
|
|
Actual total annual operating expenses* |
20.51% |
1.35% |
Voluntary expense waiver |
(19.31)% |
(0.61)% |
Total annual expenses after Reimbursement |
1.20% |
0.74% |
* |
Excluding acquired fund fees and expenses, if any. |
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The following table shows the effect that the current voluntary waiver would have for the following funds if each fund’s Institutional Class had assets of $25,000,000:
Gold and Precious Metals Fund |
Emerging
|
|
Actual total annual operating expenses* |
1.52% |
2.01% |
Voluntary expense waiver |
(0.27)% |
(0.27)% |
Total annual expenses after Reimbursement |
1.25% |
1.74% |
* |
Excluding acquired fund fees and expenses, if any. |
Portfolio Managers
The Emerging Europe Fund, Gold and Precious Metals Fund, World Precious Minerals Fund and Global Resources Fund are managed by a team consisting of Mr. Frank Holmes and Mr. Ralph Aldis. Mr. Holmes has served as Chief Executive Officer of the Adviser since 1989 and Chief Investment Officer Adviser since 1999. Mr. Aldis has served as a portfolio manager of the Adviser since 2001.
Adviser personnel may invest in securities for their own accounts according to a code of ethics that establishes procedures for personal investing and restricts certain transactions.
The SAI provides additional information about the portfolio managers’ compensation, other accounts managed, and ownership of securities in the funds they manage.
Shareholder Information
Pricing of Fund Shares
When you make a purchase, redemption, or exchange, the value of your transaction will be the next calculated NAV per share after we receive your request in good order (which generally means that the funds have received your instructions and any necessary documents or amounts in the form required by the funds’ policies and procedures). A fund’s NAV is determined as of the close of the regular trading session (generally 4 p.m. Eastern Time) of the New York Stock Exchange (NYSE) each day the NYSE is open. If we receive your request in good order prior to that time, your transaction price will be the NAV per share determined for that day. If we receive your request or payment after that time, your transaction will be effective on the next day the funds are open for business.
Opening an Account
If you are an eligible investor, you may open an Institutional Class account by downloading an application from our website at www.usfunds.com. Eligible investors for the Institutional Class are institutional and individual retail investors with a minimum investment of $1 million who purchase through certain broker-dealers or directly from the funds; and registered investment advisors investing directly with the funds or who trade through platforms approved by the Adviser and whose clients’ assets in the aggregate meet the $1 million minimum investment. You are not an eligible investor if you do not independently meet the minimum investment amount. If you are holding shares through an omnibus account, you may not aggregate your shares with the shares of other omnibus account shareholders in order to meet the Institutional Class eligibility requirements. The funds reserve the right to waive or modify the above eligibility requirements at any time.
A signed, completed application with your initial investment must be mailed to U.S. Global Investors Funds to open your initial account. However, after you open your initial account, you will not need to fill out another application to invest in another fund within the U.S. Global Investors family of funds unless the account registration is different or we need further information to verify your identity
In compliance with the USA Patriot Act of 2001, please note that the transfer agent will verify certain information on your account application as part of the fund’s Anti-Money Laundering Program. As requested on the application, you must supply your full name, date of birth, social security number and permanent street address. Mailing addresses containing only a P.O. Box will not be accepted. Please contact the transfer agent at 1-800-873-8637 if you need additional assistance when completing your application.
If we do not have a reasonable belief of the identity of a customer, the account will be rejected or the customer will not be allowed to perform a transaction
39
on the account until such information is received. The fund reserves the right to close the account within 5 business days if clarifying information/documentation is not received.
Shares of the funds have not been registered for sale outside of the United States. The U.S. Global Investors Funds generally do not sell shares to investors residing outside the United States, even if they are United States citizens or lawful permanent residents, except to investors with United States military APO or FPO addresses.
Funding an Account
All checks must be in U.S. dollars drawn on a domestic bank. The funds will not accept payment in cash, coins, or money orders. The funds also do not accept post-dated checks or any conditional order or payment. To prevent check fraud, the funds will not accept third party checks, Treasury checks, credit card checks, traveler’s checks or starter checks for the purchase of shares. Exceptions to this policy may be made in limited circumstances. Please make checks payable to: U.S. Global Investors.
The transfer agent will charge a $25 fee against a shareholder’s account, in addition to any loss sustained by the fund, for any payment that is returned. It is the policy of the fund not to accept applications under certain circumstances or in amounts considered disadvantageous to shareholders. The fund reserves the right to reject any application.
If you are making your first investment in the funds, before you wire funds, the transfer agent must have a completed account application. You may mail or overnight deliver your account application to the transfer agent. Upon receipt of your completed account application, the transfer agent will establish an account for you. An Investor Representative will contact you within 24 hours with your account number and to provide the proper wiring instruction. The account number assigned will be required as part of the instruction that should be provided to your bank to send the wire. Your bank must include the name of the fund you are purchasing, the account number, and your name so that monies can be correctly applied.
Wired funds must be received prior to 4:00 p.m. Eastern time to be eligible for same day pricing. The fund and U.S. Bank, N.A. are not responsible for the consequences of delays resulting from the banking or Federal Reserve wire system, or from incomplete wiring instructions.
Minimum Initial Investment
● |
$1 million |
Minimum Subsequent Investment
● |
None |
The funds reserve the right to redeem or to convert your Institutional Class shares to Investor Class shares if your account falls below the minimum initial purchase amount due to shareholder transactions. Please note that you may incur a tax liability as a result of a redemption.
How to Purchase, Redeem and Exchange Shares
Payment for shares redeemed will be mailed to you typically within one or two business days, but no later than the seventh calendar day after receipt of the redemption request by the transfer agent, U.S. Bancorp Fund Services, LLC. If any portion of the shares to be redeemed represents an investment made by check, the funds may delay the payment of the redemption proceeds until the transfer agent is reasonably satisfied that the check has been collected. This may take up to 15 calendar days from the purchase date.
For federal income tax purposes, redemptions are a taxable event; as such, you may realize a capital gain or loss. Such capital gains or losses are based upon the difference between your cost basis in the shares originally purchased and the redemption proceeds received.
A signature guarantee from either a Medallion program member or a non-Medallion program member, is required in the following situations:
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● |
For all redemptions in excess of $50,000 from any shareholder account; |
● |
When redemption proceeds are payable or sent to any person, address or bank account not on record; |
● |
If a change of address was received by the transfer agent within the last 15 calendar days; and |
● |
If ownership is being changed on your account. |
In addition to the situations described above, the funds and/or the transfer agent reserve the right to require a signature guarantee in other instances based on the circumstances relative to the particular situation. The funds may waive any of the above requirements in certain instances. Signature guarantees will generally be accepted from domestic banks, brokers, dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations, as well as from participants in the New York Stock Exchange Medallion Signature Program and the Securities Transfer Agents Medallion Program (“STAMP”). A notary public is not an acceptable signature guarantor.
Non-financial transactions, including establishing or modifying certain services on an account, may require a signature guarantee, signature verification from a Signature Validation Program member, or other acceptable form of authentication from a financial institution source.
Additional documents may be required for purchases, exchanges or redemptions by corporations, executors, administrators, trustees and guardians. For instructions, please call an Investor Representative at 800-873-8637.
The exchange and redemption privilege is automatic when you complete your application unless you elected to opt out of these privileges. If you elected not to have these privileges and wish to add these privileges to your profile of accounts, you can complete an Account Options Form or call an Investor Representative at 800-873-8637 for additional information or instructions. The investment minimums applicable to share purchases also apply to exchanges, and exchanges can only be performed between identically registered accounts. For federal income tax purposes, an exchange between funds is a taxable event; as such, you may realize a capital gain or loss. Such capital gains or losses are based on the difference between your cost basis in the shares originally purchased and the price of the shares received upon exchange.
By Internet Access—www.usfunds.com
You may access your account online by visiting our website at www.usfunds.com. After establishing access, you will be able to review account activity and balances, perform transactions, sign up for electronic statement delivery, and change certain account options. A signature guarantee may be required if you wish to make a redemption from your fund account into your bank account and you have changed your banking information or account address in the past 15 calendar days.
By Mail
To add to your account, send your check made payable to U.S. Global Investors and written instructions to either address stated below.
For purchases into a new fund in which you are not currently invested, please mail your check for the initial investment amount and note the fund name in which you would like to open an account.
For redemptions or exchanges, send your written instructions or redemption authorization form to the address below. Each registered shareholder(s) must sign the request, with the signature(s) appearing exactly as on your account application.
● |
Regular Mail
|
● |
Overnight Mail
|
The funds do not consider the U.S. Postal Service or other independent delivery services to be its agents. Therefore, deposit in the mail or with such services, or receipt at U.S. Bancorp Fund Services, LLC post
41
office box, of purchase orders and/or redemption requests does not constitute receipt by the transfer agent of the funds.
By Automated Clearing House (ACH) or By Bank Wire
To add to or redeem from your account via wire or ACH, visit our website at www.usfunds.com to download an Account Options Form or call 800-873-8637 to speak with an Investor Representative.
The funds will charge you $25 if a check or ACH investment is returned unpaid due to insufficient funds, stop payment or other reasons, and you will be responsible for any loss incurred by the fund. To recover any such loss or charge, the funds reserve the right to redeem shares of any U.S. Global Investors Funds that you own.
The funds do not accept purchase, redemption or exchange instructions via email.
Important Shareholder Information
If your fund shares are purchased, exchanged or redeemed through a retirement account or an investment professional, the policies and procedures on these purchases, exchanges or redemptions may vary. Additional fees or different account minimums may also apply to your investment, including a transaction fee, if you buy or sell shares of the fund through a broker-dealer or other investment professional. For more information on these fees, check with your broker-dealer or investment professional.
Funds’ Rights
The funds reserve the right to:
● |
Reject and/or restrict purchase, redemption or exchange orders when in the best interest of a fund; |
● |
Limit or discontinue the offering of shares of a fund without notice to the shareholders; |
● |
Calculate the NAV per share and accept purchases, exchange and redemption orders on a business day that the NYSE is closed; |
● |
Require a signature guarantee, from either a Medallion program member or a non-Medallion program member, for transactions or changes in account information; |
● |
Redeem an account with less than the required fund account minimum, with certain limitations; |
● |
Restrict or liquidate an account when necessary or appropriate to comply with federal law; |
● |
Charge a fee for any historical information request regarding your fund account. Please call an Investor Representative at 800-873-8637 for more information regarding this fee. |
Converting Shares
If you hold Investor Class shares of the funds and meet the minimum investment requirement for Institutional Class shares, you may be eligible to convert your Investor Class shares to Institutional Class shares of the same fund, subject to the discretion of U.S. Global Investors Funds to permit or reject such conversion. Please call an Investor Representative at 1-800-873-8637 to request a conversion.
Effective Time and Date
When you make a purchase, redemption or exchange, your transaction price will be the next calculated NAV per share after we receive your transaction request in good order. A fund’s NAV is determined as of the close of the regular trading session (generally 4 p.m. Eastern Time) of the New York Stock Exchange (NYSE) each day it is open. If we receive your transaction request prior to that time, your purchase price will be the NAV per share determined for that day. If we receive your transaction request after that time, the purchase will be effective on the next day the funds are open for business.
When a fund calculates its NAV, it values the securities it holds at market value. Foreign securities are usually valued on the basis of the most recent closing price of the foreign markets on which such securities principally trade. When market quotes are not available or do not fairly represent market value, or if a security’s value has been materially affected by events occurring after the close of a foreign market
42
on which the security principally trades, the securities may be fair valued. Fair value will be determined in good faith using consistently applied procedures that have been approved by the trustees. Assets and liabilities expressed in foreign currencies are converted into U.S. dollars at the prevailing market rates quoted by one or more banks or dealers at the close of the NYSE.
The funds invest in portfolio securities that are primarily listed on foreign exchanges or other markets that trade on weekends and other days when the funds do not price their shares. As a result, the market value of these investments may change on days when you will not be able to purchase or redeem shares.
Transactions received prior to the close of the NYSE by a financial intermediary that has been authorized to accept orders on the funds’ behalf will be deemed accepted by a fund the same day and will be executed at that day’s closing share price. Each financial intermediary’s agreement with the funds permits the financial intermediary to transmit orders received by the financial intermediary prior to the close of regular trading on the NYSE to the funds after that time and allows those orders to be executed at the closing share price calculated on the day the order was received by the financial intermediary.
Purchases of shares require payment by check, wire or ACH at the time the transaction is received in good order.
Use of Fair Value Pricing
When market quotations are readily available for portfolio securities which trade on an exchange or market within the Western Hemisphere, the market values used to price these securities will generally be the closing prices of the securities on the exchange or market on which the securities principally trade. Equity securities primarily traded on an exchange or market outside the Western Hemisphere are generally valued at the price that is an estimate of fair value, as provided by an independent third party.
When market quotations are not readily available or when the Adviser believes that a readily available market quotation is not reliable, fair value pricing procedures will be used to determine the fair valuation. In particular, the funds’ board has determined to fair value certain securities when necessary to, among other things, avoid stale prices and make the funds less attractive to short-term trading. When a security is fair valued, there is no guarantee that the security will be sold at the price at which the fund is carrying the security.
While fair value pricing cannot eliminate the possibility of short-term trading, the Adviser and the board believe it helps protect the interests of the funds.
The Adviser will monitor domestic and foreign markets and news information for any developing events that may have an impact on the valuation of fund securities.
Redemption of Shares in Accounts Below Minimum Balance
The funds reserve the right to redeem your account or convert your Institutional Class shares to Investor Class shares if your account falls below the minimum initial purchase amount due to shareholder transactions. Please note that you may incur a tax liability as a result of a redemption. The fund reserves the right to waive or modify the minimum investment at any time.
Confirmations and Statements
After any transaction, you will receive confirmation including the per share price and the dollar amount and number of shares purchased, redeemed or exchanged. Additionally, you will receive a quarterly statement on all fund accounts.
If you think that your confirmation or statement is incorrect or if you need more information about a transaction on the confirmation or statement, contact us promptly by mail or phone at the address or phone number indicated on the front of the confirmation or statement. To dispute any transaction on your confirmation or statement, you must contact us no later than 60 days after we send you the first confirmation or statement on which the disputed transaction occurred.
Excessive Short-Term Trading
The funds are not intended as short-term investment vehicles but are designed for long-term investing. However, some investors may use short-term trading strategies in an attempt to take an unfair advantage of mutual funds. These investors may trade in and out of
43
strategically targeted mutual funds over a short time period in order to take advantage of the way those funds are managed and/or priced or simply as a trading vehicle that has lower transaction costs.
Mutual fund arbitrage may occur, for example, when a fund has in its portfolio particular holdings, such as foreign or thinly traded securities, that are valued on a basis that does not include the most updated information available. Frequent purchases and redemptions of fund shares may be detrimental to long-term fund investors in numerous ways:
● |
It may lower overall fund performance; |
● |
It may create increased transaction costs to the fund, which are passed along to long-term shareholders; |
● |
Frequent redemptions by market timers may increase taxable capital gains; and |
● |
It may disrupt a portfolio manager’s ability to effectively manage fund assets. |
The funds’ board has adopted policies and procedures with respect to frequent purchases and redemptions of fund shares by fund shareholders. The policies and procedures are designed to discourage, to the extent possible, frequent purchases and redemptions of fund shares by fund shareholders in the funds.
