Our Mutual Funds

The Global Luxury Goods Fund (USLUX) gained 5.3% in the second quarter of 2023, underperforming its benchmark, the S&P 1500 Composite Index, which gained 8.39%. The performance of the U.S. Global Luxury Goods Fund was more aligned with the performance of the S&P Global Luxury Index, which increased by 4.51%, 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 overweight position in consumer discretionary had the most positive effect on the fund’s performance relative to the S&P 1500 Index. The fund invests a majority 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 hospitality services within the consumer discretionary sector had the most positive effect relative to the fund’s index.  Shares of Royal Caribbean surged 62.6% and Marriott shares appreciated by 11.0%.
• The fund’s overweight position in consumer vehicles within the discretionary sector had the second most positive effect on the fund’s performance relative to the index. Shares of Tesla gained 26.2% in the second quarter, following strong gains in BMW (+21.5%), and Mercedes-Benz Group (+10.4%). BMW and Mercedes are not part of the S& 1500 Index, while Tesla has a much smaller weighting in the S&P Global Luxury Index.
• The strongest contributor to the fund’s performance was Royal Caribbean, a cruise liner, contributing a positive 1.5% to the fund’s performance. Shares of Royal Caribbean increased by 6% in the second quarter while the S&P 1500 Index gained 8.39% and the S&P Global Luxury Index gained by 4.51%. The company reported strong first-quarter results.

Weaknesses

• The fund’s underweight position in information technology had the most negative effect on the fund’s performance relative to the S&P 1500 Index. During the quarter, the fund was not exposed to packaged software. However, shares of Microsoft Corporation gained 18.4%, Adobe Incorporated recorded a gain of 26.9%, and Oracle appreciated 28.7%.
• The fund’s underweight position in semiconductors within the information technology sector had the second most negative effect on the fund’s performance relative to the index. Shares of NVIDIA Corporation surged 52%, and shares of Broadcom gained 35.9%. However, the fund had no exposure to these names.
• The biggest detractor to the fund’s performance was German retailer Zalando, contributing a negative 0.6% to the fund’s overall performance. Shares declined 25.28% in the second quarter. The weakening economy in Germany put pressure on Zalando and H&M.

Outlook

Luxury stocks experienced a period of consolidation during the second quarter, following a robust performance in the first quarter, primarily driven by China’s reopening. However, the initial optimism surrounding China’s post-COVID reopening waned as the country began to release weaker economic data and concerns grew over mounting debt issues in various regions. While domestic travel in China showed signs of recovery, international travel continued to face significant challenges. The Manufacturing PMI in China dropped below the 50 level, indicating a slowdown in economic activity. Geopolitical tensions remained elevated, although there was some positive news with Secretary of State Antoni Blinken’s visit to China, aiming to maintain open lines of communication.

In Europe, another crucial region influencing luxury spending, the economy is gradually heading toward a recession. Energy prices remain elevated, and the European central bank is committed to raising interest rates to curb inflation and bring it down to 2%. Manufacturing PMI in Europe remains below the 50 level, signaling a manufacturing slowdown. Germany reported GDP contraction in the second quarter, taking the country into a technical recession.

In the United States, the job market remained robust and consumer spending showed no signs of weakening. However, there were some indications of economic distress. The Manufacturing PMI in the United States also remained below the 50 level, in contractionary territory, reaching its lowest level since March 2020.

Despite the prevailing global economic weakness, luxury goods exhibit a certain level of resilience toward a slowdown in global activities, primarily due to their appeal to the affluent segment. The affluent consumer, being less impacted by impending recessions, continue to drive demand for luxury products. Additionally, luxury stocks are poised to gain from the surge in trade typically observed during the summer months. Among the key players, hotels, resorts, and cruise lines are anticipated to emerge as leaders in this industry.

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.

The Purchasing Managers’ Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing and service sectors. 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 6/30/2023: Royal Caribbean Cruises Ltd. 2.02%, Marriott International Inc. 4.23%, Tesla Inc. 5.03%, Bayerische Motoren Werke AG 3.98%, Mercedes-Benz Group AG 4.96%, Microsoft Corp. 0.00%, Adobe Inc. 0.00%, Oracle Corp. 0.00%, NVIDIA Corp. 0.00%, Broadcom Inc. 0.00%, Zalando SE 1.97%, Hennes Mauritz ADR 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 06-30-2023

Industry Breakdown as of 06-30-2023

Regional Breakdown as of 06-30-2023

Growth of $10,000 Over 10 Years as of 06/30/2023

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 08/31/2023

Quarter End Average Annual Total Returns as of 06/30/2023

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.

