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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.

Russia’s Infrastructure Opportunity
December 30, 2010

Sochi, Russia Ice Palace Olympics 2014 - 123010China used the 2008 Summer Olympics as a catalyst for infrastructure development that would benefit the country in the long term. Now Russia is giving itself a makeover before it plays host to the 2014 Winter Olympic Games.

The host city of Sochi and its surrounding areas are busy building what’s needed to accommodate the thousands of visitors expected for the Games. A new $200 million airport opened for business in the fall of 2010, and officials say more than 200 sports and support facilities will eventually be constructed. This doesn’t include the road, railway, port, electrical and telecom infrastructure projects in the works.

And Sochi is just a part of the broader infrastructure effort under way in Russia as it strives to modernize itself out of the Soviet era. Along with the transportation, communication and power investments, Russia is also building schools, hospitals, housing and other social infrastructure.

Given Russia’s geographic size, its infrastructure ambitions are huge both in scale and in price. A new railway across Siberia, for example, is estimated at $13 billion and new airports can run close to $1 billion each.

The Russian Far East city of Vladivostok is preparing to host the 2012 Asia-Pacific Economic Cooperation summit – the infrastructure cost is estimated at close to $5 billion. And Russian President Dmitri Medvedev plans to spend as much as $7 billion in 2010 and 2011 on housing for the nation’s senior military officials.

On top of that, the improving relations between Russia and China stand to spread into the infrastructure realm. The Beijing government is expected to invest heavily in Russia – estimates are $12 billion over the next five to 10 years for a dozen construction projects. These projects include about $250 million to rebuild a rail link between the countries.

Infrastructure creation on this scale requires vast quantities of natural resources – energy, steel, copper, cement and more. As we have seen in China, Brazil and elsewhere, such investment typically pays off in terms of economic growth.

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Infrastructure Investing 101
November 18, 2010

InfrastructureWhen you envision America’s future, do you picture collapsing bridges, cracking dams and reoccurring brownouts? That’s certainly not the picture of America many would like to paint but it is a possibility if our country’s long-term infrastructure needs aren’t addressed.

A new article from researchers at the Wharton School of the University of Pennsylvania (America’s Aging Infrastructure: What to Fix, and Who Will Pay?) details the precarious nature of neglecting our nation’s network of pipelines, ports and power lines.

Here are some of the paper’s eye-popping statistics:

  • The U.S. has about 2.5 million miles of natural gas pipelines operated by roughly 3,000 different companies. More than half of America’s natural gas transmission pipelines were installed before 1970.
  • About 75-80 percent of the value of U.S. freight is moved via truck on our nation’s highways.
  • Government mandates and subsidies have pushed alternative energy sources up to 17 percent of Germany’s overall power supply, while that figure is roughly 1-2 percent in the U.S.
  • Less than 20 percent of America’s infrastructure is publicly owned.

President Obama has pledged $50 billion to rebuild 150,000 miles of roads, 4,000 miles of rails and 150 miles of runways but that’s only a fraction of the amount of investment needed. If America is going to give its infrastructure a comprehensive makeover, a considerable amount of investment will need to come from the private sector and this hasn’t happened yet.

Why haven’t U.S. investors embraced infrastructure investing?

A recent article from DealBook says that many of these private investors have found better opportunities abroad as foreign governments seek to privatize state entities, involve less politics and face fewer delays.

In our Global MegaTrends Fund (MEGAX), we employ a two-pronged approach to investing in infrastructure to offset some of the delays and disappointments often experienced with infrastructure investing.

First, we have taken positions in several infrastructure operators of toll roads, airports and utilities. In general, these companies possess stable cash flows, have regulated profits and pay a dividend.

One such company is Grupo Aeroportuario del Sureste, which operates airports in Cancun and southeast Mexico. As tourism traffic grows with an improving global economy and yield per passenger improves, so, in our opinion, should the company’s margins and profits.

