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Please note: The Frank Talk articles listed below contain historical material. The data provided was current at the time of publication. For current information regarding any of the funds mentioned in these presentations, please visit the appropriate fund performance page.

From Constantinople to Istanbul, Turkey Has Never Been Better
June 2, 2014

Istiklal Caddessi, the main shopping street in Instanbul, TurkeyEvery time he travels to Turkey, portfolio manager of our Emerging Europe Fund (EUROX), Tim Steinle, says the country continues to develop. Although technically classified as an emerging market, one wouldn’t think to label the country as such upon arrival. The population is young and growing, there are improvements to infrastructure everywhere you look, beautiful green parks are more prevalent, and the professional staffs that run many of the shops and businesses are both well organized and thriving.

Tim told me the entire taxi system has improved upon each visit that he makes. There are newer, cleaner cars, and more professional drivers who run meters without being asked to do so. The same higher quality of service holds true when it comes to hotels, restaurants and employees of bus systems and airlines. Tim says these kinds of improvements are merely a side show in comparison to even larger companies that are run by world-class management teams.

A sweet spot in Turkey.
As Tim saw first hand, wanting the richer things in life can start with something simple, like chocolate. During his time in Turkey, he visited the Ulker Chocolate factory, a highlight for him and the group of individual investors he was traveling with.

Ulker Chocolate FacotryThe Ulker family owns the global Godiva brand through its Yildiz holding (a major Turkish manufacturer of food products), while the remainder is held by the publicly listed Ulker company.

Ulker, the market leader among Turkish chocolate companies, processes its cocoa beans in-house, unlike many of its competitors. Ulker has started a pilot farming project in Ghana. Although there were no photographs allowed inside the Ulker plant, Tim was very impressed with what he saw and shared this observation, “The plant was spic-and-span, and the cocoa bean processing hardware was just as complex as I have seen at a petroleum refinery.” Ulker is one example of the dynamic nature of many companies in Turkey; nothing is static for them, and innovation is constant.

Car purchases continue to drive growth.
Fiat is another company that is capitalizing on the consumer-oriented growth in Europe. Fiat-branded cars are manufactured around the world, but the company also has joint ventures in several countries including Turkey. Fiat S.p.A. is a majority shareholder in Chrysler and parent company to the Fiat Group.

Tim visited Tofas headquarters during his trip, and as you can see in the photo below, he and the rest of the group were able to check out the Fiat Doblo, a vehicle that looks very similar to a van but also has characteristics of most sports utility vehicles.

The Flat DobloIn 2010, Tofas, Fiat’s JV partner, began building the newest version of the Doblo in Turkey. There are several versions of the vehicle, including the Doblo EV, which is the all-electric version. The Doblo is also coming to the U.S. as Dodge Ram, and will be branded as a light commercial vehicle.

Tim pointed out to me the growing number of European-made vehicles that we see today, including the Ford Transit which is similar in style to the Doblo. The Transit was the first product of Ford of Europe, a subsidiary of Ford Motor Co., and won the 2010 Truck of the Year award. Volkswagen is yet another car company with European roots. “Just look under the hood,” says Tim, “these cars’ engines are made in Hungary.”

Money in the bank.
We know an increasing majority of the Turkish population has more money in their pockets, but how are Turkish banks doing? It seems the financial sector and individual banks are keeping up with the demand for innovation. One of the companies Tim met with while in Turkey was Garanti Bank, the second-largest private bank in the country.

Garanti Bank's ATM MachinesTim was impressed with the bank’s presentation and the incredible functionality of Garanti’s ATM machines. In the U.S. it is common to use an ATM to withdraw money, check your account balance, and in some instances deposit money. The Garanti ATM allows users to make over 100 different types of transactions!

Available to both Garanti customers and those who do not bank with the company are unique packages of cardless services in a network of over 200 ATMs from all over the country, according to Garanti’s website. A few examples include mobile phone recharges, exchange transactions with different currencies, invoice payments and deposits, all without needing to have your bank card with you.