Short-Term Trading Fee
The funds charge a 0.05% fee on the redemption and exchange of fund shares held for 7 days or less. The “first-in first-out” (FIFO) method is used to determine the holding period; this means that if you bought shares on different days, the shares purchased first will be redeemed first for the purpose of determining whether the redemption fee applies. The short-term trading fee is deducted from your proceeds and is retained by each fund.
The short-term trading fee is applicable to fund shares purchased either directly or through a financial intermediary, such as a broker-dealer. Transactions through financial intermediaries typically are placed with a fund on an omnibus basis and include both purchase and sale transactions placed on behalf of multiple investors. These purchase and sale transactions are generally netted against one another and placed on an aggregate basis; consequently, the identities of the individuals on whose behalf the transactions are placed generally are not known to a fund. For this reason, each fund has undertaken to notify financial intermediaries of their obligation to assess the short-term trading fee on customer accounts and to collect and remit the proceeds to the fund. However, there can be no assurance that intermediaries will properly track, calculate or remit the fee in accordance with the fund’s requirements. In addition, the fund may approve a waiver of short-term trading fees in the following circumstances: (i) redemptions of shares held in certain omnibus accounts, including retirement, pension, profit sharing and other qualified plans, as well as bank or trust company accounts; (ii) redemptions of shares held through firm-sponsored, discretionary asset allocation or wrap programs that utilize a regularly scheduled automatic rebalancing of assets and that the fund determines are not designed to facilitate short-term trading; (iii) redemptions of shares due to the death or disability of a shareholder; (iv) redemptions of shares in connection with required distributions and certain other transactions in an individual retirement account or qualified retirement plan; and (v) redemptions of shares by certain other accounts in the absolute discretion of the fund when a shareholder can demonstrate hardship. The funds reserve the right to modify or eliminate these waivers at any time. In addition to the circumstances noted above, the funds reserve the right to grant additional waivers based on such factors as operational limitations, contractual limitations and further guidance from the Securities and Exchange Commission or other regulators.
Omnibus Account
The Adviser has implemented procedures to monitor shareholder activity, including activity at the sub-account and account level for omnibus relationships, to identify potential market timers and to determine whether further action is warranted. There can be no assurance that these monitoring activities will successfully detect or prevent all excessive short-term trading.
It may be difficult to identify whether particular orders placed through banks, brokers, investment representatives or other financial intermediaries may be excessive in frequency and/or amount or otherwise potentially disruptive to an affected fund.
44
Accordingly, the Adviser may consider all the trades placed in a combined order through a financial intermediary on an omnibus basis as a part of a group and such trades may be restricted in whole or in part.
The Adviser will seek the cooperation of broker-dealers and other third-party intermediaries by requesting information from them regarding the identity of investors who are trading in the funds and by requesting that the intermediary restrict access to a fund by a particular investor.
The Adviser may reject any purchase or exchange from any investor it believes has a history of market timing, or whose trading, in its judgment, has been or may be disruptive to the funds. The Adviser may consider the trading history of accounts under common ownership or control at U.S. Global or at other mutual fund companies to determine whether to restrict future transactions. The delivery of a known market timer’s redemption proceeds may be delayed for up to seven business days or the redemption may be honored with securities rather than cash.
Householding
Unless you instruct the funds otherwise, the funds will mail or email only one prospectus or shareholder report(s) to your household even if more than one person in your household has an account. If you do not want the mailing of the prospectus and the shareholder report(s) to be combined with other members of your household, please call 1-800-873-8637.
Lost Accounts
It is important that the funds maintain a correct address for each investor. An incorrect address may cause an investor’s account statements and other mailings to be returned to the funds. Based upon statutory requirements for returned mail, the funds will attempt to locate the investor or rightful owner of the account. If the funds are unable to locate the investor, then they will determine whether the investor’s account can legally be considered abandoned. The funds are legally obligated to escheat (or transfer) abandoned property to the appropriate state’s unclaimed property administrator in accordance with statutory requirements. The investor’s last known address of record determines which state has jurisdiction. All fund shares in an account that has been deemed a lost account may be transferred to the appropriate state if no activity occurs in the account within the time period specified by state escheatment or unclaimed property laws. The fund and the transfer agent will not be liable to the shareholders or their representatives for compliance in good faith with these laws. A signature guarantee, from either a Medallion program member or a non-Medallion program member, may be required to update an account from lost status.
Distributions and Taxes
Distributions will automatically be reinvested in fund shares unless you elect to have your distributions paid in cash by check, or directly deposited to your bank account of record. The funds generally distribute capital gains and income dividends, if any, annually in December, although certain funds may at times make distributions on a more frequent basis, such as quarterly or monthly.
Dividends and capital gains will automatically be reinvested in your account unless requested to be paid in cash. If you elect to have dividends and/or capital gains distributions paid in cash, the fund will automatically reinvest all distributions under $10 in additional fund shares.
If you elect to receive distributions and/or capital gains paid in cash, and the U.S. Postal Service cannot deliver the check, or if a check remains outstanding for six months, the funds reserve the right to reinvest the distribution check in your account, at the fund’s current net asset value, and to reinvest all subsequent distributions. You will not receive interest on amounts represented by uncashed distribution checks. You may change your distribution option by writing or calling the transfer agent five days prior to the next distribution date.
Taxes to You
Unless you hold your shares in a tax-advantaged account, you will generally owe federal income taxes on amounts paid or distributed to you by the funds whether you reinvest the distributions in additional shares or receive them in cash.
45
Distributions of gains from the sale of assets held by the funds for more than a year generally are taxable to you for federal income tax purposes at the applicable long-term capital gains rate, regardless of how long you have held fund shares. Distributions from other sources, except qualified dividend income, generally are taxed as ordinary income. Distributions of qualified dividend income generally will be taxable to individuals and other noncorporate shareholders at rates applicable to long-term capital gains, provided certain holding period and other requirements are satisfied. Dividends received by the funds from certain foreign corporations are not expected to qualify for treatment as qualified dividend income.
Dividends declared in October, November or December to shareholders of record as of a date in such month and paid during the following January are treated as if received on December 31 of the calendar year declared. Each year the fund will send you a statement (Form 1099) that will detail distributions made to you for that year.
Dividends, interest and some capital gains received by the funds on foreign securities may be subject to foreign withholding or other foreign taxes. If a fund has more than 50% of the value of its total assets at the close of a taxable year in stock or securities of foreign corporations, the fund may make an election for the year to pass through a shareholder’s pro rata share of such taxes paid by the fund. Shareholders generally will be able to claim a credit or deduction (subject to certain limitations) on their federal income tax returns for, and will be required to treat as part of the amounts distributed to them, their pro rata portion of the foreign taxes paid by the. If such an election is not made, any foreign taxes paid or accrued by the fund will represent an expense to the fund.
If you purchase shares of a fund just before the fund declares a dividend or distribution, you will pay the full price for the shares and receive a portion of the purchase price back as a taxable distribution. This is referred to as “buying a dividend.”
Unless you are investing through a tax-advantaged account, a redemption of fund shares is generally considered a taxable event for federal income tax purposes. Depending on the purchase price and the sale price of the shares you redeem, you may have a gain or loss on the transaction. The gain or loss generally will be treated as a long-term capital gain or loss if you held your shares for more than one year. If you held your shares for one year or less, the gain or loss generally will be treated as a short-term capital gain or loss. Short-term capital gain is taxable at ordinary federal income tax rates. Long-term capital gains are taxable to individuals and other noncorporate shareholders at a maximum federal income tax rate of 20%. Shareholders may be limited in their ability to utilize capital losses. Exchanges are treated as a redemption and purchase for federal income tax purposes. Therefore, you will also have a taxable gain or loss upon an exchange unless the exchange is in a tax-advantaged account.
Shareholders should consult with their own tax advisors concerning the federal, state, local and foreign tax consequences of owning fund shares in light of their particular tax situation.
Compared to other types of investments, derivatives may be less tax efficient. For example, the use of derivatives by a fund may cause the fund to realize higher amounts of ordinary income or short-term capital gain, distributions from which are taxable to individual shareholders at ordinary income tax rates rather than at the more favorable tax rates for long-term capital gains. Changes in government regulation of derivative instruments could affect the character, timing and amount of a fund’s taxable income or gains, and may limit or prevent the fund from using certain types of derivative instruments as a part of its investment strategy. A fund’s use of derivatives also may be limited by the requirements for taxation of the fund as a regulated investment company.
An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from a fund and net gains from redemptions or other taxable dispositions of fund shares) of U.S. individuals, estates and trusts to the extent that such person’s “modified adjusted gross income” (in the case of an individual) or “adjusted gross income” (in the case of an estate or trust) exceeds a threshold amount. This Medicare tax, if applicable, is reported by you on and paid with your federal income tax return.
46
Tax regulations require that cost basis information be provided to you and the Internal Revenue Service (IRS) when shares that are purchased on or after January 1, 2012 (known as covered shares) are sold from taxable accounts. Unless you instruct otherwise, we will use our default method of average cost to report the cost basis and will sell uncovered shares (shares purchased on or before December 31, 2011) before covered shares. Pursuant to IRS regulations, changes to or from the average cost method must be submitted in writing or online via our website, www.usfunds.com. Once a redemption occurs, you must contact us no later than 60 days after we send you the first confirmation or statement to dispute the method used to report the transaction.
When you open an account, IRS regulations require that you provide your taxpayer identification number (TIN), certify that it is correct and certify that you are not subject to backup withholding under IRS regulations. If you fail to provide your TIN or the proper tax certifications, each fund is required to withhold 28% of all the distributions (including dividends and capital gain distributions) and redemption proceeds paid to you. Each fund is also required to begin backup withholding on your account if the IRS instructs it to do so. Amounts withheld may be applied to your federal income tax liability and you may obtain a refund from the IRS if withholding results in an overpayment of federal income tax for such year.
Non-U.S. investors may be subject to U.S. withholding tax at a 30% or lower treaty rate and U.S. estate tax and are subject to special U.S. tax certification requirements to avoid backup withholding and claim any treaty benefits. Exemptions from U.S. withholding tax are provided for certain capital gain dividends paid by a fund from net long-term capital gains, interest-related dividends and short-term capital gain dividends, if such amounts are reported by a fund. However, notwithstanding such exemptions from U.S. withholding at the source, any such dividends and distributions of income and capital gains will be subject to backup withholding at a rate of 28% if you fail to properly certify that you are not a U.S. person.
Under the Foreign Account Tax Compliance Act (“FATCA”), a fund will be required to withhold a 30% tax on the following payments or distributions made by the fund to certain foreign entities, referred to as foreign financial institutions or non-financial foreign entities, that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts: (a) income dividends and (b) after Dec. 31, 2018, certain capital gain distributions, return of capital distributions and the proceeds arising from the sale of fund shares. A fund may disclose the information that it receives from its shareholders to the IRS, non-U.S. taxing authorities or other parties as necessary to comply with FATCA or similar laws. Withholding also may be required if a foreign entity that is a shareholder of a fund fails to provide the fund with appropriate certifications or other documentation concerning its status under FATCA.
47
Financial Highlights
The tables below are intended to show you each fund’s financial performance for the Institutional Class for the past five years. Some of the information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned (or lost) on an investment in each fund. It assumes that all dividends and capital gains have been reinvested.
The Institutional Class shares of the Gold and Precious Metals Fund and the Emerging Europe Fund have no operating history. The tables below show the Investor Class shares’ financial performance for those funds. Investor Class shares, which are not offered in this prospectus, would have financial performance substantially similar to those of the Institutional Class shares because they are invested in the same portfolio of securities. The financial performance shown has not been adjusted to reflect any differences in expenses between Institutional Class shares and Investor Class shares. If differences in expenses had been reflected, the financial performance shown would be different. The tables below are intended to show you the Investor Class shares of each fund’s financial performance for the past five years. Some of the information reflects financial results for a single fund share. The total returns represent the rate that an investor would have earned (or lost) on an investment in each Investor Class share of each fund. It assumes that all dividends and capital gains have been reinvested.
The information presented below has been audited by KPMG LLP, an independent registered public accounting firm. Their report and each fund’s financial statements are included in the annual report, which is available upon request.
