Welcome to U.S. Global Investors
Dear Investor,
Thank you for inquiring about the dynamic Eastern European Fund. The political and economic reform initiated after the fall of the Berlin Wall has created exciting investment opportunities throughout Eastern Europe.
To capitalize on these opportunities, U.S. Global Investors and Charlemagne Capital Ltd. formed a joint venture to make Eastern European assets available to investors in a no-load mutual fund.
The Eastern European Fund invests in dynamic companies in the emerging markets of Eastern Europe, including Poland, the Czech Republic, Hungary, Russia and other countries within the former Soviet Union. The fund seeks to achieve long-term growth of capital. Please remember that investing in foreign markets involves special risks. Read the prospectus carefully to determine the suitability of this fund for your portfolio.
Everything you need to open an account is inside this booklet. In three easy steps you can become a fund shareholder. Simply:
- Review the enclosed investor’s guide and prospectus carefully;
- Complete the enclosed new account application; and
- Mail the application with your check in the postage-paid envelope provided.
If there is anything we can do to help you with this investment decision, please call our Investment Center at 1-800-US-FUNDS (1-800-873-8637). An investor representative will be happy to answer your questions or provide additional information.
I look forward to welcoming you as a fellow shareholder.
Sincerely,
Frank Holmes
Chairman & CEO
P.S. Call 1-800-US-FUNDS to learn about qualifying for a free lifetime IRA.
Not part of prospectus
The fund may invest without limit in any country in Eastern Europe and in any sector within the Eastern European Region. The Sub-Adviser considers the following countries to be in the Eastern European region: Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Croatia, Czech Republic, Estonia, FYR Macedonia, Georgia, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Poland, Romania, Russia, Slovak Republic, Slovenia, Tajikistan, Turkey, Turkmenistan, Ukraine, Uzbekistan.
Discover the investment opportunities in the economies of Eastern Europe.
Economic reform in Eastern Europe and the former Soviet Union has given rise to many investments with outstanding growth potential. The stock prices of many companies in the region understate the true value of the assets they control. This presents a unique opportunity for adventurous investors willing to take the risks of investing in these emerging markets. These potential risks are discussed in the section "How to balance risk and reward" on page 5.
The Eastern European Fund searches throughout the region for the best opportunities to achieve maximum long-term capital gains.
By investing in the companies and the natural resources sectors with the most favorable profiles, the fund is well diversified against a downturn in any one product. With its global focus, the fund stands to benefit from economic growth throughout the world, while eliminating the risks of investing in a single country or industrial sector. Diversification does not protect an investor from market risks and does not assure a profit.
Investment Goals: Long-term growth of capital
Sales Charge: None – 100% no-load
Risk/Reward Potential:
Not part of prospectus
Why invest in Eastern Europe?
The failure of communism led to the fall of the Berlin Wall in 1989, the collapse of the Soviet Union in 1991
and the need to rebuild economies previously driven by military spending. With the end of the Cold War
came new economic, political and social challenges for Europe’s former communist nations. The countries
that most readily adopted the legal and financial systems of Western capitalism have proven to be the
most successful.
Economic reform continues its steady push forward.
Broad privatization has put thousands of companies once owned by the state in the hands of private investors, who now have a direct stake in the success of these companies. The region has experienced periods of high inflation and devaluation of currencies associated with the transition to free market economies. These turbulent periods should come under control as policies mandated by the International Monetary
Fund are enforced. As in the U.S., the baby boom that followed World War II has significantly increased
Eastern Europe’s labor force. These countries have been forced to turn to capitalism as the only way to improve economic performance sufficiently to absorb this excess labor. While some long for the security of the bygone communist era, free enterprise has taken hold as the only workable solution for Eastern Europe. The transition has not been without difficulty, and investors should expect continuing volatility in this market as the free enterprise system matures.