Yet again we see world-class innovation from a Turkish company. The financial sector in Turkey, as well as in Greece as I've written about recently, has taken off in the last year. After concerned investors sold their emerging markets holdings last year, the central bank in Europe took action by raising rates this February. It was at this time that we saw a tremendous rally in Turkish banks and the lira began to stabilize. Strength returned to financials.

Turkish Banks Rally After Central Bank Stabilizes the Lira
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Investing in the best.
At U.S. Global Investors we are always looking for companies that are growing. As an emerging market, Turkey is dependent on foreign inflows, but the positive growth throughout the country is incremental and simultaneously wide-spread in many companies both big and small. Within our EUROX fund, it is companies like the ones Tim visited that we like to invest in; those that are in growing sectors of the market and display robust fundamentals.

To see the industries and names we feel are promising within emerging Europe, check out the composition of our Emerging Europe Fund.

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. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio. The Emerging Europe Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking industries.  The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.

F Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the Emerging Europe Fund as a percentage of net assets as of 03/31/14: Chrysler Group LLC 0.00%, Fiat S.p.A. 0.00%, Ford Otomotiv Sanayi AS 0.96%, Turkiye Garanti Bankasi AS 2.58%, Tofas Turk Otomobil Fabrikasi AS 3.00%, Ulker Group 0.00%, Volkswagen 0.00%, Yildiz Holding 0.00%.

F All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The Borsa Istanbul-Banks Index (XBANK Index) is a capitalization-weighted, free-float adjusted Industry Group Index composed of National Market listed companies in the banking industry. All members of the index are also constituents of the XUMAL Sector Index.

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The Good, the Bad and the Opportunity
May 12, 2014

With so many headlines, it can be tough to sort through the market news.The press is demanding the attention of investors more than ever. Whether it was the recent jobs report or last week’s testimony from Janet Yellen, sorting through the market noise is no easy task. Since the world is so interconnected from Facebook to WhatsApp, a spark of news can ignite unfounded fear in an instant. What’s truly significant when it comes to your investments?

Twice a day, in the morning and at lunch, our investment team sits down together to discuss what’s important and what’s immaterial. Last week, in my opinion, the good outweighed the bad. Much of the economic news was a direct result of government policies, both fiscal and monetary. Here are my findings, which I hope will help you filter through the noise.

Government Policies are a Precursor for ChangeWhat are the challenges?
1. As you probably know by now, the Global Purchasing Managers’ Index (PMI) is one of the key metrics we pay attention to as a gauge of the global economy’s strength. In April, the Global PMI fell from 52.1 to 52.0, and though the drop was small, investors who previously were encouraged by a synchronized growth cycle, lost some confidence. Japan’s services and manufacturing PMI readings dropped precipitously. The services PMI plunged to 46.4 in April and the manufacturing PMI fell to 49.4. Both numbers were above the 50 mark in the previous month.

A Setback From Japan's Prime Minister's AbenomicsThe reason for Japan’s slump lies in the consumption tax rate hike, from 5 percent to 8 percent, imposed on the country on April 1. The tax increase was aimed at decreasing the country’s huge public debt, nearly 245 percent of GDP. Just when Japan was finding its economic foothold for recovery, the restrictive fiscal policy caused economic activity to stumble.

Why it matters: The reason for the fall in Global PMI is directly related to Japan’s fall in PMI. Japan has become a drag on global growth. It’s important to recognize the root cause – increased taxes just as monetary stimulus measures were seeing results. This is not good for economic growth and should serve as a cautionary tale for other countries.

Is Japan's Composite Purchasing Managers' Index Dragging Down Global Growth?
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2. Another challenging area of the market is China. China’s manufacturing PMI came in lower at 48.1 in April, contracting for the fourth month in a row, and the country also saw a decline of 0.3 percent in its consumer price index (CPI). Employment in the Asian nation is also at a seven-month low, adding growth concerns for the country.

Why it matters: This negative data means there is potential for fiscal policy easing, allowing the Chinese government to boost the economy in the coming months.

Focus on the strong points.
1. The rate of change of global industrial production (IP) was slowing until the close of 2013. Now, however, the global growth outlook is improving. You can see that an inflection point was hit in mid-2013, reaccelerating IP and coinciding with the global GDP outlook for 2014.

