Our Mutual Funds

Third Quarter 2021

The Global Luxury Goods Fund lost 2.4% in the third quarter of 2021, underperforming its benchmark, the S&P 1500 Composite Index, which gained 0.35%. The fund underperformed its index by 2.75% mostly due to the fund’s overweight position in consumer discretionary.  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.

Strengths

• The fund’s overweight position in financials had the most positive effect on the fund’s performance relative to the index. The strategy to overweight investment managers worked well. Shares of Blackstone gained more than 20%, reaching a record high at the beginning of September. The company’s earnings outpaced the Zacks Consensus Estimates in each of the trailing four quarters. During the third quarter, the company had higher earnings revisions for the fiscal 2021.
• The fund’s no exposure to industrials had the second most positive effect on the fund’s performance relative to the index. Air freight/couriers on average have lost 15% in the third quarter, and the Luxury fund did not hold any of these stocks.
• The strongest contributor to fund performance was Tesla. Tesla shares gained 14%. Tesla delivered a record worldwide car production in the third quarter. Tesla’s Shanghai factory is now outpacing the Fremont, California plant.

Weaknesses

• The fund’s overweight position in consumer discretionary had the most negative effect on the fund’s performance relative to the index.  Political noise in China, the country that is responsible for majority of luxury goods buying, cased sell off. Chinese President Xi Jinping increased his focus on growing wealth inequality and the promotion of common prosperity. As a result, luxury investors became concerned that the country’s super rich could be reined in. Shares of Nike declined by 15%, Kering by 18%, and Prada by 27%.
• The fund’s stock selection in the materials sector had the second most negative effect on the fund’s performance relative to the index. Overweight positions in gold stocks did not work as precious metal companies underperformed during the third quarter. Shares of Silvercorp declined 31% and Royal Gold lost 16% of its market share.
• The biggest detractor to the overall fund performance was Nike. Share price declined by 15.5%.  Company reported $12.25 billion in revenue for the quarter ended August 31, a 16% gain from last year that came in lower than analyst expected, and downgrades full-year guidance to mid-single digit growth due to export and shipping difficulties.

Outlook

Luxury goods should continue to outperform, supported by strong global post-pandemic economic recovery and improving consumer confidence. Growing disposable income should translate well into strength in the luxury goods sector. However, over the past quarter, the market has been increasingly concerned about Chinese luxury demand. Chinese President Xi talked more the concept of wealth distribution which should grow China’s middle class. The pull back in luxury goods during the third quarter due to increased political tensions in China most likely will present a buying opportunity.

The S&P 1500 Composite is a broad-based capitalization-weighted index of 1500 U.S. companies and is comprised of the S&P 400, S&P 500, and the S&P 600.  Gross domestic product is the total value of goods produced and services provided in a country for one year. Earnings per share (EPS) is a company’s net profit divided by the number of common shares it has outstanding.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the China Region Fund as a percentage of net assets as of 3/31/2020: Volkswagen AG 6.43%, Tesla Inc. 4.54%, Alibaba Group Holding Ltd. 0.00%, Cie Financiere Richemont SA 0.88%, Farfetch Ltd. 0.00%.

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 www.usfunds.com 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.

Stock markets can be volatile and share prices can fluctuate in response to sector-related and other risks as described in the fund prospectus.

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

Top 10 Equity and Debt Holdings as of 09-30-2021

Industry Breakdown as of 09-30-2021

Regional Breakdown as of 09-30-2021

Growth of $10,000 Over 10 Years as of 09/30/2021

The chart illustrates the performance of a hypothetical $10,000 investment made in the fund during the depicted time frame, compared to its benchmark index. Figures include reinvestment of capital gains and dividends, but the performance does not include the effect of any direct fees described in the fund’s prospectus (e.g., short-term trading fees) which, if applicable, would lower your total returns.

Month End Average Annual Total Returns as of 10/31/2021

Quarter End Average Annual Total Returns as of 09/30/2021

Expense ratios as stated in the most recent prospectus. The Adviser of the Global Luxury Goods has contractually limited, through April 30, 2022 total fund operating expenses (exclusive of acquired fund fees and expenses of 0.00%, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments (0.22%) to not exceed 1.80%. Total annual expenses after reimbursement were 1.80%.

Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. 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. Performance does not include the effect of any direct fees described in the fund’s prospectus which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.

The S&P Global Luxury Index is comprised of 80 of the largest publicly-traded companies engaged in the production or distribution of luxury goods or the provision of luxury services that meet specific investibility requirements.

Companies in the consumer discretionary sector are subject to risks associated with fluctuations in the performance of domestic and international economies, interest rate changes, increased competition and consumer confidence. The performance of such companies may also be affected by factors relating to levels of disposable household income, reduced consumer spending, changing demographics and consumer tastes, among others.