Gold and Precious Metals Fund
For a capital share outstanding during the
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Net asset value, beginning of year |
$ |
5.16 |
$ |
6.00 |
$ |
11.78 |
$ |
12.61 |
$ |
19.60 |
||||||||||
Investment Activities |
||||||||||||||||||||
Net investment loss |
(.04 |
) |
(.05 |
) |
(.06 |
) |
(.09 |
) |
(.17 |
) |
||||||||||
Net realized and unrealized loss |
(.21 |
) |
(.79 |
) |
(5.72 |
) |
(.72 |
) |
(4.28 |
) |
||||||||||
Total from investment activities |
(.25 |
) |
(.84 |
) |
(5.78 |
) |
(.81 |
) |
(4.45 |
) |
||||||||||
Distributions |
||||||||||||||||||||
From net investment income |
(.02 |
) |
— |
— |
(.02 |
) |
— |
|||||||||||||
From net realized gains |
— |
— |
— |
— |
(2.54 |
) |
||||||||||||||
Total distributions |
(.02 |
) |
— |
— |
(.02 |
) |
(2.54 |
) |
||||||||||||
Short -Term Trading Fees* (a) |
— |
— |
— |
— |
— |
|||||||||||||||
Net asset value, end of year |
$ |
4.89 |
$ |
5.16 |
$ |
6.00 |
$ |
11.78 |
$ |
12.61 |
||||||||||
Total Return (excluding account fees) (b) |
(4.78 |
)% |
(14.00 |
)% |
(49.07 |
)% |
(6.44 |
)% |
(23.97 |
)% |
||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Net investment loss |
(.83 |
)% |
(.67 |
)% |
(.48 |
)% |
(.60 |
)% |
(1.06 |
)% |
||||||||||
Total expenses |
2.13 |
% |
1.93 |
% |
2.12 |
% |
1.61 |
% |
1.56 |
% |
||||||||||
Expenses waived or reimbursed (c) |
(.08 |
)% |
(.05 |
)% |
(.06 |
)% |
— |
— |
||||||||||||
Net expenses (d) |
2.05 |
% |
1.88 |
% |
2.06 |
% |
1.61 |
% |
1.56 |
% |
||||||||||
Portfolio turnover rate |
106 |
%(f) |
99 |
%(f) |
64 |
% |
95 |
% |
155 |
% |
||||||||||
Net assets, end of year (in thousands) |
$ |
58,298 |
$ |
62,777 |
$ |
74,627 |
$ |
166,524 |
$ |
195,087 |
* |
Based on average monthly shares outstanding. |
(a) |
The per share amount does not round to a full penny. |
48
(b) |
Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. |
(c) |
Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, and decrease total returns had such reductions not occurred. |
(d) |
The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment loss ratio had such reductions not occurred. The effect of expenses offset are as follows: |
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Expense offset (e) |
— |
— |
— |
— |
— |
(e) |
Effect on the expense ratio was not greater than 0.005%. |
(f) |
Excludes option transactions. |
49
World Precious Minerals Fund
For a capital share outstanding during the
Institutional Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Net asset value, beginning of year |
$ |
4.78 |
$ |
5.72 |
$ |
11.69 |
$ |
13.10 |
$ |
22.29 |
||||||||||
Investment Activities |
||||||||||||||||||||
Net investment loss |
(.01 |
)* |
(.05 |
)* |
(.01 |
)* |
(.04 |
)* |
(.16 |
)* |
||||||||||
Net realized and unrealized loss |
(.72 |
)* |
(.89 |
)* |
(5.96 |
)* |
(1.37 |
)* |
(6.84 |
)* |
||||||||||
Total from investment activities |
(.73 |
) |
(.94 |
) |
(5.97 |
) |
(1.41 |
) |
(7.00 |
) |
||||||||||
Distributions from net investment income |
(.40 |
) |
— |
— |
— |
(2.19 |
) |
|||||||||||||
Short -Term Trading Fees* |
— |
— |
— |
— |
— |
|||||||||||||||
Net asset value, end of year |
$ |
3.65 |
$ |
4.78 |
$ |
5.72 |
$ |
11.69 |
$ |
13.10 |
||||||||||
Total Return (excluding account fees) (a) |
(15.07 |
)% |
(16.43 |
)% |
(51.07 |
)% |
(10.76 |
)% |
(32.28 |
)% |
||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Net investment loss |
(.15 |
)% |
(.71 |
)% |
(.15 |
)% |
(.32 |
)% |
(.87 |
)% |
||||||||||
Total expenses |
20.51 |
% |
4.86 |
% |
3.30 |
% |
3.56 |
% |
2.38 |
% |
||||||||||
Expenses waived or reimbursed (b) |
(19.31 |
)% |
(3.23 |
)% |
(1.97 |
)% |
(2.69 |
)% |
(1.27 |
)% |
||||||||||
Net expenses (c) |
1.20 |
% |
1.63 |
% |
1.33 |
% |
.87 |
% |
1.11 |
% |
||||||||||
Portfolio turnover rate (e) |
71 |
%(f) |
61 |
%(f) |
34 |
% |
44 |
% |
96 |
% |
||||||||||
Net assets, end of year (in thousands) |
$ |
76 |
$ |
154 |
$ |
3,660 |
$ |
769 |
$ |
1,683 |
* |
Based on average monthly shares outstanding. |
(a) |
Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. |
(b) |
Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, and decrease total returns had such reductions not occurred. |
(c) |
The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income ratio had such reductions not occurred. The effect of expenses offset are as follows: |
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Expense offset (d) |
— |
— |
— |
— |
— |
(d) |
Effect on the expense ratio was not greater than 0.005%. |
(e) |
Portfolio turnover rate is calculated at the fund level. |
(f) |
Excludes option transactions. |
50
Global Resources Fund
For a capital share outstanding during the
Institutional Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Net asset value, beginning of year |
$ |
6.67 |
$ |
9.30 |
$ |
9.74 |
$ |
9.39 |
$ |
11.98 |
||||||||||
Investment Activities |
||||||||||||||||||||
Net investment income (loss) |
.17 |
* |
.08 |
* |
.07 |
* |
.10 |
* |
—* |
(a) |
||||||||||
Net realized and unrealized gain (loss) |
(2.02 |
)* |
(2.71 |
)* |
(.10 |
)* |
.60 |
* |
(2.17 |
)* |
||||||||||
Total from investment activities |
(1.85 |
) |
(2.63 |
) |
(.03 |
) |
.70 |
(2.17 |
) |
|||||||||||
Distributions from net investment income |
(.08 |
) |
— |
(.41 |
) |
(.35 |
) |
(.42 |
) |
|||||||||||
Short -Term Trading Fees* |
— |
— |
— |
(a) |
— |
(a) |
— |
(a) |
||||||||||||
Net asset value, end of year |
$ |
4.74 |
$ |
6.67 |
$ |
9.30 |
$ |
9.74 |
$ |
9.39 |
||||||||||
Total Return (excluding account fees) (b) |
(27.73 |
)% |
(28.28 |
)% |
(0.15 |
)% |
7.44 |
% |
(18.23 |
)% |
||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Net investment income (loss) |
2.92 |
% |
.85 |
% |
.68 |
% |
1.02 |
% |
(.02 |
)% |
||||||||||
Total expenses |
1.35 |
% |
1.13 |
% |
1.25 |
% |
1.21 |
% |
1.29 |
% |
||||||||||
Expenses waived or reimbursed (c) |
(.61 |
)% |
(.27 |
)% |
(.22 |
)% |
(.14 |
)% |
(.20 |
)% |
||||||||||
Net expenses (d) |
.74 |
% |
.86 |
% |
1.03 |
% |
1.07 |
% |
1.09 |
% |
||||||||||
Portfolio turnover rate (f) |
445 |
%(g) |
444 |
%(g) |
138 |
% |
117 |
% |
232 |
% |
||||||||||
Net assets, end of year (in thousands) |
$ |
1,882 |
$ |
9,733 |
$ |
51,122 |
$ |
94,076 |
$ |
55,985 |
* |
Based on average monthly shares outstanding. |
(a) |
The per share amount does not round to a full penny. |
(b) |
Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. |
(c) |
Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, and decrease total returns had such reductions not occurred. |
(d) |
The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income (loss) ratio had such reductions not occurred. The effect of expenses offset are as follows: |
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Expense offset (e) |
— |
— |
— |
— |
— |
(e) |
Effect on the expense ratio was not greater than 0.005%. |
(f) |
Portfolio turnover rate is calculated at the fund level. |
(g) |
Excludes option transactions. |
51
Emerging Europe Fund
For a capital share outstanding during the
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Net asset value, beginning of year |
$ |
6.56 |
$ |
8.82 |
$ |
9.23 |
$ |
7.79 |
$ |
10.81 |
||||||||||
Investment Activities |
||||||||||||||||||||
Net investment income |
.04 |
.06 |
.19 |
.15 |
.03 |
|||||||||||||||
Net realized and unrealized gain (loss) |
(1.40 |
) |
(2.11 |
) |
(.46 |
) |
1.35 |
(3.05 |
) |
|||||||||||
Total from investment activities |
(1.36 |
) |
(2.05 |
) |
(.27 |
) |
1.50 |
(3.02 |
) |
|||||||||||
Distributions from net investment income |
— |
(.21 |
) |
(.14 |
) |
(.06 |
) |
— |
||||||||||||
Short -Term Trading Fees*(a) |
— |
— |
— |
— |
— |
|||||||||||||||
Net asset value, end of year |
$ |
5.20 |
$ |
6.56 |
$ |
8.82 |
$ |
9.23 |
$ |
7.79 |
||||||||||
Total Return (excluding account fees) (b) |
(20.73 |
)% |
(23.22 |
)% |
(2.93 |
)% |
19.27 |
% |
(27.94 |
)% |
||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Net investment income |
.63 |
% |
.23 |
% |
1.59 |
% |
1.39 |
% |
.25 |
% |
||||||||||
Total expenses |
2.60 |
% |
2.28 |
% |
2.13 |
% |
2.15 |
% |
1.98 |
% |
||||||||||
Expenses waived or reimbursed (c) |
— |
— |
— |
— |
— |
|||||||||||||||
Net expenses (d) |
2.60 |
% |
2.28 |
% |
2.13 |
% |
2.15 |
% |
1.98 |
% |
||||||||||
Portfolio turnover rate |
137 |
%(f) |
93 |
%(f) |
74 |
% |
85 |
% |
85 |
% |
||||||||||
Net assets, end of year (in thousands) |
$ |
44,666 |
$ |
69,066 |
$ |
122,570 |
$ |
173,687 |
$ |
193,599 |
* |
Based on average monthly shares outstanding. |
(a) |
The per share amount does not round to a full penny. |
(b) |
Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. |
(c) |
Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, and decrease total returns had such reductions not occurred. |
(d) |
The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income (loss) ratio had such reductions not occurred. The effect of expenses offset are as follows: |
Investor Class |
||||||||||||||||||||
Year Ended December 31, |
||||||||||||||||||||
2015 |
2014 |
2013 |
2012 |
2011 |
||||||||||||||||
Ratios to Average Net Assets: |
||||||||||||||||||||
Expense offset (e) |
— |
— |
— |
— |
— |
(e) |
Effect on the expense ratio was not greater than 0.005%. |
(f) |
Excludes option transactions. |
52
Additional Information about the Indexes
Returns for indexes reflect no deduction for fees, expenses or taxes, unless noted.
The FTSE Gold Mines Index encompasses all gold mining companies that have a sustainable and attributable gold production of at least 300,000 ounces a year and that derive 75% or more of their revenue from mined gold.
The MSCI Emerging Markets Europe 10/40 Index (Net Total Return) is a free float-adjusted market capitalization index that is designed to measure equity performance in the emerging market countries of Europe (Czech Republic, Greece, Hungary, Poland, Russia and Turkey). The index is calculated on a net return basis (i.e., reflects the minimum possible dividend reinvestment after deduction of the maximum rate withholding tax). The index is periodically rebalanced relative to the constituents’ weights in the parent index.
The NYSE Arca Gold Miners Index is a modified market capitalization-weighted index comprised of publicly-traded companies involved primarily in the mining for gold and silver.
The S&P Global Natural Resources Index (Net Total Return) includes 90 of the largest publicly-traded companies in natural resources and commodities businesses that meet specific investability requirements, offering investors diversified and investable equity exposure across 3 primary commodity-related sectors: agribusiness, energy, and metals & mining. The index is calculated on a net return basis (i.e., reflects the minimum possible dividend reinvestment after deduction of the maximum rate withholding tax).
The S&P 500 Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.
53
More information on the funds is available at no charge, upon request:
Annual/Semi-Annual Report
Additional information about the funds’ investments is available in the funds’ annual and semi-annual reports to shareholders, which are available free of charge on the funds’ website at www.usfunds.com. These reports describe the funds’ performance, list holdings, and describe recent market conditions, fund investment strategies, and other factors that had a significant impact on each fund’s performance during the last fiscal year.
Statement of Additional Information (SAI)
More information about the funds, their investment strategies, and related risks is provided in the SAI. The SAI and the funds’ website (www.usfunds.com) include a description of the funds’ policy with respect to the disclosure of portfolio holdings. There can be no guarantee that the funds will achieve their objectives. The current SAI is on file with the SEC and is legally considered a part of this prospectus and is available free of charge on the funds’ website at www.usfunds.com.
To Request Information:
BY PHONE |
1-800-873-8637 |
BY MAIL |
●
Regular Mail
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www.usfunds.com |
The SEC also maintains an EDGAR database at http://www.sec.gov that contains the Statement of Additional Information, material incorporated by reference and other information that the funds file electronically with the SEC. You may also visit or call the SEC’s Public Reference Room in Washington, D.C. (1-202-551-8090) or send a request plus a duplicating fee to the SEC, Public Reference Section, Washington, D.C. 20549-1520 or by electronic request at the following email address: publicinfo@sec.gov.
|
U.S. GLOBAL INVESTORS FUNDS
U.S. GLOBAL INVESTORS, INC.
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54
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Fund Services, LLC
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TABLE OF CONTENTS
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2
|
GENERAL INFORMATION
|
3
|
FUND POLICIES
|
4
|
FUNDAMENTAL INVESTMENT RESTRICTIONS
|
4
|
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
|
5
|
VALUATION OF SHARES
|
6
|
INVESTMENT STRATEGIES AND RISKS
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7
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COMMON INVESTMENT STRATEGIES AND RELATED RISKS
|
14
|
PORTFOLIO TURNOVER
|
21
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PORTFOLIO HOLDINGS DISCLOSURE POLICY
|
22
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MANAGEMENT OF THE TRUST
|
23
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CODE OF ETHICS
|
27
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PROXY VOTING POLICIES
|
27
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PRINCIPAL HOLDERS OF SECURITIES
|
28
|
INVESTMENT ADVISORY AND OTHER SERVICES
|
29
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DISTRIBUTION AGREEMENT AND DISTRIBUTION PLAN
|
33
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TRANSFER AGENCY AGREEMENT
|
34
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ADMINISTRATION AGREEMENT
|
34
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PORTFOLIO MANAGERS
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35
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BROKERAGE ALLOCATION AND OTHER PRACTICES
|
36
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TRADE AGGREGATION AND ALLOCATION PROCEDURES
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37
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PURCHASE, REDEMPTION AND PRICING OF SHARES
|
37
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FEDERAL INCOME TAXES
|
39
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FUND ACCOUNTANT AND ADMINISTRATOR
|
48
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CUSTODIAN
|
49
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DISTRIBUTOR
|
49
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FINANCIAL STATEMENTS
|
49
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND LEGAL COUNSEL
|
49
|
1. | Issue senior securities, except as permitted under the 1940 Act, and as interpreted or modified by regulatory authority having jurisdiction, from time to time. |
2. | Borrow money, except as permitted under the 1940 Act, and as interpreted or modified by regulatory authority having jurisdiction, from time to time. |
3. | Engage in the business of underwriting securities issued by other issuers, except to the extent that, in connection with the disposition of portfolio securities, the fund may be deemed an underwriter under the Securities Act of 1933. |
4. | Purchase or sell real estate, which term does not include securities of companies which deal in real estate and/or mortgages or investments secured by real estate, or interests therein, except that the fund reserves freedom of action to hold and to sell real estate acquired as a result of the fund’s ownership of securities. |
5. | Purchase or sell commodities or commodity contracts, except a fund may purchase and sell (i) derivatives (including, but not limited to, options, futures contracts and options on futures contracts) whose value is tied to the value of a financial index or a financial instrument or other asset (including, but not limited to, securities indexes, interest rates, securities, currencies and physical commodities) and (ii) the Gold and Precious Metals Fund, the World Precious Minerals Fund and the Global Resources Fund may purchase precious metals. |
6. | Make loans except as permitted under the 1940 Act, and as interpreted or modified by regulatory authority having jurisdiction, from time to time. |
7. | Invest more than 25% of its total assets in securities of companies principally engaged in any one industry (other than obligations issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities), except that the Gold and Precious Metals Fund and World Precious Minerals Fund will invest more than 25% of their total assets in securities of companies involved in the mining, fabrication, processing, marketing or distribution of metals including gold, silver, platinum group, palladium and diamonds; the Global Resources Fund will invest more than 25% of the value of their respective total assets in securities of companies principally engaged in natural resources operations; the Emerging Europe Fund will invest more than 25% of its total assets in securities of companies involved in oil, gas or banking; and the Near-Term Tax Free Fund may invest more than 25% of its total assets in general obligation bonds, single state bonds, or in securities issued by states or municipalities in connection with the financing of projects with similar characteristics, such as hospital revenue bonds, housing revenue bonds, electric power project bonds, industry revenue bonds of similar type projects.* |
*
|
Although not part of the funds’ fundamental investment restriction, for purposes of determining a company’s industry, the funds use the Bloomberg Sector Classification System.
|
1. | All funds will not borrow money, except that a fund may borrow money for temporary or emergency purposes (not for leveraging or investment) in an amount not exceeding 33-1/3% of a fund’s total assets (including the amount borrowed) less liabilities (other than borrowings). |
2. | All funds will not purchase securities on margin or make short sales, except (i) short sales against the box, (ii) short-term credits as are necessary for the clearance of transactions, and (iii) margin payments in connection with futures contracts and options on futures contracts shall not constitute purchasing securities on margin or selling securities short. |
3. | The Emerging Europe Fund will invest no more than 25% of its total assets in any one of the Bloomberg-classified industries listed below; provided, however, that if at the time of purchase a corresponding industry classification represents 20% or more of the fund’s benchmark, the MSCI Emerging Markets Europe 10/40 Index (Net Total Return), then the fund may invest up to 35% of its total assets in the corresponding Bloomberg-classified industry. |
Bloomberg-classified industries involving banking
|
|
Regional Banks — Non-U.S.