Global Industrial Production is Rising
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Europe is also doing well. The eurozone composite PMI, a good indication of growth, rose to 54.0 in April. In addition, Spain and the U.K. saw increases in GDP in the first quarter and Spanish banks are seeing a decline in bad debts.

Eurozone Composite PMI Sees a Boost
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Why it matters: When global IP moves up, this is a sign that momentum in the global economy has changed – for the better. This is good for commodities such as oil, gas and copper, but also for cyclical areas like energy and industrials. There is no doubt that people in every country want upward mobility for their families, and as the demand for better education, cars, etc. continues, commodities and cyclicals should benefit.

As wages begin to rise, workers have more money to spend, boosting the economy.2. In a recent report, ISI also highlights that minimum wages are going up in the U.S., citing examples of multi-year wage increases for those who had not received pay increases for the last several years. Various groups who received no increase before will now see a 4 percent rise per year, a leading indicator of wage growth trends. Consumer net worth is also expected to rise by $7.1 trillion in the second quarter, taking it to $82.5 trillion.

Why it matters: Real incomes are expected to rise as wage increases outpace inflation. With the uptick in consumer net worth and steady job growth, consumers will feel more comfortable spending.

3. Bank loans have seen an increase of 10.4 percent annualized over the last 14 weeks. As you can see in the chart below, the number of loans continues to increase. According to the Wall Street Journal, one area where bank lending has accelerated is to commercial businesses.

U.S. Bank Loans Continue to Increase in 2014
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Why it matters: This positive trend is a potential inflection point for the economy because it indicates economic acceleration. Not only are banks making it easier to borrow by relaxing lending standards, companies are confident enough about the economy to want more money to grow and invest. The WSJ goes on to say that earnings in April from the six largest banks in the U.S. pointed to an increase in commercial loans of 8.3 percent in the first quarter from last year.

Economic data around the globe continues to remain supportive. Even among challenges, there are opportunities to be found. For example, on Thursday we heard that the European Central Bank is likely to ease interest rates in June. This could be another catalyst for Europe, which is already showing improving economic activity.

Keep Calm and Invest OnSimilarly, China’s inflation is at an 18-month low as of yesterday, which could increase the odds of a policy response, a positive stimulus for the economy. Japan is dealing with the same thing; the country committed to Abenomics and will likely respond with additional policy support to get back on the recovery track. Don’t let negative news overshadow good news and keep in mind that bad news tells you where the opportunities are.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more of U.S. Global Investors Funds as of 03/31/2014: Facebook.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the links above, you may be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content.

The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals. The weights of components are based on consumer spending patterns. The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. The J.P. Morgan Global Purchasing Manager’s Index is an indicator of the economic health of the global manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

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The Top Five Government Policies I’m Watching This Week
May 6, 2014

Every morning when I meet with the investment team, we review the news of the previous day, the movements of the markets around the world, and corporate actions that may affect our funds. This is how we keep our ears open in order to manage money that shareholders like you have entrusted us with. We meet again at lunchtime, daily, to share ideas, because something happening in China may affect the U.S. markets, or an energy company might have news that can benefit our domestic funds as well as our resources funds.

One critical factor that we always watch is government policy. Because we know that government policy is a precursor to change, we are constantly following global politics and analyzing how shifts can affect your investments.

Here are five government policy factors that we are watching to manage our fund portfolios:

  1. New Federal Reserve chair Janet Yellen is going to affect interest rates.

Janet Yellen has been attracting a lot of attention since taking over as Federal Reserve chair. The Fed sets monetary policy, so everyone is looking to her to see when tapering might start or when interest rates will rise. As I’ve written about before, negative real interest rates are positive for gold. Interest rates have been hugging the line lately, and we’ve seen gold react with moves up and down.


click here to enlarge

What we’re watching: The Fed will likely keep interest rates low, to encourage investment. Rates may rise with inflation, but the net effect on real interest rates will likely remain about the same. This is bullish for gold, so we’re watching how the gold mining companies in the Gold and Precious Metals Fund (USERX) and World Precious Minerals Fund (UNWPX) may be able to use this to their advantage.

