The Global Luxury Goods Fund lost 10.57% in the third quarter of 2023, underperforming its benchmark, the S&P 1500 Composite Index, which lost 3.36%. The performance of the U.S. Global Luxury Goods Fund was more aligned with the performance of the S&P Global Luxury Index, which declined by 13.89%, as both focus on high-end products and services. See complete fund performance here.

The performance data quoted represents past performance. 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 higher cash level had the most positive effect on the fund’s performance relative to the S&P 1500 Index. With the expectation of a global slowdown, rising rates and weakening consumer spending, we entered a more defensive position.
• The fund’s stock selection in the financial sector had the second most positive effect on the fund’s performance relative to the index. The fund’s strategy to overweight investment managers, financial conglomerates and major banks worked well. Shares of Apollo Global Management gained 17.5%, though it is not part of the index. Within financial conglomerates, shares of Julius Bear, also not in the index, gained 7.8%. Shares of JPMorgan, the largest U.S. bank, gained 40 basis points (bps) during the quarter while the S&P 1500 declined 3.36%. The fund overweighted JPMorgan relative to the index.
• The strongest contributor to the fund’s performance was Apollo Global Management Inc., an American private investment firm with $548 billion of assets under management as of end of last year, contributing a positive 0.34% to the fund’s performance. Shares of Apollo Global Management increased by 5% in the third quarter while the S&P 1500 Index lost by 3.36% and the S&P Global Luxury Index declined by 13.89%.

Weaknesses

• The fund’s overweight position in consumer discretionary had the most negative effect on the fund’s performance relative to the S&P 1500 Index. The fund invests most of its assets in high-end products and services while the S&P 1500 Index has a much smaller exposure to this sector. The fund’s strategy to overweight automakers and apparel/footwear within the consumer discretionary sector had the most negative effect relative to the fund’s index. Shares of Volkswagen declined 20.8% and shares of Hermes and Louis Vuitton dropped more than 15%. Neither name is part of the index.
• The fund’s stock selection in consumer staples had the second most negative effect on the fund’s performance relative to the index. Shares of Pernod Ricard and Remy Cointreau declined more than 20%; neither company is part of the index.
• The biggest detractor to the fund’s performance was Compagnie Financiere Richemont SA, contributing a negative 1.86% to the fund’s overall performance. Shares declined 25.6% in the third quarter, erasing all gains from the first six months of this year. 

Outlook

In the third quarter, luxury stocks underwent a correction, which followed a period of consolidation in the second quarter and strong performance in the first quarter, primarily attributed to China’s reopening. However, the initial optimism that surrounded China’s reopening at the beginning of the year diminished rapidly as the country began to release weaker economic data, and the property sector continued to lag behind. Corporate defaults have been increasing, and despite government support, the sector continues to face challenges. Furthermore, China has been adversely impacted by a sluggish recovery in international travel, with domestic travel returning to pre-pandemic levels while foreign travel remains subdued.

Additional factors that contributed to the correction in the luxury sector included rising interest rates and the depletion of pandemic stimulus measures, which resulted in a decrease in consumer spending. Notably, only the wealthiest 20% of Americans still retained excess pandemic savings. For the remaining 80% of households by income, bank deposits and other liquid assets had declined in real terms by June of this year when compared to their levels in March 2020, accounting for inflation. According to the latest Federal Reserve study on household finances, all income groups had witnessed a decrease in their balances in real terms from their peak in 2021.

Furthermore, in the U.S., yields on government bonds with maturities of two, five and 10 years had reached new high levels. Rates for fixed 30-year mortgages surged to their highest point in over two decades, surpassing 7%. These developments in interest rates and financial markets likely had a significant impact on consumer behavior and investment decisions, further influencing the luxury sector’s performance.

