-----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, CSLsnE/3fLcK3Q2bQ+FAyXkISCADyw/UbPLsbswFIkKIJ09FJQs1/4nw80YHIjth yQAmu1yK3ipmcQ/ARfm2CA== 0001068800-08-000280.txt : 20080701 0001068800-08-000280.hdr.sgml : 20080701 20080701103016 ACCESSION NUMBER: 0001068800-08-000280 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20080430 FILED AS OF DATE: 20080701 DATE AS OF CHANGE: 20080701 EFFECTIVENESS DATE: 20080701 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S GLOBAL ACCOLADE FUNDS CENTRAL INDEX KEY: 0000902042 IRS NUMBER: 742721312 STATE OF INCORPORATION: TX FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07662 FILM NUMBER: 08928134 BUSINESS ADDRESS: STREET 1: 7900 CALLAGHAN RD CITY: SAN ANTONIO STATE: TX ZIP: 78229 BUSINESS PHONE: 2103081234 MAIL ADDRESS: STREET 1: 7900 CALLAGHAN ROAD STREET 2: PO BOX 781234 CITY: SAN ANTONIO STATE: TX ZIP: 78229 FORMER COMPANY: FORMER CONFORMED NAME: ACCOLADE FUNDS DATE OF NAME CHANGE: 19941014 FORMER COMPANY: FORMER CONFORMED NAME: SOPHISTICATED INVESTORS FUNDS DATE OF NAME CHANGE: 19930714 0000902042 S000004791 Eastern European Fund C000013002 Eastern European Fund EUROX 0000902042 S000004792 Global MegaTrends Fund C000013003 Global MegaTrends Fund MEGAX 0000902042 S000004793 Holmes Growth Fund C000013004 Holmes Growth Fund ACBGX 0000902042 S000004794 Global Emerging Markets Fund C000013005 Global Emerging Markets Fund GEMFX N-CSR 1 accolade_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 811-7662 U.S. GLOBAL ACCOLADE 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: OCTOBER 31 Date of reporting period: APRIL 30, 2008 ITEM 1. REPORTS TO STOCKHOLDERS. U.S. GLOBAL ACCOLADE FUNDS SEMI-ANNUAL REPORT APRIL 30, 2008 (UNAUDITED) TABLE OF CONTENTS LETTER TO SHAREHOLDERS 1 MANAGEMENT TEAM'S AND FUND MANAGERS' PERSPECTIVES 5 EXPENSE EXAMPLE 29 PORTFOLIOS OF INVESTMENTS 31 NOTES TO PORTFOLIOS OF INVESTMENTS 49 STATEMENTS OF ASSETS AND LIABILITIES 50 STATEMENTS OF OPERATIONS 52 STATEMENTS OF CHANGES IN NET ASSETS 54 NOTES TO FINANCIAL STATEMENTS 57 FINANCIAL HIGHLIGHTS 65 ADDITIONAL INFORMATION 69 NASDAQ SYMBOLS U.S. GLOBAL ACCOLADE FUNDS - -------------------------- HOLMES GROWTH FUND ACBGX GLOBAL MEGATRENDS FUND MEGAX EASTERN EUROPEAN FUND EUROX GLOBAL EMERGING MARKETS FUND GEMFX 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 CHINA REGION OPPORTUNITY FUND USCOX GLOBAL RESOURCES FUND PSPFX WORLD PRECIOUS MINERALS FUND UNWPX GOLD AND PRECIOUS METALS FUND USERX [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 ACCOLADE FUNDS DEAR SHAREHOLDER: Since 2000, the U.S. Global Investors family of funds has won more than two dozen Lipper Fund Awards and [PHOTO] performance certificates, both of which are given for posting top returns compared to category peers. Our funds have also performed very well when measured against the entire U.S. fund universe, which now totals nearly 7,000 distinct funds. At the end of 2007, for instance, four of our nine equity funds were in the top 2 percent overall in various time periods going back 10 years, according to the Wall Street Journal. A significant factor in our performance leadership is our focus on our investment culture. What is an "investment culture" and why is it important? After all, one might think, an investment company's success or failure is pretty easy to measure: it either makes money for its shareholders or it doesn't. I think it's a little more complicated than that. Creating a long-term record of success as an investor is not just about skill in analyzing stocks or debt securities. It can't be learned in business school, at industry conferences or by spending countless hours poring over Bloomberg data. It's about the bigger questions of how the company sees itself and what it values. As shareholders in the U.S. Global funds, you should know about our company values because you've entrusted your hard-earned money to us to manage. We never lose sight of the fact that we are answerable to you for our investment decisions, so I'd like to take a little time to let you know how we think and how we work. We strive with passion and use our culture and discipline to maintain relative and class leadership. First of all, the investments team at U.S. Global is just that - a team. Other fund companies prefer the individual manager approach in which one person has responsibility for the fund's decisions. We think many heads are better than one, and that the gathering and sharing of differing knowledge within a group expands everyone's mind and leads to superior decisions and results over time. The team is also a good risk-management tool - individuals think harder and smarter when they know they'll have to defend their ideas to the group. It's a challenge to create a team mentality in an investment setting because the notion runs counter to the common personality traits of those attracted to this business: highly competitive, opinionated, very confident in themselves and often skeptical of others. This is why investment culture is so important to me and why we've put so much effort into establishing it at U.S. Global. Culture produces the shared value set that harnesses the intellectual power generated by these strong-minded personalities without stripping away the individuality that 1 U.S. GLOBAL ACCOLADE FUNDS each of them prizes. It creates structure and accountability within the team. "Respect for people and teamwork" is a core value across the company, and as CEO and chief investment officer, one of my most important jobs is to shape a vision that the rest of the team can buy into. We have five other core values at U.S. Global that form the foundation for our investment culture and how we run the rest of our business: * Show initiative and be responsive to others * Be curious to learn and improve * Be performance- and results-oriented * Have a focused work ethic * Recognize the achievements of others As you look at our core values, you'll see that they are easy to understand and that they benefit U.S. Global by encouraging a positive work environment. Keeping the list short and simple is also important - that way, team members can quickly learn them and put them into practice. Individuals who demonstrate initiative and responsiveness to each other build trust, which is a key factor for healthy winning teams. Teammates must trust each other. In addition, these six values interlock in a way that each team member knows what to expect from his or her colleagues, and from a leadership perspective, the values provide a reliable way to "coach" any team members who need it. And because they are outward- and forward-looking values, they require people to interact with each other and be responsible to each other. One of the greatest risks for an investment company is money managers isolating themselves from their peers and making important portfolio decisions using limited information. We address that risk by ensuring that the exchange of information is open and honest, and that no one can hide himself away in a silo. Our values also give the investment team members a broader framework within which they can derive satisfaction. It's true that the fund manager's job is to make money for his shareholders, and the more money the manager makes for his fund, the more he gets paid. But plenty of research shows that investment professionals need more than just financial rewards to feel fulfilled for past achievements and enthusiastic for future opportunities. Our investment culture recognizes that the members of U.S. Global's investment team are not just money-making machines. A better way to think of them is as intellectually competitive, financial athletes striving to win for the team. 2 U.S. GLOBAL ACCOLADE FUNDS Those who embrace these core values are given many outstanding opportunities to succeed here, while those who can't or won't don't last long regardless of their experience or academic pedigree. For the investment team, values represent half of the culture equation. The other half is how we put them into practice. I'd like to take a moment now to share some thoughts on this crucial topic. I keep stressing the attributes of team because it is the key to our long- term success as investment managers. As the CEO and chief investment officer, I see myself as the head coach who puts together the game plan and makes sure that it is followed. [Culture Model chart] CULTURE MODEL - ----------------------------------------------------------------------------- EXPERIENCES What must leaders do each day to support the vision, values, and behaviors? VALUES, BELIEFS What values will drive the desired actions? BEHAVIORS What actions will lead to the desired results? RESULTS What is our vision of success? Created by The Hendricks Institute and published in "Radical Change, Radical Results" The chart above from The Hendricks Institute provides a clear, sequential model to illustrate why culture is important. In the investment team context, going from left to right on the chart, these are among the questions to be answered. What must the chief investment officer and research director do every day as coaches to guide the team's performance in a very competitive market? What values will produce the desired actions by the team? What actions (process, process, process!) by the team will lead to the desired results? What is our vision of success? The answer to the last question: our vision of success is to be in the top half consistently in everything we do. None of our funds ever aim to be No. 1 in any time period - that kind of goal could lead to excessive risk-taking, which could be disappointing for our fund shareholders. I'm a big believer in the approach of the legendary football coach Vince Lombardi, whose teams back in the 1950s and 1960s are the model for so many of today's most successful sports franchises. Lombardi kept his plays uncomplicated and he practiced them over and over until his players knew them by heart. Lombardi's most famous offensive play was the "power sweep" - a deceptively simple play in which a series of precise blocks are executed to open up running room for the halfback. 