  1. China is revising its one-child policy.

China’s government realizes that it needs to loosen the one-child policy in order to create a sustainable workforce. Longer term this means population growth in China as more babies are born. Take a look at the visual on page seven of my recent Investment U speech. Currently, every American born will consume 2.9 million pounds of minerals, metals and fuels in their lifetime. China’s middle class is growing, and we see rising demand for energy and all sorts of resources in China. Chinese babies will consume even more throughout their lifetime than their parents’ generation will.

What we’re watching: demand for natural resources of all kinds. Look at the diverse approach of the Global Resources Fund (PSPFX). Metals, food, transportation of goods, and fuel are all potential beneficiaries of this population growth.

  1. We are in year two of the presidential election cycle.

We are approaching the mid-term Congressional election cycle. Looking at the pattern of four-year presidential terms from 1953 through 2013, we see that generally in year two, the S&P 500 Index trends sideways to down for a few months in the Spring, before trending upward again in the Fall. These are patterns to be aware of as leaders make plans before wooing the electorate. But looking at a longer period of history, from 1928 through 2013, April itself is usually a positive month.


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What we’re watching: Past performance doesn’t guarantee future results, but it helps to keep the long-term trends in mind. Our management strategy for the Holmes Macro Trends Fund (MEGAX) takes advantage of these trends in the domestic market. We look for companies with robust fundamentals that are participating in the leading sectors and leading industries of the market.

  1. The conflict between Ukraine and Russia is changing the European markets.

Geopolitical conflict has the potential to shake up the markets, and the recent declines in the Russian stock market bear that out. Fortunately we have the benefit of a long history of investing in the Russian market, and tacit experience as a minority shareholder. We have taken these events as an opportunity to reposition the amount of risk we’re willing to take after the Crimea situation.

What we’re watching:  Other European markets hold particular opportunities. Greece has been making great strides in its economic recovery, and we are looking to the banking industry, which we believe is in a good position to benefit. Also, Turkey has been one of the best-performing markets overall this year, up 10 percent year-to-date.

  1. China is pushing for cleaner energy.

It’s no secret that China has problems with smog and pollution, and the Chinese government is taking an active approach in addressing this issue. I’ve written before about how China is supporting multiple forms of alternative energy. Coal is heavily used in China, but the government has a plan to increase usage of natural gas, which is a cleaner form of energy. Also, China plans to add 10 gigawatts of solar capacity each year for the next couple of years.

What we’re watching: Solar stocks in the U.S. and in China are benefiting from this support. We’re watching this energy niche grow, and we’ve positioned some of our funds to benefit from companies that manufacture solar components, like First Solar and Trina Solar. We are also participating in companies like NRG Yield Inc. and Pattern Energy Group Inc., which are solar and wind farm companies that sell energy into the grid, and pay out a dividend.

These are five government policies that we’ll be watching this week and in the weeks ahead. This is another reason why I believe in the importance of active management. Our team is attuned to these sorts of global government policies, in our daily efforts to maximize the growth and protection of our shareholders’ assets.

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

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.

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, World Precious Minerals Fund, Global Resources Fund and Holmes Macro Trends Fund as a percentage of net assets as of 3/31/2014: First Solar (Global Resources Fund 0.19%); NRG Yield Inc. (Global Resources Fund 0.22%); Pattern Energy Group Inc. (Global Resources Fund 0.85%); Trina Solar (Global Resources Fund 0.98%, Holmes Macro Trends Fund 0.87%)

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

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Albania’s Fertile Grounds for Oil Opportunities
May 5, 2014

Texas is oil country. The state I now call home leads the nation in oil production and would be one of the top oil-producing nations if it were its own country. But that doesn’t stop us from exploring other promising oil opportunities further afield. I recently traveled to Albania to check out a drill site of Petromanas Energy, a Calgary-based international oil and gas company focused on exploration and production throughout Europe and Australia. We own the junior stock in our Global Resources Fund (PSPFX) and Emerging Europe Fund (EUROX).

