Fourth Quarter 2016

In the third quarter, the Barclays Municipal 3-Year Bond Index lost -1.11 percent, while the fund lost -1.42 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.

November's surprise election outcome proved to be a boon for risk assets and a bust for so-called "safe havens," including Treasuries and municipal bonds. Muni prices sank as a result of significantly higher interest rates and, to a lesser degree, concerns over future infrastructure spending and tax policies. It was the market's worst performance month since the 2008 financial crisis. Fund flows, a measure of demand, turned sharply negative, ending 56 straight weeks of inflows. More than $10 billion left muni funds in November.

Tax reform, which has been a Republican priority, is likely to garner increasing interest. While the value of tax exemption would be lessened if the top marginal tax rate were reduced from 39.6 percent to 33 percent, the correction necessary to overcome this lower-tax environment is likely to be manageable. Moreover, the elimination of the tax exemption as highly unlikely.

The California Public Employees' Retirement System (CalPERS), the nation's largest public pension fund, recently voted to reduce its discount rate or rate of return on its investments from 7.5 percent to 7 percent over the next three years. CalPERS has determined that achieving a 7.5 percent investment return over the next 10 years will be a significant challenge. Reducing the discount rate will undoubtedly result in higher contribution rates for California local governments that participate in the CalPERS plan. Furthermore, CalPERS' decision to lower its discount rate has far reaching implications beyond California to the broader state and local government sector. Given the size of the fund ($300 billion), CalPERS has been a bellwether for investment trends at other public plans. Any change it makes will likely influence others to follow suit and lower their own discount rates, which, in turn, will result in incremental credit pressure for the sector. Overall, rating agencies do a good job of incorporating the implications of changes in discount rate assumption into their analysis by using their own hypothetical standardized discount rates to calculate the unfunded pension liabilities. However, the ratings don't necessarily fully incorporate the potential budgetary impact of a reduction in discount rates. As a result, as broader public pension funds continue to reduce discount rates, state and local governments will likely feel incremental negative ratings pressure.

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.

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