First Quarter 2018

In the March quarter, the Barclays Municipal 3-Year Bond Index returned 0.11 percent, while the Near-Term Tax Free Fund lost 0.61 percent. 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.

The municipal market was pressured in the first quarter as a result of the current interest rate environment, stronger inflation data and rising bond yields. The Federal Reserve raised interest rates again at its mid-March policy meeting. The federal funds rate was bumped another 25 basis points to bring it to the 1.50 percent to 1.75 percent range. The Fed also alerted investors they should expect another two rate hikes this year, followed by three more in 2019. The Fed’s current economic forecast for the coming year calls for faster growth, higher inflation and lower unemployment than they had anticipated in its December forecast. After running below the Fed’s 2 percent target rate for most of the last six years, inflation data started to firm up throughout the quarter. As a result, a majority of Fed members believe inflation will rise above the 2 percent threshold this year.

During the quarter, the front end outperformed the long end of the curve, while lower quality credit outperformed higher quality. Technical conditions were impacted by the record $62.5 billion in supply that was pulled forward and priced ahead of the passage of the Tax Cuts and Jobs Act in December. The pull forward led to a first-quarter new-issue total of $63 billion, down roughly 32 percent from last year. As expected, the elimination of advanced refundings has had a significant impact on supply.

Looking ahead, an important element to consider in the outlook for the muni market is valuation. 
Given weak results during the early months of 2018, muni valuations are more attractive now than they were at the start of the year. Munis continue to provide a yield in excess of equal-duration Treasuries, when taking into account their tax-advantaged status. The municipal market will evolve in response to changing fiscal and monetary policies and while investors should expect bouts of elevated spread and rate volatility during the upcoming months, short term municipal bonds remain a safer play in fixed income given the rising rate environment.

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.
A bond’s credit quality is determined by private independent rating agencies such as Standard & Poor’s, Moody’s and Fitch. Credit quality designations range from high (AAA to AA) to medium (A to BBB) to low (BB, B, CCC, CC to C).

The Near-Term Tax Free Fund invests at least 80 percent of its net assets in investment-grade municipal securities. At the time of purchase for the fund's portfolio, the ratings on the bonds must be one of the four highest ratings by Moody's Investors Services (Aaa, Aa, A, Baa) or Standard & Poor's Corporation (AAA, AA, A, BBB). Credit quality designations range from high (AAA to AA) to medium (A to BBB) to low (BB, B, CCC, CC to C). In the event a bond is rated by more than one of the ratings organizations, the highest rating is shown.

A basis point, or bp, is a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01% (0.0001).

Standard Disclosure

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Foreside Fund Services, LLC, Distributor. U.S. Global Investors is the investment adviser.

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

Bond funds are subject to interest-rate risk; their value declines as interest rates rise. Though the Near-Term Tax Free Fund seeks minimal fluctuations in share price, it is subject to the risk that the credit quality of a portfolio holding could decline, as well as risk related to changes in the economic conditions of a state, region or issuer. These risks could cause the fund’s share price to decline. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local taxes and at times the alternative minimum tax. The Near-Term Tax Free Fund may invest up to 20 percent 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.

Net Asset Value
as of 09/18/2018

Global Resources Fund PSPFX $5.37 0.05 Gold and Precious Metals Fund USERX $6.57 No Change World Precious Minerals Fund UNWPX $3.49 0.06 China Region Fund USCOX $9.02 0.15 Emerging Europe Fund EUROX $6.36 0.09 All American Equity Fund GBTFX $26.52 0.12 Holmes Macro Trends Fund MEGAX $20.20 0.08 Near-Term Tax Free Fund NEARX $2.19 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change