-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FQYM0F7p4wAriMGtPBtNr+6ApyAAvSPCdfmXMW77tvfL119FlrrZVWufqR+h2PNi plHw/e0mWAbpaKxdhfB/5g== 0001068800-10-000017.txt : 20100304 0001068800-10-000017.hdr.sgml : 20100304 20100304161923 ACCESSION NUMBER: 0001068800-10-000017 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20091231 FILED AS OF DATE: 20100304 DATE AS OF CHANGE: 20100304 EFFECTIVENESS DATE: 20100304 FILER: COMPANY DATA: COMPANY CONFORMED NAME: US GLOBAL INVESTORS FUNDS CENTRAL INDEX KEY: 0000101507 IRS NUMBER: 741619375 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-01800 FILM NUMBER: 10657480 BUSINESS ADDRESS: STREET 1: 7900 CALLAGHAN ROAD STREET 2: P.O. BOX 781234 CITY: SAN ANTONIO STATE: TX ZIP: 78229 BUSINESS PHONE: 2103081234 MAIL ADDRESS: STREET 1: 7900 CALLAGHAN ROAD STREET 2: P.O. BOX 781234 CITY: SAN ANTONIO STATE: TX ZIP: 78229 FORMER COMPANY: FORMER CONFORMED NAME: US GLOBAL INVESTORS INC/ TX DATE OF NAME CHANGE: 19970224 FORMER COMPANY: FORMER CONFORMED NAME: UNITED SERVICES FUNDS DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: UNITED SERVICES GOLD SHARES INC DATE OF NAME CHANGE: 19841106 0000101507 S000004782 Global Resources Fund C000012993 Global Resources Fund PSPFX 0000101507 S000004783 Gold and Precious Metals Fund C000012994 Gold and Precious Metals Fund USERX 0000101507 S000004784 World Precious Minerals Fund C000012995 World Precious Minerals Fund UNWPX 0000101507 S000004785 China Region Fund C000012996 China Region Fund USCOX 0000101507 S000004786 U.S. Treasury Securities Cash Fund C000012997 U.S. Treasury Securities Cash Fund USTXX 0000101507 S000004787 U.S. Government Securities Savings Fund C000012998 U.S. Government Securities Savings Fund UGSXX 0000101507 S000004788 Tax Free Fund C000012999 Tax Free Fund USUTX 0000101507 S000004789 Near-Term Tax Free Fund C000013000 Near-Term Tax Free Fund NEARX 0000101507 S000004790 All American Equity Fund C000013001 All American Equity Fund GBTFX 0000101507 S000023572 Eastern European Fund C000069383 Eastern European Fund EUROX 0000101507 S000023573 Global MegaTrends Fund C000069384 Global MegaTrends Fund MEGAX 0000101507 S000023574 Holmes Growth Fund C000069385 Holmes Growth Fund ACBGX 0000101507 S000023575 Global Emerging Markets Fund C000069386 Global Emerging Markets Fund GEMFX N-CSR 1 usgi-ncsr.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES INVESTMENT COMPANY ACT FILE NUMBER 811-1800 U.S. GLOBAL INVESTORS FUNDS 7900 CALLAGHAN ROAD SAN ANTONIO, TX 78229 (Address of principal executive offices) (Zip code) SUSAN B. MCGEE, ESQ. 7900 CALLAGHAN ROAD SAN ANTONIO, TX 78229 (Name and address of agent for service) Registrant's telephone number, including area code: 210-308-1234 Date of fiscal year end: DECEMBER 31, 2009 Date of reporting period: DECEMBER 31, 2009 ITEM 1. REPORTS TO STOCKHOLDERS. U.S. GLOBAL INVESTORS FUNDS ANNUAL REPORT DECEMBER 31, 2009 TABLE OF CONTENTS LETTER TO SHAREHOLDERS 1 MANAGEMENT TEAMS' PERSPECTIVES 10 EXPENSE EXAMPLE 70 PORTFOLIOS OF INVESTMENTS 73 NOTES TO PORTFOLIOS OF INVESTMENTS 138 STATEMENTS OF ASSETS AND LIABILITIES 146 STATEMENTS OF OPERATIONS 152 STATEMENTS OF CHANGES IN NET ASSETS 158 NOTES TO FINANCIAL STATEMENTS 167 FINANCIAL HIGHLIGHTS 187 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 200 TRUSTEES AND OFFICERS 201 ADDITIONAL INFORMATION 204 NASDAQ SYMBOLS U.S. GLOBAL INVESTORS FUNDS - --------------------------- U.S. TREASURY SECURITIES CASH FUND USTXX U.S. GOVERNMENT SECURITIES SAVINGS FUND UGSXX NEAR-TERM TAX FREE FUND NEARX TAX FREE FUND USUTX ALL AMERICAN EQUITY FUND GBTFX HOLMES GROWTH FUND ACBGX GLOBAL MEGATRENDS FUND MEGAX GLOBAL RESOURCES FUND PSPFX WORLD PRECIOUS MINERALS FUND UNWPX GOLD AND PRECIOUS METALS FUND USERX EASTERN EUROPEAN FUND EUROX GLOBAL EMERGING MARKETS FUND GEMFX CHINA REGION FUND USCOX [USGI Logo] P.O. Box 781234 San Antonio, Texas 78278-1234 Tel 1.800.US.FUNDS Fax 1.210.308.1217 www.usfunds.com U.S. GLOBAL INVESTORS FUNDS DEAR SHAREHOLDER: A brief summary of 2009 for investors: first very bad, then very good. The first two months of the year suggested 2008 all over again -- a grim year for all markets, including natural resources and emerging economies. The S&P 500 Index and the price of oil both lost nearly [PHOTO] 20 percent in January and February 2009, while the leading emerging markets index slid roughly 15 percent. Then, in early March, came the bottom and after that a dramatic turnaround. We saw that upswing taking shape as the government took several important policy actions that boosted investor confidence. In a matter of days, a massive $787 billion stimulus plan was approved to jumpstart the struggling economy, accounting overseers clarified their bank-crippling interpretation of "mark-to-market" valuation, and securities regulators revived the "uptick rule" to shield wounded stocks from being savaged by packs of predatory short-sellers. By year-end, the S&P 500 was up more than 26 percent. The macro trends of 2009 and the related emotions, both positive and negative, had an influence on the U.S. Global Investors Funds. The rough conditions that hurt our natural resources and emerging markets funds in 2008 carried over into the new year, but the downward momentum started to reverse in early March. GDP growth in the U.S. turned positive in the third quarter of 2009 after four straight quarters of contraction. A year ago, many were doubting the strength of emerging markets and whether they would be able to lead the recovery. There were questions about China's economic potential in 2009, but the government there proved its commitment to focused infrastructure spending, social stability and job creation. Chinese banks loaned more than $1 trillion last year, for example, and half of that amount went to infrastructure projects and the industrial sector, which created jobs. In my global travels to emerging markets in 2009, I witnessed more optimism and hope among citizens there than in the U.S. or Europe. It appears that where government policies are focused on job creation, there is more confidence in the political leadership. 1 U.S. GLOBAL INVESTORS FUNDS This focus on jobs and low debt levels is a key reason why the big emerging nations have led the recovery and why we see so much opportunity in those markets. Gold appreciated nearly 25 percent to end the year just under $1,100 per ounce, with investment demand driven in large part by a deficit-weakened dollar more than offsetting the price-related decline in jewelry demand. By the end of December, our World Precious Minerals Fund (UNWPX), which focuses on junior gold-mining companies, had posted a total return of nearly 90 percent, better than all other gold-oriented mutual funds and exchange-traded funds for 2009. It was a gratifying return to the top for this fund, which was also the #1 gold fund in 2006 but faced substantial headwinds in 2008 after credit markets froze up and small gold-exploration companies were unable to obtain the capital necessary to advance their projects. The fund was ranked #1 of 71, #34 of 51 and #18 of 29 among gold-oriented funds for total return by Lipper for the 1-, 5-and 10-year periods ended December 31, 2009. As optimism for a pending recovery rose, the credit markets began to thaw and the flow of funding resumed for exploration and development. Our Gold and Precious Metals Fund (USERX), which focuses on established gold-producing companies, also beat its benchmark for the year. The U.S. dollar has long been the world's leading reserve currency, but as it lost value in 2009, it also lost some of its stature. China, an important investor in U.S. government debt, was among the countries that have increased their gold holdings and decreased their exposure to the dollar. An analysis by the World Gold Council found that central banks purchased $28 billion worth of gold during the year. Our approach to active fund management allowed us to outperform the gold and gold-equity ETFs in the marketplace such as SPDR Gold Trust ETF and Market Vectors Gold Miners ETF. We believe that active management will become even more valuable in this sector as money is herded into ETFs, where stock-picking is a less important part of the investment process. 2 U.S. GLOBAL INVESTORS FUNDS [Performance Chart for UNWPX, USERX and PSPFX] TOTAL ANNUALIZED RETURNS AS OF 12/31/09
- ------------------------------------------------------------------------------------------------------------------------ FUND/TICKER ONE-YEAR THREE-YEAR FIVE-YEAR TEN-YEAR GROSS CAPPED EXPENSE EXPENSE RATIO RATIO - ------------------------------------------------------------------------------------------------------------------------ World Precious Minerals Fund (UNWPX) 89.50% 3.12% 16.92% 17.89% 1.82% 1.90% - ------------------------------------------------------------------------------------------------------------------------ Gold and Precious Metals Fund (USERX) 43.11% 6.86% 19.46% 18.31% 1.86% 1.90% - ------------------------------------------------------------------------------------------------------------------------ Market Vectors Gold Miners ETF 36.72% 5.66% n/a n/a * * - ------------------------------------------------------------------------------------------------------------------------ SPDR Gold Truct ETF 24.03% 19.24% 19.62% n/a * * - ------------------------------------------------------------------------------------------------------------------------ Global Resources Fund (PSPFX) 68.25% -3.74% 10.17% 16.87% 1.68% 1.90% - ------------------------------------------------------------------------------------------------------------------------ Reuters/Jefferies CRB Index 23.46% -2.65% -0.04% 3.28% n/a n/a - ------------------------------------------------------------------------------------------------------------------------ Morgan Stanley Commodity Related Equity Index (CRX) 54.78% 9.72% 14.73% 15.34% n/a n/a - ------------------------------------------------------------------------------------------------------------------------ Gross expense ratio as stated in the most recent prospectus. Capped expense ratio is a voluntary limit on total fund operating expenses (exclusive of any acquired fund fees and expenses, performance fees, taxes, brokerage commissions and interest) that U.S. Global Investors, Inc. can modify or terminate at any time. Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. 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 (e.g. short-term trading fees of up to 0.50%) which, if applicable, would lower your total returns. 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. Five- and 10-year performance figures may not be available for the mentioned ETFs. The inception date for the Market Vectors Gold Miners ETF is 5/16/06. The inception date for the SPDR Gold Trust ETF is 11/12/2004. *See each ETF's prospectus for details about its objectives, strategies, fees, liquidity and risks, which may be materially different from the comparable U.S. Global Investors Funds.
The supercycle in natural resources was delayed in 2008 but it was not destroyed, as we saw last year. Commodities (as measured by the Reuters-Jefferies CRB Index) shot up 23 percent in 2009, the largest single-year increase since the early 1970s, and the International Monetary Fund projects that prices will keep rising this year due to emerging markets demand and global economic recovery. Our Global Resources Fund (PSPFX) far outperformed the CRB Index and its benchmark, the Morgan Stanley Commodity Related Equity Index (CRX). The fund, which won four straight Lipper Fund Awards from 2005 to 2008, ranked in the top quintile of its peer group. Its total return in 2009 was its second-best annual gain ever. The fund was ranked #21 of 122, #30 of 54 and #9 of 33 among natural resources funds by Lipper for total return for the 1-, 5- and 10-year periods ended December 31, 2009. That return was largely driven by solid growth in China, Brazil and other key emerging markets, which spurred demand for industrial metals and other commodities. Infrastructure investment was the centerpiece of China's $586 billion stimulus program, and it amassed stockpiles of necessary materials to keep building highways, high-speed railroads, power-generating plants and the like. Copper was among several metals that more than doubled in price in 2009. 3 U.S. GLOBAL INVESTORS FUNDS With more than 13 million vehicles sold in 2009, China passed the U.S. as the world's largest car market. Not surprisingly, it is also the largest incremental consumer of oil and the second-largest oil user in the world behind the U.S. - a decade ago, China ranked 20th in oil consumption. The supply response to this greater demand for oil and other commodities has fallen short, and new sources tend to be costly to produce. This suggests a squeeze at some point down the road. Beijing has made it clear that it will aggressively pursue energy and mineral resources to satisfy rising domestic demand - with an eye toward its future needs, Chinese companies are already very active in resource-rich frontier markets in Africa. Simply put, an investment in natural resources is a vote of confidence in global economic growth. The global infrastructure theme remained intact as many governments saw the value of creating jobs in the short term and improving living standards in the longer term. Stimulus monies will likely sustain projects through 2010. [Performance Chart for MEGAX, EUROX, GEMFX, USCOX] TOTAL ANNUALIZED RETURNS AS OF 12/31/09
- ------------------------------------------------------------------------------------------------------------------------ FUND/TICKER ONE-YEAR THREE-YEAR FIVE-YEAR TEN-YEAR GROSS CAPPED EXPENSE EXPENSE RATIO RATIO - ------------------------------------------------------------------------------------------------------------------------ Global MegaTrends Fund (MEGAX) 30.15% -5.33% -0.06% 1.01% 2.28% 2.35% - ------------------------------------------------------------------------------------------------------------------------ Eastern European Fund (EUROX) 77.93% -10.03% 6.36% 15.49% 2.14% 2.85% - ------------------------------------------------------------------------------------------------------------------------ Global Emerging Markets Fund (GEMFX) 50.28% -12.49% n/a 1.84% 3.11% 3.15% - ------------------------------------------------------------------------------------------------------------------------ China Region Fund (USCOX) 49.55% 0.20% 10.47% 6.73% 2.67% 2.55% - ------------------------------------------------------------------------------------------------------------------------ *As of inception date 2/24/05 Gross expense ratio as stated in the most recent prospectus. Capped expense is a voluntary limit on total fund operating expenses (exclusive of any acquired fund fees and expenses, performance fees, taxes, brokerage commissions and interest) that U.S. Global Investors, Inc. can modify or terminate at any time. Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. 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 (e.g., short-term trading fees of up to 2.00%) which, if applicable, would lower your total returns. Obtain performance data currect 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 Global MegaTrends Fund (MEGAX) focuses on the global infrastructure opportunity. We believe in the infrastructure theme for many years to come, with key drivers being population growth and urbanization, particularly in emerging nations in Asia and Latin America that are building to support future growth. We see a historical analogy in the 1950s in the United States, when millions of people moved to 4 U.S. GLOBAL INVESTORS FUNDS newly built suburbs and the interstate highway system was constructed. To get an idea of the scale of this opportunity, consider this: Just over half of the world's people now live in cities - that figure is likely to rise to 70 percent over the next four decades. The urban population in emerging nations has expanded by an average of 3 million per week for the past 20 years. In the U.S. and other developed countries, the infrastructure theme is also promising as a "repair and replacement" story following years of underinvestment that have resulted in a significant deterioration of roads, bridges and the like. In addition, growing political momentum for greener energy should propel growth of new infrastructure associated with solar, wind and other power- generation sources. For China, another powerful trend is the rapid growth of the middle class, which is shown in the chart below. [Middle Class Growth Chart] AVERAGE ANNUAL POPULATION GROWTH MIDDLE CLASS AND ABOVE 1970-1990 1990-2000 2000-2008 India approx. 0.3 million approx. 4.0 million approx. 17.0 million China approx. 0.5 million approx. 22.5 million approx. 43.0 million SOURCE: PIRA Estimates are that as many as 25 percent of Chinese - more people than the entire U.S. population - are now middle class or richer, and that a doubling is possible within the next decade. While most dramatic in China, this same trend is also under way in India, Brazil and elsewhere. This rise of the "American Dream" in emerging nations is memorably portrayed in the Oscar-winning movie "Slumdog Millionaire." This trend has huge implications for commodities. Wealthier people want a better lifestyle. That means more and better housing - in addition to the structure itself (cement, steel), that means more 5 U.S. GLOBAL INVESTORS FUNDS wiring for electricity (copper), more plumbing (copper, zinc) and more basic appliances (steel, copper and other metals). Eastern Europe started the year with a raft of negative news out of the region that gave investors pause - Russia quarreling with Ukraine over natural gas prices, collapsing oil revenues and rapid devaluation of the ruble, as well as a 30 percent nosedive for the Polish zloty and Hungary's forint. Then came March and a major turnaround as cheap money in the U.S. compelled investors to look at the region for higher returns. The bounce-back in natural resources helped Russian stocks in particular, while neighboring countries benefited by an easing in political tension after the Obama administration backed away from a missile-defense system in Poland and the Czech Republic. Looking more broadly at emerging markets, Brazil's stock market stood out with a return of 145 percent for 2009 despite a slow start. As in Russia, overseas investors were attracted to its energy and mineral wealth, and in addition, Rio de Janeiro was awarded the 2016 Olympic Games, which should present development opportunities. In India, investor confidence was revived by an election that returned the pro-business Congress Party to power - the Sensex Index finished the year up 92 percent. [Performance Chart for ACBGX, GBTFX, USUTX, NEARX, UGSXX, USTXX] TOTAL ANNUALIZED RETURNS AS OF 12/31/09
- ------------------------------------------------------------------------------------------------------------------------ FUND/TICKER ONE-YEAR THREE-YEAR FIVE-YEAR TEN-YEAR GROSS CAPPED EXPENSE EXPENSE RATIO RATIO - ------------------------------------------------------------------------------------------------------------------------ Holmes Growth Fund (ACBGX) 21.50% -5.64% -0.41% -3.87% 1.98% 2.20% - ------------------------------------------------------------------------------------------------------------------------ All American Equity Fund (GBTFX) 13.75% -4.49% 1.56% -3.24% 2.56% 2.20% - ------------------------------------------------------------------------------------------------------------------------ Tax Free Fund (USUTX) 8.03% 3.92% 3.81% 4.90% 1.90% 0.70% - ------------------------------------------------------------------------------------------------------------------------ Near-Term Tax Free Fund (NEARX) 5.00% 4.25% 3.32% 3.98% 1.79% 0.45% - ------------------------------------------------------------------------------------------------------------------------ U.S. Governement Securities Savings Fund (UGSXX) 0.10% 2.20% 2.76% 2.67% 0.75% 0.45% - ------------------------------------------------------------------------------------------------------------------------ U.S. Treasury Securities Cash Fund (USTXX) 0.01% 1.60% 2.18% 2.04% 1.12% 1.00% - ------------------------------------------------------------------------------------------------------------------------ Gross expense ratio as stated in the most recent prospectus. Capped expense ratio is a voluntary limit on total fund operating expenses (exclusive of any acquired fund fees and expenses, performance fees, taxes, brokerage commissions and interest). In addition, the yields and returns for the U.S. Government Securities Savings Fund and the U.S. Treasury Securities Cash Fund include the effect of the Adviser's voluntary waiver of fees and/or reimbursement of expenses to maintain a minimum net yield for the funds. U.S. Global Investors, Inc. can modify or terminate these arrangements at any time. Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. 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 (e.g. short-term trading fees of up to 0.25%) which, if applicable, would lower your total returns. 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.
6 U.S. GLOBAL INVESTORS FUNDS Prospects for a continuation of global recovery look bright as the U.S. economy picks up steam - the third quarter of 2009 saw 2.2 percent annualized growth and the fourth quarter was also expected to be positive. Inflation was contained but still positive on a year-over-year basis. Consumer confidence wavered at year-end, perhaps a symptom of a soft housing market and worries about unemployment levels of 10 percent. The Federal Reserve has signaled that it plans to keep rates low for an extended period to help the recovery, but the long-term inflation risks that come with a very loose monetary policy cannot be ignored. We believe the Fed will likely return to a more normalized policy stance at some point in 2010. The municipal market was an extremely strong performer in 2009, with the Barclays Capital Municipal Bond Index rising about 13 percent. This was the best annual return for the municipal market since 1995. Low-quality and long-duration bonds outperformed during the year, which reversed the 2008 trend. At this point in the economic cycle, investors should be watching leading indicators, such as the Conference Board's Leading Index, the ISM Manufacturing Index and industrial production measures. All of these areas rebounded sharply in 2009, with some even at multiyear highs. While unemployment remains stubbornly high, the risk that the economy will double-dip back into recession appears to be lessening. Let me wrap up this letter with a few macro thoughts about commodities and emerging markets going forward. Commodity supercycles typically last 20 to 25 years - the current supercycle began in 2000, so if history is any guide, we may be just at the halfway mark. A stress in the markets is that insufficient capital has been invested in resources in recent decades, while at the same time the world's population has doubled and there has been spectacular growth in the middle class. Any supply disruptions quickly lead to price spikes. There are other reasons to consider an investment in commodities or commodity-based equities. We're hearing more talk about inflation - natural resources are one of the few asset classes that benefit from inflation. If prices for fuel 7 U.S. GLOBAL INVESTORS FUNDS or other commodities rise, one way to hedge against the impact of that price increase is to invest in those commodities. Commodities are also a natural hedge against the erosive impact of a weak dollar. Given massive federal deficits for the next decade, yawning trade deficits and historically low interest rates, it is hard to see how the dollar could see a sustainable rally any time soon. For the reasons detailed above, we believe that the secular bull market for commodities and natural resources stocks remains intact and could even intensify in 2010, depending on the extent of economic recovery in developed nations. We work hard to deliver superior returns for our loyal shareholders, and we strive to provide useful insights and perspectives about the many factors that can have an influence on global markets. Our "Frank Talk" investment blog, Weekly Investor Alert newsletter and timely webcasts help us reach a widening audience. All of these information sources are available on our website, www.usfunds.com. Thank you for placing your confidence in us, and I wish you all the best in 2010. Sincerely, /s/ Frank Holmes Frank Holmes CEO and Chief Investment Officer U.S. Global Investors, Inc. 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. With respect to the money market funds, an investment in a money market fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these funds. 8 U.S. GLOBAL INVESTORS FUNDS Past performance does not guarantee future results. 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. 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. 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. The Eastern European 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. 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. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local income taxes, and if applicable, may subject certain investors to the Alternative Minimum Tax as well. Each 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. Bond funds are subject to interest-rate risk; their value declines as interest rates rise. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The Reuters/Jefferies CRB Index is an unweighted geometric average of commodity price levels relative to the base year average price. The Morgan Stanley Commodity Related Index (CRX) is an equal-dollar weighted index of 20 stocks involved in commodity related industries such as energy, non-ferrous metals, agriculture, and forest products. The index was developed with a base value of 200 as of March 15, 1996. The Bombay Stock Exchange Sensitive Index (Sensex) is a cap-weighted index. The selection of the index members has been made on the basis of liquidity, depth, and floating-stock-adjustment depth and industry representation. Sensex has a base date and value of 100 on 1978-1979. The index uses free float. The Barclays Capital Municipal Bond Index is an unmanaged index representative of the tax-exempt bond market. The Conference Board index of leading economic indicators is an index published monthly by the Conference Board used to predict the direction of the economy's movements in the months to come. The index is made up of 10 economic components, whose changes tend to precede changes in the overall economy. The ISM manufacturing composite index is a diffusion index calculated from five of the eight sub-components of a monthly survey of purchasing managers at roughly 300 manufacturing firms from 21 industries in all 50 states. Although Lipper makes reasonable efforts to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Lipper. Users acknowledge that they have not relied upon any warranty, condition, guarantee, or representation made by Lipper. Any use of the data for analyzing, managing, or trading financial instruments is at the user's own risk. This is not an offer to buy or sell securities. 9 MONEY MARKET FUNDS MANAGEMENT TEAM'S PERSPECTIVE INTRODUCTION The U.S. Treasury Securities Cash Fund (USTXX) seeks to obtain a high level of current income while maintaining the highest degree of safety of principal and liquidity. The U.S. Government Securities Savings Fund (UGSXX) seeks to achieve a consistently high yield with safety of principal. PERFORMANCE U.S. TREASURY SECURITIES CASH FUND As of December 31, 2009 7-Day Yield 0.01% --------------------------------------------------------------- 7-Day Effective Yield 0.01% --------------------------------------------------------------- Weighted Average Days to Maturity 38 U.S. GOVERNMENT SECURITIES SAVINGS FUND As of December 31, 2009 7-Day Yield 0.01% --------------------------------------------------------------- 7-Day Effective Yield 0.01% --------------------------------------------------------------- Weighted Average Days to Maturity 38 An investment in either the U.S. Treasury Securities Cash Fund or the U.S. Government Securities Savings Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or by any other government agency. Although the funds seek to preserve the value of your investments at $1.00 per share, it is possible to lose money by investing in these funds. Pursuant to a voluntary arrangement, the Adviser has agreed to limit total fund operating expenses to not exceed 1.00% for the U.S. Treasury Securities Cash Fund and 0.45% for the U.S. Government Securities Savings Fund on an annualized basis. In addition, the yields reported above include the effects of the Adviser's voluntary waiver of fees and/or reimbursement of expenses to maintain a minimum net yield for the funds. The Adviser can modify or terminate these arrangements at any time. THE YEAR IN REVIEW - ECONOMIC AND POLITICAL ISSUES THAT AFFECTED THE FUNDS In early 2009, the Federal Reserve embarked on a $1.5 trillion "quantitative easing" program (essentially printing money and buying U.S. treasury debt and agency mortgage-backed securities) to help pull the U.S. out of a recession that began in late 2007. This program was expected to begin winding down in early 2010, but the risks inherent in reversing this policy remain large on both a short-term and long-term basis. 10 MONEY MARKETS FUNDS The Fed cut its benchmark interest rate to near zero in late 2008, which weighed on money-market yields. Yields on the three-month Treasury bill fell 3 basis points to 0.05 percent, while yields on the six-month bills dropped 7 basis points to 0.19 percent. One-year agency discount note yields moved lower by 40 basis points to 0.45 percent. The market was influenced by bouts of risk aversion, with investors seeking to own short-term Treasury securities at almost any cost. The U.S. economy continued to weaken and financial markets remained volatile in the first quarter of 2009, but signs of stabilization appeared late in the quarter and continued into the second quarter. The economy improved significantly in the third quarter and displayed signs that the worst of the recession had passed. Globally, the recovery moved along even faster, with several countries reporting economic growth for the second quarter, among them China, France and Germany. Employment growth occurred in some countries, including South Korea, Brazil, Russia, Japan, Australia and Canada. Further improvements were seen in the fourth quarter. At this point in the U.S. economic cycle, the focus should be on leading indicators such as the Conference Board's Leading Index, the ISM manufacturing index and industrial production measures. All of these areas have rebounded sharply and some are even at multiyear highs. While unemployment remains stubbornly high, the risk that the economy will double-dip back into recession appears to be abating. Globally, the recovery progressed as well, especially in emerging markets. This bodes well for continued global expansion as the U.S. picks up economic steam. U.S. consumer confidence stalled out in late 2009 at a level roughly where it was midway through the year. Inflation was contained but still positive on a year-over-year basis. Commodity and asset inflation appear to be the most likely forms and "core" inflation measures will likely remain within acceptable levels for some time. Low absolute yield levels resulting from the Fed's stimulus policy have placed a major strain on the entire money market industry. As the economy strengthens, it will be safer for the Fed to consider tightening money supply and raising rates, which stands to raise yields on money-market instruments. When the Fed does change course on interest rates, it could be a more rapid adjustment than in prior cycles. 11 MONEY MARKETS FUNDS INVESTMENT HIGHLIGHTS The U.S. Treasury Securities Cash Fund underperformed the Lipper treasury money market funds for the year ended December 31, 2009, returning 0.01 percent versus 0.03 percent for the peer group. The U.S. Government Securities Savings Fund outperformed the Lipper government-only money market funds for the year, returning 0.10 percent versus 0.09 percent for the peer group. The U.S. Government Securities Savings Fund took a laddered approach by buying fixed-rate securities across the money market spectrum. The fund averaged a weighted average maturity of 40 days. The fund took advantage of higher yields toward the end of the first quarter by selectively extending its ladder, but overall the past year was a very difficult environment for money market fund investors. The U.S. Treasury Securities Cash Fund followed a similar approach, averaging a weighted average maturity of 34 days over the period. The market dynamics were different in the Treasury markets as a tremendous amount of money flowed into the safest and most liquid securities, which pushed yields to very low levels relative to other money market alternatives. The U.S. Treasury Securities Cash Fund took advantage of relatively high repurchase rates relative to Treasuries, which kept the weighted average maturity lower than the U.S. Government Securities Savings Fund over the period. CURRENT OUTLOOK While the Fed continues to emphasize that it will keep rates low for an extended period, the risks are now shifting to a change in Fed policy. The Fed clearly does not want to move prematurely and risk an abrupt end to the recovery, but the long-term inflation implications of an extremely loose monetary policy should not be ignored. We believe 2010 will likely see the Fed return to a more normalized policy stance. 12 TAX FREE FUNDS MANAGEMENT TEAM'S PERSPECTIVE INTRODUCTION The Near-Term Tax Free Fund (NEARX) and Tax Free Fund (USUTX) seek to provide a high level of current income exempt from federal income taxation and to preserve capital. However, a portion of any distribution may be subject to federal and/or state income taxes. The Near-Term Tax Free Fund will maintain a weighted average maturity of less than five years, while the Tax Free Fund will generally maintain a longer weighted average maturity. PERFORMANCE GRAPHS NEAR-TERM TAX FREE FUND [Near-Term Tax Free Fund Graph] Barclays Capital Near-Term 3-Year Municipal Date Tax Free Fund Bond Index ---- ------------- ---------- 12/31/99 $ 10,000.00 $ 10,000.00 01/31/00 9,987.40 10,017.87 02/29/00 10,020.47 10,049.58 03/31/00 10,104.38 10,101.48 04/28/00 10,077.94 10,102.63 05/31/00 10,067.14 10,113.01 06/30/00 10,201.23 10,241.01 07/31/00 10,295.23 10,324.00 08/31/00 10,385.58 10,402.00 09/29/00 10,380.59 10,405.00 10/31/00 10,447.60 10,464.00 11/30/00 10,493.76 10,506.00 12/31/00 10,648.85 10,623.00 01/31/01 10,759.99 10,784.24 02/28/01 10,783.31 10,826.42 03/30/01 10,853.51 10,902.52 04/30/01 10,807.56 10,886.59 05/31/01 10,895.66 10,985.76 06/30/01 10,936.78 11,034.68 07/31/01 11,034.70 11,125.14 08/31/01 11,152.60 11,239.36 09/30/01 11,183.72 11,296.71 10/31/01 11,262.79 11,370.18 11/30/01 11,189.72 11,333.87 12/31/01 11,140.52 11,323.06 01/31/02 11,289.62 11,466.86 02/28/02 11,384.41 11,552.86 03/31/02 11,212.27 11,380.72 04/30/02 11,409.38 11,548.02 05/31/02 11,463.61 11,615.00 06/30/02 11,554.25 11,714.89 07/31/02 11,651.52 11,806.26 08/31/02 11,757.64 11,881.82 09/30/02 11,913.47 11,975.69 10/31/02 11,803.60 11,909.82 11/30/02 11,774.45 11,913.40 12/31/02 11,942.19 12,084.95 01/31/03 11,960.63 12,123.62 02/28/03 12,070.45 12,201.21 03/31/03 12,068.27 12,186.57 04/30/03 12,116.32 12,219.47 05/31/03 12,284.88 12,313.56 06/30/03 12,244.30 12,293.86 07/31/03 12,005.78 12,183.22 08/31/03 12,088.39 12,245.35 09/30/03 12,316.91 12,429.03 10/31/03 12,258.26 12,370.62 11/30/03 12,294.87 12,382.99 12/31/03 12,337.11 12,408.99 01/31/04 12,386.15 12,452.42 02/29/04 12,500.07 12,558.27 03/31/04 12,464.26 12,524.36 04/30/04 12,300.46 12,397.86 05/31/04 12,248.74 12,349.51 06/30/04 12,269.03 12,371.74 07/31/04 12,353.76 12,462.06 08/31/04 12,483.98 12,592.91 09/30/04 12,511.21 12,606.76 10/31/04 12,539.65 12,642.06 11/30/04 12,488.35 12,581.38 12/31/04 12,553.48 12,630.44 01/31/05 12,570.66 12,614.02 02/28/05 12,541.96 12,576.18 03/31/05 12,455.66 12,534.68 04/30/05 12,542.16 12,598.61 05/31/05 12,576.84 12,621.28 06/30/05 12,605.81 12,685.65 07/31/05 12,576.77 12,656.48 08/31/05 12,611.70 12,698.24 09/30/05 12,640.90 12,704.59 10/31/05 12,611.64 12,685.54 11/30/05 12,646.83 12,696.95 12/31/05 12,676.24 12,741.39 01/31/06 12,652.66 12,769.42 02/28/06 12,688.13 12,779.64 03/31/06 12,664.42 12,756.63 04/30/06 12,688.20 12,778.32 05/31/06 12,729.90 12,823.04 06/30/06 12,700.02 12,799.96 07/31/06 12,795.87 12,887.00 08/31/06 12,891.98 12,988.81 09/30/06 12,988.37 13,048.56 10/31/06 13,030.66 13,087.70 11/30/06 13,067.03 13,133.51 12/31/06 13,042.72 13,130.89 01/31/07 13,018.34 13,130.89 02/28/07 13,177.25 13,220.18 03/31/07 13,158.86 13,258.51 04/30/07 13,195.75 13,285.03 05/31/07 13,171.09 13,283.70 06/30/07 13,146.35 13,294.33 07/31/07 13,245.57 13,379.41 08/31/07 13,351.29 13,454.34 09/30/07 13,451.11 13,547.17 10/31/07 13,494.90 13,612.20 11/30/07 13,595.33 13,717.01 12/31/07 13,633.10 13,786.97 01/31/08 13,860.31 14,082.01 02/28/08 13,581.84 13,894.72 03/31/08 13,810.32 14,096.19 04/30/08 13,784.86 14,080.69 05/31/08 13,816.77 14,129.97 06/30/08 13,727.22 14,036.71 07/31/08 13,829.85 14,207.96 08/31/08 13,990.67 14,341.51 09/30/08 13,771.46 14,169.42 10/31/08 13,745.60 14,193.50 11/30/08 13,842.85 14,417.76 12/31/08 14,076.82 14,550.41 01/31/09 14,370.08 14,822.50 02/28/09 14,265.57 14,795.82 03/31/09 14,370.28 14,889.03 04/30/09 14,396.52 14,933.70 05/31/09 14,429.39 14,953.11 06/30/09 14,396.45 14,980.03 07/31/09 14,561.54 15,153.80 08/31/09 14,594.64 15,140.16 09/30/09 14,760.49 15,268.85 10/31/09 14,654.11 15,233.73 11/30/09 14,813.97 15,372.36 12/31/09 14,780.60 15,390.80 AVERAGE ANNUAL PERFORMANCE For the Years Ended December 31, 2009
One Year Five Year Ten Year Near-Term Tax Free Fund 5.00% 3.32% 3.98% ---------------------------------------------------------------------- Barclays Capital 3-Year Municipal Bond Index 5.78% 4.03% 4.40% Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Barclays Capital 3-Year Municipal Bond Index is a total return benchmark designed for municipal assets. The index includes bonds with a minimum credit rating of 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 two to four years. The returns for the index reflect no deduction for fees, expenses or taxes. Pursuant to a voluntary arrangement, the Adviser has agreed to limit total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments, if any) to not exceed 0.45%. The Adviser can modify or terminate this arrangement at any time.
13 TAX FREE FUNDS TAX FREE FUND [Tax Free Fund Graph] Barclays Capital 10-Year Municipal Date Tax Free Fund Bond Index ---- ------------- ---------- 12/31/99 $ 10,000.00 $ 10,000.00 01/31/00 9,898.93 9,959.15 02/29/00 10,038.16 10,037.34 03/31/00 10,305.12 10,232.59 04/28/00 10,224.53 10,181.20 05/31/00 10,140.00 10,120.80 06/30/00 10,426.59 10,395.78 07/31/00 10,575.93 10,540.00 08/31/00 10,738.71 10,703.00 09/29/00 10,658.38 10,654.00 10/31/00 10,795.55 10,763.00 11/30/00 10,883.03 10,821.00 12/31/00 11,174.49 11,076.00 01/31/01 11,276.67 11,218.98 02/28/01 11,295.50 11,237.80 03/30/01 11,394.66 11,333.62 04/30/01 11,246.78 11,193.21 05/31/01 11,362.86 11,315.05 06/30/01 11,449.75 11,382.34 07/31/01 11,614.55 11,539.19 08/31/01 11,809.73 11,734.77 09/30/01 11,757.63 11,719.40 10/31/01 11,897.95 11,864.05 11/30/01 11,752.26 11,710.49 12/31/01 11,600.24 11,587.71 01/31/02 11,808.58 11,806.72 02/28/02 11,961.70 11,975.56 03/31/02 11,697.86 11,728.86 04/30/02 11,959.68 12,000.97 05/31/02 12,021.16 12,057.37 06/30/02 12,157.49 12,206.88 07/31/02 12,302.22 12,369.24 08/31/02 12,429.45 12,530.04 09/30/02 12,680.66 12,829.50 10/31/02 12,472.00 12,596.01 11/30/02 12,398.16 12,492.72 12/31/02 12,644.70 12,766.31 01/31/03 12,603.98 12,698.65 02/28/03 12,765.10 12,918.34 03/31/03 12,751.81 12,924.79 04/30/03 12,835.87 13,020.44 05/31/03 13,136.98 13,392.82 06/30/03 13,067.95 13,328.54 07/31/03 12,557.62 12,768.74 08/31/03 12,664.34 12,878.55 09/30/03 13,012.38 13,312.56 10/31/03 12,934.24 13,211.38 11/30/03 13,028.27 13,354.06 12/31/03 13,111.01 13,495.62 01/31/04 13,188.75 13,552.30 02/29/04 13,378.36 13,790.82 03/31/04 13,312.90 13,712.21 04/30/04 12,998.34 13,333.75 05/31/04 12,959.05 13,341.75 06/30/04 12,904.75 13,385.78 07/31/04 13,022.26 13,569.17 08/31/04 13,207.52 13,866.33 09/30/04 13,262.29 13,939.82 10/31/04 13,352.71 14,051.34 11/30/04 13,241.53 13,892.56 12/31/04 13,390.94 14,056.49 01/31/05 13,484.34 14,175.97 02/28/05 13,416.81 14,086.67 03/31/05 13,332.68 13,962.70 04/30/05 13,514.69 14,233.58 05/31/05 13,593.87 14,328.94 06/30/05 13,650.14 14,412.05 07/31/05 13,600.32 14,289.55 08/31/05 13,722.45 14,463.88 09/30/05 13,642.25 14,333.71 10/31/05 13,575.21 14,224.77 11/30/05 13,639.11 14,312.97 12/31/05 13,763.00 14,443.21 01/31/06 13,798.03 14,489.43 02/28/06 13,905.74 14,574.92 03/31/06 13,820.39 14,424.80 04/30/06 13,822.67 14,398.83 05/31/06 13,871.96 14,496.74 06/30/06 13,828.25 14,431.51 07/31/06 13,982.92 14,623.45 08/31/06 14,170.60 14,873.51 09/30/06 14,250.81 14,982.09 10/31/06 14,325.44 15,071.98 11/30/06 14,419.08 15,191.05 12/31/06 14,383.85 15,119.65 01/31/07 14,342.62 15,051.61 02/28/07 14,516.43 15,263.84 03/31/07 14,486.78 15,233.31 04/30/07 14,521.30 15,282.06 05/31/07 14,463.98 15,202.59 06/30/07 14,401.67 15,120.50 07/31/07 14,499.04 15,256.58 08/31/07 14,474.92 15,294.72 09/30/07 14,689.14 15,499.67 10/31/07 14,730.41 15,553.92 11/30/07 14,813.26 15,726.57 12/31/07 14,863.37 15,770.60 01/31/08 15,082.89 16,090.75 02/28/08 14,512.05 15,422.98 03/31/08 14,883.49 15,819.35 04/30/08 15,015.98 15,912.69 05/31/08 15,075.60 15,992.25 06/30/08 14,911.14 15,825.93 07/31/08 14,996.13 15,947.79 08/31/08 15,152.86 16,171.06 09/30/08 14,609.62 15,584.05 10/31/08 14,613.41 15,454.70 11/30/08 14,646.33 15,658.70 12/31/08 14,943.58 16,007.89 01/31/09 15,373.27 16,760.26 02/28/09 15,366.88 16,632.89 03/31/09 15,373.29 16,554.71 04/30/09 15,559.98 16,857.66 05/31/09 15,618.09 16,948.69 06/30/09 15,461.39 16,709.72 07/31/09 15,708.25 17,072.32 08/31/09 15,875.11 17,265.24 09/30/09 16,273.95 17,812.54 10/31/09 16,007.75 17,374.35 11/30/09 16,136.65 17,643.66 12/31/09 16,143.25 17,587.20 AVERAGE ANNUAL PERFORMANCE For the Years Ended December 31, 2009
One Year Five Year Ten Year Tax Free Fund 8.03% 3.81% 4.90% ---------------------------------------------------------------------- Barclays Capital 10-Year Municipal Bond Index 9.85% 4.58% 5.80% Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Barclays Capital 10-Year Municipal Bond Index is a total return benchmark designed for long-term municipal assets. The index includes bonds with a minimum credit rating of 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 8 to 12 years. The returns for the index reflect no deduction for fees, expenses or taxes. Pursuant to a voluntary arrangement, the Adviser has agreed to limit total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments, if any) to not exceed 0.70%. The Adviser can modify or terminate this arrangement at any time.
Please visit our website at www.usfunds.com for updated performance information for different time periods. THE YEAR IN REVIEW - ECONOMIC AND POLITICAL ISSUES THAT AFFECTED THE FUNDS Broadly speaking, the municipal market exhibited extremely strong performance during 2009 as the Barclays Capital Municipal Bond Index(1) rose 12.91 percent. This was the best annual return for the municipal market since 1995. 14 TAX FREE FUNDS The trend in 2009, during which low quality and long duration outperformed, was a reversal of 2008. For example, in 2009 the Barclay's BBB Index appreciated more than 26 percent while the AAA-rated Index rose about 9 percent. In 2008, the BBB Index fell more than 21 percent, while the AAA Index rose 1.6 percent. The funds' conservative credit profile was extremely beneficial last year but hampered relative performance in 2009. From a yield-curve perspective, the long end of the curve significantly outperformed. Long-term municipals (greater than 22 years to maturity) rose 23.43 percent, while the 3- and 10-year segments of the curve rose 5.78 and 9.85 percent, respectively. Revenue-backed municipals modestly outperformed general-obligation bonds as lower quality bonds generally outperformed. Low quality bonds within the revenue-backed universe that outperformed included industrial development-backed municipals which rose nearly 37 percent; other lower quality outperformers included hospitals and housing backed issues. High-yield bonds rose 32.73 percent after falling 27 percent in 2008. In specialty state trading, Puerto Rico, Ohio and Arizona outperformed, while Massachusetts, Connecticut and Pennsylvania underperformed. The Federal Reserve continued the quantitative easing policies that began in the fourth quarter of 2008 and has pledged to keep interest rates low for an extended period of time. INVESTMENT HIGHLIGHTS Over the year ended December 31, 2009, the Near-Term Tax Free Fund posted a 5.00 percent return, while the Tax Free Fund returned 8.03 percent. The Near-Term Tax Free Fund trailed the performance of its benchmark, the Barclays Capital 3-Year Municipal Bond Index, which returned 5.78 percent. The Tax Free Fund trailed the performance of its benchmark, the Barclays Capital 10-Year Municipal Bond Index, which returned 9.85 percent. Both funds also lagged their respective Lipper peer groups over the 12-month period. The performance difference for the funds was primarily driven by fund credit and maturity preferences relative to the benchmark and peer group. Both funds previously benefited from a conservative credit profile over the past few years, which led to peer group outperformance in the past, but that trend reversed in 2009. STRENGTHS * The Tax Free Fund maintained significant exposure to hospital-backed municipals, which outperformed. 15 TAX FREE FUNDS * Both funds were significantly overweight Texas municipals, which outperformed. * The funds were underweight California, which underperformed. WEAKNESSES * Both funds maintained a conservative credit profile, which negatively impacted performance relative to the benchmark and peer group. * Both funds had little to no exposure in the best-performing sectors of the market, including tobacco, housing and high-yield bonds. * The funds had limited exposure to the longest maturities, which fared best during the year. CURRENT OUTLOOK OPPORTUNITIES * California state general obligation bonds were trading at historically cheap levels. If the state can reach a sensible solution to its budget problems, spreads should tighten significantly, which would result in a decrease in yields and an increase in market values. * Michigan and Puerto Rico are two other areas that appear attractive as sentiment appears to have become too negative, raising the chances of a reversal. THREATS * Continued outperformance of low-quality bonds is the most significant threat on a relative basis. * When the Fed reverses its monetary policy stance and begins to raise interest rates, the macro environment will become more difficult. (1) The Barclays Capital Municipal Bond Index is an unmanaged index representative of the tax-exempt bond market. 16 TAX FREE FUNDS NEAR-TERM TAX FREE FUND MUNICIPAL BOND RATINGS December 31, 2009 (BASED ON TOTAL MUNICIPAL BONDS) [Pie Chart] AA 37.9% AAA 32.9% A 25.5% BBB 2.2% Not Rated 1.4% B 0.1% TAX FREE FUND MUNICIPAL BOND RATINGS December 31, 2009 (BASED ON TOTAL MUNICIPAL BONDS) [Pie Chart] AAA 36.7% AA 29.2% A 26.3% BBB 6.2% Not Rated 1.2% B 0.4% 17 ALL AMERICAN EQUITY FUND MANAGEMENT TEAM'S PERSPECTIVE INTRODUCTION The principal objective of the All American Equity Fund (GBTFX) is to seek long-term capital appreciation by investing primarily in a broadly diversified portfolio of domestic common stocks. The fund invests in large-capitalization stocks, while retaining the flexibility to seek out promising individual stock opportunities. PERFORMANCE GRAPH ALL AMERICAN EQUITY FUND [All American Equity Fund Graph] All American S&P Date Equity Fund 500 Index ---- ----------- --------- 12/31/99 $ 10,000.00 $ 10,000.00 01/31/00 9,500.65 9,497.63 02/29/00 9,296.57 9,318.02 03/31/00 10,113.33 10,229.02 04/28/00 9,863.43 9,921.39 05/31/00 9,580.94 9,717.71 06/30/00 9,821.27 9,957.32 07/31/00 9,558.24 9,801.78 08/31/00 10,193.00 10,410.26 09/29/00 9,434.34 9,860.79 10/31/00 9,090.87 9,818.97 11/30/00 8,072.61 9,045.41 12/31/00 8,119.20 9,089.78 01/31/01 8,188.59 9,412.07 02/28/01 7,192.08 8,554.41 03/30/01 6,681.89 8,012.78 04/30/01 7,298.94 8,634.95 05/31/01 7,257.24 8,692.89 06/30/01 7,075.19 8,481.40 07/31/01 6,913.88 8,397.86 08/31/01 6,393.81 7,872.69 09/30/01 6,110.41 7,237.00 10/31/01 6,182.76 7,375.07 11/30/01 6,555.62 7,940.66 12/31/01 6,572.31 8,010.28 01/31/02 6,349.71 7,893.45 02/28/02 6,193.89 7,741.19 03/31/02 6,477.71 8,032.36 04/30/02 6,154.94 7,545.59 05/31/02 6,586.23 7,490.20 06/30/02 5,898.94 6,956.87 07/31/02 5,119.84 6,414.72 08/31/02 5,214.44 6,456.72 09/30/02 4,755.33 5,755.65 10/31/02 4,991.84 6,261.76 11/30/02 5,011.32 6,629.96 12/31/02 4,824.89 6,240.67 01/31/03 4,760.89 6,077.50 02/28/03 4,682.98 5,986.18 03/31/03 4,752.54 6,044.14 04/30/03 5,111.49 6,541.76 05/31/03 5,339.66 6,886.10 06/30/03 5,328.53 6,974.07 07/31/03 5,459.31 7,097.08 08/31/03 5,645.73 7,235.22 09/30/03 5,567.82 7,158.61 10/31/03 5,985.20 7,563.36 11/30/03 6,199.46 7,629.83 12/31/03 6,335.80 8,029.69 01/31/04 6,355.28 8,177.05 02/29/04 6,438.75 8,290.67 03/31/04 6,391.45 8,165.62 04/30/04 6,032.50 8,037.59 05/31/04 6,107.63 8,147.67 06/30/04 6,269.02 8,306.05 07/31/04 5,912.86 8,030.78 08/31/04 5,898.94 8,063.04 09/30/04 6,082.59 8,150.31 10/31/04 6,174.41 8,274.82 11/30/04 6,547.27 8,609.52 12/31/04 6,655.79 8,902.40 01/31/05 6,497.19 8,685.40 02/28/05 6,733.70 8,868.08 03/31/05 6,622.40 8,711.21 04/30/05 6,394.23 8,546.08 05/31/05 6,653.01 8,817.76 06/30/05 6,808.83 8,830.39 07/31/05 7,073.17 9,158.64 08/31/05 7,056.47 9,075.03 09/30/05 7,356.98 9,148.49 10/31/05 7,134.38 8,995.90 11/30/05 7,437.68 9,335.80 12/31/05 7,445.97 9,339.11 01/31/06 8,142.79 9,586.38 02/28/06 7,821.40 9,612.31 03/31/06 8,216.74 9,731.94 04/30/06 8,393.07 9,862.54 05/31/06 7,886.81 9,579.04 06/30/06 7,847.00 9,591.76 07/31/06 7,744.61 9,650.88 08/31/06 7,792.96 9,880.16 09/30/06 7,707.63 10,134.61 10/31/06 7,989.20 10,464.66 11/30/06 8,404.45 10,663.33 12/31/06 8,258.13 10,812.88 01/31/07 8,379.62 10,976.24 02/28/07 8,366.49 10,762.21 03/31/07 8,524.10 10,882.31 04/30/07 8,875.44 11,364.20 05/31/07 9,269.46 11,760.36 06/30/07 9,384.39 11,565.10 07/31/07 9,210.36 11,206.96 08/31/07 9,124.99 11,374.71 09/30/07 10,011.55 11,799.67 10/31/07 10,812.73 11,987.33 11/30/07 10,100.20 11,485.97 12/31/07 10,489.99 11,406.49 01/31/08 9,406.70 10,722.40 02/28/08 9,410.35 10,374.35 03/31/08 9,158.68 10,329.45 04/30/08 9,687.55 10,832.41 05/31/08 10,139.83 10,972.70 06/30/08 9,946.52 10,048.54 07/31/08 9,351.99 9,964.04 08/31/08 9,045.61 10,108.25 09/30/08 7,849.25 9,208.54 10/31/08 7,024.93 7,662.15 11/30/08 6,196.97 7,112.18 12/31/08 6,323.64 7,187.12 01/31/09 5,798.19 6,582.06 02/28/09 5,280.04 5,883.51 03/31/09 5,531.82 6,397.96 04/30/09 6,133.90 7,009.76 05/31/09 6,298.10 7,401.38 06/30/09 6,152.14 7,416.16 07/31/09 6,480.55 7,976.37 08/31/09 6,695.84 8,263.95 09/30/09 6,922.07 8,572.10 10/31/09 6,648.40 8,413.06 11/30/09 6,995.05 8,917.57 12/31/09 7,193.17 9,089.74 AVERAGE ANNUAL PERFORMANCE For the Years Ended December 31, 2009
One Year Five Year Ten Year All American Equity Fund 13.75% 1.56% (3.24)% ---------------------------------------------------------------------- S&P 500 Index 26.47% 0.42% (0.95)% Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The S&P 500 Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The returns for the index reflect no deduction for fees, expenses or taxes. Pursuant to a voluntary arrangement, the Adviser has agreed to limit total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments, if any) to not exceed 2.20%. The Adviser can modify or terminate this arrangement at any time.
Please visit our website at www.usfunds.com for updated performance information for different time periods. 18 ALL AMERICAN EQUITY FUND THE YEAR IN REVIEW - ECONOMIC AND POLITICAL ISSUES THAT AFFECTED THE FUND The U.S economy had officially been in recession for 13 months at the start of 2009, and the first two quarters of the year continued the trend with GDP declines of 6.4 percent and 0.7 percent, respectively. Third-quarter GDP was a positive 2.2 percent, and the fourth quarter was a positive 5.7 percent. As a result of the recession and its associated stress on the financial system, the government implemented significant monetary and fiscal responses to aid the economy. The monetary response included a quantitative-easing policy by the Federal Reserve, which targeted the federal funds rate between zero and 0.25 percent. This resulted in low short-term interest rates. Fiscal responses included the $787 billion stimulus bill passed by Congress and signed by President Obama in February. Inflation remained contained near the end of the period, with the Consumer Price Index for all items being up 2.7 percent for the 12 months ended December 31, 2009. Excluding food and energy, CPI rose 1.8 percent for 2009. The employment picture continued to worsen. Unemployment rose to a 26-year high of 10.1 percent in October 2009. In December 2009, the jobless level was 10.0 percent. The yield on the 10-year Treasury note ended the period at 3.84 percent, up from 2.21 percent at the end of December 2008. The increase in rates came as investors formed expectations that the economy had begun to recover from the recession. Stock-market performance was marked by extreme swings over the year. The S&P 500 Index began the year at 903 and then fell 25 percent to a bottom of 677 on March 9. A recovery, interrupted only by some short-term corrections, carried the S&P 500 to 1,115 at year-end, up 65 percent from the March low. INVESTMENT HIGHLIGHTS OVERVIEW The fund returned 13.75 percent for the year ended December 31, 2009, compared to a 26.47 percent return for the S&P 500 Index, the fund's benchmark. 19 ALL AMERICAN EQUITY FUND Because the fund is actively managed, and a holding period is generally not a consideration in investment decisions, the portfolio turnover rate may fluctuate from year to year as the fund adjusts its portfolio composition. Its annual portfolio turnover was, and is expected to continue to be, more than 100 percent. STRENGTHS * Information technology was the best-performing sector, and the fund benefited by being overweight the sector. The driving forces behind the sector's outperformance was in part investor anticipation of higher corporate spending on technology, as well as a period of inventory restocking after the massive de-stocking that occurred at the end of 2008. The fund benefited from holdings in Apple, Inc.,(1) Cree, Inc.(2) and Western Digital Corp.(3) * The fund's relative performance benefited from an overweighting in the energy sector and from holdings such as Linn Energy LLC,(4) Petroleo Brasileiro S.A.(5) and Pride International, Inc.(6) A driver of energy holdings was an increase in the price of crude oil to $79.62 per barrel, up about 78 percent during the year. WEAKNESSES * The fund's industrial sector investments diminished the fund's return. The fund was underweight the sector, which underperformed the benchmark index, but investments in Atlas Air Worldwide Holdings, Inc.,(5) Aerovironment, Inc.,(5) and USG Corp.(5) detracted from the fund's return. * An underweight position in consumer discretion (the third-best performing S&P 500 sector) hurt the fund. The decision to underweight the sector was based on a negative outlook for discretionary spending in the current economic environment, given rising unemployment and stagnant wage growth. When evidence of "green shoots" in the economy appeared, many of these stocks came back very strongly. CURRENT OUTLOOK The fund ended the year offensively positioned with overweights in technology and materials in anticipation of a recovering economy and increased corporate profits. The offensive posture was mitigated slightly by a low double-digit cash position. OPPORTUNITIES * A robust continuing economic recovery, which is expected by some investors, should be positive for corporate profits and stock prices. 20 ALL AMERICAN EQUITY FUND * The fiscal stimulus program launched by the government in 2009 should continue to benefit economic activity in 2010 as more of the earmarked funds are put to work. * Low interest rates, if continued throughout 2010, should provide a favorable backdrop for the economy and stock prices. THREATS * The Obama administration may continue to take a more active role in regulatory oversight. Periods of increased regulation are in general considered negative for business. * China has taken steps to diversify some of its foreign reserves away from the dollar. This may lead it to reduce its purchases of U.S. Treasury securities, which would result in higher interest rates. Higher interest rates could be a headwind for stocks. * A headwind for stocks could be created by governments around the world beginning to wind down their monetary and fiscal stimulus programs put in place during the economic crisis. (1)This security comprised 4.17% of the total net assets of the fund as of December 31, 2009. (2)This security comprised 2.72% of the total net assets of the fund as of December 31, 2009. (3)This security comprised 1.61% of the total net assets of the fund as of December 31, 2009. (4)This security comprised 2.04% of the total net assets of the fund as of December 31, 2009. (5)The fund did not hold this security as of December 31, 2009. (6)This security comprised 1.40% of the total net assets of the fund as of December 31, 2009. 21 ALL AMERICAN EQUITY FUND TOP 10 HOLDINGS BASED ON NET ASSETS December 31, 2009 (EXCLUDING REPURCHASE AGREEMENTS) APPLE, INC. 4.17% COMPUTERS --------------------------------------------------------------- SALESFORCE.COM, INC. 3.14% APPLICATIONS SOFTWARE --------------------------------------------------------------- MEDCO HEALTH SOLUTIONS, INC. 2.92% PHARMACY SERVICES --------------------------------------------------------------- CREE, INC. 2.72% ELECTRONICS & COMPONENTS --------------------------------------------------------------- AMERICAN TOWER CORP. 2.63% WIRELESS EQUIPMENT --------------------------------------------------------------- NETAPP, INC. 2.51% COMPUTERS - MEMORY DEVICES --------------------------------------------------------------- J. CREW GROUP, INC. 2.45% RETAIL --------------------------------------------------------------- CSX CORP. 2.36% TRANSPORTATION --------------------------------------------------------------- SANDISK CORP. 2.20% COMPUTERS - MEMORY DEVICES --------------------------------------------------------------- AMAZON.COM, INC. 2.05% E-COMMERCE --------------------------------------------------------------- TOTAL TOP TEN HOLDINGS 27.15% 22 ALL AMERICAN EQUITY FUND ALL AMERICAN EQUITY FUND PORTFOLIO ALLOCATION BY INDUSTRY SECTOR December 31, 2009 BASED ON TOTAL INVESTMENTS [Pie Chart] Technology 23.1% Health Care 11.6% Cash Equivalent 10.7% Materials 10.5% Energy 10.0% Financials 9.3% Consumer Discretion 6.8% Industrials 7.4% Consumer Staples 4.6% Other 3.4% Telecommunications 2.6% 23 HOLMES GROWTH FUND MANAGEMENT TEAM'S PERSPECTIVE INTRODUCTION The Holmes Growth Fund (ACBGX) focuses on companies with good growth prospects and strong positive earnings momentum. Our primary objective is long-term capital appreciation. PERFORMANCE GRAPH HOLMES GROWTH FUND [Holmes Growth Fund Graph] S&P Holmes Growth S&P 500 Composite Date Fund Index 1500 Index ---- ------------- ------- ---------- 12/31/99 $ 10,000.00 $ 10,000.00 $ 10,000.00 01/31/00 10,155.84 9,497.63 9,518.17 02/29/00 13,564.94 9,318.02 9,436.15 03/31/00 12,879.87 10,229.02 10,308.20 04/28/00 11,538.96 9,921.39 9,997.99 05/31/00 10,090.91 9,717.71 9,795.87 06/30/00 10,584.42 9,957.32 10,041.09 07/31/00 9,642.86 9,801.78 9,901.82 08/31/00 10,993.51 10,410.26 10,554.84 09/29/00 10,165.58 9,860.79 10,036.94 10/31/00 9,418.83 9,818.97 9,976.70 11/30/00 8,160.57 9,045.41 9,186.10 12/31/00 8,277.58 9,089.78 9,303.72 01/31/01 8,043.55 9,412.07 9,625.21 02/28/01 6,951.43 8,554.41 8,779.67 03/30/01 6,340.37 8,012.78 8,219.79 04/30/01 6,401.04 8,634.95 8,875.70 05/31/01 6,362.04 8,692.89 8,949.07 06/30/01 6,193.02 8,481.40 8,759.84 07/31/01 5,998.00 8,397.86 8,668.48 08/31/01 5,815.98 7,872.69 8,155.34 09/30/01 5,564.61 7,237.00 7,455.63 10/31/01 5,599.28 7,375.07 7,622.19 11/30/01 5,772.64 7,940.66 8,202.64 12/31/01 6,019.66 8,010.28 8,314.36 01/31/02 6,041.33 7,893.45 8,205.20 02/28/02 5,963.33 7,741.19 8,059.33 03/31/02 6,184.35 8,032.36 8,393.84 04/30/02 6,401.04 7,545.59 7,946.54 05/31/02 6,292.69 7,490.20 7,872.15 06/30/02 5,872.32 6,956.87 7,315.99 07/31/02 5,144.23 6,414.72 6,718.23 08/31/02 4,936.21 6,456.72 6,762.09 09/30/02 4,888.54 5,755.65 6,053.15 10/31/02 5,022.89 6,261.76 6,551.81 11/30/02 5,395.60 6,629.96 6,935.26 12/31/02 4,845.20 6,240.67 6,543.20 01/31/03 4,940.55 6,077.50 6,368.78 02/28/03 4,888.54 5,986.18 6,265.08 03/31/03 4,667.52 6,044.14 6,324.47 04/30/03 4,728.19 6,541.76 6,840.38 05/31/03 4,970.88 6,886.10 7,222.61 06/30/03 4,992.55 6,974.07 7,318.40 07/31/03 5,135.57 7,097.08 7,466.63 08/31/03 5,330.59 7,235.22 7,635.28 09/30/03 5,287.25 7,158.61 7,546.27 10/31/03 5,872.32 7,563.36 7,993.01 11/30/03 5,937.32 7,629.83 8,089.38 12/31/03 5,898.32 8,029.69 8,477.76 01/31/04 6,067.34 8,177.05 8,639.01 02/29/04 6,076.00 8,290.67 8,768.19 03/31/04 6,084.67 8,165.62 8,659.35 04/30/04 5,945.99 8,037.59 8,505.71 05/31/04 6,045.67 8,147.67 8,627.77 06/30/04 6,227.69 8,306.05 8,809.86 07/31/04 5,902.65 8,030.78 8,500.63 08/31/04 5,789.97 8,063.04 8,525.82 09/30/04 6,110.67 8,150.31 8,644.77 10/31/04 6,232.02 8,274.82 8,778.52 11/30/04 6,691.41 8,609.52 9,163.03 12/31/04 6,873.43 8,902.40 9,476.87 01/31/05 6,682.74 8,685.40 9,245.84 02/28/05 6,899.43 8,868.08 9,452.68 03/31/05 6,708.74 8,711.21 9,288.12 04/30/05 6,379.37 8,546.08 9,082.72 05/31/05 6,687.07 8,817.76 9,404.91 06/30/05 6,916.76 8,830.39 9,447.69 07/31/05 7,311.14 9,158.64 9,820.42 08/31/05 7,397.82 9,075.03 9,726.84 09/30/05 7,588.50 9,148.49 9,805.57 10/31/05 7,176.79 8,995.90 9,632.18 11/30/05 7,449.82 9,335.80 10,009.66 12/31/05 7,540.83 9,339.11 10,015.36 01/31/06 8,216.91 9,586.38 10,331.86 02/28/06 8,056.56 9,612.31 10,345.74 03/31/06 8,390.26 9,731.94 10,502.05 04/30/06 8,550.61 9,862.54 10,637.60 05/31/06 8,095.56 9,579.04 10,310.33 06/30/06 8,039.22 9,591.76 10,322.89 07/31/06 7,748.86 9,650.88 10,339.25 08/31/06 7,753.19 9,880.16 10,571.75 09/30/06 7,696.85 10,134.61 10,820.72 10/31/06 7,948.21 10,464.66 11,188.52 11/30/06 8,164.90 10,663.33 11,418.58 12/31/06 8,017.55 10,812.88 11,555.96 01/31/07 8,299.25 10,976.24 11,751.80 02/28/07 8,195.24 10,762.21 11,554.36 03/31/07 8,355.59 10,882.31 11,689.98 04/30/07 8,767.30 11,364.20 12,185.77 05/31/07 9,300.36 11,760.36 12,631.07 06/30/07 9,374.04 11,565.10 12,416.18 07/31/07 9,265.69 11,206.96 12,011.10 08/31/07 9,226.69 11,374.71 12,188.43 09/30/07 10,149.79 11,799.67 12,622.74 10/31/07 10,739.19 11,987.33 12,835.86 11/30/07 10,054.44 11,485.97 12,275.04 12/31/07 10,453.15 11,406.49 12,196.20 01/31/08 9,369.70 10,722.40 11,468.22 02/28/08 9,538.72 10,374.35 11,109.25 03/31/08 9,148.68 10,329.45 11,059.28 04/30/08 9,638.40 10,832.41 11,618.90 05/31/08 10,141.12 10,972.70 11,819.97 06/30/08 9,915.76 10,048.54 10,842.13 07/31/08 8,940.65 9,964.04 10,753.35 08/31/08 8,554.94 10,108.25 10,922.18 09/30/08 7,402.15 9,208.54 9,943.31 10/31/08 6,128.01 7,662.15 8,221.43 11/30/08 5,512.61 7,112.18 7,605.13 12/31/08 5,542.95 7,187.12 7,719.95 01/31/09 5,152.90 6,582.06 7,064.57 02/28/09 4,706.52 5,883.51 6,317.00 03/31/09 5,144.23 6,397.96 6,869.43 04/30/09 5,603.62 7,009.76 7,573.01 05/31/09 6,115.01 7,401.38 7,967.48 06/30/09 6,019.66 7,416.16 7,989.65 07/31/09 6,344.70 7,976.37 8,608.17 08/31/09 6,323.03 8,263.95 8,919.41 09/30/09 6,665.40 8,572.10 9,270.60 10/31/09 6,366.37 8,413.06 9,065.45 11/30/09 6,561.39 8,917.57 9,584.49 12/31/09 6,734.74 9,089.74 9,825.43 AVERAGE ANNUAL PERFORMANCE For the Years Ended December 31, 2009
One Year Five Year Ten Year Holmes Growth Fund 21.50% (0.41)% (3.87)% - ------------------------------------------------------------------------ S&P 500 Index 26.47% 0.42% (0.95)% - ------------------------------------------------------------------------ S&P Composite 1500 Index 27.27% 0.72% (0.18)% Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The S&P 500 Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The S&P Composite 1500 Index 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 returns for the indexes reflect no deduction for fees, expenses or taxes. Pursuant to a voluntary arrangement, the Adviser has agreed to limit total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments, if any) to not exceed 2.20%. The Adviser can modify or terminate this arrangement at any time.