3 U.S. GLOBAL ACCOLADE FUNDS He explained the power sweep, which the Green Bay Packers used to win five NFL titles and the first two Super Bowls, by saying: "It's my No. 1 play because it requires all eleven men to play as one to make it succeed, and that's what 'team' means." We also like Warren Buffett's baseball-hitting analogy to explain his approach to investment process. He says that he's more interested in the consistency of a batter's swing than how far he hits the ball. A singles-and-doubles approach that methodically puts runs on the scoreboard avoids the all-or-nothing risks that comes with swinging wildly for the fences. We take inspiration from these bits of sports wisdom as we execute our own consistent strategies as active money managers. At U.S. Global Investors, all of our investment professionals playing as one is the key to our team's success in finding and capturing value for shareholders like you. On our website at usfunds.com, you can find "Frank Talk: Insight for Investors," which offers my current thoughts on market conditions and trends, as well as observations from our investments team and others. In addition, our weekly "Investor Alert" provides updates on news and trends in key domestic and international markets. You can sign up for the Investor Alert at our website, www.usfunds.com. Sincerely, /s/ Frank Holmes Frank Holmes CEO and Chief Investment Officer U.S. Global Investors, Inc. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. 4 HOLMES GROWTH FUND MANAGEMENT TEAM'S PERSPECTIVE INTRODUCTION The Holmes Growth Fund focuses on companies that have good growth prospects and strong positive earnings momentum. The fund's primary objective is long-term capital appreciation. PERFORMANCE [Holmes Growth Fund Graph] Holmes S&P S&P MidCap Growth Fund 500 Index 400 Index Date Value Value Value 4/30/1998 $ 10,000.00 $ 10,000.00 $ 10,000.00 5/31/1998 9,464.68 9,828.35 9,550.51 6/30/1998 10,143.49 10,227.28 9,610.31 7/31/1998 9,856.51 10,118.65 9,237.58 8/31/1998 8,366.45 8,657.21 7,519.39 9/30/1998 9,006.62 9,211.83 8,220.94 10/31/1998 8,929.36 9,960.46 8,954.29 11/30/1998 9,768.21 10,563.89 9,401.15 12/31/1998 11,161.89 11,172.24 10,536.12 1/31/1999 11,960.79 11,639.25 10,126.10 2/28/1999 10,842.32 11,277.57 9,596.09 3/31/1999 11,812.43 11,728.65 9,864.18 4/30/1999 11,743.95 12,182.83 10,641.84 5/31/1999 11,641.23 11,895.56 10,688.11 6/30/1999 12,714.05 12,555.21 11,260.09 7/31/1999 12,531.44 12,163.55 11,019.03 8/31/1999 13,033.61 12,103.33 10,641.37 9/30/1999 13,273.29 11,771.94 10,313.26 10/31/1999 14,363.22 12,516.56 10,838.42 11/30/1999 16,006.69 12,770.98 11,407.21 12/31/1999 20,252.76 13,522.70 12,084.57 1/31/2000 20,568.38 12,843.37 11,744.26 2/29/2000 27,472.73 12,600.50 12,565.93 3/31/2000 26,085.29 13,832.40 13,617.06 4/30/2000 23,369.58 13,416.38 13,140.91 5/31/2000 20,436.87 13,141.81 12,978.68 6/30/2000 21,436.36 13,465.85 13,169.52 7/31/2000 19,529.44 13,255.51 13,377.76 8/31/2000 22,264.88 14,078.40 14,870.56 9/30/2000 20,588.11 13,335.35 14,768.76 10/31/2000 19,075.73 13,278.78 14,267.70 11/30/2000 16,527.40 12,232.66 13,191.44 12/31/2000 16,764.38 12,292.67 14,200.40 1/31/2001 16,290.42 12,728.54 14,516.92 2/28/2001 14,078.57 11,568.67 13,688.93 3/31/2001 12,840.99 10,836.20 12,671.90 4/30/2001 12,963.87 11,677.61 14,069.29 5/31/2001 12,884.88 11,755.95 14,396.85 6/30/2001 12,542.57 11,469.93 14,338.72 7/31/2001 12,147.59 11,356.98 14,125.01 8/31/2001 11,778.95 10,646.72 13,663.22 9/30/2001 11,269.88 9,787.04 11,964.07 10/31/2001 11,340.10 9,973.78 12,493.66 11/30/2001 11,691.18 10,738.64 13,423.03 12/31/2001 12,191.48 10,832.78 14,115.45 1/31/2002 12,235.37 10,674.78 14,042.94 2/28/2002 12,077.38 10,468.87 14,060.03 3/31/2002 12,525.01 10,862.59 15,064.98 4/30/2002 12,963.87 10,204.26 14,994.52 5/31/2002 12,744.44 10,129.08 14,741.82 6/30/2002 11,893.06 9,407.50 13,663.00 7/31/2002 10,418.49 8,674.23 12,339.35 8/31/2002 9,997.19 8,731.18 12,401.45 9/30/2002 9,900.64 7,782.27 11,402.48 10/31/2002 10,172.73 8,467.25 11,896.16 11/30/2002 10,927.57 8,965.62 12,583.66 12/31/2002 9,812.87 8,438.91 12,066.80 1/31/2003 10,005.97 8,217.84 11,714.42 2/28/2003 9,900.64 8,094.54 11,435.30 3/31/2003 9,453.01 8,173.13 11,531.52 4/30/2003 9,575.89 8,846.35 12,368.11 5/31/2003 10,067.41 9,312.45 13,392.51 6/30/2003 10,111.29 9,431.24 13,563.08 7/31/2003 10,400.94 9,597.53 14,044.48 8/31/2003 10,795.91 9,784.70 14,680.57 9/30/2003 10,708.14 9,680.79 14,456.08 10/31/2003 11,893.06 10,228.43 15,548.99 11/30/2003 12,024.71 10,318.42 16,090.53 12/31/2003 11,945.72 10,859.56 16,361.81 1/31/2004 12,288.03 11,058.88 16,716.21 2/29/2004 12,305.58 11,212.59 17,117.68 3/31/2004 12,323.14 11,043.44 17,190.14 4/30/2004 12,042.27 10,870.08 16,626.29 5/31/2004 12,244.14 11,019.25 16,970.73 6/30/2004 12,612.78 11,233.52 17,356.65 7/31/2004 11,954.50 10,861.72 16,547.05 8/31/2004 11,726.29 10,905.66 16,503.38 9/30/2004 12,375.80 11,023.78 16,992.08 10/31/2004 12,621.56 11,192.19 17,263.59 11/30/2004 13,551.94 11,645.05 18,291.30 12/31/2004 13,920.58 12,041.32 19,057.06 1/31/2005 13,534.39 11,747.81 18,570.63 2/28/2005 13,973.24 11,995.03 19,193.32 3/31/2005 13,587.05 11,782.62 18,980.93 4/30/2005 12,919.98 11,559.15 18,243.44 5/31/2005 13,543.16 11,926.95 19,341.48 6/30/2005 14,008.35 11,943.89 19,789.80 7/31/2005 14,807.07 12,388.06 20,828.98 8/31/2005 14,982.62 12,275.03 20,596.67 9/30/2005 15,368.81 12,374.45 20,754.92 10/31/2005 14,534.98 12,168.15 20,308.71 11/30/2005 15,087.94 12,628.37 21,300.62 12/31/2005 15,272.26 12,632.77 21,449.24 1/31/2006 16,641.50 12,967.26 22,712.88 2/28/2006 16,316.75 13,002.44 22,522.48 3/31/2006 16,992.59 13,164.29 23,084.21 4/30/2006 17,317.34 13,341.06 23,408.82 5/31/2006 16,395.74 12,957.10 22,353.71 6/30/2006 16,281.64 12,974.67 22,357.94 7/31/2006 15,693.57 13,054.71 21,720.49 8/31/2006 15,702.35 13,365.32 21,968.17 9/30/2006 15,588.24 13,709.74 22,115.91 10/31/2006 16,097.32 14,156.49 23,034.98 11/30/2006 16,536.18 14,425.69 23,775.62 12/31/2006 16,237.75 14,628.05 23,660.50 1/31/2007 16,808.27 14,849.27 24,519.80 2/28/2007 16,597.62 14,558.83 24,699.90 03/31/07 16,922.37 14,721.67 25,031.77 04/30/07 17,756.20 15,373.77 25,793.21 05/31/07 18,835.79 15,910.24 27,084.44 06/30/07 18,985.00 15,645.92 26,493.16 07/31/07 18,765.58 15,160.82 25,353.24 08/31/07 18,686.58 15,388.08 25,585.93 09/30/07 20,556.12 15,963.58 26,262.35 10/31/07 21,749.81 16,217.51 26,953.47 11/30/07 20,363.02 15,539.51 25,595.42 12/31/07 21,170.52 15,431.69 25,546.66 01/31/08 18,976.23 14,506.07 23,972.65 02/29/08 19,318.54 14,034.82 23,527.17 03/31/08 18,528.59 13,974.22 23,285.80 04/30/08 19,520.41 14,654.81 25,079.74 For the Periods Ended AVERAGE ANNUAL PERFORMANCE April 30, 2008 Six Month One Year Five Year Ten Year Holmes Growth Fund (10.25)% 9.94% 15.29% 6.91% ------------------------------------------------------------------------- S&P 500 Index (9.64)% (4.68)% 10.61% 3.89% ------------------------------------------------------------------------- S&P MidCap 400 Index (6.95)% (2.77)% 15.17% 9.62% ------------------------------------------------------------------------- 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 MidCap 400 Index is a capitalization-weighted index which measures the performance of the mid-range sector of the U.S. stock market. The returns for the indexes reflect no deduction for fees, expenses or taxes. Please visit our website at usfunds.com for updated performance information for different time periods. 5 HOLMES GROWTH FUND SIX MONTHS IN REVIEW - ECONOMIC AND POLITICAL ISSUES THAT AFFECTED THE FUND The credit crisis that began in earnest in August 2007 continued through the fall and into 2008. In March it came to a head when Bear Stearns was forced into a Federal Reserve-backed merger with JP Morgan Chase. Bear Stearns suffered from essentially what became a "run on the bank" and its liquidity disappeared in a matter of days. While the Fed had aggressively cut interest rates and set up alternative and innovative means to deal with the financial crisis, it could not engineer a soft landing in the financial industry. The Fed cut interest rates by 250 basis points during the past six months to 2 percent. The Fed appears willing to pause at this juncture to allow for the monetary policy measures taken to date to work through the system. U.S. economic growth was anemic over the past six months, with GDP growth of less than 1 percent. If not for strong worldwide economic growth, the U.S. would likely have fallen into a recession. Exports picked up and were a positive contributor to growth as sales of U.S.-made goods overseas benefited from a weak dollar. Housing remained weak and home prices continued to decline. Oil prices averaged $99 a barrel over the past six months. Oil prices held in the $90 to $100 range until March, when prices escalated sharply through the end of April. High energy and commodity prices continued to fuel inflation concerns. The Fed was forced to walk a fine line in supporting economic growth and the financial markets as inflation has accelerated around the world. The Fed will be unable to maintain the current monetary policy unless the inflation picture improves in the near future. The 10-year U.S. Treasury note yield fell by as much as 100 basis points during the period, bottoming out during the week of the Bear Stearns collapse. Yields rose by about 40 basis points from mid-March to end the period to close at 3.73 percent. Stock market performance was weak over this period as the S&P MidCap 400 Index fell 6.95 percent. The energy and materials sectors were the notable outperformers as commodity prices rose, while technology and consumer discretion sectors underperformed as concerns about a slowing economy negatively impacted these groups. 6 HOLMES GROWTH FUND INVESTMENT HIGHLIGHTS STRENGTHS * The fund was materially overweight the best performing sectors, energy and materials. * Oil and gas drilling, fertilizer and agriculture were among the top- performing midcap industry groups and the fund held sizable positions in these areas. * Fund holdings that positively contributed to fund performance were The Mosaic Co.,(1) Potash Corporation of Saskatchewan, Inc.,(2) and Helmerich & Payne, Inc.(3) WEAKNESSES * Information technology and telecom services were the worst performing sectors, and the fund maintained an overweight exposure during the period. * Technology and precious metals exposure negatively impacted performance. * Fund holdings that negatively impacted performance included Apple, Inc.,(4) VeriFone Holdings, Inc.,(5) and Flotek Industries, Inc.