Following the correction in the third quarter, most luxury companies are now considered oversold, and we anticipate a rebound in their performance. However, the remainder of the year could pose challenges, as many brokers are currently predicting slower growth in the luxury sector. Despite these short-term uncertainties, we maintain our belief that the luxury sector remains an attractive long-term investment 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. The S&P Global Luxury Index measures the performance of 80 companies engaged in the production, distribution, or provision of luxury goods and services drawn from the S&P Global BMI. The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining of gold and silver.

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 Luxury Goods Fund as a percentage of net assets as of 9/30/2022: Apollo Global Management Inc. 2.27%, Julius Baer Group Ltd. 0.00%, JPMorgan Chase & Co. 3.98%, Volkswagen AG 3.65%, Hermes International SCA 6.39%, LVMH Moet Hennessy Louis Vuitton 5.01%, Pernod Ricard SA 3.45%, Remy Cointreau SA 0.71%, Cie Financiere Richemont SA 5.51%.

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 09-30-2023

Industry Breakdown as of 09-30-2023

Regional Breakdown as of 09-30-2023

Growth of $10,000 Over 10 Years as of 09/30/2023

The chart illustrates the performance of a hypothetical $10,000 investment made in the fund during the depicted time frame. 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 10/31/2023

Quarter End Average Annual Total Returns as of 09/30/2023

Expense ratio as stated in the most recent prospectus.

The Adviser of the Global Luxury Goods has contractually limited, through April 30, 2024 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 (0.24%) to not exceed 1.75%. Total annual expenses after reimbursement were 1.75%.

U.S. Global Investors, Inc. can modify or terminate the voluntary limits at any time, which may lower a fund’s yield or return.

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. High double-digit returns are attributable, in part, to unusually favorable market conditions and may not be repeated or consistently achieved in the future.

For the quarter ended September 30, 2023, the World Precious Minerals Fund declined 10.06%, underperforming its benchmark, the NYSE Arca Gold Miners Index (GDM), which fell 9.80% on a total return basis. See complete fund performance here. The recently introduced S&P/TSX Venture Precious Metals and Minerals Index fell 27.01% for the quarter.

Performance data quoted represents past performance. 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

• Nano One Materials was the largest contributor to fund performance with only a 2.45% loss in its share price during the quarter. Relative to the benchmark, the small loss in Nano One yielded a performance gain of 84 basis points (bps). During the quarter, Sumitomo Metal Mining agreed to a strategic equity investment of C$16.9 million to enter into a collaboration agreement for the commercial production of lithium iron phosphate.
• The second most significant contributor was Radisson Mining Resources, which finished the quarter with a gain of 19.28%. Radisson quietly raised funding for its current ongoing drilling program at the close of the prior quarter through its network of investors. Being funded to drill should allow Radisson to continue growing the resource size.
• Overweighting K92 Mining was the third biggest contributor to our performance, with the stock only declining 1.79% for the quarter. It was a relative win of 48 bps to the benchmark, which had a double-digit decline for the quarter.

Weaknesses

• TriStar Gold was the fund’s biggest detractor for the quarter, as it was down 17.79% on no specific negative headlines. TriStar was able to raise $3.2 million in September, so the funding may have been a drag on performance.
• Not owning Zijin Mining Group was the second biggest drag on performance, with this Chinese stock rising 4.24% by quarter end, reducing the fund’s relative return by 47 bps. There is a distinct lack of disclosure in the resource statement presented by Zijin relative to Western disclosure on the assets they intend to monetize.
• Overweighting Asante Gold was the third biggest drag on performance with the stock drifting down 22.16%, or -44 bps, to the fund by quarter end. The proposed acquisition by Fujairah National Group in the prior quarter is still pending, but momentum has waned.

Outlook

A Globe and Mail news article quoted a CEO saying many miners are “definitely looking for opportunities” to acquire producing assets, particularly those that are spun-off from big producers undergoing consolidation. This could include some of the struggling Canadian mines that are widely expected by investors to be spun out from Newmont’s (NEM) merger with Newcrest (NCM).