Across the Atlantic, we’ve taken a similar position in Tav Havalimanlari, an airport operator based in Istanbul, Turkey. Tav is benefitting from Turkey’s 10.3 percent GDP growth (year-over-year) and overall growth in the region. Istanbul is only three hours by air from every major city in Europe and the airport has become a major transit hub for the region. In addition, Tav has stakes in the major airports of Macedonia, Georgia and Latvia.

Infrastructure opportunities aren’t always outside the U.S. border. Companies such as American Tower and Crown Castle provide much needed cellular and wireless infrastructure and are companies we currently hold positions in. There’s also pipeline operator NuStar Energy, which has more than 8,000 miles of pipelines and 93 million barrels of storage capacity around North America and overseas.

Second, we invest in the manufacturers and equipment makers that provide the heavy equipment needed to construct and maintain the world’s streets, sewers and electrical grids. Globally, many of these companies have seen a rise in equipment orders which has historically been a precursor to a pickup in construction activity.

The time to invest in America’s future is now, before the lights go out and the bridges fall down.

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.

By clicking the link(s) above, you will be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for its content. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. Holdings in the Global MegaTrends Fund as a percentage of net assets as of September 30, 2010: Grupo Aeroportuario del Sureste 3.65%, Tav Havalimanlari 1.93%, American Tower 1.72%, Crown Castle 1.59%, NuStar Energy 2.97%.

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Emerging Market Infrastructure Set to Drive Demand for Commodities
October 4, 2010

Every week roughly 1 million people are born in or migrate to cities in emerging markets all over the world. By 2030, the global urban population is expected to grow by 1.6 billion people and account for 60 percent of all people on Earth, according to the United Nations.

With more people to feed, house, transport and keep warm, many emerging market metropolitan areas are buckling under the pressure. A month-long traffic jam near Beijing caught worldwide attention in August. According to Merrill Lynch, the daily commute for an average office worker in China is twice as long as it is in the U.S.

Over the last two weeks we have shared with you charts demonstrating the rising demand and prices for metals and oil due to the robust rising economic activity in emerging markets.  The visual below reflects the high correlation between oil demand and urbanization, which drives infrastructure spending. 

Barrels of Oil Per Day

India is struggling to fulfill the most basic needs of its population. Nearly 40 percent of India’s population doesn’t have access to electricity and almost 400,000 children die each year from waterborne diseases because they don’t have access to clean water.

Russia relies on Soviet-era roads and infrastructure to transport its natural resources to key export hubs. Many of these roadways haven’t been updated since the early 1980s. Russia’s roadways currently rank near the bottom for quality when compared to others around the globe.

Brazil may have the widest infrastructure gap of the BRICs. The country’s investment as a percentage of GDP has been declining since the 1970s and dropped to just over 2 percent in the 2000s—roughly the same amount as the U.S. The underinvestment shows; the country ranks in the bottom quartile globally for quality of roads, quality of ports and quality of airports.

In order to get back on the right track, substantial investment is needed in global infrastructure. Merrill Lynch forecasts that more than $6 trillion in investment is required over the next three years—80 percent being invested in the BRICs.  We believe commodity prices could exceed most analysts’ expectations.

$6 Trillion in Infrastructure over the Next Three Years

Of emerging market countries, China is far and away the big spender. This table shows the investment breakdown by category. You can see that more than 81 percent of the funds go toward three areas: Energy & Power, Transport & Logistics and Water & Environment.

The spending outlined above should be a huge demand driver for commodities such as oil, coal, iron ore and for materials such as steel and cement. Equipment and construction companies could also benefit. We believe it is similar to the California gold rush when the people who made the most money weren’t the prospectors but the suppliers who sold them their picks and shovels. Water-related, transportation and logistics companies may also turn out to be accessories to the boom.

Because of rapid urbanization, decades of underinvestment and strong fiscal balance sheets relative to the developed world, the stage is set for a massive global infrastructure build-out in the emerging world.