(5) SECTOR WEIGHTINGS--HOLMES GROWTH FUND AND S&P MIDCAP 400 INDEX (AT APRIL 30, 2008 IN %) HOLMES GROWTH S&P MIDCAP OVER FUND 400 INDEX (UNDER) SECTORS % WEIGHTS % WEIGHTS % WEIGHT - ------- ------------- -------------- -------- Materials 22.4 7.6 14.8 Energy 17.6 10.3 7.3 Technology 12.2 13.5 (1.3) Industrials 12.1 16.3 (4.2) Financials 9.7 16.1 (6.4) Consumer Discretion 7.4 12.6 (5.2) Communications 2.9 2.2 0.7 Other 6.1 21.4 (15.3) Cash Equivalent 9.6 0.0 9.6 ----- ----- ----- TOTAL 100.0 100.0 0.0 ===== ===== ===== 7 HOLMES GROWTH FUND The top-down themes that we have focused on over the past year have been the secular bull market for commodities, global infrastructure build-out, and a weak U.S. dollar. The fund was overweight sectors leveraged to these themes such as energy, materials and technology, and this approach has generally worked out very well over the past six months. Traditional financials, such as banks and thrifts, do not typically meet the growth and return-on-equity metrics that we use in our models, which helped the fund avoid many of the subprime-related underperformance in financials. The fund also shifted more of the portfolio to larger capitalization issues and added more international names than in the recent past. This shift was driven by growth prospects and valuation trends within the global financial markets. FUND METRICS At April 30, 2008, the average revenue growth in the last quarter for the stocks in the fund was 39 percent, compared to 8 percent for the stocks in the S&P MidCap 400 Index. The high relative growth also applies to earnings of the stocks in the fund, which on average grew 46 percent year-over-year in the latest quarter, as compared to 2 percent for the S&P MidCap 400 Index. Despite these higher growth rates, the price-to-projected- earnings-per-share growth rate (PEG ratio) is lower than that of the S&P MidCap 400 Index (1.1x for the fund compared to 1.3x for the index). AVERAGE YEAR-OVER-YEAR FUND METRICS, QUARTER ENDED APRIL 30, 2008 RETURN ON P/E TO REVENUE EARNINGS EQUITY - GROWTH GROWTH GROWTH ROE RATIO - PEG Holmes Growth Fund 49% 83% 26% 1.3x S&P MidCap 400 Index 15% 9% 14% 1.4x The fund returned negative 10.25 percent for the six-month period, compared to a total return of negative 6.95 percent for the S&P MidCap 400 Index and negative 9.64 percent for the S&P 500 Index. 8 HOLMES GROWTH FUND CURRENT OUTLOOK OPPORTUNITIES * Fed rate cuts have historically been good for the market and the Fed was very aggressive early in the rate-cut cycle; their actions should be supportive of equities over the remainder of 2008. * We are in the fourth year of the presidential election cycle, which tends to be positive. * A global infrastructure build-out is under way in the U.S. and emerging markets, benefiting a diverse group of industries around the globe. THREATS * The economic expansion appears vulnerable as high food and energy prices weigh on the consumer. * After a strong run-up in commodity prices, a pause to digest the gains would be expected, potentially limiting the appreciation of commodity-linked equities. * Rising inflation has been a global phenomenon that threatens economic growth, equity valuations and Fed action. (1) This security comprised 4.04% of the fund's total net assets as of April 30, 2008. (2) This security comprised 3.64% of the fund's total net assets as of April 30, 2008. (3) This security comprised 1.15% of the fund's total net assets as of April 30, 2008. (4) This security comprised 0.08% of the fund's total net assets as of April 30, 2008. (5) The fund did not hold this security as of April 30, 2008. 9 HOLMES GROWTH FUND TOP 10 EQUITY HOLDINGS BASED ON TOTAL INVESTMENTS April 30, 2008 THE MOSAIC CO. 4.16% AGRICULTURE --------------------------------------------------------------------- POTASH CORPORATION OF SASKATCHEWAN, INC. 3.75% AGRICULTURE --------------------------------------------------------------------- RESEARCH IN MOTION LTD. 3.10% COMPUTER SOFTWARE & HARDWARE --------------------------------------------------------------------- GAMESTOP CORP. 2.80% RETAIL --------------------------------------------------------------------- TRANSOCEAN, INC. 2.75% OIL & GAS DRILLING --------------------------------------------------------------------- SILVER WHEATON CORP. 2.31% METAL & MINERAL MINING --------------------------------------------------------------------- MCDERMOTT INTERNATIONAL, INC. 2.28% DIVERSIFIED OPERATIONS --------------------------------------------------------------------- COACH, INC. 2.11% APPAREL --------------------------------------------------------------------- PRICELINE.COM, INC. 1.95% E-COMMERCE --------------------------------------------------------------------- YAMANA GOLD, INC. 1.93% GOLD MINING --------------------------------------------------------------------- TOTAL TOP TEN HOLDINGS 27.14% PORTFOLIO PROFILE April 30, 2008 Country Distribution* % of Investments --------------------------------------------------------------------- United States 77.24% --------------------------------------------------------------------- Canada 17.83% --------------------------------------------------------------------- Other Foreign 4.93% --------------------------------------------------------------------- * Country distribution shown is based on domicile and the locale of company operations may be different. American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs) are included as United States investments in accordance with the prospectus. 10 GLOBAL MEGATRENDS FUND MANAGEMENT TEAM'S PERSPECTIVE INTRODUCTION The Global MegaTrends Fund focuses on companies that are likely 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 (airports and toll roads), select utilities, construction and engineering firms, telecom operators, alternative energy companies, and firms in the natural resources sectors. U.S. Global Investors took over direct management of the Global MegaTrends Fund on October 1, 2007. PERFORMANCE [Global MegaTrends Fund Graph] Global MegaTrends S&P 500 Fund Index Date Value Value 4/30/1998 $ 10,000.00 $ 10,000.00 5/31/1998 9,464.68 9,828.35 6/30/1998 10,143.49 10,227.28 7/31/1998 9,856.51 10,118.65 8/31/1998 8,366.45 8,657.21 9/30/1998 9,006.62 9,211.83 10/31/1998 8,929.36 9,960.46 11/30/1998 9,768.21 10,563.89 12/31/1998 11,161.89 11,172.24 1/31/1999 11,960.79 11,639.25 2/28/1999 10,842.32 11,277.57 3/31/1999 11,812.43 11,728.65 4/30/1999 11,743.95 12,182.83 5/31/1999 11,641.23 11,895.56 6/30/1999 12,714.05 12,555.21 7/31/1999 12,531.44 12,163.55 8/31/1999 13,033.61 12,103.33 9/30/1999 13,273.29 11,771.94 10/31/1999 14,363.22 12,516.56 11/30/1999 16,006.69 12,770.98 12/31/1999 20,252.76 13,522.70 1/31/2000 20,568.38 12,843.37 2/29/2000 27,472.73 12,600.50 3/31/2000 26,085.29 13,832.40 4/30/2000 23,369.58 13,416.38 5/31/2000 20,436.87 13,141.81 6/30/2000 21,436.36 13,465.85 7/31/2000 19,529.44 13,255.51 8/31/2000 22,264.88 14,078.40 9/30/2000 20,588.11 13,335.35 10/31/2000 19,075.73 13,278.78 11/30/2000 16,527.40 12,232.66 12/31/2000 16,764.38 12,292.67 1/31/2001 16,290.42 12,728.54 2/28/2001 14,078.57 11,568.67 3/31/2001 12,840.99 10,836.20 4/30/2001 12,963.87 11,677.61 5/31/2001 12,884.88 11,755.95 6/30/2001 12,542.57 11,469.93 7/31/2001 12,147.59 11,356.98 8/31/2001 11,778.95 10,646.72 9/30/2001 11,269.88 9,787.04 10/31/2001 11,340.10 9,973.78 11/30/2001 11,691.18 10,738.64 12/31/2001 12,191.48 10,832.78 1/31/2002 12,235.37 10,674.78 2/28/2002 12,077.38 10,468.87 3/31/2002 12,525.01 10,862.59 4/30/2002 12,963.87 10,204.26 5/31/2002 12,744.44 10,129.08 6/30/2002 11,893.06 9,407.50 7/31/2002 10,418.49 8,674.23 8/31/2002 9,997.19 8,731.18 9/30/2002 9,900.64 7,782.27 10/31/2002 10,172.73 8,467.25 11/30/2002 10,927.57 8,965.62 12/31/2002 9,812.87 8,438.91 1/31/2003 10,005.97 8,217.84 2/28/2003 9,900.64 8,094.54 3/31/2003 9,453.01 8,173.13 4/30/2003 9,575.89 8,846.35 5/31/2003 10,067.41 9,312.45 6/30/2003 10,111.29 9,431.24 7/31/2003 10,400.94 9,597.53 8/31/2003 10,795.91 9,784.70 9/30/2003 10,708.14 9,680.79 10/31/2003 11,893.06 10,228.43 11/30/2003 12,024.71 10,318.42 12/31/2003 11,945.72 10,859.56 1/31/2004 12,288.03 11,058.88 2/29/2004 12,305.58 11,212.59 3/31/2004 12,323.14 11,043.44 4/30/2004 12,042.27 10,870.08 5/31/2004 12,244.14 11,019.25 6/30/2004 12,612.78 11,233.52 7/31/2004 11,954.50 10,861.72 8/31/2004 11,726.29 10,905.66 9/30/2004 12,375.80 11,023.78 10/31/2004 12,621.56 11,192.19 11/30/2004 13,551.94 11,645.05 12/31/2004 13,920.58 12,041.32 1/31/2005 13,534.39 11,747.81 2/28/2005 13,973.24 11,995.03 3/31/2005 13,587.05 11,782.62 4/30/2005 12,919.98 11,559.15 5/31/2005 13,543.16 11,926.95 6/30/2005 14,008.35 11,943.89 7/31/2005 14,807.07 12,388.06 8/31/2005 14,982.62 12,275.03 9/30/2005 15,368.81 12,374.45 10/31/2005 14,534.98 12,168.15 11/30/2005 15,087.94 12,628.37 12/31/2005 15,272.26 12,632.77 1/31/2006 16,641.50 12,967.26 2/28/2006 16,316.75 13,002.44 3/31/2006 16,992.59 13,164.29 4/30/2006 17,317.34 13,341.06 5/31/2006 16,395.74 12,957.10 6/30/2006 16,281.64 12,974.67 7/31/2006 15,693.57 13,054.71 8/31/2006 15,702.35 13,365.32 9/30/2006 15,588.24 13,709.74 10/31/2006 16,097.32 14,156.49 11/30/2006 16,536.18 14,425.69 12/31/2006 16,237.75 14,628.05 1/31/2007 16,808.27 14,849.27 2/28/2007 16,597.62 14,558.83 03/31/07 16,922.37 14,721.67 04/30/07 17,756.20 15,373.77 05/31/07 18,835.79 15,910.24 06/30/07 18,985.00 15,645.92 07/31/07 18,765.58 15,160.82 08/31/07 18,686.58 15,388.08 09/30/07 20,556.12 15,963.58 10/31/07 21,749.81 16,217.51 11/30/07 20,363.02 15,539.51 12/31/07 21,170.52 15,431.69 01/31/08 18,976.23 14,506.07 02/29/08 19,318.54 14,034.82 03/31/08 18,528.59 13,974.22 04/30/08 19,520.41 14,654.81 For the Periods Ended AVERAGE ANNUAL PERFORMANCE April 30, 2008 Six Month One Year Five Year Ten Year Global MegaTrends Fund (2.12)% 14.92% 16.10% 5.32% ------------------------------------------------------------------------- S&P 500 Index (9.64)% (4.68)% 10.61% 3.89% ------------------------------------------------------------------------- S&P Global Infrastructure Index (6.95)% 9.86% 26.18% 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. 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 S&P Global Infrastructure Index provides liquid and tradable exposure to 75 companies from around the world that represent the listed infrastructure 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. Effective May 12, 2008, the Adviser has agreed to limit the fund's total operating expenses to 1.85% on an annualized basis through October 31, 2008. Please visit our website at usfunds.com for updated performance information for different time periods. 