Top 10 Equity Holdings as of 09-30-2021

Industry Breakdown as of 09-30-2021

Regional Breakdown as of 09-30-2021

Growth of $10,000 Over 10 Years as of 09/30/2021

The chart illustrates the performance of a hypothetical $10,000 investment made in the fund during the depicted time frame, compared to its benchmark index. Figures include reinvestment of capital gains and dividends, but the performance does not include the effect of any direct fees described in the fund’s prospectus (e.g., short-term trading fees) which, if applicable, would lower your total returns.

Month End Average Annual Total Returns as of 10/31/2021

Quarter End Average Annual Total Returns as of 09/30/2021

Expense ratios as stated in the most recent prospectus. The Adviser of the Gold & Precious Metals Fund has voluntarily limited total fund operating expenses (exclusive of acquired fund fees and expenses of 0.03%, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments 0.00% to not exceed 1.90%. With the voluntary expense waiver amount of (0.00%). Total annual expenses after reimbursement were 1.56%.

Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. 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. Performance does not include the effect of any direct fees described in the fund’s prospectus which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.

The FTSE Gold Mines Index Series encompasses all gold mining companies that have a sustainable and attributable gold production of at least 300,000 ounces a year, and that derive 75% or more of their revenue from mined gold.

Third Quarter 2021

The World Precious Minerals Fund had a total return of negative 19.13% in the third quarter of 2021, underperforming its benchmark, the NYSE Arca Gold Miners Index, which delivered a negative return of 13.07 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.

Strengths

• The biggest contributor to fund performance was our overweighting of TriStar Gold. With an average fund weighting of 6.26% for the quarter, the stock gained 12.78% and contributed 168- basis points (bp) to the fund. TriStar Gold is not a member of the benchmark, the NYSE Arca Gold Mines Index. TriStar largely benefited from an increased interest in Brazil as a destination for building new mines as G Mining Ventures struck a deal to buy the Tocantinzinho Project in Brazil from Eldorado Gold. There are few advanced shovel-ready gold projects available for buyers.
• The second largest contributor to fund performance was CopperBank Resources, which gained 58.84%. With an average fund weighting of 1.50%, the company contributed 168-bp. CopperBank has largely been holding title to several copper projects that have better economics with the outlook for higher copper prices.  In addition, an executive team has joined the company to advance the projects to the next stage.
• The third best contributor to fund performance was our overweighting of Men?. With an average fund weighting of 1.40% for the quarter, the stock gained 23.90% and contributed 46-bp to the fund. Men? is not a member of the benchmark. Second quarter results were reported in August and with the continued growth in revenue, Men?’s return on invested capital turned positive for the first time.  Men? has a disruptive jewelry sales model that offers only pure 24-kt gold and platinum pieces that are sold based on their gram weight plus a flat 20% mark up.  Other jewelry retailers sell gold diluted with less valuable metals and the mark up could be in the hundreds of percent.

Weaknesses

• The largest detractor from fund performance was our overweighting of K92 Mining, which averaged 7.47% of the fund and fell 33.56% detracted 170-bp from our performance.  K92 Mining is not a member of the benchmark. K92 was the best contributor to fund performance in the prior quarter, but they experienced 2-week quarantine delays on expatriates entering and leaving Papua New Guinea with Covid-19 travel restrictions in place during the quarter. The market likely anticipates production guidance will be missed but this is not an impairment.
• The second largest detractor from fund performance was our overweighting of Barsele Minerals, which fell 37.44%. With our average weighting at 3.60%, the fund was impacted by 103-bp. During the quarter, Agnico-Eagle to exit the joint venture with Barsele Minerals agreeing to buy out their interest in the project. With gold declining over the course of the quarter, making it difficult to raise capital, the deal has been extended to the end of October.
• The third largest detractor from fund performance was underweighting of Kirkland Lake Gold, which appreciated 8.46%. With our relative weighting at 0.00% to the benchmark weight of 8.46%, the underweighting detracted 81-bp from the fund’s relative performance to the benchmark.

Outlook for Gold and Precious Minerals

The gold industry continues to increase its output as it recovers from COVID. Industry aggregate gold equivalent output is forecast to increase 13.4% year-over-year in the third quarter of 2021. In the third quarter of 2020, gold output was impacted by the COVID-19 pandemic as mines operated at reduced operating levels and are being placed on care and maintenance.