John Derrick, co-manager of the U.S. Global Investors infrastructure fund, the Global MegaTrends Fund (MEGAX) contributed to this commentary.

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.

BRIC refers to the emerging market countries Brazil, Russia, India and China. R-squared is a statistical measure that represents the percentage of a fund or security's movements that can be explained by movements in a benchmark index. R-squared values range from 0 to 100. An R-squared of 100 means that all movements of a security are completely explained by movements in the index.

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Another Shot at Infrastructure
September 8, 2010

This week President Obama announced a $50 billion infrastructure plan to improve the nation’s roads, railways and runways over the next six years. The plan also lays out long-term plans for America’s infrastructure by developing an infrastructure bank, expanding environmental sustainability and integrating a high-speed program over the next generation.

Obama's Infrastructure Plan

The announcement couldn’t come at a better time. Data released last week shows that construction spending fell to a 10-year low in July and the country lost 54,000 jobs in August.

Infrastructure investment can improve both these figures. According to federal figures, every $1 billion invested in infrastructure can create about 35,000 jobs and fuel $6.2 billion in economic activity.

Another Shot at Infrastructure Image

When President Obama took office, one of his first promises was to put Americans to work by repairing crumbling infrastructure.

Roughly $230 billion worth of his economic stimulus plan was allocated to infrastructure, but only about $66 billion had been paid out by mid-August, according to The Wall Street Journal.

Where is the money going? California, hard hit by the recession, currently has 8,000 approved projects valued at $25 billion, while Texas has 3,000 projects ($14.6 billion) and New York has 3,500 projects ($12.7 billion). In all, there are nearly 80,000 infrastructure stimulus projects approved or under way across the U.S., according to Recovery.org.

Measuring the impact of another $50 billion will take some time as the President’s plan is intended to take six years. However, with our nation’s infrastructure investment needs estimated to be over $2 trillion, every little bit counts.

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India’s Achilles Heel
August 27, 2010

Achilles Heel IndiaPoor infrastructure continues to be an Achilles heel for India—if it were better, analysts say, the country could add 1-2 percentage points to its annual economic growth rate of around 8 percent.

India spends $17 per capita annually on infrastructure and capital investment—by comparison, China spends $116. With millions of people moving to India’s cities each year, McKinsey says the country will have to spend $1.2 trillion on infrastructure just to meet basic needs. This works out to $134 per person, or about eight times current levels.

The Delhi government has a plan to spend $500 billion on infrastructure by 2012 and twice that amount in the subsequent five years. But there’s a big difference between plans and execution—India is scheduled to host the Commonwealth Games in just a few weeks, but many of the venues are still not ready due to corruption and inefficiencies.

Eight miles of new roads are being built each day, but the official target is 12 miles per day. Desperate for more electricity, the Indian government turned to a failed Enron project that had been dormant for a decade.

One reason for lagging infrastructure is a lack of qualified engineers. A New York Times article this week said many of the best and brightest are going into the high-tech sector rather than the less glamorous (and less lucrative) world of roads and bridges.

Despite the challenges, Morgan Stanley analysts think India’s economy could begin growing faster than China’s as early as 2013. MS says this is because India’s ratio of working age population to dependents is improving while China’s is declining. Their government has been successful at creating jobs and the country has a strong footing in the lucrative global services export market.

But for India to overtake China’s growth pace, it’s vital that the country get better at executing on its ambitious infrastructure vision.

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Net Asset Value
as of 11/22/2017

Global Resources Fund PSPFX $5.97 0.03 Gold and Precious Metals Fund USERX $7.36 No Change World Precious Minerals Fund UNWPX $5.76 0.03 China Region Fund USCOX $12.18 0.03 Emerging Europe Fund EUROX $7.09 0.04 All American Equity Fund GBTFX $24.06 -0.05 Holmes Macro Trends Fund MEGAX $21.36 -0.06 Near-Term Tax Free Fund NEARX $2.21 -0.01 U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change