Not part of prospectus
Eastern European markets can even outperform the U.S. market |
||||
Index |
Country |
2002 |
2003 |
2004 |
BUX Index |
Hungary |
34.97% |
29.05% |
81.20% |
WIG |
Poland |
6.75% |
48.64% |
58.92% |
PX50 Index |
Czech Republic |
39.33% |
65.44% |
82.73% |
CSFB ROS Index |
Russia |
17.22% |
72.85% |
12.61% |
XU100 Index |
Turkey |
-34.47% |
112.84% |
38.77% |
Dow Jones |
USA |
-16.76% |
25.32% |
3.15% |
Source: Bloomberg
The Budapest Stock Exchange Index is a capitalization-weighted index adjusted for free float. The index tracks the daily price-only performance of large, actively traded shares on the Budapest Stock Exchange. The WSE-WIG Index is a total return index which includes dividends and preemptive rights (subscription rights). The index includes all companies listed on the main market, excluding foreign companies and investment funds. The PX-50 Index is a capitalization-weighted index comprising 50 companies listed on the Prague Stock Exchange, into which only issues from the main and secondary market can be incorporated. The CS First Boston ROS Index is a capitalization-weighted index based on 30 stocks and denominated in U.S. dollars. The Istanbul Stock Exchange National 100 Index (XU100) is a capitalization-weighted index composed of National Market companies except investment trusts. The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry.
The Eastern European Fund can increase your portfolio’s growth potential by tapping into Europe’s most exciting markets.
In May 2004, ten new countries joined the European Union. These include Poland, Hungary the Slovak Republic and the Czech Republic. Continuing economic reforms in Eastern Europe and the low valuations of stocks make a compelling case for investment. In return for the inherent risks of investing in these emerging markets, investors have the potential to share in the rapid gains possible in Eastern Europe’s markets. The following chart includes sample returns of Eastern European markets in which the Eastern European Fund may invest.
Not part of prospectus
How to balance risk and reward
The most important decision any investor can make is how to manage the risks of investing. Diversification can reduce risk but will not eliminate it. Investing in emerging markets involves a higher level of risk than investing in more established markets. While currency risk is present in any international investment, investments in emerging markets involve risks not typically associated with more established securities markets, including political and business risk. These risks are discussed thoroughly in the prospectus, which we urge you to read carefully. The Eastern European Fund is designed for those seeking a long-term investment who can weather periods of volatility. We suggest you use our ABC Investment Plan® to dollar-cost average your investment over time. Of course, no investment plan can guarantee a profit. However, a program of dollar-cost averaging can help reduce your average share cost in a volatile market.The ABC Investment Plan® eliminates second-guessing the market and can take the emotional sting out of investing. See page 11 for more information.Charlemagne Capital Ltd.: A specialist in emerging-market fund management
Charlemagne Capital Ltd. is a specialist in the emerging markets of Eastern Europe. Established in 1991 to
provide quality investment management and advisory services to professional investors, it has extensive experience in the markets of Asia and Eastern Europe. Charlemagne Capital Ltd. serves as the sub-adviser and portfolio manager of the Eastern European Fund. Stefan Böttcher and Andrew Wiles lead the investment team from their office in London. The team first identifies those countries in Eastern Europe and the former Soviet Union that they believe offer the greatest potential based on macroeconomic conditions. They then select undervalued stocks that have the highest potential for growth. The fund invests primarily in a diversified portfolio of the common stocks of companies located in the emerging markets of Eastern Europe. While the fund may invest in any size company, it targets larger capitalized companies relative to the size of their local markets, which generally have local brand name recognition in their industry.
Our Eastern European Fund gives you all of
these shareholder benefits:
You save money with a no-load investment
Investing in growth stocks on your own can be very expensive. As an institutional investor, the fund can
negotiate lower commissions on its portfolio transactions. Because our funds are no-load, you never pay
loads or sales charges. Please read the prospectus, which includes charges and ongoing expenses, carefully before investing.
Not part of prospectus
Charlemagne Capital Ltd. specialists make
investment decisions for you.
Charlemagne Capital Ltd. is a well-established investment manager in emerging markets. Their professional
experience guides them in monitoring the markets and analyzing investments.
Investing is easy and affordable.
We believe everyone should have the opportunity to invest. Our low minimum investment of $5,000 makes
it easy and affordable to build a position in the Eastern European Fund. If you use our ABC Investment Plan,®
you can get started with as little as $1,000 with subsequent monthly investments of $100 or more. Please
see page 11 for more information about the ABC Investment Plan.®
IRAs have no minimum investment requirement. These affordable investment minimums make it easy for you to open an account for yourself, your children or grandchildren.