Several of the miners in the portfolio achieved exploration successes during the quarter.  Aya Gold & Silver Inc. said that it has been granted seven new exploration permits in Morocco. The Canadian miner said the permits were granted by the country’s Ministry of Energy, Mines and Environment, and would increase its position within its Zgounder Regional and Azegour area properties by about 40%. Aya Gold & Silver reported second quarter production from Zgounder of 439,100 ounces handily beating estimates of 401,700 ounces due to higher throughput and head grade. This puts the mine on track for 1.66 million ounces in 2021, well above guidance of 1.2 million ounces.

K92 reported the latest assay results from its ongoing drilling program at the Kora deposit at the Kainantu Mine. These 32 holes once again showcased the high grade and continuous nature of Kora, with 8 intersections exceeding 20 grams/ton silver, 24 intersections exceeding 10 grams/ton silver and 41 intersections exceeding 5 grams/ton silver.

Arizona Metals Corp. released another round of drilling from the silver/zinc zone at Kay. Four holes were released, including Hole 27. Hole 27 is outside the historic Exxon resource, the deepest hole drilled to date by the company, and this extends the silver zone depth by 20%. Also, the average drilled grade of the silver zone has increased by 9%, showing grades are improving with tighter spacing.

Roscan Gold reported positive results from an additional 14 diamond drilling and reverse circulation holes totaling 3,066 meters at the Southern Mankouke Zone. Mankouke Discovery Zone, or MS1, confirmed mineralization open at depth and Mankouke Discovery Zone, or MS3, shows a potential high-grade extension to the west.

Silver Tiger reported high grade assays from drilling stepping out 900 meters south along the Sooy vein. The company is ramping up to 5 drills on the property to accelerate work on the extensive, high-grade system.

Compass Gold reported the results of the recently completed drilling at the Old Sam and Dialéké prospects, located on the Company’s Sikasso Property in Southern Mali. The first drilling results at the Old Sam target, 40 km south of Tarabala, are highly encouraging. Initial drilling has discovered a shallow zone of low-grade gold.

Brixton Metals Corporation announced new assay results from additional surface rock samples on the Trapper Target. Rock grab sample D131206 assayed 135.5 grams/ton gold and 172 grams/ton silver. Six rock grab samples returned greater than 10 grams/ton gold.

Investment trends in the gold industry are making it more difficult for gold companies to grow. CEOs say it’s getting “tougher and tougher” for mines to get approval and to get developed, posing the biggest challenge to spend money.  Higher costs are being cited by miners. Overall, fuel was the most cited area of inflation on operating costs, with upward pressure noted by two thirds of companies. On labor costs, moderate upward pressure has been encountered in the range of 2-5%, marginally above company budgeted inflation expectations with labor tightness commonly noted in Brazil, the U.S., and Canada.

While operating and capital cost expectations have generally been higher after second quarter reporting, producer balance sheets are well positioned to absorb the impact of lower-than-expected cash flows. Exploration and mid-tiered gold and precious metal mining companies pulled back the most during the quarter as investors witnessed only gold trended sideways without any upward momentum to lure investors back.

The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver. The index benchmark value was 500.0 at the close of trading on December 20, 2002.

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). A warrant is a derivative that gives the right, but not the obligation, to buy or sell a security—most commonly an equity—at a certain price before expiration.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the World Precious Minerals Fund as a percentage of net assets as of 3/31/2021: Chalice Mining Ltd. 4.68%, CopperBank Resources Corp., Newmont Corp. 0.32%, Barrick Gold Corp. 0.31%, Orca Gold Inc. 1.57%, Franco-Nevada Corp. 0.00%, Agnico Eagle Mines Inc. 0.00%, TMAC Resources Inc. 0.00%, Gran Colombia Gold Corp. 0.00%, Gold X Mining Corp. 0.00%, Equinox Gold Corp. 0.00%, Premiere Gold Mines Ltd. 0.00%.

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 www.usfunds.com 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.

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.

Top 10 Equity and Debt Holdings as of 09-30-2021

Industry Breakdown as of 09-30-2021

Regional Breakdown as of 09-30-2021

Growth of $10,000 Over 10 Years as of 09/30/2021

The chart illustrates the performance of a hypothetical $10,000 investment made in the fund during the depicted time frame, compared to its benchmark index. Figures include reinvestment of capital gains and dividends, but the performance does not include the effect of any direct fees described in the fund’s prospectus (e.g., short-term trading fees) which, if applicable, would lower your total returns.

Month End Average Annual Total Returns as of 10/31/2021

Quarter End Average Annual Total Returns as of 09/30/2021

Expense ratios as stated in the most recent prospectus. The Adviser of the World Precious Minerals Fund has voluntarily limited total fund operating expenses (exclusive of acquired fund fees and expenses of 0.02%, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments (0.00%) to not exceed 1.90%. Total annual expenses after reimbursement were 1.81%.

Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. 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. Performance does not include the effect of any direct fees described in the fund’s prospectus which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.

The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver. The index benchmark value was 500.0 at the close of trading on December 20, 2002.

Third Quarter 2021

The Global Resources Fund had a total return of negative 5.18% in the third quarter of 2021, underperforming its benchmark, the S&P Global Natural Resources Index, which had a negative return of 2.74%. 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.

Strengths

• The three best performing commodities were natural gas, palm oil, and cotton, up 60.39%, 32.80%, and 24.62%, respectively. Energy prices have continued to push higher with more pandemic lockdowns abating and demand rising. Natural gas demand has been strong but supplies and the ability to delivery to the market has faced bottlenecks, like much of the supply chain. Palm oil also advanced, partly due to the energy demand for all heating products, but Indonesi, the world’s biggest producer of crude palm oil, plans to stop exports of crude palm oil and start selling only refined products from oil. Cotton prices surged in the latter part of September as buying from China pushed prices to decade highs. Trade group Cotton Incorporated noted that, despite the Chinese buying, their inventories are 4 to 5 times higher than a decade ago when prices were this high. This suggests the cotton prices are more likely to recede.
• The fund’s best sector performance, relative to the benchmark, came from its underweight positions in steel and agriculture chemicals and its overweight in precious metals. In steel, our weighting was 2.63% with our stocks down only 1.37% versus the benchmark weight at 7.94% but its stocks averaged a loss of 16.68%, thus yielding the fund a 118-basis points (bp) positive relative gain. For agriculture chemicals, our weighting was 6.11% versus the benchmark at 11.21% but our stock selection yielded us 108-bp above the benchmark’s contribution. Precious metals were weighted at 24.21% with our stocks down only 3.62 versus the benchmark at 8.54%, and its holdings down 11.49%, thus yielding the fund a 55-bp positive relative gain.
• The fund’s biggest contributor to performance was Standard Lithium, which was up 98.37%, yielding the fund 182-bp, with the wet commissioning of their lithium extraction plant being added to an existing boron extraction plant in Arkansas. Nanoxplore was our second-best contributor with a gain of 49.35%, yielding 128-bp of relative performance. The EPA authorized the use of their GrapheneBlack additive in U.S. supply changes for batteries and composite parts in the automotive industry. The third largest contributor to the fund’s relative performance was Vale. S.A. with its price drop of 32.63%. With an average fund weighting of 0.00%, the company contributed 89-bp to our relative performance with the avoidance of owning this company. Vale has had a poor record regarding Environmental, Social, and Corporate Governance (ESG).

Weaknesses

• The worst performing commodities were palladium, iron ore, and silver, down 31.28%, 28.59%, and 15.14%, respectively. Palladium prices were impacted by the computer chip shortage that halted car production and demand for catalytic converters for new cars. Iron ore faced major headwinds from China’s curtailing of power use to conserve energy and produce less pollution. Silver declined in line with the other precious metals over the course of the quarter.
• The worst sector performance, relative to the benchmark, came from our underweighting in integrated oil, slight overweight in agriculture commodities, and overweight in electrical products. In integrated oil, our weighting was 4.54% with our stocks down 1.13% versus the benchmark weight at 7.94% but its stocks averaged a gain of 4.59%, thus yielding the fund a 169-bp negative relative loss. For agriculture chemicals, our weighting was 4.76% versus the benchmark at 3.85% but our stock selection detracted 143-bp from our contribution. Electrical products were weighted at 7.40% with our stocks down 15.23 versus the benchmark which owns no clean energy companies, thus shedding the fund’s performance by 83-bp.
• Burcon Nutrosciece, Canadian Solar, and Royal Dutch Shell were the three worst detractors to fund performance, losing 129 basis points, 48 basis points, and 43 basis points, respectively. The share price decline has Burcon accelerated in the last two weeks going into quarter-end, with no news events driving the share price. Burcon gave an operational update a week before quarter-end that indicated operations were ramping up to 24/7 on volumes for plant proteins with no negative nuances. Canadian Solar largely suffered from money leaving clean energy to play with the more lucrative oil and gas sector. Royal Dutch Shell was not held in the fund during the quarter, and it rose in price by 12.95% and has a 2.72% weight in the benchmark.

Outlook 

Natural gas exhibited strong gains during the quarter. Natural gas prices surged to a fresh seven-year high in the U.S. due to the rally fueled by escalating concerns about tight winter supplies.  Gas is now at $6.00 per million British thermal units, a level not seen since early 2014.  Inventories are low. U.S. storage is below normal and tightened further by weather adjusted supply/demand balance. Delivery issues globally are also affecting prices with delivery prices for liquefied natural gas (LNG) ranging from $30 to $45 per million cubic feet in Europe and Asia.

