Third Quarter 2016

In the third quarter, the Barclays Municipal 3-Year Bond Index lost 0.25 percent, while the fund lost 0.14 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.

As was widely expected, in its September meeting, the Federal Open Market Committee (FOMC) opted to keep the federal funds rate unchanged for the time being. Fed Chair Janet Yellen and her allies maintained that employment and inflation data did not warrant an increase, and they continued to resist pressures to tighten monetary policy. While the Fed was reluctant to act, the end of the lower-for-longer era of U.S. central bank policy appears to be drawing closer and a December rate hike looks likely. The FOMC has upgraded its assessment of near-term risks, describing them now as “roughly balanced.” The Fed also clearly signaled its intent in its Summary of Economic Projections by suggesting a preponderance of participants still expect an increase in 2016. Investors’ focus has now shifted toward the November elections and December’s FOMC meeting.

The Fed’s decision to remain on hold means continued tight municipal bond spreads and a low, flattish curve. Muni yields tend to follow Treasuries’ direction with lower beta. Short-term rates will likely remain under pressure as impending Securities and Exchange Commission (SEC) money market fund reforms fuel selling of short bonds. Continued strong retail flows into muni bonds and growing interest from global institutional buyers should continue to mitigate rising rate pressures on bond prices, though they are unlikely to offset them completely.

In state and municipal government news, a report from Moody’s evaluated the impact of low oil and gas prices on energy-dependent state and local governments. The agency noted that the hardest hit states are Alaska, Louisiana, North Dakota, Oklahoma and New Mexico. In other news, Chicago approved a plan to raise the city’s water and sewer taxes to shore up its pension funds. The plan calls for a hike in the taxes of about 33 percent over five years. California had its credit rating raised by Fitch Ratings to AA- because of the strength of its economy and strong budget management. Minnesota also received an upgrade, to AAA, as Fitch cited the state’s broad-based economy and financial flexibility. On the other hand, Kansas’ credit rating was cut by S&P Global Ratings to AA- as persistent budget pressure erodes reserves while the state’s economic growth lags the rest of the nation. Lastly, in a report analyzing the fiscal resilience among U.S. states, S&P Global Ratings deemed Illinois, Pennsylvania, New Jersey and Connecticut to have “only a limited capacity” to withstand the effect of a moderate recession. The report also found Washington, Florida and New York as the best positioned.

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.

Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

Net Asset Value
as of 12/09/2016

Global Resources Fund PSPFX $5.59 -0.01 Gold and Precious Metals Fund USERX $7.39 -0.15 World Precious Minerals Fund UNWPX $6.59 -0.11 China Region Fund USCOX $7.80 -0.06 Emerging Europe Fund EUROX $5.78 -0.03 All American Equity Fund GBTFX $23.94 0.08 Holmes Macro Trends Fund MEGAX $20.40 0.02 Near-Term Tax Free Fund NEARX $2.21 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change