The Gold and Precious Metals Fund declined 8.97% in the second quarter of 2023, underperforming its benchmark, the FTSE Gold Mines Index, which fell 6.10% on a total return basis. 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.

While focusing on established, gold-producing companies, the Gold and Precious Metals Fund holds less than 50% of its holdings in precious metal miners that are greater than $1 billion in market capitalization; meanwhile, the FTSE Gold Mines Index’s average market capitalization is closer to $7.5 billion.

Strengths

• The fund received shares in Leo Lithium Ltd. from a pre-IPO partial spin-out from Firefinch Ltd., which controls the Morilla gold mine in Mali. We also participated in the IPO which occurred in June of 2022. Lithium pegmatite deposits can be associated with gold occurrences. This past quarter, the share price of Leo Lithium was up 104.51%, contributing 144 basis points to the fund’s performance.
• Underweighting Newmont Corporation, the largest member of the FTSE Gold Mines Index, was our next best call on relative performance. The company significantly underperformed its index peers with a loss of 12.35%. Our lack of exposure buffeted the fund by 117 bp.
• The next best contributor to performance was Emerald Resources NL, which has been achieving production guidance and delivering good exploration results. Emerald advanced 40.03% during the quarter and is not a member of the FTSE Gold Mines Index.

Weaknesses

• Overweighting K92 Mining Inc. was the biggest drag on performance, with the stock declining 23.43% by quarter end. Their first quarter production was slightly below guidance. K92 Mining is anticipated to be fully funded for the next project expansion from current production, but the guidance miss prompted one broker to speculate K92 Mining would need to raise equity now.
• The second worst contributor to relative performance was overweighting Aya Gold & Silver Inc., which fell 20.29% for the quarter. March 31, 2023, was a one-year high in the share price of Aya Gold & Silver, and profit-taking after the first quarter moved Aya down while its peers in the Global X Silver Miners ETF maintained their ground. Silver fell 5.50% for the quarter, pulling the silver ETF down 15%.
• The fund’s third largest loss came from underweighting Gold Fields, which was one of just a handful of gold companies that had a positive return for the quarter. Because we were underweight and Gold Fields is the fifth largest member of our benchmark, we underperformed by 61 bp of relative performance with the 3.68% gain in their share price.

Outlook for Gold and Precious Metals

The Gold/Copper ratio has been on an upward trend since mid-March as gold has outperformed copper. The ratio is now approaching the recent highs seen last July when recession fears were rising but well off the levels seen in early 2020. Gold has seen support from safe-haven demand and falling U.S. yields, while copper has seen more sideways performance as investors weigh up global economic growth risks against supply disruptions and China’s reopening.

China added to its gold reserves for an eight straight month, extending a flurry of purchases as central banks around the world expand their holdings of bullion amid escalating geopolitical and economic risks. China raised its gold holdings by 21 tonnes in June, according to Bloomberg. Total stockpiles now sit at about 2,068 tons. The World Gold Council (WGC) reiterated its view that central banks will continue to build their official gold holdings. This is based on WGC’s survey of central banks, but also the view that emerging and developing country central banks are inclined to purchase gold because of the metal’s appeal versus other asset classes – low or negative yielding sovereign debt, rising sanctions risks, and threat of currency wars. Gold is an important reserve asset that isn’t exposed to downside from geopolitical risks, cannot be de-based and lacks default risk.

According to Scotia, with some signs of relief in inflationary pressures on operating costs, investors should look to rotate 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 due to the fact that: (1) operators’ 2023 cost guidance is erring on the conservative side (2023 cost guidance is up 5% year-over-year), as input cost assumptions are using 2022 levels for consumables and commodity prices; (2) 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 (3) companies are expecting higher volumes in 2H/23, which should also help with the costs.