11 GLOBAL MEGATRENDS FUND SIX MONTHS IN REVIEW - ECONOMIC AND POLITICAL ISSUES THAT AFFECTED THE FUND One of the key growth drivers for global emerging markets during the period under review has been the build-out of roads, aviation networks and other infrastructure assets. Favorable government policies are largely responsible for this trend. China's rapid infrastructure growth in advance of the Beijing Olympics gets the most attention, but in late 2007 India announced that it must spend nearly $500 billion over the next five years to sustain the country's desired economic growth rate and Russia said it plans to spend more than $200 billion by 2011 on energy and transportation infrastructure. The prospect of a slowdown in the U.S. appears to have negatively affected outlook for the domestic infrastructure names. Most of this weakness came in the first quarter of 2008. There was a general feeling that some infrastructure projects may be scaled down due to a weaker economy and tighter credit conditions arising from the subprime crisis. The prospect of weaker tax revenue for municipalities - due to lower real estate assessments - also negatively weighed on the potential availability of funds for infrastructure investments. The market seemed to wait for the first quarter 2008 results of the engineering firms to confirm or dispel these fears. When the results came in slightly better than expected for the majority of the firms, there was a pick-up in valuations. We believe that infrastructure related issues are going to dominate the investment climate for many years to come due to a growth in population and urbanization in emerging nations around the world. In addition, underinvestment in infrastructure assets in the U.S. and other developed countries during the past two or three decades has resulted in a significant deterioration of the existing infrastructure that must be addressed. 12 GLOBAL MEGATRENDS FUND INVESTMENT HIGHLIGHTS OVERVIEW The fund had a negative return of 2.12 percent for the six-month period ending April 30, 2008, compared to a total return of negative 9.64 percent for the S&P 500 Index and negative 6.95 percent for the S&P Global Infrastructure Index. STRENGTHS * Overweighting materials (one of the best performers in the period) proved successful as it contributed most to the return of the fund. Exposure to the U.S. and international steel sector and to alternative energy helped boost returns. * The fund was underweighted financials, the worst-performing group. * Fund holdings that exhibited the strongest price performance were First Solar, Inc.,(1) Mechel(2) and Companhia Siderurgica Nacional S.A.(3) WEAKNESSES * Some construction and engineering firms and telecom holdings exhibited weak performance, particularly in the first three months of 2008. * Fund holdings that exhibited weak price performance included VimpelCom,(4) Intel Corp.(5) and General Electric Co.(6) SECTOR WEIGHTINGS--GLOBAL MEGATRENDS FUND AND S&P 500 INDEX (AT APRIL 30, 2008 IN %) GLOBAL MEGATRENDS S&P 500 OVER FUND INDEX (UNDER) SECTORS % WEIGHTS % WEIGHTS % WEIGHT - ------- ----------------- --------- -------- Industrials 28.0 11.8 16.2 Materials 20.9 3.6 17.3 Energy 11.7 14.1 (2.4) Utilities 6.2 3.6 2.6 Telecoms 5.5 3.4 2.1 Info. Tech 5.2 16.0 (10.8) Consumer Discretion 4.0 8.6 (4.6) Financials 2.6 17.1 (14.5) Health Care 0.0 11.3 (11.3) Consumer Staples 0.0 10.5 (10.5) Cash Equivalent 15.9 0.0 15.9 ----- ----- ----- TOTAL 100.0 100.0 0.0 ===== ===== ===== 13 GLOBAL MEGATRENDS FUND CURRENT OUTLOOK OPPORTUNITIES * Market volatility should allow the fund to acquire some names within the infrastructure space that recently saw a price correction after a stellar performance last year. * The infrastructure theme is a long-term global phenomenon that will last for the next 10 to 20 years. * Investments in alternative energy sources will likely gain traction due to growing need for additional power globally. THREATS * While many countries remain committed to improving their infrastructure, it remains to be seen how tighter credit conditions and the issue of property rights impact some of the projects. * Investors began to move to more defensive sectors at the beginning of 2008 in expectation of weaker economic activity. * Government support/subsidies are still required for a sustainable development of alternative energy and these can vary with changes in a political climate. (1) This security comprised 2.81% of the fund's total net assets as of April 30, 2008. (2) This security comprised 3.87% of the fund's total net assets as of April 30, 2008. (3) This security comprised 2.58% of the fund's total net assets as of April 30, 2008. (4) This security comprised 1.70% of the fund's total net assets as of April 30, 2008. (5) The fund did not hold this security as of April 30, 2008. (6) This security comprised 1.82% of the fund's total net assets as of April 30, 2008. 14 GLOBAL MEGATRENDS FUND TOP 10 EQUITY HOLDINGS BASED ON TOTAL INVESTMENTS April 30, 2008 MECHEL OAO 3.91% STEEL MANUFACTURING --------------------------------------------------------------------- FIRST SOLAR, INC. 2.84% ENERGY --------------------------------------------------------------------- TRANSOCEAN, INC. 2.81% OIL & GAS DRILLING --------------------------------------------------------------------- COMPANHIA VALE DO RIO DOCE 2.62% METAL & MINERAL MINING --------------------------------------------------------------------- COMPANHIA SIDERURGICA NACIONAL S.A. 2.60% STEEL MANUFACTURING --------------------------------------------------------------------- BERKSHIRE HATHAWAY, INC. 2.54% HOLDING COMPANY --------------------------------------------------------------------- BHP BILLITON LTD. 2.43% METAL & MINERAL MINING --------------------------------------------------------------------- EXELON CORP. 2.29% UTILITIES --------------------------------------------------------------------- FPL GROUP, INC. 2.22% UTILITIES --------------------------------------------------------------------- HESS CORP. 2.03% OIL & GAS - INTEGRATED --------------------------------------------------------------------- TOTAL TOP TEN HOLDINGS 26.29% 15 GLOBAL MEGATRENDS FUND PORTFOLIO PROFILE April 30, 2008 Country Distribution* % of Investments --------------------------------------------------------------------- United States 67.11% --------------------------------------------------------------------- Brazil 7.56% --------------------------------------------------------------------- Russian Federation 6.16% --------------------------------------------------------------------- Australia 4.22% --------------------------------------------------------------------- Canada 4.08% --------------------------------------------------------------------- Mexico 2.71% --------------------------------------------------------------------- Luxembourg 1.77% --------------------------------------------------------------------- Hong Kong 1.16% --------------------------------------------------------------------- Switzerland 1.03% --------------------------------------------------------------------- Other Foreign 4.20% --------------------------------------------------------------------- * Country distribution shown is based on domicile and the locale of company operations may be different. Investments in companies that are economically tied to foreign countries were 48.12% of total assets at April 30, 2008. 16 EASTERN EUROPEAN FUND FUND MANAGERS' PERSPECTIVE A Message from Stefan Bottcher, Andrew Wiles and Julian Mayo INTRODUCTION The investment objective of the Eastern European Fund 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) including Turkey. PERFORMANCE [Eastern European Fund Graph] Eastern European S&P 500 Fund Index Date Value Value 4/30/1998 $ 10,000.00 $ 10,000.00 5/31/1998 8,398.31 9,828.35 6/30/1998 8,279.66 10,227.28 7/31/1998 8,813.56 10,118.65 8/31/1998 6,279.66 8,657.21 9/30/1998 6,127.12 9,211.83 10/31/1998 6,796.61 9,960.46 11/30/1998 6,805.08 10,563.89 12/31/1998 7,076.27 11,172.24 1/31/1999 7,305.08 11,639.25 2/28/1999 6,652.54 11,277.57 3/31/1999 6,966.10 11,728.65 4/30/1999 7,525.42 12,182.83 5/31/1999 7,694.92 11,895.56 6/30/1999 8,161.02 12,555.21 7/31/1999 8,474.58 12,163.55 8/31/1999 8,271.19 12,103.33 9/30/1999 7,135.59 11,771.94 10/31/1999 7,338.98 12,516.56 11/30/1999 7,610.17 12,770.98 12/31/1999 9,177.97 13,522.70 1/31/2000 9,601.69 12,843.37 2/29/2000 10,067.80 12,600.50 3/31/2000 11,144.07 13,832.40 4/30/2000 9,635.59 13,416.38 5/31/2000 8,966.10 13,141.81 6/30/2000 8,372.88 13,465.85 7/31/2000 8,415.25 13,255.51 8/31/2000 8,745.76 14,078.40 9/30/2000 7,813.56 13,335.35 10/31/2000 7,474.58 13,278.78 11/30/2000 6,542.37 12,232.66 12/31/2000 7,211.86 12,292.67 1/31/2001 7,805.08 12,728.54 2/28/2001 7,262.71 11,568.67 3/31/2001 7,118.64 10,836.20 4/30/2001 7,440.68 11,677.61 5/31/2001 7,838.98 11,755.95 6/30/2001 8,067.80 11,469.93 7/31/2001 7,728.81 11,356.98 8/31/2001 7,644.07 10,646.72 9/30/2001 7,059.32 9,787.04 10/31/2001 7,813.56 9,973.78 11/30/2001 8,296.61 10,738.64 12/31/2001 8,610.17 10,832.78 1/31/2002 9,330.51 10,674.78 2/28/2002 9,220.34 10,468.87 3/31/2002 10,050.85 10,862.59 4/30/2002 10,855.93 10,204.26 5/31/2002 11,016.95 10,129.08 6/30/2002 10,347.46 9,407.50 7/31/2002 9,711.86 8,674.23 8/31/2002 10,220.34 8,731.18 9/30/2002 10,093.22 7,782.27 10/31/2002 10,788.14 8,467.25 11/30/2002 11,618.64 8,965.62 12/31/2002 11,593.22 8,438.91 1/31/2003 11,228.81 8,217.84 2/28/2003 11,601.69 8,094.54 3/31/2003 11,169.49 8,173.13 4/30/2003 12,567.80 8,846.35 5/31/2003 13,779.66 9,312.45 6/30/2003 13,838.98 9,431.24 7/31/2003 13,652.54 9,597.53 8/31/2003 15,016.95 9,784.70 9/30/2003 16,033.90 9,680.79 10/31/2003 16,474.58 10,228.43 11/30/2003 17,016.95 10,318.42 12/31/2003 18,705.72 10,859.56 1/31/2004 20,037.38 11,058.88 2/29/2004 21,923.14 11,212.59 3/31/2004 23,442.48 11,043.44 4/30/2004 21,226.04 10,870.08 5/31/2004 20,984.73 11,019.25 6/30/2004 21,458.40 11,233.52 7/31/2004 20,913.23 10,861.72 8/31/2004 21,949.96 10,905.66 9/30/2004 23,907.22 11,023.78 10/31/2004 25,390.81 11,192.19 11/30/2004 26,659.90 11,645.05 12/31/2004 28,501.50 12,041.32 1/31/2005 28,817.57 11,747.81 2/28/2005 32,340.75 11,995.03 3/31/2005 28,891.94 11,782.62 4/30/2005 26,846.82 11,559.15 5/31/2005 27,785.71 11,926.95 6/30/2005 29,300.96 11,943.89 7/31/2005 32,257.08 12,388.06 8/31/2005 35,045.88 12,275.03 9/30/2005 39,033.86 12,374.45 10/31/2005 35,910.41 12,168.15 11/30/2005 38,838.64 12,628.37 12/31/2005 40,125.47 12,632.77 1/31/2006 46,484.59 12,967.26 2/28/2006 47,754.38 13,002.44 3/31/2006 46,413.48 13,164.29 4/30/2006 50,974.58 13,341.06 5/31/2006 42,929.17 12,957.10 6/30/2006 41,821.91 12,974.67 7/31/2006 44,320.86 13,054.71 8/31/2006 45,550.02 13,365.32 9/30/2006 43,823.10 13,709.74 10/31/2006 47,053.46 14,156.49 11/30/2006 50,233.02 14,425.69 12/31/2006 53,281.49 14,628.05 1/31/2007 52,602.00 14,849.27 2/28/2007 51,617.90 14,558.83 03/31/07 55,284.81 14,721.67 04/30/07 56,514.93 15,373.77 05/31/07 55,448.83 15,910.24 06/30/07 59,221.18 15,645.92 07/31/07 62,103.16 15,160.82 08/31/07 59,584.35 15,388.08 09/30/07 64,680.54 15,963.58 10/31/07 69,987.60 16,217.51 11/30/07 67,785.11 15,539.51 12/31/07 70,791.87 15,431.69 01/31/08 60,329.95 14,506.07 02/29/08 62,629.59 14,034.82 03/31/08 60,486.10 13,974.22 04/30/08 63,225.79 14,654.81 For the Periods Ended AVERAGE ANNUAL PERFORMANCE April 30, 2008 Six Month One Year Five Year Ten Year Eastern European Fund (9.66)% 11.87% 38.09% 20.23% ------------------------------------------------------------------------- S&P 500 Index (9.64)% (4.68)% 10.61% 3.89% ------------------------------------------------------------------------- Morgan Stanley Capital International Emerging Markets Europe 10/40 Index (Net Total Return) (11.04)% 12.35% 38.44% 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. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund's returns and share price may be more volatile than those of a less concentrated portfolio. The 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 Capital International 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 index commenced December 1998; 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, except as noted above. Please visit our website at usfunds.com for updated performance information for different time periods. 17 EASTERN EUROPEAN FUND SIX MONTHS IN REVIEW: ECONOMIC AND POLITICAL ISSUES THAT AFFECTED THE FUND Eastern European economies were relatively unaffected by the fallout from the subprime debt crisis in the U.S., and in particular the consequent credit crunch; economic activity, buoyed by an increasing focus on the domestic sectors, remained strong over the period under review. The one concern was inflation, which began to trend higher as a result of strongly rising energy and commodity prices. Rising food prices were a particular worry. This in turn led some central banks to begin tightening monetary policy, which reversed an earlier expectation for continuing cuts in interest rates. These developments had a mixed impact on the fund. Higher interest rates are generally negative for share prices as they act to depress future growth. Companies involved in the production or supply of commodities may benefit, however, as higher prices feed through directly into their bottom line. The region's two main economies, Russia and Turkey, were also the focus of significant political developments. In Russia, there was a smooth handover of power from Vladimir Putin to his protege, Dmitry Medvedev, shortly after the period under review. The new president seems likely to continue the business-friendly policies of his predecessor, who assumed the position of prime minister to ensure their implementation. Recent announcements regarding the taxation of the energy sector have been very favorably received. Putin's United Russia party earlier won an overwhelming victory in parliamentary elections. The fact that there was little stock market reaction to the transition suggests that there has also been little material change in the political landscape. In contrast, the Istanbul stock market reacted negatively to news that the constitutional court in Turkey would hear a case to ban the ruling AKP party and bar its leaders (the current president and prime minister) from political office. At the time, the market was recovering from an earlier presidential election that highlighted the friction between the Islamist and secular movements within the country. While it seems very unlikely that the AKP will lose power, given their popular mandate, the return of political uncertainty was damaging. INVESTMENT HIGHLIGHTS The fund had a negative return of 9.66 percent for the six-month period ending April 30, 2008, compared to a total return of negative 9.64 percent for the S&P 500 Index and negative 11.04 percent for the MSCI Emerging Markets Europe 10/40 (Net Total Return) Index. 18 EASTERN EUROPEAN FUND As the fund is focused on relatively few securities (typically it holds shares in 30 to 40 companies), the performance of an individual holding can have a significant impact on overall fund performance. Over the six months under review, the fund received a significant positive contribution from some of the holdings that operate in the commodity sectors. Foremost among these was Uralkali,(2) a Russian producer of potash fertilizer. Uralkali benefited from rising demand for its product as the agricultural sector attempts to boost its production to take advantage of the current strength of food prices and the global demand for foodstuffs. Uralkali's share price almost doubled after it came into the fund in the final quarter of 2007 following an initial public offering. The company will also enter the MSCI indices in May, which should provide further support for its share price. The fund also participated in the $3 billion offering of Eurasian Natural Resources Corp. plc,(3) a diversified Kazakh mining group with a particularly interesting product mix that includes iron, aluminum and ferrochrome. The shares were priced attractively and its London listing was very well received. Its share price rose substantially, allowing the fund to take profits as its shares became fully valued. Other commodity companies that benefited the fund over the period under review included NovaTek OAO,(4) the Russian gas producer, and Rosneft Oil Co. OAO,(5) the Russian oil and gas group. Given the current attractiveness of such companies, the fund increased its exposure to this area over the past six months. It substantially increased its holdings in Gazprom OAO,(6) the Russian gas giant, and JSC MMC Norilsk Nickel,(7) the largest nickel and palladium producer in the world, another Russian company. Selected companies keyed into the strength of consumer demand across the region also performed well. Central European Distribution Corp.,(8) the Polish beverages distributor that is expanding into Russia, saw its share price rise 15 percent and shares in Telekomunikacja Polska S.A.,(9) the Polish telecommunications leader, increased by 7 percent. Over the period under review the fund also brought in a new holding in Cyfrowy Polsat S.A.,(10) the Polish subscriber satellite TV operator, via an initial public offering. The company was attractively valued and has strong growth potential. Such gains were counterbalanced by losses within the Turkish shares held by the fund. In addition to the political issues described above, the Istanbul stock market was ripe for profit-taking following the very large share price gains secured in 2007 as a whole. The financials sector, the dominant sector within the Turkish market, was hardest hit. Turkiye Garanti Bankasi a.s.(11) suffered a 42 percent share price fall whilst shares 19 EASTERN EUROPEAN FUND in Turkiye Halk Bankasi a.s.(12) tumbled 32 percent. Shares in Finans Finansal Kiralama a.s.,(13) the Turkish leasing company, were down 46 percent during the period under review following an unexpected tax hike announced at the end of December. Given the current nature of the markets, its share price seemed to fall far more than would be warranted by the impact of the tax hike on its earnings. It is, however, encouraging to note that Turkish share prices recovered strongly in April, as the market appeared to come to terms with the new uncertainties. The share price for Finans Finansal Kiralama a.s.(13) nearly doubled in the month. CURRENT OUTLOOK The outlook for Eastern European stock markets has improved as it has become apparent that the impact of the recent credit crunch on the global economy in general and the U.S. economy in particular may earlier have been overstated. As a result, world stock markets have most recently found a degree of stability. The economies of Eastern Europe were already relatively insulated from such developments and the share price falls that have occurred over the period under review now provide ample downside protection, with market valuations having fallen to historically very attractive levels. The Eastern European region now trades on a forward P-E multiple of little more than 10 times earnings with some countries, such as Turkey, on single-digit multiples. The ongoing strength of the energy and materials sectors, based upon still- buoyant demand for commodities, and the robust performance of the consumer sectors (all of which are well-represented within the fund) should additionally provide support. Although both political and economic risks remain, the combination of realistic share price valuations and exciting regional economic growth prospects gives us every reason to believe that the outlook for stock markets is bright. (1) The subadviser considers the following countries 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) This security comprised 0.98% of the fund's total net assets as of April 30, 2008. (3) The fund did not hold this security as of April 30, 2008. (4) This security comprised 1.54% of the fund's total net assets as of April 30, 2008. (5) This security comprised 5.04% of the fund's total net assets as of April 30, 2008. (6) This security comprised 17.31% of the fund's total net assets as of April 30, 2008. (7) This security comprised 8.75% of the fund's total net assets as of April 30, 2008. 20 EASTERN EUROPEAN FUND (8) This security comprised 2.05% of the fund's total net assets as of April 30, 2008. (9) This security comprised 2.00% of the fund's total net assets as of April 30, 2008. (10) This security comprised 0.64% of the fund's total net assets as of April 30, 2008. (11) This security comprised 4.02% of the fund's total net assets as of April 30, 2008. (12) This security comprised 0.83% of the fund's total net assets as of April 30, 2008. (13) This security comprised 0.47% of the fund's total net assets as of April 30, 2008. COUNTRY DISTRIBUTION* BASED ON TOTAL INVESTMENTS April 30, 2008 [Eastern European Fund Pie Chart] Russian Federation 62.7% Turkey 10.3% United States 6.2% Austria 4.6% Hungary 4.1% Czech Republic 4.0% Poland 2.6% Other 5.5% * Country distribution shown is based on domicile and the locale of company operations may be different. 