Please visit our website at www.usfunds.com for updated performance information for different time periods. 24 HOLMES GROWTH FUND THE YEAR IN REVIEW - ECONOMIC AND POLITICAL ISSUES THAT AFFECTED THE FUND The U.S economy had officially been in recession for 13 months at the start of 2009, and the first two quarters of the year continued the trend with GDP declines of 6.4 percent and 0.7 percent, respectively. Third-quarter GDP was a positive 2.2 percent, and the fourth quarter was a positive 5.7 percent. As a result of the recession and its associated stress on the financial system, the government implemented significant monetary and fiscal responses to aid the economy. The monetary response included a quantitative-easing policy by the Federal Reserve, which targeted the federal funds rate between zero and 0.25 percent. This resulted in low short-term interest rates. Fiscal responses included the $787 billion stimulus bill passed by Congress and signed by President Obama in February. Inflation remained contained near the end of the period, with the Consumer Price Index for all items up 2.7 percent for the 12 months ended December 31, 2009. Excluding food and energy, CPI rose 1.8 percent for 2009. The employment picture continued to worsen. Unemployment rose to a 26-year high of 10.1 percent in October 2009. In December 2009, the jobless level was 10.0 percent. The yield on the 10-year Treasury note ended the period at 3.84 percent, up from 2.21 percent at the end of December 2008. The increase in rates came as investors formed expectations that the economy had begun to recover from the recession. Stock-market performance was marked by extreme swings over the year. The S&P 500 Index began the year at 903 and then fell 25 percent to a bottom of 677 on March 9. A recovery, interrupted only by some short-term corrections, carried the S&P 500 to 1,115 at year-end, up 65 percent from the March low. INVESTMENT HIGHLIGHTS OVERVIEW The fund returned 21.50 percent for the year, compared to a 27.27 percent return for the benchmark S&P Composite 1500 Index. 25 HOLMES GROWTH FUND Our investment approach combines top-down and bottom-up analyses. The top-down aspect reviews global trends that include economic outlooks, political and legislative environment, government policy changes, socioeconomic trends, currency effects and other macro items. The bottom-up analysis emphasizes companies that we believe have prospects to generate long-term, sustainable growth in cash flow and relatively high returns on capital. Because the fund is actively managed, and a holding period is generally not a consideration in investment decisions, the portfolio turnover rate may fluctuate from year to year as the fund adjusts its portfolio composition. Its annual portfolio turnover was, and is expected to continue to be, more than 100 percent. STRENGTHS * Information technology was the best-performing sector, and although the fund was underweight the sector, it benefited by owning stocks such as CYBERplex, Inc.,(1) Ebix, Inc.,(2) and Cree, Inc.(3) Cree, Inc. stock was boosted by investor interest in lighting products powered by light-emitting diodes (LEDs). * Materials was the second-best performing sector due to investor expectations that the global economy would begin to recover in the near future. The fund benefited from being overweight materials. It also benefited from a position in Eastern Platinum Ltd.,(4) as the price of platinum increased during the period. Other positions aiding performance were Silver Wheaton Corp.(5) and Gold Fields Ltd.(2) WEAKNESSES * Although the financial sector underperformed the benchmark index and was underweighted in the fund, security selection and timing detracted from the fund's performance. Positions in Ezcorp, Inc.,(2) Vornado Realty Trust(2) and Wells Fargo & Co.(2) negatively affected fund performance. * Suboptimal security selection and timing in the fund's healthcare sector also diminished fund performance. Positions in Almost Family, Inc.(2) and LHC Group, Inc.(2) were affected negatively by proposed changes in Medicare reimbursement rates, while Emergent Biosolutions, Inc.(2) and Cubist Pharmaceuticals, Inc.(2) failed to live up to our expectations. 26 HOLMES GROWTH FUND FUND METRICS
- -------------------------------------------------------------------------- RETURN P/E TO ON GROWTH AVERAGE REVENUE EARNINGS EQUITY - RATIO MARKET GROWTH GROWTH ROE -PEG CAPITALIZATION - -------------------------------------------------------------------------- Holmes Growth Fund 14.6% 18% 15.5% 1.5X $22.7 Billion - -------------------------------------------------------------------------- S&P Composite 1500 Index 14.1% -8% 10.2% 2.0X $72.7 Billion - --------------------------------------------------------------------------
As of December 31, 2009, the average revenue growth for the stocks in the fund was a positive 14.6 percent year-over-year, slightly higher than the stocks in the S&P Composite 1500 Index. Earnings growth of the stocks in the fund was a positive 18 percent, while the S&P Composite 1500 Index saw earnings growth of negative 8 percent. The fund's holdings exhibited higher return on equity. Despite these higher growth rates, the price-to- projected-earnings-per-share growth rate (PEG ratio) is less than that of the S&P Composite 1500 Index (1.5x for the fund compared to 2.0x for the index). CURRENT OUTLOOK From a fund construction viewpoint, the fund was offensively positioned at December 31, 2009, by being overweight consumer discretion, materials, technology and energy. OPPORTUNITIES * A robust continuing economic recovery would be positive for corporate profits and stock prices. * The fiscal stimulus program launched by the government in 2009 should continue to benefit economic activity in 2010 as more of the earmarked funds are put to work. * Low interest rates, if continued throughout 2010, should provide a favorable backdrop for the economy and stock prices. THREATS * Should investors' expectations for an improving economy and increasing corporate profits not come to fruition on a reasonable time frame, it could be a threat to stock prices. * Should long-term interest rates increase substantially, it would be negative for stocks. 27 * As governments around the world begin to wind down the monetary and fiscal stimulus programs put in place during the economic crisis, it will likely present a headwind for stocks. (1)This security comprised 1.83% of the total net assets of the fund as of December 31, 2009. (2)The fund did not hold this security as of December 31, 2009. (3)This security comprised 2.71% of the total net assets of the fund as of December 31, 2009. (4)This security comprised 0.73% of the total net assets of the fund as of December 31, 2009. (5)This security comprised 0.58% of the total net assets of the fund as of December 31, 2009. TOP 10 HOLDINGS BASED ON NET ASSETS (EXCLUDING REPURCHASE AGREEMENTS) December 31, 2009 NEWFOUNDLAND CAPITAL CORP. LTD. 6.84% RADIO --------------------------------------------------------------- APPLE, INC. 3.41% COMPUTERS --------------------------------------------------------------- ALANGE ENERGY CORP. 3.23% OIL & GAS EXPLORATION & PRODUCTION --------------------------------------------------------------- EXPRESS SCRIPTS, INC. 2.79% PHARMACY SERVICES --------------------------------------------------------------- CREE, INC. 2.71% ELECTRONICS & COMPONENTS --------------------------------------------------------------- CAPELLA EDUCATION CO. 2.43% SCHOOLS --------------------------------------------------------------- MASTERCARD, INC. 2.41% FINANCIAL SERVICES --------------------------------------------------------------- MEDCO HEALTH SOLUTIONS, INC. 2.41% PHARMACY SERVICES --------------------------------------------------------------- PRICELINE.COM, INC. 2.35% E-COMMERCE --------------------------------------------------------------- RIVERBED TECHNOLOGY, INC. 2.32% COMPUTERS --------------------------------------------------------------- TOTAL TOP TEN HOLDINGS 30.90% 28 HOLMES GROWTH FUND HOLMES GROWTH FUND PORTFOLIO ALLOCATION BY INDUSTRY SECTOR December 31, 2009 BASED ON TOTAL INVESTMENTS [Pie Chart] Consumer Discretion 22.6% Technology 21.0% Energy 11.3% Cash Equivalent 10.4% Health Care 9.7% Materials 7.3% Industrial 7.0% Financials 6.8% Other 3.9% 29 GLOBAL MEGATRENDS FUND MANAGEMENT TEAM'S PERSPECTIVE INTRODUCTION The Global MegaTrends Fund (MEGAX) focuses on companies that are well positioned to benefit from future investments in global infrastructure, both in the private and public sectors. The fund considers a broad range of investable opportunities, including publicly traded infrastructure assets (such as airports and toll roads), select utilities, construction and engineering firms, telecom operators, select companies in the alternative energy space, and companies in the steel, cement and raw materials sectors. PERFORMANCE GRAPH GLOBAL MEGATRENDS FUND [Global MegaTrends Fund Graph] Global MegaTrends S&P 500 Date Fund Index ---- ----------------- ------- 12/31/99 $ 10,000.00 $ 10,000.00 01/31/00 9,500.00 9,497.63 02/29/00 9,583.33 9,318.02 03/31/00 10,722.22 10,229.02 04/28/00 10,685.19 9,921.39 05/31/00 10,907.41 9,717.71 06/30/00 10,481.48 9,957.32 07/31/00 10,787.04 9,801.78 08/31/00 11,629.63 10,410.26 09/29/00 11,435.19 9,860.79 10/31/00 11,453.70 9,818.97 11/30/00 10,858.67 9,045.41 12/31/00 11,671.01 9,089.78 01/31/01 12,051.48 9,412.07 02/28/01 11,609.32 8,554.41 03/30/01 10,992.35 8,012.78 04/30/01 11,989.78 8,634.95 05/31/01 12,061.76 8,692.89 06/30/01 11,537.34 8,481.40 07/31/01 10,889.52 8,397.86 08/31/01 9,881.80 7,872.69 09/30/01 8,904.93 7,237.00 10/31/01 9,460.20 7,375.07 11/30/01 9,748.12 7,940.66 12/31/01 10,190.29 8,010.28 01/31/02 9,389.30 7,893.45 02/28/02 9,055.56 7,741.19 03/31/02 9,889.92 8,032.36 04/30/02 9,578.42 7,545.59 05/31/02 9,444.93 7,490.20 06/30/02 8,410.32 6,956.87 07/31/02 7,164.35 6,414.72 08/31/02 7,564.84 6,456.72 09/30/02 6,964.10 5,755.65 10/31/02 7,364.60 6,261.76 11/30/02 7,442.47 6,629.96 12/31/02 7,118.27 6,240.67 01/31/03 7,252.57 6,077.50 02/28/03 7,252.57 5,986.18 03/31/03 7,073.50 6,044.14 04/30/03 7,454.03 6,541.76 05/31/03 8,159.14 6,886.10 06/30/03 8,315.84 6,974.07 07/31/03 8,461.33 7,097.08 08/31/03 8,964.99 7,235.22 09/30/03 8,718.76 7,158.61 10/31/03 9,233.60 7,563.36 11/30/03 9,591.75 7,629.83 12/31/03 10,264.80 8,029.69 01/31/04 10,106.01 8,177.05 02/29/04 10,468.96 8,290.67 03/31/04 10,434.93 8,165.62 04/30/04 10,117.35 8,037.59 05/31/04 10,208.09 8,147.67 06/30/04 10,400.91 8,306.05 07/31/04 10,174.06 8,030.78 08/31/04 10,196.75 8,063.04 09/30/04 10,446.28 8,150.31 10/31/04 10,434.93 8,274.82 11/30/04 10,763.86 8,609.52 12/31/04 11,092.79 8,902.40 01/31/05 10,820.57 8,685.40 02/28/05 11,172.18 8,868.08 03/31/05 10,809.23 8,711.21 04/30/05 10,650.44 8,546.08 05/31/05 10,911.31 8,817.76 06/30/05 11,160.84 8,830.39 07/31/05 11,546.48 9,158.64 08/31/05 11,796.01 9,075.03 09/30/05 11,988.83 9,148.49 10/31/05 11,682.59 8,995.90 11/30/05 12,295.07 9,335.80 12/31/05 12,410.96 9,339.11 01/31/06 12,795.89 9,586.38 02/28/06 12,399.30 9,612.31 03/31/06 12,585.93 9,731.94 04/30/06 12,749.23 9,862.54 05/31/06 12,399.30 9,579.04 06/30/06 12,399.30 9,591.76 07/31/06 12,329.31 9,650.88 08/31/06 12,480.95 9,880.16 09/30/06 12,469.28 10,134.61 10/31/06 12,912.53 10,464.66 11/30/06 13,110.83 10,663.33 12/31/06 13,036.13 10,812.88 01/31/07 13,023.52 10,976.24 02/28/07 12,746.15 10,762.21 03/31/07 12,998.30 10,882.31 04/30/07 13,691.71 11,364.20 05/31/07 14,107.76 11,760.36 06/30/07 14,107.76 11,565.10 07/31/07 14,082.55 11,206.96 08/31/07 14,309.48 11,374.71 09/30/07 15,255.04 11,799.67 10/31/07 16,074.53 11,987.33 11/30/07 15,822.38 11,485.97 12/31/07 16,234.56 11,406.49 01/31/08 14,869.29 10,722.40 02/28/08 15,139.64 10,374.35 03/31/08 14,707.08 10,329.45 04/30/08 15,734.41 10,832.41 05/31/08 16,545.46 10,972.70 06/30/08 15,761.44 10,048.54 07/31/08 14,585.42 9,964.04 08/31/08 14,085.27 10,108.25 09/30/08 11,571.01 9,208.54 10/31/08 8,921.57 7,662.15 11/30/08 8,353.84 7,112.18 12/31/08 8,498.73 7,187.12 01/31/09 7,876.22 6,582.06 02/28/09 7,118.37 5,883.51 03/31/09 7,483.76 6,397.96 04/30/09 8,417.54 7,009.76 05/31/09 9,703.17 7,401.38 06/30/09 9,486.65 7,416.16 07/31/09 10,230.96 7,976.37 08/31/09 9,973.83 8,263.95 09/30/09 10,298.63 8,572.10 10/31/09 10,027.97 8,413.06 11/30/09 10,718.15 8,917.57 12/31/09 11,060.84 9,089.74 AVERAGE ANNUAL PERFORMANCE For the Years Ended December 31, 2009
One Year Five Year Ten Year Global MegaTrends Fund 30.15% (0.06)% 1.01% - ----------------------------------------------------------------------- S&P 500 Index 26.47% 0.42% (0.95)% - ----------------------------------------------------------------------- S&P Global Infrastructure Index 25.28% 8.59% n/a Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The S&P 500 Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The S&P Global Infrastructure Index provides liquid and tradable exposure to 75 companies from around the world that represent the listed infrastruc- ture universe. The index has balanced weights across three distinct infrastructure clusters: utilities, transportation and energy. The index commenced November 2001; it is not included in the graph as it had less than the full period of data. The returns for the indexes reflect no deduction for fees, expenses or taxes. Pursuant to a voluntary arrangement, the Adviser has agreed to limit total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments, if any) to not exceed 2.35%. The Adviser can modify or terminate this arrangement at any time.
Please visit our website at www.usfunds.com for updated performance information for different time periods. 30 GLOBAL MEGATRANDS FUND THE YEAR IN REVIEW - ECONOMIC AND POLITICAL ISSUES THAT AFFECTED THE FUND 2009 was a volatile year for the markets, including companies in the infrastructure space. The first quarter was characterized by a gloom-and-doom outlook for the economy despite President Obama having taken office with promises to get the economy growing again. In addition, the swine flu epidemic scare had a devastating impact on the tourism industry, which was a negative for airport holdings in Mexico. The turning point occurred as the market found a bottom in early March, which coincided with the Federal Reserve's decision to adopt a quantitative-easing policy. This period was characterized by a much more optimistic market outlook as stocks rallied even in the face of bad news. We ended the period with a growing number of headwinds as uncertainty surrounded the upcoming earnings season. The infrastructure theme remained intact as many governments responded to the economic slowdown by investing in their national infrastructure. These policies are viewed by many as not only positive short-term job generators, but also creators of the long-term foundation of industrialized societies. The $787 billion American Recovery and Reinvestment Act earmarked more than $70 billion for infrastructure spending. China dedicated 72 percent of its $586 billion fiscal stimulus measure toward infrastructure, and many projects were moving forward. This stimulus will likely sustain projects through 2010. INVESTMENT HIGHLIGHTS OVERVIEW The fund had a 30.15 percent return in the 12-month period ended December 31, 2009, compared to a 26.47 percent return for the S&P 500 Index, the fund's benchmark, and a 25.28 percent return for the S&P Global Infrastructure Index. STRENGTHS * Some of the fund's top performance contributors were international stocks. Pacific Rubiales Energy Corp.,(1) which produces oil and natural gas in South America, was the best performer and returned 717 percent for the fund. Trina Solar Ltd.,(2) a play on alternative energy in China, 31 GLOBAL MEGATRANDS FUND returned 310 percent in the course of 2009. Novolipetsk Steel,(3) a Russian steel company, returned 184 percent as positive sentiment returned to Russia thanks to higher commodities prices. * China Gas Holdings Ltd.(4), which distributes gas to consumers in China, returned 54 percent for the fund. * In general, the fund's overseas holdings significantly outperformed the domestic holdings. Brazil's Bovespa Index(5) gained 145 percent and Russia's MICEX Index(6) rose 120 percent, both far surpassing the S&P 500 Index's 26 percent advance. WEAKNESSES * Utilities holdings in the United States were a drag on performance. These included FirstEnergy Corp.(7) and FPL Group, Inc.,(8) both of which significantly underperformed the S&P 500. Utilities, up 6.8 percent for the year, were the second-weakest performing group of the S&P 500. * U.S. construction and engineering firms also lagged their international peers. For example, Foster Wheeler AG(9) advanced by 26 percent last year, compared with a 61 percent return of SNC-Lavalin Group, Inc.(10) in Canada. CURRENT OUTLOOK We believe the infrastructure theme will be prominent for many years to come due to the continuing trend toward population growth and urbanization, particularly in emerging nations. In developed countries, decades of underinvestment in infrastructure assets have resulted in a significant deterioration of existing infrastructure. We are encouraged by the awareness of the political leaders around the world that investments in infrastructure are needed to sustain economic growth and competitiveness. In addition, growing recognition of the need for alternative energy sources will continue despite the decline in crude oil prices from 2008's all-time highs. The U.S. Senate overwhelmingly approved tax credits for solar and wind power in late 2008, which likely will encourage continued investment in this sector. OPPORTUNITIES * China remains at the forefront of the infrastructure boom and will likely be a rich source of potential investments for years to come thanks to continued government support and healthy finances of the country. 32 GLOBAL MEGATRANDS FUND * We believe investments in alternative energy sources (including nuclear) will gain traction due to a global need for additional power, although oil prices lower than their 2008 peak may change the relative attractiveness of wind and solar. * Improved water infrastructure will be crucial as emerging economies develop. Opportunities in this space are currently limited, but they offer significant potential both in desalination and waste treatment. THREATS * While many countries remain committed to improving their infrastructure, credit conditions remain tight and generally more difficult and expensive to obtain. * Emerging markets have been extremely volatile over the past year, which makes for challenging investment conditions. * Government subsidies are still required for a sustainable development of alternative energy. This support could change with the political climate. (1)This security comprised 0.32% of the fund's total net assets as of December 31, 2009. (2)This security comprised 2.83% of the fund's total net assets as of December 31, 2009. (3)This security comprised 2.74% of the fund's total net assets as of December 31, 2009. (4)This security comprised 1.52% of the fund's total net assets as of December 31, 2009. (5)The Bovespa Index is a total return index weighted by traded volume and is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange. (6)The MICEX Index is the real-time cap-weighted Russian composite index. It comprises 30 most liquid stocks of Russian largest and most developed companies from 10 main economy sectors. The MICEX Index is calculated and disseminated by the MICEX Stock Exchange, the main Russian stock exchange. (7)This security comprised 2.11% of the fund's total net assets as of December 31, 2009. (8)This security comprised 2.77% of the fund's total net assets as of December 31, 2009. (9)This security comprised 1.44% of the fund's total net assets as of December 31, 2009. (10)This security comprised 1.80% of the fund's total net assets as of December 31, 2009. 33 GLOBAL MEGATRANDS FUND TOP 10 HOLDINGS BASED ON NET ASSETS (EXCLUDING REPURCHASE AGREEMENTS) December 31, 2009 GRUPO AEROPORTUARIO DEL SURESTE S.A.B DE C.V. 3.63% AIRPORTS --------------------------------------------------------------- GERDAU S.A. 3.58% STEEL - PRODUCERS --------------------------------------------------------------- HYFLUX LTD. 3.30% WATER TREATMENT SYSTEMS --------------------------------------------------------------- COMPANIA DE CONCESSOES RODOVIARIAS 2.87% PUBLIC THOROUGHFARES --------------------------------------------------------------- TRINA SOLOR LTD. 2.83% ENERGY - ALTERNATE SOURCES --------------------------------------------------------------- FPL GROUP, INC. 2.77% ELECTRIC - INTEGRATED --------------------------------------------------------------- NOVOLIPETSK STEEL 2.74% STEEL - PRODUCERS --------------------------------------------------------------- VIVO PARTICIPACOES S.A. 2.71% CELLULAR TELECOMMUNICATIONS --------------------------------------------------------------- CPFL ENERGIA S.A. 2.70% ELECTRIC - INTEGRATED --------------------------------------------------------------- COMPANIA ENERGETICA DE MINAS GERAIS 2.54% ELECTRIC - INTEGRATED --------------------------------------------------------------- TOTAL TOP TEN HOLDINGS 29.67% 34 GLOBAL MEGATRENDS FUND GLOBAL MEGATRENDS FUND PORTFOLIO ALLOCATION BY INDUSTRY SECTOR December 31, 2009 BASED ON TOTAL INVESTMENTS [Pie Chart] Industrials 39.0% Utilities 17.0% Cash Equivalent 15.0% Materials 13.3% Telecommunications 11.9% Other 3.8% 35 GLOBAL RESOURCES FUND MANAGEMENT TEAM'S PERSPECTIVE INTRODUCTION The Global Resources Fund (PSPFX) is a diversified natural resources fund with the principal objective of achieving long-term growth of capital while providing protection against inflation and monetary instability. The fund invests globally in companies involved in the exploration, production, transportation and processing of petroleum, natural gas, industrial commodities, metals, minerals and forestry. PERFORMANCE GRAPH GLOBAL RESOURCES FUND [Global Resources Fund Graph] Morgan Stanley Global S&P 500 Commodity Related Date Resources Fund Index Equity Index ---- -------------- ----- ------------ 12/31/99 $ 10,000.00 $ 10,000.00 $ 10,000.00 01/31/00 9,670.05 9,497.63 9,189.92 02/29/00 9,137.06 9,318.02 8,611.30 03/31/00 10,126.90 10,229.02 9,660.07 04/28/00 9,974.62 9,921.39 9,671.67 05/31/00 10,482.23 9,717.71 10,375.61 06/30/00 9,847.72 9,957.32 9,505.01 07/31/00 9,670.05 9,801.78 9,250.80 08/31/00 10,736.04 10,410.26 9,962.18 09/29/00 10,710.66 9,860.79 9,573.22 10/31/00 10,304.57 9,818.97 9,851.92 11/30/00 9,796.95 9,045.41 10,117.12 12/31/00 11,065.99 9,089.78 11,773.54 01/31/01 10,710.66 9,412.07 11,121.35 02/28/01 10,532.99 8,554.41 11,162.88 03/30/01 10,380.71 8,012.78 10,478.74 04/30/01 11,319.80 8,634.95 11,589.01 05/31/01 11,192.89 8,692.89 11,925.23 06/30/01 10,177.66 8,481.40 11,364.78 07/31/01 9,771.57 8,397.86 11,701.56 08/31/01 9,416.24 7,872.69 11,625.03 09/30/01 8,807.11 7,237.00 10,579.29 10/31/01 9,390.86 7,375.07 11,032.53 11/30/01 9,467.01 7,940.66 11,516.30 12/31/01 9,568.53 8,010.28 11,795.21 01/31/02 9,593.91 7,893.45 12,136.01 02/28/02 10,126.90 7,741.19 12,523.92 03/31/02 11,065.99 8,032.36 13,123.61 04/30/02 11,751.27 7,545.59 12,908.84 05/31/02 14,137.06 7,490.20 13,432.56 06/30/02 12,512.69 6,956.87 12,970.05 07/31/02 9,720.81 6,414.72 11,143.09 08/31/02 10,203.05 6,456.72 11,389.87 09/30/02 10,000.00 5,755.65 10,630.22 10/31/02 9,340.10 6,261.76 10,800.19 11/30/02 9,695.43 6,629.96 11,439.34 12/31/02 11,270.30 6,240.67 11,355.94 01/31/03 11,918.01 6,077.50 11,169.51 02/28/03 12,151.19 5,986.18 11,036.61 03/31/03 11,736.65 6,044.14 10,596.14 04/30/03 11,710.74 6,541.76 11,059.65 05/31/03 13,083.91 6,886.10 12,168.41 06/30/03 13,317.08 6,974.07 12,546.65 07/31/03 13,964.80 7,097.08 12,645.09 08/31/03 15,726.60 7,235.22 13,536.98 09/30/03 16,555.68 7,158.61 13,477.82 10/31/03 19,302.00 7,563.36 14,532.81 11/30/03 20,830.62 7,629.83 14,967.98 12/31/03 22,491.10 8,029.69 16,649.37 01/31/04 22,017.61 8,177.05 16,318.41 02/29/04 23,175.04 8,290.67 17,485.24 03/31/04 23,780.07 8,165.62 17,732.27 04/30/04 21,465.19 8,037.59 16,678.41 05/31/04 21,491.50 8,147.67 16,978.65 06/30/04 22,070.22 8,306.05 18,092.79 07/31/04 22,175.44 8,030.78 18,119.39 08/31/04 22,228.05 8,063.04 18,240.57 09/30/04 25,411.00 8,150.31 19,692.41 10/31/04 26,173.86 8,274.82 19,573.23 11/30/04 29,462.03 8,609.52 21,279.51 12/31/04 29,331.20 8,902.40 20,976.68 01/31/05 29,526.55 8,685.40 20,602.39 02/28/05 35,387.21 8,868.08 22,420.62 03/31/05 34,968.59 8,711.21 21,600.72 04/30/05 32,289.44 8,546.08 20,077.93 05/31/05 32,652.24 8,817.76 20,305.05 06/30/05 35,359.30 8,830.39 21,136.48 07/31/05 37,703.57 9,158.64 22,683.51 08/31/05 40,215.28 9,075.03 23,293.92 09/30/05 43,592.13 9,148.49 24,411.21 10/31/05 39,824.57 8,995.90 23,053.19 11/30/05 41,219.96 9,335.80 24,300.97 12/31/05 43,695.15 9,339.11 25,575.38 01/31/06 50,819.69 9,586.38 28,995.25 02/28/06 47,670.22 9,612.31 27,025.05 03/31/06 51,278.35 9,731.94 28,202.67 04/30/06 56,201.32 9,862.54 30,517.03 05/31/06 52,776.65 9,579.04 29,938.83 06/30/06 52,654.34 9,591.76 29,679.05 07/31/06 52,929.53 9,650.88 29,830.17 08/31/06 52,409.72 9,880.16 29,274.53 09/30/06 47,547.91 10,134.61 28,145.50 10/31/06 50,636.23 10,464.66 29,945.82 11/30/06 54,183.21 10,663.33 32,269.44 12/31/06 53,389.16 10,812.88 31,549.09 01/31/07 52,525.72 10,976.24 32,450.32 02/28/07 52,849.51 10,762.21 32,739.55 03/31/07 55,008.10 10,882.31 33,480.54 04/30/07 58,785.63 11,364.20 35,257.96 05/31/07 62,599.15 11,760.36 38,487.13 06/30/07 63,678.44 11,565.10 38,781.67 07/31/07 64,326.02 11,206.96 39,120.47 08/31/07 61,160.09 11,374.71 38,853.00 09/30/07 70,046.29 11,799.67 42,375.22 10/31/07 77,493.43 11,987.33 44,600.13 11/30/07 70,801.79 11,485.97 42,308.35 12/31/07 74,718.59 11,406.49 45,817.24 01/31/08 69,338.85 10,722.40 42,879.85 02/28/08 75,615.21 10,374.35 45,914.59 03/31/08 70,619.74 10,329.45 44,533.80 04/30/08 75,487.12 10,832.41 47,929.32 05/31/08 84,111.78 10,972.70 50,793.00 06/30/08 87,612.88 10,048.54 50,531.21 07/31/08 69,765.81 9,964.04 46,146.27 08/31/08 63,702.93 10,108.25 43,878.41 09/30/08 47,478.33 9,208.54 36,884.19 10/31/08 33,858.19 7,662.15 25,507.63 11/30/08 30,314.40 7,112.18 25,601.45 12/31/08 28,299.20 7,187.12 26,935.59 01/31/09 28,460.60 6,582.06 25,576.80 02/28/09 26,900.38 5,883.51 23,381.31 03/31/09 29,321.41 6,397.96 25,837.47 04/30/09 32,657.06 7,009.76 29,156.04 05/31/09 38,736.55 7,401.38 34,170.47 06/30/09 35,508.50 7,416.16 32,100.56 07/31/09 38,951.75 7,976.37 34,853.69 08/31/09 39,382.15 8,263.95 35,566.38 09/30/09 43,632.41 8,572.10 37,966.26 10/31/09 43,524.81 8,413.06 37,371.71 11/30/09 46,268.65 8,917.57 40,521.92 12/31/09 47,613.67 9,089.74 41,699.44 AVERAGE ANNUAL PERFORMANCE For the Years Ended December 31, 2009
One Year Five Year Ten Year Global Resources Fund 68.25% 10.17% 16.87% ----------------------------------------------------------------------- S&P 500 Index 26.47% 0.42% (0.95)% ----------------------------------------------------------------------- Morgan Stanley Commodity Related Equity Index 54.78% 14.73% 15.34% Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The S&P 500 Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The Morgan Stanley Commodity Related Equity Index is an equal-dollar weighted index based on shares of widely held companies involved in commodity-related industries such as energy, non-ferrous metals, agriculture and forest products. The returns for the indexes reflect no deduction for fees, expenses or taxes. Pursuant to a voluntary arrangement, the Adviser has agreed to limit total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments, if any) to not exceed 1.90%. The Adviser can modify or terminate this arrangement at any time.
Please visit our website at www.usfunds.com for updated performance information for different time periods. 36 GLOBAL RESOURCES FUND THE YEAR IN REVIEW - ECONOMIC AND POLITICAL ISSUES THAT AFFECTED THE FUND The U.S. government implemented its $787 billion stimulus package in the start of the year to help improve business confidence and jump-start the economy. By the third quarter GDP turned positive, offsetting four consecutive quarters of negative economic output. Accordingly, cyclicals such as basic materials and commodity stocks rebounded meaningfully from low price levels set in March. Globally, economic growth was led by China, where output grew by 8.7 percent in 2009. Other large emerging markets should also generate positive real GDP growth. In large part, this growth was in due to strong monetary policy, federal stimulus packages and the end of inventory de-stocking. China's economy has been particularly resilient. The country remained an important factor for commodities demand as the largest incremental consumer of many raw materials and crude oil. China's mandate to secure natural resources during the downturn prompted aggressive buying for key commodities involving copper, metallurgical coal, iron ore and crude oil. This year's aggressive policy measures have led to a significant increase in inflation expectations among investors. In the United States, government bailout programs and stimulus packages resulted in a budget deficit exceeding $1 trillion and central bank programs doubled the monetary base, provoking concern within Congress about the ability of officials to withdraw stimulus before price inflation becomes a problem. This has drawn institutional money flows into gold and other commodities as a way to hedge against a rapidly deteriorating federal balance sheet. INVESTMENT HIGHLIGHTS OVERVIEW The Global Resources Fund returned 68.25 percent during 2009 and outperformed its benchmark, the Morgan Stanley Commodity Related Equity Index (CRX), by 13 percentage points. The fund was also in the top 20 percent of its Lipper peer group in 2009. The fund was able to achieve superior returns in 2009 with lower daily volatility (2.28 percent) than the CRX benchmark (2.41 percent). The fund's total return in 2009 was its second-best annual gain since its inception in 1983. A return by investors into core areas for the fund 37 GLOBAL RESOURCES FUND involving emerging markets and commodities greatly enhanced performance. Additionally, an increase in the risk appetite by investors allowed companies to raise equity to meet debt covenants and fortify stretched balance sheets. Broad equity markets also rebounded strongly during the 12-month period, with the S&P 500 Index returning 26.47 percent. Because the fund is actively managed, and a holding period is generally not a consideration in investment decisions, the portfolio turnover rate may fluctuate from year to year as the fund adjusts its portfolio composition. Its annual portfolio turnover was, and is expected to continue to be, more than 100 percent. STRENGTHS * Crude oil rebounded from a "panic" low of $34 a barrel to finish the year near $80 a barrel, still 40 percent below the peak set in 2008. The fund benefited from exposure to emerging crude oil exploration and production companies such as Pacific Rubiales Energy Corp.,(1) which gained more than 700 percent in U.S. dollars terms during 2009. * The price of copper gained over 130 percent in 2009, driven almost entirely by Chinese demand as imports into the country were at record levels for most of the year. Freeport McMoRan Copper & Gold, Inc.,(2) a core position in the fund, gained 229 percent in the 12-month period. * As a result of the credit crisis, companies with stretched balance sheets in the beginning of the year were sold in a panic. However, as the credit markets began to thaw, the fund was able to buy resource stocks at "fire sale" prices. Diversified miner Teck Resources, Inc.(3) gained 250 percent from the fund's initial purchase in 2009. * Platinum gained 57 percent in the period as the improving economy strengthened demand and inventories declined. Eastern Platinum Ltd.(4) gained 220 percent in the year and Impala Platinum Holdings Ltd.(5) doubled from its initial purchase in February 2009. WEAKNESSES * Natural gas futures, down about 1 percent, were one of the very few commodities that declined in 2009. Lackluster demand and rising production from prolific unconventional deposits led to record levels of natural gas storage inventories in the U.S. Regardless of the weak price performance, many natural gas equities rallied in anticipation of a recovery in the price of natural gas. The AMEX Natural Gas Index(6) returned 46.6 percent in 2009, but still underperformed the CRX benchmark by roughly 8 percentage points. 38 GLOBAL RESOURCES FUND * Refining stocks also lagged the energy sector in response to weak product margins and declining demand for gasoline and diesel. The S&P Supercomposite Oil & Gas Refining & Marketing Index(7) fell 15.4 percent in 2009, which highlights the underperformance of refining stocks in 2009. This weakness spilled over to the major integrated producers with refining exposure (as measured by the AMEX Oil Index(8)), whose 13 percent return in 2009 lagged the CRX Index by nearly 42 percentage points. * Despite strong relative performance in the beginning of the year, gold and precious metals equities underperformed the CRX benchmark by 12 percentage points as investor sentiment improved with respect to the economy and the general equity market. * The fund's limited weighting in forest and paper stocks weighed on relative performance, as the group outperformed the CRX benchmark. CURRENT OUTLOOK OPPORTUNITIES * Energy merger and acquisition activity rebounded sharply in the fourth quarter of 2009, perhaps heralding a new wave of buying. Analysts at John S. Herold said that upstream oil sector M&A totaled nearly $53 billion in the fourth quarter, the highest quarterly volume of deals since the second quarter of 2006. * China, the world's second-largest energy consumer, said it will "actively" participate in the global competition for oil, natural gas and mineral resources as domestic demand rises. The country will intensify development of overseas resources to ensure "stable" energy supplies for economic growth, the vice chairman of the National Development and Reform Commission said in a speech. * Oil producers will need to add 45 million barrels worth of daily crude output capacity in the next 20 years, a nearly 50 percent increase in capacity, to meet rising demand and offset a steady decline in major fields, the International Energy Agency said in a recent report. * With a strong rebound in oil prices driving revenues higher, a global survey of nearly 400 oil and gas companies indicates that 2010 global exploration and production spending will increase 11 percent to $439 billion, according to Barclays Capital. * Copper hit its highest price in nine months by the end of the second quarter. It surpassed $5,000 per metric ton on the London Metals Exchange as manufacturing data from China, Europe and the United 39 GLOBAL RESOURCES FUND States suggested the global economy may be past the worst of the recession. THREATS * In early January 2010, China's central bank raised a key interest rate for the first time in five months, causing the broader Chinese market and base metal prices to decline. While the move in interest rates was a relatively small 0.05 percent, many economists believe that this may be the first move in a broader interest rate tightening campaign. * Although unlikely, we see the possibility of a double-dip recession as the largest threat to commodity prices and related equities. Additionally, an early and surprisingly rapid exit from accommodative monetary and fiscal policy by global central bankers is unlikely but remains a threat to commodities and related equities. (1)This security comprised 3.62% of the total net assets of the fund as of December 31, 2009. (2)This security comprised 2.93% of the total net assets of the fund as of December 31, 2009. (3)This security comprised 2.41% of the total net assets of the fund as of December 31, 2009. (4)This security comprised 1.32% of the total net assets of the fund as of December 31, 2009. (5)This security comprised 1.99% of the total net assets of the fund as of December 31, 2009. (6)The AMEX Natural Gas Index (XNG) is an equal-dollar weighed index designed to measure the performance of highly capitalized companies in the natural gas industry involved primarily in natural gas exploration and production and natural gas pipeline transportation and transmission. (7)The S&P Supercomposite Oil & Gas Refining & Marketing Index is a capitalization-weighted index comprised of oil and gas refining and marketing stocks included in the S&P Supercomposite 1500 Index. (8)The AMEX Oil Index (XOI) is a price weighted index designed to measure the performance of the oil industry through changes in the prices of a cross section of widely-held corporations involved in the exploration, production, and development of petroleum. 40 GLOBAL RESOURCES FUND TOP 10 HOLDINGS BASED ON NET ASSETS (EXCLUDING REPURCHASE AGREEMENTS) December 31, 2009 CHEVRON CORP. 3.69% OIL & GAS - INTEGRATED --------------------------------------------------------------- PACIFIC RUBIALES ENERGY CORP. 3.62% OIL & GAS EXPLORATION & PRODUCTION --------------------------------------------------------------- CANADIAN NATURAL RESOURCES LTD. 3.11% OIL & GAS EXPLORATION & PRODUCTION --------------------------------------------------------------- FREEPORT-MCMORAN COPPER & GOLD, INC. 2.93% COPPER --------------------------------------------------------------- OCCIDENTAL PETROLEUM CORP. 2.89% OIL & GAS - INTEGRATED --------------------------------------------------------------- TECK RESOURCES LTD. 2.41% GENERAL METAL & MINERAL MINING --------------------------------------------------------------- PEABODY ENERGY CORP. 2.29% COAL --------------------------------------------------------------- SOUTHWESTERN ENERGY CO. 2.12% OIL & GAS EXPLORATION & PRODUCTION --------------------------------------------------------------- ALANGE ENERGY CORP. 2.06% OIL & GAS EXPLORATION & PRODUCTION --------------------------------------------------------------- IMPALA PLATINUM HOLDINGS LTD. 1.99% PLATINUM --------------------------------------------------------------- TOTAL TOP TEN HOLDINGS 27.11% 41 GLOBAL RESOURCES FUND PORTFOLIO ALLOCATION BY INDUSTRY SECTOR December 31, 2009 [Pie Chart] Oil & Gas Exploration & Production 26.3% Metals & Mining 19.2% Precious Metals 15.4% Oil & Gas - Integrated 10.1% General Basic Materials 8.2% Oil & Gas Equipment & Services 7.0% Cash Equivalent 4.9% Oil & Gas - Other 3.3% Other Sectors 5.6% Energy: Oil & Gas Exploration & Production 26.3% Oil & Gas - Integrated (includes 10.1% Refining and Marketing) Oil & Gas Equipment & Services 7.0% Oil & Gas - Other 3.3% Total Energy 46.7% Basic Materials: Precious Metals (includes Gold/Silver 15.4% Mining and Platinum) Metals & Mining (includes Copper, 19.2% Uranium and Coal) General Basic Materials 8.2% Total Basic Materials 42.8% Other Sectors 5.6% Repurchase Agreement 4.9% ----- 100.0% ===== 42 PRECIOUS METALS AND MINERALS FUNDS MANAGEMENT TEAM'S PERSPECTIVE INTRODUCTION The World Precious Minerals Fund (UNWPX) and the Gold and Precious Metals Fund (USERX) pursue an objective of long-term capital growth through investments in gold, precious metals and minerals companies. The Gold and Precious Metals Fund focuses on the equity securities of established gold and precious metals companies, and it pursues current income as a secondary objective. The World Precious Minerals Fund focuses on equity securities of companies principally engaged in the exploration, mining and processing of precious minerals such as gold, silver, platinum and diamonds. Although this fund has the latitude to invest in a broad range of precious minerals, it currently remains focused on the gold sector. PERFORMANCE GRAPHS WORLD PRECIOUS MINERALS FUND [World Precious Minerals Fund Graph] NYSE Arca World Precious S&P 500 Gold Miners Date Minerals Fund Index Index ---- ------------- ----- ----- 12/31/99 $ 10,000.00 $ 10,000.00 $ 10,000.00 01/31/00 8,876.68 9,497.63 8,956.70 02/29/00 9,023.20 9,318.02 9,218.36 03/31/00 8,339.44 10,229.02 8,655.86 04/28/00 7,924.30 9,921.39 8,054.19 05/31/00 7,680.10 9,717.71 8,055.52 06/30/00 7,851.04 9,957.32 8,447.00 07/31/00 7,020.76 9,801.78 7,686.28 08/31/00 7,301.59 10,410.26 7,963.87 09/29/00 6,556.78 9,860.79 7,516.60 10/31/00 5,860.81 9,818.97 6,391.95 11/30/00 5,799.76 9,045.41 6,604.13 12/31/00 6,191.70 9,089.78 6,874.42 01/31/01 6,130.39 9,412.07 7,220.75 02/28/01 6,118.13 8,554.41 7,954.91 03/30/01 5,713.53 8,012.78 7,163.30 04/30/01 6,253.00 8,634.95 8,215.57 05/31/01 6,498.22 8,692.89 8,618.67 06/30/01 6,473.70 8,481.40 8,822.88 07/31/01 6,105.87 8,397.86 8,614.36 08/31/01 6,191.70 7,872.69 9,237.28 09/30/01 6,547.26 7,237.00 9,694.85 10/31/01 6,461.43 7,375.07 9,407.62 11/30/01 6,424.65 7,940.66 9,035.06 12/31/01 6,657.61 8,010.28 9,574.64 01/31/02 7,822.38 7,893.45 11,010.09 02/28/02 8,570.29 7,741.19 12,228.72 03/31/02 9,968.02 8,032.36 13,449.33 04/30/02 11,010.19 7,545.59 14,335.57 05/31/02 15,497.63 7,490.20 17,796.19 06/30/02 12,788.00 6,956.87 15,518.99 07/31/02 9,195.59 6,414.72 12,838.36 08/31/02 10,470.71 6,456.72 15,220.81 09/30/02 10,544.28 5,755.65 15,345.66 10/31/02 9,146.55 6,261.76 13,760.79 11/30/02 9,244.63 6,629.96 13,784.70 12/31/02 12,211.28 6,240.67 17,205.14 01/31/03 12,677.07 6,077.50 17,341.28 02/28/03 12,211.28 5,986.18 15,529.29 03/31/03 11,506.30 6,044.14 14,392.68 04/30/03 11,204.16 6,541.76 14,247.91 05/31/03 12,022.44 6,886.10 16,026.70 06/30/03 12,274.22 6,974.07 16,961.42 07/31/03 13,067.33 7,097.08 17,929.34 08/31/03 15,320.75 7,235.22 20,511.69 09/30/03 16,504.11 7,158.61 20,418.71 10/31/03 20,192.67 7,563.36 22,327.67 11/30/03 23,528.74 7,629.83 25,729.18 12/31/03 23,530.92 8,029.69 25,302.83 01/31/04 21,836.02 8,177.05 22,208.13 02/29/04 22,796.47 8,290.67 23,233.50 03/31/04 24,787.98 8,165.62 24,845.26 04/30/04 19,378.41 8,037.59 19,006.18 05/31/04 20,014.00 8,147.67 20,969.92 06/30/04 19,321.91 8,306.05 20,223.80 07/31/04 18,389.71 8,030.78 19,896.73 08/31/04 19,180.67 8,063.04 21,563.95 09/30/04 22,146.75 8,150.31 23,757.80 10/31/04 22,655.22 8,274.82 24,095.83 11/30/04 24,773.85 8,609.52 24,824.68 12/31/04 23,758.27 8,902.40 22,884.85 01/31/05 22,523.89 8,685.40 21,280.38 02/28/05 24,847.44 8,868.08 22,941.29 03/31/05 23,685.66 8,711.21 21,679.51 04/30/05 20,490.79 8,546.08 19,322.62 05/31/05 20,418.17 8,817.76 19,930.27 06/30/05 22,509.37 8,830.39 21,645.30 07/31/05 22,640.07 9,158.64 21,107.72 08/31/05 24,019.67 9,075.03 22,120.47 09/30/05 27,417.86 9,148.49 25,882.26 10/31/05 25,123.36 8,995.90 23,928.81 11/30/05 27,635.69 9,335.80 26,217.96 12/31/05 31,096.25 9,339.11 29,539.12 01/31/06 38,472.43 9,586.38 35,551.53 02/28/06 37,493.02 9,612.31 32,076.97 03/31/06 42,849.16 9,731.94 34,916.32 04/30/06 48,082.88 9,862.54 39,289.08 05/31/06 44,272.37 9,579.04 34,908.02 06/30/06 44,165.24 9,591.76 34,890.09 07/31/06 45,022.23 9,650.88 34,919.64 08/31/06 45,940.42 9,880.16 36,551.00 09/30/06 40,982.16 10,134.61 32,136.41 10/31/06 44,104.03 10,464.66 34,213.04 11/30/06 48,679.71 10,663.33 37,729.11 12/31/06 47,358.05 10,812.88 35,995.15 01/31/07 47,323.30 10,976.24 35,691.99 02/28/07 48,018.21 10,762.21 36,078.50 03/31/07 47,271.18 10,882.31 35,589.06 04/30/07 49,477.52 11,364.20 35,764.38 05/31/07 49,685.99 11,760.36 35,330.39 06/30/07 49,234.30 11,565.10 34,167.55 07/31/07 51,093.18 11,206.96 36,123.66 08/31/07 45,290.69 11,374.71 33,845.46 09/30/07 54,967.30 11,799.67 40,673.40 10/31/07 64,331.20 11,987.33 45,525.97 11/30/07 55,557.97 11,485.97 41,731.64 12/31/07 58,258.44 11,406.49 42,063.02 01/31/08 61,099.24 10,722.40 45,949.99 02/28/08 67,024.95 10,374.35 48,642.25 03/31/08 58,946.45 10,329.45 43,840.15 04/30/08 53,176.09 10,832.41 39,955.84 05/31/08 56,949.02 10,972.70 42,290.48 06/30/08 56,194.43 10,048.54 44,342.21 07/31/08 47,982.76 9,964.04 39,881.79 08/31/08 41,879.50 10,108.25 34,416.26 09/30/08 34,444.61 9,208.54 30,897.20 10/31/08 20,174.07 7,662.15 19,087.53 11/30/08 21,328.14 7,112.18 24,326.27 12/31/08 27,407.27 7,187.12 30,793.93 01/31/09 27,894.64 6,582.06 31,157.19 02/28/09 28,181.33 5,883.51 30,393.48 03/31/09 31,936.93 6,397.96 33,804.29 04/30/09 31,162.87 7,009.76 30,097.62 05/31/09 41,426.26 7,401.38 40,432.99 06/30/09 37,068.62 7,416.16 34,567.01 07/31/09 40,336.85 7,976.37 36,382.65 08/31/09 40,336.85 8,263.95 36,110.04 09/30/09 45,009.85 8,572.10 41,352.77 10/31/09 44,923.84 8,413.06 38,804.29 11/30/09 52,291.70 8,917.57 46,595.50 12/31/09 51,937.31 9,089.74 42,279.52 AVERAGE ANNUAL PERFORMANCE For the Years Ended December 31, 2009
One Year Five Year Ten Year World Precious Minerals Fund 89.50% 16.92% 17.89% - ---------------------------------------------------------------------- S&P 500 Index 26.47% 0.42% (0.95)% - ---------------------------------------------------------------------- NYSE Arca Gold Miners Index* 37.30% 13.05% 15.49% * These are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment. Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The S&P 500 Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. 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 returns for the indexes reflect no deduction for fees, expenses or taxes. Pursuant to a voluntary arrangement, the Adviser has agreed to limit total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments, if any) to not exceed 1.90%. The Adviser can modify or terminate this arrangement at any time.
43 PRECIOUS METALS AND MINERALS FUNDS GOLD AND PRECIOUS METALS FUND [Gold and Precious Metals Fund Graph] FTSE Gold and Precious S&P 500 Gold Mines Metals Fund Index Index 12/31/99 $ 10,000.00 $ 10,000.00 $ 10,000.00 01/31/00 8,790.32 9,497.63 8,824.83 02/29/00 8,844.09 9,318.02 9,103.41 03/31/00 8,172.04 10,229.02 8,420.75 04/28/00 7,526.88 9,921.39 8,147.35 05/31/00 7,526.88 9,717.71 8,393.39 06/30/00 7,849.46 9,957.32 8,698.36 07/31/00 7,096.77 9,801.78 7,849.70 08/31/00 7,526.88 10,410.26 7,947.84 09/29/00 7,043.01 9,860.79 7,525.45 10/31/00 6,344.09 9,818.97 6,380.23 11/30/00 6,451.61 9,045.41 6,729.58 12/31/00 7,016.13 9,089.78 7,364.08 01/31/01 6,935.48 9,412.07 7,190.10 02/28/01 7,096.77 8,554.41 7,699.86 03/30/01 6,451.61 8,012.78 6,942.01 04/30/01 7,311.83 8,634.95 8,093.91 05/31/01 7,634.41 8,692.89 8,371.41 06/30/01 7,607.53 8,481.40 8,363.66 07/31/01 7,043.01 8,397.86 8,164.58 08/31/01 7,231.18 7,872.69 8,686.19 09/30/01 7,526.88 7,237.00 9,474.84 10/31/01 7,419.35 7,375.07 9,062.15 11/30/01 7,365.59 7,940.66 8,698.90 12/31/01 7,795.70 8,010.28 9,034.25 01/31/02 9,086.02 7,893.45 10,325.01 02/28/02 10,403.23 7,741.19 11,349.04 03/31/02 11,881.72 8,032.36 12,513.76 04/30/02 13,064.52 7,545.59 13,346.48 05/31/02 17,311.83 7,490.20 15,293.17 06/30/02 14,193.55 6,956.87 13,098.39 07/31/02 10,483.87 6,414.72 11,081.77 08/31/02 12,123.66 6,456.72 12,617.72 09/30/02 12,473.12 5,755.65 12,685.15 10/31/02 10,752.69 6,261.76 11,536.48 11/30/02 10,860.22 6,629.96 11,241.42 12/31/02 14,139.78 6,240.67 13,764.77 01/31/03 14,489.25 6,077.50 13,703.26 02/28/03 13,575.27 5,986.18 12,828.21 03/31/03 12,715.05 6,044.14 12,033.95 04/30/03 12,150.54 6,541.76 11,907.49 05/31/03 13,521.51 6,886.10 13,269.88 06/30/03 13,924.73 6,974.07 13,958.68 07/31/03 14,650.54 7,097.08 14,464.77 08/31/03 17,043.01 7,235.22 16,320.65 09/30/03 17,795.70 7,158.61 16,439.58 10/31/03 20,564.52 7,563.36 17,771.82 11/30/03 24,435.48 7,629.83 19,669.07 12/31/03 23,624.26 8,029.69 19,656.57 01/31/04 20,954.39 8,177.05 17,194.52 02/29/04 21,736.47 8,290.67 17,521.25 03/31/04 23,840.00 8,165.62 19,006.24 04/30/04 18,311.49 8,037.59 14,864.10 05/31/04 19,794.75 8,147.67 16,379.69 06/30/04 18,877.83 8,306.05 15,716.32 07/31/04 17,772.13 8,030.78 15,763.82 08/31/04 18,742.99 8,063.04 17,146.47 09/30/04 21,439.82 8,150.31 18,403.73 10/31/04 21,709.50 8,274.82 19,109.76 11/30/04 23,354.57 8,609.52 19,707.31 12/31/04 22,103.55 8,902.40 18,295.14 01/31/05 21,045.83 8,685.40 16,946.97 02/28/05 22,510.36 8,868.08 18,098.87 03/31/05 21,100.07 8,711.21 17,228.34 04/30/05 18,333.74 8,546.08 15,428.69 05/31/05 18,740.55 8,817.76 15,595.88 06/30/05 20,801.74 8,830.39 17,190.96 07/31/05 20,964.47 9,158.64 16,611.08 08/31/05 22,374.76 9,075.03 17,392.95 09/30/05 25,575.02 9,148.49 20,952.18 10/31/05 24,002.01 8,995.90 19,336.95 11/30/05 25,981.84 9,335.80 21,084.04 12/31/05 29,353.13 9,339.11 23,386.44 01/31/06 36,567.97 9,586.38 27,668.62 02/28/06 34,647.67 9,612.31 24,141.49 03/31/06 39,613.01 9,731.94 25,302.55 04/30/06 45,565.94 9,862.54 28,514.47 05/31/06 42,246.56 9,579.04 26,179.86 06/30/06 42,466.03 9,591.76 26,383.03 07/31/06 43,316.44 9,650.88 25,827.92 08/31/06 44,276.59 9,880.16 26,470.39 09/30/06 39,503.28 10,134.61 23,842.98 10/31/06 41,889.94 10,464.66 25,083.86 11/30/06 46,032.29 10,663.33 27,289.86 12/31/06 44,084.56 10,812.88 26,330.89 01/31/07 43,618.21 10,976.24 25,336.80 02/28/07 43,837.67 10,762.21 25,352.31 03/31/07 42,081.97 10,882.31 24,839.44 04/30/07 42,274.00 11,364.20 24,894.70 05/31/07 42,081.97 11,760.36 24,229.60 06/30/07 41,121.82 11,565.10 23,800.32 07/31/07 42,603.19 11,206.96 25,721.49 08/31/07 39,448.41 11,374.71 24,520.03 09/30/07 48,501.25 11,799.67 30,423.68 10/31/07 55,551.49 11,987.33 33,898.03 11/30/07 50,147.22 11,485.97 31,885.62 12/31/07 51,539.02 11,406.49 31,873.12 01/31/08 57,130.67 10,722.40 35,021.17 02/28/08 61,540.08 10,374.35 37,107.05 03/31/08 55,852.58 10,329.45 32,494.37 04/30/08 50,963.88 10,832.41 29,615.21 05/31/08 53,935.44 10,972.70 31,684.39 06/30/08 54,894.01 10,048.54 34,009.63 07/31/08 49,270.41 9,964.04 30,272.87 08/31/08 43,614.86 10,108.25 26,032.27 09/30/08 39,365.20 9,208.54 24,898.25 10/31/08 26,328.68 7,662.15 16,051.13 11/30/08 30,514.42 7,112.18 21,002.92 12/31/08 37,595.68 7,187.12 25,537.60 01/31/09 37,352.67 6,582.06 25,234.57 02/28/09 37,074.96 5,883.51 24,326.56 03/31/09 40,268.68 6,397.96 27,218.43 04/30/09 37,665.10 7,009.76 24,313.74 05/31/09 48,843.14 7,401.38 31,695.59 06/30/09 43,149.98 7,416.16 28,022.71 07/31/09 44,920.41 7,976.37 29,030.48 08/31/09 44,503.84 8,263.95 28,675.84 09/30/09 50,058.14 8,572.10 32,265.46 10/31/09 49,294.42 8,413.06 30,830.56 11/30/09 56,584.44 8,917.57 36,197.96 12/31/09 53,803.47 9,089.74 33,104.96 AVERAGE ANNUAL PERFORMANCE For the Years Ended December 31, 2009
One Year Five Year Ten Year Gold and Precious Metals Fund 43.11% 19.46% 18.31% - ---------------------------------------------------------------------- S&P 500 Index 26.47% 0.42% (0.95)% - ---------------------------------------------------------------------- FTSE Gold Mines Index* 29.63% 12.59% 12.71% * These are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment. Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The S&P 500 Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. 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. The returns for the indexes reflect no deduction for fees, expenses or taxes. Pursuant to a voluntary arrangement, the Adviser has agreed to limit total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments, if any) to not exceed 1.90%. The Adviser can modify or terminate this arrangement at any time.