The FTSE Gold Mines Index 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. AISC is an abbreviation for “all-in sustaining costs,” a measure, defined by the World Gold Council, of the cost of sustaining current mining operations. It is expressed in terms of US$ per ounce of gold sold.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the Gold and Precious Metals Fund as a percent of net assets as of 6/30/2023: Leo Lithium Ltd. 2.52%, Firefinch Ltd. 0.30%, Newmont Corp. 0.00%, Emerald Resources NL 2.74%, K92 Mining Inc. 9.99%, Aya Gold & Silver Inc. 6.42%, Global X Silver Miners ETF 0.49%, Gold Fields Ltd. 2.01%.

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 Holdings as of 06-30-2023

Industry Breakdown as of 06-30-2023

Regional Breakdown as of 06-30-2023

Growth of $10,000 Over 10 Years as of 06/30/2023

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 08/31/2023

Quarter End Average Annual Total Returns as of 06/30/2023

The Adviser of the Gold & Precious Metals 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 (0.12%) to not exceed 1.75%. With the voluntary expense waiver amount of (0.00%), Total annual expenses after reimbursement were 1.67%.

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 June 30, 2023, the World Precious Minerals Fund declined 12.15%, underperforming its benchmark, the NYSE Arca Gold Miners Index (GDM), which fell 7.49% on a total return basis. 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 S&P/TSX Venture Exchange has now introduced a subindustry index, which consists of the members of the S&P/TSX Venture Composite Index that are classified within the precious metals and minerals subindustry. Data is currently only available for the SPX/TSX Venture Precious Metals & Minerals Index as of May 25, 2023. Using May 25 as a point in time to measure performance to June 30, the World Precious Minerals Fund declined 2.45%, the NYSE Arca Gold Miners Index fell 1.21% and the SPX/TSX Venture Precious Metals & Minerals Index slid 5.42%. In the first half of 2023, the SPX/TSX Venture Exchange Composite was up 11.56%, but those gains were largely from Bitcoin mining companies that benefited from the near 100% rise in the Bitcoin price.

Strengths

• Reunion Gold was the largest contributor to fund performance with a 29.81% gain in its share price during the second quarter. Shareholders were pleased with their better-than-expected resource update for their flagship Oko West project during the quarter. Reunion Gold is not a member of the NYSE Arca Gold Miners Index.
• The second most significant contributor was Asante Gold, which finished the quarter with a gain of 4.72%, on news that Fujairah National Group LLC is trying to negotiate the purchase of Asante Gold to take it private.
• Underweighting Newmont, the largest member of the NYSE Arca Gold Miners Index, was our next best call on relative performance. The company significantly underperformed its index peers with a loss of 12.35%. Our lack of exposure buffeted the fund by 43 basis points.

Weaknesses

• Arizona Metals was the fund’s biggest detractor for the quarter as it was down 31.89%, even though copper prices were down 8.88% for the quarter. The shares came under pressure as a competing company’s CEO in Arizona told investors that Arizona Metals would never get their permits. Not typical CEO behavior.
• Overweighting K92 Mining was the second biggest drag on performance, with the stock declining 23.43% by quarter end, reducing the fund’s return by 121 basis points. Their first quarter production was slightly below guidance. K92 Mining is anticipated to be fully funded for the next project expansion from current production, but the guidance miss prompted one broker to speculate K92 Mining would need to raise equity now.
• Overweighting Barsele Minerals Corp. was the third biggest drag on performance with the stock drifting down 43.55% by quarter end. There were no material updates on the project, but Barsele issued a press release stating that drilling activities would resume in May. The project is joint owned by Agnico Eagle Mines Ltd. at 55% and Barsele at 45%. Agnico can earn another 15% by completing a feasibility study.

Outlook for World Precious Minerals

Since bottoming at $1,622/oz in September 2022, gold’s pronounced 20%+ run-up to the $2,000/oz level in recent months has brought some amount of relief to an otherwise difficult market for junior explorers and developers. In spite of this relief, valuations for the group remain trading at a significant discount to producer peers, which we see as reflective of lingering fears around cost and capital inflation, along with the perceptions/realities associated with executing on project development successfully as a junior.

According to RBC, they continue to believe explorer/developer M&A will remain muted in the near term. This is the result of not only depressed valuations among the producers, but also a focus among these producers on maintaining financial discipline while reducing project execution risk driven by the persistent inflationary environment. Longer term, as M&A inevitably comes down cap and larger producers begin to focus on growth once more, they expect one of the main emerging themes will be the acquisition of permitted, shovel-ready projects that are capable of producing material ounces (>200k ounces) over 10+ years.