To many, Albania is an unknown country yet it has a rich and interesting history. It declared independence from the Ottoman Empire in 1912, was conquered by Italy in 1939 and occupied by Germany in 1943. Albania allied itself with the USSR until 1960 and then with China until 1978.  Democratic development has progressed since the country’s first multiparty elections in 1991. The 2009 general elections resulted in the country’s first coalition government and the 2013 election saw a peaceful transition of power. A parliamentary democracy, the country has steadily been welcoming foreign direct investment (FDI) since it shifted away from communism in the early 90s. The recent FDI into the country comes on the back of the extensive development of its rich petroleum resources.

Third Time’s a Charm
This was my third trip to Albania. I last visited the country in 2004 when we were seed investors in another oil play there, Bankers Petroleum. Today Bankers’ Albanian discovery is the largest onshore oilfield in all of Europe. The company is now close to 40 percent of Albania’s FDI and is reinvesting all cash flow back into the country, about $300 million per year. Bankers has done an amazing job cleaning up the environmental disaster left behind by previous operators of the assets which Bankers is developing. Today the fields are green and sheep roam freely. Old and dirty early rigs have been replaced with new safer, cleaner technology.

So much has changed since my last visit.  The country is more prosperous and more verdant. Capital city Tirana’s infrastructure and roads have improved by a quantum leap in the past 10 years. Every morning I ran in Rinia Park, the large central public park, with Marin Katusa of Casey Research. We were impressed with the hundreds of locals jogging at 7 a.m.

Meeting A Man of Many Colors

On this visit I was honored to meet the Prime Minister of the country since 2013, Edi Rama, who also served as the mayor of Tirana from 2000 to 2011. He is a fascinating leader. Rama is a native of Tirana and, in addition to becoming involved with the first democratic movements in Albania, he is an artist and a former basketball player for the Albanian national team. He is, to a large degree, responsible for the vibrancy I saw in Tirana, his Clean and Green project resulting in nearly 100,000 square meters of green land and parks, and his creative efforts to use art and color helping to curb corruption and revive civic pride and responsibility. You’d enjoy watching him explain this dramatic transformation in his TED talk Take Back Your City with Paint. Rama has helped form a stable political environment in Albania, just one reason Petromanas Energy has invested in drill sites here.

Fertile Ground for Oil and Gas
The company’s assets in Albania cover more than 1.1 million gross acres.  In the company’s presentation during our visit, management explained why Albania’s landscape is also key. Petromanas is exploring for large, deep, fractured carbonate structures of Eocene-Cretaceous age, similar to those in southern Italy which are the sites of several prolific oil fields.

Greek 10-Year Government Bond Yields Back to Pre-Crisis Levels
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Located across the country’s Berati thrust belt, you can see the multiple wells in the map below: Papri, Shirag and Molisht. Petromanas is looking for a light oil deposit in these wells. Super major Royal Dutch Shell has invested $200 million to partner in these plays.

While at Petromanas properties, our group saw a few of these wells, but most notable was the visit to the Molisht-1 well that is currently being drilled. As Keith Schaefer points out in his recent Oil and Gas Investments Bulletin on the Albania trip, the Molisht-1 well has the potential to be an 8,000-10,000 barrels of oil production per day well, an absolute company maker. And according to Petromanas’ presentation, the Molisht-1 well could potentially hit earlier than expected, which would be a positive surprise for the company.

What do the founder of Lionsgate Entertainment and a former NATO Commander have in common?


click to enlarge

Petromanas Energy is an example of a company that is currently in a strong area of the market and exhibits robust fundamentals. Its management, research and location are only a few reasons I see great potential for this organization. Escorting us on the research trip were two of the company’s directors, my good friend the legendary Canadian venture capitalist and philanthropist extraordinaire Frank Giustra, and General Wesley Clark, who as the former Supreme Allied Commander Europe, led the charge to stop Serbian forces from committing genocide in Kosovo. I’ve also had the privilege of working alongside these distinguished gentlemen with the International Crisis Group, a non-profit, non-governmental organization committed to preventing and resolving deadly conflict around the world.