|
Mortgage Banks
|
Commercial Banks — Non-U.S.
|
Special Purpose Banks
|
Diversified Banking Institutions
|
Super-Regional Banks — U.S.
|
Central Bank
|
Commercial Banks — Central U.S.
|
Cooperative Banks
|
Commercial Banks — Eastern U.S.
|
Fiduciary Banks
|
Commercial Banks — Southern U.S.
|
Money Center Banks
|
Commercial Banks — Western U.S.
|
1. | Tax Anticipation Notes. Tax anticipation notes are issued to finance working capital needs of state and local governments. Generally, they are issued in anticipation of various seasonal tax revenues, such as ad valorem property, income, sales, use and business taxes, and are payable from these specific future taxes. Tax anticipation notes are usually general obligations of the issuer. General obligations are secured by the issuer’s pledge of its full faith, credit and taxing power for the payment of principal and interest. |
2. | Revenue Anticipation Notes. Revenue anticipation notes are issued by state and local governments or governmental bodies with the expectation that receipt of future revenues, such as Federal revenue sharing or state aid payments, will be used to repay the notes. Typically, they also constitute general obligations of the issuer. |
3. | Bond Anticipation Notes. Bond anticipation notes are issued to provide interim financing for state and local governments until long-term financing can be arranged. In most cases, the long-term bonds then provide the money for the repayment of the notes. |
4. | Tax-Exempt Commercial Paper. Tax-exempt commercial paper is a short-term obligation with a stated maturity of 365 days or less. It is issued and backed by agencies of state and local governments to finance seasonal working capital needs or as short-term financing in anticipation of longer-term financing. |
1. | The risk that a fund’s assets may be exposed to nationalization, expropriation or confiscatory taxation. |
2. | The fact that emerging market securities markets are substantially smaller, less liquid and more volatile than the securities markets of more developed nations. The relatively small market capitalization and trading volume of emerging market securities may cause the fund’s investments to be comparatively less liquid and subject to greater price volatility than investments in the securities markets of developed nations. Many emerging markets are in their infancy and have yet to be exposed to a major correction. In the event of such an occurrence, the absence of various market mechanisms that are inherent in the markets of more developed nations may lead to turmoil in the market place, as well as the inability of the fund to liquidate its investments. |
3. | Greater social, economic and political uncertainty (including the risk of war). |
4. | Greater price volatility, substantially less liquidity and significantly smaller market capitalization of securities markets. |
5. | Currency exchange rate fluctuations and the lack of available currency hedging instruments. |
6. | Higher rates of inflation. |
7. | Controls on foreign investment and limitations on repatriation of invested capital and on a fund’s ability to exchange local currencies for U.S. dollars. |
8. | Greater governmental involvement in and control over the economy. |
9. | The fact that emerging market companies may be smaller, less seasoned, and newly organized. |
10. | The difference in, or lack of, auditing and financial reporting standards, which may result in unavailability of material information about issuers. |
11. | The fact that the securities of many companies may trade at prices substantially above book value, at high price/earnings ratios, or at prices that do not reflect traditional measures of value. |
12. | The fact that statistical information regarding the economy of many emerging market countries may be inaccurate or not comparable to statistical information regarding the United States or other economies. |
13. | Less extensive regulation of the securities markets. |
14. | Certain considerations, such as currency fluctuations, less public disclosure and economic and political risk, regarding the maintenance of fund portfolio securities and cash with foreign sub-custodians and securities depositories. |
15. | The risk that it may be more difficult, or impossible, to obtain and/or enforce a judgment than in other countries. |
16. | The risk that a fund may be subject to income or withholding taxes imposed by emerging market countries or other foreign governments. The funds intend to elect for federal income tax purposes, when eligible, to “pass through” to the funds’ shareholders the amount of foreign income tax and similar taxes paid by a fund. The foreign taxes passed through to a shareholder would be included in the shareholder’s income and may be claimed as a deduction or credit on their federal income tax return. Other taxes, such as transfer taxes, may be imposed on a fund, but would not give rise to a credit or be eligible to be passed through to the shareholders. |
17. | The fact that a fund also is permitted to engage in foreign currency hedging transactions and to enter into stock options on stock index futures transactions, each of which may involve special risks, although these strategies cannot at the present time be used to a significant extent by a fund in the markets in which the fund will principally invest. |
18. | Enterprises in which a fund invests may be or become subject to unduly burdensome and restrictive regulation affecting the commercial freedom of the invested company and thereby diminishing the value of a fund’s investment in it. Restrictive or over-regulation may be, therefore, a form of indirect nationalization. |
19. | Investments in equity securities are subject to inherent market risks and fluctuations in value due to earnings, economic conditions, quality ratings and other factors beyond the control of the Adviser. As a result, the return and net asset value of the funds will fluctuate. |
20. | The Adviser may engage in hedging transactions in an attempt to hedge a fund’s foreign securities investments back to the U.S. dollar when, in its judgment, currency movements affecting particular investments are likely to harm the performance of a fund. Possible losses from changes in currency exchange rates are primarily a risk of unhedged investing in foreign securities. While a security may perform well in a foreign market, if the local currency declines against the U.S. dollar, gains from the investment can disappear or become losses. Typically, currency fluctuations are more extreme than stock market fluctuations. Accordingly, the strength or weakness of the U.S. dollar against foreign currencies may account for part of a fund’s performance even when the Adviser attempts to minimize currency risk through hedging activities. While currency hedging may reduce portfolio volatility, there are costs associated with such hedging, including the loss of potential profits, losses on hedging transactions, and increased transaction expenses. |
The portfolio turnover rates for the two most recent fiscal years are as follows:
FUND
|
December 31,
2014 |
December 31,
2015 |
|||
All American Equity Fund
|
253
|
%
|
109
|
%
|
|
Holmes Macro Trends Fund
|
183
|
%
|
320
|
%
|
|
Gold and Precious Metals Fund
|
99
|
%
|
106
|
%
|
|
World Precious Minerals Fund
|
61
|
%
|
71
|
%
|
|
Global Resources Fund
|
444
|
%
|
445
|
%
|
|
Emerging Europe Fund
|
93
|
%
|
137
|
%
|
|
China Region Fund
|
235
|
%
|
210
|
%
|
|
Near-Term Tax Free Fund
|
12
|
%
|
15
|
%
|
|
U.S. Government Securities Ultra-Short Bond Fund
|
33
|
%
|
60
|
%
|
Name and Year
of Birth |
Position with
the Trust |
Length of
Time Served |
Principal
Occupation(s) During Past Five Years |
Number of
Series in Fund Complex Overseen By Trustee |
Other
Directorships Held By Trustee During Past Five Years |
Independent Trustees
|
|||||
David Tucker
Born: 1958 |
Chairman of the Board; Trustee; Chairman, Nominating Committee and Qualified Legal Compliance Committee
|
Since 2015
|
Director, Blue Sky Experience (a charitable endeavor), since 2008; Senior Vice President & General Counsel, American Century Companies (an investment management firm) 1998-2008.
|
48
|
Trustee, Forum Funds; Trustee, Forum ETF Trust; Trustee, Forum Funds II
|
Mark D. Moyer
Born: 1959 |
Trustee; Chairman Audit Committee
|
Since 2015
|
Chief Financial Officer, Institute of International Education 2008-2011; Chief Financial Officer and Chief Restructuring Officer, Ziff Davis Media Inc. 2005-2008; Adjunct Professor of Accounting, Fairfield University from 2009-2012.
|
22
|
Trustee, Forum ETF Trust;
Trustee, Forum Funds II
|
Jennifer Brown-Strabley
Born: 1964 |
Trustee
|
Since 2015
|
Principal, Portland Global Advisors 1996-2010.
|
22
|
Trustee, Forum ETF Trust; Trustee, Forum Funds II
|
Interested Trustees
|
|||||
Stacey E. Hong
Born: 1966 |
Trustee
|
Since 2015
|
President, Atlantic since 2008
|
22
|
Trustee, Forum Funds II
|
John Y. Keffer
1
Born: 1942 |
Trustee
|
Since 2015
|
Chairman, Atlantic since 2008; President, Forum Investment Advisors, LLC since 2011; President, Forum Foundation (a charitable organization) since 2005; President, Forum Trust, LLC (a non- depository trust company chartered in the State of Maine) since 1997.
|
48
|
Trustee, Forum Funds; Trustee, , Forum ETF Trust
; Trustee, Forum Funds II
; Director, Wintergreen Fund, Inc.
|
1 | Atlantic and Forum Investment Advisors, LLC are subsidiaries of Forum Holdings Corp. I, a Delaware corporation that is wholly owned by Mr. Keffer. |
Trustees
|
Dollar Range of Beneficial Ownership
in the Funds as of December 31, 2015 |
Aggregate Dollar Range of Ownership as of December 31, 2015 in all Registered Investment Companies Overseen by Trustee in the Fund Complex
|
Independent Trustees
|
||
David Tucker
|
None
|
None
|
Mark D. Moyer
|
None
|
None
|
Jennifer Brown-Strabley
|
None
|
None
|
Interested Trustees
|
||
Stacey E. Hong
|
None
|
None
|
John Y. Keffer
|
None
|
None
|
Name and Year of
Birth |
Position
with the Trust |
Length of Time
Served |
Principal Occupation(s)
During Past 5 Years |
Jessica Chase
Born: 1970 |
President; Chief Executive Officer
|
Since 2015
|
Senior Vice President, Atlantic since 2008.
|
Karen Shaw
Born: 1972 |
Treasurer; Chief Financial Officer
|
Since 2015
|
Senior Vice President, Atlantic since 2008.
|
Zachary Tackett
Born: 1988 |
Vice President; Secretary and Anti-Money Laundering Compliance Officer, and Identity Theft Prevention Officer
|
Since 2015
|
Associate Counsel, Atlantic since 2014; Intern Associate, Coakley & Hyde, PLLC, 2010-2013.
|
Carlyn Edgar
Born: 1963 |
Chief Compliance Officer, Code of Ethics Review Officer
|
Since 2015
|
Senior Vice President, Atlantic since 2008.
|
Susan McGee
Born: 1959
|
Vice President
|
Since 2016
|
President and General Counsel of the Adviser. Since September 1992, Ms. McGee has served and continues to serve in various positions with the Adviser, its subsidiaries, and the investment companies it sponsors.
|
Trustee
|
Aggregate Compensation
from the Funds
|
Pension or Retirement Benefits Accrued as part of Fund Expenses
|
Total Compensation
from Fund Complex
|
Independent Trustees
|
|||
David Tucker
|
$5,000
|
N/A
|
$84,750
|
Mark D. Moyer
|
$3,750
|
N/A
|
$21,250
|
Jennifer Brown-Strabley
|
$3,750
|
N/A
|
$21,250
|
Interested Trustees
|
|||
Stacey E. Hong
|
$0
|
N/A
|
$0
|
John Y. Keffer
|
$0
|
N/A
|
$0
|
* | Each trustee was elected on December 9, 2015. On December 9, 2015, the Board approved new trustee compensation under which Independent Trustees of the Trust each receive an annual fee of $15,000 for service to the Trust. The Chairman of the Board is paid an annual fee of $20,000. The trustees and Chairman may receive additional fees for special Board meetings. Each trustee is also reimbursed for all reasonable out-of-pocket expenses incurred in connection with his duties as a trustee, including travel and related expenses incurred in attending Board meetings. The Trust has no pension or retirement plan. No other entity affiliated with the Trust pays any compensation to the trustees. |
FUND
|
SHAREHOLDERS
|
PERCENTAGE
OWNED |
|
All American Equity Fund
|
National Financial Services Corp
|
7.36
|
%
|
Holmes Macro Trends Fund
|
Charles Schwab & Co Inc.
|
7.12
|
%
|
Gold and Precious Metals Fund
|
Charles Schwab & Co Inc.
|
19.00
|
%
|
National Financial Services Corp
|
15.44
|
%
|
|
World Precious Minerals Fund
|
Charles Schwab & Co Inc.
|
23.99
|
%
|
National Financial Services Corp
|
15.05
|
%
|
|
Global Resources Fund
|
Charles Schwab & Co Inc.
|
28.06
|
%
|
National Financial Services Corp
|
17.58
|
%
|
|
TD Ameritrade Inc.
|
7.57
|
%
|
|
Emerging Europe Fund
|
Charles Schwab & Co Inc.
|
39.00
|
%
|
National Financial Services Corp
|
22.47
|
%
|
|
TD Ameritrade Inc.
|
7.82
|
%
|
|
China Region Fund
|
Charles Schwab & Co Inc.
|
12.18
|
%
|
National Financial Services Corp
|
9.01
|
%
|
|
Near-Term Tax Free Fund
|
Charles Schwab & Co Inc.
|
19.87
|
%
|
TD Ameritrade Inc.
|
19.20
|
%
|
|
National Financial Services Corp
|
9.92
|
%
|
|
U.S. Government Securities Ultra-Short Bond Fund
|
U.S. Global Investors, Inc.