According to Goldman, they think there will be continued focus on M&A given the supportive gold price environment and strong balance sheet positions, and potential impacts to NAV upon the proposed implementation of the Global Minimum Tax in 2024. They continue to view the gold streaming/royalty companies as attractive business models given the elevated gold price environment and flattish cost structure, underpinning 70-80% EBITDA margins in 2023E and above gold mining peers of 40-50%. They are important funders for the junior sector.

With regards to funding for the junior sector, streaming transactions have totaled $375 million year-to-date and are approximately on pace for the $722 million booked last year, but well below the $1.7 billion booked in 2021. The 10-year average, prior to last year is $1.6 billion per year.

As posted to the Financial Times, the Mexican mining industry under threat from sweeping new regulations.  The mining code changes, which include making it more challenging for companies to obtain mineral concessions, threaten to trigger a wave of litigation by Canadian miners invested in the country. Under the new legislation, all mining exploration activities will be conducted by the Mexican Geological Service, an underfunded state-run agency that could cripple exploration.

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 Composite is a broad market indicator of Canadian micro-cap securities listed on the TSX Venture Exchange. The S&P/TSX Venture Precious Metals & Minerals (Sub Industry) 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 6/30/2023: Reunion Gold Corp. 1.96%, Asante Gold Corp. 3.39%, Newmont Corp. 000%, Arizona Metals Corp. 4.81%, K92 Mining Inc. 6.83%, Barsele Minerals Corp. 2.03%, Agnico Eagle 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.

A basis point is one hundredth of 1 percentage point.

Top 10 Equity and Debt Holdings as of 6-30-2023

Industry Breakdown as of 6-30-2023

Regional Breakdown as of 6-30-2023

Growth of $10,000 Over 10 Years as of 06/30/2023

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 08/31/2023

Quarter End Average Annual Total Returns as of 06/30/2023

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 second quarter, the Global Resources Fund declined 2.30%, outperforming its benchmark, the S&P Global Natural Resources Index (Net Total Return), which fell 3.88%. 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, molybdenum and sugar, up 8.2%, 6.4% and 6.2%, respectively. Legislation is 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 could curtail access, but likely production will be restarted from U.S. operations. There are no pure plays on molybdenum, but certain copper companies produce the metal as a byproduct. Disruption to sugar-sourced crops has been plagued by weather and key producing countries, most notably India, Thailand, China and Pakistan.
• The three best sector calls for the fund were an overweight position in metals/minerals, underweight position in agricultural chemicals and a higher average cash level of 7.3%. The gains in metals and minerals were driven by lithium, copper and uranium and delivered 75 basis points of outperformance relative to the benchmark. Holding cash netted the fund 45 bp. We were 50% underweight in agricultural chemicals, and this yielded the fund 45 bp of performance.
• The three best dollar-performing stock decisions were Filo Corp., Iris Metals Ltd. and underweight Nutrien Ltd., which contributed 107 bp, 71 bp and 70 bp, respectively. Ivanhoe Mines, one of the larger positions, moved up with copper prices. Filo Mining announced a $100 million financing during the quarter that was Lundin Family Trust purchasing $70 million and BHP Group adding $30 million to their position to fund the upcoming exploration program. Iris Metals had been in a trading halt but finally announced their acquisition of the Black Hills Lithium Project in North Dakota. We participated in the new placement of shares and warrants. We were underweight Nutrien by 85%, which fell 19.14% during the quarter, saving the fund 70 bp of relative losses.

Weaknesses

• The three weakest commodities for the quarter were lithium hydroxide, zinc and palladium, down 24.5%, 19.2% and 17.4%, respectively. Lithium prices declined on Chinese destocking in the second quarter. Approximately two-thirds of zinc demand is use for galvanized steel, but Chinese construction growth has been anemic, cutting the demand for zinc. Palladium demand is being impacted by the growth in electric vehicles (EVs), cutting the demand for gasoline powered cars.
• The fund’s worst-performing sectors were its underweight position in integrated oil, overweight electrical products and underweight oil refining and marketing. Integrated oil companies delivered a positive return of 0.43% and our underweight left 111 bp unclaimed. Electrical products are a mix of clean energy focused companies, but they underperformed in the past quarter by 53 bp. Our underweight oil refining and marketing sacrificed 24 bp.
• The three biggest dollar-detractor performing stock decisions were Critical Elements Lithium Co., underweight Shell PLC. and Electra Battery Metals Corp., which penalized the returns by 55 bp, 41 bp and 27 bp, respectively to the fund. In the lithium sector, companies which own large lithium pegmatite deposits are partnering up with the major users of the lithium in the EV sector for security of supply. Critical Elements has been yet to attract a suitor when several other lithium companies did. Shell PLC was one of a handful of integrated oils which delivered positive returns for the past quarter and our underweight left 41 bp of unclaimed.