Aluminum continues to look attractive going forward – as deepening Chinese output cuts raised fears of a supply shortfall. The southwestern Chinese province of Guangxi, a major metals producer, will cut output of energy-intensive materials including aluminum. Aluminum’s recent rally has also been helped by a sharp rise in European and Chinese power prices. Surging energy costs are adding to pressure on global aluminum supply at a time when demand for the metal used in everything from cars to beer cans has already driven prices to a 13-year high. The spike in global electricity and coal prices will make restarts increasingly difficult and some producers may also soon be struggling to run their existing smelters profitably if the energy crunch worsens, particularly those not locked into long-term power contracts.

A perfect storm of events – from extreme weather and plant shutdowns to new government sanctions – has hit the chemical fertilizer market this year, slamming farmers already buckling under the strain of rising costs to produce food. Prices for urea, a popular nitrogen-based fertilizer, skyrocketed earlier this month to the highest since 2012. A common phosphate fertilizer known as DAP is the most expensive in that market since 2008. Liquid urea-ammonium nitrate (UAN) prices jumped across global benchmarks on recent supply curtailments in Europe. Potash prices moved up on rising demand in Asia and tight supply owing to logistical concerns related to Belarusian exports. A key factor going forward is that China’s National Development and Reform Commission at quarter-end ordered that all State-Owned Enterprises to halt all exports of phosphate and nitrogen immediately. China accounts for 30% of world trade in phosphate fertilizer trade so their absence from the international markets will likely have a big impact on food prices.

Copper prices have been stable due to slowing construction activity. More recently, copper prices have cooled from record levels to $4.10/lb. The long-running drought in Chile could hit production at Antofagasta’s Los Pelambres copper mine, one of the world’s largest, the London-listed copper producer warned recently. Demand for copper remains strong in China and the electrification theme should keep copper markets strong.

Steel continued to weaken during the quarter. The capacity utilization rate of the 71 independent electric-arc-furnace steelmakers which Mysteel samples across China reversed down by 2.8 percentage points to 64.6%. China crude steel production fell 4% month-to-month in August (down 13% year-to-year) to the lowest daily run rate since March of 2020. The latest survey shows some mills reduced their production amid power supply shortages and local government orders to control crude steel output. China’s central government has mandated that crude steel output this year should be below the level of 2020.

Iron ore prices dropped during the quarter, due to slowing steel markets. The spread of the Delta variant increased the risk of a demand slowdown. There is lower expected second half steel output in China.  Prices are more than 40% below a record high reached just three months ago. Using previous downturns as a guide, $70 to $85 per ton is the level where the iron ore market should start to re-balance, as higher-cost producers are squeezed, according to T. Rowe Price Group Inc. investment analyst Tom Shelmerdine.

Lumber prices spiked, then crashed during the quarter. At the start of the quarter, prices for lumber were driven by the strong global housing market. At the end of the quarter lumber pricing experienced heavy downward pressure as buyers, despite the growing wildfire threat, remained on the sidelines working down higher cost inventories. Analysts don’t expect lumber prices to fall back to pre-pandemic levels as supply chain logistics are still an issue and labor across the board certainly has the upper hand when it comes to skilled craftsman to do the physical work.

The S&P Global Natural Resources Index includes 90 of the largest publicly traded companies in natural resources and commodities businesses that meet specific investability requirements, offering investors diversified, liquid and investable equity exposure across 3 primary commodity-related sectors: Agribusiness, Energy, and Metals & Mining. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.
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).

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the Global Resources Fund as a percentage of net assets as of 3/31/2020: Talon Metals Corp. 4.35%, Exxon Mobil Corp. 0.00%, Chevron Corp. 0.00%, Salazar Resources Ltd. 1.02%.

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 www.usfunds.com 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.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.  Because the Global Resources Fund concentrates its investments in specific industries, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.

Top 10 Equity and Debt Holdings as of 09-30-2021

Industry Breakdown as of 09-30-2021

Regional Breakdown as of 09-30-2021

Growth of $10,000 Over 10 Years as of 09/30/2021

The chart illustrates the performance of a hypothetical $10,000 investment made in the fund during the depicted time frame, compared to its benchmark index. Figures include reinvestment of capital gains and dividends, but the performance does not include the effect of any direct fees described in the fund’s prospectus (e.g., short-term trading fees) which, if applicable, would lower your total returns.