Your investment is diversified to reduce risk.
Few individual investors have the financial assets to build a fully diversified Eastern European portfolio on their own. When you invest in a mutual fund, your investment is spread across many companies. This diversification minimizes the impact of any one company not performing well. Your money is invested with a long-standing leader. U.S. Global Investors is a pioneer in innovative funds in domestic and international markets. The Eastern European Fund is just one of several specialized investments in our fund family.Your account information is just a toll-free phone call away.
You can call toll free from anywhere in the United States to check your account balance, confirm deposits,
verify exchanges, make automated exchanges and more. This convenient service is available 24 hours
a day, seven days a week. Call 1-800-US-FUNDS anytime.
We give you the most up-to-date information on the markets.
Our toll-free information line provides timely information on the financial markets. Our portfolio managers give current analyses of the market, including discussions of each of our funds. Just dial 1-800-US-FUNDS and select option 6.
Not part of prospectus
You always have easy access to your money.
We make it convenient for you to invest in the Eastern European Fund. You can buy, exchange or sell shares
on any business day. You can withdraw money from your account by written request or by telephone
exchange. Upon receipt of your written instruction, we will mail or wire your money to you or your financial
institution.
You may exchange shares using the automated telephone system; speaking to an investor representative; using our website, www.usfunds.com; or by mail. Certain restrictions apply. You will be charged $5 by the transfer agent for each exchange out of any fund account.
Retirement accounts are allowed three free exchanges per calendar quarter.
Please note: The Eastern European Fund is designed as a long-term investment. Thus, short-term trading is not recommended. If shares of the fund held for less than 180 days are redeemed or exchanged, the fund will deduct a redemption fee to offset the transaction costs that short-term trading imposes on the fund and its long-term shareholders. Please see the prospectus for more details.
Not part of prospectus
Answers To Your Questions
Q: What are the benefits of investing in the Eastern European Fund?
A: The Eastern European Fund invests in a dynamic portfolio of Eastern European stocks that the portfolio
team believes offer undervalued prices and high growth potential. The fund makes many Eastern
European stocks available to investors in a no-load investment. While these stocks involve a higher
degree of risk, as detailed on page 5, they have the potential for high long-term capital gains.
Q: Why should I consider investing in the Eastern European Fund?
A: Charlemagne Capital Ltd. is a specialist in the global emerging markets with the skills and resources
necessary to seek out the best opportunities in Eastern Europe. Charlemagne Capital Ltd. analysts
are professionals who can make the tough investment decisions in the Eastern European stock
markets for you. Though there can be no guarantee of success, investing with professional money managers
offers an excellent opportunity for achieving your long-term financial goals.
Q: What is Charlemagne Capital Ltd’s philosophy for investing?
A: As economic reforms continue in Eastern Europe, Charlemagne Capital Ltd. believes that these markets offer outstanding investment opportunities. Charlemagne Capital Ltd. seeks out stocks that are undervalued by the markets and have long-term growth potential at the right price.
Q: Why should I invest in former Communist countries?
A: For the countries in which the Eastern European Fund may invest, communism is an ideology of the past. Economic realities now dictate government policies that allow economic and political freedoms. The need for economic restructuring has required the help of Western organizations such as the World Bank, the International Monetary Fund and the European Bank for Reconstruction and Development. Dependent on the financial help of these organizations, the nations of Eastern Europe follow strict policies in return for further aid. Those countries whose dependence on outside aid is lessening are those that have wholeheartedly rejected their communist past.
Not part of prospectus
Q: What strategy do you recommend for investing in this fund?
A: Since the stock markets of Eastern Europe can be volatile, we suggest the strategy of dollar-cost
averaging using our ABC Investment Plan.® By investing an equal amount at regular intervals,
you avoid extremes in the market. By investing a predetermined amount every month, you establish
an investment discipline and avoid attempting to outguess an unpredictable market. Please see
page 11 for details.
Q: How should I balance my portfolio?