According to Scotiabank, the streamers have outperformed the operators both year-to-date and shorter term, given the margin compression. With some signs of relief in inflationary pressures on operating costs, investors should start to consider rotating from the higher valued streamers (that are insulated from inflationary pressures in costs due to the nature of their business) into the lower valued operators. This is because: (1) companies have started to see easing of inflationary pressures in various input costs, which should be fully reflected in their costs once the higher cost inventories are drawn down; and (2) companies are expecting higher volumes in the second half of 2023, which should also help with the costs. All of this should lead to margin expansion and help support higher valuations.

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 S&P/TSX Venture Precious Metals & Minerals Index consists of all members of the S&P/TSX Venture Composite that are classified within the GICS precious metals & minerals sub-industry.

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 9/30/2023: Nano One Materials Corp. 13.82%, Sumitomo Metal Mining Co. Ltd. 0.00%, Radisson Mining Resources Inc. 2.90%, K92 Mining Inc. 7.56%, TriStar Gold Inc. 5.28%, Zijin Mining Group Co. Lt. 0.00%, Asante Gold Corp. 2.95%, Asante Gold Corp. 2.95%, Newmont Corp. 0.00%, Newcrest Mining 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.

A basis point is one hundredth of one percent.

Top 10 Equity and Debt Holdings as of 9-30-2023

Industry Breakdown as of 9-30-2023

Regional Breakdown as of 9-30-2023

Growth of $10,000 Over 10 Years as of 09/30/2023

The chart illustrates the performance of a hypothetical $10,000 investment made in the fund during the depicted time frame. 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 10/31/2023

Quarter End Average Annual Total Returns as of 09/30/2023

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 0.00%, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments (0.29%) to not exceed 1.75%. With the voluntary expense waiver amount of (0.16%) Total annual expenses after reimbursement were 1.75%.

U.S. Global Investors, Inc. can modify or terminate the voluntary limits at any time, which may lower a fund’s yield or return.

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. High double-digit returns are attributable, in part, to unusually favorable market conditions and may not be repeated or consistently achieved in the future.

For the third quarter of 2023, the Global Resources Fund declined 5.90%, underperforming its benchmark, the S&P Global Natural Resources Index (Net Total Return), which rose 3.55%. See complete fund performance here.

Performance data quoted represents past performance. 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 Global Resources Fund invests in exploration and development companies and the junior mining and energy sector, unlike our benchmark, which is principally invested in large capitalization natural resources companies with established revenue streams; as a result, there can be timing swings where money flows first to the most liquid names before investors go down market.

Strengths

• The three strongest commodities for the quarter were uranium, crude oil and sugar, up 35.40%, 26.14% and 15.68%, respectively. Legislation is currently moving through Congress that would explicitly ban the possession or ownership of Russian or China-sourced uranium unless the Nuclear Regulatory Commission specifically authorizes it. This would curtail access, but we expect production to be restarted at several U.S. operations that have been on care and maintenance. Crude oil prices fell in both the first and second quarters of year, but market dynamics changed with both Saudia Arabia and Russia pushing through additional cuts to their oil exports to world markets. Disruption to sugar-sourced crops has been plagued by weather conditions that look to get worse in the coming months. El Niño, which started in September, is creating “dryer than normal” conditions in Thailand, India and Australia—the three largest exporters of sugar after Brazil.
• The fund’s three best sector calls were an overweight position in specialty chemicals, underweight position in steel and underweight industrial machinery. The gains in specialty chemicals were driven by lithium and delivered 67 basis points (bps) of outperformance relative to the benchmark. We were underweight steel and industrial machinery, and this yielded the fund 30 bps and 18 bps of performance.
• The three best dollar-performing stock decisions were New Stratus Energy, NG Energy International and E3 Lithium, which contributed 102 bps, 59 bps and 67 bps, respectively. New Stratus Energy pivoted from Ecuador to Venezuela when the government reneged on a petroleum concession. Through their contacts, they were able to negotiate a partnership with Petroleos de Venezuela, the national oil company of Venezuela which the market considers lucrative. NG Energy International was recapitalized with new management, and we entered the stock after that event. E3 Lithium successfully demonstrated direct lithium extraction with their equipment designed to extract the metal from oil field brines.