Please visit our website at www.usfunds.com for updated performance information for different time periods. 44 PRECIOUS METALS AND MINERALS FUNDS THE YEAR IN REVIEW - ECONOMIC AND POLITICAL ISSUES THAT AFFECTED THE FUNDS The U.S. government rapidly expanded its balance sheet to stimulate economic growth in 2009 and later to prevent risks of a double-dip recession. Low yields for dollar-denominated debt, strong investment demand, increases in headline inflation, sovereign credit risk and fears that central banks will reverse quantitative easing all helped gold remain an attractive investment throughout the year. Risk aversion combined with unstable equity markets at the beginning of 2009 strengthened both the U.S. dollar and gold, but gold decoupled from the U.S. currency at the end of the first quarter and returned to its historical inverse relationship as investors became more optimistic about a sustainable global recovery. Investors speculated that the Federal Reserve would not tighten monetary policy because of weak domestic economic fundamentals - they sought out riskier assets abroad in emerging markets and commodities, where growth was more robust. There is evidence of a "carry trade" in which investors borrowed low-yielding dollars and invested them in high-yielding assets, a process that weighed on the dollar and enabled bullion and commodities to strengthen. The U.S. dollar's role as a world reserve currency has been undermined by concerns from various emerging market economies, especially China. China is the largest creditor of the U.S. and possessor of the world's largest foreign exchange reserves, of which the U.S. dollar commands a significant weight. The International Monetary Fund reported that the dollar's share of global currency reserves fell in the third quarter to 61.6 percent, the lowest level in a decade. Data collected by the World Gold Council showed that central banks collectively bought $28 billion of gold at an average price of $978 per ounce, indicating that the central banks are increasingly viewing gold as a reserve currency. European central banks agreed to renew the Central Bank Gold Agreement in September 2009, but reduced gold sales to a maximum of 400 metric tons per year, down from the previous 500 tons. As a result, central banks around the world have shifted from being net sellers of gold to net buyers. Gold Fields Mineral Services said net sales from central banks dropped 90 percent during the year to 24 metric tons, the lowest level in a decade. China's revelation that it increased its gold reserves by 76 percent - from 600 to 1,054 metric tons - supported central bank gold buying and strengthened inflows into bullion-backed exchange traded funds. India, Sri Lanka and Mauritius each purchased a portion of the 403 metric tons of gold being sold by the International Monetary Fund to increase 45 PRECIOUS METALS AND MINERALS FUNDS lending resources for low-income countries. India purchased 200 metric tons of IMF bullion, equivalent to 8 percent of the world's annual mine production. Gold reserves for the Reserve Bank of India rose to 6.2 percent of its foreign exchange reserves. Analysts estimated that China's gold reserves stood at only 1.8 percent of foreign-exchange reserves, fueling speculation that China was strategically positioning itself to purchase about 200 metric tons of gold still available from the IMF as part of an ambitious goal of accumulating 10,000 metric tons in the next 10 years, as proposed by state-owned Assets Supervision and Administration. Jewelry demand fared less well due to the spike in bullion prices that set new record prices in various local currencies. Global jewelry purchases fell 23 percent to 1,687 metric tons, reaching a 21-year low. Investment demand outpaced jewelry demand for the first time in three decades, according to Gold Fields Mineral Services. Indian gold imports fell 24 percent in 2009 to 343 metric tons, but the Indian festival season and year-end promotions triggered a gold rush among Chinese and Indian jewelry buyers. INVESTMENT HIGHLIGHTS For the year ended December 31, 2009, the Gold and Precious Metals Fund gained 43.11 percent, compared to a 29.63 percent return for the FTSE Gold Mines Index. The World Precious Minerals Fund posted a positive return of 89.50 percent, while its benchmark NYSE Arca Gold Miners Index had a total return of 37.97 percent. Spot gold finished the period at $1,096.95, up $214.90, or 24.36 percent. The S&P 500 Index also posted a positive return of 26.47 percent, the U.S. Trade Weighted Dollar Index(1) fell 4.24 percent and the yield on the 90-day Treasury bill fell from 0.076 percent to 0.048 percent, a decrease of 37.34 percent. Because the funds are actively managed, and a holding period is generally not a consideration in investment decisions, the portfolio turnover rate may fluctuate from year to year as the fund adjusts its portfolio composition. The annual portfolio turnover for Gold and Precious Metals Fund was, and is expected to continue to be, more than 100 percent. STRENGTHS * The gold survey by Gold Fields Mineral Services indicated that the rate at which gold producers actively dehedged increased by 30.6 percent for fiscal year 2009 to 242 metric tons. This trend is poised to further accelerate as the world's largest gold producer has wound down its hedge book in order to be fully exposed to the gold price. 46 PRECIOUS METALS AND MINERALS FUNDS * In 2009, Randgold Resources Ltd.(2) soared 80 percent on a new greenfields discovery and strong execution by management on the company's objectives. Randgold was the largest holding in both of our gold-oriented funds during most of the 12-month period. The funds held a larger weighting in this security than their benchmarks, so its return contributed to the funds outperforming their benchmarks for the period. * Pacific Rubiales Energy Corp.,(3) a top-10 holding in the World Precious Minerals Fund, gained 721 percent in the 12-month period. This security is not included in the fund's benchmark, but was included in the fund's holdings to hedge rising energy costs for gold companies. Its return also contributed to the outperformance of the benchmark for the period. WEAKNESSES * South African unions demanded large wage increases from gold producers on account of high bullion prices, but the companies counter that their profits are being compressed by falling output, rising energy costs, lack of credit and power shortages. These factors make it difficult for companies to achieve meaningful margin growth. * Global gold jewelry demand fell 23 percent as a result of high bullion prices, but was somewhat offset by a doubling of investment demand to 1,820 metric tons. Gold Fields Mineral Services said this was the first year in three decades in which investment demand outpaced jewelry demand. * Data from the Mines and Geosciences Bureau of the Philippines showed that investments in the mining industry totaled $375 million for the year due to tight credit for developing projects. The investment fell far short of the country's original budget target of $1 billion for the year. CURRENT OUTLOOK OPPORTUNITIES * Russia, the world's fifth-largest gold producer, is expected to increase output by 15 percent next year by launching new mines in Siberia. The Russian Gold Industrialists' Union has said production reached 126.42 metric tons (4.1 million ounces) during the first eight months of 2009, an 18.5 percent increase from the comparable period in the previous year. * Bank of America-Merrill Lynch analysts believe political and central bank discomfort over U.S. dollar weakness is mounting within the 10 largest economies. In order to hedge against competitive currency depreciation with the G-10, emerging market economies may be inclined to buy physical assets such as gold as opposed to fiat currencies. A move to diversify away from all G-10 currencies at the same time 47 PRECIOUS METALS AND MINERALS FUNDS would hurt the U.S. dollar the most, given its higher weight in central bank reserves. * Societe Generale forecasts continued strength in investor inflows into commodities into the first half of 2010, helped by central banks keeping monetary policy essentially loose. SocGen also expects gold prices to reach $1,500 per ounce before mid-2010. THREATS * Trade protectionist measures taken by the largest economies may hinder global growth and threaten companies that rely on international business. * Economist Nouriel Roubini has expressed concern that China's commodities inventory may exceed its needs to support economic growth. If true, this could lead to a slowdown in buying and subsequent price corrections. * Research from Sprott Asset Management indicates that U.S. households bought nearly $530 billion in government debt in 2009, up from only $15 billion a year earlier and more than the Federal Reserve itself purchased. This raises a question about sources of demand at future Treasury auctions if the household sector has been tapped out and foreign buyers are reluctant to add more dollars to their reserves. A breakdown in the Treasury market could lead to higher interest rates to stimulate demand, which would likely boost the dollar and be a negative for gold. (1)The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar. (2)This security comprised 8.14% of the total net assets of the World Precious Minerals Fund and 8.30% of the total net assets of the Gold and Precious Metals Fund as of December 31, 2009. (3)This security comprised 2.08% of the total net assets of the World Precious Minerals Fund and 0.00% of the total net assets of the Gold and Precious Metals Fund as of December 31, 2009. 48 PRECIOUS METALS AND MINERALS FUNDS WORLD PRECIOUS MINERALS FUND TOP 10 HOLDINGS BASED ON NET ASSETS (EXCLUDING REPURCHASE AGREEMENTS) December 31, 2009 RANDGOLD RESOURCES LTD. 8.14% SENIOR GOLD PRODUCERS --------------------------------------------------------------- ROMARCO MINERALS, INC. 5.00% GOLD/MINERAL EXPLORATION & DEVELOPMENT --------------------------------------------------------------- GOLDCORP, INC. 4.38% SENIOR GOLD PRODUCERS --------------------------------------------------------------- CENTAMIN EGYPT LTD. 3.02% INTERMEDIATE & JUNIOR GOLD PRODUCERS --------------------------------------------------------------- RED BACK MINING, INC. 2.73% SENIOR GOLD PRODUCERS --------------------------------------------------------------- CHESAPEAKE GOLD CORP. 2.72% GOLD/MINERAL EXPLORATION & DEVELOPMENT --------------------------------------------------------------- SILVER WHEATON CORP. 2.53% SILVER MINING --------------------------------------------------------------- YAMANA GOLD, INC. 2.33% SENIOR GOLD PRODUCERS --------------------------------------------------------------- GREYSTAR RESOURCES LTD. 2.28% GOLD/MINERAL EXPLORATION & DEVELOPMENT --------------------------------------------------------------- ANDEAN RESOURCES LTD. 2.14% GOLD/MINERAL EXPLORATION & DEVELOPMENT --------------------------------------------------------------- TOTAL TOP TEN HOLDINGS 35.27% 49 PRECIOUS METALS AND MINERALS FUNDS GOLD AND PRECIOUS METALS FUND TOP 10 HOLDINGS BASED ON NET ASSETS (EXCLUDING REPURCHASE AGREEMENTS) December 31, 2009 RANDGOLD RESOURCES LTD. 8.30% GOLD MINING --------------------------------------------------------------- YAMANA GOLD, INC. 4.22% GOLD MINING --------------------------------------------------------------- RED BACK MINING, INC. 3.99% GOLD MINING --------------------------------------------------------------- DUNDEE PRECIOUS METALS, INC. 3.68% GOLD MINING --------------------------------------------------------------- AGNICO-EAGLE MINES LTD. 3.68% GOLD MINING --------------------------------------------------------------- CENTAMIN EGYPT LTD. 3.59% GOLD MINING --------------------------------------------------------------- ROYAL GOLD, INC. 3.52% GOLD/MINERAL ROYALTY COMPANIES --------------------------------------------------------------- GOLDCORP, INC. 3.30% GOLD MINING --------------------------------------------------------------- SILVER WHEATON CORP. 3.17% SILVER MINING --------------------------------------------------------------- KINROSS 2.70% GOLD MINING --------------------------------------------------------------- TOTAL TOP TEN HOLDINGS 40.15% 50 PRECIOUS METALS AND MINERALS FUNDS WORLD PRECIOUS MINERALS FUND PORTFOLIO ALLOCATION BY INDUSTRY December 31, 2009 BASED ON TOTAL INVESTMENTS [Pie Chart] Gold/Mineral Exploration & Development 28.0% Senior Gold Producers 24.7% Intermediate & Junior Gold Producers 15.9% Silver Mining 8.2% Cash Equivalent 8.2% Platinum 2.9% Metal & Mineral Mining & Exploration 2.8% Gold/Mineral Royalty Company 2.4% Oil & Gas Exploration & Production 2.2% Closed-End and Exchange-Traded Funds 1.1% GOLD AND PRECIOUS METALS FUND PORTFOLIO ALLOCATION BY INDUSTRY December 31, 2009 BASED ON TOTAL INVESTMENTS [Pie Chart] Gold Mining 61.8% Cash Equivalent 11.9% Silver Mining 10.8% Gold/Mineral Royalty Companies 4.2% Platinum 2.7% Closed-End and Exchange-Traded Funds 3.6% Metal & Mineral Mining 2.3% Other 2.7% 51 EASTERN EUROPEAN FUND MANAGEMENT TEAM'S PERSPECTIVE INTRODUCTION The investment objective of the Eastern European Fund (EUROX) is to achieve long-term capital growth by investing in a non-diversified portfolio of equity securities of companies located in the emerging markets of Eastern Europe.(1) PERFORMANCE GRAPH EASTERN EUROPEAN FUND [Eastern European Fund Graph] MSCI Emerging Eastern Markets Europe European S&P 500 10/40 Index Date Fund Index (Net Total Return) ---- --------- ------- ------------------ 12/31/99 $ 10,000.00 $ 10,000.00 $ 10,000.00 01/31/00 10,461.68 9,497.63 9,700.27 02/29/00 10,969.53 9,318.02 9,887.77 03/31/00 12,142.20 10,229.02 10,002.43 04/28/00 10,498.61 9,921.39 9,654.60 05/31/00 9,769.16 9,717.71 9,285.71 06/30/00 9,122.81 9,957.32 8,575.92 07/31/00 9,168.98 9,801.78 8,435.80 08/31/00 9,529.09 10,410.26 7,971.73 09/29/00 8,513.39 9,860.79 7,569.99 10/31/00 8,144.04 9,818.97 7,303.66 11/30/00 7,128.35 9,045.41 5,808.89 12/31/00 7,857.80 9,089.78 6,527.36 01/31/01 8,504.16 9,412.07 6,852.51 02/28/01 7,913.20 8,554.41 5,763.71 03/30/01 7,756.23 8,012.78 5,337.40 04/30/01 8,107.11 8,634.95 6,028.53 05/31/01 8,541.09 8,692.89 5,852.74 06/30/01 8,790.40 8,481.40 5,588.22 07/31/01 8,421.05 8,397.86 5,020.34 08/31/01 8,328.72 7,872.69 4,989.57 09/30/01 7,691.60 7,237.00 4,164.74 10/31/01 8,513.39 7,375.07 4,862.46 11/30/01 9,039.70 7,940.66 5,484.39 12/31/01 9,381.35 8,010.28 6,000.07 01/31/02 10,166.20 7,893.45 6,518.85 02/28/02 10,046.17 7,741.19 5,912.93 03/31/02 10,951.06 8,032.36 6,469.09 04/30/02 11,828.25 7,545.59 6,811.93 05/31/02 12,003.69 7,490.20 6,613.97 06/30/02 11,274.24 6,956.87 5,797.94 07/31/02 10,581.72 6,414.72 5,463.66 08/31/02 11,135.73 6,456.72 5,595.95 09/30/02 10,997.23 5,755.65 5,375.44 10/31/02 11,754.39 6,261.76 5,946.42 11/30/02 12,659.28 6,629.96 6,585.78 12/31/02 12,631.58 6,240.67 6,197.59 01/31/03 12,234.53 6,077.50 6,088.76 02/28/03 12,640.81 5,986.18 6,398.66 03/31/03 12,169.90 6,044.14 5,944.60 04/30/03 13,693.44 6,541.76 7,080.81 05/31/03 15,013.85 6,886.10 7,898.34 06/30/03 15,078.49 6,974.07 7,972.78 07/31/03 14,875.35 7,097.08 7,930.59 08/31/03 16,361.96 7,235.22 8,926.11 09/30/03 17,469.99 7,158.61 9,380.97 10/31/03 17,950.14 7,563.36 9,519.77 11/30/03 18,541.09 7,629.83 9,479.15 12/31/03 20,381.12 8,029.69 10,682.55 01/31/04 21,832.05 8,177.05 10,993.23 02/29/04 23,886.71 8,290.67 11,874.05 03/31/04 25,542.13 8,165.62 12,922.79 04/30/04 23,127.17 8,037.59 11,367.66 05/31/04 22,864.25 8,147.67 10,896.66 06/30/04 23,380.35 8,306.05 11,195.67 07/31/04 22,786.35 8,030.78 10,901.62 08/31/04 23,915.93 8,063.04 11,516.56 09/30/04 26,048.49 8,150.31 12,466.69 10/31/04 27,664.96 8,274.82 13,264.98 11/30/04 29,047.72 8,609.52 13,580.82 12/31/04 31,054.27 8,902.40 14,478.67 01/31/05 31,398.64 8,685.40 14,774.38 02/28/05 35,237.38 8,868.08 16,914.64 03/31/05 31,479.67 8,711.21 15,153.66 04/30/05 29,251.38 8,546.08 14,314.93 05/31/05 30,274.37 8,817.76 14,642.60 06/30/05 31,925.33 8,830.39 15,550.06 07/31/05 35,146.22 9,158.64 17,116.32 08/31/05 38,184.80 9,075.03 18,662.85 09/30/05 42,529.97 9,148.49 20,786.35 10/31/05 39,126.76 8,995.90 19,002.51 11/30/05 42,317.27 9,335.80 20,656.94 12/31/05 43,719.34 9,339.11 21,433.33 01/31/06 50,648.03 9,586.38 24,355.75 02/28/06 52,031.55 9,612.31 25,557.87 03/31/06 50,570.55 9,731.94 24,777.67 04/30/06 55,540.17 9,862.54 27,416.12 05/31/06 46,774.16 9,579.04 23,756.34 06/30/06 45,567.73 9,591.76 23,785.75 07/31/06 48,290.51 9,650.88 25,440.55 08/31/06 49,629.76 9,880.16 25,760.01 09/30/06 47,748.17 10,134.61 24,764.17 10/31/06 51,267.85 10,464.66 26,699.72 11/30/06 54,732.19 10,663.33 28,745.32 12/31/06 58,053.70 10,812.88 30,370.49 01/31/07 57,313.35 10,976.24 29,938.11 02/28/07 56,241.11 10,762.21 29,609.24 03/31/07 60,236.46 10,882.31 31,470.24 04/30/07 61,576.74 11,364.20 32,403.99 05/31/07 60,415.16 11,760.36 31,780.08 06/30/07 64,525.38 11,565.10 33,834.32 07/31/07 67,665.49 11,206.96 35,432.41 08/31/07 64,921.09 11,374.71 33,888.55 09/30/07 70,473.72 11,799.67 37,132.91 10/31/07 76,256.11 11,987.33 40,680.84 11/30/07 73,856.35 11,485.97 39,677.29 12/31/07 77,132.42 11,406.49 40,739.57 01/31/08 65,733.46 10,722.40 34,073.35 02/28/08 68,239.07 10,374.35 35,988.04 03/31/08 65,903.60 10,329.45 35,132.20 04/30/08 68,888.67 10,832.41 36,188.81 05/31/08 76,049.75 10,972.70 40,065.28 06/30/08 70,388.94 10,048.54 36,830.77 07/31/08 65,934.53 9,964.04 35,199.83 08/31/08 57,907.32 10,108.25 30,847.72 09/30/08 45,750.49 9,208.54 24,441.57 10/31/08 29,464.06 7,662.15 16,117.02 11/30/08 24,452.85 7,112.18 13,638.06 12/31/08 23,756.85 7,187.12 13,514.42 01/31/09 20,462.44 6,582.06 11,379.68 02/28/09 19,302.44 5,883.51 10,545.41 03/31/09 21,993.64 6,397.96 12,455.67 04/30/09 26,401.65 7,009.76 15,458.78 05/31/09 32,897.67 7,401.38 19,084.92 06/30/09 30,948.86 7,416.16 17,742.09 07/31/09 34,336.07 7,976.37 20,365.84 08/31/09 34,985.67 8,263.95 21,341.40 09/30/09 38,744.08 8,572.10 23,344.10 10/31/09 38,790.48 8,413.06 24,027.74 11/30/09 40,414.48 8,917.57 24,717.62 12/31/09 42,270.48 9,089.74 25,685.59 AVERAGE ANNUAL PERFORMANCE For the Years Ended December, 2009
One Year Five Year Ten Year Eastern European Fund 77.93% 6.36% 15.49% - ---------------------------------------------------------------------- S&P 500 Index 26.47% 0.42% (0.95)% - ---------------------------------------------------------------------- MSCI Emerging Markets Europe 10/40 Index (Net Total Return) 90.06% 12.14% 9.88% Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The S&P 500 Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The MSCI Emerging Markets Europe 10/40 Index (Net Total Return) is a free float-adjusted market capitalization index that is designed to measure equity performance in the emerging market countries of Europe (Czech Republic, Hungary, Poland, Russia, and Turkey). The index is calculated on a net return basis (i.e., reflects the minimum possible dividend reinvestment after deduction of the maximum rate withholding tax). The index is periodically rebalanced relative to the constituents' weights in the parent index. The returns for the indexes reflect no deduction for fees, expenses or taxes, except as noted above. Pursuant to a voluntary arrangement, the Adviser has agreed to limit total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments, if any) to not exceed 2.85%. The Adviser can modify or terminate this arrangement at any time.
Please visit our website at www.usfunds.com for updated performance information for different time periods. 52 EASTERN EUROPEAN FUND THE YEAR IN REVIEW - ECONOMIC AND POLITICAL ISSUES THAT AFFECTED THE FUND Macro factors are critical to the Emerging Europe region. For instance, Russian equities, which comprise more than 50 percent of the MSCI Emerging Europe Index, are heavily influenced by oil price swings, currency fluctuations and government policy actions. These macro factors are critical in driving the region's investment climate. The year began with a flood of negative economic and political news. In January 2009, Russia's Gazprom shut off energy pipelines to Europe after a quarrel with Ukraine over gas pricing. Countries in Central and Eastern Europe along the transit route were affected by the supply shortages. The Central Bank of Russia accelerated the pace of ruble devaluation. These and other events soured investors' sentiment toward the Eastern European equities. The Polish zloty, being the most liquid currency in Central Europe, came under severe pressure as a proxy for the region and lost 30 percent of its value against the dollar. Hungary's forint underwent devaluation of the same magnitude, putting pressure on Hungarian citizens who financed their homes with loans denominated in euros and Swiss francs. In March, a dramatic turnaround took place as massive quantitative easing in the U.S. led investors to seek higher returns in commodities and emerging markets. Russian stocks led the advance, as the investors saw reassuring signs in the newly found stability of the ruble, coupled with the country's huge reserves of oil, natural gas, gold and minerals. Political tension in the region subsided after the U.S. abandoned its plans to construct a powerful defense radar in the Czech Republic and missile interceptors in Poland. These plans had long been a point of contention with Russia. Russia and Turkey concluded a number of energy agreements that will support Turkey's drive to become a regional hub for oil and gas pipelines while helping Moscow maintain its monopoly on natural gas shipments from Asia to Europe. The resolution of the Alfa-Telenor standoff was another important breakthrough, as the conflict was seen as one of the key problems in the sphere of Russia's corporate governance. INVESTMENT HIGHLIGHTS OVERVIEW The fund returned 77.93 percent in the year ended December 31, 2009, compared to a 90.06 percent return for the MSCI Emerging Europe 10/40 Index (Net Total Return), the fund's benchmark. 53 EASTERN EUROPEAN FUND STRENGTHS * We maintained more than half of the fund's equity allocation in Russia, whose MICEX Index(2) had the highest return among emerging markets during 2009 at 120 percent. The fund built an overweight exposure to the steel sector, where Novolipetsk Steel(3) rose 200 percent and OAO TMK(4) gained 359 percent. * Turkey had the second-best performance in Emerging Europe and was the second-largest country weighting of the fund. Turkey was well- positioned in 2009 as a result of the structural strength of its banking sector and the private sector's dynamic response to the crisis. Turkiye Garanti Bankasi A.S.(5) rose 154 percent. * The fund's selective positioning in individual stocks in the energy and financial sectors made a positive contribution to returns. Independent gas producer NovaTek OAO(6) returned over 250 percent, while Sberbank RF(7) of Russia rose 260 percent. * The fund was significantly underweight Poland on a view that the local banks would be most negatively affected by the currency devaluation. Our exposure to Poland focused instead on the commodity sector. KGHM Polska Miedz S.A.,(8) a copper miner, returned 340 percent. WEAKNESSES * The fund's defensive positioning enabled it to better manage downside volatility and to outperform in the first quarter. This positioning, however, hurt relative performance compared with its benchmark for balance of the year, despite posting a gain of 40.51 percent gain in the second quarter, a 25.38 percent gain in the third quarter, and a 9.10 percent gain in the fourth quarter. * Under the tax liability structure in Russia, oil company profits are protected on the downside, but they are also capped on the upside. With the overall Russian equity market highly correlated with oil, companies outside the energy sector were better geared to the economic recovery and rallied the most. Due to a relative underweight outside of energy, the fund was able to capture only part of that performance. * The utility sector underperformed due to weak electricity demand in Europe. Czech electricity producer CEZ a.s.(9) was a laggard with total annual return of 21 percent, and an accident destroyed the Sayano-Shushenskaya hydro power plant run by RusHydro.(10) * Depreciation of the U.S. dollar over the course of the year hurt the performance of the fund, as the cash component of the portfolio was not affected by gains in the local currencies of Emerging Europe. 54 EASTERN EUROPEAN FUND CURRENT OUTLOOK OPPORTUNITIES * The key forces that have driven asset prices higher are still in place, and likely to remain so in the foreseeable future. * Better relations between Russia and the U.S. may spill over into an improved perception on the part of the U.S. investors of the balance of risks and opportunities of investing in Russia's stock market. * Turkey's long-running negotiations with the IMF may come to fruition in 2010. A proposed deal would reduce the funds that the country's treasury has to borrow from the market, increase bank lending to the private sector and create a significant upside of up to 3.5 percent GDP growth in 2010. * Poland is the only European country that managed to avoid recession in 2009 and it is set to grow at an even faster rate as manufacturing and consumer sentiment picks up. THREATS * Prime Minister Vladimir Putin announced that Russia will negotiate its entry into the World Trade Organization as a regional trade group together with Belarus and Kazakhstan. With the recent crisis fostering protectionist measures, it appears that Russia wants to give itself room to manuever to support its domestic agricultural and car manufacturing sectors. * The prospects for the economies in Eastern and Central Europe to generate export-led recoveries are tempered by the fact that their currency depreciation has been relatively small compared with previous crises. * The conservative-led coalition ruling Germany is hostile to Turkey's accession to the European Union. The newly elected president of the EU has also in the past spoken against Turkey's membership. (1)The following countries are considered to be in the Eastern European region: Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Croatia, Czech Republic, Estonia, FYR Macedonia, Georgia, Hungary, Latvia, Lithuania, Moldova, Poland, Romania, Russia, Slovakia, Slovenia, Turkey and Ukraine. (2)The MICEX Index is the real-time cap-weighted Russian composite index. It comprises 30 most liquid stocks of Russian largest and most developed companies from 10 main economy sectors. The MICEX Index is calculated and disseminated by the MICEX Stock Exchange, the main Russian stock exchange. (3)This security comprised 3.25% of the fund's total net assets as of December 31, 2009. (4)This security comprised 1.89% of the fund's total net assets as of December 31, 2009. 55 EASTERN EUROPEAN FUND (5)This security comprised 5.29% of the fund's total net assets as of December 31, 2009. (6)This security comprised 3.88% of the fund's total net assets as of December 31, 2009. (7)This security comprised 10.36% of the fund's total net assets as of December 31, 2009. (8)This security comprised 1.43% of the fund's total net assets as of December 31, 2009. (9)This security comprised 2.23% of the fund's total net assets as of December 31, 2009. (10)The fund did not hold this security as of December 31, 2009. COUNTRY DISTRIBUTION* BASED ON TOTAL INVESTMENTS December 31, 2009 [Eastern European Fund Pie Chart] Russian Federation 60.8% Turkey 13.6% United States 8.6% Poland 8.0% Hungary 4.8% Czech Republic 2.2% Other 2.0% * Country distribution shown is based on domicile and the locale of company operations may be different. 56 EASTERN EUROPEAN FUND TOP 10 HOLDINGS BASED ON NET ASSETS (EXCLUDING REPURCHASE AGREEMENTS) December 31, 2009 SBERBANK RF 10.36% COMMERCIAL BANKS - NON US --------------------------------------------------------------- LUKOIL OAO 7.32% OIL & GAS - INTEGRATED --------------------------------------------------------------- ROSNEFT OIL CO. OJSC 7.22% OIL & GAS - INTEGRATED --------------------------------------------------------------- GAZPROM OAO 5.44% OIL & GAS - INTEGRATED --------------------------------------------------------------- TURKIYE GARANTI BANKASI A.S. 5.29% COMMERCIAL BANKS - NON US --------------------------------------------------------------- NOVATEK OAO 3.88% OIL & GAS EXPLORATION & PRODUCTION --------------------------------------------------------------- OTP BANK NYRT. PLC 3.34% COMMERCIAL BANKS - NON US --------------------------------------------------------------- MOBILE TELESYSTEMS 3.28% CELLULAR TELECOMMUNICATIONS --------------------------------------------------------------- NOVOLIPETSK STEEL 3.25% STEEL - PRODUCERS --------------------------------------------------------------- VIMPEL-COMMUNICATIONS 3.13% CELLULAR TELECOMMUNICATIONS --------------------------------------------------------------- TOTAL TOP TEN HOLDINGS 52.51% 57 GLOBAL EMERGING MARKETS FUND MANAGEMENT TEAM'S PERSPECTIVE INTRODUCTION The investment objective of the Global Emerging Markets Fund (GEMFX) is to achieve long-term capital growth by investing in a non- diversified portfolio of the equity securities of companies located in or with a significant business presence in emerging countries.(1) PERFORMANCE GRAPH GLOBAL EMERGING MARKETS FUND [Global Emerging Markets Fund Graph] MSCI Emerging Global Emerging S&P 500 Markets Net Total Date Markets Fund Index Return Index ---- --------------- ------- ----------------- 02/24/05 $ 10,000.00 $ 10,000.00 $ 10,000.00 02/28/05 10,180.00 10,210.33 10,196.56 03/31/05 9,370.00 10,029.72 9,522.68 04/30/05 9,020.00 9,839.59 9,267.07 05/31/05 9,190.00 10,152.39 9,589.64 06/30/05 9,440.00 10,166.93 9,915.45 07/31/05 10,230.00 10,544.87 10,608.51 08/31/05 10,520.00 10,448.60 10,699.37 09/30/05 11,470.00 10,533.18 11,695.59 10/31/05 10,650.00 10,357.49 10,931.16 11/30/05 11,440.00 10,748.84 11,835.44 12/31/05 12,298.06 10,752.65 12,534.99 01/31/06 13,908.39 11,037.34 13,935.03 02/28/06 13,764.80 11,067.20 13,918.54 03/31/06 13,805.82 11,204.94 14,041.19 04/30/06 14,759.72 11,355.30 15,040.99 05/31/06 13,077.58 11,028.89 13,465.14 06/30/06 12,995.53 11,043.54 13,432.22 07/31/06 13,251.95 11,111.61 13,624.53 08/31/06 13,672.48 11,375.59 13,971.64 09/30/06 13,569.91 11,668.56 14,087.99 10/31/06 14,287.90 12,048.56 14,756.92 11/30/06 15,241.79 12,277.30 15,853.90 12/31/06 16,305.69 12,449.49 16,567.76 01/31/07 16,206.06 12,637.57 16,389.35 02/28/07 16,128.57 12,391.14 16,292.08 03/31/07 16,593.50 12,529.43 16,940.86 04/30/07 17,301.96 13,084.26 17,725.17 05/31/07 17,910.80 13,540.37 18,603.10 06/30/07 18,729.95 13,315.56 19,475.14 07/31/07 20,091.53 12,903.22 20,502.70 08/31/07 19,615.53 13,096.35 20,066.98 09/30/07 21,785.19 13,585.63 22,283.04 10/31/07 24,220.53 13,801.70 24,768.06 11/30/07 22,183.70 13,224.46 23,012.33 12/31/07 22,722.72 13,132.94 23,093.03 01/31/08 19,244.61 12,345.31 20,211.25 02/29/08 20,151.36 11,944.58 21,703.09 03/31/08 18,635.61 11,892.88 20,554.58 04/30/08 20,219.02 12,471.97 22,222.67 05/31/08 20,584.43 12,633.50 22,634.92 06/30/08 18,567.94 11,569.45 20,377.38 07/31/08 17,038.66 11,472.17 19,608.75 08/31/08 15,116.90 11,638.20 18,042.48 09/30/08 12,044.80 10,602.32 14,885.04 10/31/08 8,038.89 8,821.87 10,811.31 11/30/08 6,983.28 8,188.66 9,997.46 12/31/08 7,267.85 8,274.94 10,777.19 01/31/09 6,608.39 7,578.31 10,081.18 02/28/09 6,223.70 6,774.02 9,512.50 03/31/09 6,883.17 7,366.33 10,879.54 04/30/09 7,693.76 8,070.74 12,689.97 05/31/09 9,150.08 8,521.63 14,858.29 06/30/09 8,847.82 8,538.65 14,658.12 07/31/09 9,946.93 9,183.65 16,306.38 08/31/09 10,056.84 9,514.75 16,248.04 09/30/09 10,166.75 9,869.55 17,722.87 10/31/09 9,988.15 9,686.44 17,744.79 11/30/09 10,785.00 10,267.31 18,506.99 12/31/09 10,922.39 10,465.54 19,237.88 AVERAGE ANNUAL PERFORMANCE For the Periods Ended December 31, 2009
One Year Inception Global Emerging Markets Fund (Inception 2/24/05) 50.28% 1.84% --------------------------------------------------------------------- S&P 500 Index 26.47% 0.94% --------------------------------------------------------------------- MSCI Emerging Markets Net Total Return Index 78.51% 14.44% Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The S&P 500 Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The MSCI Emerging Markets Net Total Return Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in emerging market countries on a net return basis (i.e., reflects the minimum possible dividend reinvestment after deduction of the maximum rate withholding tax). The returns for the indexes reflect no deduction for fees, expenses or taxes, except as noted above. Pursuant to a voluntary arrangement, the Adviser has agreed to limit total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments, if any) to not exceed 3.15%. The Adviser can modify or terminate this arrangement at any time.
Please visit our website at www.usfunds.com for updated performance information for different time periods. 58 GLOBAL EMERGINE MARKETS FUND THE YEAR IN REVIEW - ECONOMIC AND POLITICAL ISSUES THAT AFFECTED THE FUND In response to a slowing global economy, China announced a 4 trillion yuan ($586 billion) stimulus plan in late 2008. The intended effect was to counteract a slowdown in exports by ramping up fixed asset investment in the near term and consumption in the long run. China GDP growth got progressively stronger, rising from 6.2 percent in the first quarter of 2009 to 7.9 percent, 9.1 percent and 10.7 percent in subsequent quarters, easily surpassing the government's goal of 8 percent for all of 2009. For 2009, China's exports averaged year-over-year growth of negative 15.8 percent. These weak exports numbers reflected the economic weakness of China's major trading partners, the U.S. and the European Union. Money supply as measured by M2 (cash plus checking, savings and money market accounts) exploded in China in 2009 as a result of the stimulus program. For 2009, M2 grew at an average rate of 27.7 percent. Auto and property sales were very strong, as the government provided incentives to boost sales in both of these categories. China surpassed the U.S. in total car sales. In Russia, 2009 opened with a flood of negative economic and political news. In January, Gazprom OAO(2) shut off natural gas pipelines to Europe after a quarrel with Ukraine over pricing. The Central Bank of Russia accelerated the pace of ruble devaluation. After reaching 36 rubles per dollar, Russia's currency stabilized and, supported by stronger crude prices, the MICEX Index(3) gained 120 percent for the year. In Latin America, Brazil was a star performer, up 145 percent despite languishing early in the year as investors fretted about exposure to BRIC countries (Brazil, Russia, India and China). However, a dramatic turnaround took place in March as the massive quantitative easing in the U.S. led investors to seek higher returns in commodities. In addition, awarding the 2016 Olympic Games to Rio de Janeiro added to the positive momentum for the country. Peru, up around 120 percent, was also a strong performer in Latin America as it was viewed as one of the beneficiaries of higher commodities prices. In India, a massive fraud uncovered at software company Satyam Computer Services Ltd.(4) led to a heavy selloff in the Indian shares early in the 59 GLOBAL EMERGING MARKETS FUND year. But in May, the Congress Party returned to power in a coalition government following a national election. The Congress Party, led by Sonia Gandhi, historically has taken a pro-business stance. The election results gave investors sufficient confidence to return to the market - the Bombay Stock Exchange Sensitive Index (Sensex)(5) ended the year up nearly 92 percent. INVESTMENT HIGHLIGHTS OVERVIEW The fund gained 50.28 percent for the year ended December 31, 2009, compared to a 78.51 percent return for the MSCI Emerging Markets Net Total Return Index, the fund's benchmark. Because the fund is actively managed, and a holding period is generally not a consideration in investment decisions, the portfolio turnover rate may fluctuate from year to year as the fund adjusts its portfolio composition. Its annual portfolio turnover was, and is expected to continue to be, more than 100 percent. STRENGTHS * One of the best-performing sectors was materials. Shares of Teck Resources Ltd.,(6) a diversified mining company with operations in North and South America, were up 611 percent during the time period, the best performer in the fund. * Another significant contributor to performance was China Agritech Inc.,(7) which appreciated by 508 percent in the 12 months. The fund was overweighted China, whose index rose by 82 percent in the course of 2009. * Russia was also overweighted, which helped returns in light of the MICEX Index appreciating by 120 percent. X5 Retail Group N.V.(8) (up 270 percent), Wimm-Bill-Dann Foods OJSC(9) (up 262 percent) and Magnit OAO(10) (up 254 percent) ranked in the top 10 performers for the fund. * South Korea was underweighted, which positively impacted the fund in light of the KOSPI Index(11) rising by 67 percent, less than the benchmark return. WEAKNESSES * The fund underweighted Brazil, which with a return of 145 percent, was one of the strongest performers among emerging markets. This was one of the main reasons why the fund underperformed the benchmark. 60 GLOBAL EMERGINE MARKETS FUND Strong economic data throughout the year provided comfort for investors, who saw Brazil as the first Latin American country to emerge from recession last year. * The fund underweighted India, whose Sensex Index returned nearly 92 percent last year. The positive sentiment after last May's election and win of the Congress Party was a missed opportunity. * The fund missed an opportunity in Peru, whose index rose around 120 percent in 2009, fueled by higher commodities prices, and ranked among the best performers among emerging markets. CURRENT OUTLOOK OPPORTUNITIES * China approved an economic zone along the coastline of the Liaoning province, a traditional base for heavy industry, as part of an effort to propel growth in northeast China. This should benefit seaports, ocean shippers, and equipment manufacturers in the region. * Russia is finding new ways to achieve economic competitiveness in the 21st century. The country is carving out an international niche in the design and production of polysilicon solar panels. Several players are emerging in this sector, which is leveraging pioneering solar technologies used by the space program. THREATS * One key inflation-related risk in China is the possibility of more aggressive policy tightening as CPI rises. While there is no clear consensus as to what level CPI needs to rise before interest rates are raised, many China strategists think CPI needs to hit at least 3 percent before action is taken. * Valuations in emerging markets have stretched in the second half of 2009, making it harder to spot opportunities. (1)Emerging market countries are those countries defined as such by the World Bank, the International Finance Corporation, the United Nations or the European Bank for Reconstruction and Development or included in the MSCI Emerging Markets Index. (2)This security comprised 0.91% of the fund's total net assets as of December 31, 2009. (3)The MICEX Index is the real-time cap-weighted Russian composite index. It comprises 30 most liquid stocks of Russian largest and most developed companies from 10 main economy sectors. The MICEX Index is calculated and disseminated by the MICEX Stock Exchange, the main Russian stock exchange. (4)The fund did not hold this security as of December 31, 2009. 61 GLOBAL EMERGING MARKETS FUND (5)The Bombay Stock Exchange Sensitive Index (Sensex) is a cap-weighted index. The selection of the index members has been made on the basis of liquidity, depth, and floating-stock-adjustment depth and industry representation. The index uses free float. (6)This security comprised 1.14% of the fund's total net assets as of December 31, 2009. (7)This security comprised 0.40% of the fund's total net assets as of December 31, 2009. (8)This security comprised 1.15% of the fund's total net assets as of December 31, 2009. (9)This security comprised 0.86% of the fund's total net assets as of December 31, 2009. (10)This security comprised 0.57% of the fund's total net assets as of December 31, 2009. (11)The KOSPI Index is a capitalization-weighted index of all common shares on the Korean Stock Exchange. COUNTRY DISTRIBUTION* BASED ON TOTAL INVESTMENTS December 31, 2009 [Global Emerging Markets Fund Pie Chart] United States 17.8% Brazil 16.6% People's Republic of China 14.2% Russian Federation 12.7% Canada 6.0% South Africa 5.8% Korea, Republic Of 5.1% Mexico 4.9% Hong Kong 3.3% India 3.3% Hungary 2.4% Other 7.9% * Country distribution shown is based on domicile and the locale of company operations may be different. 62 GLOBAL EMERGING MARKETS FUND TOP 10 HOLDINGS BASED ON NET ASSETS (EXCLUDING REPURCHASE AGREEMENTS) December 31, 2009 VIVO PARTICIPACOES S.A. 2.80% CELLULAR TELECOMMUNICATIONS --------------------------------------------------------------- SAMSUNG ELECTRONICS CO., LTD. 2.75% ELECTRONICS & COMPONENTS --------------------------------------------------------------- NASPERS LTD. 2.63% MULTIMEDIA --------------------------------------------------------------- LOJAS RENNER S.A. 2.62% DEPARTMENT STORES --------------------------------------------------------------- NOVOLIPETSK STEEL 2.62% STEEL - PRODUCERS --------------------------------------------------------------- OPTO CIRCUITS INDIA LTD. 2.52% HEALTHCARE EQUIPMENT & SERVICES --------------------------------------------------------------- OTP BANK NYRT. PLC 2.45% COMMERCIAL BANKS - NON US --------------------------------------------------------------- ROSNEFT OIL CO. OJSC 2.13% OIL & GAS - INTEGRATED --------------------------------------------------------------- CHINA LIFE INSURANCE CO., LTD. 2.13% INSURANCE --------------------------------------------------------------- MTN GROUP LTD. 2.06% CELLULAR TELECOMMUNICATIONS --------------------------------------------------------------- TOTAL TOP TEN HOLDINGS 24.71% 63 CHINA REGION FUND MANAGEMENT TEAM'S PERSPECTIVE INTRODUCTION The China Region Fund (USCOX) seeks capital appreciation by focusing on the economic growth in the greater China region, including China, Hong Kong, Singapore, Korea, Taiwan and other Asian countries.(1) The fund emphasizes a long-term growth approach over current income. PERFORMANCE GRAPH CHINA REGION FUND [China Region Fund Graph] MSCI All Country Far East China Region Free ex Date Fund Japan Index ---- ---- ----------- 12/31/99 $ 10,000.00 $ 10,000.00 01/31/00 10,050.17 9,772.17 02/29/00 10,719.06 9,247.29 03/31/00 11,137.12 9,661.79 04/28/00 10,000.00 8,863.74 05/31/00 9,464.88 8,131.87 06/30/00 10,217.39 8,499.22 07/31/00 10,267.56 8,182.85 08/31/00 10,050.17 8,072.02 09/29/00 9,214.05 7,129.61 10/31/00 8,394.65 6,565.06 11/30/00 7,943.14 6,230.40 12/31/00 8,112.04 6,212.37 01/31/01 8,450.75 7,043.26 02/28/01 8,027.36 6,697.81 03/30/01 7,959.62 5,964.19 04/30/01 8,281.39 5,973.18 05/31/01 8,552.36 5,914.69 06/30/01 8,332.20 5,780.30 07/31/01 7,637.85 5,549.74 08/31/01 7,045.11 5,449.79 09/30/01 6,249.15 4,575.77 10/31/01 6,486.25 4,804.70 11/30/01 6,943.50 5,459.21 12/31/01 7,045.11 5,952.31 01/31/02 7,214.47 6,192.05 02/28/02 7,129.79 6,201.71 03/31/02 7,485.43 6,639.93 04/30/02 7,688.66 6,718.47 05/31/02 7,671.72 6,564.30 06/30/02 7,417.69 6,202.80 07/31/02 6,926.56 5,963.40 08/31/02 6,672.53 5,821.28 09/30/02 6,113.67 5,149.32 10/31/02 6,164.47 5,422.86 11/30/02 6,452.37 5,688.98 12/31/02 6,181.41 5,294.59 01/31/03 6,367.70 5,357.05 02/28/03 6,367.70 5,094.08 03/31/03 6,096.73 4,849.89 04/30/03 6,130.60 5,003.51 05/31/03 6,824.95 5,411.63 06/30/03 7,062.05 5,716.64 07/31/03 7,722.53 6,193.20 08/31/03 8,315.26 6,630.45 09/30/03 8,586.23 6,646.56 10/31/03 10,059.61 7,204.88 11/30/03 10,347.51 7,089.63 12/31/03 11,196.67 7,453.34 01/31/04 11,264.94 7,934.93 02/29/04 11,896.46 8,220.16 03/31/04 11,503.89 8,034.31 04/30/04 10,343.26 7,547.36 05/31/04 10,292.06 7,340.00 06/30/04 10,001.90 7,256.04 07/31/04 9,899.49 7,038.90 08/31/04 9,984.83 7,382.13 09/30/04 10,667.55 7,620.72 10/31/04 10,684.62 7,648.34 11/30/04 11,367.35 8,297.01 12/31/04 11,668.03 8,514.15 01/31/05 11,283.76 8,563.31 02/28/05 12,314.32 9,042.05 03/31/05 11,930.04 8,600.65 04/30/05 11,720.43 8,491.55 05/31/05 11,563.23 8,652.93 06/30/05 11,999.91 8,831.39 07/31/05 12,436.59 9,372.17 08/31/05 12,366.72 9,030.97 09/30/05 13,047.94 9,464.28 10/31/05 12,261.92 8,865.68 11/30/05 12,820.86 9,488.75 12/31/05 13,847.65 10,034.74 01/31/06 15,298.70 10,734.96 02/28/06 15,119.55 10,695.31 03/31/06 16,176.49 10,793.99 04/30/06 17,269.25 11,545.31 05/31/06 16,122.75 10,723.69 06/30/06 15,603.24 10,634.43 07/31/06 15,442.01 10,610.23 08/31/06 15,585.32 10,871.41 09/30/06 15,854.03 11,171.30 10/31/06 16,373.55 11,456.62 11/30/06 17,609.62 12,357.17 12/31/06 19,086.11 12,891.56 01/31/07 18,795.00 12,665.24 02/28/07 18,503.88 12,758.50 03/31/07 19,013.33 13,008.08 04/30/07 19,777.50 13,453.54 05/31/07 21,487.79 14,160.97 06/30/07 22,834.19 14,907.26 07/31/07 24,398.92 15,948.38 08/31/07 25,363.24 15,722.91 09/30/07 30,257.58 17,524.16 10/31/07 34,751.64 19,265.40 11/30/07 30,293.97 17,449.64 12/31/07 29,257.24 17,194.13 01/31/08 24,733.16 14,798.25 02/28/08 25,513.97 15,800.51 03/31/08 22,643.36 14,948.78 04/30/08 23,975.32 16,080.37 05/31/08 23,309.34 15,633.31 06/30/08 20,875.06 13,876.25 07/31/08 19,933.50 13,568.21 08/31/08 18,371.89 12,506.89 09/30/08 15,799.83 10,428.16 10/31/08 12,860.33 7,955.98 11/30/08 12,125.45 7,508.01 12/31/08 12,837.36 8,259.78 01/31/09 11,735.05 7,766.98 02/28/09 11,321.68 7,285.09 03/31/09 12,791.43 8,293.40 04/30/09 14,261.18 9,636.11 05/31/09 16,626.56 10,927.02 06/30/09 16,259.13 10,874.62 07/31/09 17,774.81 12,302.74 08/31/09 16,442.84 11,838.11 09/30/09 17,499.23 12,825.83 10/31/09 17,614.05 12,807.05 11/30/09 18,923.05 13,056.33 12/31/09 19,198.63 13,629.09 AVERAGE ANNUAL PERFORMANCE For the Years Ended December 31, 2009
One Year Five Year Ten Year China Region Fund 49.55% 10.47% 6.73% - ---------------------------------------------------------------------- Hang Seng Composite Index 58.78% 14.47% n/a - ---------------------------------------------------------------------- MSCI All Country Far East Free ex Japan Index* 65.01% 9.86% 3.14% * These are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment. Performance data quoted above is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The Hang Seng Composite Index is a market-capitalization weighted index that comprises the top 200 companies listed on the Stock Exchange of Hong Kong, based on average market capitalization for the twelve months. The index commenced January 2000; it is not included in the graph as it had less than ten years of data. The MSCI All Country Far East Free ex Japan Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of the Far East, excluding Japan. The index consists of the following developed and emerging market country indices: China, Hong Kong, Indonesia, Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan and Thailand. The returns for the indexes reflect no deduction for fees, expenses or taxes. Pursuant to a voluntary arrangement, the Adviser has agreed to limit total fund operating expenses (exclusive of acquired fund fees and expenses, extraordinary expenses, taxes, brokerage commissions and interest, and advisory fee performance adjustments, if any) to not exceed 2.55%. The Adviser can modify or terminate this arrangement at any time.