A: As you move through life, your investment needs change. Younger investors typically have a greater portion of assets in growth investments. Mature investors approaching retirement likely will prefer a shift to fixed income investments. A well-diversified portfolio should have an exposure to aggressive as well as conservative stocks. Depending on the investor’s risk profile, we suggest investing in the Eastern European Fund as part of the stock component for investors seeking to invest in emerging markets. We also suggest that investors use our ABC Investment Plan.®
Q: Why should I choose a fund that is no-load?
A: Investing in growth stocks on your own can be very expensive. As an institutional investor, the fund can negotiate lower commissions on its portfolio transactions. Because our funds are no-load, you never pay loads or sales charges. Please read the prospectus, which includes charges and ongoingexpenses, carefully before investing.
Q: What is your minimum investment requirement?
A: You can open a regular account with $5,000 and add to your investment with $50 or more. Or you may begin investing with $1,000 if you use our ABC Investment Plan® and make monthly investments of $100 or more. IRA accounts have no minimum investment requirement at U.S. Global Investors.
Did you know...?
For instant liquidity, you can transfer money by phone to your U.S. Treasury Securities Cash Fund account and then write a check for any amount you need. If you have yet to invest in our money market funds, call 1-800-US -FUNDS for a free investment kit.
An investment in the U.S. Treasury Securities Cash Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
Not part of prospectus
You Can Open Your New Account in 3 Easy Steps.
1. Review the prospectus carefully.
Prospectus: A legal document that describes a mutual fund’s objectives, strategies, risks, costs and management.
The prospectus is the best source of information on a mutual fund. While a fund’s prospectus may appear intimidating at first, it is important that you read it carefully before investing to make sure the fund’s investment objectives and risks are appropriate for you.
The prospectus contains valuable information including:
■ the fund’s investment objectives
■ the strategies it plans to use to achieve its objectives
■ the fund’s operating expenses and fees
■ special risks associated with the fund’s investments.
2. Complete the enclosed new-account application. Please be sure to sign it.
Your Account Options:
Basic Accounts are for individuals or joint account holders.
Retirement Accounts earn tax-deferred income for your retirement savings. We offer traditional and Roth IRAs, Education Savings Accounts, SEPs, 401(k) and 403(b) Plans, Profit Sharing and Money Purchase Plans.
Uniform Gifts to Minors Act Accounts (UGMA) and Uniform Transfers to Minors Act Accounts (UTMA) allow an adult to act as a custodian for a child’s investment.
Business Accounts can be customized for your sole proprietorship, partnership or corporation.
Trust Accounts are for estate planning purposes and for those with fiduciary responsibilities.
Not part of prospectus
ABC Investment Plan®
The ABC Investment Plan® Provides You with an Opportunity to Automatically Invest in Our Funds with a Lower Initial Investment.
To sign up for the ABC Investment Plan,® simply complete section 8 of your new account application.
Saving is as easy as ABC! This systematic approach to investing, called dollar-cost averaging, provides you with a disciplined program for achieving your financial goals. With an initial investment amount of $1,000 and a minimum monthly investment of $100, this savings program allows you to automatically invest on a monthly basis. Simply choose the amount you want to invest and the day of the month you want to invest it (between the 1st and 28th). According to your instructions, we will transfer the money from your checking account and invest it in the fund of your choice.
Monthly investing is easy and affordable, and the power of compounding can make it pay off.
Long-term goals like buying a home, saving for college or building a retirement nest egg are achieved more easily when you put aside a little each month. Automatic reinvestment and compounding of dividend income add momentum to the building of your wealth. And, because the amount you invest stays the same, your money buys more shares when the price is low and fewer shares when the price is high.
The table below shows how your money can grow over time.
A program of regular investing doesn’t assure a profit or protect against loss in a declining market. You should evaluate your ability to continue in such a program in view of the possibility that you may have to redeem fund shares in periods of declining share prices as well as in periods of rising prices.
This hypothetical example assumes an 8% annual return, with earnings spread equally over 12 months. The example also assumes that monthly contributions were made at month end. Your actual return may be more or less than this amount. No investment program can guarantee a profit.