|
14.93
|
%
|
Fiscal Year Ended
|
|||||||||
FUND
|
December 31,
2013 |
December 31,
2014 |
December 31,
2015 |
||||||
All American Equity Fund
|
$
|
159,042
|
$
|
185,983
|
$
|
167,090
|
|||
Holmes Macro Trends Fund
|
$
|
378,923
|
$
|
513,911
|
$
|
449,744
|
|||
Gold and Precious Metals Fund
|
$
|
1,000,736
|
$
|
752,383
|
$
|
565,159
|
|||
World Precious Minerals Fund
|
$
|
1,937,073
|
$
|
1,428,006
|
$
|
923,871
|
|||
Global Resources Fund
|
$
|
3,603,739
|
$
|
2,683,377
|
$
|
1,217,173
|
|||
Emerging Europe Fund
|
$
|
1,809,598
|
$
|
1,203,532
|
$
|
727,480
|
|||
China Region Fund
|
$
|
339,184
|
$
|
290,521
|
$
|
246,629
|
|||
Near-Term Tax Free Fund
|
$
|
247,697
|
$
|
333,667
|
$
|
470,045
|
|||
U. S. Government Securities Ultra-Short Bond Fund
|
$
|
649,135
|
$
|
346,170
|
$
|
299,305
|
Fiscal Year Ended
|
|||||||||
FUND
|
December 31,
2013 |
December 31,
2014 |
December 31,
2015 |
||||||
All American Equity Fund
|
$
|
96,186
|
$
|
168,664
|
$
|
107,050
|
|||
Holmes Macro Trends Fund
|
$
|
314,221
|
$
|
496,390
|
$
|
339,028
|
|||
Gold and Precious Metals Fund
|
$
|
1,196,420
|
$
|
749,259
|
$
|
568,683
|
|||
World Precious Minerals Fund
|
$
|
1,819,275
|
$
|
1,517,841
|
$
|
645,606
|
|||
Global Resources Fund
|
$
|
3,281,504
|
$
|
1,843,643
|
$
|
622,643
|
|||
Emerging Europe Fund
|
$
|
1,734,314
|
$
|
1,203,532
|
$
|
765,533
|
|||
China Region Fund
|
$
|
189,919
|
$
|
179,068
|
$
|
123,787
|
|||
Near-Term Tax Free Fund
|
$
|
0
|
$
|
0
|
$
|
0
|
|||
U. S. Government Securities Ultra-Short Bond Fund
|
$
|
0
|
$
|
0
|
$
|
0
|
NAME OF FUND
|
ANNUAL PERCENTAGE OF AVERAGE DAILY NET ASSETS
|
All American Equity Fund
|
0.80%
<
$500,000,000; 0.75%> $500,000,000
|
Holmes Macro Trends Fund
|
1.00%
|
Gold and Precious Metals Fund
|
0.90%
<
$500,000,000; 0.85%> $500,000,000
|
World Precious Minerals Fund
|
1.00%
<
$500,000,000; 0.95% $500,000,001 - $1,000,000,000; 0.90%>$1,000,000,000
|
Global Resources Fund
|
0.95%
<
$500,000,000; 0.90% $500,000,001 - $1,000,000,000; 0.85%>$1,000,000,000
|
Emerging Europe Fund
|
1.25%
|
China Region Fund
|
1.25%
|
Near-Term Tax Free Fund
|
0.50%
|
U.S. Government Securities Ultra-Short Bond Fund
|
0.50%
<
$250,000,000; 0.375%>$250,000,000
|
Fiscal Year Ended
|
|||||||||
FUND
|
December 31, 2013
|
December 31, 2014
|
December 31, 2015
|
||||||
All American Equity Fund
|
$
|
16,820
|
$
|
32,747
|
$
|
28,658
|
|||
Holmes Macro Trends Fund
|
$
|
31,533
|
$
|
60,890
|
$
|
52,074
|
|||
Gold and Precious Metals Fund
|
$
|
90,542
|
$
|
93,098
|
$
|
69,432
|
|||
World Precious Minerals Fund
|
$
|
157,241
|
$
|
152,241
|
$
|
98,421
|
|||
Global Resources Fund
|
$
|
308,428
|
$
|
290,878
|
$
|
133,089
|
|||
Emerging Europe Fund
|
$
|
118,031
|
$
|
105,628
|
$
|
65,178
|
|||
China Region Fund
|
$
|
22,666
|
$
|
32,741
|
$
|
27,590
|
|||
Near-Term Tax Free Fund
|
$
|
0
|
$
|
0
|
$
|
0
|
|||
U. S. Government Securities Ultra-Short Bond Fund
|
$
|
0
|
$
|
0
|
$
|
0
|
Fund
|
Advertising and Literature
|
Prospectus Printing
|
Compensation to Broker-Dealers
|
Travel and Promotion Expenses
|
Compensation Expense
|
Other | ||||||||||||||||||
All American Equity Fund
|
$
|
17,191
|
$
|
836
|
$
|
5,265
|
$
|
592
|
$
|
28,711
|
$ | 796 | ||||||||||||
Holmes Macro Trends Fund
|
16,797
|
997
|
13,294
|
2,199
|
32,192
|
1,238 | ||||||||||||||||||
Gold and Precious Metals Fund
|
37,176
|
3,017
|
52,627
|
6,374
|
66,525
|
1,530 | ||||||||||||||||||
World Precious Minerals Fund
|
36,515
|
2,493
|
100,668
|
5,095
|
58,395
|
1,930 | ||||||||||||||||||
Global Resources Fund
|
42,180
|
2,869
|
180,285
|
5,860
|
80,313
|
2,346 | ||||||||||||||||||
Emerging Europe Fund
|
20,915
|
873
|
98,302
|
3,596
|
35,850
|
414 | ||||||||||||||||||
China Region Fund
|
19,646
|
790
|
12,720
|
1,883
|
33,398
|
738 |
Fiscal Year Ended
*
|
|||||||||
FUND
|
December 31, 2013
|
December 31, 2014
|
December 31, 2015
|
||||||
All American Equity Fund
|
$
|
55,600
|
$
|
49,382
|
$
|
29,955
|
|||
Holmes Macro Trends Fund
|
$
|
56,788
|
$
|
56,032
|
$
|
63,955
|
|||
Gold and Precious Metals Fund
|
$
|
69,010
|
$
|
70,708
|
$
|
90,834
|
|||
World Precious Minerals Fund
|
$
|
82,852
|
$
|
87,866
|
$
|
135,779
|
|||
Global Resources Fund
|
$
|
135,293
|
$
|
147,007
|
$
|
181,861
|
|||
Emerging Europe Fund
|
$
|
70,201
|
$
|
75,350
|
$
|
92,759
|
|||
China Region Fund
|
$
|
66,800
|
$
|
61,255
|
$
|
40,759
|
|||
Near-Term Tax Free Fund
|
$
|
91,702
|
$
|
100,324
|
$
|
161,935
|
|||
U.S. Government Securities Ultra-Short Bond Fund
|
$
|
50,708
|
$
|
61,579
|
$
|
85,535
|
NUMBER
|
NUMBER OF
|
TOTAL ASSETS OF
|
||||||||
OF
|
PERFORMANCE
|
PERFORMANCE
|
||||||||
TYPE OF ACCOUNT
|
ACCOUNTS
|
TOTAL ASSETS
|
FEE ACCOUNTS
|
FEE ACCOUNTS
|
||||||
Registered investment companies
|
1
|
$
|
52,196,402
|
0
|
$
|
0
|
||||
Pooled investment vehicles
|
2
|
$
|
10,204,284
|
2
|
$
|
10,204,284
|
||||
Other accounts
|
1
|
$
|
20,014,000
|
0
|
$
|
0
|
DOLLAR RANGE OF EQUITY SECURITIES IN THE
|
||
NAME OF FUND
|
FUND HELD AS OF 12/31/2015
|
|
All American Equity Fund
|
$100,001 -- $500,000
|
|
Holmes Macro Trends Fund
|
$100,001 – $500,000
|
|
Gold and Precious Metals Fund
|
$10,001 – $50,000
|
|
World Precious Minerals Fund
|
$10,001 – $50,000
|
|
Global Resources Fund
|
$50,001 – $100,000
|
|
Emerging Europe Fund
|
$50,001 – $100,000
|
|
China Region Fund
|
$50,001 – $100,000
|
|
Near-Term Tax Free Fund
|
Over $1,000,000
|
|
U.S. Government Securities Ultra-Short Bond Fund
|
$50,001 – $100,000
|
NUMBER
|
NUMBER OF
|
TOTAL ASSETS OF
|
||||||||
OF
|
PERFORMANCE
|
PERFORMANCE
|
||||||||
TYPE OF ACCOUNT
|
ACCOUNTS
|
TOTAL ASSETS
|
FEE ACCOUNTS
|
FEE ACCOUNTS
|
||||||
Registered investment companies
|
1
|
$
|
52,196,402
|
0
|
$
|
0
|
||||
Pooled investment vehicles
|
2
|
$
|
10,204,284
|
2
|
$
|
10,204,284
|
||||
Other accounts
|
0
|
$
|
0
|
0
|
$
|
0
|
DOLLAR RANGE OF EQUITY SECURITIES IN THE
|
||
NAME OF FUND
|
FUND HELD AS OF 12/31/2015
|
|
Gold and Precious Metals Fund
|
$50,001 – $100,000
|
|
World Precious Minerals Fund
|
$50,001 – $100,000
|
|
All American Equity Fund
|
$10,001-$50,000
|
|
Emerging Europe Fund1
|
$1 - $10,000
|
|
Near-Term Tax Free Fund
|
$10,001-$50,000
|
|
U.S. Government Ultra-Short Bond Fund
|
$100,001-$500,000
|
|
Holmes Macro Trends Fund
|
$10,001-$50,000
|
|
Global Resources Fund
|
$10,001-$50,000
|
|
China Region Fund
|
$1 - $10,000
|
Fiscal Year Ended
|
|||||||||
December 31, 2013
|
December 31, 2014
|
December 31, 2015
|
|||||||
All American Equity Fund
|
$
|
68,669
|
$
|
114,236
|
$
|
44,920
|
|||
Holmes Macro Trends Fund
|
$
|
96,177
|
$
|
194,591
|
$
|
281,113
|
|||
Gold and Precious Metals Fund
|
$
|
635,832
|
$
|
602,696
|
$
|
427,094
|
|||
World Precious Minerals Fund
|
$
|
944,344
|
$
|
931,431
|
$
|
530,012
|
|||
Global Resources Fund
|
$
|
2,384,962
|
$
|
6,540,761
|
$
|
2,509,014
|
|||
Emerging Europe Fund
|
$
|
621,234
|
$
|
456,398
|
$
|
631,774
|
|||
China Region Fund
|
$
|
251,317
|
$
|
227,604
|
$
|
169,547
|
COMMISSIONS
|
PRINCIPAL VALUE
|
|||||
All American Equity Fund
|
$
|
14,215
|
$
|
17,021,446
|
||
Holmes Macro Trends Fund
|
$
|
121,795
|
$
|
138,990,302
|
||
Gold and Precious Metals Fund
|
$
|
51,480
|
$
|
17,116,977
|
||
World Precious Minerals Fund
|
$
|
61,032
|
$
|
19,552,915
|
||
Global Resources Fund
|
$
|
693,212
|
$
|
410,463,649
|
||
Emerging Europe Fund
|
$
|
31,507
|
$
|
11,917,440
|
||
China Region Fund
|
$
|
1,402
|
$
|
1,002,618
|
||
Total
|
$
|
974,641
|
$
|
616,056,345
|
1. | The securities offered by the investor in exchange for shares of the fund must not be in any way restricted as to resale or otherwise be illiquid. |
2. | Securities of the same issuer must already exist in the fund’s portfolio. |
3. | The securities must have a value that is readily ascertainable (and not established only by valuation procedures) as evidenced by a listing on the NYSE, or NASDAQ-AMEX. |
4. | Any securities so acquired by the fund shall not comprise over 5% of the fund’s net assets at the time of such exchange. |
5. | No over-the-counter securities will be accepted unless the principal over-the-counter market is in the United States. |
6. | The securities are acquired for investment and not for resale. |
· | distribute each taxable year at least the sum of (i) 90% of the fund’s investment company taxable income (which includes, among other items, dividends, interest, the excess of any net short-term capital gain over net long-term capital loss and other taxable income, other than any net long-term capital gain, reduced by deductible expenses) determined without regard to the deduction for dividends paid and (ii) 90% of a fund’s net tax-exempt interest (the excess of its gross tax-exempt interest over certain disallowed deductions). Each fund intends to distribute substantially all of such income each year. |
· | 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 and net income derived from interests in qualified publicly traded partnerships (“90% test”); |
· | satisfy the following asset diversification test at the close of each quarter of the fund’s tax year: (1) at least 50% of the value of the fund’s assets must consist of cash and cash items, U.S. government securities, securities of other regulated investment companies, and securities of other issuers (as to which the fund has not invested more than 5% of the value of the fund’s total assets in securities of an issuer and as to which the fund does not hold more than 10% of the outstanding voting securities of the issuer); and (2) no more than 25% of the value of the fund’s total assets may be invested in the securities of any one issuer (other than U.S. government securities or securities of other regulated investment companies) or of two or more issuers which the fund controls and which are engaged in the same or similar trades or businesses, or, in the securities of one or more qualified publicly traded partnerships. |
No Expiration
|
Expiration Date
|
||||||||
Fund
|
Short-Term
|
Long-Term
|
2016
|
||||||
All American Equity Fund
|
$
|
1,331,255
|
$
|
—
|
$
|
—
|
|||
Holmes Macro Trends Fund (a)
|
—
|
—
|
461,463
|
||||||
Global Resources Fund
|
162,040,410
|
28,978,749
|
—
|
||||||
World Precious Minerals Fund
|
75,572,552
|
164,992,899
|
—
|
||||||
Gold and Precious Metals Fund
|
41,610,403
|
56,391,301
|
—
|
||||||
Emerging Europe Fund
|
13,372,996
|
11,568,837
|
28,524,678
|
||||||
China Region Fund
|
3,270,330
|
—
|
15,020,267
|
||||||
Near-Term Tax Free Fund (a)
|
151,678 |
231,557
|
112
|
||||||
U.S. Government Securities Ultra-Short Bond Fund
|
—
|
—
|
—
|
Expiration Date
|
|||||||||
Fund
|
2017
|
2018
|
Total
|
||||||
Near-Term Tax Free Fund (a)
|
$
|
722
|
$
|
2,532
|
$
|
386,601
|
|||
All American Equity Fund
|
—
|
—
|
1,331,255
|
||||||
Holmes Macro Trends Fund (a)
|
—
|
—
|
461,463
|
||||||
Global Resources Fund
|
259,212,512
|
—
|
450,231,671
|
||||||
World Precious Minerals Fund
|
63,779,512
|
—
|
304,344,963
|
||||||
Gold and Precious Metals Fund
|
—
|
—
|
98,001,704
|
||||||
Emerging Europe Fund
|
257,523,539
|
15,445,946
|
326,435,996
|
||||||
China Region Fund
|
—
|
—
|
18,290,597
|
||||||
U.S. Government Securities Ultra-Short Bond Fund
|
—
|
—
|
—
|
(a) | Utilization of capital loss carryovers is subject to annual limitation. |
Fund
|
Post October 31, 2015
Capital Loss Deferral |
Post October 31, 2015
Ordinary Loss Deferral |
||||
Gold and Precious Metals Fund
|
$
|
5,850,927
|
$
|
838,814
|
||
World Precious Minerals Fund
|
13,305,056
|
—
|
||||
Global Resources Fund
|
613,075
|
—
|
||||
Emerging Europe Fund
|
—
|
301,693
|
(i) | any net capital loss incurred after October 31 of the current taxable year, or, if there is no such loss, any net long-term capital loss or any net short-term capital loss incurred after October 31 of the current taxable year (“post-October capital losses”), and |
(ii) | the sum of (1) the excess, if any, of (a) specified losses incurred after October 31 of the current taxable year, over (b) specified gains incurred after October 31 of the current taxable year and (2) the excess, if any, of (a) ordinary losses incurred after December 31 of the current taxable year, over (b) the ordinary income incurred after December 31 of the current taxable year. |
TABLE OF CONTENTS
|
2
|
GENERAL INFORMATION
|
3
|
FUND POLICIES
|
4
|
FUNDAMENTAL INVESTMENT RESTRICTIONS
|
4
|
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
|
5
|
VALUATION OF SHARES
|
6
|
INVESTMENT STRATEGIES AND RISKS
|
6
|
COMMON INVESTMENT STRATEGIES AND RELATED RISKS
|
8
|
PORTFOLIO TURNOVER
|
15
|
PORTFOLIO HOLDINGS DISCLOSURE POLICY
|
16
|
MANAGEMENT OF THE TRUST
|
17
|
CODE OF ETHICS
|
21
|
PROXY VOTING POLICIES
|
21
|
PRINCIPAL HOLDERS OF SECURITIES
|
22
|
INVESTMENT ADVISORY AND OTHER SERVICES
|
22
|
DISTRIBUTION AGREEMENT
|
25
|
TRANSFER AGENCY AGREEMENT
|
25
|
ADMINISTRATION AGREEMENT
|
25
|
PORTFOLIO MANAGERS
|
26
|
BROKERAGE ALLOCATION AND OTHER PRACTICES
|
28
|
TRADE AGGREGATION AND ALLOCATION PROCEDURES
|
28
|
PURCHASE, REDEMPTION AND PRICING OF SHARES
|
29
|
FEDERAL INCOME TAXES
|
30
|
FUND ACCOUNTANT AND ADMINISTRATOR
|
38
|
CUSTODIAN
|
38
|
DISTRIBUTOR
|
39
|
FINANCIAL STATEMENTS
|
40
|
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND LEGAL COUNSEL
|
40
|
1. | Issue senior securities, except as permitted under the 1940 Act, and as interpreted or modified by regulatory authority having jurisdiction, from time to time. |
2. | Borrow money, except as permitted under the 1940 Act, and as interpreted or modified by regulatory authority having jurisdiction, from time to time. |
3. | Engage in the business of underwriting securities issued by other issuers, except to the extent that, in connection with the disposition of portfolio securities, the fund may be deemed an underwriter under the Securities Act of 1933. |
4. | Purchase or sell real estate, which term does not include securities of companies which deal in real estate and/or mortgages or investments secured by real estate, or interests therein, except that the fund reserves freedom of action to hold and to sell real estate acquired as a result of the fund’s ownership of securities. |
5. | Make loans except as permitted under the 1940 Act, and as interpreted or modified by regulatory authority having jurisdiction, from time to time. |
6. | Invest more than 25% of its total assets in securities of companies principally engaged in any one industry, except that the Gold and Precious Metals Fund and World Precious Minerals Fund will invest more than 25% of their total assets in securities of companies involved in the mining, fabrication, processing, marketing or distribution of metals including gold, silver, platinum group, palladium and diamonds; the Global Resources Fund will invest more than 25% of the value of its respective total assets in securities of companies principally engaged in natural resources operations; and the Emerging Europe Fund will invest more than 25% of its total assets in securities of companies involved in oil, gas or banking. 1 |
7.