Month End Average Annual Total Returns as of 10/31/2021

Quarter End Average Annual Total Returns as of 09/30/2021

Third Quarter 2021

The Emerging Europe fund gained 2.99% in the third quarter of 2021, underperforming its benchmark, the Emerging Europe 10/40, which gained 6.75%. See complete fund performance here. The Emerging Europe fund underperformed its index by 3.77%. European equities move higher as markets continued to recover from the negative effects of the pandemic. The fund lagged its index mostly due to stock selection in Russia and overweight Western Europe.

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.

Strengths

• On the country level, the fund’s underweight position in Poland had the most positive effect on the fund’s performance relative to the index. The strategy to underweight metals and minerals worked well. Shares of copper producer KGHM dipped on the worsening metal production outlook. There is a growing fear that rising global inflation will lead central banks to pare back stimulus slowing down global growth and, at the same time, negatively effecting the commodity production. Moreover, the auto parts supply shortage is putting pressure on commodity producers. Finally, stock selection among Polish internet retailers worked well. For example, shares of Allegro declined 15.5%, but the Emerging Europe fund did not hold any shares of Allegro during the third quarter.
• On the sector level, the fund’s underweight position and stock selection in materials had the most positive effect on the fund’s performance relative to the index. Underweight Russian gold producers worked well. Polymetal Internationals’ shares were down 19.6% and shares of Polyus decline more than 15%. In the third quarter, Russia proposed higher taxes on metal producers including precious metals, but in the end the precious metals producers were not affected by the change in taxation.
• The top three positive contributors to the fund’s performance were all Russian stocks:
  • Sberbank Russia PJSC, Russia’s largest private bank, contributed a positive 1.1% to the fund’s performance. The shares gained 11.9% supported by strong performance of the broad Russian market. Russia was the best performing country among eastern European members, gaining 9.6%.  Higher energy prices continued to push Russian equities higher in the third quarter.
  • Gazprom, a Russian gas producer and distributor, contributed 1% to the fund’s performance. The shares gained 35% on news that the Nord Stream 2 (NS2) pipeline connecting Russia with Germany has been completed and due to soaring energy prices. Gazprom could transport gas through the newly finished pipeline as soon as December of this year.
  • Rosneft Oil, the largest state-owned oil producer, contributed a positive 0.70% to the fund’s performance.  The shares gained 9% in the third quarter supported by higher oil prices and stronger quarterly results. Rosneft is trying to become eligible to transport gas to Europe through the Nord Stream 2 pipeline. Currently, Gazprom is the only company who has the right to transport gas to Germany through the NS2.

Weaknesses

• On the country level, the fund’s overweight position in Germany and France had the most negative effect on the fund’s performance relative to the index. The strategy to overweight German and French motor vehicles did not work. A shortage of semiconductor components has forced major automakers to cut production volumes pushing the automaker share prices lower. Bayerische Motoren Werke (BMW) lost 9.4% of its market value, Renault lost 11.42% and Volkswagen 3.75%.
• On the sector level, the fund’s stock selection and underweight position in energy had the most negative effect on the fund’s performance relative to the index. Russian integrated oil stocks had a strong quarter and fund’s underweight position in Russian gas producers/distributors Gazprom and Novatek cased the biggest underperformance against the index. Gazprom’s shares gained 35% on news that the controversial Nord Stream 2 pipeline connecting Russia with Germany was completed. Shares of Novatek gained 20%. Energy prices spiked during the third quarter due to stronger than expected demand for energy as markets continue to recover from the pandemic.
• The bottom three negative contributors to the fund’s performance were as follows:
  • Norilsk Nickel, the world’s largest nickel and palladium producer, contributed a negative 0.68% to the fund’s performance. The share lost 11.8%. The company cut its outlook for metals production due to the auto sector cutting productions on a semiconductors supply crunch. Moreover, company’s share price was negatively affected by dropping palladium and nickel prices.
  • Novolipetsk Steel, a Russian steel producer, contributed a negative 0.22% to the fund’s performance. Russia proposed higher taxes on metal producers, but the final tax changes proposed by the government for next year are moderate and below market expectations.
  • Turkey Is Bankasi, a Turkish bank, contributed a negative 0.16% to the fund’s performance.  The shares declined by 15.9%. The central bank in Turkey unexpectedly cut its main rate by 100 basis points despite inflation spiking above 19% year-over-year. Turkish banks and the Turkish lira underperformed. The lira is the world’s weakest currency so far in 2021.