Weaknesses

• The three weakest commodities for the quarter were lithium hydroxide, wheat and tin, down 45.51%, 19.09% and 13.83%, respectively. Lithium prices declined on the weakened demand outlook from China’s property crisis. Consumers may delay new car purchases. Wheat saw a stronger than expected rebound in production, and Ukrainian wheat is still making it to the market. China is world’s largest tin producer and consumer, accounting for approximately 30% of the global tin supply and 47% of the global tin consumption in 2022.
• The fund’s worst-performing sectors were its overweight position in metals and minerals, off 371 bps; overweight precious metals down, 233 bps; and overweight electrical products, which lost 109 bps. Metals and minerals are predominately copper, but uranium is also in this category, and it was one of the few metals to outperform. Gold stocks gave up 233 bps with a nearly 4% drop in the price of bullion for the quarter. Our overweight of electrical products is exposure to carbon, lithium, nickel and cobalt. This position suffered from the same headwinds as metals and minerals and sacrificed 109 bps.
• The three biggest dollar-detractor performing stock decisions were Filo Corp., Ivanhoe Mines and Leo Lithium, which penalized the returns by 196 bps, 62 bps and 61 bps, respectively. Both Filo and Ivanhoe Mines drifted lower on poor copper sentiment due to rising London Metal Exchange (LME) inventories and the property construction in China being weak. Leo Lithium was the biggest drag on performance, with the stock declining 54.24%, or 61 bps of performance, following a halt in trading pending ongoing talks with the latest government of Mali. The Goulamina project is fully funded by Ganfeng and was spun out to fund from our holding in Firefinch LTD.

Outlook

After languishing for most of the year, crude oil is surging as fuel demand in China and elsewhere recovers from the pandemic to reach new highs. That is happening just as production cutbacks by Saudi Arabia and its Organization of Petroleum Exporting Countries (OPEC+) allies are set to rapidly drain storage tanks around the world. “We’re expecting a sharp tightening of the market,” Toril Bosoni, head of oil markets at the International Energy Agency (IEA) in Paris, said in an interview with Bloomberg. “As demand increases seasonally, we do think there’s a risk that prices will continue to increase into the third quarter.”

Clean energy developers are expected to install a record amount of solar power in the U.S. this year as the industry recovers from supply-chain and trade obstacles. The solar industry is projected to add 32 gigawatts of capacity in 2023, an amount equal to about 30 new nuclear reactors, according to a report by the Solar Energy Industries Association (SEIA) and Wood Mackenzie. The installations will be a 52% increase compared to 2022, when the solar market contracted by 13%, the report says.

According to ISI, hydrogen stands out as one of its favorite clean energy verticals, highlighting the industry’s immense growth potential. It benefits significantly from the ongoing energy transition, supported by favorable government policies and a wide range of applications. While many think about hydrogen as an energy source, particularly for material handling and industrial lift trucks, ISI believes hydrogen’s potential extends far beyond that, with tremendous value that could be unleashed through opportunities including energy storage, backup power generation, alternative energy fuels and compatibility with traditional gasoline-powered internal combustion engines with minimal adjustments.

According to Goldman Sachs, it is important to recognize that the copper economy continues to display significant outperformance. In China, the majority consumer of the metal globally, apparent refined copper demand rose 11% year-over-year (yoy) in the first half of 2023, and end demand was up 7% yoy for the year-to-May period. This realized onshore demand trend is substantially above their full-year forecast (+4.6% yoy) and reflects a combination of surging green demand as well as healthy growth in traditional drivers (property completions, grid investment, home appliances all in clear expansion).

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.