|
(a) Purchase or sell commodities, except that the Gold and Precious Metals Fund, the World Precious Minerals Fund, and the Global Resources Fund may purchase precious metals.
|
1. | All funds will not borrow money, except that a fund may borrow money for temporary or emergency purposes (not for leveraging or investment) in an amount not exceeding 33 1/3% of a fund’s total assets (including the amount borrowed) less liabilities (other than borrowings). |
2. | All funds will not purchase securities on margin or make short sales, except (i) short sales against the box, (ii) short term credits as are necessary for the clearance of transactions, and (iii) margin payments in connection with futures contracts and options on futures contracts shall not constitute purchasing securities on margin or selling securities short. |
3. | The Emerging Europe Fund will invest no more than 25% of its total assets in any one of the Bloomberg-classified industries listed below; provided, however, that if at the time of purchase a corresponding industry classification represents 20% or more of the fund’s benchmark, the MSCI Emerging Markets Europe 10/40 Index (Net Total Return), then the fund may invest up to 35% of its total assets in the corresponding Bloomberg-classified industry. |
Bloomberg-classified industries involving oil & gas
|
||
Oil Companies — Integrated
|
Oil Field Machinery & Equipment
|
|
Oil Companies — Exploration & Production
|
Oil — Field Services
|
|
Oil Refining & Marketing
|
Oil — U.S. Royalty Trusts
|
|
Oil & Gas Drilling
|
Seismic Data Collection
|
Bloomberg-classified industries involving banking
|
||
Regional Banks — Non-U.S.
|
Mortgage Banks
|
|
Commercial Banks — Non-U.S.
|
Special Purpose Banks
|
|
Diversified Banking Institutions
|
Super-Regional Banks — U.S.
|
|
Central Bank
|
Commercial Banks — Central U.S.
|
|
Cooperative Banks
|
Commercial Banks — Eastern U.S.
|
|
Fiduciary Banks
|
Commercial Banks — Southern U.S.
|
|
Money Center Banks
|
Commercial Banks — Western U.S.
|
1 | Although not part of the funds’ fundamental investment restriction, for purposes of determining a company’s industry, the funds use the Bloomberg Sector Classification System. |
1. | The risk that a fund’s assets may be exposed to nationalization, expropriation or confiscatory taxation. |
2. | The fact that emerging market securities markets are substantially smaller, less liquid and more volatile than the securities markets of more developed nations. The relatively small market capitalization and trading volume of emerging market securities may cause the fund’s investments to be comparatively less liquid and subject to greater price volatility than investments in the securities markets of developed nations. Many emerging markets are in their infancy and have yet to be exposed to a major correction. In the event of such an occurrence, the absence of various market mechanisms that are inherent in the markets of more developed nations may lead to turmoil in the market place, as well as the inability of the fund to liquidate its investments. |
3. | Greater social, economic and political uncertainty (including the risk of war). |
4. | Greater price volatility, substantially less liquidity and significantly smaller market capitalization of securities markets. |
5. | Currency exchange rate fluctuations and the lack of available currency hedging instruments. |
6. | Higher rates of inflation. |
7. | Controls on foreign investment and limitations on repatriation of invested capital and on a fund’s ability to exchange local currencies for U.S. dollars. |
8. | Greater governmental involvement in and control over the economy. |
9. | The fact that emerging market companies may be smaller, less seasoned, and newly organized. |
10. | The difference in, or lack of, auditing and financial reporting standards, which may result in unavailability of material information about issuers. |
11. | The fact that the securities of many companies may trade at prices substantially above book value, at high price/earnings ratios, or at prices that do not reflect traditional measures of value. |
12. | The fact that statistical information regarding the economy of many emerging market countries may be inaccurate or not comparable to statistical information regarding the United States or other economies. |
13. | Less extensive regulation of the securities markets. |
14. | Certain considerations, such as currency fluctuations, less public disclosure and economic and political risk, regarding the maintenance of fund portfolio securities and cash with foreign sub-custodians and securities depositories. |
15. | The risk that it may be more difficult, or impossible, to obtain and/or enforce a judgment than in other countries. |
16. | The risk that a fund may be subject to income or withholding taxes imposed by emerging market countries or other foreign governments. The funds intend to elect for federal income tax purposes, when eligible, to “pass through” to the funds’ shareholders the amount of foreign income tax and similar taxes paid by a fund. The foreign taxes passed through to a shareholder would be included in the shareholder’s income and may be claimed as a deduction or credit on their federal income tax return. Other taxes, such as transfer taxes, may be imposed on a fund, but would not give rise to a credit or be eligible to be passed through to the shareholders. |
17. | The fact that a fund also is permitted to engage in foreign currency hedging transactions and to enter into stock options on stock index futures transactions, each of which may involve special risks, although these strategies cannot at the present time be used to a significant extent by a fund in the markets in which the fund will principally invest. |
18. | Enterprises in which a fund invests may be or become subject to unduly burdensome and restrictive regulation affecting the commercial freedom of the invested company and thereby diminishing the value of a fund’s investment in it. Restrictive or over-regulation may be, therefore, a form of indirect nationalization. |
19. | Investments in equity securities are subject to inherent market risks and fluctuations in value due to earnings, economic conditions, quality ratings and other factors beyond the control of the Adviser. As a result, the return and net asset value of the funds will fluctuate. |
20. | The Adviser may engage in hedging transactions in an attempt to hedge a fund’s foreign securities investments back to the U.S. dollar when, in its judgment, currency movements affecting particular investments are likely to harm the performance of a fund. Possible losses from changes in currency exchange rates are primarily a risk of unhedged investing in foreign securities. While a security may perform well in a foreign market, if the local currency declines against the U.S. dollar, gains from the investment can disappear or become losses. Typically, currency fluctuations are more extreme than stock market fluctuations. Accordingly, the strength or weakness of the U.S. dollar against foreign currencies may account for part of a fund’s performance even when the Adviser attempts to minimize currency risk through hedging activities. While currency hedging may reduce portfolio volatility, there are costs associated with such hedging, including the loss of potential profits, losses on hedging transactions, and increased transaction expenses. |
Fiscal Year Ended
|
|||||
FUND
|
December 31,
2014 |
December 31,
2015 |
|||
Gold and Precious Metals Fund
|
99
|
%
|
106%
|
||
World Precious Minerals Fund
|
61
|
%
|
71%
|
||
Global Resources Fund
|
444
|
%
|
445%
|
||
Emerging Europe Fund
|
93
|
%
|
137%
|
Name and Year
of Birth |
Position with
the Trust |
Length of
Time Served |
Principal
Occupation(s) During Past Five Years |
Number of
Series in Fund Complex Overseen By Trustee |
Other
Directorships Held By Trustee During Past Five Years |
Independent Trustees
|
|||||
David Tucker
Born: 1958 |
Chairman of the Board; Trustee; Chairman, Nominating Committee and Qualified Legal Compliance Committee
|
Since 2015
|
Director, Blue Sky Experience (a charitable endeavor), since 2008; Senior Vice President & General Counsel, American Century Companies (an investment management firm) 1998-2008.
|
48
|
Trustee, Forum Funds; Trustee, Forum ETF Trust; Trustee, Forum Funds II
|
Mark D. Moyer
Born: 1959 |
Trustee; Chairman Audit Committee
|
Since 2015
|
Chief Financial Officer, Institute of International Education 2008-2011; Chief Financial Officer and Chief Restructuring Officer, Ziff Davis Media Inc. 2005-2008; Adjunct Professor of Accounting, Fairfield University from 2009-2012.
|
22
|
Trustee, Forum ETF Trust;
Trustee, Forum Funds II
|
Jennifer Brown-Strabley
Born: 1964 |
Trustee
|
Since 2015
|
Principal, Portland Global Advisors 1996-2010.
|
22
|
Trustee, Forum ETF Trust; Trustee, Forum Funds II
|
Interested Trustees
|
|||||
Stacey E. Hong
Born: 1966 |
Trustee
|
Since 2015
|
President, Atlantic since 2008
|
22
|
Trustee, Forum Funds II
|
John Y. Keffer
1
Born: 1942 |
Trustee
|
Since 2015
|
Chairman, Atlantic since 2008; President, Forum Investment Advisors, LLC since 2011; President, Forum Foundation (a charitable organization) since 2005; President, Forum Trust, LLC (a non- depository trust company chartered in the State of Maine) since 1997.
|
48
|
Trustee, Forum Funds, Trustee, Forum ETF Trust
; Trustee, Forum Funds II
; Director, Wintergreen Fund, Inc.
|
1 | Atlantic and Forum Investment Advisors, LLC are subsidiaries of Forum Holdings Corp. I, a Delaware corporation that is wholly owned by Mr. Keffer. |
Trustees
|
Dollar Range of Beneficial Ownership
in the Funds as of December 31, 2015 |
Aggregate Dollar Range of Ownership as of December 31, 2015 in all Registered Investment Companies Overseen by Trustee in the Fund Complex
|
Independent Trustees
|
||
David Tucker
|
None
|
None
|
Mark D. Moyer
|
None
|
None
|
Jennifer Brown-Strabley
|
None
|
None
|
Interested Trustees
|
||
Stacey E. Hong
|
None
|
None
|
John Y. Keffer
|
None
|
None
|
Name and Year of
Birth |
Position
with the Trust |
Length of Time
Served |
Principal Occupation(s)
During Past 5 Years |
Jessica Chase
Born: 1970 |
President; Chief Executive Officer
|
Since 2015
|
Senior Vice President, Atlantic since 2008.
|
Karen Shaw
Born: 1972 |
Treasurer; Chief Financial Officer
|
Since 2015
|
Senior Vice President, Atlantic since 2008.
|
Zachary Tackett
Born: 1988 |
Vice President; Secretary and Anti-Money Laundering Compliance Officer, and Identity Theft Prevention Officer
|
Since 2015
|
Associate Counsel, Atlantic since 2014; Intern Associate, Coakley & Hyde, PLLC, 2010-2013.
|
Carlyn Edgar
Born: 1963 |
Chief Compliance Officer, Code of Ethics Review Officer
|
Since 2015
|
Senior Vice President, Atlantic since 2008.
|
Susan McGee
Born: 1959
|
Vice President
|
Since 2016
|
President and General Counsel of the Adviser. Since September 1992, Ms. McGee has served and continues to serve in various positions with the Adviser, its subsidiaries, and the investment companies it sponsors.
|
Trustee
|
Aggregate Compensation
from the Funds
|
Pension or Retirement Benefits Accrued as part of Fund Expenses
|
Total Compensation
from Fund Complex
|
Independent Trustees
|
|||
David Tucker
|
$5,000
|
N/A
|
$84,750
|
Mark D. Moyer
|
$3,750
|
N/A
|
$21,250
|
Jennifer Brown-Strabley
|
$3,750
|
N/A
|
$21,250
|
Interested Trustees
|
|||
Stacey E. Hong
|
$0
|
N/A
|
$0
|
John Y. Keffer
|
$0
|
N/A
|
$0
|
* | Each trustee was elected on December 9, 2015. On December 9, 2015, the Board approved new trustee compensation under which Independent Trustees of the Trust each receive an annual fee of $15,000 for service to the Trust. The Chairman of the Board is paid an annual fee of $20,000. The trustees and Chairman may receive additional fees for special Board meetings. Each trustee is also reimbursed for all reasonable out-of-pocket expenses incurred in connection with his duties as a trustee, including travel and related expenses incurred in attending Board meetings. The Trust has no pension or retirement plan. No other entity affiliated with the Trust pays any compensation to the trustees. |
FUND
|
SHAREHOLDERS
|
PERCENTAGE OWNED
|
World Precious Minerals Fund
|
Charles Schwab & Co Inc.
|
75.53%
|
NFS LLC FEBO
|
8.31%
|
|
NFS LLC FEBO
|
6.33%
|
|
Global Resources Fund
|
Charles Schwab & Co Inc.
|
85.58%
|
TD Ameritrade Inc.