Monthly
Contribution |
5 years |
10 years |
20 years |
30 years |
$100 |
$7,744 |
$20,484 |
$75,937 |
$226,049 |
$250 |
$19,359 |
$51,211 |
$189,842 |
$565,122 |
$500 |
$38,719 |
$102,422 |
$379,684 |
$1,130,244 |
$1,000 |
$77,437 |
$204,845 |
$759,369 |
$2,260,488 |
This hypothetical example assumes an 8% annual return, with earnings spread equally over 12 months. The example also assumes that monthly contributions were made at month end. Your actual return may be more or less than this amount. No investment program can guarantee a profit.
3. Open Your Account by Mail or Wire Transfer.
To open an account, mail your investment check (made payable to the Eastern European Fund) with your application in the postage-paid envelope provided. Or, to arrange a wire transfer, call 1-800-873- 8637. Current shareholders may easily establish a new account by telephone exchange. On the day we receive your account application and investment, we will open your new account and immediately mail you a statement confirming your purchase.
Not part of prospectus
Initial Investment Requirements
Regular Retirement UGMA/UTMA Business Trust ABC Investment Plan® |
$5,000 no minimum $ 1,000 $ 5,000 $ 5,000 $ 1,000 |
The ABC Investment Plan® is a powerful tool for teaching children the rewards of saving and investing regularly. With the ABC Investment Plan,® they can watch their savings grow and witness the benefits of compounding earnings over time. These invaluable financial lessons can provide a lifetime of benefits.
Attention
parents and grandparents:
Did you know...?
The ABC Investment Plan® is a powerful tool for teaching children the rewards of saving and investing regularly. With the ABC Investment Plan,® they can watch their savings grow and witness the benefits of compounding earnings over time. These invaluable financial lessons can provide a lifetime of benefits.
Not part of prospectus
Services to Keep You Informed
Account Statements
Each time you make a transaction or a dividend is paid, you’ll receive an account statement.
Investment Center
The Center is staffed by a team of investor representatives who are mutual fund specialists. They are dedicated to helping you maximize your investment experience with U.S. Global Investors. You can call 1-800 US-FUNDS to have our specialists answer questions about your investment, explain how our family of funds can help you build a diversified portfolio, provide you with educational tools to help you learn how to build wealth, suggest strategies for making investing easy and assist you in making account transactions. The Investment Center is open every business day from 7:30 a.m. to 7:00 p.m. (CST). Toll-Free Telephone Link Call 1-800-US-FUNDS anytime for your account balance, fund performance updates, share closing prices and fund insights direct from our portfolio managers. This automated service is available 24 hours a day, seven days a week.
Portfolio Direct
Listen to our portfolio managers’ insights and expectations for the markets. Call 1-800-US-FUNDS and select menu option 6.
The Shareholder Report
Each quarter you will receive an educational report filled with financial solutions, fund performance highlights, insights from expert money managers and global perspectives on investing.
Financial Reports
We will provide you with detailed information on portfolio holdings and investment performance twice a year.
Internet Website
Our website, www.usfunds.com, offers you services and information, including access to your account, an asset allocation tool for selecting an asset mix that meets your goals, and retirement planning worksheets to help you determine how much to save to reach your retirement goals. You can also download prospectuses, read the Shareholder Report, monitor share prices and learn more about our family of funds.
E-mail Connection
You can communicate with the Investment Center via electronic mail. Send your questions to shsvc@usfunds.com. An investor representative will respond to your message within one business day.
Not part of prospectus
Fund Listings
Daily share prices and performance data for our funds are listed in The Wall Street Journal, Investor’s
Business Daily, Barron’s and many local newspapers. Here is an easy reference chart to help you
decipher the listings.
| Reading Fund Performance |
 |
Not part of prospectus
Explore U.S. Global Investors
Entrepreneurial, Dynamic and Unique
These are the words which best describe our company as well as our employees. We are sophisticated investment specialists seeking opportunities globally for our shareholders. Our performance-inspired fund management team not only has advanced academic credentials but also the hands-on experience needed to guide them in making investment decisions on your behalf.
Our Mission:
To maximize the growth, protection and service of our shareholders’ wealth, with the highest ethical standards.
Still Have Questions?
Please call our Investment Center at 1-800-US-FUNDS. An investor representative will be happy to answer your questions or provide you with additional information.
Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.
Not part of prospectus