Please visit our website at www.usfunds.com for updated performance information for different time periods. 64 CHINA REGION FUND THE YEAR IN REVIEW - ECONOMIC AND POLITICAL ISSUES THAT AFFECTED THE FUND With their announcement of a $586 billion stimulus package, China showed it was willing to invest freely to achieve its target of 8 percent GDP growth in 2009. As the year progressed, it became clear that the fear of deceleration was becoming less of a concern, although deflationary signs were still evident. GDP grew stronger throughout the year, rising from 6.2 percent in the first quarter to 10.7 percent in the fourth quarter. Fixed asset investment was the primary source of GDP growth. For 2009, FAI was up 31 percent from the same period in 2008. Exports, long China's key economic driver, were a drag on growth. Export growth was negative for the first 11 months of 2009 before finally registering a positive number in December. Retail sales were generally stronger than a year ago. Auto and property sales were particularly strong as the government provided incentives to boost sales in both of these categories. China's total car sales surpassed that of the United States to become the world's largest auto market. Money supply (as measured by M2(2)) was very strong in 2009, growing at an average rate of 27.7 percent compared to 17.8 percent in 2008. The performance of the various sectors in the Hang Seng Composite Index (HSCI), the fund's benchmark, was mostly positive during the year. Technology, consumer goods and energy advanced the most, while telecom and utilities lagged and finished in negative territory for the year. INVESTMENT HIGHLIGHTS OVERVIEW The fund returned 49.55 percent for the year ended December 31, 2009, compared to a 58.78 percent return for the HSCI. Because the fund is actively managed, and holding period is not generally a consideration in investment decisions, the portfolio turnover rate may fluctuate from year to year as the fund adjusts its portfolio composition. Its portfolio turnover is, and is expected to continue to be, over 100 percent. 65 CHINA REGION FUND STRENGTHS * The best-performing sector in the Hang Seng Composite Index was technology. This was due to restocking early in the year and continued as global economies showed a recovery from the global recession. Tencent Holdings Ltd.,(3) a longtime technology holding of the fund, returned 238 percent in the time period and was a significant positive contributor to performance. * China sold 13.6 million cars in 2009, compared to a little more than 10 million for the U.S. For China, this was 53 percent growth from 2008. Both countries had incentives in place to drive car sales, with China's incentives favoring smaller cars. The fund benefited from its holdings in Dongfeng Motor Group Co., Ltd.,(4) which was up 351 percent over the 12 months. * China was a big importer of commodities in 2009, which helped drive prices higher. Copper gained over 130 percent in price during the year. For most of 2009, the fund held Jiangxi Copper Co. Ltd.,(5) which rose 225 percent for the year. * Consumer goods was the second-best performing sector in the HSCI as China aims to make consumption a larger contributor to GDP both in the short term and the long term. China Dongxiang Group Co.,(6) a sportswear company, rose 231 percent and Belle International Holdings Ltd.,(7) which sells women's footwear, rose 170 percent. WEAKNESSES * The fund's benchmark, the Hang Seng Composite Index (HSCI), underperformed mainland Chinese stock indexes during the year. This was largely driven by the underperformance of the telecom and property sectors. The fund was underweight those sectors, but exposure to specific stocks within the sectors had a negative impact on the fund's performance. These stocks included China Mobile Ltd.,(5) Shimao Property Holdings Ltd.(8) and Agile Property Holdings Ltd.(5) The fund was overweight information technology and consumer goods, both of which outperformed the HSCI, but did not own the best-performing stocks within those sectors. * Financial stocks were also laggards during the time period. Loan growth was staggering to the point where new loans in the first four months of the year were greater than all new lending in 2008. With such massive lending came concerns about the Chinese banks' ability to price loans correctly and the possibility for future loan losses. As a sector, the group was up only 4.86 percent during the year. Bank holdings included Industrial & Commercial Bank of China Ltd.(9) and Standard Chartered plc.(10) 66 CHINA REGION FUND CURRENT OUTLOOK OPPORTUNITIES * Entering 2009, the twin concerns facing China were deflation and deceleration. These are no longer concerns. China should easily surpass its goal of 8 percent GDP growth for all of 2009. GDP growth should also be at least 8 percent in 2010 despite a slowdown in investment. Falling prices are also no longer a concern - CPI should turn positive from a low base effect. * China is not expecting any contribution from net exports towards GDP growth. December 2009 exports came in much stronger than expected. If exports remain strong, net exports could once again become a contributor to GDP growth. * Urbanization remains an opportunity. China is looking for another 90 million people to move to cities by 2015. This is a long-term positive for resources such as iron ore and copper. THREATS * Deflation and deceleration have been replaced by concerns over inflation and imbalance. While prices fell for most of 2009, as measured by China's CPI, this should reverse itself in 2010 as the global economy continues its recovery and prices rise from a low base. Imbalance refers to an imbalance in China's economy, particularly in the area of investments, which was the biggest contributor to GDP in 2009. This cannot continue and be good for the economy in the long run. China needs more balance in its GDP composition, meaning greater consumption. * One inflation-related risk is the possibility of more aggressive policy tightening as CPI rises. While there is no clear consensus as to what level of inflation must be seen before interest rates are raised, many China strategists think CPI needs to climb at least 3 percent before action is taken. * A threat external to China is recovery in the United States. Some think that a slowdown (or worse, a double dip into recession) is possible in the second half of 2010. If that happens, China's GDP growth could weaken. (1)The China region is defined as any country that either shares a border with China or is located in the South China Sea or the East China Sea and includes: the People's Republic of China (PRC or China), Bangladesh, Hong Kong, India, Indonesia, Kazakhstan, Korea, Kyrgyzstan, Laos, Malaysia, Mongolia, Nepal, Pakistan, Philippines, Singapore, Taiwan, Tajikistan, Thailand, and Vietnam. (2)M1 and M2 are measures of total money supplies. The M1 money supply includes only checkable demand deposits. M2 includes everything in M1 and also savings and other time deposits. 67 CHINA REGION FUND (3)This security comprised 5.75% of the total net assets of the fund as of December 31, 2009. (4)This security comprised 2.02% of the total net assets of the fund as of December 31, 2009. (5)The fund did not hold this security as of December 31, 2009. (6)This security comprised 1.09% of the total net assets of the fund as of December 31, 2009. (7)This security comprised 2.05% of the total net assets of the fund as of December 31, 2009. (8)This security comprised 0.67% of the total net assets of the fund as of December 31, 2009. (9)This security comprised 2.19% of the total net assets of the fund as of December 31, 2009. (10)This security comprised 0.66% of the total net assets of the fund as of December 31, 2009. COUNTRY DISTRIBUTION* BASED ON TOTAL INVESTMENTS December 31, 2009 [Pie Chart] People's Republic of China 47.5% Hong Kong 19.7% United States 15.8% Korea, Republic of 5.0% Canada 3.3% Indonesia 3.2% Other 5.5% * Country distribution shown is based on domicile and not intended to conform to the China region definition in the prospectus. 68 CHINA REGION FUND TOP 10 HOLDINGS BASED ON NET ASSETS (EXCLUDING REPURCHASE AGREEMENTS) December 31, 2009 TENCENT HOLDINGS LTD. 5.75% INTERNET --------------------------------------------------------------- WEICHAI POWER CO., LTD. 3.85% AUTO PARTS & EQUIPMENT --------------------------------------------------------------- TSINGTAO BREWERY CO., LTD. 3.54% BREWERY --------------------------------------------------------------- TINGYI (CAYMAN ISLANDS) HOLDINGS CORP. 3.52% FOOD & BEVERAGES --------------------------------------------------------------- CHINA RESOURCES ENTERPRISE LTD. 2.90% DIVERSIFIED OPERATIONS --------------------------------------------------------------- CTRIP.COM INTERNATIONAL LTD. 2.55% E-COMMERCE --------------------------------------------------------------- CHINA SHENHUA ENERGY CO., LTD. 2.32% COAL --------------------------------------------------------------- CHINA GAS HOLDINGS LTD. 2.31% PIPELINES --------------------------------------------------------------- INDUSTRIAL AND COMMERCIAL BANK OF CHINA LTD. 2.19% COMMERCIAL BANKS - NON US --------------------------------------------------------------- LI & FUNG LTD. 2.18% DISTRIBUTION/WHOLESALE --------------------------------------------------------------- TOTAL TOP TEN HOLDINGS 31.11% 69 EXPENSE EXAMPLE (UNAUDITED) December 31, 2009 As a shareholder of the funds, you incur two types of costs: (1) transaction costs, including short-term trading fees and exchange fees; and (2) ongoing costs, including management fees and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below. * ACTUAL EXPENSES. The first line of the following table for each fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. * HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The second line of the following table for each fund provides information about hypothetical account values and hypothetical expenses based on the fund's actual expense ratio and an assumed rate of return of 5 percent per year before expenses, which is not the fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in these funds and other funds. To do so, compare this 5 percent hypothetical example with the 5 percent hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any direct or transactional costs, such as small account, exchange or short-term trading fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these direct or transactional costs were included, your costs would have been higher. 70 EXPENSE EXAMPLE (UNAUDITED) December 31, 2009
- ----------------------------------------------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 2009 BEGINNING ENDING ACCOUNT VALUE ACCOUNT VALUE EXPENSES JULY 1, DECEMBER 31, PAID DURING 2009 2009** PERIOD*/** - ----------------------------------------------------------------------------------- U.S. TREASURY SECURITIES CASH FUND Based on Actual Fund Return $1,000.00 $1,000.10 $ 0.71 Based on Hypothetical 5% Yearly Return $1,000.00 $1,024.50 $ 0.71 - ----------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES SAVINGS FUND Based on Actual Fund Return $1,000.00 $1,000.10 $ 1.36 Based on Hypothetical 5% Yearly Return $1,000.00 $1,023.84 $ 1.38 - ----------------------------------------------------------------------------------- NEAR-TERM TAX FREE FUND Based on Actual Fund Return $1,000.00 $1,026.70 $ 2.30 Based on Hypothetical 5% Yearly Return $1,000.00 $1,022.94 $ 2.29 - ----------------------------------------------------------------------------------- TAX FREE FUND Based on Actual Fund Return $1,000.00 $1,044.10 $ 3.61 Based on Hypothetical 5% Yearly Return $1,000.00 $1,021.68 $ 3.57 - ----------------------------------------------------------------------------------- ALL AMERICAN EQUITY FUND Based on Actual Fund Return $1,000.00 $1,169.20 $10.33 Based on Hypothetical 5% Yearly Return $1,000.00 $1,015.68 $ 9.60 - ----------------------------------------------------------------------------------- HOLMES GROWTH FUND Based on Actual Fund Return $1,000.00 $1,118.80 $ 9.56 Based on Hypothetical 5% Yearly Return $1,000.00 $1,016.18 $ 9.10 - ----------------------------------------------------------------------------------- GLOBAL MEGATRENDS FUND Based on Actual Fund Return $1,000.00 $1,165.90 $11.08 Based on Hypothetical 5% Yearly Return $1,000.00 $1,014.97 $10.31 - ----------------------------------------------------------------------------------- GLOBAL RESOURCES FUND Based on Actual Fund Return $1,000.00 $1,340.90 $ 8.56 Based on Hypothetical 5% Yearly Return $1,000.00 $1,017.90 $ 7.37 - ----------------------------------------------------------------------------------- WORLD PRECIOUS MINERALS FUND Based on Actual Fund Return $1,000.00 $1,401.10 $ 9.86 Based on Hypothetical 5% Yearly Return $1,000.00 $1,016.99 $ 8.29 - ----------------------------------------------------------------------------------- GOLD AND PRECIOUS METALS FUND Based on Actual Fund Return $1,000.00 $1,246.90 $ 8.89 Based on Hypothetical 5% Yearly Return $1,000.00 $1,017.29 $ 7.98 - ----------------------------------------------------------------------------------- EASTERN EUROPEAN FUND Based on Actual Fund Return $1,000.00 $1,365.80 $11.03 Based on Hypothetical 5% Yearly Return $1,000.00 $1,015.88 $ 9.40 - ----------------------------------------------------------------------------------- GLOBAL EMERGING MARKETS FUND Based on Actual Fund Return $1,000.00 $1,234.50 $15.43 Based on Hypothetical 5% Yearly Return $1,000.00 $1,011.39 $13.89 - ----------------------------------------------------------------------------------- CHINA REGION FUND Based on Actual Fund Return $1,000.00 $1,180.80 $11.16 Based on Hypothetical 5% Yearly Return $1,000.00 $1,014.97 $10.31 - ----------------------------------------------------------------------------------- *These calculations are based on expenses incurred in the most recent fiscal half-year. The funds' annualized expense ratios (after reimbursements and offsets) for the six-month period ended December 31, 2009, were 0.14%, 0.27%, 0.45%, 0.70%, 1.89%, 1.79%, 2.03%, 1.45%, 1.63%, 1.57%, 1.85%, 2.74% and 2.03%, respectively, for the U.S. Treasury Securities Cash, U.S. Government Securities Savings, Near-Term Tax Free, Tax Free, All American Equity, Holmes Growth, Global MegaTrends, Global Resources, World Precious Minerals, Gold and Precious Metals, Eastern European, Global Emerging Markets and China Region Funds. The dollar amounts shown as "Expenses Paid" are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by 184, the number of days in the most recent fiscal half-year, then divided by 365 days in the current fiscal year. 71 **As detailed in the Notes to Financial Statements, there were changes in expense limitations and waivers during the six-month period. Had the current expense limitations and waivers been in place throughout the entire six-month period, the values in the first table above would be shown as below. - ----------------------------------------------------------------------------------- SIX MONTHS ENDED DECEMBER 31, 2009 BEGINNING ENDING ACCOUNT VALUE ACCOUNT VALUE EXPENSES JULY 1, DECEMBER 31, PAID DURING 2009 2009 PERIOD* - ----------------------------------------------------------------------------------- U.S. TREASURY SECURITIES CASH FUND Based on Actual Fund Return $1,000.00 $1,000.10 $ 0.71 Based on Hypothetical 5% Yearly Return $1,000.00 $1,024.50 $ 0.71 - ----------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES SAVINGS FUND Based on Actual Fund Return $1,000.00 $1,000.10 $ 1.36 Based on Hypothetical 5% Yearly Return $1,000.00 $1,023.84 $ 1.38 - ----------------------------------------------------------------------------------- NEAR-TERM TAX FREE FUND Based on Actual Fund Return $1,000.00 $1,026.70 $ 2.30 Based on Hypothetical 5% Yearly Return $1,000.00 $1,022.94 $ 2.29 - ----------------------------------------------------------------------------------- TAX FREE FUND Based on Actual Fund Return $1,000.00 $1,044.10 $ 3.61 Based on Hypothetical 5% Yearly Return $1,000.00 $1,021.68 $ 3.57 - ----------------------------------------------------------------------------------- ALL AMERICAN EQUITY FUND Based on Actual Fund Return $1,000.00 $1,169.20 $11.54 Based on Hypothetical 5% Yearly Return $1,000.00 $1,014.57 $10.71 - ----------------------------------------------------------------------------------- HOLMES GROWTH FUND Based on Actual Fund Return $1,000.00 $1,118.80 $10.36 Based on Hypothetical 5% Yearly Return $1,000.00 $1,015.43 $ 9.86 - ----------------------------------------------------------------------------------- GLOBAL MEGATRENDS FUND Based on Actual Fund Return $1,000.00 $1,165.90 $12.01 Based on Hypothetical 5% Yearly Return $1,000.00 $1,014.12 $11.17 - ----------------------------------------------------------------------------------- GLOBAL RESOURCES FUND Based on Actual Fund Return $1,000.00 $1,340.90 $ 8.85 Based on Hypothetical 5% Yearly Return $1,000.00 $1,017.64 $ 7.63 - ----------------------------------------------------------------------------------- WORLD PRECIOUS MINERALS FUND Based on Actual Fund Return $1,000.00 $1,401.10 $10.29 Based on Hypothetical 5% Yearly Return $1,000.00 $1,016.64 $ 8.64 - ----------------------------------------------------------------------------------- GOLD AND PRECIOUS METALS FUND Based on Actual Fund Return $1,000.00 $1,246.90 $ 9.12 Based on Hypothetical 5% Yearly Return $1,000.00 $1,017.09 $ 8.19 - ----------------------------------------------------------------------------------- EASTERN EUROPEAN FUND Based on Actual Fund Return $1,000.00 $1,365.80 $11.03 Based on Hypothetical 5% Yearly Return $1,000.00 $1,015.88 $ 9.40 - ----------------------------------------------------------------------------------- GLOBAL EMERGING MARKETS FUND Based on Actual Fund Return $1,000.00 $1,234.50 $17.12 Based on Hypothetical 5% Yearly Return $1,000.00 $1,009.88 $15.40 - ----------------------------------------------------------------------------------- CHINA REGION FUND Based on Actual Fund Return $1,000.00 $1,180.80 $12.15 Based on Hypothetical 5% Yearly Return $1,000.00 $1,014.06 $11.22
72 U.S. TREASURY SECURITIES CASH FUND PORTFOLIO OF INVESTMENTS December 31, 2009
UNITED STATES GOVERNMENT COUPON MATURITY PRINCIPAL OBLIGATIONS 48.12% RATE DATE AMOUNT VALUE UNITED STATES TREASURY BILLS 48.12% - ------------------------------------------------------------------------------------- Yield 0.25% 01/07/10 $ 10,000,000 $ 9,999,583 Yield 0.07% 01/21/10 10,000,000 9,999,611 Yield 0.18% 04/01/10 10,000,000 9,995,625 Yield 0.09% 04/15/10 10,000,000 9,997,400 Yield 0.13% 05/27/10 10,000,000 9,994,931 - ------------------------------------------------------------------------------------- TOTAL UNITED STATES GOVERNMENT OBLIGATIONS 49,987,150 - ------------------------------------------------------------------------------------- (cost $49,987,150) REPURCHASE AGREEMENTS 52.02% Joint Tri-Party Repurchase Agreements, 12/31/09, collateralized by U.S. Treasury securities held in joint tri-party repurchase accounts: 0.00% Merrill Lynch, repurchase price $9,000,000 0.00% 01/04/10 9,000,000 9,000,000 0.00% Morgan Stanley, repurchase price $25,046,640 0.00% 01/04/10 25,046,640 25,046,640 0.00% UBS Financial Services, Inc., repurchase price $20,000,000 0.00% 01/04/10 20,000,000 20,000,000 - ------------------------------------------------------------------------------------- TOTAL REPURCHASE AGREEMENTS 54,046,640 - ------------------------------------------------------------------------------------- (cost 54,046,640) - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS 100.14% 104,033,790 - ------------------------------------------------------------------------------------- (cost $104,033,790) Other assets and liabilities, net (0.14)% (144,402) ------------ NET ASSETS 100% $103,889,388 ------------ See notes to portfolios of investments and notes to financial statements. 73 U.S. GOVERNMENT SECURITIES SAVINGS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 UNITED STATES GOVERNMENT AND AGENCY COUPON MATURITY PRINCIPAL OBLIGATIONS 76.64% RATE DATE AMOUNT VALUE FEDERAL FARM CREDIT BANK 30.55% - ------------------------------------------------------------------------------------ Discount Notes: Yield 0.01% 01/04/10 $ 50,000,000 $ 49,999,958 Yield 0.26% 06/23/10 2,608,000 2,604,741 Fixed Rates: 5.10% 03/15/10 1,500,000 1,513,738 0.88% 04/01/10 2,000,000 2,003,708 5.20% 04/19/10 10,000,000 10,151,118 Variable Rates: 0.13% 03/29/10 3,000,000 2,999,519 0.17% 05/26/10 5,000,000 5,000,000 0.53% 10/15/10 1,350,000 1,354,101 0.23% 11/02/10 1,725,000 1,726,178 ------------ 77,353,061 FEDERAL HOME LOAN BANK 46.09% - ------------------------------------------------------------------------------------ Discount Notes: Yield 0.12% 01/04/10 5,000,000 4,999,952 Yield 0.65% 01/06/10 3,937,000 3,936,645 Yield 0.86% 01/11/10 2,827,000 2,826,333 Yield 0.03% 01/15/10 10,000,000 9,999,883 Yield 0.09% 03/12/10 13,200,000 13,197,616 Yield 0.11% 03/19/10 1,503,000 1,502,646 Yield 0.11% 03/26/10 11,621,000 11,618,153 Yield 0.09% 03/29/10 4,162,000 4,161,095 Yield 0.15% 05/12/10 2,400,000 2,398,690 Fixed Rates: 3.88% 01/15/10 4,000,000 4,005,266 3.55% 01/25/10 3,000,000 3,006,796 1.00% 02/05/10 3,000,000 3,000,000 1.02% 02/10/10 3,000,000 3,000,000 1.00% 02/18/10 3,000,000 2,999,842 1.00% 02/18/10 3,000,000 2,999,659 1.05% 03/03/10 3,000,000 2,999,691 1.10% 03/11/10 3,000,000 2,999,648 2.63% 03/12/10 5,000,000 5,024,434 4.13% 08/13/10 2,000,000 2,042,730 See notes to portfolios of investments and notes to financial statements. 74 U.S. GOVERNMENT SECURITIES SAVINGS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 UNITED STATES GOVERNMENT AND AGENCY COUPON MATURITY PRINCIPAL OBLIGATIONS RATE DATE AMOUNT VALUE FEDERAL HOME LOAN BANK (CONT'D) - ------------------------------------------------------------------------------------ Variable Rates: 0.67% 02/05/10 $ 10,000,000 $ 10,000,000 0.78% 03/19/10 10,000,000 10,000,000 0.18% 07/13/10 10,000,000 9,999,875 ------------ 116,718,954 - ------------------------------------------------------------------------------------ TOTAL INVESTMENTS 76.64% 194,072,015 - ------------------------------------------------------------------------------------ (cost $194,072,015) Other assets and liabilities, net 23.36% 59,159,623 ------------ NET ASSETS 100% $253,231,638 ------------ See notes to portfolios of investments and notes to financial statements. 75 NEAR-TERM TAX FREE FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COUPON MATURITY PRINCIPAL MUNICIPAL BONDS 92.00% RATE DATE AMOUNT VALUE ALABAMA 4.59% - --------------------------------------------------------------------------------------- Bessemer, Alabama Water Revenue 4.00% 01/01/16 $ 300,000 $ 278,466 Mountain Brook City Board of Education Capital Outlay 4.00% 02/15/15 200,000 218,516 Sheffield, Alabama Electric Revenue 4.45% 07/01/11 250,000 250,350 University of Alabama at Birmingham, Hospital Revenue, Series A 5.00% 09/01/15 300,000 324,645 ----------- 1,071,977 ALASKA 1.38% - --------------------------------------------------------------------------------------- Alaska Municipal Bond Bank Authority, Series A 4.00% 02/01/16 300,000 320,826 ARIZONA 3.70% - --------------------------------------------------------------------------------------- Arizona School Facilities Board Certificates, Series A-1 5.00% 09/01/17 325,000 347,214 Arizona State Transportation Board Excise Tax Revenue 5.00% 07/01/17 175,000 198,562 Pima County Unified School District, GO Unlimited, Refunding 3.70% 07/01/12 300,000 317,556 ----------- 863,332 CALIFORNIA 2.42% - --------------------------------------------------------------------------------------- San Diego, California Community College District, Capital Appreciation, Election 2002, GO Unlimited (ZCB) 4.34%(1) 05/01/15 300,000 252,459 Vernon, California Electric Systems Revenue, Series A 3.75% 08/01/13 300,000 311,685 ----------- 564,144 CONNECTICUT 2.13% - --------------------------------------------------------------------------------------- Connecticut State, Series D, GO Unlimited 5.38% 11/15/18 250,000 281,800 Connecticut State, Series E, GO Unlimited 5.13% 11/15/14 200,000 215,536 ----------- 497,336 DISTRICT OF COLUMBIA 2.78% - --------------------------------------------------------------------------------------- District of Columbia Certifications of Participation 4.00% 01/01/14 250,000 260,567 Washington D.C. Convention Center Authority Dedicated Tax Revenue, Refunding, Series A 5.00% 10/01/13 110,000 119,215 Washington D.C. Convention Center Authority Dedicated Tax Revenue, Refunding, Series A 5.00% 10/01/16 250,000 268,590 ----------- 648,372 See notes to portfolios of investments and notes to financial statements. 76 NEAR-TERM TAX FREE FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COUPON MATURITY PRINCIPAL MUNICIPAL BONDS RATE DATE AMOUNT VALUE FLORIDA 5.30% - -------------------------------------------------------------------------------------- Florida State Board of Education Lottery Revenue, Series A 4.00% 07/01/14 $ 300,000 $ 322,947 Orange County, Florida Tourist Development Tax Revenue, Refunding 5.00% 10/01/10 300,000 307,317 Orange County, Florida Tourist Development Tax Revenue, Refunding 5.00% 10/01/14 260,000 286,653 Reedy Creek, Florida Improvement District Utilities Revenue, Refunded, Series 2 5.00% 10/01/16 300,000 320,133 ----------- 1,237,050 GEORGIA 1.78% - -------------------------------------------------------------------------------------- Atlanta, Georgia Water & Wastewater Revenue, Series B 3.50% 11/01/13 400,000 414,624 ILLINOIS 8.96% - -------------------------------------------------------------------------------------- Aurora, Illinois, Series B, GO Unlimited 3.00% 12/30/15 200,000 208,352 Chicago, Illinois Sales Tax Revenue 5.50% 01/01/15 350,000 392,133 Chicago, Illinois, Unrefunded Balance, Series B 5.13% 01/01/15 325,000 365,732 Dundee Township, GO Unlimited 5.00% 12/01/13 240,000 267,854 Illinois Finance Authority Revenue, Refunding 5.00% 07/01/16 390,000 410,214 Illinois State Sales Tax Revenue 5.00% 06/15/14 200,000 223,750 Illinois State Toll Highway Authority, Toll Highway Revenue, Series A 5.00% 01/01/16 200,000 222,340 ----------- 2,090,375 INDIANA 5.51% - -------------------------------------------------------------------------------------- Hamilton Heights Independent School 5.25% 07/15/11 305,000 326,109 Indiana State Finance Authority Revenue, Refunding 4.00% 05/01/12 350,000 373,594 Noblesville Independent Redevelopment Authority Lease Rent Revenue 5.00% 01/15/24 250,000 256,650 Tippecanoe County, Indiana School Improvements 4.00% 01/15/15 300,000 329,904 ----------- 1,286,257 IOWA 2.21% - -------------------------------------------------------------------------------------- Ames, Iowa Hospital Revenue, Refunding 5.00% 06/15/15 300,000 305,682 Johnston Community School District, GO Unlimited 4.00% 06/01/16 200,000 209,090 ----------- 514,772 KANSAS 0.94% - -------------------------------------------------------------------------------------- Kansas State Development Finance Authority Revenue 4.00% 10/01/15 200,000 219,976 See notes to portfolios of investments and notes to financial statements. 77 NEAR-TERM TAX FREE FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COUPON MATURITY PRINCIPAL MUNICIPAL BONDS RATE DATE AMOUNT VALUE KENTUCKY 1.38% - -------------------------------------------------------------------------------------- Louisville & Jefferson County Metropolitan Sewer District & Drain Systems, Series A 5.50% 05/15/15 $ 300,000 $ 322,689 MICHIGAN 5.23% - -------------------------------------------------------------------------------------- Detroit, Michigan Local Development Finance Authority, Series A 5.20% 05/01/10 40,000 11,200 Detroit, Michigan Sewer Disposal Revenue, Refunded, Series C-1 5.25% 07/01/15 400,000 435,496 Michigan State Building Authority Revenue, Refunded, Series I 5.25% 10/15/14 300,000 325,584 Michigan State Grant Anticipation Bonds 5.00% 09/15/16 200,000 220,004 Michigan State Hospital Finance Authority Revenue, Trinity Health, Series A 6.00% 12/01/18 200,000 229,060 ----------- 1,221,344 MISSOURI 1.01% - -------------------------------------------------------------------------------------- Missouri State Health & Educational Facilities Authority Revenue, Series A 6.75% 05/15/13 200,000 236,716 NEVADA 1.94% - -------------------------------------------------------------------------------------- North Las Vegas, GO Limited 4.00% 03/01/16 200,000 200,618 Nye County School District, GO Limited 4.00% 05/01/15 230,000 253,099 ----------- 453,717 NEW HAMPSHIRE 0.63% - -------------------------------------------------------------------------------------- New Hampshire Health & Education Facilities Authority Revenue 5.00% 07/01/14 145,000 147,871 NEW JERSEY 2.28% - -------------------------------------------------------------------------------------- New Jersey State 5.13% 05/01/10 250,000 253,880 New Jersey State Transportation Trust Fund Authority, Series D 4.00% 06/15/14 250,000 277,895 ----------- 531,775 NEW YORK 2.48% - -------------------------------------------------------------------------------------- New York, New York, Series G, GO Unlimited 5.00% 08/01/12 125,000 136,416 New York, New York, Subseries L-1, GO Unlimited 4.00% 04/01/15 300,000 322,101 Schenectady Metroplex Development Authority Revenue, Series A 5.00% 12/15/12 110,000 119,809 ----------- 578,326 See notes to portfolios of investments and notes to financial statements. 78 NEAR-TERM TAX FREE FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COUPON MATURITY PRINCIPAL MUNICIPAL BONDS RATE DATE AMOUNT VALUE PENNSYLVANIA 0.87% - --------------------------------------------------------------------------------------- Philadelphia, Pennsylvania 4.50% 08/01/12 $ 195,000 $ 202,178 PUERTO RICO 2.28% - --------------------------------------------------------------------------------------- Commonwealth of Puerto Rico, GO Unlimited 6.00% 07/01/13 250,000 271,970 Commonwealth of Puerto Rico, Refunded, GO Unlimited 5.50% 07/01/11 250,000 260,165 ----------- 532,135 SOUTH CAROLINA 3.14% - --------------------------------------------------------------------------------------- Horry County Hospitality Fee Special Obligation 5.00% 04/01/10 200,000 201,542 Jasper County School District, GO Unlimited 4.00% 03/01/15 195,000 215,208 Spartanburg County School District 3.88% 04/01/12 300,000 316,557 ----------- 733,307 TENNESSEE 2.68% - --------------------------------------------------------------------------------------- Metropolitan Government of Nashville & Davidson County, Water & Sewer Revenue 6.50% 12/01/14 250,000 307,803 Tennessee State, GO Unlimited, Refunding, Series A 5.00% 05/01/11 300,000 317,649 ----------- 625,452 TEXAS 15.45% - --------------------------------------------------------------------------------------- Addison, Texas Certificates of Obligation, GO Unlimited 4.00% 02/15/20 250,000 260,005 Bexar County Hospital District, GO Limited 3.50% 02/15/10 300,000 300,945 Conroe Texas, GO Limited (ZCB) 2.75%(1) 03/01/10 170,000 169,774 Grand Prairie Independent School District, Refunded, GO Unlimited (ZCB) 3.92%(1) 08/15/16 400,000 319,696 Katy, Texas Independent School District, School Building, Series D, GO Unlimited 4.50% 02/15/19 325,000 348,078 Lewisville, Texas Independent School District, GO Unlimited, Refunding (ZCB) 4.04%(1) 08/15/15 400,000 342,620 Lower Colorado River Authority Texas, Refunding 5.25% 05/15/19 240,000 255,461 Mount Vernon, Texas Independent School District Capital Appreciation Bonds, GO Unlimited (ZCB) 1.66%(1) 02/15/10 200,000 199,600 North Texas Municipal Water District, Regional Solid Waste Disposal Systems Revenue 3.00% 09/01/12 300,000 307,866 Port Arthur, Texas, Refunding, GO Unlimited 2.85% 02/15/11 200,000 204,358 San Antonio Water System Revenue 5.00% 05/15/13 100,000 105,187 San Antonio, Texas Municipal Drain Utilities Systems Revenue 4.00% 02/01/16 300,000 308,196 San Patricio, Texas Municipal Water District, Refunding 4.00% 07/10/18 200,000 201,576 See notes to portfolios of investments and notes to financial statements. 79 NEAR-TERM TAX FREE FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COUPON MATURITY PRINCIPAL MUNICIPAL BONDS RATE DATE AMOUNT VALUE TEXAS (CONT'D) - -------------------------------------------------------------------------------------- Texas Municipal Power Agency Revenue, Refunding 5.00% 09/01/17 $ 250,000 $ 281,405 ----------- 3,604,767 UTAH 1.43% - -------------------------------------------------------------------------------------- Utah State, Refunding, Series B, GO Unlimited 5.38% 07/01/12 300,000 333,876 VIRGINIA 2.90% - -------------------------------------------------------------------------------------- Virginia College Building Authority Educational Facilities Revenue, Prerefunded, Series A 5.00% 09/01/15 10,000 11,648 Virginia College Building Authority Educational Facilities Revenue, Unrefunded, Series A 5.00% 09/01/15 290,000 333,596 Virginia State Public Building Authority & Public Facilities Revenue, Refunding, Series A 5.00% 08/01/12 300,000 331,494 ----------- 676,738 WASHINGTON 4.12% - -------------------------------------------------------------------------------------- Clark County, Washington School District, GO Unlimited 5.13% 12/01/11 100,000 108,130 Energy Northwest, Washington Electric Revenue 5.00% 07/01/14 250,000 285,955 King County, Washington School District No. 401 Highline Public Schools, GO Unlimited 5.50% 12/01/13 240,000 266,546 Seattle, Washington Municipal Light and Power Revenue, Refunding 5.00% 07/01/17 300,000 300,381 ----------- 961,012 WISCONSIN 2.48% - -------------------------------------------------------------------------------------- Chippewa Valley, Wisconsin, Technical College District Promissory Notes, Series A, GO Unlimited 4.00% 04/01/14 250,000 273,937 Wisconsin State, Refunding, Series 2, GO Unlimited 4.13% 11/01/16 295,000 305,036 ----------- 578,973 - -------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS 21,469,917 - -------------------------------------------------------------------------------------- (cost $20,885,062) See notes to portfolios of investments and notes to financial statements. 80 NEAR-TERM TAX FREE FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COUPON MATURITY PRINCIPAL REPURCHASE AGREEMENT 10.63% RATE DATE AMOUNT VALUE Joint Tri-Party Repurchase Agreement, Morgan Stanley, 12/31/09, 0.00%, due 01/04/10, repurchase price $2,481,059, collateralized by U.S. Treasury securities held in a joint tri-party account (cost $2,481,059) 0.00% 01/04/10 $2,481,059 $ 2,481,059 - -------------------------------------------------------------------------------------- TOTAL INVESTMENTS 102.63% 23,950,976 - -------------------------------------------------------------------------------------- (cost $23,366,121) Other assets and liabilities, net (2.63)% (613,897) ----------- NET ASSETS 100% $23,337,079 ----------- (1)Represents Yield See notes to portfolios of investments and notes to financial statements. 81 TAX FREE FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COUPON MATURITY PRINCIPAL MUNICIPAL BONDS 89.83% RATE DATE AMOUNT VALUE ALABAMA 6.32% - --------------------------------------------------------------------------------------- Alabama 21st Century Authority, Tobacco Settlement Revenue 5.75% 12/01/19 $ 275,000 $ 280,236 Alabama State, GO Unlimited, Series A 4.63% 09/01/22 375,000 392,520 Bessemer, Alabama Water Revenue 4.00% 01/01/16 200,000 185,644 Mountain Brook City Board of Education Capital Outlay 4.00% 02/15/15 195,000 213,053 University of Alabama at Birmingham, Hospital Revenue, Series A 5.00% 09/01/15 300,000 324,645 ----------- 1,396,098 ARIZONA 1.22% - --------------------------------------------------------------------------------------- University of Arizona Certificates of Participation, Series C 5.00% 06/01/22 260,000 268,681 CALIFORNIA 9.49% - --------------------------------------------------------------------------------------- Anaheim, California City School District, Capital Appreciation, Election 2002, GO Unlimited (ZCB) 4.60%(1) 08/01/28 580,000 172,045 California State, GO Unlimited 5.00% 03/01/32 300,000 276,303 California State, GO Unlimited 4.75% 03/01/34 205,000 176,339 California State, GO Unlimited 5.00% 06/01/37 455,000 409,423 Campbell, California Union High School District, GO Unlimited 4.75% 08/01/34 300,000 295,710 San Diego, California Community College District, Capital Appreciation, Election 2002, GO Unlimited (ZCB) 4.34%(1) 05/01/15 450,000 378,688 Santa Clara Valley Transportation Authority, Refunded, Series A 5.00% 04/01/27 370,000 388,049 ----------- 2,096,557 COLORADO 0.69% - --------------------------------------------------------------------------------------- Colorado Health Facilities Authority Revenue 5.00% 09/01/16 150,000 153,405 CONNECTICUT 1.46% - --------------------------------------------------------------------------------------- Connecticut State, Series E, GO Unlimited 5.13% 11/15/14 300,000 323,304 DISTRICT OF COLUMBIA 1.51% - --------------------------------------------------------------------------------------- District of Columbia Income Tax Revenue, Series A 5.25% 12/01/27 300,000 334,560 FLORIDA 3.52% - --------------------------------------------------------------------------------------- Florida Board of Education, GO Unlimited, Refunding, Series C 4.50% 06/01/28 300,000 303,651 See notes to portfolios of investments and notes to financial statements. 82 TAX FREE FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COUPON MATURITY PRINCIPAL MUNICIPAL BONDS RATE DATE AMOUNT VALUE FLORIDA (CONT'D) - -------------------------------------------------------------------------------------- St. Lucie County Florida Sales Tax Revenue 5.25% 10/01/23 $ 465,000 $ 474,114 ----------- 777,765 GEORGIA 2.31% - -------------------------------------------------------------------------------------- Atlanta Development Authority Revenue 5.25% 07/01/22 500,000 510,490 ILLINOIS 7.21% - -------------------------------------------------------------------------------------- Chicago Board of Education, GO Unlimited 5.25% 12/01/19 300,000 328,860 Cook County, Illinois Capital Improvement, GO Unlimited, Series A 5.00% 11/15/28 400,000 404,352 Du Page County, Refunding 5.60% 01/01/21 490,000 558,257 Illinois Regional Transportation Authority Revenue, Series A 7.20% 11/01/20 250,000 301,332 ----------- 1,592,801 INDIANA 1.38% - -------------------------------------------------------------------------------------- Indianapolis Local Public Improvement Bond Bank, Waterworks Project, Series 2007 L 5.25% 01/01/33 305,000 306,180 KANSAS 6.42% - -------------------------------------------------------------------------------------- Kansas State Development Finance Authority Hospital Revenue, Series Z 5.00% 12/15/12 500,000 505,695 Kansas State Development Finance Authority Revenue 4.00% 10/01/15 250,000 274,970 University of Kansas Hospital Authority Health Facilities Revenue 5.63% 09/01/27 570,000 638,201 ----------- 1,418,866 KENTUCKY 2.55% - -------------------------------------------------------------------------------------- Bowling Green, Kentucky, GO Unlimited, Series B 4.00% 09/01/16 215,000 233,686 Kentucky State Property & Buildings Community Revenues, Refunded, Project No. 93 5.25% 02/01/25 300,000 330,198 ----------- 563,884 MARYLAND 1.46% - -------------------------------------------------------------------------------------- Maryland Health & Higher Educational Facilities Authority Revenue 5.75% 07/01/21 300,000 322,917 MICHIGAN 1.77% - -------------------------------------------------------------------------------------- Detroit, Michigan Local Development Financing Authority, Refunding, Series A 5.38% 05/01/18 300,000 84,000 See notes to portfolios of investments and notes to financial statements. 83 TAX FREE FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COUPON MATURITY PRINCIPAL MUNICIPAL BONDS RATE DATE AMOUNT VALUE MICHIGAN (CONT'D) - -------------------------------------------------------------------------------------- Macomb County Building Authority, GO Limited 4.50% 11/01/23 $ 300,000 $ 307,083 ----------- 391,083 MISSOURI 3.10% - -------------------------------------------------------------------------------------- Kansas City Water Revenue 4.00% 12/01/22 250,000 269,080 St. Louis Airport Development Program, Prerefunded, Series A 5.00% 07/01/11 165,000 175,649 St. Louis Airport Development Program, Unrefunded, Series A 5.00% 07/01/11 235,000 240,610 ----------- 685,339 NEVADA 1.17% - -------------------------------------------------------------------------------------- Nye County School District, GO Limited 4.00% 05/01/15 235,000 258,601 NEW HAMPSHIRE 2.33% - -------------------------------------------------------------------------------------- Manchester, New Hampshire School Facilities Revenue, Refunding 5.50% 06/01/26 300,000 356,940 New Hampshire Health & Education Facilities Authority Revenue 5.00% 07/01/14 155,000 158,069 ----------- 515,009 NEW JERSEY 2.09% - -------------------------------------------------------------------------------------- New Jersey Health Care Facilities Financing Authority Revenue 4.38% 07/01/10 460,000 461,362 OHIO 2.00% - -------------------------------------------------------------------------------------- Ohio State Mental Health Facilities Revenue 5.50% 06/01/15 300,000 320,808 South Euclid Special Assessment, GO Limited Tax 6.70% 12/01/14 110,000 121,678 ----------- 442,486 PUERTO RICO 2.41% - -------------------------------------------------------------------------------------- Commonwealth of Puerto Rico, GO Unlimited 6.00% 07/01/13 250,000 271,970 Commonwealth of Puerto Rico, Refunded, GO Unlimited 5.50% 07/01/11 250,000 260,165 ----------- 532,135 RHODE ISLAND 2.58% - -------------------------------------------------------------------------------------- Rhode Island State Health & Educational Building Corporation Revenue 6.50% 08/15/32 500,000 570,065 See notes to portfolios of investments and notes to financial statements. 84 TAX FREE FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COUPON MATURITY PRINCIPAL MUNICIPAL BONDS RATE DATE AMOUNT VALUE SOUTH CAROLINA 1.11% - --------------------------------------------------------------------------------------- South Carolina Jobs Economic Development Authority Revenue 5.00% 11/01/23 $ 250,000 $ 245,095 TENNESSEE 1.01% - --------------------------------------------------------------------------------------- Memphis, Tennessee Sanitary Sewage System Revenue, Refunding 5.00% 05/01/20 200,000 222,670 TEXAS 18.74% - --------------------------------------------------------------------------------------- Baytown, Texas, GO Limited 4.50% 02/01/27 250,000 254,378 Dallas, Texas Waterworks & Sewer Systems Revenue, Refunding 4.50% 10/01/19 225,000 241,859 Duncanville, Texas Independent School District, GO Unlimited, Prerefunded, Series B 5.25% 02/15/32 495,000 542,708 Duncanville, Texas Independent School District, GO Unlimited, Unrefunded, Series B 5.25% 02/15/32 5,000 5,125 Forney, Texas, GO Limited 5.00% 02/15/27 500,000 524,340 Goose Creek, Texas Independent School District Schoolhouse, Series A 5.25% 02/15/18 370,000 425,992 Greenville, Texas Independent School District, GO Unlimited, Refunding 4.00% 08/15/17 120,000 127,661 Houston Community College System Revenue, Refunding 4.00% 04/15/17 300,000 308,202 North Texas Municipal Water District Regional Solid Waste Disposal System Revenue 4.25% 09/01/17 385,000 403,857 North Texas Tollway Authority Revenue, Series F 5.75% 01/01/38 250,000 253,510 Prosper, Texas Independent School District, Capital Appreciation, School Building, GO Unlimited (ZCB) 6.00%(1) 08/15/33 1,000,000 292,920 San Marcos, Texas Tax & Toll Revenue, GO Limited 5.10% 08/15/27 400,000 429,416 White Settlement, Texas Independent School District, GO Unlimited 4.13% 08/15/15 300,000 331,308 ----------- 4,141,276 UTAH 2.62% - --------------------------------------------------------------------------------------- Utah State Building Ownership Authority, Lease Revenue, Refunded, Series C 5.50% 05/15/19 500,000 579,665 WASHINGTON 2.73% - --------------------------------------------------------------------------------------- King County, Washington School District No. 401 Highline Public Schools, GO Unlimited 5.50% 12/01/13 300,000 333,183 See notes to portfolios of investments and notes to financial statements. 85 TAX FREE FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COUPON MATURITY PRINCIPAL MUNICIPAL BONDS RATE DATE AMOUNT VALUE WASHINGTON (CONT'D) - --------------------------------------------------------------------------------------- Spokane County, Washington School District, No. 81, GO Unlimited 5.05% 06/01/22 $ 255,000 $ 271,195 ----------- 604,378 WISCONSIN 0.63% - -------------------------------------------------------------------------------------- Wisconsin State Health & Educational Facilities Authority 5.50% 12/01/26 140,000 140,011 - -------------------------------------------------------------------------------------- TOTAL MUNICIPAL BONDS 19,854,683 - -------------------------------------------------------------------------------------- (cost $19,374,485) REPURCHASE AGREEMENT 8.99% Joint Tri-Party Repurchase Agreement, Merrill Lynch, 12/31/09, 0.00%, due 01/04/10, repurchase price $1,986,818, collateralized by U.S. Treasury securities held in a joint tri-party account (cost $1,986,818) 0.00% 01/04/10 1,986,818 1,986,818 - -------------------------------------------------------------------------------------- TOTAL INVESTMENTS 98.82% 21,841,501 - -------------------------------------------------------------------------------------- (cost $21,361,303) Other assets and liabilities, net 1.18% 260,578 ----------- NET ASSETS 100% $22,102,079 ----------- (1)Represents Yield See notes to portfolios of investments and notes to financial statements. 86 ALL AMERICAN EQUITY FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS 85.46% SHARES VALUE AGRICULTURAL CHEMICALS 1.32% - --------------------------------------------------------------------------------------- Potash Corporation of Saskatchewan, Inc. 2,000 $ 217,000 APPAREL 1.34% - --------------------------------------------------------------------------------------- Skechers U.S.A., Inc., Class A 7,500 220,575* APPLICATIONS SOFTWARE 4.20% - --------------------------------------------------------------------------------------- Salesforce.com, Inc. 7,000 516,390* Sybase, Inc. 4,000 173,600* ----------- 689,990 BANKS 2.81% - --------------------------------------------------------------------------------------- Bank of America Corp. 20,000 301,200 Royal Bank of Canada 3,000 160,650 ----------- 461,850 CHEMICALS 1.03% - --------------------------------------------------------------------------------------- Huntsman Corp. 15,000 169,350 COAL 1.37% - --------------------------------------------------------------------------------------- Walter Energy, Inc. 3,000 225,930 COMPUTERS 5.02% - --------------------------------------------------------------------------------------- Apple, Inc. 3,000 632,580* Infosys Technologies Ltd., Sponsored ADR 3,500 193,445 ----------- 826,025 COMPUTERS - MEMORY DEVICES 6.33% - --------------------------------------------------------------------------------------- NetApp, Inc. 12,000 412,680* SanDisk Corp. 12,500 362,375* Western Digital Corp. 6,000 264,900* ----------- 1,039,955 COSMETICS & TOILETRIES 1.29% - --------------------------------------------------------------------------------------- The Procter & Gamble Co. 3,500 212,205 DIAGNOSTIC KITS 1.01% - --------------------------------------------------------------------------------------- Inverness Medical Innovations, Inc. 4,000 166,040* DISTRIBUTION/WHOLESALE 1.02% - --------------------------------------------------------------------------------------- Fossil, Inc. 5,000 167,800* See notes to portfolios of investments and notes to financial statements. 87 ALL AMERICAN EQUITY FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE DIVERSIFIED MINERALS 1.17% - --------------------------------------------------------------------------------------- Teck Resources Ltd., Class B 5,500 $ 192,335* DIVERSIFIED MANUFACTURING OPERATIONS 2.15% - --------------------------------------------------------------------------------------- Brink's Co. 6,000 146,040 Textron, Inc. 11,000 206,910 ----------- 352,950 E-COMMERCE 2.05% - --------------------------------------------------------------------------------------- Amazon.com, Inc. 2,500 336,300* ELECTRIC - INTEGRATED 2.46% - --------------------------------------------------------------------------------------- DTE Energy Co. 3,500 152,565 Pepco Holdings, Inc. 15,000 252,750 ----------- 405,315 ELECTRONICS & COMPONENTS 3.92% - --------------------------------------------------------------------------------------- Advanced Micro Devices, Inc. 20,000 193,600* Cree, Inc. 8,000 450,960*^ ----------- 644,560 FINANCIAL SERVICES 1.03% - --------------------------------------------------------------------------------------- The Goldman Sachs Group, Inc. 1,000 168,840 FOOD & BEVERAGES 1.51% - --------------------------------------------------------------------------------------- General Mills, Inc. 3,500 247,835 FORESTRY 0.79% - --------------------------------------------------------------------------------------- Weyerhaeuser Co. 3,000 129,420 INSURANCE 4.09% - --------------------------------------------------------------------------------------- Lincoln National Corp. 10,000 248,800 Prudential Financial, Inc. 5,000 248,800 The Hartford Financial Services Group, Inc. 7,500 174,450 ----------- 672,050 INTERNET 1.60% - --------------------------------------------------------------------------------------- Rackspace Hosting, Inc. 12,500 260,625* Stockhouse, Inc. 131,125 3,121* ----------- 263,746 IRON AND STEEL 1.12% - --------------------------------------------------------------------------------------- Cliffs Natural Resources, Inc. 4,000 184,360 See notes to portfolios of investments and notes to financial statements. 88 ALL AMERICAN EQUITY FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE MEDICAL - DRUGS 3.28% - --------------------------------------------------------------------------------------- Abbott Laboratories 6,000 $ 323,940 Merck & Co., Inc. 5,883 214,965 ----------- 538,905 MEDICAL - HMO 2.85% - --------------------------------------------------------------------------------------- CIGNA Corp. 5,000 176,350 WellPoint, Inc. 5,000 291,450* ----------- 467,800 MEDICAL INFORMATION SYSTEM 1.50% - --------------------------------------------------------------------------------------- Cerner Corp. 3,000 247,320* METAL - ALUMINUM 0.54% - --------------------------------------------------------------------------------------- Alcoa, Inc. 5,500 88,660 METAL - COPPER 1.22% - --------------------------------------------------------------------------------------- Freeport-McMoRan Copper & Gold, Inc. 2,500 200,725 METAL PROCESSING 0.67% - --------------------------------------------------------------------------------------- Precision Castparts Corp. 1,000 110,350 OIL & GAS DRILLING 2.31% - --------------------------------------------------------------------------------------- Atlas Energy, Inc. 5,000 150,850* Pride International, Inc. 7,200 229,752* ----------- 380,602 OIL & GAS EXPLORATION & PRODUCTION 3.13% - --------------------------------------------------------------------------------------- Concho Resources, Inc. 4,000 179,600* Linn Energy LLC 12,000 334,560 ----------- 514,160 OIL FIELD MACHINERY & EQUIPMENT 1.41% - --------------------------------------------------------------------------------------- FMC Technologies, Inc. 4,000 231,360* OIL FIELD SERVICES 1.66% - --------------------------------------------------------------------------------------- Key Energy Services, Inc. 20,000 175,800* Schlumberger Ltd. 1,500 97,635 ----------- 273,435 PAPER PRODUCTS 1.71% - --------------------------------------------------------------------------------------- Schweitzer-Mauduit International, Inc. 4,000 281,400 See notes to portfolios of investments and notes to financial statements. 89 ALL AMERICAN EQUITY FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE PHARMACY SERVICES 2.92% - --------------------------------------------------------------------------------------- Medco Health Solutions, Inc. 7,500 $ 479,325* RETAIL 2.45% - --------------------------------------------------------------------------------------- J. Crew Group, Inc. 9,000 402,660* SOFTWARE TOOLS 1.56% - --------------------------------------------------------------------------------------- ArcSight, Inc. 10,000 255,800* TOBACCO 1.76% - --------------------------------------------------------------------------------------- Philip Morris International, Inc. 6,000 289,140 TRANSPORTATION 3.92% - --------------------------------------------------------------------------------------- CSX Corp. 8,000 387,920 Golar LNG Ltd. 20,000 256,400* ----------- 644,320 WATER TREATMENT SYSTEMS 1.31% - --------------------------------------------------------------------------------------- Duoyuan Global Water, Inc., Sponsored ADR 6,000 214,740* WIRELESS EQUIPMENT 2.63% - --------------------------------------------------------------------------------------- American Tower Corp., Class A 10,000 432,100* - --------------------------------------------------------------------------------------- TOTAL COMMON STOCKS 14,047,233 - --------------------------------------------------------------------------------------- (cost $11,526,767) EXCHANGE-TRADED FUNDS (ETF) 3.24% iShares Dow Jones Transportation Average Index Fund 2,000 147,640 iShares Dow Jones U.S. Real Estate Index Fund 5,000 229,600 iShares Russell 2000 Index Fund 2,500 155,650 - --------------------------------------------------------------------------------------- TOTAL EXCHANGE-TRADED FUNDS 532,890 - --------------------------------------------------------------------------------------- (cost $538,265) PURCHASED OPTIONS 0.86% CONTRACTS AUTOMOBILES 0.04% - --------------------------------------------------------------------------------------- Ford Motor Co., Strike Price 10, Call, Expiration Jan. 2010 (premium $5,050) 200 6,200 BANKS 0.02% - --------------------------------------------------------------------------------------- Bank of America Corp., Strike Price 20, Call, Expiration May 2010 (premium $15,600) 100 2,400 See notes to portfolios of investments and notes to financial statements. 90 ALL AMERICAN EQUITY FUND PORTFOLIO OF INVESTMENTS December 31, 2009 PURCHASED OPTIONS CONTRACTS VALUE COMPUTERS 0.32% - --------------------------------------------------------------------------------------- Apple, Inc., Strike Price 160, Call, Expiration Feb. 2010 (premium $41,040) 10 $ 52,350 INTERNET 0.20% - --------------------------------------------------------------------------------------- Google, Inc., Strike Price 560, Call, Expiration Feb. 2010 (premium $29,910) 5 33,500 MEDICAL - PRODUCTS 0.03% - --------------------------------------------------------------------------------------- Johnson & Johnson, Strike Price 65, Call, Expiration Jan. 2010 (premium $7,100) 100 4,400 METAL - COPPER 0.25% - --------------------------------------------------------------------------------------- Freeport-McMoRan Copper & Gold, Inc., Strike Price 60, Call, Expiration Jan. 2010 (premium $40,574) 20 41,800 - --------------------------------------------------------------------------------------- TOTAL PURCHASED OPTIONS 140,650 - --------------------------------------------------------------------------------------- (cost $139,274) - --------------------------------------------------------------------------------------- TOTAL SECURITIES 14,720,773 - --------------------------------------------------------------------------------------- (cost $12,204,306) PRINCIPAL REPURCHASE AGREEMENT 10.74% AMOUNT Joint Tri-Party Repurchase Agreement, Morgan Stanley, 12/31/09, 0.00%, due 01/04/10, repurchase price $1,764,613, collateralized by U.S. Treasury securities held in a joint tri-party account (cost $1,764,613) $1,764,613 1,764,613 - --------------------------------------------------------------------------------------- TOTAL INVESTMENTS 100.30% 16,485,386 - --------------------------------------------------------------------------------------- (cost $13,968,919) Other assets and liabilities, net (0.30)% (49,143) ----------- NET ASSETS 100% $16,436,243 ----------- SHARES SUBJECT CALL OPTIONS WRITTEN TO CALL - --------------------------------------------------------------------------------------- Cree, Inc., Strike Price 55, Expiration Jan. 2010 (premiums received $3,488) (Note 2A) 1,600 $ 4,160 See notes to portfolios of investments and notes to financial statements. 91 HOLMES GROWTH FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS 82.54% SHARES VALUE AGRICULTURAL CHEMICALS 1.17% - ------------------------------------------------------------------------------------- Potash Corporation of Saskatchewan, Inc. 4,000 $ 434,000 AIRLINES 0.95% - ------------------------------------------------------------------------------------- Copa Holdings S.A., Class A 6,500 354,055 APPAREL 1.37% - ------------------------------------------------------------------------------------- Deckers Outdoor Corp. 5,000 508,600* APPLICATIONS SOFTWARE 1.49% - ------------------------------------------------------------------------------------- Salesforce.com, Inc. 7,500 553,275* BANKS 1.82% - ------------------------------------------------------------------------------------- Bank of America Corp. 45,000 677,700 COAL 2.13% - ------------------------------------------------------------------------------------- Peabody Energy Corp. 7,500 339,075 Walter Energy, Inc. 6,000 451,860 ----------- 790,935 COMPUTERS 5.72% - ------------------------------------------------------------------------------------- Apple, Inc. 6,000 1,265,160* Riverbed Technology, Inc. 37,500 861,375* ----------- 2,126,535 DIVERSIFIED MINERALS 1.69% - ------------------------------------------------------------------------------------- Teck Resources Ltd., Class B 18,000 629,460 E-COMMERCE 9.09% - ------------------------------------------------------------------------------------- Amazon.com, Inc. 4,500 605,340* Ctrip.com International Ltd., Sponsored ADR 7,000 503,020* CYBERplex, Inc. 620,000 678,626* Netflix, Inc. 13,000 716,820* Priceline.com, Inc. 4,000 874,000* ----------- 3,377,806 ELECTRONICS & COMPONENTS 3.58% - ------------------------------------------------------------------------------------- Broadcom Corp., Class A 10,000 314,500* Cree, Inc. 18,000 1,014,660*^ ----------- 1,329,160 See notes to portfolios of investments and notes to financial statements. 92 HOLMES GROWTH FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE FINANCIAL SERVICES 6.55% - ------------------------------------------------------------------------------------- GMP Capital, Inc. 63,800 $ 766,341 MasterCard, Inc., Class A 3,500 895,930 MCO Capital, Inc. (RS) 1,000,000 78,523*@ The Goldman Sachs Group, Inc. 4,100 692,244 ----------- 2,433,038 GOLD MINING 0.65% - ------------------------------------------------------------------------------------- Red Back Mining, Inc. 17,000 242,707* INTERNET 3.34% - ------------------------------------------------------------------------------------- AboveNet, Inc. 10,000 650,400* Perfect World Co., Ltd., Sponsored ADR 15,000 591,600* ----------- 1,242,000 INVESTMENT MANAGEMENT 0.85% - ------------------------------------------------------------------------------------- Franklin Resources, Inc. 3,000 316,050 MACHINERY 0.94% - ------------------------------------------------------------------------------------- Flowserve Corp. 3,700 349,761 MARINE SERVICES 2.07% - ------------------------------------------------------------------------------------- Aegean Marine Petroleum Network, Inc. 28,000 769,440 MEDICAL - BIOMEDICAL 0.92% - ------------------------------------------------------------------------------------- Alexion Pharmaceuticals, Inc. 7,000 341,740* MEDICAL - HOSPITALS 1.02% - ------------------------------------------------------------------------------------- African Medical Investments plc 1,000,000 379,795* MEDICAL - PRODUCTS 2.51% - ------------------------------------------------------------------------------------- Bristol-Myers Squibb Co. 17,000 429,250 Quality Systems, Inc. 8,000 502,320 ----------- 931,570 METAL - COPPER 1.08% - ------------------------------------------------------------------------------------- Freeport-McMoRan Copper & Gold, Inc. 5,000 401,450 OIL & GAS DRILLING 1.25% - ------------------------------------------------------------------------------------- Atwood Oceanics, Inc. 13,000 466,050* See notes to portfolios of investments and notes to financial statements. 93 HOLMES GROWTH FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE OIL & GAS EXPLORATION & PRODUCTION 5.41% - ------------------------------------------------------------------------------------- Alange Energy Corp. 2,000,000 $ 1,199,258* Canadian Natural Resources Ltd. 5,000 359,750 Concho Resources, Inc. 10,000 449,000* ----------- 2,008,008 OIL FIELD MACHINERY & EQUIPMENT 1.41% - ------------------------------------------------------------------------------------- Cameron International Corp. 12,500 522,500* OIL FIELD SERVICES 1.72% - ------------------------------------------------------------------------------------- Core Laboratories N.V. 5,400 637,848 PHARMACY SERVICES 5.20% - ------------------------------------------------------------------------------------- Express Scripts, Inc. 12,000 1,037,400* Medco Health Solutions, Inc. 14,000 894,740* ----------- 1,932,140 PLATINUM 0.73% - ------------------------------------------------------------------------------------- Eastern Platinum Ltd. 310,800 272,152* PRINTING 1.53% - ------------------------------------------------------------------------------------- VistaPrint N.V. 10,000 566,600* RADIO 6.84% - ------------------------------------------------------------------------------------- Newfoundland Capital Corp. Ltd., Class A 381,200 2,539,761 RETAIL 2.90% - ------------------------------------------------------------------------------------- Dollar Tree, Inc. 7,500 362,250* J. Crew Group, Inc. 16,000 715,840* ----------- 1,078,090 SCHOOLS 3.09% - ------------------------------------------------------------------------------------- Apollo Group, Inc., Class A 4,000 242,320* Capella Education Co. 12,000 903,600* ----------- 1,145,920 SOFTWARE TOOLS 2.07% - ------------------------------------------------------------------------------------- ArcSight, Inc. 30,000 767,400* See notes to portfolios of investments and notes to financial statements. 94 HOLMES GROWTH FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE WATER TREATMENT SYSTEMS 1.45% - ------------------------------------------------------------------------------------- Duoyuan Global Water, Inc., Sponsored ADR 15,000 $ 536,850* - ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS 30,662,396 - ------------------------------------------------------------------------------------- (cost $25,078,342) EXCHANGE-TRADED FUNDS (ETF) 5.92% iShares Dow Jones Transportation Average Index Fund 8,000 590,560 iShares Dow Jones U.S. Real Estate Index Fund 10,000 459,200 iShares Dow Jones U.S. Telecommunications Sector Index Fund 22,500 450,450 Technology Select Sector SPDR Fund 15,000 343,050 Utilities Select Sector SPDR Fund 11,500 356,500 - ------------------------------------------------------------------------------------- TOTAL EXCHANGE-TRADED FUNDS 2,199,760 - ------------------------------------------------------------------------------------- (cost $2,204,639) WARRANTS 1.34% MEDICAL - HOSPITALS 0.08% - ------------------------------------------------------------------------------------- African Medical Investments plc, Warrants (June 2011) 500,000 28,283*@ OIL & GAS EXPLORATION & PRODUCTION 0.68% - ------------------------------------------------------------------------------------- Pacific Rubiales Energy Corp., Warrants (July 2012) 29,200 252,910* SILVER MINING 0.58% - ------------------------------------------------------------------------------------- Silver Wheaton Corp., Warrants (December 2010) 32,500 216,223* - ------------------------------------------------------------------------------------- TOTAL WARRANTS 497,416 - ------------------------------------------------------------------------------------- (cost $143,764) PURCHASED OPTION 0.23% CONTRACTS METAL - COPPER 0.23% - ------------------------------------------------------------------------------------- Freeport-McMoRan Copper & Gold, Inc., Strike Price 60, Call, Expiration Jan. 2010 (premium $81,149) 40 83,600 - ------------------------------------------------------------------------------------- TOTAL SECURITIES 33,443,172 - ------------------------------------------------------------------------------------- (cost $27,507,894) See notes to portfolios of investments and notes to financial statements. 95 HOLMES GROWTH FUND PORTFOLIO OF INVESTMENTS December 31, 2009 PRINCIPAL REPURCHASE AGREEMENT 10.39% AMOUNT VALUE Joint Tri-Party Repurchase Agreement, UBS Financial Services, Inc., 12/31/09, 0.00%, due 01/04/10, repurchase price $3,860,909, collateralized by U.S. Treasury securities held in a joint tri-party account (cost $3,860,909) $3,860,909 $ 3,860,909 - ------------------------------------------------------------------------------------- TOTAL INVESTMENTS 100.42% 37,304,081 - ------------------------------------------------------------------------------------- (cost $31,368,803) Other assets and liabilities, net (0.42)% (155,103) ----------- NET ASSETS 100% $37,148,978 ----------- SHARES SUBJECT CALL OPTIONS WRITTEN TO CALL VALUE - ------------------------------------------------------------------------------------- Cree, Inc., Strike Price 55, Expiration Jan. 2010 (premiums received $7,848) (Note 2A) 3,600 $ 9,360 See notes to portfolios of investments and notes to financial statements. 96 GLOBAL MEGATRENDS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS 78.15% SHARES VALUE AIRLINES 1.05% - --------------------------------------------------------------------------------------- Copa Holdings S.A., Class A 5,500 $ 299,585 AIRPORTS 3.63% - --------------------------------------------------------------------------------------- Grupo Aeroportuario del Sureste S.A.B de C.V., Sponsored ADR 20,000 1,036,200 BUILDING & CONSTRUCTION 0.56% - --------------------------------------------------------------------------------------- Alarko Holding A.S. 60,000 158,960 BUILDING PRODUCTS 1.79% - --------------------------------------------------------------------------------------- Anhui Conch Cement Co., Ltd., H shares 30,000 191,782 Polaris Minerals Corp. 200,000 319,802* ----------- 511,584 CELLULAR TELECOMMUNICATIONS 8.57% - --------------------------------------------------------------------------------------- America Movil SAB de C.V., ADR, Series L, Sponsored ADR 9,000 422,820 Mobile TeleSystems, Sponsored ADR 8,000 391,120 Turkcell Iletisim Hizmetleri A.S., Sponsored ADR 22,500 393,525 Vimpel-Communications, Sponsored ADR 25,000 464,750 Vivo Participacoes S.A., Sponsored ADR 25,000 775,000 ----------- 2,447,215 COMMERCIAL SERVICES 2.01% - --------------------------------------------------------------------------------------- Stantec, Inc. 20,000 575,400* CONSTRUCTION 1.50% - --------------------------------------------------------------------------------------- Aecon Group, Inc. 30,000 428,306 ELECTRIC - INTEGRATED 13.62% - --------------------------------------------------------------------------------------- CMS Energy Corp. 17,500 274,050 Compania Energetica de Minas Gerais, Sponsored ADR 40,201 726,030 CPFL Energia S.A., Sponsored ADR 12,500 772,250 Exelon Corp. 6,000 293,220 FirstEnergy Corp. 13,000 603,850 FPL Group, Inc. 15,000 792,300 Polska Grupa Energetyczna S.A. 50,000 427,172* ----------- 3,888,872 ELECTRONICS & COMPONENTS 3.03% - --------------------------------------------------------------------------------------- China High Speed Transmission Equipment Group Co., Ltd. 190,000 459,881 Zhuzhou CSR Times Electric Co., Ltd., H shares 200,000 406,634 ----------- 866,515 See notes to portfolios of investments and notes to financial statements. 97 GLOBAL MEGATRENDS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE ENERGY - ALTERNATE SOURCES 2.83% - --------------------------------------------------------------------------------------- Trina Solar Ltd., Sponsored ADR 15,000 $ 809,550* ENGINEERING/RESEARCH & DEVELOPMENT SERVICES 3.24% - --------------------------------------------------------------------------------------- Foster Wheeler AG 14,000 412,160* SNC-Lavalin Group, Inc. 10,000 513,872 ----------- 926,032 HOLDING COMPANY 1.96% - --------------------------------------------------------------------------------------- Berkshire Hathaway, Inc., Class B 170 558,620* INTERNET 2.28% - --------------------------------------------------------------------------------------- AboveNet, Inc. 10,000 650,400* MACHINERY 2.13% - --------------------------------------------------------------------------------------- Flowserve Corp. 4,000 378,120 The Manitowoc Co., Inc. 23,000 229,310 ----------- 607,430 MARINE SERVICES 2.41% - --------------------------------------------------------------------------------------- Aegean Marine Petroleum Network, Inc. 25,000 687,000 METAL - COPPER 2.06% - --------------------------------------------------------------------------------------- First Quantum Minerals Ltd. 3,500 267,368 Freeport-McMoRan Copper & Gold, Inc. 4,000 321,160 ----------- 588,528 METAL & MINERAL MINING 2.89% - --------------------------------------------------------------------------------------- Eastern Platinum Ltd. 145,400 127,319* Teck Resources Ltd., Class B 20,000 699,400* ----------- 826,719 METAL PROCESSING 0.10% - --------------------------------------------------------------------------------------- China Wind Systems, Inc. 5,000 27,250* OIL & GAS EXPLORATION & PRODUCTION 0.32% - --------------------------------------------------------------------------------------- Pacific Rubiales Energy Corp. 6,233 91,657* PIPELINES 1.52% - --------------------------------------------------------------------------------------- China Gas Holdings Ltd. 800,000 432,796 See notes to portfolios of investments and notes to financial statements. 98 GLOBAL MEGATRENDS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE PUBLIC THOROUGHFARES 3.47% - --------------------------------------------------------------------------------------- Anhui Expressway Co., Ltd., H shares 250,000 $ 172,677 Compania de Concessoes Rodoviarias 36,000 819,590 ----------- 992,267 STEEL - PRODUCERS 6.32% - --------------------------------------------------------------------------------------- Gerdau S.A., Sponsored ADR 60,000 1,021,800 Novolipetsk Steel, Sponsored GDR 26,000 783,254 ----------- 1,805,054 TRANSPORT & STORAGE 3.49% - --------------------------------------------------------------------------------------- Dalian Port (PDA) Co., Ltd., H shares 1,000,000 383,435 Westshore Terminals Income Fund 45,000 612,478 ----------- 995,913 TRANSPORTATION 2.69% - --------------------------------------------------------------------------------------- CSX Corp. 10,000 484,900 Novorossiysk Sea Trade Port, Sponsored GDR 25,000 283,848 ----------- 768,748 WATER TREATMENT SYSTEMS 4.68% - --------------------------------------------------------------------------------------- Duoyuan Global Water, Inc., Sponsored ADR 11,000 393,690* Hyflux Ltd. 375,000 941,662 ----------- 1,335,352 - --------------------------------------------------------------------------------------- TOTAL COMMON STOCKS 22,315,953 - --------------------------------------------------------------------------------------- (cost $18,569,963) EXCHANGE-TRADED FUNDS (ETF) 5.08% iShares Dow Jones Transportation Average Index Fund 5,000 369,100 iShares Dow Jones U.S. Telecommunications Sector Index Fund 15,000 300,300 PowerShares Global Water Portfolio 14,000 254,240 Utilities Select Sector SPDR Fund 17,000 527,000 - --------------------------------------------------------------------------------------- TOTAL EXCHANGE-TRADED FUNDS 1,450,640 - --------------------------------------------------------------------------------------- (cost $1,435,355) See notes to portfolios of investments and notes to financial statements. 99 GLOBAL MEGATRENDS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 WARRANTS 0.06% SHARES VALUES BUILDING PRODUCTS 0.06% - --------------------------------------------------------------------------------------- Polaris Minerals Corp., Warrants (January 2011) 100,000 $ 16,180* (cost $9,053) PURCHASED OPTION 0.18% CONTRACTS METAL - COPPER 0.18% - --------------------------------------------------------------------------------------- Freeport-McMoRan Copper & Gold, Inc., Strike Price 60, Call, Expiration Jan. 2010 (premium $50,718) 25 52,250 MASTER LIMITED PARTNERSHIP 1.47% UNITS PIPELINES 1.47% - --------------------------------------------------------------------------------------- NuStar Energy L.P. 7,500 420,675 (cost $339,574) - --------------------------------------------------------------------------------------- TOTAL SECURITIES 24,255,698 - --------------------------------------------------------------------------------------- (cost $20,404,663) PRINCIPAL REPURCHASE AGREEMENT 14.98% AMOUNT Joint Tri-Party Repurchase Agreement, UBS Financial Services, Inc., 12/31/09, 0.00%, due 01/04/10, repurchase price $4,278,620, collateralized by U.S. Treasury securities held in a joint tri-party account (cost $4,278,620) $4,278,620 4,278,620 - --------------------------------------------------------------------------------------- TOTAL INVESTMENTS 99.92% 28,534,318 - --------------------------------------------------------------------------------------- (cost $24,683,283) Other assets and liabilities, net 0.08% 22,997 ----------- NET ASSETS 100% $28,557,315 ----------- See notes to portfolios of investments and notes to financial statements. 100 GLOBAL RESOURCES FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS 85.54% SHARES VALUE AGRICULTURAL CHEMICALS & FERTILIZERS 2.07% - ---------------------------------------------------------------------------------------------- Agrium, Inc. 125,000 $ 7,687,500* Potash Corporation of Saskatchewan, Inc. 70,000 7,595,000 Spur Ventures, Inc. 274,867 73,253* -------------- 15,355,753 AGRICULTURAL OPERATIONS 0.61% - ---------------------------------------------------------------------------------------------- Agriterra Ltd. 46,380,108 4,496,908*+ ALUMINUM 1.09% - ---------------------------------------------------------------------------------------------- Alcoa, Inc. 500,000 8,060,000 COAL 5.41% - ---------------------------------------------------------------------------------------------- Alpha Natural Resources, Inc. 200,000 8,676,000* Bounty Mining Ltd. 22,000,000 247,019*@ Coalcorp Mining, Inc. 5,732,661 1,364,075* Peabody Energy Corp. 375,000 16,953,750 Walter Energy, Inc. 120,000 9,037,200 Western Coal Corp. 1,200,000 3,723,409* -------------- 40,001,453 COPPER 6.36% - ---------------------------------------------------------------------------------------------- Chariot Resources Ltd. 2,491,600 877,449* Continental Minerals Corp. 1,026,227 2,080,487* First Quantum Minerals Ltd. 175,000 13,368,391 Freeport-McMoRan Copper & Gold, Inc. 270,000 21,678,300 Inmet Mining Corp. 145,000 8,802,265 Los Andes Copper Ltd. 754,000 64,589* Lumina Copper Corp. 168,600 168,496* -------------- 47,039,977 DIAMOND MINING & EXPLORATION 0.03% - ---------------------------------------------------------------------------------------------- Diamond Fields International Ltd. 1,822,400 121,418* Rockwell Diamonds, Inc. 950,000 54,252* Vaaldiam Resources Ltd. 1,044,001 29,810* -------------- 205,480 ENERGY - ALTERNATIVE SOURCES 0.50% - ---------------------------------------------------------------------------------------------- Magma Energy Corp. 2,150,000 3,703,898* FINANCIAL SERVICES 0.27% - ---------------------------------------------------------------------------------------------- Endeavour Financial Corp. 1,206,500 2,032,556* See notes to portfolios of investments and notes to financial statements. 