Global Resources Fund

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January 2010

In January the Global Resources Fund underperformed the broader equity market as measured by the S&P 500 Index. However, the fund outperformed its benchmark, the Morgan Stanley Commodity Equity Index.

Strengths

The China Iron & Steel Association (CISA) reported preliminary steel production for the month of December, indicating that China produced 49.4 million metric tons, or 1.59 million metric tons per day, an increase of 30.7 percent year-over-year and an increase of 0.9 percent month-over-month.
Minor metals remain bullish. Over the past month, the U.S. molybdenum price is now up 22.4 percent. The cash price of iron ore delivered to China, the world’s largest buyer, rose to the highest level in more than a year amid what Goldman Sachs called “panic buying” by steel mills. Chinese mills have stepped up iron ore purchases to meet rising steel demand fueled by the nation’s stimulus spending.
Prices of thermal coal in Australia, a benchmark for Asia, hit a 14-month high of above $90 per metric ton in the first week of 2010, jumping more than 7 percent from a week earlier due to robust Chinese demand.
The U.S. overtook Russia as the world’s largest natural gas producer last year, according to the latest Energy Information Administration/Department of Energy data.

Weaknesses

Crude oil and base metals fell during the month on concerns of a slowdown in Chinese demand amidst the Chinese government’s tightening economic policy. Copper fell nearly 9 percent and zinc more than 10 percent on strength in the dollar and reports of further curbs on lending in China prompting a sell-off.
Chinese construction activity in December was weaker than expected. Housing starts fell back from the stratospheric 200 percent year-over-year gain in November to 35 percent year-over-year in December. Global stainless steel production for the first nine months of 2009 fell 15 percent from the prior year to 17.9 million metric tons, according to the International Stainless Steel Forum.

Opportunities

India has fast tracked a $12 billion Posco project in the Orissa district of India before the South Korean president visits the country. ArcelorMittal also has a sizeable project planned for the iron-ore-rich district. These projects will not be fully operational until 2015, but both will be significant consumers of Indian iron ore. This could further decrease exports of this material to China, causing the country to seek additional material from the seaborne market.
Severstal and ArcelorMittal have notified the United Steelworkers Union that idled steel and coking coal facilities in Ohio will be returning to production near the end of the first quarter of 2010. Increasing steel prices and demand are the reasons Severstal cited for resuming production at its steel making operation.
Macquarie Group said in a report that Maanshan Iron & Steel, China's sixth-largest steelmaker, has expressed worries that government prioritization of thermal coal for the country's railway network will limit metallurgical coal supply. When a similar situation arose in early-2008, Chinese domestic prices for premium coal rose above $200 per tonne.
China, the world’s second-largest energy consumer, said it will “actively” participate in the global competition for oil, natural gas and mineral resources as domestic demand rises. The country will intensify development of overseas resources to ensure “stable” energy supplies for economic growth, the vice chairman of the National Development and Reform Commission said in a speech.

Threats

China’s central bank raised a key interest rate for the first time in five months, then followed with an increase in the bank reserve requirement ratio by 0.5 percent. China’s measures to rein in lending may curb price gains in copper and aluminum on concern that the move foreshadows higher interest rates that will limit demand from the world’s largest metals consumer.
London Metals Exchange aluminum inventories reached a new all time high of 4,640,750 tonnes and inventories of nickel, copper, and zinc all continue to hover around their 52-week highs.
Australia's government has not yet decided what recommendations it will adopt from a report proposing major tax reforms, possibly including a big increase in mining royalties, Prime Minister Kevin Rudd has said.

Past performance does not guarantee future results.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The Morgan Stanley Commodity Related Index (CRX) is an equal-dollar weighted index of 20 stocks involved in commodity related industries such as energy, non-ferrous metals, agriculture, and forest products. The index was developed with a base value of 200 as of March 15, 1996. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. Holdings in the Global Resources Fund as a percentage of net assets as of 12/31/09: Posco 0.00%, ArcelorMittal 0.00%, Severstal 0.00%, Maanshan Iron & Steel 0.00%.

Net Asset Value
as of 03/12/2010

Global Resources Fund
PSPFX $9.34 +0.06
Gold and Precious Metals Fund
USERX $15.12 -0.05
World Precious Minerals Fund
UNWPX $17.63 +0.02
China Region Fund
USCOX $8.39 -0.04
Eastern European Fund
EUROX $9.41 +0.08
Global Emerging Markets Fund
GEMFX $8.08 No Change
Global MegaTrends Fund
MEGAX $8.07 +0.03
All American Equity Fund
GBTFX $20.11 -0.03
Holmes Growth Fund
ACBGX $16.17 -0.03
Tax Free Fund
USUTX $12.32 No Change
Near-Term Tax Free Fund
NEARX $2.23 No Change
U.S. Government Securities Savings Fund
UGSXX $1.00 No Change
U.S. Treasury Securities Cash Fund
USTXX $1.00 No Change

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by clicking here or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc. With respect to the money market funds, an investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these funds.

Read additional important information.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio. Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors. The Eastern European Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking industries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile. Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local income taxes, and if applicable, may subject certain investors to the Alternative Minimum Tax as well. Each tax free fund may invest up to 20% of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes. Bond funds are subject to interest-rate risk; their value declines as interest rates rise. The tax free funds may be exposed to risks related to a concentration of investments in a particular state or geographic area. These investments present risks resulting from changes in economic conditions of the region or issuer.

For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)

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All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

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Global Resources Fund

Fund Vitals

NAV: $9.34
as of 03/12/2010
Change: 0.06 (0.64)

January 2010

Net Asset Value
as of 03/12/2010

Global Resources Fund

Fund Vitals

NAV: $9.34 as of 03/12/2010 Change: 0.06 (0.64)

January 2010

Net Asset Valueas of 03/12/2010

NAV: $9.34
as of 03/12/2010
Change: 0.06 (0.64)

Net Asset Value
as of 03/12/2010