The Path from War to Peace and Prosperity in 20 Years

Albanians and their Balkan neighbors have seen more than their share of conflict. The trigger for World War I was the assassination in Sarajevo of Archduke Ferdinand, heir to the throne of Austria-Hungary, by a Yugoslav nationalist in 1914. The Yugoslav Wars fought from 1991 to 1999 on the territory of former Yugoslavia have been described as Europe’s deadliest conflict since World War II and the first since the Great War to be formally judged genocidal. It is estimated at least 130,000 lost their lives.  In the last of these ethnic conflicts, the Kosovo War, a million ethnic Albanians fled or were forcefully driven from Kosovo by Yugoslav troops. Under the command of General Clark, NATO forces bombed Serbian forces to prevent the continued displacement and persecution of the Albanian people.

Prime Minister Rama told us that he is profoundly grateful to the American people, President Clinton, and NATO for saving the lives of at least 900,000 Albanians and ushering in stability and positioning the region for progress. It was a case study in the successful use of force to bring peace to a region and a consequent drive for prosperity for its people. Our collective investment in this humanitarian success story is paying dividends for a new generation of Albanians. The country’s transition to a free market economy has been difficult and there are many economic challenges on the road ahead but the government believes in creating a path favorable for business. Companies such as Bankers Petroleum and Petromanas are helping Albania to develop its natural resources, improve its economy and create growth opportunities for investors who see the potential of this resilient country.

Greek 10-Year Government Bond Yields Back to Pre-Crisis Levels

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.

Past performance does not guarantee future results.

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.

By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio. The Emerging Europe Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking industries.  The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the Global Resources Fund as a percentage of net assets as of 3/31/14: Bankers Petroleum 0.00%, Petromanas Energy 0.05%, Royal Dutch Shell 0.00%. Holdings in the Emerging Europe Fund as a percentage of net assets as of 3/31/14: Bankers Petroleum 0.00%, Petromanas Energy 0.18%, Royal Dutch Shell 0.00%.

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

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We’re Shuffling the Cards on Our European Play
April 14, 2014

Did you know that over the last year the Greek stock market is up roughly 45 percent? The country that many believed would never recover from a six-year recession is now making astounding strides, recently being added to the MSCI Emerging Markets Index at the end of 2013.

As I’ve witnessed new strength from this “comeback country,” along with a rise in foreign investment into emerging markets as a whole, our investment team is currently strategizing to adapt our game to new European plays. Here are the game changers we see:

We're looking to play our cards right to capture opportunity in the European recovery.Greece Wants Back in the Game
Last week, Greece returned to the international markets with a five-year bond sale, quickly topping $4 billion according to Bloomberg. The yield on these bonds is a little under 5 percent, an attractive number in comparison to other countries’ currency bonds. Greece has been shut out of the bond market for roughly four years now, but I believe the country’s reentry last week is an imminent sign of recovery. 

In the Investor Alert on March 28, we highlighted another indicator of Greece’s recovery. The Greek 10-year bond yields are back down to 2010 levels and the country’s economy is expected to grow by 1.1 percent this year. These conditions have boosted consumer confidence and allowed Greek banks to recapitalize, changing the lending landscape in a credit-starved nation.

Greek 10-Year Government Bond Yields Back to Pre-Crisis Levels
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A recent Reuters’ article discussed the Greek bond sale stating that, “It would not only raise confidence in Greece’s ability to fund itself and aid its recovery, but it also offers Europe the chance to claim its widely-criticized crisis medicine of tough cuts and austerity was necessary, and ultimately successful.”

In fact, last October our Director of Research John Derrick expressed his confidence in the country during a time when most investors wouldn’t offer Greece a second look. He said the country’s current account situation could move from a deficit to a surplus in 2014. As it stands now, several strong economic signs are pointing to John’s positivity on the country, including the fact that Greece hit a surplus before 2014 even began, as you can see in the chart below.

