|
| ||
 Investment Professionals Access Account Open Account Fund PerformanceRetirement |
||
| Webcasts Press Center Forms and Prospectus About the AdvisorFrank Talk |
||
|
Letter From the Chairman
Dear Shareholder: |
|
It’s time to review, realign and rebuild your investment strategy. Remember the amazing bull years for equity markets – 1997, 1998 and 1999. What Federal Reserve Board Chairman Alan Greenspan described as an "irrational exuberance" could have also been characterized as an "irrational fear of Y2K." This sentiment, coupled with a tremendous amount of overbuilding resulting from far too much exuberance surrounding the Internet, created a bubble in the stock market. Go back to the history books and look at previous market cycles. You will quickly realize that all massive booms eventually lead to severe bear markets. And when the bears rule Wall Street, gold shines. True to form, as the market has unraveled over the past year – in particular, since the emotional and economic September 11 disaster – gold has far out-performed the equity markets. This is why we have always advocated looking at investments holistically with an asset allocation strategy that meets the investor’s personal needs. Investors should consider gold as one asset class in a diversified portfolio. Financial studies, such as the one conducted by the Wharton School’s Dr. Jeffrey Jaffe, suggest a 5 percent weighting in gold. We have provided a chart to explain why gold is performing exceptionally well in the current environment. It is important to maintain discipline in both bull and bear markets,and to rebalance your portfolio at least once a year. For example, between Christmas and New Years, when the equity markets are typically up and the gold markets down, investors should take profits from their equity funds and move them to their gold funds to maintain a 5 percent overall weighting in gold funds.Then when gold funds generate fantastic returns, it is prudent to take profits and buy equity funds, which are typically down, and rebalance gold assets to the 5 percent level of the total portfolio. This methodology is known as Dynamic Asset Allocation. There is good news for the stock market! For the first time in more than two years the year-over- year change in earnings of the Standard and Poor’s 500 companies is predicted to turn positive. The economy is rebuilding and companies are becoming profitable. Although the economy is on the mend, many investors are still captivated by "Enronitis." Being an election year, this malady dominates the media and continues to generate much fear and skepticism among investors. 
Diversification of your monthly income is also important. It is a key component to your overall
asset allocation strategy. With money market fund yields so low, investors should consider
investing in our tax-free municipal bond funds, which have performed well throughout the bear
and bull markets. In particular, the Near-Term Tax Free Fund has historically had a relatively
stable net asset value. In fact,the fund has been awarded the designation of "Lipper Leader"
in the "Preservation of Capital" category¹. Not only does the fund distribute its income on a
monthly basis, it has historically offered a tax-equivalent yield higher than the average money
market fund.
Please take a moment of your time to read the article on the back page by newsletter writer Ian McAvity. As you will see, he brings his readers more than 40 years of investment experience in a simple, yet methodical manner. His charts have made him famous across the globe. If you like what you read, please sign-up for a trial subscription. I would also like to encourage you to explore our website and discover our investment tools, which can help you realign and rebuild your portfolio. Sincerely, 
Frank E.Holmes Chairman and CEO U.S.Global Investors,Inc. |
|
¹Lipper Leader for Preservation Fund: Lipper Leader for Preservation ratings reflect the degree of a fund’s historical success in avoiding periods of losses relative to other funds within the same asset class for the three years ended 6/30/02. The ratings are subject to change every month. Twenty percent of funds analyzed are named Lipper Leaders for Preservation. Preservation ratings are relative, rather than absolute, measures, and funds named Lipper Leaders for Preservation may still experience losses periodically; those losses may be larger for equity and mixed equity funds than for fixed income funds. Near-Term Tax Free Fund was rated among 3,536 fixed income funds for the three-year period. Lipper Leader ratings are not intended to predict future results, and Lipper does not guarantee the accuracy of this information. More information is available at www.lipperleaders.com. Lipper Leader ratings copyright 2001, Reuters, All Rights Reserved. The Near-Term Tax Free Fund’s annualized total return for the 1-, 5- and 10-year periods was 5.65%, 4.76% and 4.93%, respectively, as of June 30, 2002. **The Tax Free Fund's annualized total return for the 1-, 5- and 10-year periods was 6.18%, 5.28% and 5.75%, respectively, as of June 30, 2002. Performance data quoted represent past performance and investment return,and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The adviser for the Tax Free and Near-Term Tax Free Funds has guaranteed total fund operating expenses (as a percentage of net assets) will not exceed 0.70% through June 30, 2003, or until such later date as the adviser determines. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks. |