101 GLOBAL RESOURCES FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE FORESTRY 1.27% - ---------------------------------------------------------------------------------------------- Sino-Forest Corp. 510,000 $ 9,407,319* GENERAL METAL & MINERAL MINING 7.80% - ---------------------------------------------------------------------------------------------- Anfield Nickel Corp. (RS) 200,000 528,054*@ Atacama Minerals Corp. 1,025,000 575,596* Baja Mining Corp. 1,381,050 1,012,143* Calibre Mining Corp. 550,000 117,784* Canada Zinc Metals Corp. 1,000,000 561,557* Century Mining Corp. 225,911 84,933* HudBay Minerals, Inc. 550,000 7,103,698* Ivanhoe Mines Ltd. 71,900 1,050,459* Lundin Mining Corp. 1,465,000 5,995,812* Mercator Minerals Ltd. 2,750,000 6,491,220* Natasa Mining Ltd. 1,099,160 1,459,833*+ Revett Minerals, Inc. 5,048,000 1,633,579* Sable Mining Africa Ltd. 21,446,000 3,632,467* Savant Explorations Ltd. 54,191 7,092* Sterling Group Ventures, Inc. 500,000 15,500* Teck Resources Ltd., Class B 510,000 17,834,700* Terrane Metals Corp. 2,337,000 2,980,612* Thompson Creek Metals Co., Inc. 555,000 6,504,600* Toledo Mining Corp. plc 426,200 172,140* Verona Development Corp. 708,800 0*@ -------------- 57,761,779 GOLD & SILVER MINING 4.79% - ---------------------------------------------------------------------------------------------- Chesapeake Gold Corp. 723,500 5,701,785* Corona Gold Ltd. 50,000 0*@ Dundee Precious Metals, Inc. 1,050,000 3,587,779* Euromax Resources Ltd. 540,840 151,856* Fortress Minerals Corp. 431,425 180,676* Kinross Gold Corp. 1 18 Medoro Resources Ltd. 3,135,614 1,611,604* NGEx Resources, Inc. 1,954,005 1,450,649* Northern Dynasty Minerals Ltd. 700,000 5,829,724* Olympus Pacific Minerals, Inc. 375,000 112,430* Orsu Metals Corp. 147,605 81,484* Planet Exploration, Inc. 160,000 27,412* Randgold Resources Ltd., Sponsored ADR 180,000 14,241,600 Rusoro Mining Ltd. 3,583,333 1,500,658* Svit Gold Corp. 1,800,000 342,645* TVI Pacific, Inc. 5,850,000 612,478* -------------- 35,432,798 See notes to portfolios of investments and notes to financial statements. 102 GLOBAL RESOURCES FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE GOLD/MINERAL ROYALTY COMPANIES 0.07% - ---------------------------------------------------------------------------------------------- Aberdeen International, Inc. 1,274,750 $ 533,850* IRON AND STEEL 4.23% - ---------------------------------------------------------------------------------------------- Baffinland Iron Mines Corp. 3,350,000 1,658,021* Cliffs Natural Resources, Inc. 200,000 9,218,000 Tenaris S.A., Sponsored ADR 285,000 12,155,250 United States Steel 150,000 8,268,000 -------------- 31,299,271 MACHINERY 2.26% - ---------------------------------------------------------------------------------------------- Flowserve Corp. 95,000 8,980,350 Joy Global, Inc. 150,000 7,738,500 -------------- 16,718,850 MEDICAL - HOSPITALS 0.12% - ---------------------------------------------------------------------------------------------- African Medical Investments plc 2,386,000 906,191* OIL & GAS - INTEGRATED 8.19% - ---------------------------------------------------------------------------------------------- Chevron Corp. 355,000 27,331,450 Hess Corp. 200,000 12,100,000 Occidental Petroleum Corp. 260,000 21,151,000 -------------- 60,582,450 OIL & GAS DRILLING 2.52% - ---------------------------------------------------------------------------------------------- ENSCO International plc, Sponsored ADR 185,000 7,388,900 Noble Corp. 195,000 7,936,500 Vantage Drilling Co. 2,082,069 3,352,131* -------------- 18,677,531 OIL & GAS EXPLORATION & PRODUCTION 23.47% - ---------------------------------------------------------------------------------------------- Africa Oil Corp. 2,050,000 2,341,408* Alange Energy Corp. 25,386,000 15,222,177* Anadarko Petroleum Corp. 125,000 7,802,500 Arena Resources, Inc. 200,000 8,624,000* Atlas Energy, Inc. 440,000 13,274,800* Bankers Petroleum Ltd. 1,766,667 10,458,924* BNK Petroleum, Inc. 891,600 1,001,369* Canadian Natural Resources Ltd. 320,000 23,024,000 Green Dragon Gas Ltd. 748,831 4,998,447* Gulf Keystone Petroleum Ltd. 1,711,111 2,493,671* Ivanhoe Energy, Inc. 1,500,000 4,225,955* NiMin Energy Corp. 2,631,580 3,506,603*+ See notes to portfolios of investments and notes to financial statements. 103 GLOBAL RESOURCES FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE OIL & GAS EXPLORATION & PRODUCTION (CONT'D) - ---------------------------------------------------------------------------------------------- Noble Energy, Inc. 155,000 $ 11,039,100 North Peace Energy Corp. 3,233,400 846,319* Pacific Rubiales Energy Corp. 1,550,000 22,793,033* Petroamerica Oil Corp. (RS) 8,000,000 4,568,600*@ Range Metals, Inc. (RS) 15,000,000 4,882,692*@+ Royalite Petroleum Co., Inc. 2,266,333 7,026* Shamaran Petroleum Corp. 15,009,900 6,428,834* Southwestern Energy Co. 325,000 15,665,000* Ultra Petroleum Corp. 190,000 9,473,400* WesternZagros Resources Ltd. 1,350,000 989,387* -------------- 173,667,245 OIL & GAS REFINING AND MARKETING 1.90% - ---------------------------------------------------------------------------------------------- Tesoro Corp. 465,000 6,300,750 Valero Energy Corp. 430,000 7,202,500 Value Creation, Inc. (RS) 336,880 537,136*@ -------------- 14,040,386 OIL FIELD MACHINERY & EQUIPMENT 2.93% - ---------------------------------------------------------------------------------------------- Cameron International Corp. 255,000 10,659,000* National-Oilwell Varco, Inc. 250,000 11,022,500 -------------- 21,681,500 OIL FIELD SERVICES 4.08% - ---------------------------------------------------------------------------------------------- Core Laboratories N.V. 100,000 11,812,000 Halliburton Co. 410,000 12,336,900 Key Energy Services, Inc. 685,700 6,027,303* -------------- 30,176,203 PLATINUM 3.40% - ---------------------------------------------------------------------------------------------- Anooraq Resources Corp. 725,000 621,044* Eastern Platinum Ltd. 11,142,500 9,756,912* Impala Platinum Holdings Ltd., Sponsored ADR 540,000 14,742,000 Ivanhoe Nickel and Platinum Ltd. (RS) 15,000 20,966*@ Osmium Holdings S.A. (RS) 104 0*@ -------------- 25,140,922 SUGAR/ETHANOL 0.00% - ---------------------------------------------------------------------------------------------- Infinity Bio-Energy Ltd. 682,400 0*@ See notes to portfolios of investments and notes to financial statements. 104 GLOBAL RESOURCES FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE TRANSPORTATION 1.99% - ---------------------------------------------------------------------------------------------- CSX Corp. 170,000 $ 8,243,300 Diana Shipping, Inc. 450,000 6,516,000* -------------- 14,759,300 URANIUM 0.18% - ---------------------------------------------------------------------------------------------- Govi Uranium, Inc. (RS) 750,000 514,500*@ GoviEx IP Holdings, Inc. (RS) 750,000 10,500*@ UMC Energy plc 1,000,000 30,303* Uranium North Resources Corp. 12,500 1,071* Western Uranium Corp. 1,000,000 789,987* -------------- 1,346,361 - ---------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS 633,027,981 - ---------------------------------------------------------------------------------------------- (cost $574,344,663) EXCHANGE-TRADED FUND (ETF) 1.05% Utilities Select Sector SPDR Fund 250,000 7,750,000 (cost $7,738,000) WARRANTS 4.68% COAL 0.09% - ---------------------------------------------------------------------------------------------- Bounty Mining Ltd., Warrants (December 2011) 5,500,000 0*@ Coalcorp Mining, Inc., Warrants (February 2011) 1,228,071 11,689* Coalcorp Mining, Inc., Warrants (August 2011) 885,500 14,749* Coalcorp Mining, Inc., Warrants (June 2013) 3,803,000 144,786* Western Coal Corp., Warrants (June 2012) 425,000 525,865* -------------- 697,089 GENERAL METAL & MINERAL MINING 0.05% - ---------------------------------------------------------------------------------------------- Baja Mining Corp., Warrants (April 2011) 1,055,500 0*@ Terrane Metals Corp., Warrants (June 2012) 562,500 353,353* -------------- 353,353 GOLD & SILVER MINING 2.86% - ---------------------------------------------------------------------------------------------- Chesapeake Gold Corp., Warrants (February 2012) 91,023 346,540* Dundee Precious Metals, Inc., Warrants (November 2015) 625,000 826,869* Goldcorp, Inc., Warrants (June 2011) 1,423,441 10,161,145* Medoro Resources Ltd., Warrants (March 2010) 1,125,000 0*@ See notes to portfolios of investments and notes to financial statements. 105 GLOBAL RESOURCES FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE GOLD & SILVER MINING (CONT'D) - ---------------------------------------------------------------------------------------------- New Gold, Inc., Warrants (April 2012) 88,500 $ 2,948* New Gold, Inc., Warrants (November 2012) 294,000 37,777* New Gold, Inc., Warrants (June 2017) 822,570 383,629* Orsu Metals Corp., Warrants (April 2010) 950,000 4,521* Orsu Metals Corp., Warrants (March 2011) 660,000 3,141* Rusoro Mining Ltd., Warrants (November 2011) 216,667 0*@ Rusoro Mining Ltd., Warrants (November 2012) 3,150,000 164,898* Silver Wheaton Corp., Warrants (December 2010) 1,133,840 7,543,465* Silver Wheaton Corp., Warrants (September 2013) 237,844 1,726,747* -------------- 21,201,680 GOLD/MINERAL ROYALTY COMPANIES 0.05% - ---------------------------------------------------------------------------------------------- Aberdeen International, Inc., Warrants (July 2012) 500,000 47,589* Franco-Nevada Corp., Warrants (June 2017) 44,000 296,293* -------------- 343,882 IRON AND STEEL 0.04% - ---------------------------------------------------------------------------------------------- Baffinland Iron Mines Corp., Warrants (December 2012) 1,425,000 325,513* MEDICAL - HOSPITALS 0.01% - ---------------------------------------------------------------------------------------------- African Medical Investments plc, Warrants (June 2011) 1,162,500 65,757*@ OIL & GAS DRILLING 0.03% - ---------------------------------------------------------------------------------------------- Vantage Drilling Co., Warrants (May 2011) 2,461,400 221,526* OIL & GAS EXPLORATION & PRODUCTION 1.54% - ---------------------------------------------------------------------------------------------- Africa Oil Corp., Warrants (April 2012) 2,050,000 0*@ Americas Petrogas, Inc., Warrants (January 2010) 2,162,500 0*@ Coastal Energy Co., Warrants (July 2010) 250,000 129,819*@ Foothills Resources, Inc., Warrants (September 2011) 633,334 0*@ Gran Tierra Energy, Inc., Warrants (June 2012) 1,550,000 7,254,000*@ North Peace Energy Corp., Warrants (February 2010) 1,616,700 0*@ Pacific Rubiales Energy Corp., Warrants (July 2012) 463,500 4,014,515* Petroamerica Oil Corp., Warrants (October 2014) (RS) 8,000,000 0*@ Range Metals, Inc., Warrants (October 2011) (RS) 15,000,000 0*@ -------------- 11,398,334 URANIUM 0.01% - ---------------------------------------------------------------------------------------------- Denison Mines Corp., Warrants (March 2011) 231,050 40,684* - ---------------------------------------------------------------------------------------------- TOTAL WARRANTS 34,647,818 - ---------------------------------------------------------------------------------------------- (cost $33,782,425) See notes to portfolios of investments and notes to financial statements. 106 GLOBAL RESOURCES FUND PORTFOLIO OF INVESTMENTS December 31, 2009 SPECIAL WARRANTS 0.18% SHARES VALUE GOLD & SILVER MINING 0.18% - ---------------------------------------------------------------------------------------------- Medoro Resources Ltd., Special Warrants (November 2011) (RS) 2,500,000 $ 1,359,130*@ (cost $1,905,397) PURCHASED OPTIONS 0.32% CONTRACTS EXCHANGE-TRADED FUND 0.29% - ---------------------------------------------------------------------------------------------- Oil Services HOLDRS Trust, Strike Price 105, Call, Expiration Apr. 2010 (premium $1,419,000) 1,000 1,747,500 SPDR Gold Trust, Strike Price 110, Call, Expiration Mar. 2010 (premium $774,000) 1,000 359,000 United States National Gas Fund LP, Strike Price 16, Call, Expiration Jan. 2010 (premium $1,084,300) 5,000 5,000 -------------- 2,111,500 OIL & GAS - INTEGRATED 0.03% - ---------------------------------------------------------------------------------------------- Occidental Petroleum Corp., Strike Price 70, Call, Expiration Jan. 2010 (premium $281,840) 200 232,200 - ---------------------------------------------------------------------------------------------- TOTAL PURCHASED OPTIONS 2,343,700 - ---------------------------------------------------------------------------------------------- (cost $3,559,140) PRINCIPAL CONVERTIBLE DEBENTURE 0.53% AMOUNT COAL 0.53% - ---------------------------------------------------------------------------------------------- Western Coal Corp., 7.50%, maturity 03/24/11 $3,589,375 3,949,936 (cost $3,073,403) NOTES 1.19% COAL 0.27% - ---------------------------------------------------------------------------------------------- Coalcorp Mining, Inc., 12.00%, maturity 08/31/11 2,999,000 2,039,320 GOLD & SILVER MINING 0.92% - ---------------------------------------------------------------------------------------------- New Gold, Inc., 10.00%, maturity 06/28/17 6,539,611 6,795,793 - ---------------------------------------------------------------------------------------------- TOTAL NOTES 8,835,113 - ---------------------------------------------------------------------------------------------- (cost $9,538,611) See notes to portfolios of investments and notes to financial statements. 107 GLOBAL RESOURCES FUND PORTFOLIO OF INVESTMENTS December 31, 2009 UNITS 1.46% SHARES VALUE GENERAL METAL & MINERAL MINING 0.11% - ---------------------------------------------------------------------------------------------- Lithium Americas Corp., Units (RS) 566,667 $ 809,024*@ OIL & GAS EXPLORATION & PRODUCTION 1.35% - ---------------------------------------------------------------------------------------------- HRT Petroleum, Units (RS) 7,083 10,001,196*@ - ---------------------------------------------------------------------------------------------- TOTAL UNITS 10,810,220 - ---------------------------------------------------------------------------------------------- (cost $10,806,502) SUBSCRIPTION RECEIPTS 0.51% COAL 0.51% - ---------------------------------------------------------------------------------------------- Xinergy Corp. (RS) 1,185,000 3,750,178*@ (cost $3,962,075) - ---------------------------------------------------------------------------------------------- TOTAL SECURITIES 706,474,076 - ---------------------------------------------------------------------------------------------- (cost $648,710,216) PRINCIPAL REPURCHASE AGREEMENT 4.90% AMOUNT Joint Tri-Party Repurchase Agreement, Merrill Lynch, 12/31/09, 0.00%, due 01/04/10, repurchase price $36,244,931, collateralized by U.S. Treasury securities held in a joint tri-party account (cost $36,244,931) $36,244,931 36,244,931 - ---------------------------------------------------------------------------------------------- TOTAL INVESTMENTS 100.36% 742,719,007 - ---------------------------------------------------------------------------------------------- (cost $684,955,147) Other assets and liabilities, net (0.36)% (2,647,418) ------------ NET ASSETS 100% $740,071,589 ------------ SHARES SUBJECT CALL OPTIONS WRITTEN TO CALL Oil Services HOLDRS Trust, Strike Price 125, Expiration Apr. 2010 100,000 $ 562,500 SPDR Gold Trust, Strike Price 125, Expiration Mar. 2010 100,000 76,000 - ---------------------------------------------------------------------------------------------- TOTAL CALL OPTIONS WRITTEN $ 638,500 - ---------------------------------------------------------------------------------------------- (premiums received $727,981) (Note 2A) See notes to portfolios of investments and notes to financial statements. 108 WORLD PRECIOUS MINERALS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS 77.78% SHARES VALUE AGRICULTURAL OPERATIONS 0.43% - ---------------------------------------------------------------------------------------------- Agriterra Ltd. 28,207,200 $ 2,734,905*+ DIAMOND MINING & EXPLORATION 0.34% - ---------------------------------------------------------------------------------------------- Diagem, Inc. 406,350 0*@ Diamond Fields International Ltd. 448,600 29,888* Diamonds North Resources Ltd. 2,804,200 774,014* Olivut Resources Ltd. 675,000 134,917* Rockwell Diamonds, Inc. 3,575,000 204,159* Shore Gold, Inc. 1,126,500 1,018,584* Vaaldiam Resources Ltd. 1,513,999 43,230* -------------- 2,204,792 FINANCIAL SERVICES 1.54% - ---------------------------------------------------------------------------------------------- Endeavour Financial Corp. 2,175,000 3,664,160* GMP Capital, Inc. 495,100 5,946,949 Jovian Capital Corp. 24,355 232,968* -------------- 9,844,077 GENERAL METAL & MINERAL MINING 0.36% - ---------------------------------------------------------------------------------------------- Sable Mining Africa Ltd. 13,519,000 2,289,813* GOLD/MINERAL EXPLORATION & DEVELOPMENT 26.82% - ---------------------------------------------------------------------------------------------- African Gold Group, Inc. 1,099,900 680,469* Aldridge Minerals, Inc. 1,145,100 1,689,340*+ Amarc Resources Ltd. 695,545 430,309* Ampella Mining Ltd. 399,662 212,922* Andean Resources Ltd. 5,930,856 13,649,563* Andina Minerals, Inc. 1,251,000 2,298,035* Atikwa Resources, Inc. 3,062,333 233,176* AuEx Ventures, Inc. 855,000 2,376,243* Brazauro Resources Corp. 3,334,500 1,999,462* Candente Resource Corp. 300,000 168,467* Carnavale Resources Ltd. 3,500,000 440,142*+ Chesapeake Gold Corp. 2,042,219 16,094,392*+ Continental Minerals Corp. 758,946 1,538,624* Continental Precious Minerals, Inc. 267,000 226,174* Corona Gold Ltd. 812,500 0*@ Crystallex International Corp. 2,150,000 817,000* East Asia Minerals Corp. 730,000 3,223,909* Eastmain Resources, Inc. 675,000 976,538* Entree Gold, Inc. 750,000 1,820,302* Erdene Resource Development Corp. 725,000 193,214* First Point Minerals Corp. 2,423,000 818,698* Fortress Minerals Corp. 2,400,000 1,005,092* See notes to portfolios of investments and notes to financial statements. 109 WORLD PRECIOUS MINERALS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE GOLD/MINERAL EXPLORATION & DEVELOPMENT (CONT'D) - ---------------------------------------------------------------------------------------------- Gold Summit Corp. 10,000 $ 1,428* Golden Arrow Resources Corp. 1,000,000 409,270* Golden Odyssey Mining, Inc. 2,656,500 429,834* Golden Predator Royalty & Development Corp. 989,000 715,405* Grandview Gold, Inc. 1,100,000 125,637* Grayd Resource Corp. 2,196,000 1,379,489* Greenock Resources, Inc. 126,200 15,015* Greystar Resources Ltd. 2,625,000 14,590,967* Guyana Goldfields, Inc. 1,081,000 8,241,384* Hainan Mining Corp. plc (RS) 2,018,700 809,105*@+ Helio Resource Corp. 502,000 301,014* Inca Pacific Resources, Inc. 337,000 59,339* Ivanhoe Mines Ltd. 84,300 1,231,623* Keegan Resources, Inc. 50,000 315,519* Kilo Goldmines Ltd. 1,050,000 479,703* Kings Minerals NL 14,817,931 2,668,643* Klondex Mines Ltd. 2,575,000 3,210,632*+ Kria Resources, Inc. 268,925 63,990* Leyshon Resources Ltd. 2,220,000 309,068* Linear Gold Corp. 1,000,000 1,884,548* MAG Silver Corp. 510,000 3,058,107* Malbex Resources, Inc. 1,469,333 1,300,604* Marengo Mining Ltd. 500,000 68,778* Metallic Ventures Gold, Inc. 965,000 1,065,436* Mindoro Resources Ltd. 2,984,000 312,416* Mirasol Resources Ltd. 725,000 1,014,372* Moss Lake Gold Mines Ltd. 3,182,000 658,721*+ Moydow Mines International, Inc. 490,000 363,775* Nautilus Minerals, Inc. 300,000 496,835* New Pacific Metals Corp. 657,700 619,734* NGEx Resources, Inc. 3,006,700 2,232,167* Northern Dynasty Minerals Ltd. 700,000 5,829,724* Orsu Metals Corp. 300,800 166,053* Pacific North West Capital Corp. 1,291,666 233,585* Pacific Rim Mining Corp. 5,350,713 910,430* Pelangio Mines, Inc. 1,500,000 828,059* Planet Exploration, Inc. 1,020,500 174,835* Platte River Gold U.S., Inc. (RS) 1,098,900 2,314,954*@ Premier Gold Mines Ltd. 1,025,000 4,077,952* Q2 Gold Resources, Inc. (RS) 201,333 0*@ Queenston Mining, Inc. 455,000 2,399,181* Radius Gold, Inc. 1,698,200 323,267* Reunion Gold Corp. 2,129,500 141,879* Rochester Resources Ltd. 500,000 102,317*+ Rochester Resources Ltd. (RS) 6,630,000 1,288,895*@+ Romarco Minerals, Inc. 16,845,706 28,058,807* See notes to portfolios of investments and notes to financial statements. 110 WORLD PRECIOUS MINERALS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE GOLD/MINERAL EXPLORATION & DEVELOPMENT (CONT'D) - ---------------------------------------------------------------------------------------------- Rubicon Minerals Corp. 1,969,600 $ 9,373,245* Rye Patch Gold Corp. 200,000 60,915*+ San Anton Resource Corp. 1,303,200 303,892* Solitario Exploration & Royalty Corp. 994,522 2,271,787* St Andrew Goldfields Ltd. 927,549 653,297* Staccato Gold Resources Ltd. 3,091,500 353,096* Strikepoint Gold, Inc. 950,000 361,681* Strongbow Exploration, Inc. 880,500 108,947* Svit Gold Corp. 1,564,000 297,720* Temex Resources Corp. 978,268 228,121* Terrane Metals Corp. 1,651,000 2,105,687* Underworld Resources, Inc. 500,000 870,889* Valley High Ventures Ltd. 1,083,500 680,636* Verena Minerals Corp. 1,741,000 364,555* Verona Development Corp. 48,500 0*@ VG Gold Corp. 5,936,501 2,062,364* Victoria Gold Corp. 1,150,000 744,301* Virginia Mines, Inc. 675,000 3,347,214* Wesdome Gold Mines Ltd. 461,700 1,010,717 -------------- 171,373,631 GOLD/MINERAL ROYALTY COMPANIES 2.24% - ---------------------------------------------------------------------------------------------- Aberdeen International, Inc. 2,386,000 999,229* Gold Wheaton Gold Corp. 3,750,000 957,741* International Royalty Corp. 702,000 5,031,228 Royal Gold, Inc. 155,000 7,300,500 -------------- 14,288,698 INTERMEDIATE & JUNIOR GOLD PRODUCERS 13.71% - ---------------------------------------------------------------------------------------------- Aurizon Mines Ltd. 500,000 2,250,000* B2Gold Corp. 450,000 518,251* Bendigo Mining NL 1,000,000 223,342 Centamin Egypt Ltd. 9,750,000 19,302,337* Centerra Gold, Inc. 200,000 2,055,870* Century Mining Corp. 2,634,809 990,577* Claude Resources, Inc. 1,724,400 2,035,174* DRDGOLD Ltd., Sponsored ADR 100,000 684,000 Dundee Precious Metals, Inc. 2,155,000 7,363,489* Gold One International Ltd. 2,000,000 560,273* Golden Star Resources Ltd. 565,000 1,762,800* Great Basin Gold Ltd. 2,225,000 3,833,103* Kingsgate Consolidated Ltd. 427,776 3,503,112 Lake Shore Gold Corp. 3,334,000 13,105,620* Medoro Resources Ltd. 10,687,557 5,493,057* New Gold, Inc. 265,000 958,570* See notes to portfolios of investments and notes to financial statements. 111 WORLD PRECIOUS MINERALS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE INTERMEDIATE & JUNIOR GOLD PRODUCERS (CONT'D) - ---------------------------------------------------------------------------------------------- Olympus Pacific Minerals, Inc. 5,480,500 $ 1,643,133* Pan African Resources plc 15,620,000 1,959,267* Rusoro Mining Ltd. 7,225,000 3,025,746* San Gold Corp. 3,000,000 10,422,120* SEMAFO, Inc. 700,000 2,951,506* Zhaojin Mining Industry Co., Ltd., H shares 1,500,000 2,958,520 -------------- 87,599,867 INTERNET 0.00% - ---------------------------------------------------------------------------------------------- Stockhouse, Inc. 1,027,000 24,437* MEDICAL - HOSPITALS 0.27% - ---------------------------------------------------------------------------------------------- African Medical Investments plc 4,489,000 1,704,901* METAL - COPPER 0.50% - ---------------------------------------------------------------------------------------------- Freeport-McMoRan Copper & Gold, Inc. 40,000 3,211,600 METAL & MINERAL MINING & EXPLORATION 2.78% - ---------------------------------------------------------------------------------------------- Avion Gold Corp. 3,900,000 2,375,672* Baja Mining Corp. 685,450 502,352* Breakwater Resources Ltd. 450,000 175,606* Brilliant Mining Corp. 158,900 37,054* Calibre Mining Corp. 900,000 192,738* Chariot Resources Ltd. 1,961,000 690,592* Dia Bras Exploration, Inc. 1,444,496 281,846* Farallon Mining Ltd. 700,000 366,440* Freewest Resources Canada, Inc. 1,090,000 1,006,329* Independence Group NL 260,000 1,115,110 JNR Resources, Inc. 456,800 104,347* Linear Metals Corp. 1,004,410 186,418* Lundin Mining Corp. 170,000 695,760* Mercator Minerals Ltd. 75,000 177,033* Mines Management, Inc. 825,400 2,324,014* Natasa Mining Ltd. 503,045 655,842* North American Tungsten Corp. 1,282,000 262,342* North Arrow Minerals, Inc. 261,500 34,845* Odyssey Resources Ltd. 414,900 82,929* Red Hill Energy, Inc. 145,000 49,683* Revett Minerals, Inc. 3,200,500 1,035,711* Teck Resources Ltd., Class B 70,000 2,447,900* Toledo Mining Corp. plc 432,900 174,846* TVI Pacific, Inc. 15,111,428 1,582,123* Uranium North Resources Corp. 517,035 44,290* Wallbridge Mining Co. Ltd. 1,541,000 374,011* See notes to portfolios of investments and notes to financial statements. 112 WORLD PRECIOUS MINERALS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE METAL & MINERAL MINING & EXPLORATION (CONT'D) - ---------------------------------------------------------------------------------------------- Western Copper Corp. 504,400 $ 787,337* -------------- 17,763,170 OIL & GAS EXPLORATION & PRODUCTION 1.51% - ---------------------------------------------------------------------------------------------- Alange Energy Corp. 1,351,000 810,099* Big Sky Energy Corp. 2,000,000 1,800* Pacific Rubiales Energy Corp. 600,000 8,823,109* -------------- 9,635,008 PLATINUM 2.86% - ---------------------------------------------------------------------------------------------- Anooraq Resources Corp. 3,550,000 3,040,975* Eastern Platinum Ltd. 14,640,000 12,819,493* Ivanhoe Nickel and Platinum Ltd. (RS) 135,000 188,690*@ Osmium Holdings S.A. (RS) 891 0*@ Platinum Group Metals Ltd. 1,070,000 2,209,965* -------------- 18,259,123 SENIOR GOLD PRODUCERS 18.86% - ---------------------------------------------------------------------------------------------- Agnico-Eagle Mines Ltd. 175,000 9,450,000 Eldorado Gold Corp. 400,000 5,668,000* Gold Fields Ltd., Sponsored ADR 125,000 1,638,750 Harmony Gold Mining Co., Ltd., Sponsored ADR 116,500 1,184,805 IAMGOLD Corp. 400,000 6,256,000 Kinross Gold Corp. 220,000 4,048,000 Lihir Gold Ltd., Sponsored ADR 136,500 3,984,435 Newmont Mining Corp. 62,500 2,956,875 Polyus Gold Co. 2,142 111,999 Polyus Gold Co., Sponsored ADR 54,000 1,463,128 Randgold Resources Ltd. 32,550 2,587,826 Randgold Resources Ltd., Sponsored ADR 625,000 49,450,000 Red Back Mining, Inc. 450,000 6,424,594* Red Back Mining, Inc., 144A 770,000 10,993,195* Yamana Gold, Inc. 1,255,000 14,281,900 -------------- 120,499,507 SILVER MINING 5.53% - ---------------------------------------------------------------------------------------------- Coeur d'Alene Mines Corp. 287,000 5,183,220* ECU Silver Mining, Inc. 1,090,000 767,715* Fortuna Silver Mines, Inc. 1,230,000 2,458,478* Hecla Mining Co. 1,160,000 7,168,800* Pan American Silver Corp. 130,000 3,095,300* Polymetal, Sponsored GDR 150,500 1,377,237* Silver Standard Resources, Inc. 200,000 4,374,000* See notes to portfolios of investments and notes to financial statements. 113 WORLD PRECIOUS MINERALS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE SILVER MINING (CONT'D) - ---------------------------------------------------------------------------------------------- Silvercorp Metals, Inc. 1,650,000 $ 10,946,081 -------------- 35,370,831 WIRELESS EQUIPMENT 0.03% - ---------------------------------------------------------------------------------------------- Active Control Technology, Inc. 4,575,000 217,722* - ---------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS 497,022,082 - ---------------------------------------------------------------------------------------------- (cost $445,665,769) EXCHANGE-TRADED FUNDS (ETF) 0.92% ETFS Physical Palladium 25,000 979,049* ETFS Physical Platinum 34,000 4,871,043* - ---------------------------------------------------------------------------------------------- TOTAL EXCHANGE-TRADED FUNDS 5,850,092 - ---------------------------------------------------------------------------------------------- (cost $4,620,489) CLOSED-END FUND 0.18% ASA Ltd. 14,500 1,123,025 (cost $641,350) WARRANTS 10.94% FINANCIAL SERVICES 0.13% - ---------------------------------------------------------------------------------------------- Endeavour Financial Corp., Warrants (February 2014) 1,110,000 824,062* GOLD/MINERAL EXPLORATION & DEVELOPMENT 0.93% - ---------------------------------------------------------------------------------------------- Chesapeake Gold Corp., Warrants (February 2012) 337,874 1,286,343* Crystallex International Corp., Warrants (February 2010) 162,500 0*@ Fortress Minerals Corp., Warrants (December 2010) 1,400,000 253,176*@ Golden Arrow Resources Corp., Warrants (October 2010) 1,000,000 28,554*@ Hainan Mining Corp. plc, Warrants (August 2011) (RS) 1,705,000 203,910*@ Hainan Mining Corp. plc, Warrants (May 2011) (RS) 313,700 37,517*@ Malbex Resources, Inc., Warrants (April 2011) 666,666 0*@ Orsu Metals Corp., Warrants (April 2010) 2,476,000 11,783* Orsu Metals Corp., Warrants (March 2011) 4,112,000 19,569* Platte River Gold U.S., Inc., Warrants (February 2010) (RS) 75,200 0*@ Rochester Resources Ltd., Warrants (November 2011) (RS) 6,630,000 89,923*@ See notes to portfolios of investments and notes to financial statements. 114 WORLD PRECIOUS MINERALS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 WARRANTS SHARES VALUE GOLD/MINERAL EXPLORATION & DEVELOPMENT (CONT'D) - ---------------------------------------------------------------------------------------------- Romarco Minerals, Inc., Warrants (April 2010) 2,650,000 $ 3,884,262*@ Staccato Gold Resources Ltd., Warrants (August 2011) 3,000,000 0*@ Terrane Metals Corp., Warrants (June 2012) 219,000 137,572* US Gold Corp., Warrants (February 2011) 39,000 7,609* -------------- 5,960,218 GOLD/MINERAL ROYALTY COMPANIES 0.16% - ---------------------------------------------------------------------------------------------- Franco-Nevada Corp., Warrants (March 2012) 73,600 399,296* Franco-Nevada Corp., Warrants (June 2017) 94,700 637,703* Gold Wheaton Gold Corp., Warrants (July 2013) 12,000 856* -------------- 1,037,855 INTERMEDIATE & JUNIOR GOLD PRODUCERS 0.44% - ---------------------------------------------------------------------------------------------- Dundee Precious Metals, Inc., Warrants (November 2015) 1,125,000 1,488,364* GBS Gold International, Inc., Warrants (May 2010) 630,000 0*@ Lake Shore Gold Corp., Warrants (December 2010) 73,000 196,631*@ Medoro Resources Ltd., Warrants (March 2010) 1,250,000 0*@ New Gold, Inc., Warrants (April 2012) 2,495,100 83,119* New Gold, Inc., Warrants (June 2017) 1,452,430 677,381* New Gold, Inc., Warrants (November 2012) 326,000 41,888* Rusoro Mining Ltd., Warrants (November 2011) 600,000 0*@ Rusoro Mining Ltd., Warrants (November 2012) 6,330,750 331,406* -------------- 2,818,789 MEDICAL - HOSPITALS 0.02% - ---------------------------------------------------------------------------------------------- African Medical Investments plc, Warrants (June 2011) 2,125,000 120,201*@ METAL & MINERAL MINING & EXPLORATION 0.04% - ---------------------------------------------------------------------------------------------- Avion Gold Corp., Warrants (May 2011) 1,950,000 0*@ Baja Mining Corp., Warrants (April 2011) 527,750 0*@ Coalcorp Mining, Inc., Warrants (February 2011) 113,214 1,078* Denison Mines Corp., Warrants (March 2011) 201,295 35,444* Mines Management, Inc., Warrants (April 2012) 723,300 233,264* -------------- 269,786 OIL & GAS EXPLORATION & PRODUCTION 0.70% - ---------------------------------------------------------------------------------------------- Pacific Rubiales Energy Corp., Warrants (July 2012) 516,400 4,472,698* SENIOR GOLD PRODUCERS 5.81% - ---------------------------------------------------------------------------------------------- Agnico-Eagle Mines Ltd., Warrants (December 2013) 150,400 3,194,496* Goldcorp, Inc., Warrants (June 2011) 3,818,402 27,257,426* Kinross Gold Corp., Warrants (September 2011) 1,622,600 3,057,867* See notes to portfolios of investments and notes to financial statements. 115 WORLD PRECIOUS MINERALS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 WARRANTS SHARES VALUE SENIOR GOLD PRODUCERS (CONT'D) - ---------------------------------------------------------------------------------------------- Kinross Gold Corp., Warrants (September 2013) 947,371 $ 3,579,749* -------------- 37,089,538 SILVER MINING 2.71% - ---------------------------------------------------------------------------------------------- Hecla Mining Co., Warrants (August 2014) 315,250 1,160,120*@ Silver Wheaton Corp., Warrants (December 2010) 1,954,520 13,003,469* Silver Wheaton Corp., Warrants (September 2013) 437,595 3,176,940* -------------- 17,340,529 - ---------------------------------------------------------------------------------------------- TOTAL WARRANTS 69,933,676 - ---------------------------------------------------------------------------------------------- (cost $69,519,422) SPECIAL WARRANTS 0.85% GOLD/MINERAL EXPLORATION & DEVELOPMENT 0.00% - ---------------------------------------------------------------------------------------------- Western Exploration & Development Ltd., 144A, Special Warrants (December 2049) (RS) 600,000 0*@ INTERMEDIATE & JUNIOR GOLD PRODUCERS 0.85% - ---------------------------------------------------------------------------------------------- Medoro Resources Ltd., Special Warrants (November 2011) (RS) 10,000,000 5,436,520*@ - ---------------------------------------------------------------------------------------------- TOTAL SPECIAL WARRANTS 5,436,520 - ---------------------------------------------------------------------------------------------- (cost $7,921,588) PURCHASED OPTIONS 0.25% CONTRACTS EXCHANGE-TRADED FUND 0.01% - ---------------------------------------------------------------------------------------------- Market Vectors Junior Gold Miners ETF, Strike Price 25, Put, Expiration Jan. 2010 (premium $122,000) 1,000 50,000 SENIOR GOLD PRODUCERS 0.24% - ---------------------------------------------------------------------------------------------- Barrick Gold Corp., Strike Price 36, Put, Expiration Jan. 2010 (premium $123,745) 464 12,064 Goldcorp, Inc., Strike Price 42, Put, Expiration Jan. 2010 (premium $1,614,540) 2,535 740,220 IAMGOLD Corp., Strike Price 15, Put, Expiration Mar. 2010 (premium $147,320) 1,160 165,300 Newmont Mining Corp., Strike Price 43, Put, Expiration Jan. 2010 (premium $111,569) 383 6,894 See notes to portfolios of investments and notes to financial statements. 116 WORLD PRECIOUS MINERALS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 PURCHASED OPTIONS CONTRACTS VALUE SENIOR GOLD PRODUCERS (CONT'D) - ---------------------------------------------------------------------------------------------- Yamana Gold, Inc., Strike Price 10, Call, Expiration Jan. 2012 (premium $356,070) 715 $ 293,150 Yamana Gold, Inc., Strike Price 12.50, Put, Expiration Jan. 2010 (premium $631,970) 2,694 331,362 -------------- 1,548,990 SILVER MINING 0.00% - ---------------------------------------------------------------------------------------------- Hecla Mining Co., Strike Price 10, Call, Expiration Jan. 2010 (premium $889,136) 1,600 4,800 - ---------------------------------------------------------------------------------------------- TOTAL PURCHASED OPTIONS 1,603,790 - ---------------------------------------------------------------------------------------------- (cost $3,996,350) EXCHANGE TRADED NOTE (ETN) 0.03% UNITS PLATINUM 0.03% - ---------------------------------------------------------------------------------------------- E-TRACS UBS Long Platinum ETN, maturity 05/14/18 (ZCB) 12,000 220,800* (cost $177,431) PRINCIPAL NOTES 0.71% AMOUNT INTERMEDIATE & JUNIOR GOLD PRODUCERS 0.71% - ---------------------------------------------------------------------------------------------- GBS Gold International, Inc., 12.00%, maturity 05/27/11 (RS) $ 1,472,752 1,027,682*@ New Gold, Inc., 10.00%, maturity 06/28/17 3,315,856 3,504,688 - ---------------------------------------------------------------------------------------------- TOTAL NOTES 4,532,370 - ---------------------------------------------------------------------------------------------- (cost $4,584,625) UNITS 0.45% SHARES GOLD/MINERAL EXPLORATION & DEVELOPMENT 0.45% - ---------------------------------------------------------------------------------------------- Candente Gold Corp., Units (RS) 4,875,000 1,855,994*@+ Rye Patch Gold Corp., Units (RS) 3,600,000 1,041,641*@+ - ---------------------------------------------------------------------------------------------- TOTAL UNITS 2,897,635 - ---------------------------------------------------------------------------------------------- (cost $2,691,866) See notes to portfolios of investments and notes to financial statements. 117 WORLD PRECIOUS MINERALS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 SUBSCRIPTION RECEIPTS 0.26% SHARES VALUE INTERMEDIATE & JUNIOR GOLD PRODUCERS 0.26% - ---------------------------------------------------------------------------------------------- Argonaut Gold 500,000 $ 1,665,635*@ (cost $1,416,230) - ---------------------------------------------------------------------------------------------- TOTAL SECURITIES 590,285,625 - ---------------------------------------------------------------------------------------------- (cost $541,235,120) PRINCIPAL REPURCHASE AGREEMENT 8.21% AMOUNT Joint Tri-Party Repurchase Agreement, Merrill Lynch, 12/31/09, 0.00%, due 01/04/10, repurchase price $52,445,209, collateralized by U.S. Treasury securities held in a joint tri-party account (cost $52,445,209) $52,445,209 52,445,209 - ---------------------------------------------------------------------------------------------- TOTAL INVESTMENTS 100.58% 642,730,834 - ---------------------------------------------------------------------------------------------- (cost $593,680,329) Other assets and liabilities, net (0.58)% (3,695,516) ------------- NET ASSETS 100% $639,035,318 ------------ See notes to portfolios of investments and notes to financial statements. 118 GOLD AND PRECIOUS METALS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS 73.81% SHARES VALUE DIAMOND MINING & EXPLORATION 0.00% - ---------------------------------------------------------------------------------------- Diamond Fields International Ltd. 21,600 $ 1,439* FINANCIAL SERVICES 1.23% - ---------------------------------------------------------------------------------------- Endeavour Financial Corp. 884,700 1,490,429* GMP Capital, Inc. 115,000 1,381,335 ----------- 2,871,764 GOLD MINING 54.89% - ---------------------------------------------------------------------------------------- Agnico-Eagle Mines Ltd. 120,000 6,480,000 Aurizon Mines Ltd. 400,000 1,800,000* B2Gold Corp. 450,000 518,251* Barrick Gold Corp. 110,000 4,331,800 Centamin Egypt Ltd. 4,250,000 8,413,839* Centerra Gold, Inc. 200,000 2,055,870* Century Mining Corp. 509,512 191,555* Claude Resources, Inc. 2,597,600 3,065,744* DRDGOLD Ltd., Sponsored ADR 500,000 3,420,000 Dundee Precious Metals, Inc. 2,100,000 7,175,558* Eldorado Gold Corp. 400,000 5,668,000* Gold Fields Ltd., Sponsored ADR 175,000 2,294,250 Golden Star Resources Ltd. 935,000 2,917,200* Harmony Gold Mining Co., Ltd., Sponsored ADR 143,500 1,459,395 IAMGOLD Corp. 300,000 4,692,000 Kingsgate Consolidated Ltd. 309,625 2,535,559 Kinross Gold Corp. 80,000 1,472,000 Kirkland Lake Gold, Inc. 375,000 3,198,020* Lake Shore Gold Corp. 250,000 982,725* Lihir Gold Ltd., Sponsored ADR 100,000 2,919,000 Medoro Resources Ltd. 2,020,000 1,038,214* New Gold, Inc. 494,823 1,789,792* Newmont Mining Corp. 50,000 2,365,500 Pan African Resources plc 10,570,000 1,325,829* Polyus Gold Co. 4,135 216,206 Polyus Gold Co., Sponsored ADR 77,500 2,099,859 Randgold Resources Ltd., Sponsored ADR 246,000 19,463,520 Red Back Mining, Inc. 410,000 5,853,519* Red Back Mining, Inc., 144A 245,000 3,497,835* Richmont Mines, Inc. 500,000 1,875,000* Rusoro Mining Ltd. 930,000 389,473* San Gold Corp. 1,500,000 5,211,060* SEMAFO, Inc. 800,000 3,373,150* Troy Resources NL 479,850 1,016,772 Yamana Gold, Inc. 845,000 9,616,100 Zhaojin Mining Industry Co., Ltd., H shares 2,000,000 3,944,694 ----------- 128,667,289 See notes to portfolios of investments and notes to financial statements. 119 GOLD AND PRECIOUS METALS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE GOLD/MINERAL ROYALTY COMPANIES 3.94% - ---------------------------------------------------------------------------------------- Aberdeen International, Inc. 52,250 $ 21,882* Gold Wheaton Gold Corp. 3,750,000 957,740* Royal Gold, Inc. 175,000 8,242,500 ----------- 9,222,122 MEDICAL - HOSPITALS 0.31% - ---------------------------------------------------------------------------------------- African Medical Investments plc 1,910,000 725,409* METAL - COPPER 1.03% - ---------------------------------------------------------------------------------------- Freeport-McMoRan Copper & Gold, Inc. 30,000 2,408,700 METAL & MINERAL MINING 2.30% - ---------------------------------------------------------------------------------------- Independence Group NL 115,000 493,222 Ivanhoe Mines Ltd. 30,900 451,449* Lundin Mining Corp. 15,430 63,151* Mercator Minerals Ltd. 675,000 1,593,299* Teck Resources Ltd., Class B 80,000 2,797,600* ----------- 5,398,721 PLATINUM 2.64% - ---------------------------------------------------------------------------------------- Eastern Platinum Ltd. 7,075,000 6,195,213* SILVER MINING 7.47% - ---------------------------------------------------------------------------------------- Coeur d'Alene Mines Corp. 111,000 2,004,660* Fortuna Silver Mines, Inc. 700,000 1,399,134* Hecla Mining Co. 915,000 5,654,700* Pan American Silver Corp. 100,000 2,381,000 Polymetal, Sponsored GDR 66,000 603,971* Silvercorp Metals, Inc. 825,000 5,473,040 ----------- 17,516,505 - ---------------------------------------------------------------------------------------- TOTAL COMMON STOCKS 173,007,162 - ---------------------------------------------------------------------------------------- (cost $142,187,742) EXCHANGE-TRADED FUNDS (ETF) 2.31% ETFS Physical Palladium 25,000 979,048* ETFS Physical Platinum 31,000 4,441,246* - ---------------------------------------------------------------------------------------- TOTAL EXCHANGE-TRADED FUNDS 5,420,294 - ---------------------------------------------------------------------------------------- (cost $4,350,449) See notes to portfolios of investments and notes to financial statements. 120 GOLD AND PRECIOUS METALS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 CLOSED-END FUND 1.34% SHARES VALUE ASA Ltd. 40,500 $ 3,136,725 (cost $1,840,993) WARRANTS 10.88% FINANCIAL SERVICES 0.12% - ---------------------------------------------------------------------------------------- Endeavour Financial Corp., Warrants (February 2014) 382,500 283,967* GOLD MINING 6.95% - ---------------------------------------------------------------------------------------- Agnico-Eagle Mines Ltd., Warrants (December 2013) 100,500 2,134,620* Crystallex International Corp., Warrants (February 2010) 62,500 0*@ Dundee Precious Metals, Inc., Warrants (June 2012) 13,000 1,856* Dundee Precious Metals, Inc., Warrants (November 2015) 1,094,800 1,448,410* GBS Gold International, Inc., Warrants (May 2010) 175,000 0*@ Goldcorp, Inc., Warrants (June 2011) 1,040,284 7,426,003* Kinross Gold Corp., Warrants (September 2011) 1,005,400 1,894,724* Kinross Gold Corp., Warrants (September 2013) 782,034 2,955,004* New Gold, Inc., Warrants (April 2012) 3,078,400 102,550* New Gold, Inc., Warrants (November 2012) 1,082,500 139,092* New Gold, Inc., Warrants (June 2017) 251,800 117,434* Rusoro Mining Ltd., Warrants (November 2012) 1,568,750 82,122* ----------- 16,301,815 GOLD/MINERAL ROYALTY COMPANIES 0.34% - ---------------------------------------------------------------------------------------- Franco-Nevada Corp., Warrants (March 2012) 91,700 497,492* Franco-Nevada Corp., Warrants (June 2017) 43,700 294,272* ----------- 791,764 MEDICAL - HOSPITALS 0.02% - ---------------------------------------------------------------------------------------- African Medical Investments plc, Warrants (June 2011) 912,500 51,616*@ METAL & MINERAL MINING 0.01% - ---------------------------------------------------------------------------------------- Mines Management, Inc., Warrants (April 2012) 44,000 14,190* SILVER MINING 3.44% - ---------------------------------------------------------------------------------------- Hecla Mining Co., Warrants (August 2014) 169,750 624,680*@ Silver Wheaton Corp., Warrants (December 2010) 484,140 3,220,995* Silver Wheaton Corp., Warrants (September 2013) 580,806 4,216,652* ----------- 8,062,327 - ---------------------------------------------------------------------------------------- TOTAL WARRANTS 25,505,679 - ---------------------------------------------------------------------------------------- (cost $20,745,957) See notes to portfolios of investments and notes to financial statements. 121 GOLD AND PRECIOUS METALS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 PURCHASED OPTIONS 0.30% CONTRACTS VALUE GOLD MINING 0.30% - ---------------------------------------------------------------------------------------- Barrick Gold Corp., Strike Price 36, Put, Expiration Jan. 2010 (premium $45,624) 171 $ 4,446 Goldcorp, Inc., Strike Price 42, Put, Expiration Jan. 2010 (premium $649,630) 1,020 297,840 IAMGOLD Corp., Strike Price 15, Put, Expiration Mar. 2010 (premium $106,680) 840 119,700 Newmont Mining Corp., Strike Price 43, Put, Expiration Jan. 2010 (premium $41,496) 142 2,556 Yamana Gold, Inc., Strike Price 10, Call, Expiration Jan. 2012 (premium $141,930) 285 116,850 Yamana Gold, Inc., Strike Price 12.50, Put, Expiration Jan. 2010 (premium $317,106) 1,341 164,943 ----------- 706,335 SILVER MINING 0.00% - ---------------------------------------------------------------------------------------- Hecla Mining Co., Strike Price 10, Call, Expiration Jan. 2010 (premium $227,124) 420 1,260 - ---------------------------------------------------------------------------------------- TOTAL PURCHASED OPTIONS 707,595 - ---------------------------------------------------------------------------------------- (cost $1,529,590) EXCHANGE TRADED NOTE (ETN) 0.10% UNITS PLATINUM 0.10% - ---------------------------------------------------------------------------------------- E-TRACS UBS Long Platinum ETN, maturity 05/14/18 (ZCB) 12,000 220,800* (cost $177,431) PRINCIPAL NOTES 0.37% AMOUNT GOLD MINING 0.37% - ---------------------------------------------------------------------------------------- GBS Gold International, Inc., 12.00%, maturity 05/27/11 (RS) $ 409,098 285,467*@ New Gold, Inc., 10.00%, maturity 06/28/17 504,753 582,496 - ---------------------------------------------------------------------------------------- TOTAL NOTES 867,963 - ---------------------------------------------------------------------------------------- (cost $713,212) - ---------------------------------------------------------------------------------------- TOTAL SECURITIES 208,866,218 - ---------------------------------------------------------------------------------------- (cost $171,545,374) See notes to portfolios of investments and notes to financial statements. 122 GOLD AND PRECIOUS METALS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 PRINCIPAL REPURCHASE AGREEMENT 12.01% AMOUNT VALUE Joint Tri-Party Repurchase Agreement, Morgan Stanley, 12/31/09, 0.00%, due 01/04/10, repurchase price $28,152,325, collateralized by U.S. Treasury securities held in a joint tri-party account (cost $28,152,325) $28,152,325 $28,152,325 - ---------------------------------------------------------------------------------------- TOTAL INVESTMENTS 101.12% 237,018,543 - ---------------------------------------------------------------------------------------- (cost $199,697,699) Other assets and liabilities, net (1.12)% (2,625,157) ------------ NET ASSETS 100% $234,393,386 ------------ See notes to portfolios of investments and notes to financial statements. 123 EASTERN EUROPEAN FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS 90.77% SHARES VALUE AGRICULTURAL CHEMICALS 0.91% - ------------------------------------------------------------------------------------------- Uralkali, Sponsored GDR 206,015 $ 4,236,029 APPLIANCES 0.63% - ------------------------------------------------------------------------------------------- Arcelik 750,000 2,915,450 AUTO PARTS & EQUIPMENT 0.88% - ------------------------------------------------------------------------------------------- Tofas Turk Otomobil Fabrikasi AS 1,300,000 4,072,792 BUILDING & CONSTRUCTION 0.46% - ------------------------------------------------------------------------------------------- Alarko Holding A.S. 800,000 2,119,467 CELLULAR TELECOMMUNICATIONS 9.10% - ------------------------------------------------------------------------------------------- Mobile TeleSystems, Sponsored ADR 312,000 15,253,680 Turkcell Iletisim Hizmetleri A.S. 1,024,975 7,196,533 Turkcell Iletisim Hizmetleri A.S., Sponsored ADR 300,000 5,247,000 Vimpel-Communications, Sponsored ADR 783,157 14,558,889 -------------- 42,256,102 COMMERCIAL BANKS - NON US 26.83% - ------------------------------------------------------------------------------------------- Bank Pekao S.A. 150,000 8,443,932* Bank Zachodni WBK S.A. 50,000 3,276,342* OTP Bank Nyrt. plc 550,000 15,533,005* Powszechna Kasa Oszczednosci Bank Polski S.A. 350,000 4,596,781 Sberbank RF 17,127,095 48,110,010 Turkiye Garanti Bankasi A.S. 5,800,082 24,579,955 Turkiye Halk Bankasi A.S. 650,000 5,163,746 Turkiye Vakiflar Bankasi T.A.O., Class D 1,940,000 5,474,958* VTB Bank OJSC, Sponsored GDR 2,000,000 9,409,236 -------------- 124,587,965 COMPUTER SERVICES 0.70% - ------------------------------------------------------------------------------------------- Asseco Poland S.A. 150,000 3,272,257* DIVERSIFIED METALS & MINING 2.12% - ------------------------------------------------------------------------------------------- JSC MMC Norilsk Nickel, Sponsored ADR 200,000 2,806,122* KGHM Polska Miedz S.A. 180,000 6,640,535 Orsu Metals Corp. 694,740 383,524* -------------- 9,830,181 ELECTRIC - INTEGRATED 1.79% - ------------------------------------------------------------------------------------------- Polska Grupa Energetyczna S.A. 975,000 8,329,846* See notes to portfolios of investments and notes to financial statements. 124 EASTERN EUROPEAN FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE ELECTRIC UTILITY 2.23% - ------------------------------------------------------------------------------------------- CEZ A.S. 221,471 $ 10,357,794 FOOD 1.10% - ------------------------------------------------------------------------------------------- Wimm-Bill-Dann Foods OJSC, Sponsored ADR 215,000 5,123,450* GOLD MINING 1.14% - ------------------------------------------------------------------------------------------- Dundee Precious Metals, Inc. 850,000 2,904,392* Polyus Gold Co. 21,001 1,098,078 Polyus Gold Co., Sponsored ADR 48,500 1,314,106 -------------- 5,316,576 INSURANCE 0.52% - ------------------------------------------------------------------------------------------- Aksigorta A.S. 700,732 2,419,381 INVESTMENT COMPANIES 0.12% - ------------------------------------------------------------------------------------------- Vostok Nafta Investment Ltd. 130,000 566,911* MEDICAL - DRUGS 2.32% - ------------------------------------------------------------------------------------------- Pharmstandard, Sponsored GDR 200,000 4,014,519* Richter Gedeon Nyrt. 30,000 6,762,128 -------------- 10,776,647 OIL & GAS - INTEGRATED 19.98% - ------------------------------------------------------------------------------------------- Gazprom OAO, Sponsored ADR 1,008,901 25,272,970 Lukoil OAO, Sponsored ADR 606,810 33,990,352 Rosneft Oil Co. OJSC, Sponsored GDR 3,982,309 33,507,657 -------------- 92,770,979 OIL & GAS EXPLORATION & PRODUCTION 4.50% - ------------------------------------------------------------------------------------------- Alliance Oil Co. Ltd. 200,000 2,856,678* BNK Petroleum, Inc. 18,400 20,665* NovaTek OAO, Sponsored GDR 278,477 18,041,006 -------------- 20,918,349 RETAIL 3.63% - ------------------------------------------------------------------------------------------- Eurocash S.A. 500,000 2,719,751 Magnit OAO, Sponsored GDR 400,000 6,335,112 X5 Retail Group N.V., Sponsored GDR 245,000 7,812,093* -------------- 16,866,956 See notes to portfolios of investments and notes to financial statements. 125 EASTERN EUROPEAN FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE RETAIL - FOOD 1.00% - ------------------------------------------------------------------------------------------- BIM Birlesik Magazalar A.S. 100,000 $ 4,625,378 SILVER MINING 0.30% - ------------------------------------------------------------------------------------------- Polymetal, Sponsored GDR 150,000 1,372,661* STEEL - PRODUCERS 8.52% - ------------------------------------------------------------------------------------------- Evraz Group S.A., Sponsored GDR 180,000 5,007,850* Magnitogorsk Iron & Steel Works, Sponsored GDR 750,000 8,461,533* Mechel, Sponsored ADR 120,000 2,258,400 Novolipetsk Steel, Sponsored GDR 501,000 15,092,697* OAO TMK, Sponsored GDR 500,000 8,763,915* -------------- 39,584,395 TELEVISION 1.13% - ------------------------------------------------------------------------------------------- CTC Media, Inc. 353,000 5,259,700* TRANSPORTATION 0.86% - ------------------------------------------------------------------------------------------- Novorossiysk Sea Trade Port, Sponsored GDR 350,000 3,973,865 - ------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS 421,553,131 - ------------------------------------------------------------------------------------------- (cost $339,642,672) PREFERRED STOCK 1.30% OIL & GAS EXPLORATION & PRODUCTION 1.30% - ------------------------------------------------------------------------------------------- Surgutneftegaz, Preferred Stock 12,529,631 6,043,367@ (cost $7,434,109) WARRANTS 0.14% GOLD MINING 0.14% - ------------------------------------------------------------------------------------------- Dundee Precious Metals, Inc., Warrants (November 2015) (cost $0) 500,000 661,495* See notes to portfolios of investments and notes to financial statements. 126 EASTERN EUROPEAN FUND PORTFOLIO OF INVESTMENTS December 31, 2009 PURCHASED OPTION 0.18% CONTRACTS VALUE EXCHANGE-TRADED FUND 0.18% - ------------------------------------------------------------------------------------------- Market Vectors Russia ETF, Strike Price 26, Call, Expiration Jan. 2010 (premium $1,009,500) 1,500 $ 802,500 - ------------------------------------------------------------------------------------------- TOTAL SECURITIES 429,060,493 - ------------------------------------------------------------------------------------------- (cost $348,086,281) PRINCIPAL REPURCHASE AGREEMENT 8.55% AMOUNT Joint Tri-Party Repurchase Agreement, Morgan Stanley, 12/31/09, 0.00%, due 01/04/10, repurchase price $39,727,332, collateralized by U.S. Treasury securities held in a joint tri-party account (cost $39,727,332) $39,727,332 39,727,332 - ------------------------------------------------------------------------------------------- TOTAL INVESTMENTS 100.94% 468,787,825 - ------------------------------------------------------------------------------------------- (cost $387,813,613) Other assets and liabilities, net (0.94)% (4,378,946) ------------ NET ASSETS 100% $464,408,879 ------------ See notes to portfolios of investments and notes to financial statements. 127 GLOBAL EMERGING MARKETS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS 82.48% SHARES VALUE AGRICULTURAL CHEMICALS 0.40% - -------------------------------------------------------------------------------------- China Agritech, Inc. 2,000 $ 55,900* AIR FREIGHT & LOGISTICS 1.85% - -------------------------------------------------------------------------------------- Shenzhen International Holdings Ltd. 3,392,000 256,209 AIRLINES 1.18% - -------------------------------------------------------------------------------------- Copa Holdings S.A., Class A 3,000 163,410 AUTO MANUFACTURERS 1.54% - -------------------------------------------------------------------------------------- Dongfeng Motor Group Co., Ltd., H shares 150,000 213,497 BROADCASTING & CABLE TV 1.13% - -------------------------------------------------------------------------------------- Grupo Televisa S.A., Sponsored ADR 7,500 155,700 CELLULAR TELECOMMUNICATIONS 9.70% - -------------------------------------------------------------------------------------- America Movil SAB de C.V., ADR, Series L, Sponsored ADR 4,000 187,920 Mobile TeleSystems, Sponsored ADR 3,000 146,670 MTN Group Ltd. 17,954 284,480 Tim Participacoes S.A., Sponsored ADR 5,000 148,550 Vimpel-Communications, Sponsored ADR 10,000 185,900 Vivo Participacoes S.A., Sponsored ADR 12,500 387,500 ----------- 1,341,020 CHEMICALS - DIVERSIFIED 0.88% - -------------------------------------------------------------------------------------- Israel Chemicals Ltd. 9,346 121,858 COMMERCIAL BANKS - NON US 9.76% - -------------------------------------------------------------------------------------- ABSA Group Ltd. 10,000 172,459 Banco Bradesco S.A., Sponsored ADR 10,000 218,700 Banco do Brasil S.A. 10,000 168,433 Bank of Nova Scotia 3,000 140,220 China Construction Bank Corp., H shares 88,000 74,901* Industrial and Commercial Bank of China Ltd., H shares 287,000 235,519 OTP Bank Nyrt. plc 12,000 338,902* ----------- 1,349,134 CONSTRUCTION 0.46% - -------------------------------------------------------------------------------------- China Railway Construction Corp., Ltd., H shares 50,000 63,616 DEPARTMENT STORES 2.62% - -------------------------------------------------------------------------------------- Lojas Renner S.A. 16,269 362,342 See notes to portfolios of investments and notes to financial statements. 128 GLOBAL EMERGING MARKETS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE DIVERSIFIED METALS & MINING 0.17% - -------------------------------------------------------------------------------------- Orsu Metals Corp. 43,083 $ 23,783* DIVERSIFIED MINERALS 3.35% - -------------------------------------------------------------------------------------- Centamin Egypt Ltd. 44,500 88,098* Teck Resources Ltd., Class B 4,500 157,365* Vale S.A., Class B, Sponsored ADR 7,500 217,725 ----------- 463,188 E-COMMERCE 1.04% - -------------------------------------------------------------------------------------- Ctrip.com International Ltd., Sponsored ADR 2,000 143,720* ELECTRIC - INTEGRATED 1.55% - -------------------------------------------------------------------------------------- Polska Grupa Energetyczna S.A. 25,000 213,586* ELECTRONICS & COMPONENTS 4.94% - -------------------------------------------------------------------------------------- China High Speed Transmission Equipment Group Co., Ltd. 45,000 108,919 Samsung Electronics Co., Ltd. 558 380,582 Samsung Techwin Co., Ltd. 2,500 193,564 ----------- 683,065 FINANCIAL SERVICES 2.43% - -------------------------------------------------------------------------------------- BM&F BOVESPA S.A. 15,000 104,128 Bolsa de Valores de Colombia 3,000,000 43,319 Bolsa Mexicana de Valores S.A. 60,000 70,548* Bursa Malaysia Bhd 25,000 58,085 Singapore Exchange Ltd. 10,000 59,284 ----------- 335,364 FOOD 2.49% - -------------------------------------------------------------------------------------- Compania Brasileira de Distribuicao Grupo Pao de Acucar, Class A, Sponsored ADR 3,000 225,360 Wimm-Bill-Dann Foods OJSC, Sponsored ADR 5,000 119,150* ----------- 344,510 GOLD MINING 1.28% - -------------------------------------------------------------------------------------- Eldorado Gold Corp. 10,000 141,700* Polyus Gold Co. 669 34,980 ----------- 176,680 HEALTHCARE EQUIPMENT & SERVICES 2.52% - -------------------------------------------------------------------------------------- Opto Circuits India Ltd. 71,048 347,842 See notes to portfolios of investments and notes to financial statements. 129 GLOBAL EMERGING MARKETS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE INSURANCE 2.13% - -------------------------------------------------------------------------------------- China Life Insurance Co., Ltd., H shares 60,000 $ 293,971 INTERNET 2.56% - -------------------------------------------------------------------------------------- Baidu, Inc., Sponsored ADR 500 205,615* NHN Corp. 900 148,410* ----------- 354,025 INVESTMENT COMPANIES 0.63% - -------------------------------------------------------------------------------------- Vostok Nafta Investment Ltd. 20,000 87,217* METAL - COPPER 2.27% - -------------------------------------------------------------------------------------- First Quantum Minerals Ltd. 2,000 152,782 Freeport-McMoRan Copper & Gold, Inc. 2,000 160,580 ----------- 313,362 METAL PROCESSING 0.66% - -------------------------------------------------------------------------------------- Catcher Technology Co., Ltd. 33,000 91,498 MULTIMEDIA 2.63% - -------------------------------------------------------------------------------------- Naspers Ltd., Class N 9,000 363,751 OIL & GAS - INTEGRATED 5.98% - -------------------------------------------------------------------------------------- Gazprom OAO, Sponsored ADR 5,000 125,250 Lukoil OAO, Sponsored ADR 5,000 280,074 PetroChina Co., Ltd., H shares 106,000 126,283 Rosneft Oil Co. OJSC, Sponsored GDR 35,000 294,494 ----------- 826,101 OIL & GAS EXPLORATION & PRODUCTION 0.22% - -------------------------------------------------------------------------------------- Alange Energy Corp. 50,000 29,981* PIPELINES 1.57% - -------------------------------------------------------------------------------------- China Gas Holdings Ltd. 400,000 216,398 PLATINUM 1.65% - -------------------------------------------------------------------------------------- Eastern Platinum Ltd. 260,021 227,687* PUBLIC THOROUGHFARES 0.50% - -------------------------------------------------------------------------------------- Anhui Expressway Co., Ltd., H shares 100,000 69,070 See notes to portfolios of investments and notes to financial statements. 130 GLOBAL EMERGING MARKETS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE RETAIL 3.73% - -------------------------------------------------------------------------------------- Magnit OAO, Sponsored GDR 5,000 $ 79,189 Wal-Mart de Mexico SAB de CV, Series V 61,900 276,248 X5 Retail Group N.V., Sponsored GDR 5,000 159,431* ----------- 514,868 SEMICONDUCTORS 1.17% - -------------------------------------------------------------------------------------- Taiwan Semiconductor Manufacturing Co., Ltd. 23,230 46,591 Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR 10,000 114,400 ----------- 160,991 STEEL - PRODUCERS 4.46% - -------------------------------------------------------------------------------------- Gerdau S.A., Sponsored ADR 15,000 255,450 Novolipetsk Steel, Sponsored GDR 12,000 361,502* ----------- 616,952 TELECOMMUNICATIONS EQUIPMENT 1.73% - -------------------------------------------------------------------------------------- ZTE Corp., H shares 39,000 239,266 WATER TREATMENT SYSTEMS 1.30% - -------------------------------------------------------------------------------------- Duoyuan Global Water, Inc., Sponsored ADR 5,000 178,950* - -------------------------------------------------------------------------------------- TOTAL COMMON STOCKS 11,398,512 - -------------------------------------------------------------------------------------- (cost $10,326,248) PREFERRED STOCK 1.86% COMMERCIAL BANKS - NON US 1.86% - -------------------------------------------------------------------------------------- Itau Unibanco Banco Multiplo S.A., Preferred Stock 11,337 256,269 (cost $210,650) EXCHANGE-TRADED FUNDS (ETF) 6.26% Emerging Global Shares Dow Jones Emerging Markets Energy Titans Index ETF 1,000 46,700 iShares MSCI Chile Investable Market Index Fund 1,300 71,227 iShares MSCI Israel Capped Index Fund 1,300 70,720 iShares MSCI South Africa Index Fund 1,000 55,970 iShares MSCI South Korea Index Fund 1,250 59,550 iShares MSCI Taiwan Index Fund 4,900 63,553 iShares MSCI Thailand Index Fund 1,600 67,984 iShares MSCI Turkey Index Fund 3,000 161,700 Market Vectors Indonesia Index ETF 950 59,061 See notes to portfolios of investments and notes to financial statements. 131 GLOBAL EMERGING MARKETS FUND PORTFOLIO OF INVESTMENTS December 31, 2009 EXCHANGE-TRADED FUNDS (ETF) SHARES VALUE Market Vectors Russia ETF 2,000 $ 62,360 PowerShares India Portfolio 2,700 59,589 SPDR S&P Emerging Europe ETF 2,000 86,680 - -------------------------------------------------------------------------------------- TOTAL EXCHANGE-TRADED FUNDS 865,094 - -------------------------------------------------------------------------------------- (cost $840,815) EQUITY-LINKED SECURITY 0.86% CONSTRUCTION & ENGINEERING 0.86% - -------------------------------------------------------------------------------------- Arabtec Holding Co. 163,654 119,412*@ (cost $379,638) WARRANTS 0.00% DIVERSIFIED METALS & MINING 0.00% - -------------------------------------------------------------------------------------- Orsu Metals Corp., Warrants (March 2011) 25,813 123* (cost $0) PURCHASED OPTION 0.23% CONTRACTS METAL - COPPER 0.23% - -------------------------------------------------------------------------------------- Freeport-McMoRan Copper & Gold, Inc., Strike Price 60, Call, Expiration Jan. 2010 (premium $30,431) 15 31,350 - -------------------------------------------------------------------------------------- TOTAL SECURITIES 12,670,760 - -------------------------------------------------------------------------------------- (cost $11,787,782) PRINCIPAL REPURCHASE AGREEMENT 10.48% AMOUNT Joint Tri-Party Repurchase Agreement, UBS Financial Services, Inc., 12/31/09, 0.00%, due 01/04/10, repurchase price $1,448,909, collateralized by U.S. Treasury securities held in a joint tri-party account (cost $1,448,909) $1,448,909 1,448,909 - -------------------------------------------------------------------------------------- TOTAL INVESTMENTS 102.17% 14,119,669 - -------------------------------------------------------------------------------------- (cost $13,236,691) Other assets and liabilities, net (2.17)% (300,471) ----------- NET ASSETS 100% $13,819,198 ----------- See notes to portfolios of investments and notes to financial statements. 132 CHINA REGION FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS 85.59% SHARES VALUE AGRICULTURAL CHEMICALS 1.49% - ------------------------------------------------------------------------------------------- China Agritech, Inc. 30,000 $ 838,500* AGRICULTURAL OPERATIONS 1.63% - ------------------------------------------------------------------------------------------- Chaoda Modern Agriculture Holdings Ltd. 500,000 531,824 China Agri-Industries Holdings Ltd. 300,000 389,102 -------------- 920,926 AUTO MANUFACTURERS 4.29% - ------------------------------------------------------------------------------------------- Dongfeng Motor Group Co., Ltd., H shares 800,000 1,138,651 Geely Automobile Holdings Ltd. 1,000,000 544,169 PT Astra International Tbk 200,000 732,342 -------------- 2,415,162 AUTO PARTS & EQUIPMENT 5.15% - ------------------------------------------------------------------------------------------- China Automotive Systems, Inc. 25,000 467,750* Depo Auto Parts Industries Co., Ltd. 100,000 263,079 Weichai Power Co., Ltd., H shares 270,000 2,168,051* -------------- 2,898,880 BREWERY 3.54% - ------------------------------------------------------------------------------------------- Tsingtao Brewery Co., Ltd., H shares 360,000 1,992,048 BUILDING PRODUCTS 0.58% - ------------------------------------------------------------------------------------------- PT Holcim Indonesia Tbk 2,000,000 329,208* COAL 3.40% - ------------------------------------------------------------------------------------------- China Shenhua Energy Co., Ltd., H shares 270,000 1,305,373 Yanzhou Coal Mining Co., H shares 280,000 612,592 -------------- 1,917,965 COMMERCIAL BANKS - NON US 3.76% - ------------------------------------------------------------------------------------------- Industrial and Commercial Bank of China Ltd., H shares 1,500,000 1,230,936 Oversea-Chinese Banking Corp. Ltd. 80,000 514,879 Standard Chartered plc 15,000 372,203 -------------- 2,118,018 COMMERCIAL SERVICES 0.84% - ------------------------------------------------------------------------------------------- SIA Engineering Co., Ltd. 200,000 471,596 DISTRIBUTION/WHOLESALE 2.18% - ------------------------------------------------------------------------------------------- Li & Fung Ltd. 300,000 1,228,854 See notes to portfolios of investments and notes to financial statements. 133 CHINA REGION FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE DIVERSIFIED MINERALS 0.05% - ------------------------------------------------------------------------------------------- Erdene Resource Development Corp. 100,000 $ 26,650* DIVERSIFIED OPERATIONS 2.90% - ------------------------------------------------------------------------------------------- China Resources Enterprise Ltd. 450,000 1,633,321 E-COMMERCE 2.55% - ------------------------------------------------------------------------------------------- Ctrip.com International Ltd., Sponsored ADR 20,000 1,437,200* EDUCATION 0.58% - ------------------------------------------------------------------------------------------- CIBT Education Group, Inc. 453,632 328,140* ELECTRONICS & COMPONENTS 6.04% - ------------------------------------------------------------------------------------------- Byd Co., Ltd., H shares 60,000 523,707* MediaTek, Inc. 40,080 695,919 Samsung Techwin Co., Ltd. 15,000 1,161,385 Wasion Group Holdings Ltd. 400,000 413,879 Yageo Corp., Sponsored GDR 1 0@ Zhuzhou CSR Times Electric Co., Ltd., H shares 300,000 609,951 -------------- 3,404,841 ENERGY-ALTERNATE SOURCES 0.23% - ------------------------------------------------------------------------------------------- China Longyuan Power Group Corp., H shares 100,000 129,487* FOOD & BEVERAGES 8.58% - ------------------------------------------------------------------------------------------- China Foods Ltd. 1,200,000 1,070,775 China Yurun Food Group Ltd. 350,000 1,032,838 PT Indofood Sukses Makmur Tbk 2,000,000 747,615 Tingyi (Cayman Islands) Holding Corp. 800,000 1,980,017 -------------- 4,831,245 FOOD-RETAIL 1.60% - ------------------------------------------------------------------------------------------- Lianhua Supermarket Holdings Co., Ltd., H shares 300,000 901,431 GOLD MINING 2.51% - ------------------------------------------------------------------------------------------- Euromax Resources Ltd. 473,235 132,874* Kingsgate Consolidated Ltd. 2,599 21,284 Lihir Gold Ltd., Sponsored ADR 10,000 291,900 Olympus Pacific Minerals, Inc. 590,500 177,040* Zhaojin Mining Industry Co., Ltd., H shares 400,000 788,939 -------------- 1,412,037 See notes to portfolios of investments and notes to financial statements. 134 CHINA REGION FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE INTERNET 10.78% - ------------------------------------------------------------------------------------------- Asia Broadband, Inc. 500,000 $ 0*@ Baidu, Inc., Sponsored ADR 2,000 822,460* NHN Corp. 4,000 659,598* Perfect World Co., Ltd., Sponsored ADR 20,000 788,800* Sina Corp. 12,500 564,750* Tencent Holdings Ltd. 150,000 3,236,574 -------------- 6,072,182 METAL - COPPER 1.27% - ------------------------------------------------------------------------------------------- Continental Minerals Corp. 56,920 115,395* Freeport-McMoRan Copper & Gold, Inc. 7,500 602,175 -------------- 717,570 METAL PROCESSING 0.10% - ------------------------------------------------------------------------------------------- China Wind Systems, Inc. 10,000 54,500* NON-FERROUS METALS 0.03% - ------------------------------------------------------------------------------------------- Sterling Group Ventures, Inc. 500,000 15,500* OIL & GAS EXPLORATION & PRODUCTION 2.51% - ------------------------------------------------------------------------------------------- CNOOC Ltd., Sponsored ADR 3,000 466,350 CNPC Hong Kong Ltd. 500,000 659,172 Green Dragon Gas Ltd. 42,949 286,685* -------------- 1,412,207 PAPER & FOREST PRODUCTS 1.94% - ------------------------------------------------------------------------------------------- Lee & Man Paper Manufacturing Ltd. 1,600,000 1,092,635 PETROCHEMICALS 0.00% - ------------------------------------------------------------------------------------------- Danhua Chemical Technology Co., Ltd., B shares 1 2* PIPELINES 2.30% - ------------------------------------------------------------------------------------------- China Gas Holdings Ltd. 2,400,000 1,298,388 POWER SUPPLY 1.60% - ------------------------------------------------------------------------------------------- Canadian Solar, Inc. 15,000 432,300* Yingli Green Energy Holding Co., Ltd., Sponsored ADR 29,500 466,395* -------------- 898,695 PRECIOUS METALS 0.19% - ------------------------------------------------------------------------------------------- TVI Pacific, Inc. 1,000,000 104,697* See notes to portfolios of investments and notes to financial statements. 135 CHINA REGION FUND PORTFOLIO OF INVESTMENTS December 31, 2009 COMMON STOCKS SHARES VALUE PUBLISHING 0.04% - ------------------------------------------------------------------------------------------- Lingo Media Corp. 22,642 $ 22,413* REAL ESTATE COMPANIES 0.67% - ------------------------------------------------------------------------------------------- Shimao Property Holdings Ltd. 200,000 375,090 RETAIL 3.93% - ------------------------------------------------------------------------------------------- Anta Sports Products Ltd. 300,000 444,712 Belle International Holdings Ltd. 1,000,000 1,155,096 China Dongxiang Group Co. 800,000 615,519 Lao Feng Xiang Co., Ltd., B shares 1 2 -------------- 2,215,329 SEMICONDUCTORS 1.78% - ------------------------------------------------------------------------------------------- Samsung Electronics Co., Ltd. 800 545,637 Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR 40,000 457,600 -------------- 1,003,237 SILVER MINING 0.88% - ------------------------------------------------------------------------------------------- Silvercorp Metals, Inc. 75,000 497,549 STEEL MANUFACTURING 1.20% - ------------------------------------------------------------------------------------------- Maanshan Iron and Steel Co., Ltd., H shares 300,000 216,334* POSCO, Sponsored ADR 3,500 458,850 -------------- 675,184 TELECOMMUNICATIONS EQUIPMENT 3.20% - ------------------------------------------------------------------------------------------- Foxconn International Holdings Ltd. 500,000 574,312* ZTE Corp., H shares 200,000 1,227,008 -------------- 1,801,320 WATER TREATMENT SYSTEMS 1.27% - ------------------------------------------------------------------------------------------- Duoyuan Global Water, Inc., Sponsored ADR 20,000 715,800* - ------------------------------------------------------------------------------------------- TOTAL COMMON STOCKS 48,207,807 - ------------------------------------------------------------------------------------------- (cost $38,160,441) See notes to portfolios of investments and notes to financial statements. 136 CHINA REGION FUND PORTFOLIO OF INVESTMENTS December 31, 2009 EXCHANGE-TRADED FUNDS (ETF) 2.05% SHARES VALUE iShares MSCI South Korea Index Fund 5,000 $ 238,200 iShares MSCI Taiwan Index Fund 19,500 252,915 iShares MSCI Thailand Index Fund 6,200 263,438 Market Vectors Indonesia Index ETF 3,800 236,246 SPDR Gold Trust 1,500 161,135* - ------------------------------------------------------------------------------------------- TOTAL EXCHANGE-TRADED FUNDS 1,151,934 - ------------------------------------------------------------------------------------------- (cost $1,080,604) PURCHASED OPTION 0.22% CONTRACTS METAL - COPPER 0.22% - ------------------------------------------------------------------------------------------- Freeport-McMoRan Copper & Gold, Inc., Strike Price 60, Call, Expiration Jan. 2010 (premium $121,723) 60 125,400 - ------------------------------------------------------------------------------------------- TOTAL SECURITIES 49,485,141 - ------------------------------------------------------------------------------------------- (cost $39,362,768) PRINCIPAL REPURCHASE AGREEMENT 12.53% AMOUNT Joint Tri-Party Repurchase Agreement, Morgan Stanley, 12/31/09, 0.00%, due 01/04/10, repurchase price $7,057,187, collateralized by U.S. Treasury securities held in a joint tri-party account (cost $7,057,187) $7,057,187 7,057,187 - ------------------------------------------------------------------------------------------- TOTAL INVESTMENTS 100.39% 56,542,328 - ------------------------------------------------------------------------------------------- (cost $46,419,955) Other assets and liabilities, net (0.39)% (219,008) ----------- NET ASSETS 100% $56,323,320 ----------- See notes to portfolios of investments and notes to financial statements.