Outlook for Global Resources

The Biden administration plans to begin purchasing oil to replenish the nation’s emergency reserve after completing maintenance work later this year. The Strategic Petroleum Reserve (SPR) is at a four-decade low after the federal government withdrew a historic 180 million barrels to tame gasoline prices in the wake of Russia’s invasion of Ukraine. The Biden administration previously said it planned to restock the cache when prices reached about $70 a barrel but wasn’t specific on timing. “The SPR remains the largest in the world and the Department of Energy (DOE) remains committed to refilling the SPR in a manner that will deliver the best value for American taxpayers and protect U.S. national (and economic) security interests, while abiding by congressional mandates and undertaking necessary maintenance that is also part of good stewardship,” the Energy Department said in a statement.

J.P Morgan remains constructive on European energy the sector at this complex macro juncture for three reasons: 1) resilient balance sheets: they expect EU Big Oils to continue deleveraging with debt/equity at 9% by end 2023E compared to a long-term range of 15-30%; 2) resilient free cash flow (FCF) and ongoing capital discipline, with the sector still generating a 12% FCF yield in 2023E, at the current forward curve. They think this FCF comfortably finances the sector’s 6.9% dividend yield and leaves headroom for ongoing buybacks; and 3) underinvestment and supply tightness, suggesting a structural production decline in most non-OPEC (Organization of Petroleum Exporting Countries) and several OPEC countries.

According to Goldman Sachs, the copper market itself is now in a significant deficit phase, with the velocity of global inventory draw from peak seasonal surplus in Q1 to the end of April the highest since 2004, increasing the risk of a stockout episode this year. Despite focus on China’s services led growth recovery being a metal’s headwind, onshore copper demand has met their positive expectations – with both refined and end-demand increasing 4% year-over-year year-to-date – well-supported by property stabilization and the green economy. Ex-China demand has been flatter, though surging green energy investments and housing completions are offsetting the drag from early cycle property.

According to J.P Morgan, for aluminum, they still think prices approaching $2,000/mt are nearing fundamental cost support. While a temporary dive below these levels is possible, without significant moves lower in power or input prices, they would expect monthly average prices to find a floor around these levels in the coming months, aided by boosted consumer hedging flows. Wood Mackenzie’s latest estimates for the 50%-tile of the global aluminum smelting cost curve sits at $1,990/mt. This mid-point of the cost curve has historically acted as a floor for aluminum prices.

The global lithium market is facing a supply crunch toward the end of this decade amid wider adoption of electric vehicles, with more than $51 billion in investments needed to meet future demand of rechargeable batteries, according to Benchmark Mineral Intelligence. “We need to move urgently here or we’re going to have massive problems meeting the demands of the auto industry,” Chief Operating Officer Andrew Miller told a seminar in New York.

Canada has been experiencing unusually extensive wildfires that are affecting logistics and forestry operations. The impact on pulp production has been limited so far, although risks remain and Canada was already tight from a wood availability perspective. So far, there has been a limited impact on overall pulp supply/demand. In terms of market updates, producers managed to implement a $30-40/ton hardwood price hike in China.

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 6/30/2023: Filo Corp. 6.91%, Iris Metals Ltd. 1.55%, Ivanhoe Mines Ltd. 6.12%, BHP Group Ltd. 0.00%, Critical Elements Lithium Corp. 1.42%, Shell PLC 0.00%, Electra Battery Materials Corp. 0.26%.

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 1 percentage point.