|
10.75%
|
Fiscal Year Ended
|
|||||||||
FUND
|
December 31,
2013 |
December 31,
2014 |
December 31,
2015 |
||||||
World Precious Minerals Fund
|
$
|
16,425
|
$
|
8,395
|
$
|
1,163
|
|||
Global Resources Fund
|
$
|
594,791
|
$
|
334,792
|
$
|
71,245
|
Fiscal Year Ended
|
|||||||||
FUND
|
December 31,
2013 |
December 31,
2014 |
December 31,
2015 |
||||||
World Precious Minerals Fund
|
$
|
16,225
|
$
|
10,538
|
$
|
732
|
|||
Global Resources Fund
|
$
|
549,317
|
$
|
211,243
|
$
|
22,232
|
NAME OF FUND
|
ANNUAL PERCENTAGE OF AVERAGE DAILY NET ASSETS
|
|
Gold and Precious Metals Fund
|
0.90%
<
$500,000,000; 0.85%>$500,000,000
|
|
World Precious Minerals Fund
|
1.00%
<
$500,000,000; 0.95% $500,000,001 - $1,000,000,000; 0.90%>$1,000,000,000
|
|
Global Resources Fund
|
0.95%
<
$500,000,000; 0.90% $500,000,001 - $1,000,000,000; 0.85%>$1,000,000,000
|
|
Emerging Europe Fund
|
1.25%
|
Base
Advisory Fee |
Benchmark
|
Hurdle
Rate |
Base
Advisory Fee Range With Performance Fee Adjustment |
|||||
Gold and Precious Metals Fund
|
0.90
|
%
|
FTSE Gold Mines Index
|
+/- 5
|
%
|
0.65%-1.15
|
%
|
|
World Precious Minerals Fund
|
1.00
|
%
|
NYSE Arca Gold Miners Index
|
+/- 5
|
%
|
0.75%-1.25
|
%
|
|
Global Resources Fund
|
0.95
|
%
|
S&P Global Natural Resources Index
(Net Total Return) |
+/- 5
|
%
|
0.70%-1.20
|
%
|
|
Emerging Europe Fund
|
1.25
|
%
|
MSCI Emerging Markets Europe 10/40 Index (Net Total Return)
|
+/- 5
|
%
|
1.00%-1.50
|
%
|
Fiscal Year Ended
|
|||||||||
FUND
|
December 31, 2013
|
December 31, 2014
|
December 31, 2015
|
||||||
World Precious Minerals Fund
|
$
|
533
|
$
|
395
|
$
|
56
|
|||
Global Resources Fund
|
$
|
19,224
|
$
|
15,176
|
$
|
3,441
|
Fiscal Year Ended
*
|
|||||||||
FUND
|
December 31, 2013
|
December 31, 2014
|
December 31, 2015
|
||||||
World Precious Minerals Fund
|
$
|
699
|
$
|
415
|
$
|
170
|
|||
Global Resources Fund
|
$
|
22,308
|
$
|
16,625
|
$
|
10,209
|
* | For periods prior to November 1, 2014, these amounts were paid to Brown Brothers Harriman & Co. |
NUMBER
|
NUMBER OF
|
TOTAL ASSETS OF
|
||||||||
OF
|
PERFORMANCE
|
PERFORMANCE
|
||||||||
TYPE OF ACCOUNT
|
ACCOUNTS
|
TOTAL ASSETS
|
FEE ACCOUNTS
|
FEE ACCOUNTS
|
||||||
Registered investment companies
|
1
|
$
|
52,196,402
|
0
|
$
|
0
|
||||
Pooled investment vehicles
|
2
|
$
|
10,204,284
|
2
|
$
|
10,204,284
|
||||
Other accounts
|
1
|
$
|
20,014,000
|
0
|
$
|
0
|
DOLLAR RANGE OF EQUITY SECURITIES IN THE
|
||
NAME OF FUND
|
FUND HELD AS OF 12/31/2015
|
|
Gold and Precious Metals Fund
|
$10,001 – $50,000
|
|
World Precious Minerals Fund
|
$10,001 – $50,000
|
|
Global Resources Fund
|
$50,001 – $100,000
|
|
Emerging Europe Fund
|
$500,001 – $1,000,000
|
NUMBER
|
NUMBER OF
|
TOTAL ASSETS OF
|
||||||||
OF
|
PERFORMANCE
|
PERFORMANCE
|
||||||||
TYPE OF ACCOUNT
|
ACCOUNTS
|
TOTAL ASSETS
|
FEE ACCOUNTS
|
FEE ACCOUNTS
|
||||||
Registered investment companies
|
1
|
$
|
52,196,402
|
0
|
$
|
0
|
||||
Pooled investment vehicles
|
2
|
$
|
10,204,284
|
2
|
$
|
10,204,284
|
||||
Other accounts
|
0
|
$
|
0
|
0
|
$
|
0
|
DOLLAR RANGE OF EQUITY SECURITIES IN THE
|
||
NAME OF FUND
|
FUND HELD AS OF 12/31/2015
|
|
Gold and Precious Metals Fund
|
$50,001 – $100,000
|
|
World Precious Minerals Fund
|
$50,001 – $100,000
|
|
Emerging Europe Fund
|
$1 - $10,000
|
|
Global Resources Fund
|
$10,001 - $50,000
|
Fiscal Year Ended
|
|||||||||
December 31, 2013
|
December 31, 2014
|
December 31, 2015
|
|||||||
World Precious Minerals Fund
|
$
|
944,344
|
$
|
931,431
|
$
|
530,012
|
|||
Global Resources Fund
|
$
|
2,384,962
|
$
|
6,540,761
|
$
|
2,509,014
|
COMMISSIONS
|
PRINCIPAL VALUE
|
|||||
World Precious Minerals Fund
|
$
|
61,032
|
$
|
19,552,915
|
||
Global Resources Fund
|
$
|
693,212
|
$
|
410,463,649
|
||
Total
|
$
|
754,244
|
$
|
430,016,564
|
1. | The securities offered by the investor in exchange for shares of the fund must not be in any way restricted as to resale or otherwise be illiquid. |
2. | Securities of the same issuer must already exist in the fund’s portfolio. |
3. | The securities must have a value that is readily ascertainable (and not established only by valuation procedures) as evidenced by a listing on the NYSE, or NASDAQ-AMEX. |
4. | Any securities so acquired by the fund shall not comprise over 5% of the fund’s net assets at the time of such exchange. |
5. | No over-the-counter securities will be accepted unless the principal over-the-counter market is in the United States. |
6. | The securities are acquired for investment and not for resale. |
· | distribute each taxable year at least the sum of (i) 90% of the fund’s investment company taxable income (which includes, among other items, dividends, interest, the excess of any net short-term capital gain over net long-term capital loss and other taxable income, other than any net long-term capital gain, reduced by deductible expenses) determined without regard to the deduction for dividends paid and (ii) 90% of a fund’s net tax-exempt interest (the excess of its gross tax-exempt interest over certain disallowed deductions). Each fund intends to distribute substantially all of such income each year. |
· | 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 and net income derived from interests in qualified publicly traded partnerships (“90% test”); |
· | satisfy the following asset diversification test at the close of each quarter of the fund’s tax year: (1) at least 50% of the value of the fund’s assets must consist of cash and cash items, U.S. government securities, securities of other regulated investment companies, and securities of other issuers (as to which the fund has not invested more than 5% of the value of the fund’s total assets in securities of an issuer and as to which the fund does not hold more than 10% of the outstanding voting securities of the issuer); and (2) no more than 25% of the value of the fund’s total assets may be invested in the securities of any one issuer (other than U.S. government securities or securities of other regulated investment companies) or of two or more issuers which the fund controls and which are engaged in the same or similar trades or businesses, or, in the securities of one or more qualified publicly traded partnerships. |
No Expiration
|
Expiration Date
|
||||||||
Fund
|
Short-Term
|
Long-Term
|
2016
|
||||||
Gold and Precious Metals Fund
|
$ |
41,610,403
|
$ |
56,391,301
|
$ |
—
|
|||
World Precious Minerals Fund
|
75,572,552
|
164,992,899
|
—
|
||||||
Global Resources Fund
|
162,040,410
|
|
28,978,749
|
—
|
|||||
Emerging Europe Fund
|
13,372,996
|
11,568,837
|
28,524,678
|
Expiration Date
|
|||||||||
Fund
|
2017
|
2018
|
Total
|
||||||
Gold and Precious Metals Fund
|
$ |
—
|
$ |
—
|
$ |
98,001,704
|
|||
World Precious Minerals Fund
|
63,779,512
|
—
|
304,344,963
|
||||||
Global Resources Fund
|
|
259,212,512
|
|
—
|
|
450,231,671
|
|||
Emerging Europe Fund
|
257,523,539
|
15,445,946
|
326,435,996
|
Fund
|
Post October 31, 2015
Capital Loss Deferral |
Post October 31, 2015
Ordinary Loss Deferral |
||||
Gold and Precious Metals Fund
|
$
|
5,850,927
|
$
|
838,814
|
||
World Precious Minerals Fund
|
613,075
|
—
|
||||
Global Resources Fund
|
13,305,056
|
—
|
||||
Emerging Europe Fund
|
—
|
301,693
|
(i) | any net capital loss incurred after October 31 of the current taxable year, or, if there is no such loss, any net long-term capital loss or any net short-term capital loss incurred after October 31 of the current taxable year (“post-October capital losses”), and |
(ii) | the sum of (1) the excess, if any, of (a) specified losses incurred after October 31 of the current taxable year, over (b) specified gains incurred after October 31 of the current taxable year and (2) the excess, if any, of (a) ordinary losses incurred after December 31 of the current taxable year, over (b) the ordinary income incurred after December 31 of the current taxable year. |
(a) | Agreement and Declaration of Trust, dated July 31, 2008, incorporated by reference to Post-Effective Amendment 100 filed October 1, 2008 (EDGAR Accession No. 0000950134-08-017422). |
(b) | By-laws, dated July 31, 2008, incorporated by reference to Post-Effective Amendment 100 filed October 1, 2008 (EDGAR Accession No. 0000950134-08-017422). |
(c) | Instruments Defining Rights of Security Holders. Not applicable. |
(d) | 1. Advisory Agreement with U.S. Global Investors, Inc., dated October 1, 2008, incorporated by reference to Post-Effective Amendment 100 filed October 1, 2008 (EDGAR Accession No. 0000950134-08-017422). |
(e) | 1. Distribution Agreement with Foreside Fund Services, LLC dated December 9, 2015, incorporated by reference to Post-Effective Amendment No. 124 filed February 29, 2016 (EDGAR Accession No. 0001398344-16-010373). |
(f) | Bonus or Profit Sharing Contracts. Not applicable. |
(g) | 1. Custodian Agreement, dated November 1, 1997, between Registrant and Brown Brothers Harriman & Co., incorporated by reference to Post-Effective Amendment No. 82 filed September 2, 1998 (EDGAR Accession No. 0000101507-98-000031). |
(h) | 1. Transfer Agent Servicing Agreement, dated September 5, 2013, between Registrant and U.S. Bancorp Fund Services, LLC, incorporated by reference to the N-14 filed October 24, 2013 (EDGAR Accession No. 0001104659-13-077689). |
(i) | 1. Opinion of Counsel, filed herein. |
(j) | 1. Consent of KPMG, LLP, filed herein. |
(k) | Omitted Financial Statements. Not applicable. |
(l) | Initial Capital Agreements. Not applicable. |
(m) | 1. Amended Distribution Plan, dated March 4, 2010, incorporated by reference to Post-Effective Amendment 107 filed April 30, 2010 (EDGAR Accession No. 0001104659-10-02438). |
(n) | 1. Rule 18f-3 Plan, dated January 15, 2010, as amended on May 29, 2013, incorporated by reference to Post-Effective Amendment 116, filed August 9, 2013 (EDGAR Accession No. 0001104659-13-062077). |
(o) | Powers of Attorney, dated December 9, 2015, incorporated by reference to Post-Effective Amendment No. 124 filed February 29, 2016 (EDGAR Accession No. 0001398344-16-010373). |
(p) | 1. U.S. Global Investors Funds Code of Ethics, filed herein. |
2.
|
U.S. Global Investors, Inc. Code of Ethics dated February 23, 2016, filed herein.
|
Item 32(a) | Foreside Fund Services, LLC (the “Distributor”) serves as principal underwriter for the following investment companies registered under the Investment Company Act of 1940, as amended: |
1.
|
ABS Long/Short Strategies Fund
|
2.
|
Absolute Shares Trust
|
3.
|
AdvisorShares Trust
|
4.
|
American Beacon Funds
|
5.
|
American Beacon Select Funds
|
6.
|
Archstone Alternative Solutions Fund
|
7.
|
Ark ETF Trust
|
8.
|
Avenue Mutual Funds Trust
|
9.
|
BP Capital TwinLine Energy Fund, Series of Professionally Managed Portfolios
|
10.
|
BP Capital TwinLine MLP Fund, Series of Professionally Managed Portfolios
|
11.
|
Braddock Multi-Strategy Income Fund, Series of Investment Managers Series Trust
|
12.
|
Bridgeway Funds, Inc.
|
13.
|
Calamos ETF Trust
|
14.
|
Capital Innovations Global Agri, Timber, Infrastructure Fund, Series of Investment Managers Series Trust
|
15.
|
Center Coast MLP Focus Fund, Series of Investment Managers Series Trust
|
16.
|
Context Capital Funds
|
17.
|
CornerCap Group of Funds
|
18.
|
Corsair Opportunity Fund
|
19.
|
Direxion Shares ETF Trust
|
20.
|
Evanston Alternative Opportunities Fund
|
21.
|
Exchange Listed Funds Trust
|
22.
|
FEG Absolute Access Fund I LLC
|
23.
|
FlexShares Trust
|
24.
|
Forum Funds
|
25.
|
Forum Funds II
|
26.
|
FQF Trust
|
27.
|
FSI Low Beta Absolute Return Fund
|
28.
|
Gottex Trust
|
29.
|
Henderson Global Funds
|
30.
|
Horizon Spin-off and Corporate Restructuring Fund, Series of Investment Managers Series Trust
(f/k/a Liberty Street Horizon Fund)
|
31.
|
Horizons ETF Trust
|
32.
|
Infinity Core Alternative Fund
|
33.
|
Ironwood Institutional Multi-Strategy Fund LLC
|
34.
|
Ironwood Multi-Strategy Fund LLC
|
35.
|
John Hancock Exchange-Traded Fund Trust
|
36.
|
Little Harbor Multistrategy Composite Fund
|
37.
|
Lyons Funds
|
38.
|
Manor Investment Funds
|
39.
|
Miller/Howard Funds Trust
|
40.
|
Montage Managers Trust
|
41.
|
Palmer Square Opportunistic Income Fund
|
42.
|
PENN Capital Funds Trust
|
43.
|
Performance Trust Mutual Funds, Series of Trust for Professional Managers
|
44.
|
Pine Grove Alternative Fund
|
45.
|
Pine Grove Alternative Institutional Fund
|
46.
|
Plan Investment Fund, Inc.
|
47.
|
PMC Funds, Series of Trust for Professional Managers
|
48.
|
Precidian ETFs Trust
|
49.
|
Quaker Investment Trust
|
50.
|
Ramius Archview Credit and Distressed Feeder Fund
|
51.
|
Ramius Archview Credit and Distressed Fund
|
52.
|
Recon Capital Series Trust
|
53.
|
Renaissance Capital Greenwich Funds
|
54.
|
Robinson Opportunistic Income Fund, Series of Investment Managers Series Trust
|
55.
|
Robinson Tax Advantaged Income Fund, Series of Investment Managers Series Trust
|
56.
|
Salient MF Trust
|
57.
|
SharesPost 100 Fund
|
58.
|
Sound Shore Fund, Inc.
|
59.
|
Steben Alternative Investment Funds
|
60.
|
Steben Select Multi-Strategy Fund
|
61.
|
The 504 Fund
|
62.
|
The Community Development Fund
|
63.
|
The Roxbury Funds
|
64.
|
TIFF Investment Program
|
65.
|
Toroso Newfound Tactical Allocation Fund, Series of Investment Managers Series Trust
|
66.
|
TrimTabs ETF Trust
|
67.
|
Turner Funds
|
68.
|
U.S. Global Investors Funds
|
69.
|
West Loop Realty Fund, Series of Investment Managers Series Trust
(f/k/a Chilton Realty Income & Growth Fund)
|
70.
|
Wintergreen Fund, Inc.
|
71.