137 NOTES TO PORTFOLIOS OF INVESTMENTS December 31, 2009 LEGEND * Non-income producing security GO General Obligation Bond + Affiliated company (see following) RS Restricted Security (see following) ADR American Depositary Receipt ZCB Zero Coupon Bond GDR Global Depositary Receipt ^ Security or portion of security segregated as collateral for written options @ Security was fair valued at December 31, 2009, by U.S. Global Investors, Inc. (Adviser) in accordance with valuation procedures approved by the Board of Trustees. Fair valued securities, which were primarily composed of restricted securities, as a percentage of net assets at December 31, 2009, were, 0.29% of Holmes Growth, 4.69% of Global Resources, 3.38% of World Precious Minerals, 0.41% of Gold and Precious Metals, 1.30% of Eastern European, and 0.86% of Global Emerging Markets. See also Note 1B in the Notes to Financial Statements and the Fair Valuation of Securities section of these Notes to Portfolios of Investments for further discussion of fair valued securities. See further information and detail on restricted securities in the Restricted Securities section of these Notes to Portfolios of Investments.
GENERAL The yields reflect the effective yield from the date of purchase. Variable Rate Notes have periodic reset features, which effectively shorten the maturity dates and reset the interest rates as tied to various interest-bearing instruments. Rates shown are current rates at December 31, 2009. Securities with a 144A designation are exempt from registration under Rule 144A of the Securities Act of 1933. JOINT TRI-PARTY REPURCHASE AGREEMENTS The terms of the joint tri-party repurchase agreements and the securities held as collateral at December 31, 2009, were: Merrill Lynch repurchase agreement, 12/31/09, 0.00%, due 01/04/10: Total principal amount: $99,676,958; Total repurchase price: $99,676,958 Collateral: $88,589,700 U.S. Treasury Note, 2.625%, 06/30/14 $11,668,500 U.S. Treasury Note, 4.000%, 08/15/18 (total collateral market value, including accrued interest, of $101,670,530) Morgan Stanley repurchase agreement, 12/31/09, 0.00%, due 01/04/10: Total principal amount: $104,229,157; Total repurchase price: $104,229,157 Collateral: $106,239,400 U.S. Treasury Note, 2.625%, 12/31/14 (total collateral market value, including accrued interest, of $106,313,768) UBS Financial Services, Inc. repurchase agreement, 12/31/09, 0.00%, due 01/04/10: Total principal amount: $29,588,437; Total repurchase price: $29,588,437 Collateral: $30,750,000 U.S. Treasury Note, 2.125%, 11/30/14 (total collateral market value, including accrued interest, of $30,183,576) 138 NOTES TO PORTFOLIOS OF INVESTMENTS December 31, 2009 FAIR VALUATION OF SECURITIES For the funds' policies regarding the valuation of investments and other significant accounting policies, please refer to the Notes to Financial Statements. The funds are required to disclose information regarding the fair value measurements of a fund's assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. For example, money market securities are valued using amortized cost, in accordance with the Investment Company Act of 1940. Generally, amortized cost reflects the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected as Level 2. Fair value determinations are required for securities whose value is affected by a significant event that will materially affect the value of a domestic or foreign security and which occurs subsequent to the time of the close of the principal market on which such domestic or foreign security trades but prior to the calculation of the Fund's NAV. The three levels defined by the fair value hierarchy are as follows: Level 1 - quoted prices in active markets for identical securities. Level 2 - significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) Level 3 - significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments). In some instances, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest input level that is significant to the fair value measurement in its entirety. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments. The following table summarizes the valuation of each fund's securities as of December 31, 2009, using the fair value hierarchy:
QUOTED PRICES IN ACTIVE SIGNIFICANT MARKETS FOR OTHER SIGNIFICANT IDENTICAL OBSERVABLE UNOBSERV- INVESTMENTS INPUTS ABLE INPUTS (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL U.S. TREASURY SECURITIES CASH FUND Investments in securities* U.S. Government Obligations $ -- $ 49,987,150 $ -- $ 49,987,150 Repurchase Agreements 54,046,640 -- -- 54,046,640 ------------ ------------ ------------ ------------ Total $ 54,046,640 $ 49,987,150 $ -- $104,033,790 ============ ============ ============ ============ 139 NOTES TO PORTFOLIOS OF INVESTMENTS December 31, 2009 QUOTED PRICES IN ACTIVE SIGNIFICANT MARKETS FOR OTHER SIGNIFICANT IDENTICAL OBSERVABLE UNOBSERV- INVESTMENTS INPUTS ABLE INPUTS (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL U.S. GOVERNMENT SECURITES SAVINGS FUND Investments in securities* U.S. Government and Agency Obligations $ -- $194,072,015 $ -- $194,072,015 ------------ ------------ ------------ ------------ Total $ -- $194,072,015 $ -- $194,072,015 ============ ============ ============ ============ NEAR-TERM TAX FREE FUND Investments in securities* Municipal Bonds $ -- $ 21,469,917 $ -- $ 21,469,917 Repurchase Agreement 2,481,059 -- -- 2,481,059 ------------ ------------ ------------ ------------ Total $ 2,481,059 $ 21,469,917 $ -- $ 23,950,976 ============ ============ ============ ============ TAX FREE FUND Investments in securities* Municipal Bonds $ -- $ 19,854,683 $ -- $ 19,854,683 Repurchase Agreement 1,986,818 -- -- 1,986,818 ------------ ------------ ------------ ------------ Total $ 1,986,818 $ 19,854,683 $ -- $ 21,841,501 ============ ============ ============ ============ ALL AMERICAN EQUITY FUND Investments in securities* Common Stocks $ 14,047,233 $ -- $ -- $ 14,047,233 Exchange-Traded Funds 532,890 -- -- 532,890 Purchased Options 140,650 -- -- 140,650 Repurchase Agreement 1,764,613 -- -- 1,764,613 ------------ ------------ ------------ ------------ Total $ 16,485,386 $ -- $ -- $ 16,485,386 ============ ============ ============ ============ Other Financial Instruments** Written Options $ (672) $ -- $ -- $ (672) HOLMES GROWTH FUND Investments in securities* Common Stocks $ 30,204,078 $ 379,795 $ 78,523 $ 30,662,396 Exchange-Traded Funds 2,199,760 -- -- 2,199,760 Warrants 469,133 28,283 -- 497,416 Purchased Options 83,600 -- -- 83,600 Repurchase Agreement 3,860,909 -- -- 3,860,909 ------------ ------------ ------------ ------------ Total $ 36,817,480 $ 408,078 $ 78,523 $ 37,304,081 ============ ============ ============ ============ Other Financial Instruments** Written Options $ (1,512) $ -- $ -- $ (1,512) GLOBAL MEGATRENDS FUND Investments in securities* Common Stocks $ 16,854,263 $ 5,461,690 $ -- $ 22,315,953 Exchange-Traded Funds 1,450,640 -- -- 1,450,640 Warrants 16,180 -- -- 16,180 Purchased Options 52,250 -- -- 52,250 Master Limited Partnerships 420,675 -- -- 420,675 Repurchase Agreement 4,278,620 -- -- 4,278,620 ------------ ------------ ------------ ------------ Total $ 23,072,628 $ 5,461,690 $ -- $ 28,534,318 ============ ============ ============ ============ 140 NOTES TO PORTFOLIOS OF INVESTMENTS December 31, 2009 QUOTED PRICES IN ACTIVE SIGNIFICANT MARKETS FOR OTHER SIGNIFICANT IDENTICAL OBSERVABLE UNOBSERV- INVESTMENTS INPUTS ABLE INPUTS (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL GLOBAL RESOURCES FUND Investments in securities* Common Stocks $603,528,555 $ 28,169,306 $ 1,330,120 $633,027,981 Exchange-Traded Funds 7,750,000 -- -- 7,750,000 Warrants 27,198,242 7,449,576 -- 34,647,818 Special Warrants -- 1,359,130 -- 1,359,130 Purchased Options 2,343,700 -- -- 2,343,700 Convertible Debentures -- 3,949,936 -- 3,949,936 Notes -- 8,835,113 -- 8,835,113 Units -- -- 10,810,220 10,810,220 Subscription Receipts -- 3,750,178 -- 3,750,178 Repurchase Agreement 36,244,931 -- -- 36,244,931 ------------ ------------ ------------ ------------ Total $677,065,428 $ 53,513,239 $ 12,140,340 $742,719,007 ============ ============ ============ ============ Other Financial Instruments** Written Options $ 89,481 $ -- $ -- $ 89,481 WORLD PRECIOUS MINERALS FUND Investments in securities* Common Stocks $456,273,256 $ 37,436,077 $ 3,312,749 $497,022,082 Exchange-Traded Funds -- 5,850,092 -- 5,850,092 Closed-End Fund 1,123,025 -- -- 1,123,025 Warrants 63,959,382 5,732,867 241,427 69,933,676 Special Warrants -- 5,436,520 -- 5,436,520 Purchased Options 1,603,790 -- -- 1,603,790 Exchange-Traded Note 220,800 -- -- 220,800 Notes -- 3,504,688 1,027,682 4,532,370 Units -- 1,041,641 1,855,994 2,897,635 Subscription Receipts -- 1,665,635 -- 1,665,635 Repurchase Agreement 52,445,209 -- -- 52,445,209 ------------ ------------ ------------ ------------ Total $575,625,462 $ 60,667,520 $ 6,437,852 $642,730,834 ============ ============ ============ ============ Other Financial Instruments** Foreign Currency $ (12) $ -- $ -- $ (12) GOLD AND PRECIOUS METALS FUND Investments in securities* Common Stocks $160,045,641 $ 12,961,521 $ -- $173,007,162 Exchange-Traded Fund -- 5,420,294 -- 5,420,294 Closed-End Fund 3,136,725 -- -- 3,136,725 Warrants 24,829,383 676,296 -- 25,505,679 Purchased Options 707,595 -- -- 707,595 Exchange-Traded Note 220,800 -- -- 220,800 Notes -- 582,496 285,467 867,963 Repurchase Agreement 28,152,325 -- -- 28,152,325 ------------ ------------ ------------ ------------ Total $217,092,469 $ 19,640,607 $ 285,467 $237,018,543 ============ ============ ============ ============ 141 NOTES TO PORTFOLIOS OF INVESTMENTS December 31, 2009 QUOTED PRICES IN ACTIVE SIGNIFICANT MARKETS FOR OTHER SIGNIFICANT IDENTICAL OBSERVABLE UNOBSERV- INVESTMENTS INPUTS ABLE INPUTS (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL EASTERN EUROPEAN FUND Investments in securities* Common Stocks $ 76,282,670 $345,270,461 $ -- $421,553,131 Preferred Stocks -- 6,043,367 -- 6,043,367 Warrants 661,495 -- -- 661,495 Purchased Options 802,500 -- -- 802,500 Repurchase Agreement 39,727,332 -- -- 39,727,332 ------------ ------------ ------------ ------------ Total $117,473,997 $351,313,828 $ -- $468,787,825 ============ ============ ============ ============ GLOBAL EMERGING MARKETS FUND Investments in securities* Common Stocks $ 4,460,667 $ 6,937,845 $ -- $ 11,398,512 Preferred Stocks -- 256,269 -- 256,269 Exchange-Traded Funds 865,094 -- -- 865,094 Equity-Linked Security -- 119,412 -- 119,412 Warrants 123 -- -- 123 Purchased Options 31,350 -- -- 31,350 Repurchase Agreement 1,448,909 -- -- 1,448,909 ------------ ------------ ------------ ------------ Total $ 6,806,143 $ 7,313,526 $ -- $ 14,119,669 ============ ============ ============ ============ CHINA REGION FUND Investments in securities* Common Stocks $ 10,285,591 $ 37,922,216 $ -- $ 48,207,807 Exchange-Traded Funds 990,799 161,135 -- 1,151,934 Purchased Options 125,400 -- -- 125,400 Repurchase Agreement 7,057,187 -- -- 7,057,187 ------------ ------------ ------------ ------------ Total $ 18,458,977 $ 38,083,351 $ -- $ 56,542,328 ============ ============ ============ ============ *Refer to the portfolio of investments for a detailed list of the fund's investments. **Other financial instruments include currency contracts and written options. Currency contracts and written options are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract's value from trade date.
The following is a reconciliation of assets for which significant unobservable inputs (Level 3) were used in determining fair value during the period January 1, 2009, through December 31, 2009:
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) CHANGE IN TRANSFERS FROM BEGINNING TOTAL UNREALIZED NET IN AND/OR ENDING INVESTMENTS BALANCE REALIZED APPRECIATION PURCHASES OUT OF BALANCE HELD AS OF 12/31/08 GAIN (LOSS) (DEPRECIATION) (SALES) LEVEL 3 12/31/09 12/31/09 HOLMES GROWTH FUND Investments in Securities Common Stock $ -- $ -- $ 82 $ 78,441 $ -- $ 78,523 $ 82 - ------------------------------------------------------------------------------------------------------------------------------- Total Investments in Securities $ -- $ -- $ 82 $ 78,441 $ -- $ 78,523 $ 82 - ------------------------------------------------------------------------------------------------------------------------------- 142 NOTES TO PORTFOLIOS OF INVESTMENTS December 31, 2009 CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) CHANGE IN TRANSFERS FROM BEGINNING TOTAL UNREALIZED NET IN AND/OR ENDING INVESTMENTS BALANCE REALIZED APPRECIATION PURCHASES OUT OF BALANCE HELD AS OF 12/31/08 GAIN (LOSS) (DEPRECIATION) (SALES) LEVEL 3 12/31/09 12/31/09 GLOBAL RESOURCES FUND Investments in Securities Common Stock $7,511,608 $(6,012,400) $ (416,107) $ -- $247,019 $ 1,330,120 $ (258,210) Warrants -- -- -- -- -- -- -- Units -- -- 3,718 10,806,502 -- 10,810,220 3,718 - ------------------------------------------------------------------------------------------------------------------------------- Total Investments in Securities $7,511,608 $(6,012,400) $ (412,389) $10,806,502 $247,019 $12,140,340 $ (254,492) - ------------------------------------------------------------------------------------------------------------------------------- WORLD PRECIOUS MINERALS FUND Investments in Securities Common Stock $1,766,411 $(1,000,352) $ 2,546,690 $ -- $ -- $ 3,312,749 $1,557,038 Warrants -- -- 241,427 -- -- 241,427 241,427 Special Warrants -- -- -- -- -- -- -- Note 2,071,006 (139,313) 1,068,510 (1,972,521) -- 1,027,682 1,068,510 Units -- -- 16,805 1,839,189 -- 1,855,994 16,805 - ------------------------------------------------------------------------------------------------------------------------------- Total Investments in Securities $3,837,417 $(1,139,665) $ 3,873,432 $ (133,332) $ -- $ 6,437,852 $2,883,780 - ------------------------------------------------------------------------------------------------------------------------------- GOLD AND PRECIOUS METALS Investments in Securities Notes $ 575,279 $ (38,698) $ 296,808 $ (547,922) $ -- $ 285,467 $ 296,808 - ------------------------------------------------------------------------------------------------------------------------------- Total Investments in Securities $ 575,279 $ (38,698) $ 296,808 $ (547,922) $ -- $ 285,467 $ 296,808 - ------------------------------------------------------------------------------------------------------------------------------- CHINA REGION FUND Investments in Securities Common Stock $ 1 $ -- $ (1) $ -- $ -- $ -- $ (1) - ------------------------------------------------------------------------------------------------------------------------------- Total Investments in Securities $ 1 $ -- $ (1) $ -- $ -- $ -- $ (1) - -------------------------------------------------------------------------------------------------------------------------------
AFFILIATED COMPANIES - INDICATED IN PORTFOLIO OF INVESTMENTS AS "+" The Investment Company Act of 1940 defines affiliates as companies in which a fund owns at least 5% of the outstanding voting securities. The following is a summary of transactions with each affiliated company during the period ended December 31, 2009.
SHARES OF AFFILIATED COMPANIES GLOBAL RESOURCES FUND DECEMBER 31, 2008 ADDITIONS REDUCTIONS DECEMBER 31, 2009 - ------------------------------------------------------------------------------------------------ Agriterra Ltd. (formerly White Nile Ltd.) 13,247,308 33,132,800 -- 46,380,108 Bounty Mining Ltd. 22,000,000 -- -- 22,000,000(a) Cano Petroleum, Inc. 2,725,000 -- (2,725,000) --(a) Ivory Energy, Inc. 4,138,166 -- (4,138,166) --(a) Natasa Mining Ltd. 1,099,160 -- -- 1,099,160 NiMin Energy Corp. -- 2,631,580 -- 2,631,580 North Peace Energy Corp. 3,233,400 -- -- 3,233,400(a) Range Metals, Inc. -- 15,000,000 -- 15,000,000 Red Dragon Resources Corp. 3,720,000 -- (3,720,000) --(a) Revett Minerals, Inc. 5,048,000 -- -- 5,048,000(a) Sable Mining Africa (formerly BIoenergy Africa Ltd.) 8,750,000 12,696,000 -- 21,446,000(a)
At December 31, 2009, the value of investments in affiliated companies was $14,346,036, representing 1.94% of net assets, and the total cost was $18,119,204. Net realized losses on transactions were $18,574,126 and there was no income earned for the year. 143 NOTES TO PORTFOLIOS OF INVESTMENTS December 31, 2009
SHARES OF AFFILIATED COMPANIES WORLD PRECIOUS MINERALS FUND DECEMBER 31, 2008 ADDITIONS REDUCTIONS DECEMBER 31, 2009 - ---------------------------------------------------------------------------------------------------------- Agriterra Ltd. (formerly White Nile Ltd.) -- 28,207,200 -- 28,207,200 Aldridge Minerals, Inc. -- 1,145,100 -- 1,145,100 Atikwa Minerals Corp. 3,062,333 -- -- 3,062,333(a) Avion Gold Corp. (formerly Avion Resources Corp.) 3,900,000 -- -- 3,900,000(a) Candente Gold Corp. -- 4,875,000 -- 4,875,000 Carnavale Resources Ltd. 3,348,857 151,143 -- 3,500,000 Chesapeake Gold Corp. 1,974,219 68,000 -- 2,042,219 Golden Odyssey Mining, Inc. 1,646,500 1,010,000 -- 2,656,500(a) Hainan Mining Corp. plc 2,018,700 -- -- 2,018,700 Klondex Mines Ltd. -- 2,575,000 -- 2,575,000 Moss Lake Gold Mines Ltd. 3,162,000 20,000 -- 3,182,000 Rochester Resources Ltd. -- 7,130,000 -- 7,130,000 Romarco Minerals, Inc. 22,301,706 2,862,800 (8,318,800) 16,845,706(a) Rye Patch Gold Corp. -- 3,800,000 -- 3,800,000 Sable Mining Africa (formerly BIoenergy Africa Ltd.) 5,750,000 7,769,000 -- 13,519,000(a) Terrane Metals Corp. 9,010,400 49,600 (7,409,000) 1,651,000(a) VG Gold Corp. 5,936,510 59,991 (60,000) 5,936,501(a)
At December 31, 2009, the value of investments in affiliated companies was $29,986,999, representing 4.69% of net assets, and the total cost was $22,686,895. Net realized gains on transactions were $9,637,971, and there was no income earned for the year. (a) At December 31, 2009, the company is no longer defined as an affiliate, although it was an affiliated company during the year. RESTRICTED SECURITIES - INDICATED IN PORTFOLIO OF INVESTMENTS AS "RS" The following securities are subject to contractual and regulatory restrictions on resale or transfer. These investments may involve a high degree of business and financial risk. Because of the thinly traded markets for these investments, a fund may be unable to liquidate its securities in a timely manner, especially if there is negative news regarding the specific securities or the markets overall. These securities could decline significantly in value before the fund could liquidate these securities. The issuer bears the cost of registration, if any, involved in the disposition of these securities.
ACQUISITION COST PER HOLMES GROWTH FUND DATE SHARE/UNIT - ---------------------------------------------------------------------------------------- MCO Capital, Inc. 12/04/09 $0.08
As of December 31, 2009, the total cost of restricted securities was $78,441 and the total value was $78,523, representing 0.21% of net assets. 144 NOTES TO PORTFOLIOS OF INVESTMENTS December 31, 2009
ACQUISITION COST PER GLOBAL RESOURCES FUND DATE SHARE/UNIT - ------------------------------------------------------------------------------------------- Anfield Nickel Corp. 09/24/09 $2.58 Govi Uranium, Inc. 10/04/07 $1.96 GoviEx IP Holdings, Inc. 10/04/07 $0.04 HRT Petroleum, Units 10/28/09 $1,412.00 Ivanhoe Nickel and Platinum Ltd. 07/09/03 $5.00 Lithium Americas Corp., Units 12/22/09 $1.42 Medoro Resources Ltd., Special Warrants (November 2011) 10/20/09 $0.76 Osmium Holdings S.A. 10/22/96-01/29/98 $987.07 Petroamerica Oil Corp. 09/23/09 $0.23 Petroamerica Oil Corp, Warrants (October 2014) 09/23/09 $0.00 Range Metals, Inc. 09/23/09 $0.19 Range Metals, Inc., Warrants (October 2011) 09/23/09 $0.00 Value Creation, Inc. 08/11/06 $10.60 Xinergy Corp., Subscription Receipts 12/02/09 $3.34
As of December 31, 2009, the total cost of restricted securities was $27,101,577 and the total value was $26,981,976, representing 3.65% of net assets.
ACQUISITION COST PER WORLD PRECIOUS MINERALS FUND DATE SHARE/UNIT - ------------------------------------------------------------------------------------------- Candente Gold Corp., Units 12/08/09 $0.38 GBS Gold International, Inc., 12% Note, maturity 5/27/11 05/12/08 $995.72 Hainan Mining Corp. plc 08/31/06-05/16/07 $0.85 Hainan Mining Corp. plc, Warrants (May 2011) 05/16/07 $0.00 Hainan Mining Corp. plc, Warrants (August 2011) 08/31/06 $0.00 Ivanhoe Nickel and Platinum Ltd. 07/09/03 $5.00 Medoro Resources Ltd., Special Warrants (November 2011) 10/20/09 $0.76 Osmium Holdings S.A. 10/22/96-01/29/98 $1,280.75 Platte River Gold U.S., Inc. 03/01/04-01/25/08 $1.70 Platte River Gold U.S., Inc., Warrants (February 2010) 01/25/08 $0.00 Q2 Gold Resources, Inc. 06/18/07 $0.00 Rochester Resources Ltd. 11/20/09 $0.14 Rochester Resources Ltd., Warrants (November 2011) 11/20/09 $0.00 Rye Patch Gold Corp., Units 12/22/09 $0.24 Western Exploration & Development Ltd., 144A, Special Warrants (December 2049) 08/14/97 $0.50
As of December 31, 2009, the total cost of restricted securities was $18,417,195 and the total value was $14,294,831, representing 2.24% of net assets.
ACQUISITION COST PER GOLD AND PRECIOUS METALS FUND DATE SHARE/UNIT - ------------------------------------------------------------------------------------------- GBS Gold International, Inc., 12% Note, maturity 5/27/11 05/12/08 $995.72
As of December 31, 2009, the total cost of restricted securities was $409,098, and the total value was $285,467, representing 0.12% of net assets. 145 STATEMENTS OF ASSETS AND LIABILITIES
U.S. TREASURY SECURITIES CASH FUND Investments, at identified cost $104,033,790 ============ ASSETS - --------------------------------------------------------------------------- Investments, at value: Securities $ 49,987,150 Repurchase agreements 54,046,640 Cash 81 Receivables: Interest -- Capital shares sold 969,149 Other assets 32,221 - --------------------------------------------------------------------------- TOTAL ASSETS 105,035,241 - --------------------------------------------------------------------------- LIABILITIES - --------------------------------------------------------------------------- Payables: Capital shares redeemed 1,100,445 Adviser and affiliates 13,244 Dividends and distributions -- Accounts payable and accrued expenses 32,164 - --------------------------------------------------------------------------- TOTAL LIABILITIES 1,145,853 - --------------------------------------------------------------------------- NET ASSETS $103,889,388 ============ NET ASSETS CONSIST OF: - --------------------------------------------------------------------------- Paid-in capital $103,888,844 Accumulated undistributed net investment income 829 Accumulated net realized loss on investments (285) Net unrealized appreciation of investments -- ------------ Net assets applicable to capital shares outstanding $103,889,388 ============ Capital shares outstanding, an unlimited number of no par shares authorized 103,964,641 ============ NET ASSET VALUE, PUBLIC OFFERING PRICE, REDEMPTION PRICE, PER SHARE $ 1.00 ============ See accompanying notes to financial statements. 146 December 31, 2009 U.S. GOVERNMENT SECURITIES NEAR-TERM TAX FREE SAVINGS FUND TAX FREE FUND FUND Investments, at identified cost $194,072,015 $23,366,121 $21,361,303 ============ =========== =========== ASSETS - ------------------------------------------------------------------------------------------------------------------------- Investments, at value: Securities $194,072,015 $21,469,917 $19,854,683 Repurchase agreements -- 2,481,059 1,986,818 Cash 57,682,233 -- -- Receivables: Interest 407,067 278,114 262,844 Capital shares sold 2,403,233 4,903 43,592 Other assets 56,880 4,895 5,944 - ------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 254,621,428 24,238,888 22,153,881 - ------------------------------------------------------------------------------------------------------------------------- LIABILITIES - ------------------------------------------------------------------------------------------------------------------------- Payables: Capital shares redeemed 1,300,936 861,458 5,724 Adviser and affiliates 43,724 1,115 4,876 Dividends and distributions -- 9,522 12,105 Accounts payable and accrued expenses 45,130 29,714 29,097 - ------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 1,389,790 901,809 51,802 - ------------------------------------------------------------------------------------------------------------------------- NET ASSETS $253,231,638 $23,337,079 $22,102,079 ============ =========== =========== NET ASSETS CONSIST OF: - ------------------------------------------------------------------------------------------------------------------------- Paid-in capital $252,970,904 $23,019,454 $22,108,615 Accumulated undistributed net investment income 260,734 21,475 34,140 Accumulated net realized loss on investments -- (288,705) (520,874) Net unrealized appreciation of investments -- 584,855 480,198 ------------ ----------- ----------- Net assets applicable to capital shares outstanding $253,231,638 $23,337,079 $22,102,079 ============ =========== =========== Capital shares outstanding, an unlimited number of no par shares authorized 253,399,880 10,539,271 1,811,497 ============ =========== =========== NET ASSET VALUE, PUBLIC OFFERING PRICE, REDEMPTION PRICE, PER SHARE $ 1.00 $ 2.21 $ 12.20 ============ =========== ===========
147 STATEMENTS OF ASSETS AND LIABILITIES
ALL AMERICAN HOLMES GROWTH EQUITY FUND FUND Investments, at identified cost $13,968,919 $31,368,803 =========== =========== ASSETS - --------------------------------------------------------------------------------- Investments, at value: Securities of unaffiliated issuers $14,720,773 $33,443,172 Securities of affiliated issuers -- -- Repurchase agreements 1,764,613 3,860,909 Foreign currencies (Cost $0, $0, $0, $0 and $157,760) -- -- Receivables: Investments sold -- 180,876 Dividends 9,394 44,463 Interest -- -- Capital shares sold 2,510 1,406 Other assets 17,654 21,118 - --------------------------------------------------------------------------------- TOTAL ASSETS 16,514,944 37,551,944 - --------------------------------------------------------------------------------- LIABILITIES - --------------------------------------------------------------------------------- Payables: Investments purchased -- 180,942 Capital shares redeemed 27,490 133,116 Adviser and affiliates 15,492 41,705 Accounts payable and accrued expenses 31,559 37,843 Written options at value (Premiums $3,488, $7,848, $0, $727,981 and $0) 4,160 9,360 Unrealized depreciation on foreign currency exchange contracts - Note 2 B -- -- - --------------------------------------------------------------------------------- TOTAL LIABILITIES 78,701 402,966 - --------------------------------------------------------------------------------- NET ASSETS $16,436,243 $37,148,978 =========== =========== NET ASSETS CONSIST OF: - --------------------------------------------------------------------------------- Paid-in capital $20,121,856 $41,842,386 Accumulated undistributed net investment income (distributions in excess of net investment income) -- (115,375) Accumulated net realized loss on investments and foreign currencies (6,201,407) (10,511,594) Net unrealized appreciation of investments and other assets and liabilities denominated in foreign currencies 2,515,794 5,933,561 ----------- ----------- Net assets applicable to capital shares outstanding $16,436,243 $37,148,978 =========== =========== Capital shares outstanding, an unlimited number of no par shares authorized 838,374 2,391,092 =========== =========== NET ASSET VALUE, PUBLIC OFFERING PRICE, REDEMPTION PRICE, PER SHARE $ 19.60 $ 15.54 =========== =========== See accompanying notes to financial statements. 148 December 31, 2009 GLOBAL MEGATRENDS GLOBAL RESOURCES WORLD PRECIOUS FUND FUND MINERALS FUND Investments, at identified cost $24,683,283 $684,955,147 $593,680,329 =========== ============ ============ ASSETS - ----------------------------------------------------------------------------------------------------------------- Investments, at value: Securities of unaffiliated issuers $24,255,698 $692,128,040 $560,298,626 Securities of affiliated issuers -- 14,346,036 29,986,999 Repurchase agreements 4,278,620 36,244,931 52,445,209 Foreign currencies (Cost $0, $0, $0, $0 and $157,760) -- -- 157,300 Receivables: Investments sold 88 304,966 1,491,050 Dividends 25,531 160,697 77,255 Interest -- 598,830 174,936 Capital shares sold 69,653 584,302 610,289 Other assets 20,721 119,135 103,771 - ----------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 28,650,311 744,486,937 645,345,435 - ----------------------------------------------------------------------------------------------------------------- LIABILITIES - ----------------------------------------------------------------------------------------------------------------- Payables: Investments purchased -- 1,674,308 4,367,011 Capital shares redeemed 15,005 1,137,977 895,215 Adviser and affiliates 41,765 807,127 915,512 Accounts payable and accrued expenses 36,226 157,436 132,367 Written options at value (Premiums $3,488, $7,848, $0, $727,981 and $0) -- 638,500 -- Unrealized depreciation on foreign currency exchange contracts - Note 2 B -- -- 12 - ----------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 92,996 4,415,348 6,310,117 - ----------------------------------------------------------------------------------------------------------------- NET ASSETS $28,557,315 $740,071,589 $639,035,318 =========== ============ ============ NET ASSETS CONSIST OF: - ----------------------------------------------------------------------------------------------------------------- Paid-in capital $40,739,253 $1,186,045,003 $735,751,978 Accumulated undistributed net investment income (distributions in excess of net investment income) 35,372 (5,516,161) (32,180,775) Accumulated net realized loss on investments and foreign currencies (16,068,205) (498,309,733) (113,618,606) Net unrealized appreciation of investments and other assets and liabilities denominated in foreign currencies 3,850,895 57,852,480 49,082,721 ----------- ------------ ------------ Net assets applicable to capital shares outstanding $28,557,315 $740,071,589 $639,035,318 =========== ============ ============ Capital shares outstanding, an unlimited number of no par shares authorized 3,502,251 83,625,506 36,677,292 =========== ============ ============ NET ASSET VALUE, PUBLIC OFFERING PRICE, REDEMPTION PRICE, PER SHARE $ 8.15 $ 8.85 $ 17.42 =========== ============ ============
149 STATEMENTS OF ASSETS AND LIABILITIES
GOLD AND PRECIOUS METALS FUND Investments, at identified cost $199,697,699 ============ ASSETS - ------------------------------------------------------------------------------- Investments, at value: Securities $208,866,218 Repurchase agreements 28,152,325 Cash -- Foreign currencies (Cost $0, $100, $5,997 and $286,751) -- Receivables: Investments sold 506,532 Dividends 54,575 Interest 28,554 Capital shares sold 176,628 Other assets 66,638 - ------------------------------------------------------------------------------- TOTAL ASSETS 237,851,470 - ------------------------------------------------------------------------------- LIABILITIES - ------------------------------------------------------------------------------- Payables: Investments purchased 2,813,838 Capital shares redeemed 245,990 Adviser and affiliates 326,587 Accounts payable and accrued expenses 71,669 - ------------------------------------------------------------------------------- TOTAL LIABILITIES 3,458,084 - ------------------------------------------------------------------------------- NET ASSETS $234,393,386 ============ NET ASSETS CONSIST OF: - ------------------------------------------------------------------------------- Paid-in capital $222,606,370 Accumulated undistributed net investment income (distributions in excess of net investment income) (1,935,664) Accumulated net realized loss on investments and foreign currencies (23,615,216) Net unrealized appreciation of investments and other assets and liabilities denominated in foreign currencies 37,337,896 ------------ Net assets applicable to capital shares outstanding $234,393,386 ============ Capital shares outstanding, an unlimited number of no par shares authorized 15,158,240 ============ NET ASSET VALUE, PUBLIC OFFERING PRICE, REDEMPTION PRICE, PER SHARE $ 15.46 ============ See accompanying notes to financial statements. 150 December 31, 2009 EASTERN GLOBAL EMERGING CHINA EUROPEAN FUND MARKETS FUND REGION FUND Investments, at identified cost $387,813,613 $13,236,691 $46,419,955 ============ =========== =========== ASSETS - -------------------------------------------------------------------------------------------------------------------- Investments, at value: Securities $429,060,493 $12,670,760 $49,485,141 Repurchase agreements 39,727,332 1,448,909 7,057,187 Cash 937,976 -- -- Foreign currencies (Cost $0, $100, $5,997 and $286,751) 100 6,045 294,864 Receivables: Investments sold 6,653,427 74,074 1,097,495 Dividends 794,599 11,630 1,214 Interest -- -- -- Capital shares sold 314,486 1,678 8,978 Other assets 82,843 31,035 30,685 - -------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 477,571,256 14,244,131 57,975,564 - -------------------------------------------------------------------------------------------------------------------- LIABILITIES - -------------------------------------------------------------------------------------------------------------------- Payables: Investments purchased 11,550,393 342,874 1,467,256 Capital shares redeemed 843,549 11,806 55,352 Adviser and affiliates 635,256 17,821 80,410 Accounts payable and accrued expenses 133,179 52,432 49,226 - -------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 13,162,377 424,933 1,652,244 - -------------------------------------------------------------------------------------------------------------------- NET ASSETS $464,408,879 $13,819,198 $56,323,320 ============ =========== =========== NET ASSETS CONSIST OF: - -------------------------------------------------------------------------------------------------------------------- Paid-in capital $769,402,744 $26,321,652 $71,629,646 Accumulated undistributed net investment income (distributions in excess of net investment income) (110,313) (19,144) (661,723) Accumulated net realized loss on investments and foreign currencies (385,829,279) (13,366,341) (24,773,062 Net unrealized appreciation of investments and other assets and liabilities denominated in foreign currencies 80,945,727 883,031 10,128,459 ------------ ----------- ----------- Net assets applicable to capital shares outstanding $464,408,879 $13,819,198 $56,323,320 ============ =========== =========== Capital shares outstanding, an unlimited number of no par shares authorized 50,982,126 1,738,621 6,740,048 ============ =========== =========== NET ASSET VALUE, PUBLIC OFFERING PRICE, REDEMPTION PRICE, PER SHARE $ 9.11 $ 7.95 $ 8.36 ============ =========== ===========
151 STATEMENTS OF OPERATIONS
U.S. TREASURY SECURITIES CASH FUND NET INVESTMENT INCOME INCOME: - --------------------------------------------------------------------------- Interest and other $ 298,329 EXPENSES: - --------------------------------------------------------------------------- Management fee 560,585 Administrative services fee 89,694 Transfer agent fees and expenses 275,363 Accounting service fees and expenses 22,245 Professional fees 37,940 Custodian fees 63,613 Shareholder reporting expenses 24,996 Registration fees 14,291 Trustee fees and expenses 20,271 Miscellaneous expenses 26,362 ---------- Total expenses before reductions 1,135,360 Expenses offset - Note 1 H (76) Expense waiver - Note 3 (9,669) Expenses reimbursed - Note 3 (838,551) ---------- NET EXPENSES 287,064 - --------------------------------------------------------------------------- NET INVESTMENT INCOME 11,265 - --------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized gain (loss) from securities -- Net change in unrealized appreciation of Investments -- - --------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS -- - --------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 11,265 ========== See accompanying notes to financial statements. 152 For the Year Ended December 31, 2009 U.S. GOVERNMENT NEAR-TERM SECURITIES TAX FREE SAVINGS FUND FUND TAX FREE FUND NET INVESTMENT INCOME INCOME: - ---------------------------------------------------------------------------------------------------------------- Interest and other $ 1,421,012 $ 579,885 $ 849,865 EXPENSES: - ---------------------------------------------------------------------------------------------------------------- Management fee 1,433,811 94,292 143,900 Administrative services fee 239,213 15,087 15,349 Transfer agent fees and expenses 362,921 51,222 51,179 Accounting service fees and expenses 50,458 37,056 35,171 Professional fees 53,810 35,028 35,178 Custodian fees 67,833 12,494 11,637 Shareholder reporting expenses 31,518 2,632 3,492 Registration fees 14,488 15,827 12,677 Trustee fees and expenses 20,271 20,271 20,271 Miscellaneous expenses 62,245 5,171 6,794 ----------- --------- ---------- Total expenses before reductions 2,336,568 289,080 335,648 Expenses offset - Note 1 H -- (255) (233) Expense waiver - Note 3 (17,789) (11,028) (10,833) Expenses reimbursed - Note 3 (1,231,766) (192,935) (190,275) ----------- --------- ---------- NET EXPENSES 1,087,013 84,862 134,307 - ---------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 333,999 495,023 715,558 - ---------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized gain (loss) from securities -- (722) 1,626 Net change in unrealized appreciation of Investments -- 427,850 700,396 - ---------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS -- 427,128 702,022 - ---------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 333,999 $ 922,151 $1,417,580 =========== ========= ==========
153 STATEMENTS OF OPERATIONS
ALL AMERICAN HOLMES EQUITY FUND GROWTH FUND NET INVESTMENT INCOME INCOME: - --------------------------------------------------------------------------------- Dividends from unaffiliated issuers $ 167,081 $ 298,756 Foreign tax withheld on dividends (2,427) (14,178) ---------- ----------- Net dividends 164,654 284,578 Interest and other 2,181 7,706 ---------- ----------- TOTAL INCOME 166,835 292,284 EXPENSES: - --------------------------------------------------------------------------------- Management fee 116,735 331,396 Administrative services fee 12,316 27,646 Transfer agent fees and expenses 107,390 103,387 Accounting service fees and expenses 21,959 28,798 Professional fees 37,383 37,280 Distribution plan expenses 38,486 86,394 Custodian fees 24,772 37,734 Shareholder reporting expenses 18,752 12,643 Registration fees 10,891 16,117 Trustee fees and expenses 20,271 20,374 Miscellaneous expenses 20,932 24,412 ---------- ----------- Total expenses before reductions 429,887 726,181 Expenses offset - Note 1 H (240) (140) Expense waiver - Note 3 (10,206) (13,332) Expenses reimbursed - Note 3 (138,629) (99,767) ---------- ----------- NET EXPENSES 280,812 612,942 - --------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) (113,977) (320,658) - --------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized gain (loss) from: Securities from unaffiliated issuers (971,073) (4,714,692) Securities from affiliated issuers -- -- Written options (24,285) (311,725) Foreign currency transactions (1,816) (2,348) ---------- ----------- NET REALIZED GAIN (LOSS) (997,174) (5,028,765) ---------- ----------- Net change in unrealized appreciation (depreciation) of: Investments 3,092,138 12,372,950 Written options (672) (1,512) Other assets and liabilities denominated in foreign currencies (1) (205) ---------- ----------- NET UNREALIZED APPRECIATION 3,091,465 12,371,233 - --------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 2,094,291 7,342,468 - --------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,980,314 $ 7,021,810 ========== =========== See accompanying notes to financial statements. 154 For the Year Ended December 31, 2009 GLOBAL MEGATRENDS GLOBAL RESOURCES WORLD PRECIOUS FUND FUND MINERALS FUND NET INVESTMENT INCOME INCOME: - ------------------------------------------------------------------------------------------------------------------ Dividends from unaffiliated issuers $ 650,476 $ 7,014,522 $ 940,825 Foreign tax withheld on dividends (23,720) (131,006) (86,850) ---------- ------------ ------------ Net dividends 626,756 6,883,516 853,975 Interest and other 5,208 1,333,588 412,001 ---------- ------------ ------------ TOTAL INCOME 631,964 8,217,104 1,265,976 EXPENSES: - ------------------------------------------------------------------------------------------------------------------ Management fee 262,677 5,202,312 5,059,356 Administrative services fee 21,014 471,819 391,386 Transfer agent fees and expenses 100,216 1,563,541 1,040,145 Accounting service fees and expenses 36,721 247,115 215,878 Professional fees 38,260 99,689 109,150 Distribution plan expenses 65,669 1,474,434 1,223,082 Custodian fees 37,256 175,966 235,229 Shareholder reporting expenses 15,204 225,133 122,760 Registration fees 16,204 14,600 22,990 Trustee fees and expenses 22,042 22,221 20,271 Miscellaneous expenses 22,356 162,390 116,652 ---------- ------------ ------------ Total expenses before reductions 637,619 9,659,220 8,556,899 Expenses offset - Note 1 H (122) (152) (48) Expense waiver - Note 3 (17,807) (115,272) (100,030) Expenses reimbursed - Note 3 (106,913) (871,661) (745,959) ---------- ------------ ------------ NET EXPENSES 512,777 8,672,135 7,710,862 - ------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) 119,187 (455,031) (6,444,886) - ------------------------------------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized gain (loss) from: Securities from unaffiliated issuers (1,336,125) (34,678,149) 27,594,272 Securities from affiliated issuers -- (18,574,126) (9,637,971) Written options (135,572) 3,583,868 7,161,156 Foreign currency transactions 6,124 70,536 (548,688) ---------- ------------ ------------ NET REALIZED GAIN (LOSS) (1,465,573) (49,597,871) 24,568,769 ---------- ------------ ------------ Net change in unrealized appreciation (depreciation) of: Investments 8,656,446 350,363,320 292,423,712 Written options -- (89,481) 8,778 Other assets and liabilities denominated in foreign currencies (762) 209,107 42,642 ---------- ------------ ------------ NET UNREALIZED APPRECIATION 8,655,684 350,482,946 292,475,132 - ------------------------------------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 7,190,111 300,885,075 317,043,901 - ------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,309,298 $300,430,044 $310,599,015 ========== ============ ============
155 STATEMENTS OF OPERATIONS
GOLD AND PRECIOUS METALS FUND NET INVESTMENT INCOME INCOME: - ---------------------------------------------------------------------------------- Dividends $ 752,587 Foreign tax withheld on dividends (50,256) ----------- Net dividends 702,331 Interest and other 96,097 ----------- TOTAL INCOME 798,428 EXPENSES: - ---------------------------------------------------------------------------------- Management fee 1,959,098 Administrative services fee 170,257 Transfer agent fees and expenses 424,931 Accounting service fees and expenses 116,011 Professional fees 58,939 Distribution plan expenses 532,053 Custodian fees 150,768 Shareholder reporting expenses 76,416 Registration fees 20,425 Trustee fees and expenses 20,271 Miscellaneous expenses 67,054 ----------- Total expenses before reductions 3,596,223 Expenses offset - Note 1 H (125) Expense waiver - Note 3 (47,527) Expenses reimbursed - Note 3 (279,793) ----------- NET EXPENSES 3,268,778 - ---------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) (2,470,350) - ---------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized gain (loss) from: Securities from unaffiliated issuers 20,170,851 Written options 4,688,888 Foreign currency transactions (223,367) ----------- NET REALIZED GAIN (LOSS) 24,636,372 ----------- Net change in unrealized appreciation (depreciation) of: Investments 54,679,394 Written options 29,898 Other assets and liabilities denominated in foreign currencies 40,951 ----------- NET UNREALIZED APPRECIATION 54,750,243 - ---------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 79,386,615 - ---------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $76,916,265 =========== See accompanying notes to financial statements. 156 For the Year Ended December 31, 2009 EASTERN EUROPEAN GLOBAL EMERGING CHINA REGION FUND MARKETS FUND FUND NET INVESTMENT INCOME INCOME: - -------------------------------------------------------------------------------------------------------------------------- Dividends $ 8,493,988 $ 236,944 $ 624,227 Foreign tax withheld on dividends (1,305,149) (23,888) (43,046) ------------ ---------- ----------- Net dividends 7,188,839 213,056 581,181 Interest and other 44,038 771 5,316 ------------ ---------- ----------- TOTAL INCOME 7,232,877 213,827 586,497 EXPENSES: - -------------------------------------------------------------------------------------------------------------------------- Management fee 4,375,323 150,104 569,832 Administrative services fee 294,167 9,132 38,283 Transfer agent fees and expenses 962,616 77,205 182,629 Accounting service fees and expenses 164,707 32,144 46,791 Professional fees 59,868 55,784 49,133 Distribution plan expenses 919,271 28,539 119,636 Custodian fees 455,582 46,413 80,689 Shareholder reporting expenses 110,538 8,030 24,979 Registration fees 18,368 675 13,243 Trustee fees and expenses 20,373 20,373 20,271 Miscellaneous expenses 116,458 30,763 34,722 ------------ ---------- ----------- Total expenses before reductions 7,497,271 459,162 1,180,208 Expenses offset - Note 1 H (330) (273) (128) Expense waiver - Note 3 (78,482) (15,353) (21,489) Expenses reimbursed - Note 3 (198,208) (142,477) (194,611) ------------ ---------- ----------- NET EXPENSES 7,220,251 301,059 963,980 - -------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) 12,626 (87,232) (377,483) - -------------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized gain (loss) from: Securities from unaffiliated issuers (258,939,885) (5,006,580) 8,167,316 Written options (218,686) (36,411) (182,935) Foreign currency transactions (119,009) (978) (73,556) ------------ ---------- ----------- NET REALIZED GAIN (LOSS) (259,277,580) (5,043,969) 7,910,825 ------------ ---------- ----------- Net change in unrealized appreciation (depreciation) of: Investments 465,705,917 9,749,302 11,522,977 Written options -- -- -- Other assets and liabilities denominated in foreign currencies (36,001) 332 112,435 ------------ ---------- ----------- NET UNREALIZED APPRECIATION 465,669,916 9,749,634 11,635,412 - -------------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 206,392,336 4,705,665 19,546,237 - -------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $206,404,962 $4,618,433 $19,168,754 ============ ========== ===========
157 STATEMENTS OF CHANGES IN NET ASSETS
U.S. TREASURY SECURITIES CASH FUND -------------------------------------------- YEAR ENDED PERIOD ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, 2009 2008(a) 2008 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: - --------------------------------------------------------------------------------------- Net investment income $ 11,265 $ 259,535 $ 2,906,691 Net realized gain (loss) -- -- -- Net unrealized appreciation -- -- -- ------------- ------------- ------------- NET INCREASE IN NET ASSETS FROM OPERATIONS 11,265 259,535 2,906,691 DISTRIBUTIONS TO SHAREHOLDERS: - --------------------------------------------------------------------------------------- From net investment income (10,436) (259,483) (2,910,606) ------------- ------------- ------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (10,436) (259,483) (2,910,606) FROM CAPITAL SHARE TRANSACTIONS: - --------------------------------------------------------------------------------------- Proceeds from shares sold 153,649,644 130,413,946 255,882,468 Distributions reinvested 10,353 251,689 2,823,671 ------------- ------------- ------------- 153,659,997 130,665,635 258,706,139 Cost of shares redeemed (171,181,575) (121,210,250) (262,759,089) ------------- ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (17,521,578) 9,455,385 (4,052,950) - --------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (17,520,749) 9,455,437 (4,056,865) - --------------------------------------------------------------------------------------- NET ASSETS Beginning of period 121,410,137 111,954,700 116,011,565 - --------------------------------------------------------------------------------------- END OF PERIOD $ 103,889,388 $ 121,410,137 $ 111,954,700 - --------------------------------------------------------------------------------------- Accumulated undistributed net investment income, (distributions in excess of net investment income), end of period $ 829 $ -- $ (682) ============= ============= ============= CAPITAL SHARE ACTIVITY - --------------------------------------------------------------------------------------- Shares sold 153,649,644 130,413,946 255,882,468 Shares reinvested 10,353 251,689 2,823,671 Shares redeemed (171,181,575) (121,210,250) (262,759,089) ------------- ------------- ------------- NET SHARE ACTIVITY (17,521,578) 9,455,385 (4,052,950) ============= ============= ============= (a) for the six-month fiscal period ended December 31, 2008 See accompanying notes to financial statements. 158 U.S. GOVERNMENT SECURITIES SAVINGS FUND NEAR-TERM TAX FREE FUND ------------------------------------------ ------------------------------------------ YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, DECEMBER 31, JUNE 30, 2009 2008(a) 2008 2009 2008(a) 2008 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: - ----------------------------------------------------------------------------------------------------------------------------------- Net investment income $ 333,999 $ 2,801,871 $ 15,989,739 $ 495,023 $ 223,507 $ 462,411 Net realized gain (loss) -- 3,459 64,190 (722) -- 277 Net unrealized appreciation -- -- -- 427,850 84,257 110,288 ------------- ------------- ------------- ----------- ----------- ----------- NET INCREASE IN NET ASSETS FROM OPERATIONS 333,999 2,805,330 16,053,929 922,151 307,764 572,976 DISTRIBUTIONS TO SHAREHOLDERS: - ----------------------------------------------------------------------------------------------------------------------------------- From net investment income (334,574) (2,801,889) (15,993,388) (494,773) (223,006) (459,010) ------------- ------------- ------------- ----------- ----------- ----------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (334,574) (2,801,889) (15,993,388) (494,773) (223,006) (459,010) FROM CAPITAL SHARE TRANSACTIONS: - ----------------------------------------------------------------------------------------------------------------------------------- Proceeds from shares sold 151,396,515 134,091,962 369,995,971 14,685,709 1,808,188 3,217,467 Distributions reinvested 319,050 2,737,639 15,556,039 402,076 175,005 356,102 ------------- ------------- ------------- ----------- ----------- ----------- 151,715,565 136,829,601 385,552,010 15,087,785 1,983,193 3,573,569 Cost of shares redeemed (256,393,375) (225,130,630) (408,499,445) (6,167,222) (1,681,960) (3,467,805) ------------- ------------- ------------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (104,677,810) (88,301,029) (22,947,435) 8,920,563 301,233 105,764 - ----------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (104,678,385) (88,297,588) (22,886,894) 9,347,941 385,991 219,730 - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Beginning of period 357,910,023 446,207,611 469,094,505 13,989,138 13,603,147 13,383,417 - ----------------------------------------------------------------------------------------------------------------------------------- END OF PERIOD $ 253,231,638 $ 357,910,023 $ 446,207,611 $23,337,079 $13,989,138 $13,603,147 - ----------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed net investment income, (distributions in excess of net investment income), end of period $ 260,734 $ 461,309 $ 403,299 $ 21,475 $ 21,225 $ 20,724 ============= ============= ============= =========== =========== =========== CAPITAL SHARE ACTIVITY - ----------------------------------------------------------------------------------------------------------------------------------- Shares sold 151,396,515 134,091,962 369,995,971 6,661,147 841,748 1,487,510 Shares reinvested 319,050 2,737,639 15,556,039 182,801 81,677 165,330 Shares redeemed (256,393,375) (225,130,630) (408,499,445) (2,790,990) (787,328) (1,603,148) ------------- ------------- ------------- ----------- ----------- ----------- NET SHARE ACTIVITY (104,677,810) (88,301,029) (22,947,435) 4,052,958 136,097 49,692 ============= ============= ============= =========== =========== ===========
159 STATEMENTS OF CHANGES IN NET ASSETS
TAX FREE FUND -------------------------------------------- YEAR ENDED PERIOD ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, 2009 2008(a) 2008 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: - ------------------------------------------------------------------------------------------ Net investment income (loss) $ 715,558 $ 355,031 $ 670,891 Net realized gain (loss) 1,626 33,947 (42,271) Net unrealized appreciation (depreciation) 700,396 (457,262) (74,214) ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 1,417,580 (68,284) 554,406 DISTRIBUTIONS TO SHAREHOLDERS: - ------------------------------------------------------------------------------------------ From net investment income (715,942) (355,381) (668,191) From net capital gains -- -- -- Tax return of capital -- -- -- ----------- ----------- ----------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (715,942) (355,381) (668,191) FROM CAPITAL SHARE TRANSACTIONS: - ------------------------------------------------------------------------------------------ Proceeds from shares sold 9,240,470 2,556,729 6,825,328 Distributions reinvested 557,292 287,716 544,322 Proceeds from short-term trading fees -- -- -- ----------- ----------- ----------- 9,797,762 2,844,445 7,369,650 Cost of shares redeemed (5,343,353) (3,854,351) (4,816,254) ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS 4,454,409 (1,009,906) 2,553,396 - ------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS 5,156,047 (1,433,571) 2,439,611 - ------------------------------------------------------------------------------------------ NET ASSETS Beginning of period 16,946,032 18,379,603 15,939,992 - ------------------------------------------------------------------------------------------ END OF PERIOD $22,102,079 $16,946,032 $18,379,603 - ------------------------------------------------------------------------------------------ Accumulated undistributed net investment income, (distributions in excess of net investment income), end of period $ 34,140 $ 34,524 $ 34,874 =========== =========== =========== CAPITAL SHARE ACTIVITY - ------------------------------------------------------------------------------------------ Shares sold 759,141 215,622 563,924 Shares reinvested 46,071 24,537 45,182 Shares redeemed (439,867) (334,996) (398,760) ----------- ----------- ----------- NET SHARE ACTIVITY 365,345 (94,837) 210,346 =========== =========== =========== (a) for the six-month fiscal period ended December 31, 2008 (b) for the two-month fiscal period ended December 31, 2008 See accompanying notes to financial statements. 160 ALL AMERICAN EQUITY FUND HOLMES GROWTH FUND ------------------------------------------ ----------------------------------------- YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, DECEMBER 31, OCTOBER 31, 2009 2008(a) 2008 2009 2008(b) 2008 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: - ----------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) $ (113,977) $ 36,469 $ (144,283) $ (320,658) $ (14,866) $ (373,448) Net realized gain (loss) (997,174) (4,506,237) 403,111 (5,028,765) (2,844,467) (2,485,529) Net unrealized appreciation (depreciation) 3,091,465 (5,129,815) 1,022,225 12,371,233 (650,503) (25,643,241) ----------- ----------- ----------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 1,980,314 (9,599,583) 1,281,053 7,021,810 (3,509,836) (28,502,218) DISTRIBUTIONS TO SHAREHOLDERS: - ----------------------------------------------------------------------------------------------------------------------------------- From net investment income (91,991) (6,594) -- -- -- -- From net capital gains -- -- (2,702,440) -- -- -- Tax return of capital -- -- (110,537) -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (91,991) (6,594) (2,812,977) -- -- -- FROM CAPITAL SHARE TRANSACTIONS: - ----------------------------------------------------------------------------------------------------------------------------------- Proceeds from shares sold 2,018,841 2,272,974 11,702,468 2,773,433 481,499 4,868,436 Distributions reinvested 90,879 6,496 2,717,435 -- -- -- Proceeds from short-term trading fees 469 285 755 132 52 517 ----------- ----------- ----------- ----------- ----------- ----------- 2,110,189 2,279,755 14,420,658 2,773,565 481,551 4,868,953 Cost of shares redeemed (3,796,615) (2,952,671) (9,854,499) (5,134,081) (714,741) (9,017,148) ----------- ----------- ----------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (1,686,426) (672,916) 4,566,159 (2,360,516) (233,190) (4,148,195) - ----------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 201,897 (10,279,093) 3,034,235 4,661,294 (3,743,026) (32,650,413) - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Beginning of period 16,234,346 26,513,439 23,479,204 32,487,684 36,230,710 68,881,123 - ----------------------------------------------------------------------------------------------------------------------------------- END OF PERIOD $16,436,243 $16,234,346 $26,513,439 $37,148,978 $32,487,684 $36,230,710 - ----------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed net investment income, (distributions in excess of net investment income), end of period $ -- $ 29,875 $ -- $ (115,375) $ -- $ -- =========== =========== =========== =========== =========== =========== CAPITAL SHARE ACTIVITY - ----------------------------------------------------------------------------------------------------------------------------------- Shares sold 117,450 103,969 422,589 217,283 35,294 228,630 Shares reinvested 4,761 391 96,056 -- -- -- Shares redeemed (220,835) (139,580) (367,851) (366,984) (57,386) (445,988) ----------- ----------- ----------- ----------- ----------- ----------- NET SHARE ACTIVITY (98,624) (35,220) 150,794 (149,701) (22,092) (217,358) =========== =========== =========== =========== =========== ===========
161 STATEMENTS OF CHANGES IN NET ASSETS
GLOBAL MEGATRENDS FUND ----------------------------------------- YEAR ENDED PERIOD ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, OCTOBER 31, 2009 2008(b) 2008 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: - ------------------------------------------------------------------------------------------- Net investment income (loss) $ 119,187 $ (7,575) $ (17,782) Net realized gain (loss) (1,465,573) (5,713,928) (8,888,916) Net unrealized appreciation (depreciation) 8,655,684 4,479,663 (13,800,939) ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 7,309,298 (1,241,840) (22,707,637) DISTRIBUTIONS TO SHAREHOLDERS: - ------------------------------------------------------------------------------------------- From net investment income (86,578) -- -- From net capital gains -- -- (1,317,151) Tax return of capital -- (25,988) -- ----------- ----------- ----------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (86,578) (25,988) (1,317,151) FROM CAPITAL SHARE TRANSACTIONS: - ------------------------------------------------------------------------------------------- Proceeds from shares sold 11,166,132 1,746,194 46,895,942 Distributions reinvested 81,740 24,701 1,265,576 Proceeds from short-term trading fees 1,360 61 5,176 ----------- ----------- ----------- 11,249,232 1,770,956 48,166,694 Cost of shares redeemed (11,949,778) (3,855,326) (16,477,891) ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (700,546) (2,084,370) 31,688,803 - ------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 6,522,174 (3,352,198) 7,664,015 - ------------------------------------------------------------------------------------------- NET ASSETS Beginning of period 22,035,141 25,387,339 17,723,324 - ------------------------------------------------------------------------------------------- END OF PERIOD $28,557,315 $22,035,141 $25,387,339 - ------------------------------------------------------------------------------------------- Accumulated undistributed net investment income, (distributions in excess of net investment income), end of period $ 35,372 $ -- $ -- =========== =========== =========== CAPITAL SHARE ACTIVITY - ------------------------------------------------------------------------------------------- Shares sold 1,647,632 285,800 4,151,097 Shares reinvested 10,129 4,043 107,984 Shares redeemed (1,665,659) (627,748) (1,801,601) ----------- ----------- ----------- NET SHARE ACTIVITY (7,898) (337,905) 2,457,480 =========== =========== =========== (a) for the six-month fiscal period ended December 31, 2008 (b) for the two-month fiscal period ended December 31, 2008 See accompanying notes to financial statements. 162 GLOBAL RESOURCES FUND WORLD PRECIOUS MINERALS FUND -------------------------------------------- ----------------------------------------- YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31, DECEMBER 31, JUNE 30, 2009 2008(a) 2008 2009 2008(a) 2008 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: - ----------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) $ (455,031) $ (1,716,551) $ 4,454,166 $ (6,444,886) $ (2,050,603) $ (4,325,331) Net realized gain (loss) (49,597,871) (430,081,840) 277,348,862 24,568,769 (105,750,761) 178,189,530 Net unrealized appreciation (depreciation) 350,482,946 (823,897,526) 231,570,502 292,475,132 (368,719,138) (62,202,206) ------------ -------------- -------------- ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 300,430,044 (1,255,695,917) 513,373,530 310,599,015 (476,520,502) 111,661,993 DISTRIBUTIONS TO SHAREHOLDERS: - ----------------------------------------------------------------------------------------------------------------------------------- From net investment income -- -- (78,221,305) (24,089,084) -- (99,747,352) From net capital gains -- (96,308,578) (176,347,594) -- (61,845,712) (103,097,880) Tax return of capital -- -- -- -- -- -- ------------ -------------- -------------- ------------ ------------ ------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS -- (96,308,578) (254,568,899) (24,089,084) (61,845,712) (202,845,232) FROM CAPITAL SHARE TRANSACTIONS: - ----------------------------------------------------------------------------------------------------------------------------------- Proceeds from shares sold 181,440,914 178,643,865 817,774,032 139,489,345 82,524,302 418,681,230 Distributions reinvested -- 93,000,270 246,775,705 23,204,309 59,587,050 192,776,672 Proceeds from short-term trading fees 30,658 47,596 91,286 58,946 48,834 206,975 ------------ -------------- -------------- ------------ ------------ ------------ 181,471,572 271,691,731 1,064,641,023 162,752,600 142,160,186 611,664,877 Cost of shares redeemed (206,354,015) (465,744,284) (696,115,025) (169,346,997) (193,687,785) (495,247,072) ------------ -------------- -------------- ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (24,882,443) (194,052,553) 368,525,998 (6,594,397) (51,527,599) 116,417,805 - ----------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 275,547,601 (1,546,057,048) 627,330,629 279,915,534 (589,893,813) 25,234,566 - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Beginning of period 464,523,988 2,010,581,036 1,383,250,407 359,119,784 949,013,597 923,779,031 - ----------------------------------------------------------------------------------------------------------------------------------- END OF PERIOD $740,071,589 $ 464,523,988 $2,010,581,036 $639,035,318 $359,119,784 $949,013,597 - ----------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed net investment income, (distributions in excess of net investment income), end of period $ (5,516,161) $ (7,742,455) $ (47,434,621) $(32,180,775) $(25,221,445) $(64,048,128) ============ ============== ============== ============ ============ ============ CAPITAL SHARE ACTIVITY - ----------------------------------------------------------------------------------------------------------------------------------- Shares sold 26,149,328 15,106,616 44,109,226 10,066,467 5,873,543 14,550,574 Shares reinvested -- 18,379,336 14,892,921 1,380,387 8,473,439 8,106,672 Shares redeemed (30,816,159) (43,177,704) (39,167,676) (12,317,772) (14,285,921) (17,762,117) ------------ -------------- -------------- ------------- ------------ ------------ NET SHARE ACTIVITY (4,666,831) (9,691,752) 19,834,471 (870,918) 61,061 4,895,129 ============ ============== ============== ============= ============ ============
163 STATEMENTS OF CHANGES IN NET ASSETS
GOLD AND PRECIOUS METALS FUND ------------------------------------------ YEAR ENDED PERIOD ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, 2009 2008(a) 2008 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: - --------------------------------------------------------------------------------------- Net investment income (loss) $ (2,470,350) $ (612,057) $ (892,947) Net realized gain (loss) 24,636,372 (45,658,084) 45,556,108 Net unrealized appreciation (depreciation) 54,750,243 (37,631,473) 2,976,851 ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 76,916,265 (83,901,614) 47,640,012 DISTRIBUTIONS TO SHAREHOLDERS: - --------------------------------------------------------------------------------------- From net investment income (605,996) -- -- From net capital gains -- (11,619,090) (25,521,881) Tax return of capital -- -- -- ------------ ------------ ------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS (605,996) (11,619,090) (25,521,881) FROM CAPITAL SHARE TRANSACTIONS: - --------------------------------------------------------------------------------------- Proceeds from shares sold 69,373,429 83,548,879 182,890,757 Distributions reinvested 576,071 10,904,039 24,120,907 Proceeds from short-term trading fees 65,721 65,548 127,619 ------------ ------------ ------------ 70,015,221 94,518,466 207,139,283 Cost of shares redeemed (104,137,668) (65,814,015) (148,997,522) ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (34,122,447) 28,704,451 58,141,761 - --------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 42,187,822 (66,816,253) 80,259,892 - --------------------------------------------------------------------------------------- NET ASSETS Beginning of period 192,205,564 259,021,817 178,761,925 - --------------------------------------------------------------------------------------- END OF PERIOD $234,393,386 $192,205,564 $259,021,817 - --------------------------------------------------------------------------------------- Accumulated undistributed net investment income, (distributions in excess of net investment income), end of period $ (1,935,664) $ (1,197,725) $ (796,871) ============ ============ ============ CAPITAL SHARE ACTIVITY - --------------------------------------------------------------------------------------- Shares sold 5,480,136 7,260,223 10,241,147 Shares reinvested 37,166 1,295,781 1,635,316 Shares redeemed (8,113,350) (5,876,426) (8,730,139) ------------ ------------ ------------ NET SHARE ACTIVITY (2,596,048) 2,679,578 3,146,324 ============ ============ ============ (a) for the six-month fiscal period ended December 31, 2008 (b) for the two-month fiscal period ended December 31, 2008 See accompanying notes to financial statements. 164 EASTERN EUROPEAN FUND GLOBAL EMERGING MARKETS FUND -------------------------------------------- ------------------------------------------ YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31, OCTOBER 31, 2009 2008(b) 2008 2009 2008(b) 2008 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: - ---------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) $ 12,626 $ (1,756,193) $ (1,857,811) $ (87,232) $ (19,625) $ (399,157) Net realized gain (loss) (259,277,580) (82,059,126) 10,880,465 (5,043,969) (2,933,938) (4,956,114) Net unrealized appreciation (depreciation) 465,669,916 (2,066,670) (828,852,508) 9,749,634 1,809,552 (27,053,864) ------------ ------------ -------------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 206,404,962 (85,881,989) (819,829,854) 4,618,433 (1,144,011) (32,409,135) DISTRIBUTIONS TO SHAREHOLDERS: - ---------------------------------------------------------------------------------------------------------------------------------- From net investment income -- -- -- -- -- (1,235,838) From net capital gains -- -- (273,627,367) -- -- (8,418,305) Tax return of capital -- -- -- -- (147,530) -- ------------ ------------ -------------- ----------- ----------- ----------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS -- -- (273,627,367) -- (147,530) (9,654,143) FROM CAPITAL SHARE TRANSACTIONS: - ---------------------------------------------------------------------------------------------------------------------------------- Proceeds from shares sold 60,092,169 24,488,731 269,122,580 2,643,707 176,198 11,160,939 Distributions reinvested -- -- 266,926,394 -- 137,693 9,156,240 Proceeds from short-term trading fees 259,343 108,582 1,599,093 8,428 1,230 116,466 ------------ ------------ -------------- ----------- ----------- ----------- 60,351,512 24,597,313 537,648,067 2,652,135 315,121 20,433,645 Cost of shares redeemed (119,667,750) (36,889,330) (611,403,256) (3,114,125) (1,068,774) (26,283,342) ------------ ------------ -------------- ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (59,316,238) (12,292,017) (73,755,189) (461,990) (753,653) (5,849,697) - ---------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 147,088,724 (98,174,006) (1,167,212,410) 4,156,443 (2,045,194) (47,912,975) - ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Beginning of period 317,320,155 415,494,161 1,582,706,571 9,662,755 11,707,949 59,620,924 - ---------------------------------------------------------------------------------------------------------------------------------- END OF PERIOD $464,408,879 $317,320,155 $ 415,494,161 $13,819,198 $ 9,662,755 $11,707,949 - ---------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed net investment income, (distributions in excess of net investment income), end of period $ (110,313) $ (6) $ (1,796) $ (19,144) $ -- $ (300) ============ ============ ============== =========== =========== =========== CAPITAL SHARE ACTIVITY - ---------------------------------------------------------------------------------------------------------------------------------- Shares sold 8,490,410 3,727,676 17,749,450 401,295 32,218 739,179 Shares reinvested -- -- 16,352,444 -- 26,789 570,838 Shares redeemed (19,544,443) (7,172,967) (48,093,690) (488,408) (203,613) (2,064,625) ------------ ------------ -------------- ----------- ----------- ----------- NET SHARE ACTIVITY (11,054,033) (3,445,291) (13,991,796) (87,113) (144,606) (754,608) ============ ============ ============== =========== =========== ===========
165 STATEMENTS OF CHANGES IN NET ASSETS
CHINA REGION FUND ------------------------------------------- YEAR ENDED PERIOD ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, JUNE 30, 2009 2008(a) 2008 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: - ----------------------------------------------------------------------------------------- Net investment loss $ (377,483) $ (128,137) $ (301,827) Net realized gain (loss) 7,910,825 (25,290,168) 8,268,285 Net unrealized appreciation (depreciation) 11,635,412 (3,141,768) (21,280,538) ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS 19,168,754 (28,560,073) (13,314,080) DISTRIBUTIONS TO SHAREHOLDERS: - ----------------------------------------------------------------------------------------- From net investment income -- -- (862,509) From net capital gains -- -- (24,776,876) Tax return of capital -- -- (1,395,287) ----------- ----------- ----------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS -- -- (27,034,672) FROM CAPITAL SHARE TRANSACTIONS: - ----------------------------------------------------------------------------------------- Proceeds from shares sold 17,131,885 6,720,245 87,256,997 Distributions reinvested -- -- 26,049,930 Proceeds from short-term trading fees 85,053 59,386 363,983 ----------- ----------- ----------- 17,216,938 6,779,631 113,670,910 Cost of shares redeemed (18,410,242) (20,981,063) (86,017,501) ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (1,193,304) (14,201,432) 27,653,409 - ----------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 17,975,450 (42,761,505) (12,695,343) - ----------------------------------------------------------------------------------------- NET ASSETS Beginning of period 38,347,870 81,109,375 93,804,718 - ----------------------------------------------------------------------------------------- END OF PERIOD $56,323,320 $38,347,870 $81,109,375 - ----------------------------------------------------------------------------------------- Distributions in excess of net investment income, end of period $ (661,723) $ (722,297) $(1,910,999) =========== =========== =========== CAPITAL SHARE ACTIVITY - ----------------------------------------------------------------------------------------- Shares sold 2,675,507 979,972 6,246,450 Shares reinvested -- -- 2,136,992 Shares redeemed (2,794,611) (3,044,240) (6,934,355) ----------- ----------- ----------- NET SHARE ACTIVITY (119,104) (2,064,268) 1,449,087 =========== =========== =========== (a) for the six-month fiscal period ended December 31, 2008 See accompanying notes to financial statements.