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 9/30/2023: New Stratus Energy Inc. 1.92%, NG Energy International Corp. 3.12%, E3 Lithium Ltd. 2.05%, Petroleos de Venezuela SA 0.00%, Filo Corp. 5.71%, Ivanhoe Mines Ltd. 6.18%, Leo Lithium Ltd. 0.48%, Firefinch Ltd. 0.12%.

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.

A basis point is one hundredth of one percent.

Top 10 Equity and Debt Holdings as of 9-30-2023

Industry Breakdown as of 9-30-2023

Regional Breakdown as of 9-30-2023

Growth of $10,000 Over 10 Years as of 09/30/2023

The chart illustrates the performance of a hypothetical $10,000 investment made in the fund during the depicted time frame. 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 10/31/2023

Quarter End Average Annual Total Returns as of 09/30/2023

For the third quarter of 2023, the Near-Term Tax Free Fund declined 0.46%, outperforming its benchmark, the Bloomberg Municipal Bond 3-Year Index, which fell 1.02%. See complete fund performance here.

Performance data quoted represents past performance. 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 fund’s duration has been lowered to 1.34 years compared to the benchmark at 2.88 years. Our outperformance relative to the benchmark is a result of our shorter stance on duration. Rising municipal bond yields during the quarter triggered greater losses on longer-dated maturities.

Strengths

• The fund’s allocation to bonds from Texas, Minnesota and New Jersey outperformed, respectively.
• The fund benefited from its allocation to state general obligation, facilities and power bonds, all of which outperformed.
• The fund’s allocation in the zero- to one-year maturities was the largest contributor to returns with short-dated bonds being impacted the least by the rise in rates. Our outperformance for the quarter is mostly attributed to the duration of the fund being shortened relative to the benchmark.

Weaknesses

• The fund’s allocation to bonds from New Mexico, Washington and Colorado underperformed as did 12 other states.
• The fund’s exposure to multifamily housing, general and airport bonds underperformed and delivered negative returns along with three other sectors.
• The fund’s allocation in the one- to three-year maturities was the largest drag on performance, slightly worse than our three- to five-year maturities, but the latter is a much smaller weight.

Current Outlook

Going into the third quarter, the market had been expecting the Federal Reserve to end its rate hiking cycle, perhaps by year end with softer economic data. Investors sunk record inflows into longer-dated bonds, betting rates have peaked but instead have suffered substantial losses. The losses were a result of long-term interest rates, as proxied by the five-year AAA municipal yield, rising 77 basis points (bps) for the third quarter while the one-year AAA municipal bond yield rose 71 bps. Fixed income markets are potentially heading for their third straight year of losses, in an asset class that is not supposed to lose money. The U.S. dollar soared 317 bps over the course of the quarter as the yield curve rose.

What has confounded the Fed is the strength in consumer spending and new job growth despite the dramatic lift in interest rates. There are signs that inflation is waning, but given that the U.S. is moving forward with transforming its auto industry from gasoline engines to electrically powered motors, this will require a substantial capital investment. This change in technology along with the “onshoring” of new supply lines is going to be difficult to achieve without some inflationary pressures in the supply chain going forward. Much of the infrastructure and factories to help with the electrification were strategically placed in “red” states to have an important impact on their local economies and may face local opposition to defunding well-paying jobs supporting these projects should there be a change in energy policy.

With these economic pressures, we continue to remain positioned on the yield curve in shorter-term government bills and notes where we can take advantage of the elevated rates within the inverted yield curve. The Fed’s message is now higher interest rates for longer than previously thought with the current economic data. Consumer spending and new jobs will be the barometers to watch and likely will signal when and if a recession is in the cards for 2024.

Respectively, California, New York and Texas are the largest state weightings in our benchmark, comprising 38% of the index. We are overweight New Jersey, Oklahoma and Minnesota but 76% underweight California and 56% underweight New York. Texas was our biggest state holding at the start of the quarter, but a substantial amount matured during the quarter. We anticipate deploying new maturities back into Texas, as our overweight positions in New Jersey will mature in the fourth quarter.