Greece Posts Current Account Surplus in 2013
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One way we are playing these powerful signs within our Emerging Europe Fund (EUROX), is through Greek banks such as Alpha and Piraeus. These banks recently recapitalized, and with the Greek banking industry now consolidated to only four major banks, these names are poised to benefit from the economic recovery.

The Cards Are Stacked Against the Russian Investment Case
I have always believed that government policies are a precursor to change, and witnessing the drama with Putin in the Russian corner of the globe, I think now is a perfect time to shuffle our investment deck and underweight our portfolio to the country. We noticed economic growth in Russia beginning to slow in 2013, with few identifiable, positive catalysts, but the recent geopolitical tension with Ukraine was the final indication of an undesirable shift.

Since the breakout of conflict between Russia and Ukraine, investor confidence has dwindled in the area, and as you can see in the chart below, the two countries directly involved in the clash are the ones showing the highest market-risk impact.

Dramatic Increase in Market Risk in Ukraine
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Towards the end of 2013 I wrote that European equities had seen the longest streak of inflows in over 11 years, as investors began noticing this area of the globe as a spectacular investment opportunity. In addition to many strong areas in developed and emerging Europe, several of these equities were in Russia, and continue to be in Russia. Despite the disorder and our decreased exposure to Russia, we still see resilient stocks with growth opportunities. Two examples of strong Russian names include Norilsk Nickel, a nickel and palladium mining company, along with an Internet company, Mail.Ru.

When it comes to actively managing a portfolio, it’s all about playing your cards right, and at U.S. Global Investors we seek to manage risk while pursuing opportunity for our shareholders.

Turkey’s Turnaround
Greece isn’t the only country returning to the Eurobond market. Last Wednesday, Turkey sold 1 billion euros of nine-year bonds for the first time this year. The bonds, which will mature in 2023, should help the country with financing needs for the remainder of 2014.

Investors showed particular interest in Turkey’s bond issue, but have also started looking to the country as a prime tourist destination. Istanbul, the largest city in Turkey, recently jumped 11 spots to take this year’s No. 1 position on TripAdvisor’s Traveler’s Choice list of global destinations, according to CNN.

Passenger growth in Turkish airports is taking off, seeing year-over-year growth of 15 percent in both international and domestic passengers. Additionally, Turkish Airlines flies to more countries around the world than any other airline! No wonder people love to visit this country. One way we capture this strength for our European fund is through a Turkish airport operator, TAV Airports.

Join me for an investment adventure in Turkey, May 4-17, 2014In fact, I too will be participating in this outstanding growth when I travel to Turkey next month. U.S. Global is inviting all curious investors to take part in this exciting trip as well! I encourage you to read about the opportunities we will be exploring in Turkey straight from the experts.

So inspite of Turkey’s underperformance last year, the country is up 10 percent year-to-date, and over the past decade Turkey’s economy has more than tripled. Consumer confidence is back on track and the long-term, secular growth story remains intact.

Follow the Money
I believe the European recovery is a story worth telling, and within our Emerging Europe Fund (EUROX) we use our investment model to lead us not only to the strong and stable countries in this emerging market, but also to the strong sectors within each country. As Western Europe continues to recover, we believe companies with robust fundamentals in emerging Europe provide leverage to this growth. Explore this opportunity to invest in companies we believe are playing their cards right.

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.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the Emerging Europe Fund as a percentage of net assets as of 03/31/14: Alpha Bank AE 1.98%, Mail.Ru 0.00%, Norilsk Nickel 0.00%, Piraeus Bank SA 2.34%, TAV Havalimanlari Holdings Inc. 0.75%.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio. The Emerging Europe Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking industries.  The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets.

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Net Asset Value
as of 09/25/2017

Global Resources Fund PSPFX $5.78 -0.04 Gold and Precious Metals Fund USERX $8.02 0.06 World Precious Minerals Fund UNWPX $6.69 0.06 China Region Fund USCOX $10.96 -0.46 Emerging Europe Fund EUROX $6.94 -0.06 All American Equity Fund GBTFX $24.34 0.10 Holmes Macro Trends Fund MEGAX $19.99 0.03 Near-Term Tax Free Fund NEARX $2.23 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change