Top 10 Equity and Debt Holdings as of 6-30-2023

Industry Breakdown as of 6-30-2023

Regional Breakdown as of 6-30-2023

Growth of $10,000 Over 10 Years as of 06/30/2023

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 08/31/2023

Quarter End Average Annual Total Returns as of 06/30/2023

For the quarter, the Near-Term Tax Free Fund declined 0.01%, outperforming its benchmark, the Bloomberg Municipal Bond 3-Year Index, which fell 0.45%. 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 is closer to 1.5 years compared to the benchmark at three years. Short interest rates at the one-year to five-year marks declined 30 basis points (bps) and 10 bps, respectively, for the quarter, giving an advantage to the three-year benchmark performance relative to the fund and its peers. That entire shift in the curve reversed in April, with rates higher than at the end of the March quarter. 

Strengths

• The fund’s allocation to bonds from Texas, Oklahoma and Illinois outperformed, respectively.
• The fund benefited from its allocation to state general obligation, school districts and education, 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 most attributed to the duration of the fund being shortened relative to the benchmark.

Weaknesses

• The fund’s allocation to bonds from New Mexico, Colorado and Michigan underperformed as did many other states.
• The fund’s exposure to general revenue bonds, water utilities and multifamily housing 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 

We believe the Federal Reserve is likely near the end of its rate-hiking cycle to cool inflation. What has confounded the Fed and economists is how resilient the labor market has remained despite one of the most aggressive Fed hiking cycles in its history. However, manufacturing is showing some signs of a slowdown. The U.S. dollar rose 40 bp during the quarter but is still down slightly for the year.

Economic data shows a slowing of inflation, which is likely a result of higher rates. However, there were major commodity dislocations with the isolation of Russia from most Western trading partners, which was the catalyst for this inflation cycle, but those initial shocks have stabilized, bringing down inflationary pressures too. The municipal yield curve remains inverted with all notes shorter than nine years trading at higher yields. The highest yielding opportunities are with shorter-dated municipal notes with six-month to one-year maturities. Credit quality probably peaked when Covid relief funds were flowing to states and municipalities to shore up capital needs, but those support payments are gone now. Should a recession become more certain, those conditions could change.

California, New York and Texas are the largest state weightings in our benchmark, comprising 38% of the index. We are overweight Texas, Oklahoma and Minnesota but 80% underweight California and 60% underweight New York. States like Texas and Minnesota were among six states that saw positive tax revenue growth of 15% or more in the first quarter of 2023. In contrast, California and New York had tax revenue growth reported as below 0% in the same study, according to the Bureau of Labor Statistics (BLS).

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 6-30-2023

Industry Breakdown as of 6-30-2023

Top 5 States as of 6-30-2023

Growth of $10,000 Over 10 Years as of 06/30/2023

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 08/31/2023

Quarter End Average Annual Total Returns as of 06/30/2023

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 1.30% for the quarter, outperforming its benchmark, the Barclays U.S. Treasury Bills 6-9 Months Total Return Index, which returned 1.06%. 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.

Current Outlook

The year is starting to rebound from the steep losses of 2022 associated with the jumbo rate hikes. Economic signals are mixed in that employment is still strong, but diesel fuel demand points to a weakening economy. The Federal Reserve has stepped back from jumbo 75 basis point (bp) hikes in favor of smaller 25 bps hikes, and there is the view that the Fed may eventually have to cut interest rates in late 2023.

Inflation has tapered off only a bit. The municipal yield curve remains inverted from the prior year’s lift in short-term rates. The Fed’s tone is bearish, keeping rates up high enough to tame inflation, but two bank failures in the first quarter alone must be a red flag.

Given that the U.S. is moving forward with transforming its auto industry from internal combustion engines to electrically powered engines, 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. The U.S. dollar strengthened for the first couple of months of the quarter, but it slid downward in March to lose 1% for the quarter. Continued U.S. dollar weakness could push interest rates higher.

The Federal Reserve may slow down its interest rate hikes to just 25 bps as the central bank assesses the impact of the prior rate hikes in 2022. Inflation has shown some signs of cooling, but new job growth still remains strong. The yield curve remains inverted. The market has taken a more optimistic view than the Fed and is expecting that the bank will have to start cutting interest rates in late 2023. The Fed’s tone is more bearish, keeping rates up high enough to tame inflation.

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 6-30-2023

U.S. Government Securities Ultra-Short Bond Fund
Growth of $10,000 Over 10 Years as of 06/30/2023

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 08/31/2023

Quarter End Average Annual Total Returns as of 06/30/2023

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.