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 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 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).

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% 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 9-30-2023

Industry Breakdown as of 9-30-2023

Top 5 States as of 9-30-2023

Growth of $10,000 Over 10 Years as of 09/30/2023

The chart illustrates the performance of a hypothetical $10,000 investment made in the fund during the depicted time frame. 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 10/31/2023

Quarter End Average Annual Total Returns as of 09/30/2023

Expense ratios as stated in the most recent prospectus.

The Adviser of the Near-Term Tax Free Fund has contractually limited, through April 30, 2023, the total fund operating expenses (exclusive of acquired fund fees and expenses 0.01%, extraordinary expenses, taxes, brokerage commissions and interest) to not exceed 0.45%. Total annual expenses after the waiver of (0.75%) were 0.45%. The fund’s yield calculation is based on the holdings’ yield to maturity for prior 30 days; distribution may differ.

U.S. Global Investors, Inc. can modify or terminate the voluntary limits at any time, which may lower a fund’s yield or return.

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. High double-digit returns are attributable, in part, to unusually favorable market conditions and may not be repeated or consistently achieved in the future.

The U.S. Government Securities Ultra-Short Bond Fund returned 0.97% for the third quarter, underperforming its benchmark, the Bloomberg U.S. Treasury Bills 6-9 Months Total Return Index, which returned 1.22%.  See complete fund performance here. Fund expenses and management fees largely accounted for the underperformance.

Performance data quoted represents past performance. 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 duration of the fund was 0.73 years versus the benchmark at 0.52 years at quarter-end, slightly higher as the most advantageous part of the curve to pick up yield is the six-month to one-year maturities. Should rates fall, our slightly longer maturity may help the fund to outperform relative to our benchmark.

Current Outlook

Going into the third quarter, the market had been expecting the Federal Reserve to end its rate hiking cycle, perhaps by year end with softer economic data. Investors sunk record inflows into longer-dated bonds, betting rates have peaked but instead have suffered substantial losses. The losses were a result of long-term interest rates, as proxied by the five-year AAA municipal yield, rising 77 basis points (bps) for the third quarter while the one-year AAA municipal bond yield rose 71 bps. Fixed income markets are potentially heading for their third straight year of losses, in an asset class that is not supposed to lose money. The U.S. dollar soared 317 bps over the course of the quarter as the yield curve rose.

What has confounded the Fed is the strength in consumer spending and new job growth despite the dramatic lift in interest rates. There are signs that inflation is waning, but given that the U.S. is moving forward with transforming its auto industry from gasoline engines to electrically powered motors, this will require a substantial capital investment. This change in technology along with the “onshoring” of new supply lines is going to be difficult to achieve without some inflationary pressures in the supply chain going forward. Much of the infrastructure and factories to help with the electrification were strategically placed in “red” states to have an important impact on their local economies and may face local opposition to defunding well-paying jobs supporting these projects should there be a change in energy policy.

With these economic pressures, we continue to remain positioned on the yield curve in shorter-term government bills and notes where we can take advantage of the elevated rates within the inverted yield curve. The Fed’s message is now higher interest rates for longer than previously thought with the current economic data. Consumer spending and new jobs will be the barometers to watch and likely will signal when and if a recession is in the cards for 2024.

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.

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 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 9-30-2023

U.S. Government Securities Ultra-Short Bond Fund
Growth of $10,000 Over 10 Years as of 09/30/2023

The chart illustrates the performance of a hypothetical $10,000 investment made in the fund during the depicted time frame. 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 10/31/2023

Quarter End Average Annual Total Returns as of 09/30/2023

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 (0.68%) 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.

U.S. Global Investors, Inc. can modify or terminate the voluntary limits at any time, which may lower a fund’s yield or return.

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. High double-digit returns are attributable, in part, to unusually favorable market conditions and may not be repeated or consistently achieved in the future.