March 2016

During the first quarter, the Global Resources Fund underperformed its benchmark, the S&P Global Natural Resources Index, by 233 basis points. Weak performance was due in part to higher cash allocations and an underweight position in base metals and energy companies. See complete fund performance here.

Strengths

  • Superior stock selection in the junior mining and agribusiness industries were the major positive contributors to the fund's performance.
  • The fund's overweight in precious metal stocks and stock selection in the oil and gas space had a positive contribution to the fund relative to the benchmark this quarter.
  • Holdings that were among the fund's best contributors to performance included Gran Colombia Gold, Klondex Mines and Cal-Maine Foods.

Weaknesses

  • An underweight position in base metals, together with an overweight in the refining sector had the largest negative contribution to the fund this quarter.
  • The fund's relatively high cash holdings throughout the quarter had a negative contribution to the fund's performance.
  • Marathon Petroleum, Tesoro and Valero Energy were among the fund's most significant laggards this quarter.

Opportunities

  • Supply outages in OPEC and non-OPEC countries may continue to push up oil prices. According to OilPrice.com, recent disruptions have trimmed OPEC's collective output by nearly 200,000 barrels per day. The main outages are coming out of Nigeria and Iraq, especially from the Iraqi semi-autonomous region of Kurdistan where a rebel attack put a key pipeline temporarily out of service.
  • China's Premier Li Keqiang is confident the country can achieve its growth targets. The Premier added that Beijing is ready to use "innovative" tools to strengthen the recovery, vowing to reduce taxes and bureaucracy to unleash China's entrepreneurial potential.
  • Silver has the wind at its sail as the gold-to-silver ratio rises to a seven-year high. Silver's rally has trailed that of gold this year, sending the gold to silver ratio to 83 times--a signal that it may be undervalued relative to its 10-year average of 60 times.

Threats

  • The U.S. dollar is setting up for one "final leg higher," a move normally associated with lower commodity prices, according to Morgan Stanley analysts. The bank believes the trade-weighted dollar will hit 135 by the end of 2017, a 10 percent rally from current levels, as emerging market currencies will continue to weaken until these economies eliminate their output gap.
  • Barclay's warns investors that the rally in commodities has overshot fundamentals and poses a risk that investors may "rush for the exits." With commodity investment products scoring $20 billion in net inflows between January and February, any setback could result in a sharp reversal and liquidation of billions of dollars in commodity-related assets.
  • Copper prices have "run ahead of fundamental reality," according to a recent Citi report, following a 14 percent rally in the metal. After all, demand for the metal is falling outside of Asia, while Chinese demand in 2015 grew at the slowest pace since 2006. In addition, Goldman Sachs forecasts that Chinese demand is unlikely to rebound this year.

Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. 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. Performance does not include the effect of any direct fees described in the fund's prospectus (e.g., short-term trading fees of 0.05%) which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end here or by calling 1-800-US-FUNDS.

The S&P Global Natural Resources Index includes 90 of the largest publicly-traded companies in natural resources and commodities businesses that meet specific investability requirements, offering investors diversified, liquid and investable equity exposure across 3 primary commodity-related sectors: Agribusiness, Energy, and Metals & Mining.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the Global Resources Fund as a percentage of net assets as of 3/31/2016: Klondex Mines Ltd. 4.62%, Gran Colombia Gold Corp. 9.98%, Cal-Maine Foods Inc. 1.03%, Marathon Petroleum Corp. 1.99%, Tesoro Corp. 1.67%, Valero Energy Corp. 1.37%.

Net Asset Value
as of 05/27/2016

Global Resources Fund PSPFX $5.07 -0.01 Gold and Precious Metals Fund USERX $7.67 -0.23 World Precious Minerals Fund UNWPX $6.42 -0.14 China Region Fund USCOX $6.91 0.08 Emerging Europe Fund EUROX $5.58 -0.01 All American Equity Fund GBTFX $23.67 0.06 Holmes Macro Trends Fund MEGAX $18.01 0.12 Near-Term Tax Free Fund NEARX $2.25 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 -0.01