Digging up a Sweet Find in Africa

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  Evan Smith, portfolio manager at U.S. Global, recently traveled thousands of miles by plane, helicopter and jeep to his destination in sub-Saharan Africa. Surrounded by hundreds of miles of forest and savannah, it’s tough to imagine Evan would find an agricultural diamond-in-the-rough nearby.

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  You never know where in the world you’ll find a sweet or savory opportunity.

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  Evan Smith, portfolio manager for the Global Resources Fund, traveled nearly 6,000 miles to Kenema in Sierra Leone, which is in the Western part of sub-Saharan Africa.

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  Sierra Leone has nearly 5.6 million people living within its peaceful borders today, recovering from a decade-long civil war that ended 11 years ago. Evan found the rural people, mostly farmers and fisherman, to be very friendly.

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  The heart of Africa has been beating strong in recent years due to elevated commodity prices and resilient domestic demand, despite the global economic slowdown.

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  The countries in sub-Saharan Africa are expected to be among the fastest growing economies in the world. The International Monetary Fund estimates that out of the top 20 countries with the highest projected compound annual growth rate from 2013 through 2017, 10 are in sub-Saharan Africa.

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  This is the growth Agriterra is looking to capture in its development of a cocoa plantation. Agriterra is a London-based company that invests in African agricultural businesses to serve the fast-growing economies of frontier markets.

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  When Evan toured the grounds, he snapped pictures of the initial stages of development, as the company nurtures 250,000 seedlings in a technically advanced and irrigated nursery. The blue container holds the fertilizer that is delicately fed to the plants.

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  Each cocoa sprout is planted in its own bag…

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  …and is covered by a canopy of screens which provides just the right amount of light.

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  After a few months, the seedlings will be mature enough to be transplanted to an area that provides the right amount of shade. This photo shows a three-meter grid of stakes designating where each plant will go.

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  Cocoa has traditionally been raised on small, individually owned farms, many of which have aging plants and therefore, lower yields. But with Agriterra’s advanced applications and solid operations, the development seems to be off to a sweet start.

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  The cocoa plantation is only one example of a company producing a commodity that we believe will be sought by the world’s growing middle class population. As more and more people reach this status, consumption of discretionary items, including chocolate, should increase.

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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. Distributed by U.S. Global Brokerage, Inc.

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 a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.

Holdings in the Global Resources Fund as a percentage of net assets as of March 31, 2013: Agriterra Ltd 0.57%.