21 EASTERN EUROPEAN FUND TOP 10 EQUITY HOLDINGS BASED ON TOTAL INVESTMENTS April 30, 2008 GAZPROM OAO 17.30% OIL & GAS - INTEGRATED --------------------------------------------------------------------- JSC MMC NORILSK NICKEL 8.75% DIVERSIFIED METALS & MINING --------------------------------------------------------------------- LUKOIL 6.21% OIL & GAS - INTEGRATED --------------------------------------------------------------------- SBERBANK RF 6.19% DIVERSIFIED BANKS --------------------------------------------------------------------- ROSNEFT OIL CO. OAO 5.04% OIL & GAS INTEGRATED --------------------------------------------------------------------- MOBILE TELESYSTEMS 4.44% COMMUNICATIONS --------------------------------------------------------------------- VIMPELCOM 4.43% COMMUNICATIONS --------------------------------------------------------------------- OTP BANK NYRT. 4.13% DIVERSIFIED BANKS --------------------------------------------------------------------- CEZ A.S. 4.04% ELECTRIC UTILITIES --------------------------------------------------------------------- TURKIYE GARANTI BANKASI A.S. 4.02% DIVERSIFIED BANKS --------------------------------------------------------------------- TOTAL TOP TEN HOLDINGS 64.55% TOP 5 INDUSTRIES BASED ON TOTAL INVESTMENTS April 30, 2008 OIL & GAS - INTEGRATED 28.55%** DIVERSIFIED BANKS 19.42% COMMUNICATIONS 10.87% DIVERSIFIED METALS & MINING 8.75% OIL & GAS EXPLORATION & PRODUCTION 5.92% **Greater than 25% due to market appreciation. 22 GLOBAL EMERGING MARKETS FUND FUND MANAGERS' PERSPECTIVE A Message from Stefan Bottcher and Julian Mayo INTRODUCTION The investment objective of the Global Emerging Markets Fund is to achieve long-term capital growth by investing in a non-diversified portfolio of equity securities of companies located in or with a significant business presence in emerging countries.(1) PERFORMANCE [Global Emerging Markets Fund Graph] Morgan Stanley Capital International Global Emerging Markets Emerging Net Total Markets Fund S&P 500 Index Return Index Date Value Value Value 2/24/2005 $ 10,000.00 $ 10,000.00 $ 10,000.00 2/28/2005 10,180.00 10,029.62 10,196.56 3/31/2005 9,370.00 9,852.10 9,522.68 4/30/2005 9,020.00 9,664.91 9,267.07 5/31/2005 9,190.00 9,972.25 9,589.64 6/30/2005 9,440.00 9,986.21 9,915.44 7/31/2005 10,230.00 10,357.70 10,608.51 8/31/2005 10,520.00 10,263.44 10,699.37 9/30/2005 11,470.00 10,346.58 11,695.59 10/31/2005 10,650.00 10,173.79 10,931.17 11/30/2005 11,440.00 10,558.36 11,835.45 12/31/2005 12,298.06 10,561.53 12,535.00 1/31/2006 13,908.39 10,841.41 13,935.05 2/28/2006 13,764.80 10,870.68 13,918.57 3/31/2006 13,805.82 11,005.47 14,041.18 4/30/2006 14,759.72 11,152.95 15,041.01 5/31/2006 13,077.58 10,831.74 13,465.18 6/30/2006 12,995.53 10,846.91 13,432.26 7/31/2006 13,251.95 10,914.16 13,624.52 8/31/2006 13,672.48 11,173.92 13,971.69 9/30/2006 13,569.91 11,462.20 14,088.02 10/31/2006 14,287.90 11,835.87 14,756.96 11/30/2006 15,241.79 12,060.75 15,853.91 12/31/2006 16,305.69 12,229.60 16,567.75 1/31/2007 16,206.06 12,414.27 16,389.36 2/28/2007 16,128.57 12,170.95 16,292.07 3/31/2007 16,593.50 12,307.26 16,940.87 4/30/2007 17,301.96 12,852.48 17,725.20 5/31/2007 17,910.80 13,300.96 18,602.99 6/30/2007 18,729.95 13,079.99 19,475.34 7/31/2007 20,091.53 12,674.45 20,502.59 8/31/2007 19,615.53 12,864.44 20,067.20 9/30/2007 21,785.19 13,345.56 22,282.88 10/31/2007 24,220.53 13,557.84 24,768.06 11/30/2007 22,183.70 12,991.03 23,012.37 12/31/2007 22,722.72 12,900.90 23,092.96 1/31/2008 19,244.61 12,127.08 20,211.11 2/29/2008 20,151.36 11,733.12 21,703.06 3/31/2008 18,635.61 11,682.45 20,554.40 4/30/2008 20,219.02 12,251.42 22,222.70 For the Periods Ended AVERAGE ANNUAL PERFORMANCE April 30, 2008 Six Months One Year Inception Global Emerging Markets Fund (Inception 2/24/05) (16.52)% 16.86% 24.77% ------------------------------------------------------------------------- S&P 500 Index (9.64)% (4.68)% 6.59% ------------------------------------------------------------------------- Morgan Stanley Capital International Emerging Markets Net Total Return Index (10.28)% 25.37% 28.54% 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 Morgan Stanley Capital International 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. The Adviser has agreed to limit the fund's total operating expenses to 2.50% through February 28, 2009. Please visit our website at usfunds.com for updated performance information for different time periods. 23 GLOBAL EMERGING MARKETS FUND SIX MONTHS IN REVIEW: ECONOMIC AND POLITICAL ISSUES THAT AFFECTED THE FUND The six months under review saw world stock markets first come to accept that the U.S. economy had fallen to the brink of recession in the wake of the subprime debt crisis and consequent credit crunch, and then more recently come to hope that the worst had passed and that the impact had not been as severe as first feared. Outside the U.S., economic activity appeared to remain robust. This was especially the case in emerging markets, where the continuing strong demand for commodities of all types contributed to rising inflation worldwide. This development was perhaps the most noteworthy economic event of the period under review. Higher inflation in turn led some central banks to begin tightening monetary policy, which reversed an earlier expectation for continuing cuts in interest rates. These developments have had a mixed impact on the fund. Higher interest rates are generally negative for share prices as they act to depress future growth. Companies involved in the production or supply of commodities may benefit, however, as higher prices feed through directly into their bottom line and to their share prices. The period under review was also noteworthy for a slew of political developments across emerging markets, some of which had a significant impact. One place where share prices were relatively unaffected was Russia, where there was a smooth handover of power from Vladimir Putin to his protege, Dmitry Medvedev. The new president seems likely to continue the business-friendly policies of his predecessor, who now assumes the position of prime minister to ensure their implementation. Recent announcements regarding the taxation of the energy sector have been very favorably received. Putin's United Russia party earlier won an overwhelming victory in parliamentary elections. The fact that there was little stock market reaction to the transition suggests that there has also been little material change in the political landscape. That said, the elimination of political uncertainty following the elections is perhaps as important as the results themselves. Elsewhere around the world, a return to political uncertainty in Turkey led to a sharp drop in the Istanbul stock market. The fund's exposure to Turkey is, however, very limited. Developments in South Africa were also generally a concern, with economic activity hit by power shortages and political uncertainty increased by the election of Jacob Zuma as ANC leader. One wholly positive development at the end of the period under review was Standard and Poor's upgrading of Brazil to investment grade status. This had an immediate impact on share prices in Sao Paolo. The victory of the KMT in the Taiwanese elections was also generally well- 24 GLOBAL EMERGING MARKETS FUND received, as it raised the likelihood of better relations with mainland China. INVESTMENT HIGHLIGHTS The fund had a negative return of 16.52 percent for the six-month period ending April 30, 2008, compared to a total return of negative 9.64 percent for the S&P 500 Index and negative 10.28 percent for the MSCI Emerging Markets Index. As the fund is focused on a relatively few securities (typically the fund holds shares in 40 to 80 companies), the performance of an individual holding can have a significant impact on the performance of the fund as a whole. Over the six months under review, the fund received a significant positive contribution from some of the companies which it owns that operate in the commodity sectors. Foremost among these has been Uralkali,(2) a producer of potash fertilizer in Russia. Uralkali benefits from rising demand for its product as the agricultural sector attempts to boost its production to take advantage of the current strength of food prices and the global demand for foodstuffs. Indeed, potash prices have more than tripled over the past year. Uralkali came into the fund in the final quarter of 2007 following an initial public offering, and since then its share price has almost doubled. The company will also enter the MSCI indices in May, which should provide further support for its share price. Raspadskaya,(3) the second largest coal producer in Russia, was another new holding for the fund. The company has a very low cost base and has recently secured a 70 percent price increase for its output. Its shares have also performed exceptionally well since coming into the fund. The fund also participated in the $3 billion share offer from Eurasian Natural Resources Corp. plc,(4) a diversified Kazakh mining group with a particularly interesting product mix that includes iron, aluminum and ferrochrome. The shares were priced attractively and its London listing was very well-received. Its share price rose substantially, allowing the fund to take profits as its shares became fully valued. The Brazilian stock market was one of the few to record a rise over the period under review, even before receiving investment grade status. In part this was due to the strength of commodity prices, including oil. Shares of Petroleo Brasileiro S.A.,(5) the national oil and gas producer, climbed 22 percent over the six month period after it was reported that substantial offshore reserves has been discovered. The fund's holding in Lupatech S.A.,(6) the oil services firm, fared even better, with a 41 percent share price rise, showing once again that better value can often be achieved via 25 GLOBAL EMERGING MARKETS FUND some of the less obvious investments. There was also a 12 percent rise recorded by the South African company Sasol Ltd.,(7) which specializes in extracting oil from coal. Gains were, however, counterbalanced by losses elsewhere, particularly among the fund's holdings in Asia. Mainland China's markets fell 50 percent from their peak, perhaps a reflection of earlier overvaluations. The fund could not avoid taking losses in this area as a result. The worst performing shares included China Grand Forestry Resources Group Ltd.,(8) down 67 percent, and KIWOOM Securities Co., Ltd.,(9) the Korean online broker, down 50 percent. Given the volatility of these markets, the good companies tended to be swept away with the bad, with traders failing to discriminate between the two. In each case, the fundamental rationale for investing in these companies has not changed, and their operating businesses have not suffered appreciably over the past six months. They remain attractive investments which will no doubt once again find favor in due course. CURRENT OUTLOOK The outlook for global emerging markets has improved as it has become apparent that the impact of the recent credit crunch on the global economy in general and the U.S. economy in particular may earlier have been overstated. As a result, world stock markets have most recently found a degree of stability. Emerging-market economies were already relatively insulated from such developments, given the largely self-sufficient nature of their financing needs and the increasing importance of domestic demand within economic activity. The share price drops that occurred during the period under review now provide ample downside protection, with market valuations having fallen to historically very attractive levels. Global emerging markets as a whole now trade on a multiple of only around 12 or 13 times earnings, and as such are still cheaper than developed markets despite their superior growth prospects. The ongoing strength of the energy and materials sectors, based upon still- buoyant demand for commodities, and the robust performance of the consumer sectors (also well represented within the fund) should also provide support. Although both political and economic risks remain, the combination of realistic share price valuations and exciting regional economic growth prospects gives us every reason to have confidence in the outlook for stock markets. (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. 