166 NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE 1: SIGNIFICANT ACCOUNTING POLICIES U.S. Global Investors Funds (Trust), consisting of thirteen separate funds (Funds), is organized as a Delaware statutory trust. Each Fund is an open-end management investment company registered under the Investment Company Act of 1940, as amended. All funds are diversified with the exception of Global Resources, World Precious Minerals, Gold and Precious Metals, Eastern European, Global Emerging Markets and China Region. A nondiversified fund may invest a significant portion of its assets in a small number of companies. Effective October 1, 2008, U.S. Global Investor Funds and U.S. Global Accolade Funds reorganized from two separate Massachusetts business trusts into a single Delaware statutory trust under the name U.S. Global Investors Funds. Effective December 31, 2008, the fiscal year for all Funds in the Trust changed to December 31. The four Funds previously in the U.S. Global Accolade Funds Trust (Holmes Growth, Global MegaTrends, Eastern European and Global Emerging Markets) had a fiscal year that ended October 31. The fiscal period ended December 31, 2008, presented in these financial statements is a two-month period for these Funds. The nine funds originally in the U.S. Global Investors Funds Trust (U.S. Treasury Securities Cash, U.S. Government Securities Savings, Near-Term Tax Free, Tax Free, All American Equity, Global Resources, World Precious Minerals, Gold and Precious Metals and China Region) had a fiscal year that ended June 30. The fiscal period ended December 31, 2008, presented is a six- month period for these Funds. The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. The policies are in conformity with U.S. generally accepted accounting principles. A. SECURITY VALUATIONS The Funds value investments traded on national or international securities exchanges or over-the-counter at the last sales price reported by the security's primary exchange of its market at the time of daily valuation. Securities for which no sale was reported are valued at the mean between the last reported bid and asked quotation. Short-term investments with effective maturities of sixty days or less at the date of purchase may be valued at amortized cost, which approximates market value. An independent pricing service values municipal securities, long-term U.S. Government obligations and corporate debt securities using a system based on such factors as credit rating, maturity, coupon and type of security to determine fair value. B. FAIR VALUED SECURITIES Securities for which market quotations are not readily available or which are subject to legal restrictions are valued at their fair value as determined in good faith under consistently applied procedures under the general supervision of the 167 NOTES TO FINANCIAL STATEMENTS December 31, 2009 Board of Trustees. The following factors are generally considered in determining fair value: nature and duration of any trading restrictions, trading volume, market values of unrestricted shares of the same or similar class, investment management's judgment regarding the market experience of the issuer, financial status and other operational and market factors affecting the issuer, issuer's management, quality of the underlying property based on review of independent geological studies, the extent of a Fund's investment in the trading securities of the issuer; and other relevant matters. The fair values may differ from what would have been used had a broader market for these securities existed. For securities traded on international exchanges, if events which may materially affect the value of a Fund's securities occur after the close of the primary exchange and before a Fund's net asset value is next determined, then those securities will be valued at their fair value as determined in good faith under the supervision of the Board of Trustees. The Funds may use a systematic fair value model provided by an independent third party to value international securities. At December 31, 2009, this model was used to value certain foreign securities in Global MegaTrends, Global Resources, World Previous Minerals, Gold and Precious Metals, Eastern European, Global Emerging Markets and China Region Funds. C. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for on trade date. Realized gains and losses from security transactions are determined on an identified-cost basis. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as a Fund is informed of the ex-dividend data in the exercise of reasonable diligence. Interest income, which may include original issue discount, is recorded on an accrual basis. Discounts and premiums on securities purchased are accreted and amortized, respectively, on a yield-to-maturity basis as adjustments to interest income. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. The Funds may purchase securities on a when-issued or delayed-delivery basis and segregate the liquid assets on their books collateral with a value at least equal to the amount of the commitment. Losses may arise due to the changes in the value of the underlying securities or if the counterparty does not perform under the contract. The equity funds may invest in private placements and initial public offerings (IPOs), the volatility of which may significantly affect performance. There is no guarantee that these high-risk investments will affect a Fund's performance in the same way in the future. 168 NOTES TO FINANCIAL STATEMENTS December 31, 2009 D. REPURCHASE AGREEMENTS The Funds may enter into repurchase agreements with recognized financial institutions or registered broker-dealers and, in all instances, hold as collateral, underlying securities with a value exceeding the principal amount of the repurchase obligation. The Funds use joint tri-party repurchase agreement accounts with other funds under common management where uninvested cash is collectively invested in repurchase agreements, and each participating fund owns an undivided interest in the account. E. FOREIGN CURRENCY TRANSACTIONS Some Funds may invest in securities of foreign issuers. The accounting records of these Funds are maintained in U.S. dollars. At each net asset value determination date, the value of assets and liabilities denominated in foreign currencies are translated into U.S. dollars using the current prevailing exchange rate. Security transactions, income and expenses are converted at the prevailing rate of exchange on the respective dates of the transactions. The effect of changes in foreign exchange rates on foreign denominated securities is included with the net realized and unrealized gain or loss on securities. Other foreign currency gains or losses are reported separately. F. FEDERAL INCOME TAXES The Funds intend to continue to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their taxable income to shareholders. Accordingly, no provision for federal income taxes is required. Each Fund may be subject to foreign taxes on income and gains on investments, which are accrued based on the Fund's understanding of the tax rules and regulations in the foreign markets. The Funds recognize the tax benefits of uncertain tax positions only where the position is "more likely than not" to be sustained assuming examination by tax authorities. Management has analyzed the Funds' tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years or expected to be taken in the 2009 tax returns. Tax years 2005 through 2008 remain subject to examination by major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts. The Funds have no examinations in progress. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months. 169 NOTES TO FINANCIAL STATEMENTS December 31, 2009 G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS The Funds record dividends and distributions to shareholders on the ex-dividend date. Distributions are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States. Accordingly, periodic reclassifications related to permanent book and tax basis differences are made within the Funds' capital accounts to reflect income and gains available for distribution under income tax regulations. The Funds generally pay income dividends and distribute capital gains, if any, annually. The U.S. Treasury Securities Cash and U.S. Government Securities Savings Funds accrue dividends on a daily basis with payment monthly. The Tax Free and Near-Term Tax Free Funds pay monthly dividends. Dividends and distributions payable at period end are processed for reinvestment on the following business day. A Fund may elect to designate a portion of the earnings and profits distributed to shareholders on the redemption of fund shares during the year as distributions for federal income tax purposes. H. EXPENSES Each Fund bears expenses incurred specifically on its behalf plus an allocation of its share of Trust level expenses. Expense offset arrangements have been made with the Funds' custodian so the custodian fees may be paid indirectly by credits earned on the Funds' cash balances. Such deposit arrangements are an alternative to overnight investments. I. SHORT-TERM TRADING (REDEMPTION) FEES Shares held in the All American Equity Fund 30 days or less are subject to a short-term trading fee equal to 0.10% of the proceeds of the redeemed shares. Shares held in the Holmes Growth, Global MegaTrends and Global Resources Funds 30 days or less are subject to a short-term trading fee equal to 0.25% of the proceeds of the redeemed shares. Shares held in the World Precious Minerals and Gold and Precious Metals Funds 30 days or less are subject to a short-term trading fee equal to 0.50% of the proceeds of the redeemed shares. Shares held in the Eastern European and Global Emerging Markets Funds 180 days or less are subject to a short-term trading fee equal to 2.00% of the proceeds of the redeemed shares. Shares held in the China Region Fund 180 days or less are subject to a short-term trading fee equal to 1.00% of the proceeds of the redeemed shares. These fees, which are retained by the Funds, are accounted for as an addition to paid-in capital. J. USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements 170 NOTES TO FINANCIAL STATEMENTS December 31, 2009 and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. K. SUBSEQUENT EVENTS EVALUATION Management has evaluated the need for disclosures and/or adjustments resulting from subsequent events through February 22, 2010, the date the financial statements were available to be issued. This evaluation did not result in any subsequent events that necessitated disclosures and/or adjustments. L. NEW ACCOUNTING PRONOUNCEMENTS In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-06, Improving Disclosures about Fair Value Measurements. This ASU will add new requirements for disclosures into and out of Levels 1 and 2 fair-value measurements and information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of Level 3 fair-value measurements. It also clarifies existing fair value disclosures about the level of disaggregation, inputs and valuation techniques. Except for the detailed Level 3 reconciliation disclosures, the guidance in the ASU is effective for annual and interim reporting periods in fiscal years beginning after December 15, 2009. The new disclosures for Level 3 activity are effective for annual and interim reporting periods in fiscal years beginning after December 15, 2010. Management is currently evaluating the impact that adoption will have on the Funds' financial statement disclosures. NOTE 2: FINANCIAL DERIVATIVE INSTRUMENTS A. OPTIONS CONTRACTS The equity Funds purchase or write (sell) options on securities to manage their exposure to stock or commodity markets as well as fluctuations in interest and currency conversion rates. The use of options carries the risks of a change in value of the underlying instruments, an illiquid secondary market, or failure of the counterparty to perform its obligations. A put option gives the purchaser of the option, upon payment of a premium, the right to sell, and the issuer of the option the obligation to buy, the underlying security, commodity, index, currency or other instrument at the exercise price. A call option, upon payment of a premium, gives the purchaser of the option the right to buy, and the issuer the obligation to sell, the underlying instrument at the exercise price. Purchasing a put option tends to decrease a Fund's exposure to the underlying instrument, whereas purchasing a call option tends to increase a Fund's exposure to the underlying instrument. A Fund pays a premium which is included in the Statement of Assets and Liabilities as an investment and subsequently marked to market to reflect the current value of the option. Premiums paid to purchase options which expire are treated as realized losses. Premiums paid to purchase 171 NOTES TO FINANCIAL STATEMENTS December 31, 2009 options which are exercised or closed are added to the cost of securities acquired or the proceeds from securities sold. The risk associated with purchasing put and call options is limited to the premium paid. The Funds will realize a loss equal to all or a part of the premium paid for an option if the price of the underlying security or other instrument decreases or does not increase by more than the premium (in the case of a call option), or if the price of the underlying security or other instrument increases or does not decrease by more than the premium (in the case of a put option). Writing a put option tends to increase a Fund's exposure to the underlying instrument, whereas writing a call option tends to decrease a Fund's exposure to the underlying instrument. The premium received is recorded as liability in the Statement of Assets and Liabilities and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which expire are treated as realized gains. Premiums received from options which are exercised or closed are added to the proceeds or offset against amounts paid on the underlying transaction to determine the realized gain or loss. Written options include a risk of loss in excess of the option premium. A Fund as a writer of an option has no control over whether the underlying instrument may be sold (call) or purchased (put) and thus bears the market risk of an unfavorable change in the price of the instrument underlying the written option. There is the risk a Fund may not be able to enter into a closing transaction because of an illiquid market. A Fund's ability to close out its position as a purchaser or seller of a put or call option is dependent, in part, upon the liquidity of the market for that particular option. There can be no guarantee that a fund will be able to close out an option position when desired. An inability to close out its option positions may reduce a Fund's anticipated profits or increase its losses. As of December 31, 2009, portfolio securities valued at $90,192 and $202,932 were held in escrow by the custodian as cover for call options written for the All American and Holmes Growth Fund, respectively. 172 NOTES TO FINANCIAL STATEMENTS December 31, 2009 Transactions in written call options during the year ended December 31, 2009, were as follows:
ALL AMERICAN HOLMES EQUITY FUND GROWTH FUND ----------------------------------------------------- NUMBER OF PREMIUMS NUMBER OF PREMIUMS CONTRACTS RECEIVED CONTRACTS RECEIVED Options outstanding at December 31, 2008 -- $ -- -- $ -- Options written 1,227 194,347 2,575 576,418 Options closed (841) (130,584) (2,360) (505,140) Options expired (304) (38,703) (179) (63,430) Options exercised (66) (21,572) -- -- ------- --------- ------- ------------ Options outstanding at December 31, 2009 16 $ 3,488 36 $ 7,848 ======= ========= ======= ============ GLOBAL GLOBAL MEGATRENDS FUND RESOURCES FUND ----------------------------------------------------- NUMBER OF PREMIUMS NUMBER OF PREMIUMS CONTRACTS RECEIVED CONTRACTS RECEIVED Options outstanding at December 31, 2008 -- $ -- -- $ -- Options written 1,612 303,059 128,747 21,967,057 Options closed (1,360) (237,926) (98,537) (17,212,301) Options expired (32) (21,112) (10,350) (1,494,938) Options exercised (220) (44,021) (17,860) (2,531,837) ------ -------- ------- ------------ Options outstanding at December 31, 2009 -- $ -- 2,000 $ 727,981 ====== ======== ======= ============ WORLD PRECIOUS GOLD AND PRECIOUS MINERALS FUND METALS FUND ---------------------------------------------------- NUMBER OF PREMIUMS NUMBER OF PREMIUMS CONTRACTS RECEIVED CONTRACTS RECEIVED Options outstanding at December 31, 2008 2,557 $ 180,422 2,193 $ 163,402 Options written 50,578 8,903,042 38,848 5,606,890 Options closed (27,322) (4,455,650) (20,280) (2,358,197) Options expired (6,501) (767,938) (6,815) (767,668) Options exercised (19,312) (3,859,876) (13,946) (2,644,427) ------- ----------- ------- ----------- Options outstanding at December 31, 2009 -- $ -- -- $ -- ======= =========== ======= =========== EASTERN GLOBAL EMERGING EUROPEAN FUND MARKETS FUND ------------------------------------------------- NUMBER OF PREMIUMS NUMBER OF PREMIUMS CONTRACTS RECEIVED CONTRACTS RECEIVED Options outstanding at December 31, 2008 -- $ -- -- $ -- Options written 17,400 2,571,627 663 108,198 Options closed (9,000) (1,491,848) (593) (93,603) Options expired -- -- -- -- Options exercised (8,400) (1,079,779) (70) (14,595) ------ ----------- ---- -------- Options outstanding at December 31, 2009 -- $ -- -- $ -- ====== =========== ==== ======== CHINA REGION FUND ------------------------- NUMBER OF PREMIUMS CONTRACTS RECEIVED Options outstanding at December 31, 2008 -- $ -- Options written 805 174,198 Options closed (300) (132,306) Options expired (500) (41,471) Options exercised (5) (421) ---- -------- Options outstanding at December 31, 2009 -- $ -- ==== ========
173 NOTES TO FINANCIAL STATEMENTS December 31, 2009 B. FORWARD FOREIGN CURRENCY CONTRACTS The Funds enter into forward foreign currency contracts to lock in the U.S. dollar cost of purchase and sale transactions or to defend the portfolio against currency fluctuations. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. These contracts are valued daily, and the Fund's net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting, is included in the statement of assets and liabilities. Realized and unrealized gains and losses are included in the statement of operations. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of the contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. Open forward foreign currency contracts at December 31, 2009, were:
FOREIGN IN EXCHANGE SETTLEMENT UNREALIZED UNREALIZED FUND CONTRACT CURRENCY FOR USD DATE VALUE APPRECIATION (DEPRECIATION) - -------------------------------------------------------------------------------------------------------------------- World Precious Minerals Fund PURCHASES: South African Rands 18,452 $ 2,500 01/08/10 $2,488 $ -- $(12)
C. SUMMARY OF DERIVATIVE INSTRUMENTS The following is a summary of the valuations of derivative instruments categorized by location in the Statement of Assets and Liabilities as of December 31, 2009:
GLOBAL GLOBAL ALL AMERICAN HOLMES GROWTH MEGATRENDS RESOURCES LOCATION EQUITY FUND FUND FUND FUND --------------------------------------------------------------------------------------------------------- ASSET DERIVATIVES Investments, at value Equity contracts - Note 2 A $140,650 $83,600 $ 52,250 $2,343,700 Unrealized appreciation on foreign currency exchange contracts Foreign exchange contracts - Note 2 B -- -- -- -- ------------------------------------------------------ TOTAL $140,650 $83,600 $ 52,250 $2,343,700 ------------------------------------------------------ LIABILITY DERIVATIVES Liability derivatives Written options at value Equity contracts - Note 2 A $ (4,160) $(9,360) $ -- $ (638,500) Unrealized depreciation on foreign currency exchange contracts Foreign exchange contracts - Note 2 B -- -- -- -- ------------------------------------------------------ TOTAL $ (4,160) $(9,360) $ -- $ (638,500) ------------------------------------------------------
174 NOTES TO FINANCIAL STATEMENTS December 31, 2009
WORLD GOLD & GLOBAL PRECIOUS PRECIOUS EASTERM EMERGING CHINA MINERALS METALS EUROPEAN MARKETS REGION LOCATION FUND FUND FUND FUND FUND ----------------------------------------------------------------------------------------------------------- ASSET DERIVATIVES Investments, at value Equity contracts - Note 2 A $1,603,790 $707,595 $802,500 $31,350 $125,400 Unrealized appreciation on foreign currency exchange contracts Foreign exchange contracts - Note 2 B -- -- -- -- -- ------------------------------------------------------ TOTAL $1,603,790 $707,595 $802,500 $31,350 $125,400 ------------------------------------------------------ LIABILITY DERIVATIVES Written options at value Equity contracts - Note 2 A $ -- $ -- $ -- $ -- $ -- Unrealized depreciation on foreign currency exchange contracts Foreign exchange contracts - Note 2 B (12) -- -- -- -- ------------------------------------------------------ TOTAL $ (12) $ -- $ -- $ -- $ -- ------------------------------------------------------
The following is a summary of the effect of derivative instruments on the Statement of Operations for the year ended December 31, 2009:
GLOBAL GLOBAL ALL AMERICAN HOLMES GROWTH MEGATRENDS RESOURCES LOCATION EQUITY FUND FUND FUND FUND ---------------------------------------------------------------------------------------------------------- REALIZED GAIN/(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME Realized gain (loss) from securities Equity contracts $ (99,539) $ 5,397 $ (52,036) $(17,318,284) Realized gain (loss) on written options Equity contracts (24,285) (311,725) (135,572) 3,583,868 Net realized gain (loss) on foreign currency transactions Foreign exchange contracts -- (12,047) 5,867 (544,106) -------------------------------------------------------- $(123,824) $(318,375) $(181,741) $(14,278,522) -------------------------------------------------------- CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME Net change in unrealized appreciation (depreciation) on investments Equity contracts $ 17,576 $ 2,451 $ 1,532 $ 10,355,621 Net change in unrealized appreciation (depreciation) on options written Equity contracts (672) (1,512) -- (89,481) Net change in unrealized appreciation (depreciation) on translation of assets and liabilities denominated in foreign currencies Foreign exchange contracts -- -- -- -- -------------------------------------------------------- 16,904 939 1,532 10,266,140 -------------------------------------------------------- TOTAL $(106,920) $(317,436) $(180,209) $ (4,012,382) --------------------------------------------------------
175 NOTES TO FINANCIAL STATEMENTS December 31, 2009
WORLD GOLD & GLOBAL PRECIOUS PRECIOUS EASTERM EMERGING CHINA MINERALS METALS EUROPEAN MARKETS REGION LOCATION FUND FUND FUND FUND FUND - -------------------------------------------------------------------------------------------------------------- REALIZED GAIN/(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME Realized gain (loss) from securities Equity contracts $(11,088,416) $ 6,728,975 $ (896,802) $(61,908) $ 6,594 Realized gain on written options Equity contracts 7,161,156 4,688,888 (218,686) (36,411) (182,935) Net realized gain (loss) on foreign currency transactions Foreign exchange contracts (558,333) (103,240) 115,283 2,933 -- --------------------------------------------------------------- $ (4,485,593) $11,314,623 $(1,000,205) $(95,386) $(176,341) --------------------------------------------------------------- CHANGE IN UNREALIZED APPRECIATION/ (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME Net change in unrealized (depreciation) on investments Equity contracts $ 432,509 $ 588,324 $ (207,000) $ 919 $ 3,677 Net change in unrealized appreciation (depreciation) on options written Equity contracts 8,778 29,898 -- -- -- Net change in unrealized appreciation (depreciation) on translation of assets and liabilities denominated in foreign currencies Foreign exchange contracts (12) -- (6) -- -- --------------------------------------------------------------- 441,275 618,222 (207,006) 919 3,677 --------------------------------------------------------------- TOTAL $ (4,044,318) $11,932,845 $(1,207,211) $(94,467) $(172,664) ---------------------------------------------------------------
The average notional amounts of written options, purchased options and forward currency contracts outstanding during the year ended December 31, 2009 were approximately as follows:
WRITTEN PURCHASED FOREIGN FUND OPTIONS OPTIONS EXCHANGE CONTRACTS ----------------------------------------------------------------------------------------------------------- All American Equity $ 6,752 $ 84,014 $ -- Holmes Growth 31,911 42,087 -- Global MegaTrends 9,629 22,362 -- Global Resources 1,293,915 3,577,613 34,417 World Precious Minerals 880,942 5,191,492 12,716 Gold and Precious Metals 420,920 1,948,184 3,784 Eastern European 252,963 258,688 3,051 Global Emerging Markets 8,250 10,824 78 China Region 9,059 30,431 --
176 NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE 3: RELATED PARTY TRANSACTIONS U.S. Global Investors, Inc. (Adviser), under an investment advisory agreement with the Trust in effect through September 30, 2010, furnishes management and investment advisory services and, subject to the supervision of the trustees, directs the investments of each Fund according to its investment objectives, policies and limitations. The Adviser also furnishes all necessary office facilities, business equipment and personnel for administering the affairs of the Trust. Frank E. Holmes, a trustee of the Funds, is the controlling owner of the Adviser. For the services of the Adviser, each Fund pays a base management or advisory fee based upon its net assets. Fees are accrued daily and paid monthly. The contractual management fee for each fund is:
ANNUAL PERCENTAGE OF FUND AVERAGE DAILY NET ASSETS ------------------------------------------------------------------------------- U.S. Treasury Securities Cash and .50% of the first $250,000,000 and U.S. Government Securities Savings .375% of the excess Near-Term Tax Free 0.50% Tax Free .75% of the first $250,000,000 and .50% of the excess All American Equity .80% of the first $500,000,000 and .75% of the excess Holmes Growth and Global MegaTrends 1.00% Global Resources .95% of the first $500,000,000; .90% of $500,000,001 to $1,000,000,000 and .85% of the excess World Precious Minerals 1.00% of the first $500,000,000; .95% of $500,000,001 to $1,000,000,000 and .90% of the excess Gold and Precious Metals .90% of the first $500,000,000 and .85% of the excess Eastern European 1.25% Global Emerging Markets 1.375% China Region 1.25%
177 NOTES TO FINANCIAL STATEMENTS December 31, 2009 The advisory agreement for the equity funds also provides, effective October 1, 2009, that the base advisory fee will be adjusted upwards or downwards by 0.25 percent if there is a performance difference of 5 percent or more between a Fund's performance and that of its designated benchmark index over the prior 12 months. The benchmarks are as follows:
FUND BENCHMARK INDEX ----------------------------------------------------------------------- All American Equity S&P 500 Index Holmes Growth S&P Composite 1500 Index Global MegaTrends S&P 500 Index Global Resources Morgan Stanley Commodity Related Equity Index World Precious Minerals NYSE Arca Gold Miners Index Gold and Precious Metals FTSE Gold Mines Index Eastern European MSCI Emerging Markets Europe 10/40 Index (Net Total Return) Global Emerging Markets MSCI Emerging Markets Total Net Return Index China Region Hang Seng Composite Index
No performance adjustment is applied unless the difference between the Fund's investment performance and the benchmark is 5 percent or greater (positive or negative) during the applicable performance measurement period. The performance fee adjustment is calculated monthly in arrears and is accrued ratably during the month. The management fee, net of any performance fee adjustment, is paid monthly in arrears. The Funds' prospectus and statement of additional information contain additional information about the performance adjustment. The amounts shown as management fees on the Statements of Operations reflects the base fee plus/minus any performance adjustment. During the three-month period from October 1, 2009, the date the performance fee became effective, through December 31, 2009, the Funds recorded performance adjustments as follows:
FUND PERFORMANCE FEE ADJUSTMENT ----------------------------------------------------------- All American Equity $ (6,421) Holmes Growth (14,182) Global MegaTrends -- Global Resources (350,266) World Precious Minerals 186,311 Gold and Precious Metals 43,707 Eastern European (221,032) Global Emerging Markets (6,862) China Region (28,347)
178 NOTES TO FINANCIAL STATEMENTS December 31, 2009 Under an administrative services agreement, the Funds compensate the Adviser at an annual rate of 0.08 percent of the average daily net assets of each Fund for administrative services provided. All equity Funds in the Trust have adopted a distribution plan pursuant to Rule 12b-1 of the Investment Company Act of 1940 in which a subsidiary of the Adviser is paid a fee at an annual rate of 0.25% of the average daily net assets of each Fund for sales and promotional services related to the distribution of each Fund's shares. Effective October 1, 2009, the Adviser has voluntarily agreed to reimburse specific funds so that their total operating expenses will not exceed certain annual percentages of average net assets. Expenses were limited from October 1, 2009, through December 31, 2009, as follows: U.S. Treasury Securities Cash Fund at 1.00%, U.S. Government Securities Savings Fund at 0.45%, Near-Term Tax Free Fund at 0.45%, Tax Free Fund at 0.70%, All American Equity Fund at 2.20%, Holmes Growth Fund at 2.20%, Global MegaTrends Fund at 2.35%, Global Resources Fund, World Precious Minerals Fund, and Gold and Precious Metals Funds at 1.90%, Eastern European Fund at 2.85%, Global Emerging Markets Fund at 3.15% and China Region Fund at 2.55%. These expense limitations are exclusive of any performance fee adjustments and will continue on a voluntary basis at the Adviser's discretion. Prior to October 1, 2009, the operating expenses were limited during the fiscal year as follows: U.S. Treasury Securities Cash Fund at 1.00%, U.S. Government Securities Savings Fund at 0.45%, Near-Term Tax Free Fund at 0.45%, Tax Free Fund at 0.70%, All American Equity Fund at 1.75%, Holmes Growth Fund at 1.75%, Global MegaTrends Fund at 1.85%, Global Resources Fund, World Precious Minerals Fund, and Gold and Precious Metals Funds at 1.50%, Eastern European Fund at 2.25%, Global Emerging Markets Fund at 2.50% and China Region Fund at 2.00%. As of March 19, 2008, the Adviser voluntarily agreed to waive fees and/or reimburse U.S. Treasury Securities Cash Fund and U.S. Government Securities Savings Fund to the extent necessary to maintain the respective fund's yield at a certain level as determined by the Adviser (Minimum Yield). The Adviser may recapture any fees waived and/or expenses reimbursed within three years after the end of the fiscal year of such waiver and/or reimbursement to the extent that such recapture would not cause the fund's yield to fall below the Minimum Yield. For the year ended December 31, 2009, fees waived and/or expenses reimbursed as a result of this agreement were $789,420 and $258,561 for the U.S. Treasury Securities Cash Fund and the U.S. Government Securities Savings Fund, respectively. These amounts are recoverable by the Adviser through December 31, 2012. In addition, $170,642 is recoverable by the Adviser from the U.S. Treasury Securities 179 NOTES TO FINANCIAL STATEMENTS December 31, 2009 Cash Fund through December 31, 2011, for fees waived and/or expenses reimbursed in the prior fiscal year. Prior to November 7, 2008, for the Eastern European Fund and Global Emerging Markets Fund, the Adviser contracted with and compensated subadviser Charlemagne Capital (IOM) Limited to serve in the execution of the Adviser's investment responsibilities. Effective November 7, 2008, the Adviser assumed the day-to-day management of both the Eastern European Fund and the Global Emerging Markets Fund. Charlemagne continues to provide non-discretionary advisory services to the Adviser, but is not responsible for the investment or management of the Funds' assets. United Shareholder Services, Inc. (USSI), a wholly-owned subsidiary of the Adviser, is the transfer agent for the Funds. Each Fund pays an annual fee based on the number of shareholder accounts, certain base fees and transaction-and activity-based fees for transfer agency services. Certain account fees are paid directly by shareholders to the transfer agent, which, in turn, reduces its charge to the Funds. Effective October 1, 2008, as noted above, the Funds no longer reimburse the Adviser for in-house legal and administration services as those services are included in the administrative services agreement. The Adviser was reimbursed for services of the Funds' Chief Compliance Officer during the year ended December 31, 2009, in the amount of $153,345. The Funds will continue to reimburse the Adviser for certain compliance services. Brown Brothers Harriman & Co. (BBH) serves as the custodian, fund accounting and administration service agent with a fee structure based on average net assets of the Funds, certain base fees and transaction-based fees. BBH voluntarily waived certain fund accounting service fees for the six-month period ended December 31, 2009, as shown on the Statements of Operations. This voluntary fee waiver ended December 31, 2009. The independent Trustees receive compensation for serving on the Board. Trustees serving as Chairman of the Board or a special committee or as a member of a committee receive additional compensation. Trustees are also reimbursed for out-of-pocket expenses incurred while attending meetings. Frank E. Holmes receives no compensation from the Funds for serving on the Board. 180 NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE 4: INVESTMENTS Cost of purchases and proceeds from sales of long-term securities for the year ended December 31, 2009, are summarized as follows:
FUND PURCHASES SALES ----------------------------------------------------------------------- Near-Term Tax Free $ 10,926,753 $ 35,000 Tax Free 3,494,454 45,000 All American Equity 45,435,299 47,903,282 Holmes Growth 65,945,614 69,583,895 Global MegaTrends 22,053,413 25,902,921 Global Resources 1,010,558,945 1,032,054,611 World Precious Minerals 319,247,876 397,730,984 Gold and Precious Metals 243,588,403 289,972,368 Eastern European 265,234,359 341,422,652 Global Emerging Markets 16,835,856 18,037,303 China Region 135,483,799 140,878,743
U.S. Treasury Securities Cash and U.S. Government Securities Savings held only short-term investments. The Funds neither purchased nor sold long-term U.S. government securities during the period. Investments in foreign issuers as a percent of total investments at December 31, 2009, were: 7.51% of All American Equity, 27.89% of Holmes Growth, 60.75% of Global MegaTrends, 53.82% of Global Resources, 84.45% of World Precious Minerals, 77.80% of Gold and Precious Metals, 91.35% of Eastern European, 82.25% of Global Emerging Markets and 84.17% of China Region. 181 NOTES TO FINANCIAL STATEMENTS December 31, 2009 NOTE 5: TAX INFORMATION The following table presents the income tax basis of securities owned at December 31, 2009, and the tax basis components of net unrealized appreciation (depreciation):
GROSS GROSS NET UNREALIZED AGGREGATE UNREALIZED UNREALIZED APPRECIATION/ FUND TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) -------------------------------------------------------------------------------------------------- U.S. Treasury Securities Cash $104,033,790 $ -- $ -- $ -- U.S. Government Securities Savings 194,072,015 -- -- -- Near-Term Tax Free 23,366,121 664,296 (79,441) 584,855 Tax Free 21,361,303 893,644 (413,446) 480,198 All American Equity 14,041,089 2,606,205 (161,908) 2,444,297 Holmes Growth 32,048,853 5,516,023 (260,795) 5,255,228 Global MegaTrends 24,742,684 4,666,718 (875,084) 3,791,634 Global Resources 723,416,122 129,576,588 (110,273,703) 19,302,885 World Precious Minerals 705,370,362 66,800,301 (129,439,830) (62,639,528) Gold and Precious Metals 207,726,897 44,333,464 (15,041,819) 29,291,645 Eastern European 429,852,286 56,530,873 (17,595,335) 38,935,538 Global Emerging Markets 13,312,281 2,323,885 (1,516,497) 807,388 China Region 47,352,508 9,773,947 (584,127) 9,189,820
As of December 31, 2009, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED UNDISTRIBUTED NET UNREALIZED TAX-EXEMPT ORDINARY LONG-TERM APPRECIATION/ FUND INCOME INCOME CAPITAL GAINS (DEPRECIATION) --------------------------------------------------------------------------------------------------- U.S. Treasury Securities Cash $ -- $ 829 $-- $ -- U.S. Government Securities Savings -- 260,734 -- -- Near-Term Tax Free 9,817 11,658 -- 584,855 Tax Free 3,509 30,631 -- 480,198 All American Equity -- -- -- 2,433,624 Holmes Growth -- 456,807 -- 5,253,511 Global MegaTrends -- 35,372 -- 3,791,494 Global Resources -- 22,010,983 -- 19,391,505 World Precious Minerals -- 76,506,233 -- (62,607,300) Gold and Precious Metals -- 4,005,264 -- 29,308,697 Eastern European -- -- -- 38,907,053 Global Emerging Markets -- -- -- 807,441 China Region -- -- -- 9,195,906
The differences between book-basis and tax-basis unrealized appreciation (depreciation) for All American Equity, Holmes Growth, Global MegaTrends, Global Resources, World Precious Minerals, Gold and Precious Metals, Eastern European, Global Emerging Markets and China Region Funds are attributable primarily to the tax deferral of losses on wash sales, investment in passive foreign investment companies (PFIC), forwards marked to markets, unreversed return of 182 NOTES TO FINANCIAL STATEMENTS December 31, 2009 capital in Canadian trusts, adjustments for partnerships, tax straddle loss deferrals on written options, and adjustments for grantor trusts. Reclassifications are made to the Funds' capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. For the year ended December 31, 2009, the Funds recorded the following reclassifications to increase (decrease) the accounts listed below:
ACCUMULATED NET ACCUMULATED NET PAID-IN FUND INVESTMENT INCOME REALIZED GAIN CAPITAL ----------------------------------------------------------------------------------------- U.S. Treasury Securities Cash $ -- $ -- $ -- U.S. Government Securities Savings (200,000) -- 200,000 Near-Term Tax Free -- -- -- Tax Free -- -- -- All American Equity 176,093 (6,449) (169,644) Holmes Growth 205,283 869,283 (1,074,566) Global MegaTrends 2,763 (2,763) -- Global Resources 2,681,325 (2,453,833) (227,492) World Precious Minerals 23,574,640 (23,243,824) (330,816) Gold and Precious Metals 2,338,407 (2,103,425) (234,982) Eastern European (122,933) 168,135 (45,202) Global Emerging Markets 68,088 (15,232) (52,856) China Region 438,057 (256,507) (181,550)
The tax character of distributions paid during the fiscal year ended December 31, 2009, were as follows:
TAX-EXEMPT ORDINARY LONG-TERM TAX RETURN FUND INCOME INCOME CAPITAL GAINS OF CAPITAL TOTAL ---------------------------------------------------------------------------------------------------------- U.S. Treasury Securities Cash $ -- $ 10,436 $ -- $ -- $ 10,436 U.S. Government Securities Savings -- 334,574 -- -- 334,574 Near-Term Tax Free 462,656 32,117 -- -- 494,773 Tax Free 677,673 38,269 -- -- 715,942 All American Equity -- 91,991 -- -- 91,991 Holmes Growth -- -- -- -- -- Global MegaTrends -- 86,578 -- -- 86,578 Global Resources -- -- -- -- -- World Precious Minerals -- 24,089,084 -- -- 24,089,084 Gold and Precious Metals -- 605,996 -- -- 605,996 Eastern European -- -- -- -- -- Global Emerging Markets -- -- -- -- -- China Region -- -- -- -- --
183 NOTES TO FINANCIAL STATEMENTS December 31, 2009 The tax character of distributions paid during the fiscal year ended December 31, 2008, were as follows:
TAX-EXEMPT ORDINARY LONG-TERM TAX RETURN FUND INCOME INCOME CAPITAL GAINS OF CAPITAL TOTAL ----------------------------------------------------------------------------------------------------- U.S. Treasury Securities Cash $ -- $ 259,483 $ -- $ -- $ 259,483 U.S. Government Securities Savings -- 2,801,889 -- -- 2,801,889 Near-Term Tax Free 183,663 39,343 -- -- 223,006 Tax Free 324,296 31,085 -- -- 355,381 All American Equity -- 6,594 -- -- 6,594 Holmes Growth -- -- -- -- -- Global MegaTrends -- -- -- 25,988 25,988 Global Resources -- 10,465,142 85,843,436 -- 96,308,578 World Precious Minerals -- -- 61,845,712 -- 61,845,712 Gold and Precious Metals -- 5,098,335 6,520,755 -- 11,619,090 Eastern European -- -- -- -- -- Global Emerging Markets -- -- -- 147,530 147,530 China Region -- -- -- -- --
The tax character of distributions paid during the fiscal year ended June 30, 2008, were as follows:
TAX-EXEMPT ORDINARY LONG-TERM TAX RETURN FUND INCOME INCOME CAPITAL GAINS OF CAPITAL TOTAL ------------------------------------------------------------------------------------------------------- U.S. Treasury Securities Cash $ -- $ 2,910,606 $ -- $ -- $ 2,910,606 U.S. Government Securities Savings -- 15,993,388 -- -- 15,993,388 Near-Term Tax Free 397,725 61,285 -- -- 459,010 Tax Free 598,358 69,833 -- -- 668,191 All American Equity -- 2,184,301 518,139 110,537 2,812,977 Global Resources -- 149,122,250 105,446,649 -- 254,568,899 World Precious Minerals -- 120,839,685 82,005,547 -- 202,845,232 Gold and Precious Metals -- 1,341,359 24,180,522 -- 25,521,881 China Region -- 23,799,607 1,839,778 1,395,287 27,034,672
The tax character of distributions paid during the fiscal year ended October 31, 2008, were as follows:
ORDINARY LONG-TERM FUND INCOME CAPITAL GAINS TOTAL --------------------------------------------------------------------------------------- Holmes Growth $ -- $ -- $ -- Global MegaTrends -- 1,317,151 1,317,151 Eastern European 55,221,730 218,405,637 273,627,367 Global Emerging Markets 5,732,993 3,921,150 9,654,143
Net realized capital loss carryforwards, for federal income tax purposes, may be used to offset current or future capital gains until expiration. The Funds' tax-basis capital gains and losses are determined only at the end of each fiscal year. The loss 184 NOTES TO FINANCIAL STATEMENTS December 31, 2009 carryforwards and related expiration dates for each fund, as of December 31, 2009, are as follows:
EXPIRATION DATE ----------------------------------------------------- FUND 2010 2011 2012 2013 2014 ----------------------------------------------------------------------------------------- U.S. Treasury Securities Cash $ 285 $ -- $ -- $ -- $ -- U.S. Government Securities Savings -- -- -- -- -- Near-Term Tax Free -- 46,218 33,686 2,760 202,719 Tax Free -- 88,733 421,236 -- -- All American Equity -- -- -- -- -- Holmes Growth -- -- -- -- -- Global MegaTrends -- -- -- -- -- Global Resources -- -- -- -- -- World Precious Minerals -- -- -- -- -- Gold and Precious Metals -- -- -- -- -- Eastern European -- -- -- -- -- Global Emerging Markets -- -- -- -- -- China Region -- -- -- -- -- EXPIRATION DATE ------------------------------------------------------- FUND 2015 2016 2017 TOTAL ------------------------------------------------------------------------------------------- U.S. Treasury Securities Cash $ -- $ -- $ -- $ 285 U.S. Government Securities Savings -- -- -- -- Near-Term Tax Free 2,488 112 722 288,705 Tax Free -- 10,697 -- 520,666 All American Equity -- 3,190,748 2,938,489 6,129,237 Holmes Growth 2,281,824 2,829,615 5,264,310 10,375,749 Global MegaTrends 8,605,703 5,994,166 995,675 15,595,544 Global Resources -- 174,185,267 313,190,635 487,375,902 World Precious Minerals -- 43,501,061 65,130,599 108,631,660 Gold and Precious Metals -- 18,761,278 2,765,666 21,526,944 Eastern European -- 83,605,572 257,523,539 341,129,111 Global Emerging Markets 4,262,898 2,965,929 5,814,949 13,043,776 China Region -- 24,409,458 -- 24,409,458
POST OCTOBER 31, 2009 FUND CAPITAL LOSS DEFERRAL --------------------------------------------------- Tax Free $ 208 Holmes Growth 27,977 Global MegaTrends 413,260 World Precious Minerals 1,983,933 Eastern European 2,771,807 Global Emerging Markets 266,119 China Region 92,773
The above amounts, in accordance with tax rules, are deemed to have occurred on January 1, 2010. NOTE 6: RISKS OF CONCENTRATIONS The Near-Term Tax Free Fund and the Tax Free Fund may be exposed to risks related to concentration of investments in a particular state or geographic area. 185 NOTES TO FINANCIAL STATEMENTS December 31, 2009 These investments present risks resulting from changes in economic conditions of the region or the issuer. The investment policies of the World Precious Minerals and Gold and Precious Metals Funds present unique risks to their respective portfolios' values. The prices of gold and other precious metals may be subject to fluctuations caused by international monetary and political developments including trade or currency restrictions, currency devaluation and revaluation, and social and political conditions within a country. Fluctuations in the prices of gold and other precious metals will affect the market values of the securities held by these funds. The Eastern European and Global Emerging Markets Funds may be exposed to risks not typically associated with investment in the United States due to their concentration of investments in emerging markets. These risks include possible revaluation of currencies, less public information about companies, disruptive political or economic conditions and the possible imposition of adverse governmental laws or currency exchange restrictions. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those securities of comparable U.S. issuers. The China Region Fund may be exposed to risks not typically associated with investments in the United States, due to concentration of investments in foreign issuers in the region. These investments present risks resulting from disruptive political or economic conditions and the potential imposition of adverse governmental laws or currency exchange restrictions affecting the area. NOTE 7: CREDIT ARRANGEMENTS Each of the Funds, along with other funds under common management, has a revolving credit facility with BBH. Borrowings of each Fund are collateralized by any or all of the securities held by BBH as the Fund's custodian up to the amount of the borrowing. Interest on borrowings is charged at the current overnight Federal Funds Rate plus 2%. Each Fund has a maximum borrowing limit of 10% of qualified assets. The aggregate of borrowings by all Funds under the agreement cannot exceed $30,000,000 at any one time. There were no borrowings under the revolving credit facility during the period ended December 31, 2009. The U.S. Global Investors Funds paid BBH a total of $45,625 in commitment fees during the year ended December 31, 2009, under this arrangement. NOTE 8: SHARES OF BENEFICIAL INTEREST At December 31, 2009, individual shareholders holding more than 5% of outstanding shares comprised 19.60% and 6.55% of the Tax Free Fund and Global MegaTrends Fund, respectively. In addition, the Adviser held 8.24%, 6.52% and 7.45% of the U.S. Government Securities Savings Fund, Near-Term Tax Free Fund and Tax Free Fund, respectively. Control is defined by the 1940 Act as the beneficial ownership, either directly or through one or more controlled companies, of more than 25% of the voting securities of a company. Investment activities of these shareholders could have a material impact on the Funds. 186 FINANCIAL HIGHLIGHTS U.S. TREASURY SECURITIES CASH FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE
YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, ----------------------------------------- 2009 2008 2008 2007 2006 2005 NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------------------------------------------------------- Investment Activities Net investment income --(a) --(a) .02 .04 .03 .01 Net realized and unrealized gain -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- Total from investment activities --(a) --(a) .02 .04 .03 .01 -------- -------- -------- -------- -------- -------- Distributions from net investment income --(a) --(a) (.02) (.04) (.03) (.01) - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (b) .01% .23% 2.46% 4.36% 3.11% 1.12% Ratios to Average Net Assets: (c) Net investment income .01% .44% 2.43% 4.27% 3.06% 1.11% Total expenses 1.01% 1.11% 1.09% .91% .92% .97% Expenses waived or reimbursed (d)(e) (.75)% (.38)% (.09)% (.02)% -- -- Net recouped fees (e) -- -- --(g) -- .03% -- Net expenses (f) .26% .73% 1.00% .89% .95% .97% NET ASSETS, END OF PERIOD (IN THOUSANDS) $103,889 $121,410 $111,955 $116,012 $119,028 $124,058 (a) The per share amount does not round to a full penny. (b) Total returns for periods less than one year are not annualized. Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. (c) Ratios are annualized for periods of less than one year. (d) Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income ratio had such reductions not occurred. (e) During the year ended June 30, 2004, the Adviser waived fees and/or reimbursed expenses as a result of a Minimum Yield Agreement in the amount of $45,136. As allowed by the recapture provision of this agreement, the U.S. Treasury Securities Cash Fund reimbursed the Adviser the previously waived amount of $45,136 during the year ended June 30, 2006. During the year ended June 30, 2008, the Adviser waived fees and/or reimbursed expenses under the Minimum Yield Agreement in the amount of $4,259. The Fund reimbursed the Adviser the $4,259 during the year ended June 30, 2008. During the six months ended December 31, 2008, the Adviser waived fees and/or reimbursed expenses under the Minimum Yield Agreement in the amount of $170,642. During the year ended December 31, 2009, the Adviser waived fees and/or reimbursed expenses under the Minimum Yield Agreement in the amount of $789,420. (f) The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income ratio had such reductions not occurred. The effect of expenses offset are as follows: YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, ----------------------------------------- 2009 2008 2008 2007 2006 2005 Ratios to Average Net Assets (c): Expenses offset (g) -- -- -- -- -- -- (g) Effect on the expense ratio was not greater than 0.005%.
See accompanying notes to financial statements. 187 FINANCIAL HIGHLIGHTS U.S. GOVERNMENT SECURITIES SAVINGS FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE
YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, --------------------------------------------- 2009 2008 2008 2007 2006 2005 NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - ---------------------------------------------------------------------------------------------------------------------------------- Investment Activities Net investment income --(a) .01 .03 .05 .04 .02 Net realized and unrealized gain -- --(a) --(a) --(a) -- -- -------- -------- -------- -------- -------- -------- Total from investment activities --(a) .01 .03 .05 .04 .02 -------- -------- -------- -------- -------- -------- Distributions from net investment income --(a) (.01) (.03) (.05) (.04) (.02) - -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (b) .10% .67% 3.47% 4.86% 3.69% 1.70% Ratios to Average Net Assets: (c) Net investment income .11% 1.36% 3.42% 4.75% 3.64% 1.67% Total expenses .78% .73% .65% .62% .64% .65% Expenses waived or reimbursed (d) (.42)% (.26)% (.20)% (.17)% (.19)% (.20)% Net expenses (e) .36% .47%(g) .45% .45% .45% .45% NET ASSETS, END OF PERIOD (IN THOUSANDS) $263,232 $357,910 $446,208 $469,095 $435,417 $411,979 (a) The per share amount does not round to a full penny. (b) Total returns for periods less than one year are not annualized. Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. (c) Ratios are annualized for periods of less than one year. (d) Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income ratio had such reductions not occurred. During the year ended December 31, 2009, the Adviser waived fees and/or reimbursed expenses as a result of a Minimum Yield Agreement in the amount of $258,561. (e) The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income ratio had such reductions not occurred. The effect of expenses offset are as follows: YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, -------------------------------------------- 2009 2008 2008 2007 2006 2005 Ratios to Average Net Assets (c): Expenses offset (f) -- -- -- -- -- -- (f) Effect on the expense ratio was not greater than 0.005%. (g) The annualized net expense ratio for the six months ended December 31, 2008, exceeded the limitation for the period due to the cost of participating in the U.S. Treasury Guarantee Program for the Money Market Funds. The cost to participate was without regard to the expense limitation.
