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February 2014

In February, the Near-Term Tax Free Fund rose 0.63 percent, while the benchmark Barclay’s Capital 3-Year Municipal Bond Index rose 0.31 percent. The Barclay’s Municipal Bond Index rose 1.17 percent for the month. See complete fund performance here.

Broadly speaking, fixed-income markets rallied in February and municipals were no exception as economic data generally disappointed, inflation remains muted and the Federal Reserve shows no inclination to tighten monetary policy other than the already-announced tapering.

U.S. economic data got off to a weak start in February, with the ISM Manufacturing Index falling much more than expected, flashing a warning sign for anyone who was questioning the economy’s strength. That was quickly followed up by a weak employment report, which showed the economy only created 113,000 jobs in January. Housing indicators were mixed and consumer confidence indicators were weaker.

International data exhibited a mixed pattern with China showing some slowing while Europe experienced improving data. The Fed continued to taper its quantitative easing (QE) program by an additional $10 billion at the end of January after beginning the wind down of the program in December. The Fed appears committed to taper unless economic data deteriorates significantly.

In specialty-state trading Puerto Rico outperformed by a wide margin as the credit bounced back on news of a pending issuance that would help stabilize its finances. Illinois and Michigan also outperformed while Texas and New York were laggards. As a group, revenue bonds modestly outperformed general obligation credits. Within the revenue universe, electric utilities and industrial development-backed bonds outperformed. High yield or “junk” bonds were among the best performers, rising 2.06 percent. Within the investment-grade universe, lower quality outperformed by a wide margin due to Puerto Rico’s very strong performance, as AAA-rated credits underperformed BBB-rated bonds by 165 basis points.

Past performance does not guarantee future results.

The Barclays Municipal Bond Index is an unmanaged index representative of the tax-exempt bond market. The Barclays 3-Year Municipal Bond Index is a total return benchmark designed for short-term municipal assets. The index includes bonds with a minimum credit rating BAA3, are issued as part of a deal of at least $50 million, have an amount outstanding of at least $5 million and have a maturity of 2 to 4 years.

The HSBC Flash China Manufacturing PMI is published a week ahead of the final HSBC China PMI every month. It analyzes 85-90 percent of the responses to the Final PMI from purchasing executives in more than 400 small, medium and large manufacturers, both state-owned and private enterprises. The ISM manufacturing composite index is a diffusion index calculated from five of the eight sub-components of a monthly survey of purchasing managers at roughly 300 manufacturing firms from 21 industries in all 50 states.

Net Asset Value
as of 04/17/2014

Global Resources Fund PSPFX $9.70 0.07 Gold and Precious Metals Fund USERX $6.60 -0.08 World Precious Minerals Fund UNWPX $6.32 -0.04 China Region Fund USCOX $8.03 0.08 Emerging Europe Fund EUROX $8.11 0.11 All American Equity Fund GBTFX $31.98 0.01 Holmes Macro Trends Fund MEGAX $23.29 0.07 Near-Term Tax Free Fund NEARX $2.25 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change