|
WisdomTree Trust
|
Item 32(b) | The following are the Officers and Manager of the Distributor, the Registrant’s underwriter. The Distributor’s main business address is Three Canal Plaza, Suite 100, Portland, Maine 04101. |
Name
|
Address
|
Position with Underwriter
|
Position with Registrant
|
|||
Richard J. Berthy
|
Three Canal Plaza, Suite 100, Portland, ME 04101
|
President, Treasurer and Manager
|
None | |||
Mark A. Fairbanks | Three Canal Plaza, Suite 100, Portland, ME 04101 | Vice President | None | |||
Jennifer K. DiValerio
|
899 Cassatt Road, 400 Berwyn Park, Suite 110, Berwyn, PA 19312
|
Vice President
|
None
|
|||
Nanette K. Chern
|
Three Canal Plaza, Suite 100, Portland, ME 04101
|
Vice President and Chief Compliance Officer
|
None
|
|||
Jennifer E. Hoopes
|
Three Canal Plaza, Suite 100, Portland, ME 04101
|
Secretary
|
None
|
Item 32(c) | Not applicable. |
U.S. GLOBAL INVESTORS FUNDS
|
|||
By:
|
/s/ Jessica Chase
|
||
Jessica Chase
|
|||
President, Chief Executive Officer
|
Signature
|
Title
|
Date
|
||
/s/ David Tucker*
|
April 29, 2016
|
|||
David Tucker
|
Trustee
|
|||
/s/ Mark D. Moyer*
|
April 29, 2016
|
|||
Mark D. Moyer
|
Trustee
|
|||
/s/ Jennifer Brown-Strabley*
|
Trustee
|
April 29, 2016
|
||
Jennifer Brown-Strabley
|
||||
/s/ Stacey E. Hong*
|
April 29, 2016
|
|||
Stacey E. Hong
|
Trustee
|
|||
/s/ John Y. Keffer*
|
April 29, 2016
|
|||
John Y. Keffer
|
Trustee
|
*BY:
|
/s/ Zachary Tackett
|
|
Zachary Tackett
|
||
Attorney-in-Fact under Power of Attorney Dated
|
||
December 9, 2015
|
(i)(1)
|
Opinion of Stradley Ronon Stevens & Young, LLP
|
(j)(1)
|
Consent of KPMG, LLP
|
(j)(2)
|
Consent of BBD, LLP
|
(p) 1.
|
U.S. Global Investors Funds Code of Ethics
|
(p) 2.
|
U.S. Global Investors, Inc. Code of Ethics
|
Re: | Post-Effective Amendment No. 125 to the Registration |
Very truly yours,
|
|||
STRADLEY, RONON, STEVENS & YOUNG, LLP
|
|||
BY:
|
/s/ Christopher J. Zimmerman
|
||
Christopher J. Zimmerman, a Partner
|
|
|
BBD, LLP
|
SECTION 1. | BACKGROUND |
SECTION 2. | DEFINITIONS |
SECTION 3. | PROHIBITED TRANSACTIONS |
SECTION 4. | REPORTING REQUIREMENTS |
SECTION 5. | COVERED OFFICERS |
(B) | Duties . A Covered Officer shall: |
SECTION 6. | REVIEW OFFICER |
SECTION 7. | BOARD REVIEW |
Page
|
||
1.
|
INTRODUCTION AND OVERVIEW
|
1
|
2.
|
COVERED PERSONS
|
2
|
3.
|
RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES
|
2
|
4.
|
PRE-CLEARANCE OF TRANSACTIONS
|
5
|
5.
|
REPORTING REQUIREMENTS
|
6
|
6.
|
RESTRICTIONS ON OTHER ACTIVITIES
|
9
|
7.
|
ADMINISTRATION OF THE CODE OF ETHICS
|
10
|
APPENDIX A
|
Definitions
|
|
APPENDIX B
|
Quarterly Certification of Partially Covered Independent Directors
|
1. | INTRODUCTION AND OVERVIEW |
1.1. | Statement of General Principles |
(a) | prohibit fraudulent, deceptive, or manipulative acts in connection with your Personal Securities Transactions in: |
a. | Reportable U.S. Global Funds , |
b. | USGI Stock , |
c. | U.S. Global ETFs , and |
d. | Covered Securities held or to be acquired by the U.S. Global Funds or other clients of USGI (“Other USGI-Managed Accounts”), and |
(b) | avoid conflicts of interest so that the best interests of investors in the U.S. Global Funds and Other USGI-Managed Accounts will be served. |
(a) | to place the interests of U.S. Global Fund shareholders and Other USGI-Managed Accounts above your own personal interests; |
(b) | to refrain, in the conduct of all of your personal affairs, from taking any inappropriate advantage of your roles and responsibilities with USGI, the U.S. Global Funds, and the Other USGI-Managed Accounts; |
(c) | to comply with the Federal Securities Laws ; and |
(d) | to conduct all Personal Securities Transactions so as to fully comply with the provisions of this Code in order to avoid any actual or even apparent conflict or claim of a conflict of interest or abuse of your roles and responsibilities with USGI, the U.S. Global Funds, and Other USGI-Managed Accounts. |
1.2. | Adoption of the Code of Ethics |
2. | COVERED PERSONS |
3. | RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES |
3.1. | Reportable U.S. Global Funds |
3.2. | Initial Public Offerings |
3.3. | Limited Offering Transaction |
(a) | whether the investment opportunity is available to, and should be reserved solely for, the U.S. Global Funds or Other USGI-Managed Accounts; and |
(b) | whether the opportunity is or seems to have been made available to the Covered Person due to or by virtue of the position which he or she holds with USGI. |
3.4. | “Black-Out” Trading Restrictions |
3.5. | Short-Term Matched Profit Restriction on Covered Securities Transactions |
(a) | the transaction, and any earlier Personal Securities Transaction with which it may be matched over the most recent 60 calendar days, do not appear to evidence actual abuse of a conflict of interest with any U.S. Global Fund or Other USGI-Managed Account (as, for example, where the Covered Security or Securities involved have not recently been held, traded, or actively considered for investment or trading by such accounts); and |
(b) | the Covered Person can demonstrate that a bona fide and sufficient personal or family economic hardship exists warranting the granting of such an exception. |
3.6. | Prohibition on Trading on Material, Nonpublic Information |
3.7. | Limitations on Trading In USGI Stock |
3.7.1. | Limitations on Purchases of USGI Stock |
3.7.2. | Prohibitions on Purchases of USGI Stock |
4. | PRE-CLEARANCE OF TRANSACTIONS |
4.1 | Pre-Clearance Process |
4.2. | Effect of Pre-Execution Clearance of Personal Covered Securities Transactions |
5. | REPORTING REQUIREMENTS |
5.1. | Acknowledgement Form |
5.2. | Initial Holdings Reports |
(a) | the title and type of security, and as applicable the exchange ticker symbol or CUSIP number, number of shares and principal amount of USGI Stock , USGI ETFs , each Covered Security , and each Reportable U.S. Global Fund in which the Covered Person had any direct or indirect Beneficial Ownership when the person became a Covered Person ; |
(b) | the name of any broker, dealer, bank, or transfer agent with whom the Covered Person maintains an account in which any Covered Securities , Reportable U.S. Global Funds , USGI ETFs , or USGI Stock are held, or could be held, for the direct or indirect benefit of the Covered Person as of the date the person became a Covered Person ; and |
(c) | the date that the report is submitted by the Covered Person . |
5.3. | Account Confirmations and Statements |
(a) | confirmations issued by brokers, dealers, banks, or transfer agents upon the execution of all Personal Securities Transactions in USGI Stock , USGI ETFs , any Covered Security , or any Reportable U.S. Global Fund in which the Covered Person had, at the time of the transaction, or by reason of the transaction acquired, any direct or indirect Beneficial Ownership interest in the USGI Stock , Covered Security , USGI ETFs , or Reportable U.S. Global Fund which was the subject of the transaction; and |
(b) | any regular periodic or other statements reflecting Personal Securities Transaction activity in USGI Stock , USGI ETFs , any Covered Security , or any Reportable U.S. Global Fund within any account with a broker, dealer, bank, or transfer agent in which the Covered Person has any direct or indirect Beneficial Ownership interest. |
5.4. | Quarterly Transaction Reports |
(a) | The date of the transaction, the title of and, as applicable, the exchange ticker symbol or CUSIP number, number of shares, interest rate and maturity date, and the principal amount of each security involved; |
(b) | The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition); |
(c) | The price at which the transaction was effected; |
(d) | The name of the broker, dealer, bank, or transfer agent with or through whom the transaction was effected; and |
(e) | The date the Covered Person submits the report. |
(a) | the name of the broker, dealer, bank, or transfer agent with whom the Covered Person established the account; |
(b) | the date the account was established; and |
(c) | the date that the report was submitted by the Covered Person . |
5.5. | Annual Holdings Reports |
(a) | the title and type of security, and as applicable the exchange ticker symbol or CUSIP number, number of shares and principal amount of each Covered Security, USGI Stock, USGI ETFs , and Reportable U.S. Global Fund in which the Covered Person had any direct or indirect Beneficial Ownership ; |
(b) | The name of any broker, dealer or bank with whom the Covered Person maintains an account in which any Covered Securities , Reportable U.S. Global Funds , USGI ETFs , or USGI Stock are held, or could be held, for the direct or indirect benefit of the Covered Person ; and |
(c) | the date that the report is submitted by the Covered Person . |
5.6. | Other Reporting and Disclosure Requirements |
5.7. | Newly Opened Securities Accounts |
5.8. | Exemption to Reporting Requirements |
5.9. | Additional Reporting Requirements Concerning USGI Stock |
5.9.1. | Insider Reporting Liability . Any Covered Person or Partially Covered Independent Director who is the beneficial owner of more than 10 percent of any class of USGI Stock registered under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”) and each Executive Officer and Director of USGI (“Insiders”) are subject to the provisions of Section 16(b) of the Exchange Act. |
5.9.2. | SEC Reporting . Insiders must file certain reports with the SEC and the New York Stock Exchange concerning their holdings, and any changes thereto, of USGI Stock or options to purchase USGI Stock . If Insiders fail to file a report, USGI must disclose the failure in the proxy statement it annually distributes to shareholders, the Insider and USGI could suffer penalties as a result. Please note that under these regulations, the reporting obligation is ultimately the Insider’s responsibility, not USGI’s. |
· | Form 3 . The initial ownership report by an Insider is required to be filed on Form 3. This report must be filed within 10 days after a person becomes an Insider (i.e., is elected as a director or appointed as an executive officer) to report all current holdings of USGI Stock . |
· | Form 4 . Any change in the Insider’s ownership of USGI Stock must be reported on Form 4 unless the Insider is eligible for deferred reporting on year-end Form 5. The Form 4 must be filed electronically before the end of the second business day following the day on which a transaction resulting in a change in Beneficial Ownership has been executed. |
· | Form 5 . Any transaction or holding that is exempt from reporting on Form 4, such as small purchases of stock or gifts may be reported electronically on a deferred basis on Form 5 within 45 calendar days after the end of the calendar year in which the transaction occurred. No Form 5 is necessary if all transactions and holdings were previously reported on Form 4. |
5.9.3. | Liability for Short-Swing Profits . Under the U.S. securities laws, profit realized by certain officers, as well as directors and 10% stockholders of a company (including USGI) as a result of a purchase and sale (or sale and purchase) of USGI Stock within a period of less than six months must be returned to USGI or its designated payee upon request. Profit is measured by matching the highest sale price with the lowest purchase price within six months. The grant and exercise of options, although reportable under Section 16(b), are exempt from short-swing profit liability. You are subject to potential short swing profit liability for so long as you are subject to Section 16(a) reporting requirements, which could continue for a period of time after you cease to be a director or officer. |
6. | RESTRICTIONS ON OTHER ACTIVITIES |
6.1. | Policy on Gifts, Gratuities, Favors, an d Other Benefits |
6.2. | Policy on Service as a Director of a Public Company |
6.2.1. | Prohibition against Serving as a Director of a Public Company |
6.2.2. | Notice about CEO to Serve as Director |
6.2.3. | Trading Restrictions While Serving as Director |
6.2.4. | Pre-Clearance Requirement |
7. | ADMINISTRATION OF THE CODE OF ETHICS |
7.1. | Review by Chief Compliance Officer |
7.2. | Review Committee |
7.3. | Imposition of Sanctions |
7.4. | Sanction Guidelines |
· | First violation – A written or verbal reprimand may be given to the person and a copy or record will be put in the person’s personnel file. The written or verbal reprimand will reinforce the person’s responsibilities under the Code, educate the person on the severity of personal trading violations, and inform the person of the possible penalties for future violations. |
· | Second violation – The Review Committee will impose such sanctions as it deems appropriate, including without limitation, a letter of censure, fines, withholding of bonus payments, or suspension of personal trading privileges for up to 60 days. |
· | Third violation – The Review Committee will impose such sanctions as it deems appropriate, including without limitation, a letter of censure, fines, withholding of bonus payments, or suspension or termination of personal trading privileges or employment. |
· | In addition to the above disciplinary sanctions, such persons may be required to disgorge any profits realized in connection with such violation. All disgorgement proceeds collected will be donated to a charitable organization selected by the Review Committee . The Review Committee may determine to impose any sanctions, including termination, immediately and without notice if it determines that the severity of any violation or violations warrants such action. All sanctions imposed will be documented in such person’s personal trading file maintained by USGI. |
7.5. | Exemptions from the Code |
7.6. | Records |
7.7. | Amendments |
7.8. | Questions |
· | any note, stock, treasury stock, shares of a closed-end fund, shares of an exchange-traded fund (“ETF”), interests in a 529 plan, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights; |
· | any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or on any group or index of securities (including any interest therein or based on the value thereof); |
· | any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency; or |
· | in general, any interest or instrument commonly known as a “security,” or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. |
(i) | “security issued by the Government of the United States” shall NOT be deemed to include any indirect obligations of the Government of the United States (so-called “agency” obligations) with a remaining maturity in excess of 397 calendar days (e.g., FNMA and FHLMC), but shall be deemed to include any obligations directly issued or guaranteed by the Government of the United States, irrespective of the obligation’s initial or remaining maturity (e.g., U.S. Treasury and GNMA); and |
(ii) | certain so-called “money-market instruments,” including conventional repurchase agreements, U.S. Government agency obligations and obligations issued or guaranteed by foreign governments maturing within 397 calendar days from date of purchase, are also deemed to be excepted securities. |
(a) | involving a security or securities account over which a person has no direct or indirect influence or control; |
(b) | which is non-volitional on the part of the person by or for whom the transaction is effected; |
(c) | which is effected pursuant to an automatic dividend reinvestment plan; |
(d) | which is effected pursuant to an Automatic Investment Plan ; |
(e) | which occurs as a result of taking a loan from the USGI 401(k) Plan; or |
(f) | involving either: |
a. | the purchase of a security effected upon the exercise of one or more rights issued by an issuer pro rata to all holders of a class of its securities, if and only to the extent to which such rights were acquired directly from such issuer; or |
b. | the sale of any such rights so acquired. |
(a) | The person’s spouse, minor children, or any other relatives sharing the person’s household; |
(b) | A trust in which the person has a beneficial interest, unless such person has no direct or indirect control over the trust; |
(c) | A trust as to which the person is a trustee; |
(d) | A revocable trust as to which the person is a settlor; |
(e) | A corporation of which the person is an officer, director or 10% or greater stockholder; or |
(f) | A partnership of which the person is a partner (including most investment clubs) unless the person has no direct or indirect control over the partnership. |
· | I did not have access to or knowledge of nonpublic information regarding any USGI client’s purchase or sale of securities or the portfolio holdings of mutual funds affiliated with USGI; |
· | I neither was involved in making securities recommendations to USGI clients nor did I have access to any such nonpublic recommendations; and |
· | I engaged in and reported any personal securities transactions in USGI stock in accordance with the applicable provisions of the USGI Code of Ethics. |
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