Fourth Quarter 2016

During the fourth quarter, the Global Resources Fund underperformed its benchmark, the S&P Global Natural Resources Index, by 1,267 basis points. Weak performance was due to an overweight position in gold equities and inferior stock selection in junior natural resource companies.See complete fund performance here.

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.

Strengths

  • The fund's overweight in oil and gas refining, industrials and oil and gas explorers and producers as well as its underweight in fertilizers and chemicals stocks had a positive contribution to the fund in excess of its benchmark.
  • The fund had superior stock selection in oil and gas refining, fertilizers and chemicals, paper and forest, oil and gas explorers and developers and industrial metals sectors. This superior stock selection resulted in positive contribution to the fund in excess of its benchmark.
  • The securities that provided the highest contribution to the fund were Unit Corporation, Fibria Celulose, Syngenta, Novolipetsk Steel and Severstal PAO.

Weaknesses

  • The fund's overweight in precious metals, junior natural resource stocks, and renewable energy stocks, as well as its underweight in integrated oil, base metals and industrial metals stocks had a negative contribution to the fund relative to its benchmark.
  • The fund had inferior stock selection in junior natural resource stocks, precious metals, base metals, integrated oil and oil services sectors. This inferior stock selection resulted in negative contribution to the fund relative to its benchmark.
  • The securities that resulted in the largest negative contribution to the fund were Klondex Mines, Pacific Green Energy, Gran Colombia Gold Convertible Notes, Sibanye Gold and Pacific Infrastructure.

Opportunities

  • Commodity prices may continue to rally as supply and demand dynamics are tightening, according to Citi. With 2016 in the books, commodities are posting their best annual performance in over five years. The trend should continue in 2017, says Citigroup, a bank which has been notoriously bearish on commodities, by stating that "there is absolutely no doubt that commodity markets are at a turning point."
  • The Brent forward curve is signaling that oil storage tanks will start emptying in the second half of 2017, according to oil traders surveyed by Reuters. As crude oil trades range bound and overhang continues to exist in inventories, higher demand in the future is slowly starting to emerge where oil fundamentals may turn bullish in late 2017.
  • 2016 led rallies in zinc and coal, but 2017 could be the year of nickel and oil. Nickel finished 2016 with a rally of 22 percent; however, developments such as the Philippines President Rodrigo Duterte's rally against mining companies and Indonesia's export ban may dramatically hamper the metal's fundamentals and create a severe supply shortage.

Threats

  • China may fall short of its 6.5 percent in economic growth objective, according to President Xi Jinping. Xi stated that the country doesn't need to meet its objective if doing so will create too much systematic risk and jeopardize its long-term growth prospects. In 2015, policymakers pledged an annual growth rate of at least 6.5 percent through 2020. Falling short of its growth objectives will have negative ramifications for industrial metal demand.
  • Commodity prices may be susceptible to major swings in 2017 as commodity exporting nations prepare for the potential of protectionist measures in the U.S. Following the victory of President-elect Donald Trump, markets have reacted to a stronger U.S. dollar and are making preparations for potential protectionist policies against their imports. Some economic commentators have warned that a wave of protectionist measures may sink the world into a global recession, with negative implications for commodity prices.
  • General Motors is temporarily idling five U.S. assembly plants in an attempt to reduce bloated inventories. The sector has experienced rapid growth over the past five years as a result of cheap consumer financing; however, interest rates on car loans are slowly rising while terms are much longer than before. According to the research organization IHS Automotive, sales could slide by more than 200,000 vehicles if the company permanently suspends production from these plants--a negative read-through for platinum group metals and steel demand.

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 12/31/2016: Unit Corp. 0.00%, Fibria Celulose SA 0.00%, Syngenta AG 0.52%, Novolipetsk Steel PJSC 1.33%, Severstal PJSC 1.19%, Klondex Mines Ltd. 7.08%, Pacific Green Energy Corp 0.00%, Gran Colombia Gold Corp. 9.86%, Sibanye Gold Ltd. 1.27%, Pacific Infrastructure Ventures Inc. 5.22%, General Motors Co. 0.00%.

Net Asset Value
as of 02/27/2017

Global Resources Fund PSPFX $5.69 -0.07 Gold and Precious Metals Fund USERX $8.20 -0.48 World Precious Minerals Fund UNWPX $7.09 -0.37 China Region Fund USCOX $8.08 -0.02 Emerging Europe Fund EUROX $6.08 -0.03 All American Equity Fund GBTFX $24.70 0.04 Holmes Macro Trends Fund MEGAX $19.11 0.02 Near-Term Tax Free Fund NEARX $2.22 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change