Third Quarter 2018

During the third quarter, the Emerging Europe Fund lost 2.22 percent, while its benchmark, the MSCI Emerging Europe 10/40 Index, gained 2.68 percent.  See complete fund performance.  

Past performance does not guarantee future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost.


  • The fund’s overweight in Romania and Western Europe holdings had the largest positive contributions to the fund’s performance this quarter.
  • The fund’s underweight in the financial sector and stock selection in consumer staples had the largest positive contributions to the fund’s performance this quarter.
  • Lukoil, a Russian oil producer, made the single largest contribution to the performance of the fund.


  • The fund’s underweight in Russia and stock selection in Poland had the largest negative contribution to the fund’s performance this quarter.
  • The fund’s underweight in energy and overweight in the industrial sector had the largest negative contribution to the fund’s performance this quarter.
  • Sberbank, a Russian bank, was the greatest absolute detractor to the fund’s performance during the quarter.


  • After an eight-year bailout period, Greece Prime Minister Alexis Tsipras declared the end of the bailout program. Greece turned a 15.1 percent budget deficit in 2008 into a 0.8 percent surplus last year. Greece is planning to help banks speed up their bad-loans disposal, possibly including a government guarantee. The details of the plan are not known yet, but the proposal would see lenders transferring some bad loans into special purpose vehicles, improving banks’ balance sheet and boosting confidence in the banking sector.
  • The European Union (EU) has decided to set up a new payment channel that will enable legal trade with Iran without encountering U.S. sanctions. According to the plan, a legal entity will be created to facilitate legitimate financial transactions with Iran, and this will allow European companies to continue to trade with Iran in accordance with EU law and could be open to other partners in the world, said Federica Mogherini, the EU’s foreign policy chief.
  • Poland was upgraded to a status of developed markets by FTSE Russell. Polish equites joined the developed indices on September 24. This is a positive development, as Poland is now promoted with Western countries such as France, Germany, Spain, Switzerland, the U.K. and the U.S.


  • The sharp depreciation of the lira is boosting prices in Turkey. Inflation in September spiked to 24.52 percent from 17.9 percent in August. Ratings agencies have downgraded 20 Turkish financial institutions, saying there are signs of substantial increase in risk of a downside scenario. The banks’ performance, asset quality, capitalization, liquidity and funding profiles are more likely to come under further pressure because of the depreciation of the Turkish lira, the spike in interest rates and the weaker growth outlook.
  • Eurozone economic confidence weakened further in September to a 15-month low. The economic sentiment index dropped more-than-expected to 110.9 from 111.6 in August on trades protectionism and political uncertainty. The confidence level was notably revised down in the industry and consumer sectors, and just partially offset by increases in the retail trade and construction sectors.
  • The Italian government had a plan to shrink its budget deficit in 2019 to 0.8 percent of country GDP; however, the new administration proposed to run a deficit of 2.4 percent of GDP. This new deficit gap is still below the EU’s required of less than 3 percent. However, the higher deficit will make the process of servicing national debt more expensive for Rome, which stands at 130 percent of GDP. Italian banks have been big buyers of local government bonds, and if local bonds go down in value, banks will suffer. Italian banking problems could affect other banks in Europe.

The MSCI Emerging Markets Europe 10/40 Index 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 Economic Sentiment Indicator (ESI) is calculated using the results of five separate confidence indicator surveys, as part of the European Commission's Joint Harmonised EU Programme of Business and Consumer Surveys.

Gross domestic product (GDP) is the monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings are reported as of the most recent quarter-end. Holdings in the Emerging Europe Fund as a percentage of net assets as of 9/30/2018: Lukoil PJSC 11.19%, Sberbank of Russia PJSC 8.42%.

Net Asset Value
as of 02/15/2019

Global Resources Fund PSPFX $4.59 0.03 Gold and Precious Metals Fund USERX $7.51 0.15 World Precious Minerals Fund UNWPX $2.94 0.05 China Region Fund USCOX $8.11 -0.07 Emerging Europe Fund EUROX $6.48 0.05 All American Equity Fund GBTFX $24.03 0.18 Holmes Macro Trends Fund MEGAX $16.80 0.16 Near-Term Tax Free Fund NEARX $2.20 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change