The Holmes Growth Fund Strategy

One main factor drives the Holmes Growth Fund stock selection strategy —the search for quality growth companies. This search begins with a universe of almost 9,000 stocks listed on the over-the-counter market (Nasdaq), the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX), as well as a few select foreign stocks. Potential investments are chosen through a fundamental analysis of financial data. Although not all individual stocks purchased will meet every standard, the Holmes Growth Fund strategy focuses on:

Sales: A company must demonstrate strong organic sales growth (i.e., not from acquisitions) and accelerating sales trends.

Earnings: A company must demonstrate strong quality earnings that come from operations, not from tax breaks or interest income.

Balance Sheet: A company’s balance sheet must be strong; the less debt, the better.

Mr. Holmes also looks at a company’s price-to-earnings ratio, accounting and stock momentum. After all of these items are weighed, a company is compared to its industry group and to the stock universe as a whole. Each company is analyzed according to these standards and to other technical considerations before being considered for purchase by the fund. Few companies can pass these strict selection standards.

Unlike many growth-oriented fund managers, Frank Holmes does not try to predict a company’s future earnings. Instead, he focuses on year-to-year trailing earnings growth and other indications of financial health.

The S&P MidCap 400 Index is a capitalization-weighted index, which measures the performance of the mid-range sector of the U.S. stock market. Investing in small- and mid-cap stocks may be more risky and more volatile than investing in large-cap stocks. The Lehman Brothers Long Term Treasury Index includes fixed rate debt issues rated investment grade or higher by Moody’s, S&P, or Fitch, in that order. The Russell 1000 Index consists of the 1,000 largest companies in the Russell 3000 Index, representing 89% of the total market capitalization of the Russell 3000.

Who is Frank Holmes?

Mr. Frank Holmes is Chief Executive Officer and Chief Investment Officer of U.S. Global Investors, a registered investment adviser managing approximately $4.7 billion for U.S. Global Investors Funds and U.S. Global Accolade Funds, a mutual fund family of 13 no-load mutual funds. Prior to purchasing controlling interest in U.S. Global Investors in 1989, Mr. Holmes had investment banking experience in the international capital markets and the gold-mining industry. For more than a decade, Mr. Holmes worked for a Canadian investment corporation where he was a research analyst and portfolio manager specializing in emerging-growth companies and ultimately served as Vice President, Corporate Finance.