26 GLOBAL EMERGING MARKETS FUND (2) This security comprised 1.00% of the fund's total net assets as of April 30, 2008. (3) This security comprised 1.01% of the fund's total net assets as of April 30, 2008. (4) The fund did not hold this security as of April 30, 2008. (5) This security comprised 5.31% of the fund's total net assets as of April 30, 2008. (6) This security comprised 2.13% of the fund's total net assets as of April 30, 2008. (7) This security comprised 1.04% of the fund's total net assets as of April 30, 2008. (8) This security comprised 1.52% of the fund's total net assets as of April 30, 2008. (9) This security comprised 0.85% of the fund's total net assets as of April 30, 2008. COUNTRY DISTRIBUTION* BASED ON TOTAL INVESTMENTS April 30, 2008 [Global Emerging Markets Fund Pie Chart] Brazil 17.8% Russian Federation 11.4% Korea, Republic Of 11.1% People's Republic of China 9.6% Hong Kong 7.9% Taiwan 7.9% India 6.9% United Kingdom 4.1% Cayman Islands 3.8% Mexico 3.4% South Africa 3.2% Austria 2.2% Other 10.7% *Country distribution shown is based on domicile and the locale of company operations may be different. 27 GLOBAL EMERGING MARKETS FUND TOP 10 EQUITY HOLDINGS BASED ON TOTAL INVESTMENTS April 30, 2008 GAZPROM OAO 6.98% OIL & GAS - INTEGRATED --------------------------------------------------------------------- PETROLEO BRASILEIRO S.A. 5.41% OIL & GAS - INTEGRATED --------------------------------------------------------------------- SAMSUNG ELECTRONICS CO., LTD. 4.36% SEMICONDUCTORS --------------------------------------------------------------------- COMPANHIA VALE DO RIO DOCE 4.03% DIVERSIFIED METALS & MINING --------------------------------------------------------------------- METAGE SPECIAL EMERGING MARKETS FUND LTD. 3.81% CLOSED-END FUNDS --------------------------------------------------------------------- CHINA MOBILE LTD. 3.10% COMMUNICATIONS --------------------------------------------------------------------- WISTRON CORP. 2.68% COMPUTER HARDWARE --------------------------------------------------------------------- TANLA SOLUTIONS LTD. 2.21% APPLICATION SOFTWARE --------------------------------------------------------------------- LUPATECH S.A. 2.17% INDUSTRIAL MACHINERY --------------------------------------------------------------------- OPTO CIRCUITS INDIA LTD. 1.99% HEALTHCARE EQUIPMENT & SERVICES --------------------------------------------------------------------- TOTAL TOP TEN HOLDINGS 36.74% TOP 5 INDUSTRIES BASED ON TOTAL INVESTMENTS April 30, 2008 OIL & GAS - INTEGRATED 15.27% DIVERSIFIED BANKS 10.13% DIVERSIFIED METALS & MINING 7.46% SEMICONDUCTORS 7.39% CLOSED-END FUNDS 4.98% 28 EXPENSE EXAMPLE (UNAUDITED) April 30, 2008 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; distribution [and/or service] (12b-1) 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. 29 EXPENSE EXAMPLE (UNAUDITED) April 30, 2008 ------------------------------------------------------------------------- SIX MONTHS ENDED APRIL 30, 2008 BEGINNING ACCOUNT VALUE ENDING EXPENSES NOVEMBER 01, ACCOUNT VALUE PAID DURING 2007 APRIL 30, 2008 PERIOD* ------------------------------------------------------------------------- HOLMES GROWTH FUND Based on Actual Fund Return $1,000.00 $ 897.50 $ 8.11 Based on Hypothetical 5% Yearly Return $1,000.00 $1,016.31 $ 8.62 ------------------------------------------------------------------------- GLOBAL MEGATRENDS FUND Based on Actual Fund Return $1,000.00 $ 978.80 $11.07 Based on Hypothetical 5% Yearly Return $1,000.00 $1,013.67 $11.27 ------------------------------------------------------------------------- EASTERN EUROPEAN FUND Based on Actual Fund Return $1,000.00 $ 903.40 $ 9.18 Based on Hypothetical 5% Yearly Return $1,000.00 $1,015.22 $ 9.72 ------------------------------------------------------------------------- GLOBAL EMERGING MARKETS FUND Based on Actual Fund Return $1,000.00 $ 834.80 $11.40 Based on Hypothetical 5% Yearly Return $1,000.00 $1,012.43 $12.51 ------------------------------------------------------------------------- *These calculations are based on expenses incurred in the most recent fiscal half-year. The funds' annualized six-month expense ratios (after reimbursements and offsets) for the six-month period ended April 30, 2008, were 1.72%, 2.25%, 1.94% and 2.50%, respectively, for the Holmes Growth, Global MegaTrends, Eastern European and Global Emerging Markets 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 182, the number of days in the most recent fiscal half-year, then divided by 366 days in the current fiscal year. 30 HOLMES GROWTH FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
COMMON STOCKS 84.00% SHARES VALUE AGRICULTURE 9.52% - -------------------------------------------------------------------------------------- Intrepid Potash, Inc. 11,500 $ 546,135* Monsanto Co. 5,000 570,100 Potash Corporation of Saskatchewan, Inc. 12,000 2,207,400 The Mosaic Co. 20,000 2,450,200* ----------- 5,773,835 APPAREL 4.47% - -------------------------------------------------------------------------------------- Coach, Inc. 35,000 1,244,950* The Buckle, Inc. 9,000 437,220 Urban Outfitters, Inc. 30,000 1,027,500* ----------- 2,709,670 BANKS 1.82% - -------------------------------------------------------------------------------------- Bancolombia S.A., Sponsored ADR 12,500 499,000 Credicorp Ltd. 7,500 602,700 ----------- 1,101,700 BREWERY 0.60% - -------------------------------------------------------------------------------------- Companhia de Bebidas das Americas, ADR 5,000 366,500 CABLE & WIRE PRODUCTS 1.21% - -------------------------------------------------------------------------------------- General Cable Corp. 11,000 737,000* COMMUNICATIONS 2.79% - -------------------------------------------------------------------------------------- Active Control Technology, Inc. 305,000 130,219* Millicom International Cellular S.A. 7,500 810,075* VimpelCom, Sponsored ADR 25,000 754,000 ----------- 1,694,294 COMPUTER SOFTWARE & HARDWARE 7.60% - -------------------------------------------------------------------------------------- Activision, Inc. 40,000 1,082,000* Oracle Corp. 25,000 521,250* Research in Motion Ltd. 15,000 1,824,450* Salesforce.com, Inc. 12,500 834,125* Western Digital Corp. 12,000 347,880* ----------- 4,609,705 CONSTRUCTION 2.84% - -------------------------------------------------------------------------------------- D.R. Horton, Inc. 30,000 464,700 Desarrolladora Homex S.A. de C.V., ADR 7,000 417,060* Pulte Homes, Inc. 30,000 391,200
See notes to portfolios of investments and notes to financial statements. 31 HOLMES GROWTH FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
COMMON STOCKS SHARES VALUE CONSTRUCTION (CONT'D) - -------------------------------------------------------------------------------------- Toll Brothers, Inc. 20,000 $ 452,800* ----------- 1,725,760 DIVERSIFIED OPERATIONS 2.21% - -------------------------------------------------------------------------------------- McDermott International, Inc. 25,000 1,339,500* E-COMMERCE 3.11% - -------------------------------------------------------------------------------------- CYBERplex, Inc. 1,100,000 735,690* Priceline.com, Inc. 9,000 1,148,760* ----------- 1,884,450 ELECTRONICS & COMPONENTS 1.10% - -------------------------------------------------------------------------------------- Corning, Inc. 25,000 667,750 ENERGY 1.44% - -------------------------------------------------------------------------------------- First Solar, Inc. 3,000 875,970* ENGINEERING/RESEARCH & DEVELOPMENT 0.72% - -------------------------------------------------------------------------------------- Aecom Technology Corp. 16,000 439,360* FINANCIAL SERVICES 6.62% - -------------------------------------------------------------------------------------- Charles Schwab Corp. 40,000 864,000 GMP Capital Trust 58,100 1,032,607 IntercontinentalExchange, Inc. 7,000 1,086,050* Jovian Capital Corp. 685,000 476,096* MasterCard, Inc. 2,000 556,320 ----------- 4,015,073 FOOD PRODUCTS 1.30% - -------------------------------------------------------------------------------------- CoolBrands International, Inc. 995,200 790,508* GOLD MINING 3.57% - -------------------------------------------------------------------------------------- Freeport-McMoRan Copper & Gold, Inc. 5,000 568,750 Peak Gold Ltd. 43,384 30,584* Rangold Resources Ltd., ADR 10,000 455,200 Yamana Gold, Inc. 86,623 1,110,364 ----------- 2,164,898 MACHINERY 1.02% - -------------------------------------------------------------------------------------- Flowserve Corp. 5,000 620,450
See notes to portfolios of investments and notes to financial statements. 32 HOLMES GROWTH FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