Outlook

European equities continued to move higher in the third quarter supported by economic recovery and market reopening. Europe should continue to outperform. After an 18-month travel ban, the United States is set to reopen its border to fully vaccinated travels from Europe before the holiday season. This will give a much-needed boost to trans-Atlantic traffic and tourism. In the third quarter, Europe has hit a milestone announcing 70% of its adults are fully vaccinated against Covid-19. Some countries in Europe are experiencing another wave of COVID cases and the biggest threat present in those countries are lower participation rates in vaccination. For example, the vaccination rate in Russia is relatively low compared to other European countries. Nevertheless, people are now better prepared to fight COVID than this time last year. Winter will likely bring more outbreaks of COVID cases, but no major economic showdowns are expected as we have seen last year. Europe’s economy is strongly recovering supported by massive monetary and fiscal stimulus. The Manufacturing Purchasing Manager’s Index (PMI) in September was reported at 58.6, the Service PMI at 56.4 and the Composite PMI at 56.2. Europe and the United States are driving the global growth. In Europe, focus will remain on Germany and the country’s formation of a new government. Germany is Europe’s strongest country and depending on the new coalition, additional fiscal measure could be announced supporting further growth in the euro-area. Consumer confidence will continue to improve. However, the energy shortage in Europe and spiking energy prices could put pressure on companies’ revenue. Russia will be the main beneficiary of further tightens in energy supplies and higher energy prices.

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 www.usfunds.com 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.

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. The Emerging Europe 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.

Top 10 Equity and Debt Holdings as of 09-30-2021

Industry Breakdown as of 09-30-2021

Regional Breakdown as of 09-30-2021

Growth of $10,000 Over 10 Years as of 09/30/2021

The chart illustrates the performance of a hypothetical $10,000 investment made in the fund during the depicted time frame, compared to its benchmark index. Figures include reinvestment of capital gains and dividends, but the performance does not include the effect of any direct fees described in the fund’s prospectus (e.g., short-term trading fees) which, if applicable, would lower your total returns.

Month End Average Annual Total Returns as of 10/31/2021

Quarter End Average Annual Total Returns as of 09/30/2021

Expense ratios as stated in the most recent prospectus. The Adviser of the Emerging Europe Fund has voluntarily limited total fund operating expenses (exclusive of acquired fund fees and expenses of 0.01%, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments (0.02%) to not exceed 2.85%. With the voluntary expense waiver amount of (0.16%), total annual expenses after reimbursement were 2.67%.

Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. 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. Performance does not include the effect of any direct fees described in the fund’s prospectus which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.

The MSCI Emerging Markets Europe 10/40 Index (Net Total Return) is a free float-adjusted market capitalization index that is designed to measure equity performance in the emerging market countries of Europe (Czech Republic, Hungary, Poland, Russia, and Turkey). The index is calculated on a net return basis (i.e., reflects the minimum possible dividend reinvestment after deduction of the maximum rate withholding tax). The index is periodically rebalanced relative to the constituents’ weights in the parent index.

Third Quarter 2021

The Near-Term Tax-Free Fund had a total return of -0.24% in the third quarter of 2021, underperforming its benchmark, the Bloomberg Barclays Municipal Bond 3-Year Index, which returned 0.09 percent. See complete fund performance here. The main source of underperformance came from an overweight position in Texas bonds and their school districts. This fund continues to use a barbell strategy which overweighs short- and long-term maturities while underweighting medium-term maturities.

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.

Strengths

• The fund’s underweight allocation to the 1- to 3-year maturity area of the curve was a positive contributor to our performance as bonds in those maturities gained a bit in price as shorter dated yields declined slightly.
• The fund’s underweight allocation to the Virgin Islands, Puerto Rico, and Alabama bonds contributed positively to performance, as they underperformed the benchmark and carried a higher weighting.
• Bouncing back in the third quarter were single family housing and power bonds. The second and third best sectors were our overweight general obligation bonds and overweight water districts.

Weaknesses

• The fund’s allocation to maturities outside of the 1- to 5-year maturity range of its benchmark’s weighted maturity of 3 years, pulled the performance of the fund down with the late September rally in yields, particularly at the longer end of the yield curve.
• The fund’s overweight allocation to New Mexico bonds were the largest negative contributor to performance. We were also underweighting in California bonds which outperformed the benchmark.
• Longer dated maturities, water, and general obligation bonds underperformed for the quarter.

Outlook

Municipal bond underperformed Treasury bonds in the third quarter for the first time since the economy began to come out of lockdowns in the spring of 2020. The interest rate shift upward, more so on the long end of the yield curve, was a headwind to performance.  Most of the physical stimulus money hit the market in the second quarter while potential capital improvements, related to infrastructure, are still pending in President Biden’s infrastructure legislation.  Credit rating upgrades are running at two times the pace of downgrades which bodes well for investors.  With the pull back in prices, municipal bonds are more attractive to own at these levels.  Most states have about 15% of their top line budget in cash on hand for a rainy-day funds. Much of the outlook on infrastructure, social spending and new tax policies are on the horizon but the scope of these programs is still being debated. However, corporations and upper-income people will likely see their tax rates increase, thus any allocation to municipal bonds should become more attractive.