See accompanying notes to financial statements. 188 FINANCIAL HIGHLIGHTS NEAR-TERM TAX FREE FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE
YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, -------------------------------------------- 2009 2008 2008 2007 2006 2005* NET ASSET VALUE, BEGINNING OF PERIOD $2.16 $2.14 $2.12 $2.12 $2.17 $2.17 - ---------------------------------------------------------------------------------------------------------------------------------- Investment Activities Net investment income .06 .03 .07 .07 .07 .07 Net realized and unrealized gain (loss) .05 .02 .02 --(a) (.05) (.01) ------- ------- ------- ------- ------- ------- Total from investment activities .11 .05 .09 .07 .02 .06 ------- ------- ------- ------- ------- ------- Distributions from net investment income (.06) (.03) (.07) (.07) (.07) (.06) - ---------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $2.21 $2.16 $2.14 $2.12 $2.12 $2.17 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (b) 5.00% 2.55% 4.42% 3.51% .75% 2.75% Ratios to Average Net Assets: (c) Net investment income 2.63% 3.15% 3.41% 3.43% 3.08% 2.79% Total expenses 1.53% 1.82% 1.91% 1.63% 1.54% 1.49% Expenses waived or reimbursed (d) (1.08)% (1.37)% (1.46)% (1.18)% (1.09)% (1.04)% Net expenses (e) .45% .45% .45% .45% .45% .45% Portfolio turnover rate --(g) 8% 8% 22% 33% 5% NET ASSETS, END OF PERIOD (IN THOUSANDS) $23,337 $13,989 $13,603 $13,383 $15,830 $18,706 * The values shown for Near-Term Tax Free Fund prior periods have been adjusted to reflect the 5-for-1 stock split, which was effective on January 3, 2005. (a) The per share amount does not round to a full penny. (b) Total returns for periods less than one year are not annualized. Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. (c) Ratios are annualized for periods of less than one year. (d) Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income ratio had such reductions not occurred. (e) The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income ratio had such reductions not occurred. The effect of expenses offset are as follows: YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, -------------------------------------------- 2009 2008 2008 2007 2006 2005 Ratios to Average Net Assets (c): Expenses offset (f) -- -- -- -- -- -- (f) Effect on the expense ratio was not greater than 0.005%. (g) Portfolio turnover was not greater than 0.5%
See accompanying notes to financial statements. 189 FINANCIAL HIGHLIGHTS TAX FREE FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE
YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, -------------------------------------------- 2009 2008 2008 2007 2006 2005 NET ASSET VALUE, BEGINNING OF PERIOD $11.72 $11.93 $11.98 $11.98 $12.33 $12.08 - ---------------------------------------------------------------------------------------------------------------------------------- Investment Activities Net investment income .45 .23 .47 .50 .52 .44 Net realized and unrealized gain (loss) .48 (.21) (.05) --(a) (.36) .25 ------- ------- ------- ------- ------- ------- Total from investment activities .93 .02 .42 .50 .16 .69 ------- ------- ------- ------- ------- ------- Distributions from net investment income (.45) (.23) (.47) (.50) (.51) (.44) - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $12.20 $11.72 $11.93 $11.98 $11.98 $12.33 - --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (b) 8.03% .22% 3.54% 4.15% 1.30% 5.78% Ratios to Average Net Assets: (c) Net investment income 3.73% 3.92% 3.91% 4.09% 4.01% 3.50% Total expenses 1.75% 1.91% 1.94% 1.86% 1.69% 1.47% Expenses waived or reimbursed (d) (1.05)% (1.21)% (1.24)% (1.16)% (.99)% (.77)% Net expenses (e) .70% .70% .70% .70% .70% .70% Portfolio turnover rate --(g) 6% 11% 6% 19% 40% NET ASSETS, END OF PERIOD (IN THOUSANDS) $22,102 $16,946 $18,380 $15,940 $14,992 $22,433 (a) The per share amount does not round to a full penny. (b) Total returns for periods less than one year are not annualized. Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. (c) Ratios are annualized for periods of less than one year. (d) Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income ratio had such reductions not occurred. (e) The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would decrease the net investment income ratio had such reductions not occurred. The effect of expenses offset are as follows: YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, -------------------------------------------- 2009 2008 2008 2007 2006 2005 Ratios to Average Net Assets (c): Expenses offset (f) -- -- -- -- -- -- (f) Effect on the expense ratio was not greater than 0.005%. (g) Portfolio turnover was not greater than 0.5%
See accompanying notes to financial statements. 190 FINANCIAL HIGHLIGHTS ALL AMERICAN EQUITY FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE
YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, ------------------------------------------ 2009 2008 2008 2007 2006 2005 NET ASSET VALUE, BEGINNING OF PERIOD $17.33 $27.27 $28.58 $27.59 $24.47 $22.53 - -------------------------------------------------------------------------------------------------------------------------------- Investment Activities Net investment gain (loss) (.13) .04 (.15) (.08) (.18) (.02) Net realized and unrealized gain (loss) 2.51 (9.97) 1.98 4.94 3.89 1.96 ------- ------- ------- ------- ------- ------- Total from investment activities 2.38 (9.93) 1.83 4.86 3.71 1.94 ------- ------- ------- ------- ------- ------- Distributions From net investment income (.11) (.01) -- -- -- -- From net realized gains -- -- (3.01) (3.87) (.59) -- From tax return of capital -- -- (.13) -- -- -- ------- ------- ------- ------- ------- ------- Total distributions (.11) (.01) (3.14) (3.87) (.59) -- ------- ------- ------- ------- ------- ------- Short-Term Trading Fees * (a) -- -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $19.60 $17.33 $27.27 $28.58 $27.59 $24.47 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (b) 13.75% (36.42)% 5.99% 19.59% 15.25% 8.61% Ratios to Average Net Assets: (c) Net investment income (loss) (.74)% .35% (.55)% (.28)% (.67)% (.09)% Total expenses 2.79% 2.37% 1.98% 2.01% 2.20% 2.44% Expenses waived or reimbursed (d) (.96)% (.62)% (.23)% (.26)% (.44)% (.69)% Net expenses (e) 1.83% 1.75% 1.75% 1.75% 1.76% 1.75% Portfolio turnover rate 343% 205% 225% 223% 369% 262% NET ASSETS, END OF PERIOD (IN THOUSANDS) $16,436 $16,234 $26,513 $23,479 $21,547 $19,253 * Based on average monthly shares outstanding. (a) The per share amount does not round to a full penny. (b) Total returns for periods less than one year are not annulized. Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. (c) Ratios are annualized for periods of less than one year. (d) Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, had such reductions not occurred. (e) The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio, or decrease the net investment income ratio, as applicable, had such reductions not occurred. The effect of expenses offset are as follows: SIX MONTHS SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, ------------------------------------------ 2009 2008 2008 2007 2006 2005 Ratios to Average Net Assets (c): Expenses offset --(f) --(f) --(f) --(f) (0.01)% --(f) (f) Effect on the expense ratio was not greater than 0.005%.
See accompanying notes to financial statements. 191 FINANCIAL HIGHLIGHTS HOLMES GROWTH FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE
YEAR TWO MONTHS ENDED ENDED YEAR ENDED OCTOBER 31, DECEMBER 31, DECEMBER 31, ------------------------------------------ 2009 2008 2008 2007 2006 2005 NET ASSET VALUE, BEGINNING OF PERIOD $12.79 $14.14 $24.78 $18.34 $16.56 $14.38 - -------------------------------------------------------------------------------------------------------------------------------- Investment Activities Net investment loss (.13) (.01) (.15) (.14) (.14) (.18) Net realized and unrealized gain (loss) 2.88 (1.34) (10.49) 6.58 1.92 2.36 ------- ------- ------- ------- ------- ------- Total from investment activities 2.75 (1.35) (10.64) 6.44 1.78 2.18 ------- ------- ------- ------- ------- ------- Distributions -- -- -- -- -- -- Short-Term Trading Fees *(a) -- -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $15.54 $12.79 $14.14 $24.78 $18.34 $16.56 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (b) 21.50% (9.55)% (42.94)% 35.11% 10.75% 15.16% Ratios to Average Net Assets: (c) (.93)% (.27)% (.65)% (.62)% (.69)% (.98)% Total expenses 2.10% 2.51% 1.74% 1.72% 1.74% 1.83% Expenses waived or reimbursed (d) (.33)% (.76)% -- -- -- -- Net expenses (e) 1.77% 1.75% 1.74% 1.72% 1.74% 1.83% Portfolio turnover rate 219% 20% 140% 98% 290% 268% NET ASSETS, END OF PERIOD (IN THOUSANDS) $37,149 $32,488 $36,231 $68,881 $61,810 $65,065 * Based on average monthly shares outstanding. (a) The per share amount does not round to a full penny. (b) Total returns for periods less than one year are not annualized. Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. (c) Ratios are annualized for periods of less than one year. (d) Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, had such reductions not occurred. (e) The net expense shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio, or decrease the net investment income ratio, as applicable, had such reductions not occurred. The effect of expenses offset are as follows: YEAR TWO MONTHS ENDED ENDED YEAR ENDED OCTOBER 31, DECEMBER 31, DECEMBER 31, ------------------------------------------ 2009 2008 2008 2007 2006 2005 Ratios to Average Net Assets (c): Expenses offset --(f) --(f) --(f) --(f) (0.01)% --(f) (f) Effect on the expense ratio was not greater than 0.005%.
See accompanying notes to financial statements. 193 FINANCIAL HIGHLIGHTS GLOBAL MEGATRENDS FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE
YEAR TWO MONTHS ENDED ENDED YEAR ENDED OCTOBER 31, DECEMBER 31, DECEMBER 31, ------------------------------------------- 2009 2008 2008 2007** 2006 2005 NET ASSET VALUE, BEGINNING OF PERIOD $6.28 $6.60 $12.75 $11.07 $10.30 $9.20 - --------------------------------------------------------------------------------------------------------------------------------- Investment Activities Net investment income (loss) .03 --(a) --(a) (.11) (.10) (.14) Net realized and unrealized gain (loss) 1.86 (.31) (5.30) 2.63 1.18 1.24 ------- ------- ------- ------- ------- ------- Total from investment activities 1.89 (.31) (5.30) 2.52 1.08 1.10 ------- ------- ------- ------- ------- ------- Distributions From net investment income (.02) -- -- -- -- -- From net realized gains -- -- (.85) (.84) (.31) -- From tax return of capital -- (.01) -- -- -- -- ------- ------- ------- ------- ------- ------- Total distributions (.02) (.01) (.85) (.84) (.31) -- ------- ------- ------- ------- ------- ------- Short-Term Trading Fees * (a) -- -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $8.15 $6.28 $6.60 $12.75 $11.07 $10.30 - --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (b) 30.15% (4.74)% (44.50)% 24.49% 10.53% 11.96% Ratios to Average Net Assets: (c) Net investment income (loss) .45% (.20)% (.06)% (.93)% (.89)% (1.37)% Total expenses 2.43% 2.96% 2.21% 2.49% 2.55% 2.83% Expenses waived or reimbursed (d) (.48)% (1.11)% (.21)% -- -- -- Net expenses (e) 1.95% 1.85% 2.00% 2.49% 2.55% 2.83% Portfolio turnover rate 100% 29% 92% 65% 75% 54% NET ASSETS, END OF PERIOD (IN THOUSANDS) $28,557 $22,035 $25,387 $17,723 $17,077 $14,276 * Based on average monthly shares outstanding. ** Effective October 1, 2007, U.S. Global Investors, Inc. assumed management of Global MegaTrends Fund from the former subadviser. (a) The per share amount does not round to a full penny. (b) Total returns for periods less than one year are not annualized. Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. (c) Ratios are annualized for periods of less than one year. (d) Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, had such reductions not occurred. (e) The expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to financial statements. These amounts would increase the net investment loss ratio, or decrease the net investment income ratio, as applicable, had such reductions not occurred. The effect of expenses offset are as follows: YEAR TWO MONTHS ENDED ENDED YEAR ENDED OCTOBER 31, DECEMBER 31, DECEMBER 31, ----------------------------------------- 2009 2008 2008 2007 2006 2005 Ratios to Average Net Assets (c): Expenses offset (f) -- -- -- -- -- -- (f) Effect on the expense ratio was not greater than 0.005%.
See accompanying notes to financial statements. 193 FINANCIAL HIGHLIGHTS GLOBAL RESOURCES FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE
YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, ----------------------------------------------- 2009 2008 2008 2007 2006 2005 NET ASSET VALUE, BEGINNING OF PERIOD $5.26 $20.52 $17.70 $17.22 $12.67 $8.39 - ------------------------------------------------------------------------------------------------------------------------------- Investment Activities Net investment income (loss) (.01) (.02)* .05* .21 .29 .25 Net realized and unrealized gain (loss) 3.60 (13.92)* 5.86* 2.86 5.63 4.67 -------- -------- ---------- ---------- ---------- -------- Total from investment activities 3.59 (13.94) 5.91 3.07 5.92 4.92 -------- -------- ---------- ---------- ---------- -------- Distributions From net investment income -- -- (.95) (.88) (.32) (.34) From net realized gains -- (1.32) (2.14) (1.71) (1.05) (.30) -------- -------- ---------- ---------- ---------- -------- Total distributions -- (1.32) (3.09) (2.59) (1.37) (.64) -------- -------- ---------- ---------- ---------- -------- Short-Term Trading Fees * (a) -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $8.85 $5.26 $20.52 $17.70 $17.22 $12.67 - ------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (b) 68.25% (67.70)% 37.59% 20.94% 48.91% 60.21% Ratios to Average Net Assets: (c) Net investment income (loss) (.08)% (.34)% .28% .74% 1.07% .91% Total expenses 1.64% 1.20% .88% .95% .96% 1.30% Expenses waived or reimbursed (d) (.17)% (.12)% -- -- -- -- Net expenses (e) 1.47% 1.08% .88% .95% .96% 1.30% Portfolio turnover rate 189% 100% 133% 122% 157% 116% NET ASSETS, END OF PERIOD (IN THOUSANDS) $740,072 $464,524 $2,010,581 $1,383,250 $1,281,664 $488,183 * Based on average monthly shares outstanding. (a) The per share amount does not round to a full penny. (b) Total returns for periods less than one year are not annualized. Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. (c) Ratios are annualized for periods of less than one year. (d) Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, had such reductions not occurred. (e) The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio, or decrease the net investment income ratio, as applicable, had such reductions not occurred. The effect of expenses offset are as follows: YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, ------------------------------------------ 2009 2008 2008 2007 2006 2005 Ratios to Average Net Assets (c): Expenses offset --(f) --(f) (0.01)% (0.01)% (0.01)% --(f) (f) Effect on the expense ratio was not greater than 0.005%.
See accompanying notes to financial statements. 194 FINANCIAL HIGHLIGHTS WORLD PRECIOUS MINERALS FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE
YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, ------------------------------------------- 2009 2008 2008 2007 2006 2005 NET ASSET VALUE, BEGINNING OF PERIOD $9.56 $25.32 $28.34 $28.86 $15.50 $13.68 - --------------------------------------------------------------------------------------------------------------------------------- Investment Activities Net investment income (loss) (.18) (.06)* (.13)* --* .72 (.22) Net realized and unrealized gain (loss) 8.71 (13.65)* 3.70* 3.02 13.62 2.42 -------- -------- -------- -------- -------- -------- Total from investment activities 8.53 (13.71) 3.57 3.02 14.34 2.20 -------- -------- -------- -------- -------- -------- Distributions From net investment income (.67) -- (3.25) (1.52) (.67) (.46) From net realized gains -- (2.05) (3.35) (2.04) (.37) -- -------- -------- -------- -------- -------- -------- Total distributions (.67) (2.05) (6.60) (3.56) (1.04) (.46) -------- -------- -------- -------- -------- -------- Short-Term Trading Fees * --(a) --(a) .01 .02 .06 .08 - --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $17.42 $9.56 $25.32 $28.34 $28.86 $15.50 - --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (b) 89.50% (51.23)% 14.14% 11.48% 96.21% 16.50% Ratios to Average Net Assets: (c) Net investment income (loss) (1.32)% (.80)% (.43)% .06% .05% (1.01)% Total expenses 1.75% 1.36% .97% .99% 1.13% 1.48% Expenses waived or reimbursed (d) (.17)% (.11)% -- -- -- -- Net expenses (e) 1.58% 1.25% .97% .99% 1.13% 1.48% Portfolio turnover rate 72% 27% 58% 54% 66% 55% NET ASSETS, END OF PERIOD (IN THOUSANDS) $639,035 $359,120 $949,014 $923,779 $920,249 $268,312 * Based on average monthly shares outstanding. (a) The per share amount does not round to a full penny. (b) Total returns for periods less than one year are not annualized. Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. (c) Ratios are annualized for periods of less than one year. (d) Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, had such reductions not occurred. (e) The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio, or decrease the net investment income ratio, as applicable, had such reductions not occurred. The effect of expenses offset are as follows: YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, ----------------------------------------- 2009 2008 2008 2007 2006 2005 Ratios to Average Net Assets (c): Expenses offset (f) -- -- -- -- -- -- (f) Effect on the expense ratio was not greater than 0.005%.
See accompanying notes to financial statements. 195 FINANCIAL HIGHLIGHTS GOLD AND PRECIOUS METALS FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE
YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, ----------------------------------------- 2009 2008 2008 2007 2006 2005 NET ASSET VALUE, BEGINNING OF PERIOD $10.83 $17.18 $14.99 $15.48 $7.67 $7.00 - -------------------------------------------------------------------------------------------------------------------------------- Investment Activities Net investment income (loss) (.17)* (.03) (.08)* .05 (.01)* (.11) Net realized and unrealized gain (loss) 4.84 (5.59) 4.69 (.56) 7.88 .79 -------- -------- -------- -------- - ------- -------- Total from investment activities 4.67 (5.62) 4.61 (.51) 7.87 .68 -------- -------- -------- -------- - ------- -------- Distributions From net investment income (.04) -- -- -- (.12) (.05) From net realized gains -- (.73) (2.43) -- -- -- -------- -------- -------- -------- - ------- -------- Total distributions (.04) (.73) (2.43) -- (.12) (.05) -------- -------- -------- -------- - ------- -------- Short-Term Trading Fees * --(a) --(a) .01 .02 .06 .04 - -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $15.46 $10.83 $17.18 $14.99 $15.48 $7.67 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (b) 43.11% (31.51)% 33.49% (3.17)% 104.15% 10.19% Ratios to Average Net Assets: (c) Net investment income (loss) (1.16)% (.66)% (.41)% .31% (.06)% (1.13)% Total expenses 1.69% 1.54% 1.27% 1.29% 1.47% 1.97% Expenses waived or reimbursed (d) (.15)% (.15)% -- -- -- -- Net expenses (e) 1.54% 1.39% 1.27% 1.29% 1.47% 1.97% Portfolio turnover rate 135% 61% 93% 72% 78% 66% NET ASSETS, END OF PERIOD (IN THOUSANDS) $234,393 $192,206 $259,022 $178,762 $208,027 $63,816 * Based on average monthly shares outstanding. (a) The per share amount does not round to a full penny. (b) Total returns for periods less than one year are not annualized. Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. (c) Ratios are annualized for periods of less than one year. (d) Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, had such reductions not occurred. (e) The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio, or decrease the net investment income ratio, as applicable, had such reductions not occurred. The effect of expenses offset are as follows: YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, ------------------------------------------ 2009 2008 2008 2007 2006 2005 Ratios to Average Net Assets (c): Expenses offset --(f) --(f) --(f) (0.01)% --(f) --(f) (f) Effect on the expense ratio was not greater than 0.005%.
See accompanying notes to financial statements. 196 FINANCIAL HIGHLIGHTS EASTERN EUROPEAN FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE
YEAR TWO MONTHS ENDED ENDED YEAR ENDED OCTOBER 31, DECEMBER 31, DECEMBER 31, ----------------------------------------------- 2009 2008*** 2008* 2007* 2006* 2005* NET ASSET VALUE, BEGINNING OF PERIOD $5.12 $6.35 $19.91 $15.44 $12.88 $9.47 - ----------------------------------------------------------------------------------------------------------------------------------- Investment Activities Net investment income (loss) --(a) (.03) (.03) (.10) .13 (.03)** Net realized and unrealized gain (loss) 3.99 (1.20) (10.10) 6.83 3.60 3.81** -------- -------- -------- ---------- ---------- -------- Total from investment activities 3.99 (1.23) (10.13) 6.73 3.73 3.78 -------- -------- -------- ---------- ---------- -------- Distributions From net investment income -- -- -- (.29) -- (.09) From net realized gains -- -- (3.46) (1.98) (1.22) (.31) -------- -------- -------- ---------- ---------- -------- Total distributions -- -- (3.46) (2.27) (1.22) (.40) -------- -------- -------- ---------- ---------- -------- Short-Term Trading Fees ** --(a) --(a) .03 .01 .05 .03 - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $9.11 $5.12 $6.35 $19.91 $15.44 $12.88 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (b) 77.93% (19.37)% (61.36)% 48.74% 31.03% 41.43% Ratios to Average Net Assets: (c) Net investment income (loss) --(f) (3.02)% (.15)% (.61)% .71% (.31)% Total expenses 2.04% 2.37% 1.96% 1.98% 1.95% 2.00% Expenses waived or reimbursed (d) (.08)% (.27)% --(f) -- -- -- Net expenses (e) 1.96% 2.10% 1.96% 1.98% 1.95% 2.00% Portfolio turnover rate 80% 11% 82% 54% 68% 95% NET ASSETS, END OF PERIOD (IN THOUSANDS) $464,409 $317,320 $415,494 $1,582,707 $1,347,149 $903,855 * The per share amounts shown for the current and prior periods have been adjusted to reflect the 3-for-1 stock split which was effective on May 27, 2008. ** Based on average monthly shares outstanding. *** Effective November 7, 2008, U.S. Global Investors, Inc. assumed management of the fund from Charlemagne Capital (IOM) Limited. (a) The per share amount does not round to a full penny. (b) Total returns for periods less than one year are not annualized. Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. (c) Ratios are annualized for periods of less than one year. (d) Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, had such reductions not occurred. (e) The expense ratios shown above exclude the effect of reductions to total expenses for any expenses offset and for fees rebated from the subadviser. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. Through June 2006, the subadviser of the above fund provided advisory services to two closed-end investment companies that the above fund had invested in. The subadviser rebated amounts to the above fund representing the portion of management fees paid by the two investment companies to the subadviser based on the above fund's investment. Fees rebated by the subadviser also reduced total expenses. These amounts would increase the net investment loss ratio, or decrease the net investment income ratio, as applicable, had such reductions not occurred. The effect of expenses offset and expenses rebated by the subadviser are as follows: YEAR TWO MONTHS ENDED ENDED YEAR ENDED OCTOBER 31, DECEMBER 31, DECEMBER 31, ------------------------------------------ 2009 2008 2008 2007 2006 2005 Ratios to Average Net Assets (c): Expenses offset --(f) --(f) (0.01)% (0.01)% (0.01)% (0.01)% Expenses rebated by subadviser n/a n/a n/a n/a (0.01)% (0.02)% (f) Effect on the ratio was not greater than 0.005%.
See accompanying notes to financial statements. 197 FINANCIAL HIGHLIGHTS GLOBAL EMERGING MARKETS FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE
YEAR TWO MONTHS YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED PERIOD ENDED DECEMBER 31, DECEMBER 31, OCTOBER OCTOBER OCTOBER OCTOBER 31, 2009 2008** 31, 2008 31, 2007 31, 2006 2005(a) NET ASSET VALUE, BEGINNING OF PERIOD $5.29 $5.94 $21.88 $13.93 $10.65 $10.00 - ------------------------------------------------------------------------------------------------------------------------------- Investment Activities Net investment income (loss) (.05) (.01) (.43) (.13) .02 .06 Net realized and unrealized gain (loss) 2.71 (.56) (11.98) 9.18 3.50 .56 -------- ------ ------- ------- ------- ------- Total from investment activities 2.66 (.57) (12.41) 9.05 3.52 .62 -------- ------ ------- ------- ------- ------- Distributions From net investment income -- -- (.46) -- (.05) -- From net realized gains -- -- (3.11) (1.13) (.26) -- From tax return of capital -- (.08) -- -- -- -- -------- ------ ------- ------- ------- ------- Total distributions -- (.08) (3.57) (1.13) (.31) -- -------- ------ ------- ------- ------- ------- Short-Term Trading Fees * --(b) --(b) .04 .03 .07 .03 - ------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $7.95 $5.29 $5.94 $21.88 $13.93 $10.65 - ------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (c) 50.28% (9.59)% (66.81)% 69.52% 34.16% 6.50% Ratios to Average Net Assets (d): Net investment income (loss) (.77)% (1.16)% (1.01)% (.92)% .13% 1.08% Total expenses 4.02% 6.83% 2.80% 2.75% 3.07% 4.16% Expenses waived or reimbursed (e) (1.38)% (4.33)% (.30)% (.39)% (1.05)% (2.16)% Net expenses (f) 2.64% 2.50% 2.50% 2.36% 2.02% 2.00% Portfolio Turnover Rate 166% 21% 83% 125% 136% 93% NET ASSETS, END OF PERIOD (IN THOUSANDS) $13,819 $9,663 $11,708 $59,621 $29,029 $16,157 * Based on average monthly shares outstanding. ** Effective November 7, 2008, U.S. Global Investors, Inc. assumed management of the fund from Charlemagne Capital (IOM) Limited. (a) From February 24, 2005, commencement of operations. (b) The per share amount does not round to a full penny. (c) Total returns for periods less than one year are not annualized. Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. (d) Ratios are annualized for periods of less than one year. (e) Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, had such reductions not occurred. (f) The expense ratios shown above exclude the effect of reductions to total expenses for any expenses offset and for fees rebated from the subadviser. Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. Through June 2006, the subadviser of the above fund provided advisory services to a closed-end investment company that the above fund had invested in. The subadviser rebated amounts to the above fund representing the portion of management fees paid by the investment company to the subadviser based on the above fund's investment. Fees rebated by the subadviser also reduced total expenses. These amounts would increase the net investment loss ratio, or decrease the net investment income ratio, as applicable, had such reductions not occurred. The effect of expenses offset and expenses rebated by the subadviser are as follows: YEAR TWO MONTHS YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED PERIOD ENDED DECEMBER 31, DECEMBER 31, OCTOBER OCTOBER OCTOBER OCTOBER 31, 2009 2008 31, 2008 31, 2007 31, 2006 2005(a) Ratios to Average Net Assets (d): Expenses offset --(g) --(g) --(g) n/a n/a n/a Expenses rebated by subadviser n/a n/a n/a n/a (0.02)% --(g) (g) Effect on the expense ratio was not greater than 0.005%.
See accompanying notes to financial statements. 198 FINANCIAL HIGHLIGHTS CHINA REGION FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE
YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, ------------------------------------------ 2009 2008 2008 2007 2006 2005 NET ASSET VALUE, BEGINNING OF PERIOD $5.59 $9.09 $12.55 $8.71 $6.87 $5.86 - -------------------------------------------------------------------------------------------------------------------------------- Investment Activities Net investment income (loss) (.05) (.02)* (.03)* --* (.01)* (.06) Net realized and unrealized gain (loss) 2.81 (3.49)* (.27)* 3.98* 2.02 1.22 ------- ------- ------- ------- ------- ------- Total from investment activities 2.76 (3.51) (.30) 3.98 2.01 1.16 ------- ------- ------- ------- ------- ------- Distributions From net investment income -- -- (.10) (.16) (.19) (.16) From net realized gains -- -- (2.93) -- -- -- From tax return of capital -- -- (.17) -- -- -- ------- ------- ------- ------- ------- ------- Total distributions -- -- (3.20) (.16) (.19) (.16) ------- ------- ------- ------- ------- ------- Short-Term Trading Fees * .01 .01 .04 .02 .02 .01 - -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $8.36 $5.59 $9.09 $12.55 $8.71 $6.87 - -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (a) 49.55% (38.50)% (8.58)% 46.34% 30.03% 19.98% Ratios to Average Net Assets: (b) Net investment income (loss) (.79)% (.47)% (.26)% .02% (.08)% (.54)% Total expenses 2.47% 2.46% 1.95% 2.02% 2.31% 2.56% Expenses waived or reimbursed (c) (.45)% (.27)% -- -- -- -- Net expenses (d) 2.02% 2.19% 1.95% 2.02% 2.31% 2.56% Portfolio turnover rate 327% 117% 208% 208% 292% 136% NET ASSETS, END OF PERIOD (IN THOUSANDS) $56,323 $38,348 $81,109 $93,805 $67,761 $30,511 * Based on average monthly shares outstanding. (a) Total returns for periods less than one year are not annualized. Assumes investment at the net asset value at the beginning of the period, reinvestment of all distributions and a complete redemption of the investment at the net asset value at the end of the period. (b) Ratios are annualized for periods of less than one year. (c) Expenses waived or reimbursed reflect reductions to total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio or decrease the net investment income ratio, as applicable, had such reductions not occurred. (d) The net expense ratios shown above reflect expenses after waivers and reimbursements but exclude the effect of reductions to total expenses for any expenses offset Expense offset arrangements reduce total expenses, as discussed in the notes to the financial statements. These amounts would increase the net investment loss ratio, or decrease the net investment income ratio, as applicable, had such reductions not occurred. The effect of expenses offset are as follows: YEAR SIX MONTHS ENDED ENDED YEAR ENDED JUNE 30, DECEMBER 31, DECEMBER 31, ------------------------------------------- 2009 2008 2008 2007 2006 2005 Ratios to Average Net Assets (c): Expenses offset --(e) --(e) --(e) --(e) (0.01)% --(e) (e) Effect on the expense ratio was not greater than 0.005%.
See accompanying notes to financial statements. 199 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Trustees and Shareholders of U.S. Global Investors Funds: We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the All American Equity Fund, China Region Fund, Eastern European Fund, Global Emerging Markets Fund, Global MegaTrends Fund, Global Resources Fund, Gold and Precious Metals Fund, Holmes Growth Fund, Near-Term Tax Free Fund, Tax Free Fund, U.S. Government Securities Savings Fund, U.S Treasury Securities Cash Fund, and World Precious Minerals Fund, each a portfolio within the U.S. Global Investors Funds (the "Trust") as of December 31, 2009 and the related statement of operations for the year then ended, statements of changes in net assets for each of the years or periods in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective funds within the U.S. Global Investors Funds, as of December 31, 2009, and the results of their operations, the changes in their net assets and financial highlights for the periods described above, in conformity with U.S. generally accepted accounting principles. /s/ KPMG LLP Boston, Massachusetts February 22, 2010 200 TRUSTEES AND OFFICERS (UNAUDITED) December 31, 2009 The following table presents information about the Trustees as of December 31, 2009, together with a brief description of their principal occupations during the last five years. The Agreement and Declaration of Trust provides that each trustee shall serve as a trustee of the Trust during the lifetime of this Trust and until its termination except as such trustee sooner dies, resigns or is removed. In addition, each trustee who is not an "interested person" of the Trust shall be required to retire in accordance with the terms of any retirement policy then in effect that has been approved by a majority vote of all independent trustees. The current retirement policy provides that the retirement age for non-interested trustees is 72 years of age. If you would like more information about the Trustees, you may call 1-800-US-FUNDS (1-800-873-8637) to request a free copy of the Statement of Additional Information. NON-INTERESTED TRUSTEES
NAME (AGE) ADDRESS POSITIONS HELD WITH TRUST LENGTH OF TIME SERVED* NUMBER OF PORTFOLIOS IN FUND PRINCIPAL OCCUPATION(S) AND PREVIOUS POSITIONS COMPLEX OVERSEEN BY TRUSTEE DURING PAST 5 YEARS AND OTHER DIRECTORSHIPS HELD - --------------------------------------------------------------------------------- J. Michael Belz (56) PRINCIPAL OCCUPATION: President and Chief 7900 Callaghan Road Executive Officer of Catholic Life Insurance San Antonio, TX 78229 since 1984. Trustee OTHER DIRECTORSHIPS HELD: Director, Broadway November 1998 to present National Bank from October 2003 to present. Thirteen portfolios - --------------------------------------------------------------------------------- James F. Gaertner (66) PRINCIPAL OCCUPATION: President of Sam Houston 7900 Callaghan Road State University from August 2001 to present. San Antonio, TX 78229 OTHER DIRECTORSHIPS HELD: Chairman of the Audit Trustee Committee, Tandy Brands Accessories, Inc. from November 2002 to present October 1997 to present. Thirteen portfolios - --------------------------------------------------------------------------------- Clark R. Mandigo (66) PRINCIPAL OCCUPATION: Restaurant operator, 7900 Callaghan Road business consultant from 1991 to present. San Antonio, TX 78229 Trustee May 1993 to present Thirteen portfolios - --------------------------------------------------------------------------------- Joe C. McKinney (63) PRINCIPAL OCCUPATION: Vice Chairman, Broadway 7900 Callaghan Road National Bank from October 2002 to present. San Antonio, TX 78229 OTHER DIRECTORSHIPS HELD: Director, Broadway Trustee National Bank from October 2002 to present; October 2008 to present Director, USAA Real Estate Company from Thirteen portfolios September 2004 to present; Director, Luby's, Inc. from January 2003 to present. - --------------------------------------------------------------------------------- *These dates include service for a predecessor trust.
201 TRUSTEES AND OFFICERS (UNAUDITED) December 31, 2009 INTERESTED TRUSTEE
NAME (AGE) ADDRESS POSITIONS HELD WITH TRUST LENGTH OF TIME SERVED* NUMBER OF PORTFOLIOS IN FUND PRINCIPAL OCCUPATION(S) AND PREVIOUS POSITIONS COMPLEX OVERSEEN BY TRUSTEE DURING PAST 5 YEARS AND OTHER DIRECTORSHIPS HELD - --------------------------------------------------------------------------------- Frank E. Holmes ** (54) PRINCIPAL OCCUPATION: Director, Chief Executive 7900 Callaghan Road Officer, and Chief Investment Officer of the San Antonio, TX 78229 Adviser. Since October 1989, Mr. Holmes has Trustee, Chief Executive served and continues to serve in various Officer, Chief Investment positions with the Adviser, its subsidiaries, Officer, President and the investment companies it sponsors. January 1990 to present OTHER DIRECTORSHIPS HELD: Director of 71316 Thirteen portfolios Ontario, Inc. since April 1987 and of F. E. Holmes Organization, Inc. from July 1978 to July 2009. - --------------------------------------------------------------------------------- *These dates include service for a predecessor trust. **Mr. Holmes is an "interested person" of the Trust by virtue of his positions with U.S. Global Investors, Inc.
The following table presents information about each Officer of the Trust as of December 31, 2009, together with a brief description of their principal occupations during the last five years. Each holds office until his or her successor is duly elected and qualified. OFFICERS
NAME (AGE) ADDRESS POSITIONS HELD WITH TRUST LENGTH OF TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - -------------------------------------------------------------------------------- Frank E. Holmes (54) Director, Chief Executive Officer, and Chief 7900 Callaghan Road Investment Officer of the Adviser. Since San Antonio, TX 78229 October 1989, Mr. Holmes has served and Trustee, Chief Executive continues to serve in various positions with Officer, Chief Investment the Adviser, its subsidiaries, and the Officer, President investment companies it sponsors. January 1990 to present - -------------------------------------------------------------------------------- Susan B. McGee (50) President and General Counsel of the Adviser. 7900 Callaghan Road Since September 1992, Ms. McGee has served and San Antonio, TX 78229 continues to serve in various positions with Executive Vice President, the Adviser, its subsidiaries, and the Secretary, General Counsel investment companies it sponsors. March 1997 to present - -------------------------------------------------------------------------------- Catherine A. Rademacher (49) Chief Financial Officer of the Adviser. Since 7900 Callaghan Road April 2004, Ms. Rademacher has served and San Antonio, TX 78229 continues to serve in various positions with Treasurer the Adviser, its subsidiaries, and the July 2004 to present investment companies it sponsors. - --------------------------------------------------------------------------------
202 TRUSTEES AND OFFICERS (UNAUDITED) December 31, 2009
NAME (AGE) ADDRESS POSITIONS HELD WITH TRUST LENGTH OF TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - -------------------------------------------------------------------------------- James L. Love, Jr. (41) Chief Compliance Officer of the Adviser since 7900 Callaghan Road September 2007. Executive Director Executive San Antonio, TX 78229 Attorney from January 2003 to September 2007, Chief Compliance Officer Senior Counsel May 2002 to January 2003 with September 2007 to present USAA. - -------------------------------------------------------------------------------- Mark Carter (42) Vice President, Shareholder Services of the 7900 Callaghan Road Adviser since April 2008. Operations Manager of San Antonio, TX 78229 the Adviser from April 2007 through March 2008; Vice President, Shareholder Transfer Agent Operations Manager, Invesco AIM Services from 2004 to April 2007. April 2008 to present - -------------------------------------------------------------------------------- T. Kelly Niland (47) Director of Portfolio Administration of the 7900 Callaghan Road Adviser since January 2006. Fund Accounting San Antonio, TX 78229 Manager with AIM Investments from June 1992 to Vice President, Investment January 2006. Operations December 2008 to present; Assistant Treasurer from May 2006 to December 2008. - -------------------------------------------------------------------------------- Susan K. Filyk (40) Director of Marketing of the Adviser since 7900 Callaghan Road August 2008. Sr. VP Marketing with Frost San Antonio, TX 78229 National Bank from May 1998 to August 2007. Vice President, Marketing December 2008 to present - -------------------------------------------------------------------------------- *These dates include service for a predecessor trust.
203 ADDITIONAL INFORMATION (UNAUDITED) ADDITIONAL FEDERAL TAX INFORMATION The percentage of tax-exempt dividends paid by the Funds for the year ended December 31, 2009, was: Near-Term Tax Free 93.51% Tax Free 94.65% The percentage of ordinary income dividends paid by the Funds during the year ended December 31, 2009, which qualify for the Dividends Received Deduction available to corporate shareholders was: All American Equity 100.00% Global MegaTrends 100.00% World Precious Minerals 0.00% Gold and Precious Metals 13.19% The amounts which represent foreign source income and foreign taxes paid during the year ended December 31, 2009, are as follows:
FOREIGN SOURCE FOREIGN TAX INCOME CREDIT Global MegaTrends $417,405 $19,747 World Precious Minerals $950,095 $73,599 Gold and Precious Metals $662,679 $39,498
In January 2010, the Funds reported on Form 1099-DIV the tax status of all distributions made during the calendar year 2009. The funds intend to distribute the maximum amount of qualified dividend income allowable. The amount of qualified dividend income distributed by each fund will be reported to shareholders on their Form 1099-DIV. Shareholders should use the information on Form 1099-DIV for their income tax returns. PROXY VOTING A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 1-800-US-FUNDS (1-800-873-8637). It also appears in the Funds' statement of additional information (Form 485B), which can be found on the SEC's website at www.sec.gov. Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 1-800-US-FUNDS (1-800-873-8637) or accessing the Funds' Form N-PX on the SEC's website at www.sec.gov. AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES The Funds provide complete lists of holdings four times in each fiscal year, at the quarter-ends. For the second and fourth quarters, the lists appear in the Funds' semi-annual and annual reports to shareholders. For the first and third quarters, the Funds file the lists with the SEC on Form N-Q. 204 ADDITIONAL INFORMATION (UNAUDITED) Shareholders can look up the Funds' Forms N-Q on the SEC's website at www.sec.gov. You may also visit or call the SEC's Public Room in Washington, D.C. (1-202-942-8090) or send a requestplus a duplicating fee to the SEC, Public Reference Section, Washington, DC 20549-0102 or by electronic request at the following e-mail address: publicinfo@sec.gov. APPROVAL OF THE ADVISORY AGREEMENT FOR EACH FUND On September 3, 2009, the Board of Trustees (the "Board") of U.S. Global Investors Funds (the "Trust"), including all of the trustees who are not "interested persons" of the Trust (the "Independent Trustees"), approved continuation of the advisory agreement with U.S. Global Investors, Inc. (the "Adviser") for each fund for an additional one-year term ending October 1, 2010. In considering approval of the agreement, the Board reviewed a variety of materials relating to each fund and the Adviser including (i) the nature, extent and quality of services provided; (ii) comparison of services rendered and amounts paid to other registered investment companies, including other registered investment companies managed by the Adviser, and other accounts managed by the Adviser; (iii) the investment performance of the fund measured against appropriate benchmarks; (iv) the costs of services provided and estimated profits realized by the Adviser (and its affiliates); (v) the extent to which economies of scale are realized as the fund grows; (vi) whether fee levels reflect any possible economies of scale for the benefit of fund shareholders; and (vii) benefits realized by the Adviser (and its affiliates) from its relationship with the fund. The Independent Trustees began their process of reviewing information, which they had previously requested, and considering approval of the agreement at the Board's May 27, 2009, meeting. The Independent Trustees were represented by independent legal counsel throughout the process. After the May 27, 2009, Board meeting, at the direction of the Independent Trustees, independent legal counsel requested additional information from the Adviser, which was reviewed at Board meetings held on July 28, 2009, August 25, 2009, and September 3, 2009. The Independent Trustees also had separate meetings among themselves and with independent legal counsel during this period. In addition, the Independent Trustees received materials from their independent legal counsel discussing the legal standards applicable to their consideration of the agreement. After their review of the information received, the Independent Trustees presented their findings and recommendations to the full Board. The Board reviewed the functions performed by the Adviser, the portfolio management team and support staff of the Adviser, the Adviser's investment strategy and process for each fund, the Adviser's financial condition, and considered the quality of services provided. The Board also reviewed information on the performance of each fund, along with the performance information of a relevant securities index, a peer group and a peer universe using information supplied by Lipper Inc. ("Lipper"). For the All American Equity Fund, the information showed that for the one-year period ended December 31, 2008, the fund's performance was in the 5th quartile of its applicable Lipper peer group (the 1st quartile being the best performers and the 5th quartile being the worst performers) and in the 4th quartile of its applicable Lipper peer universe, but that over the longer-term periods 205 ADDITIONAL INFORMATION (UNAUDITED) (for the two-, three-, four-and five-year periods ended December 31, 2008), the fund's performance was in the 1st quartile of its applicable Lipper peer group and universe. The Board noted that the fund's advisory fee includes a performance incentive adjustment, which will go into effect beginning with the month ended October 31, 2009, and is based on the performance of the fund during the prior 12 month period. For the Holmes Growth Fund, the information showed that for the one-year period ended December 31, 2008, the fund's performance was in the 5th quartile of its applicable Lipper peer group and peer universe. In addition, the information showed that for the two-, three-, four- and five-year periods ended December 31, 2008, the fund's performance was in the 3rd quartile of its applicable Lipper peer group and peer universe. In response to questions from the Independent Trustees, the Adviser provided supplemental information noting that longer-term performance was significantly affected by poor performance in the last two quarters of 2008 and that for the year-to-date period through May 31, 2009, the fund outperformed its benchmark and was in the 53rd percentile of its applicable Lipper peer universe. The Adviser also noted that since it took over management of the fund on June 1, 2004, for the five-year period ended May 31, 2009, the fund ranks in the top 34th percentile of its applicable Lipper peer universe. The Board took into consideration that the fund's advisory fee includes a performance incentive adjustment, which will go into effect beginning with the month ended October 31, 2009, and is based on the performance of the fund during the prior 12 month period. For the Global MegaTrends Fund, the information showed that for the one-, two-, three-, four- and five-year periods ended December 31, 2008 (the Adviser assumed management of the fund effective October 1, 2007), the fund's performance was in the 4th, 4th, 4th, 2nd and 2nd quartile, respectively, of its applicable Lipper peer group and in the 5th, 4th, 4th, 3rd and 3rd quartile, respectively, of its applicable Lipper peer universe. In response to questions from the Independent Trustees, the Adviser provided supplemental information showing that the fund is outperforming its benchmark for the year-to-date period through May 31, 2009, and that the fund is also in the top half of its applicable Lipper peer universe for this same period. The Adviser also noted that the fund ranks in the top 30th percentile of its applicable Lipper peer universe for the five-year period ended May 31, 2009. The Board took into consideration that the fund's advisory fee includes a performance incentive adjustment, which will go into effect beginning with the month ended October 31, 2009, and is based on the performance of the fund during the prior 12 month period. For the Global Resources Fund, the information showed for the one-, two-, three-, four- and five-year periods ended December 31, 2008, the fund's performance was in the 5th quartile of its applicable Lipper peer universe (peer group information was omitted because of the limited number of funds in the expense group). In response to questions from the Independent Trustees, the Adviser provided supplemental information noting that while longer-term performance was significantly affected by poor performance in 2008, for the year-to-date period through May 31, 2009, the fund outperformed its benchmark index and the fund was also in the top half of its applicable Lipper peer universe for the same period (29th percentile). The Adviser also noted that for the five-year period ended May 31, 2009, the fund was in the top half of its applicable Lipper peer universe. The Board took into consideration that the fund's advisory fee includes a 206 ADDITIONAL INFORMATION (UNAUDITED) performance incentive adjustment, which will go into effect beginning with the month ended October 31, 2009, and is based on the performance of the fund during the prior 12 month period. For the World Precious Minerals Fund, the information showed for the one-, two- and three-year periods ended December 31, 2008, the fund's performance was in the 5th quartile of its applicable Lipper peer group and peer universe. This information also showed for the four-and five-year periods, the fund's performance was in the 4th quartile of its applicable Lipper peer group and in the 5th quartile of its applicable Lipper peer universe. In response to questions from the Independent Trustees, the Adviser provided supplemental information noting that while longer-term performance was significantly affected by poor performance in 2008, the fund is outperforming its benchmark for the year-to-date period through May 31, 2009, and it is also the best performing fund in its applicable Lipper peer universe for the same period. The Board took into consideration that the fund's advisory fee includes a performance incentive adjustment, which will go into effect beginning with the month ended October 31, 2009, and is based on the performance of the fund during the prior 12 month period. For the Gold and Precious Metals Fund, the information showed for the one-, two-, three-, four-and five-year periods ended December 31, 2008, the fund's performance was in the 1st, 3rd, 1st, 1st and 1st quartile, respectively, of its applicable Lipper peer group and for the one-, two-, three-, four- and five-year periods ended December 31, 2008, the fund's performance was in the 3rd, 4th, 2nd, 1st and 1st quartile, respectively, of its applicable Lipper peer universe. The Board noted that the fund's advisory fee includes a performance incentive adjustment, which will go into effect beginning with the month ended October 31, 2009, and is based on the performance of the fund during the prior 12 month period. For the Eastern European Fund, the information showed for the one-, two-, three- and four-year periods ended December 31, 2008, the fund's performance was in the 5th quartile of its applicable Lipper peer group and peer universe. For the five-year period ended December 31, 2008, the information showed that the fund's performance was in the 5th quartile of its applicable Lipper peer group and in the 4th quartile of its applicable Lipper peer universe. In response to questions from the Independent Trustees, the Adviser provided supplemental information noting that for the year-to-date period through May 31, 2009, the fund was in the top half of its applicable Lipper peer universe. The Board also noted that the Adviser only recently assumed management of the fund (effective November 7, 2008). The Board took into consideration that the fund's advisory fee includes a performance incentive adjustment, which will go into effect beginning with the month ended October 31, 2009, and is based on the performance of the fund during the prior 12 month period. For the Global Emerging Markets Fund, the information showed for the one-, two- and three-year periods ended December 31, 2008, and since the fund's inception on February 24, 2005, the fund's performance was in the 5th quartile of its applicable Lipper peer group and peer universe. In response to questions from the Independent Trustees, the Adviser provided supplemental information noting improved relative performance in May 2009 and noting the corrective action it has taken since the Adviser assumed management of the fund effective November 7, 2008. The Board took into consideration that the fund's advisory fee includes a performance incentive adjustment, 207 ADDITIONAL INFORMATION (UNAUDITED) which will go into effect beginning with the month ended October 31, 2009, and is based on the performance of the fund during the prior 12 month period. For the China Region Fund, the information showed for the one-, two- and three- year periods ended December 31, 2008, the fund's performance was in the 4th, 4th and 5th quartile, respectively, of its applicable Lipper peer group. In addition, this information showed for the one-, two-, three-, four- and five-year periods, the fund's performance was in the 5th quartile of its applicable Lipper peer universe. In response to questions from the Independent Trustees, the Adviser provided supplemental information noting that for the year-to-date period through May 31, 2009, the fund's performance was comparable to its benchmark index. The Adviser also cited that the fund has had historic periods of outperforming and underperforming its benchmark index. The Board took into consideration that the fund's advisory fee includes a performance incentive adjustment, which will go into effect beginning with the month ended October 31, 2009, and is based on the performance of the fund during the prior 12 month period. For the Tax Free Fund and Near-Term Tax-Free Fund, the information showed good overall performance (for the one-, two-, three-, four- and five year periods ended December 31, 2008, the Tax Free Fund's performance was in the 1st quartile of its applicable Lipper peer group and peer universe and for the same periods the Near-Term Tax Free Fund was in the 1st quartile of its applicable peer group). For the U.S. Government Securities Savings Fund, the information showed for the one-, two-, three-, four- and five-year periods ended December 31, 2008, the fund's performance was in the 4th, 4th, 3rd, 3rd and 2nd quartile, respectively, of its applicable Lipper peer group and for these same periods, the fund's performance was in the 2nd quartile of its applicable Lipper peer universe. For the U.S. Treasury Securities Cash Fund, the information showed for the one-, two-, three-, four- and five-year periods ended December 31, 2008, the fund's performance was in the 5th quartile of its applicable Lipper peer group. The information also showed for the one-year period ended December 31, 2008, the fund's performance was in the 5th quartile and for the two-, three-, four- and five-year periods ended December 31, 2008, the fund's performance was in the 4th quartile of its applicable Lipper peer universe. In response to questions from the Independent Trustees, the Adviser provided supplemental information on the fund's gross yield, noting that while in prior years the fund historically outperformed its peer universe on a gross basis, during 2008, the fund underperformed its peer universe on a gross basis because the Adviser took a conservative approach to credit and liquidity, which negatively impacted all historical time frames. On the basis of this evaluation and the ongoing review of performance by the Board, the Board concluded that the nature, quality and extent of services provided by the Adviser historically have been and continue to be satisfactory. The Board also reviewed information on each fund's advisory fee and gross expense ratio (without regard to contractual expense caps that were set to expire on September 30, 2009) compared to a peer group of funds based upon information prepared by Lipper. For the All American Equity Fund, China Region Fund, Gold and Precious Metals Fund, World Precious Minerals Fund and Global 208 ADDITIONAL INFORMATION (UNAUDITED) Resources Fund, the Lipper information was based on the six-month fiscal period ended December 31, 2008, and for the Holmes Growth Fund, Global MegaTrends Fund, Global Emerging Markets Fund and Eastern European Fund, the Lipper information was based on the two-month fiscal period ended December 31, 2008. The Board also compared the advisory fees to the fees charged by the Adviser to two non-U.S. registered funds. (However, the Board noted that, although these non-U.S. registered funds may have investment objectives and policies that are similar to some of the funds, the contractual fees payable to the Adviser for managing those client assets are the same or higher than the advisory fees of the similar funds.) For the All American Equity Fund, the information showed that with respect to the fund's advisory fee, the fund is in the 4th quartile of its applicable Lipper peer group and in the 5th quartile of its applicable Lipper peer group with respect to its gross expenses. For the Holmes Growth Fund, the information showed that with respect to the fund's advisory fee, the fund is in the 4th quartile of its applicable Lipper peer group and in the 5th quartile of its applicable Lipper peer group with respect to its gross expenses. For the Global MegaTrends Fund, the information showed that with respect to the fund's advisory fee and gross expense ratio, the fund is in the 5th quartile of its applicable Lipper peer group. For the Global Resources Fund, the information showed that with respect to the fund's advisory fee, the fund is in the 3rd quartile of its applicable Lipper peer group and in the 5th quartile of its applicable Lipper peer group with respect to its gross expenses. For the World Precious Minerals Fund, the information showed that with respect to the fund's advisory fee, the fund is in the 5th quartile of its applicable Lipper peer group and in the 4th quartile of its applicable Lipper peer group with respect to its gross expenses. For the Gold and Precious Metals Fund, the information showed that with respect to the fund's advisory fee, the fund is in the 3rd quartile of its applicable Lipper peer group and in the 5th quartile of its applicable Lipper peer group with respect to its gross expenses. For the Eastern European Fund, the information showed that with respect to the fund's advisory fee and gross expense ratio, the fund is in the 5th quartile of its applicable Lipper peer group. For the Global Emerging Markets Fund, the information showed that with respect to the fund's advisory fee and gross expense ratio, the fund is in the 5th quartile of its applicable Lipper peer group. For the China Region Fund, the information showed that with respect to the fund's advisory fee, the fund is in the 4th quartile of its applicable Lipper peer group and in the 5th quartile of its applicable Lipper peer group with respect to its gross expenses. In response to questions from the Independent Trustees, the Adviser noted that the expense data for these funds was potentially skewed, compared to their peer group, because the funds' data was based upon shorter periods (which also happened to coincide with the severe market conditions in the latter part of 2008). Accordingly, the Adviser provided supplemental expense data for the funds based on the 12-month period ended December 31, 2008. The Adviser also provided 209 ADDITIONAL INFORMATION (UNAUDITED) data noting that the funds' expenses were negatively affected by their smaller average account sizes (compared to industry data) and discussed steps it is taking to address the average account size of the funds. The Adviser also noted that management recently negotiated a reduction in custody and fund accounting fees that is projected to benefit each fund. Notwithstanding the above, the Adviser stated its belief that higher expenses are inherent in small fund complexes, such as the U.S. Global Funds, and that it could not operate effectively at a lower level of fees or with the burden of contractual expense caps. The Adviser, however, agreed to voluntarily limit expenses at the following levels (the expense limitation may be modified or removed by the Adviser at any time):
VOLUNTARY EXPENSE LIMITATION FUND % OF AVERAGE NET ASSETS ------------------------------------------------------------- All American Equity Fund 2.20% Holmes Growth Fund 2.20% Global MegaTrends Fund 2.35% Global Resources Fund 1.90% World Precious Minerals Fund 1.90% Gold and Precious Metals Fund 1.90% Eastern European Fund 2.85% Global Emerging Markets Fund 3.15% China Region Fund 2.55%
For the Tax Free Fund and the U.S. Treasury Securities Cash Fund, the information showed that with respect to the funds' advisory fees and gross expense ratios, the funds are in the 5th quartile of their applicable Lipper peer group and that, net of contractual waivers that were set to expire on September 30, 2009, the funds' net expense ratios are in the 3rd quartile of their Lipper peer group. The Board noted, however, that the Adviser voluntarily agreed to limit expenses of the Tax Free Fund and U.S. Treasury Securities Cash Fund to .70% and 1.00%, respectively, of average net assets (the expense limitation may be modified or removed by the Adviser at any time). For the Near-Term Tax Free Fund and the U.S. Government Securities Savings Fund, the information showed that with respect to the funds' advisory fees, the funds are in the 5th quartile of their applicable Lipper Peer Group. With respect to their gross expense ratios, the Near-Term Tax Free Fund and the U.S. Government Securities Savings Fund are in the 4th and 5th quartile, respectively, of their applicable Lipper peer group and, net of contractual waivers that were set to expire on September 30, 2009, the funds' net expense ratios are in the 1st and 2nd quartile, respectively, of their Lipper peer group. The Board noted, however, that the Adviser voluntarily agreed to limit expenses to .45% of average net assets of each fund (the expense limitation may be modified or removed by the Adviser at any time). In each case, the Board concluded that the advisory fee was reasonable and appropriate in amount given the quality of services provided. The Board considered the fee structure of the agreement, including the costs of the services provided and the profits realized by the Adviser and its affiliates from their relationship with the funds. For all funds except the World Precious Minerals Fund, Global Resources Fund, Eastern 210 ADDITIONAL INFORMATION (UNAUDITED) European Fund, China Region Fund and U.S. Government Securities Savings Fund, the net income generated from the advisory relationship was negative. For the Tax Free Fund, Near-Term Tax Free Fund, U.S. Government Securities Savings Fund and U.S. Treasury Securities Cash Fund, the Board also considered the contractual expense cap agreement. The Board concluded for each fund that the profits realized by the Adviser were reasonable in comparison with the costs of providing investment advisory services to the fund. As part of its review of the agreement, the Board considered whether there will be economies of scale with respect to the management of each fund and whether each fund will benefit from any economies of scale. The Board considered that the advisory fees for the All American Equity Fund, Gold and Precious Metals Fund, World Precious Minerals Fund, Global Resources Fund, Tax Free Fund, U.S. Government Securities Savings Fund and U.S. Treasury Securities Cash Fund include a breakpoint. For the remaining funds, the Board reviewed each fund's asset size and whether the Adviser was realizing economies of scale. The Board noted that, in all cases, the Adviser did not believe, with respect to the investment advisory services provided, that it was realizing significant economies of scale and that the current fees represent an appropriate sharing of economies of scale. Based upon its review of all available information, the Board concluded for the funds with a flat advisory fee that such fee was reasonable and appropriate. The Board considered that the Adviser engages in soft dollar arrangements in connection with brokerage transactions for the funds. The Board also considered benefits derived by the Adviser from its relationship with the funds, including the other services provided and fees received by the Adviser and its affiliates for providing such services, and concluded for each fund that the direct and indirect benefits accruing to the Adviser were reasonable in comparison with the costs of providing advisory services, the advisory fee charged to each fund, the Adviser's commitment to cap expenses (with respect to the Tax Free Fund, Near-Term Tax Free Fund, U.S. Government Securities Savings Fund and U.S. Treasury Securities Cash Fund) and the benefits to each fund. Based on all of the above-mentioned factors and related conclusions, with no single factor or conclusion being determinative and with each Trustee not necessarily attributing the same weight to each factor, the Board, including the Independent Trustees, concluded that approval of the advisory agreement would be in the interests of each fund. 211 ITEM 2. CODE OF ETHICS. (a) The registrant has adopted a code of ethics that applies to its principal executive officer and principal financial officer. (b) During the period covered by this report, no material amendments were made to the provisions of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, no implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a) above were granted. (d) Not applicable. (e) Not applicable. (f) The registrant has posted such code of ethics on its Internet website at www.usfunds.com. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. For the covered period, the registrant's Board of Trustees designated two independent trustees as audit committee financial experts: Mr. Clark Mandigo and Dr. James F. Gaertner. An "audit committee financial expert" is not an "expert" for any purpose, including for purposes of Section 11 of the Securities Act of 1933, as a result of being designated as an "audit committee financial expert." Further, the designation of a person as an "audit committee financial expert" does not mean that the person has any greater duties, obligations, or liability than those imposed on the person without the "audit committee financial expert" designation. Similarly, the designation of a person as an "audit committee financial expert" does not affect the duties, obligations, or liability of any other member of the audit committee or Board of Trustees. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (A) AUDIT FEES The aggregate fees billed to the registrant for professional services rendered by the registrant's principal accountant for the audit of the registrant's annual financial statements or for services that are normally provided by the accountant in connection with statutory or regulatory filings or engagements were $267,200 and $211,946 for the fiscal years ended December 31, 2009, and 2008, respectively. (B) AUDIT-RELATED FEES There were no fees billed for assurance and related services by the registrant's principal accountant that were reasonably related to the performance of the audit of the registrant's financial statements and were not reported under paragraph (a) of this Item for the last two fiscal years. (C) TAX FEES The aggregate fees billed for professional services rendered by the registrant's principal accountant for tax compliance, tax advice and tax planning were $62,499 and $62,499 for the fiscal yeara ended December 31, 2009, and 2008, respectively. The nature of the services comprising the tax fees included the review of the registrant's income and excise tax returns and distribution requirements. (D) ALL OTHER FEES There were no other fees during the last two fiscal years billed to the registrant. (E)(1) The registrant's audit committee is directly responsible for approving the services to be provided by the auditors, including approval in advance of audit and non-audit services at regularly scheduled audit committee meetings. If non-audit services are required between regularly scheduled audit committee meetings, approval may be authorized by the chairman of the audit committee for non-prohibited services for engagements of less than $3,500 with notification of other audit committee members at the next scheduled audit committee meeting. (2) No services included in (b) - (d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (F) Less than 50 percent of the hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. (G) The aggregate fees billed by the registrant's principal accountant for non-audit services rendered to the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant were $119,829 and $62,499 for the fiscal years ended December 31, 2009, and 2008, respectively. These fees related to tax services rendered to the registrant and the issuance of a report on internal controls for an entity controlled by the investment adviser. (H) All non-audit services rendered in (g) above were considered by the registrant's audit committee in maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to the registrant. ITEM 6. SCHEDULE OF INVESTMENTS. Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's president and treasurer have determined that the registrant's disclosure controls and procedures are effective based on their evaluation of the disclosure controls and procedures as of a date within 90 days of the filing date of this report. (b) There was no change in the registrant's internal control over financial reporting that occurred in the registrant's fourth fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Code of ethics is posted on registrant's Internet website at www.usfunds.com. (a)(2) Certifications of principal executive officer and principal financial officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002. (a)(3) Not applicable. (b) Certifications of principal executive officer and principal financial officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. U.S. GLOBAL INVESTORS FUNDS By: /s/ Frank E. Holmes ---------------------------------- Frank E. Holmes President, Chief Executive Officer Date: March 4, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Frank E. Holmes ---------------------------------- Frank E. Holmes President, Chief Executive Officer Date: March 4, 2010 By: /s/ Catherine A. Rademacher ---------------------------------- Catherine A. Rademacher Treasurer Date: March 4, 2010 EX-99.CERT 2 ex99pa2.txt Exhibit (a)(2) SECTION 302 CERTIFICATION I, Frank E. Holmes, certify that: 1. I have reviewed this report on Form N-CSR of U.S. Global Investors Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 4, 2010 /s/ Frank E. Holmes - ------------------------ Frank E. Holmes Chief Executive Officer SECTION 302 CERTIFICATION I, Catherine A. Rademacher, certify that: 1. I have reviewed this report on Form N-CSR of U.S. Global Investors Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 4, 2010 /s/ Catherine A. Rademacher - --------------------------- Catherine A. Rademacher Treasurer EX-99.906 CERT 3 ex99pb.txt EXHIBIT (B) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with this annual report on Form N-CSR for U.S. Global Investors Funds (the Registrant) for the period ended December 31, 2009, as furnished to the Securities and Exchange Commission (the "Report"), the undersigned officers of the Registrant hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of each such officer's knowledge and belief: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as applicable; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. By: /s/ Frank E. Holmes --------------------------------------------------------------- Frank E. Holmes President, Chief Executive Officer Date: March 4, 2010 By: /s/ Catherine A. Rademacher ---------------------------------------------------------------- Catherine A. Rademacher Treasurer Date: March 4, 2010 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Form N-CSR filed with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----