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.

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 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.

Top 10 Holdings as of 09-30-2021

Industry Breakdown as of 09-30-2021

Top 5 States as of 09-30-2021

Growth of $10,000 Over 10 Years as of 09/30/2021

The chart illustrates the performance of a hypothetical $10,000 investment made in the fund during the depicted time frame, compared to its benchmark index. Figures include reinvestment of capital gains and dividends, but the performance does not include the effect of any direct fees described in the fund’s prospectus (e.g., short-term trading fees) which, if applicable, would lower your total returns.

Month End Average Annual Total Returns as of 10/31/2021

Quarter End Average Annual Total Returns as of 09/30/2021

Expense ratios as stated in the most recent prospectus. The Adviser of the Near-Term Tax Free Fund has contractually limited, through April 30, 2022, the total fund operating expenses (exclusive of acquired fund fees and expenses 0.02%, extraordinary expenses, taxes, brokerage commissions and interest) to not exceed 0.45%. Total annual expenses after the waiver of (0.64%) were 0.45%. The fund’s yield calculation is based on the holdings’ yield to maturity for prior 30 days; distribution may differ.

Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. 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. Performance does not include the effect of any direct fees described in the fund’s prospectus which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.

The Barclay 3-Year Municipal Bond Index is a total return benchmark designed for long-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 8 to 12 years.

Third Quarter 2021

The U.S. Government Securities Ultra-Short Bond Fund had a total return of -0.50% in the third quarter of 2021, underperforming its benchmark, the Bloomberg Barclays US Treasury Bills 6-9 Months Index, which returned 0.01%. See complete fund performance here. The main source of underperformance came from allocations to bonds with maturities between one and three years, as they underperformed the benchmark. These longer dated bonds, 3- to 5-year notes, were impacted by the backup in real interest rates in September. The 50-bp loss represents the fund rounding down one penny in price on September 15th from it share price of $2.00.

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.

Outlook

The yield on the 10-year Treasury, a bellwether used in the fixed-income markets, ended the quarter at 1.48%, just 1-basis point (bp) higher than the prior quarter close, but the 5-year Treasury moved up 7.5-bp and the 3-year rose 4.8-bp. These shorter-term moves were significant enough to change the prices of longer dated notes, where we can pick up meaningful yield. The Fed had signaled that the economy has regained enough strength to allow tapering to end by year-end, but that labor markets have further to improve before any rate hikes, perhaps a year later. Inflation remains more of a concern now that the “transitory” inflation we were first seeing is going to stick around longer. When inflation is considered, there is no opportunity for new money to pursue when buying short dated government investment, unless you are mandated to be invested in this tranche of the curve.

The Barclays U.S. Treasury Bills 6-9 Months Total Return Index tracks the performance of U.S. Treasury Bills with a maturity of six to nine months. Gross domestic product is the total value of goods produced and services provided in a country for one year. The personal consumption expenditures index reflects changes in the prices of goods and services purchased by consumers in the U.S.

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 www.usfunds.com 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.

Bond funds are subject to interest-rate risk; their value declines as interest rates rise.

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

Issuer Breakdown as of 09-30-2021

U.S. Government Securities Ultra-Short Bond Fund
Growth of $10,000 Over 10 Years as of 09/30/2021

The chart illustrates the performance of a hypothetical $10,000 investment made in the fund during the depicted time frame, compared to its benchmark index. Figures include reinvestment of capital gains and dividends, but the performance does not include the effect of any direct fees described in the fund’s prospectus (e.g., short-term trading fees) which, if applicable, would lower your total returns.

Month End Average Annual Total Returns as of 10/31/2021

Quarter End Average Annual Total Returns as of 09/30/2021

Expense ratios as stated in the most recent prospectus. The Adviser of the U.S. Government Securities Ultra-Short Bond Fund has voluntarily limited total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest) to not exceed 0.45%. With the voluntary expense waiver amount of (0.60%) total annual expenses after reimbursement were 0.45%. U.S. Global Investors, Inc. can modify or terminate the voluntary limit at any time, which may lower a fund’s yield or return. The fund’s yield calculation is based on the holdings’ yield to maturity for prior 30 days; distribution may differ.

Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. For a portion of periods, the fund had expense limitations, without which returns would have been lower. 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. Performance does not include the effect of any direct fees described in the fund’s prospectus which, if applicable, would lower your total returns. Performance quoted for periods of one year or less is cumulative and not annualized. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.