COMMON STOCKS SHARES VALUE MANUFACTURING 1.25% - -------------------------------------------------------------------------------------- The Manitowoc Co., Inc. 20,000 $ 756,400 MEDICAL - BIOMEDICAL 1.16% - -------------------------------------------------------------------------------------- Illumina, Inc. 9,000 701,010* MEDICAL PRODUCTS 0.91% - -------------------------------------------------------------------------------------- Alcon, Inc. 3,500 553,000 METAL & MINERAL MINING 4.37% - -------------------------------------------------------------------------------------- Companhia Vale do Rio Doce, ADR 25,000 977,000 Eastern Platinum Ltd. 188,800 543,633* Silver Wheaton Corp. 85,000 1,127,211* ----------- 2,647,844 OIL & GAS DRILLING 7.74% - -------------------------------------------------------------------------------------- Atwood Oceanics, Inc. 9,500 956,555* Diamond Offshore Drilling, Inc. 5,000 627,050 Helmerich & Payne, Inc. 13,000 698,750 Noble Corp. 14,000 787,920 Transocean, Inc. 11,000 1,622,060* ----------- 4,692,335 OIL & GAS EXPLORATION & PRODUCTION 0.71% - -------------------------------------------------------------------------------------- Continental Resources, Inc. 10,000 429,700* OIL & GAS EXTRACTION & SERVICES 1.55% - -------------------------------------------------------------------------------------- Core Laboratories N.V. 7,500 939,600* OIL & GAS FIELD MACHINERY 4.29% - -------------------------------------------------------------------------------------- Cameron International Corp. 20,000 984,600* FMC Technologies, Inc. 8,500 571,200* Weatherford International Ltd. 13,000 1,048,710* ----------- 2,604,510 OIL & GAS ROYALTY TRUSTS 1.38% - -------------------------------------------------------------------------------------- Canadian Oil Sands Trust 5,000 224,544 San Juan Basin Royalty Trust 16,000 614,880 ----------- 839,424 RETAIL 2.72% - -------------------------------------------------------------------------------------- GameStop Corp., Class A 30,000 1,651,200*
See notes to portfolios of investments and notes to financial statements. 33 HOLMES GROWTH FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
COMMON STOCKS SHARES VALUE STEEL MANUFACTURING 3.52% - -------------------------------------------------------------------------------------- Gerdau S.A. Sponsored ADR 15,000 $ 580,950 Mechel OAO, ADR 7,500 1,093,500 United States Steel Corp. 3,000 461,850 ----------- 2,136,300 TRANSPORTATION 1.61% - -------------------------------------------------------------------------------------- J.B. Hunt Transport Services, Inc. 15,000 509,550 Landstar System, Inc. 9,000 467,640 ----------- 977,190 UTILITIES 0.85% - -------------------------------------------------------------------------------------- Exelon Corp. 6,000 512,880 - -------------------------------------------------------------------------------------- TOTAL COMMON STOCKS 50,957,816 - -------------------------------------------------------------------------------------- (cost $39,534,355) EXCHANGE-TRADED FUNDS 2.94% iShares Dow Jones U.S. Broker-Dealers Index Fund 14,000 576,240 iShares Silver Trust 800 133,760* KBW Regional Banking ETF 15,000 522,150 SPDR S&P Homebuilders ETF 25,000 553,000 - -------------------------------------------------------------------------------------- TOTAL EXCHANGE-TRADED FUNDS 1,785,150 - -------------------------------------------------------------------------------------- (cost $1,826,720) WARRANTS 0.44% GOLD MINING 0.05% - -------------------------------------------------------------------------------------- Peak Gold Ltd., Warrants (April 2012) 23,500 3,150* Yamana Gold, Inc., Warrants (May 2008) 5,300 25,944* ----------- 29,094 METAL & MINERAL MINING 0.39% - -------------------------------------------------------------------------------------- Eastern Platinum Ltd., Warrants (March 2009) 3,343 4,547* Silver Wheaton Corp., Warrants (December 2010) 32,500 231,693* ----------- 236,240 - -------------------------------------------------------------------------------------- TOTAL WARRANTS 265,334 - -------------------------------------------------------------------------------------- (cost $54,177)
See notes to portfolios of investments and notes to financial statements. 34 HOLMES GROWTH FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
PURCHASED OPTIONS 0.33% CONTRACTS VALUE COMPUTER SOFTWARE & HARDWARE 0.08% - -------------------------------------------------------------------------------------- Apple, Inc., Strike Price 180, Call, Expiration May 2008 (premium $61,725) 150 $ 45,750 FINANCIAL SERVICES 0.16% - -------------------------------------------------------------------------------------- Citigroup, Inc., Strike Price 30, Call, Expiration Jan. 2009 (premium $112,726) 580 76,560 Citigroup, Inc., Strike Price 30, Call, Expiration June 2008 (premium $99,447) 200 3,600 Merrill Lynch, Strike Price 60, Call, Expiration Jan. 2009 (premium $51,940) 70 17,010 ----------- 97,170 GOLD MINING 0.09% - -------------------------------------------------------------------------------------- Goldcorp, Inc., Strike Price 45, Call, Expiration Jan. 2009 (premium $65,705) 85 21,675 Goldcorp, Inc., Strike Price 45, Call, Expiration Jan. 2010 (premium $59,915) 55 30,800 Goldcorp, Inc., Strike Price 45, Call, Expiration Oct. 2008 (premium $15,550) 25 4,125 ----------- 56,600 - -------------------------------------------------------------------------------------- TOTAL PURCHASED OPTIONS 199,520 - -------------------------------------------------------------------------------------- (cost $467,008) - -------------------------------------------------------------------------------------- TOTAL SECURITIES 53,207,820 - -------------------------------------------------------------------------------------- (cost $41,882,260) PRINCIPAL REPURCHASE AGREEMENT 9.36% AMOUNT Joint Tri-Party Repurchase Agreement, Credit Suisse First Boston, 4/30/08, 1.92%, due 05/01/08, repurchase price $5,675,864 collateralized by U.S. Treasury securities held in a joint tri-party account (cost $5,675,561) $5,675,561 5,675,561 - -------------------------------------------------------------------------------------- TOTAL INVESTMENTS 97.07% 58,883,381 - -------------------------------------------------------------------------------------- (cost $47,557,821) Other assets and liabilities, net 2.93% 1,776,712 ----------- NET ASSETS 100% $60,660,093 -----------
See notes to portfolios of investments and notes to financial statements. 35 GLOBAL MEGATRENDS FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
COMMON STOCKS 82.04% SHARES VALUE AEROSPACE/DEFENSE 2.21% - -------------------------------------------------------------------------------------- Northrop Grumman Corp. 3,900 $ 286,923 Raytheon Company 5,900 377,423 ----------- 664,346 AIRPORTS 0.93% - -------------------------------------------------------------------------------------- Grupo Aeroportuario del Sureste S.A.B. de C.V., ADR 5,000 280,150 AUTOMOBILE 1.01% - -------------------------------------------------------------------------------------- Toyota Motor Corp., Sponsored ADR 3,000 304,500 CABLE & WIRE PRODUCTS 1.56% - -------------------------------------------------------------------------------------- General Cable Corp. 7,000 469,000* CHEMICALS 1.24% - -------------------------------------------------------------------------------------- Air Products & Chemicals, Inc. 3,800 374,034 COAL 0.93% - -------------------------------------------------------------------------------------- Fording Canadian Coal Trust 4,500 279,405 COMMUNICATIONS 5.45% - -------------------------------------------------------------------------------------- America Movil SAB de C.V., ADR, Series L 5,000 289,800 China Mobile Ltd., Sponsored ADR 4,000 345,280 Millicom International Cellular S.A. 2,500 270,025* Orascom Telecom Holding S.A.E., GDR 3,000 224,400 VimpelCom, Sponsored ADR 17,000 512,720 ----------- 1,642,225 CONSTRUCTION 5.27% - -------------------------------------------------------------------------------------- D.R. Horton, Inc. 10,000 154,900 Desarrolladora Homex S.A. de C.V., ADR 4,000 238,320* Leighton Holdings Ltd. 12,000 533,181 Martin Marietta Materials, Inc. 1,500 164,070 Pulte Homes, Inc. 12,000 156,480 Toll Brothers, Inc. 15,000 339,600* ----------- 1,586,551 CONSULTING SERVICES 0.72% - -------------------------------------------------------------------------------------- Hill International, Inc. 15,000 216,750
See notes to portfolios of investments and notes to financial statements. 36 GLOBAL MEGATRENDS FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
COMMON STOCKS SHARES VALUE DIVERSIFIED OPERATIONS 1.22% - -------------------------------------------------------------------------------------- Keppel Corp. Ltd. 30,000 $ 228,302 Sherritt International Corp. 10,000 139,503 ----------- 367,805 ELECTRIC GENERATION 0.91% - -------------------------------------------------------------------------------------- Companhia Energetica de Minas Gerais, Sponsored ADR 8,161 167,382 Huadian Power International Corp. Ltd. 300,000 106,247 ----------- 273,629 ELECTRIC SERVICES 0.74% - -------------------------------------------------------------------------------------- CPFL Energia S.A., ADR 3,000 222,300 ELECTRONICS & COMPONENTS 1.56% - -------------------------------------------------------------------------------------- Corning, Inc. 17,600 470,096 ENERGY 3.41% - -------------------------------------------------------------------------------------- Energy Conversion Devices, Inc. 5,500 179,245* First Solar, Inc. 2,900 846,771* ----------- 1,026,016 ENGINEERING/RESEARCH & DEVELOPMENT 4.21% - -------------------------------------------------------------------------------------- ABB Ltd., Sponsored ADR 10,000 306,700 Aecom Technology Corp. 9,000 247,140* Foster Wheeler Ltd. 9,000 573,210* SNC-Lavalin Group, Inc. 2,800 140,424 ----------- 1,267,474 GOLD MINING 0.71% - -------------------------------------------------------------------------------------- Barrick Gold Corp. 5,500 212,410 HOLDING COMPANY 2.52% - -------------------------------------------------------------------------------------- Berkshire Hathaway, Inc., Class B 170 757,690* MACHINERY 2.80% - -------------------------------------------------------------------------------------- Deere & Co. 5,600 470,792 Flowserve Corp. 3,000 372,270 ----------- 843,062 MANUFACTURING 7.38% - -------------------------------------------------------------------------------------- Danaher Corp. 5,200 405,704 General Electric Co. 16,800 549,360
See notes to portfolios of investments and notes to financial statements. 37 GLOBAL MEGATRENDS FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
COMMON STOCKS SHARES VALUE MANUFACTURING (CONT'D) - -------------------------------------------------------------------------------------- ITT Corp. 5,500 $ 352,000 Terex Corp. 5,000 348,400* The Manitowoc Co., Inc. 15,000 567,300 ----------- 2,222,764 METAL & MINERAL MINING 6.54% - -------------------------------------------------------------------------------------- BHP Billiton Ltd., Sponsored ADR 9,000 725,940 Companhia Vale Do Rio Doce, ADR 20,000 781,600 Eastern Platinum Ltd. 19,400 55,861* Freeport-McMoRan Copper & Gold, Inc. 1,500 170,625 Rio Tinto plc, Sponsored ADR 500 235,000 ----------- 1,969,026 OIL & GAS - INTEGRATED 2.54% - -------------------------------------------------------------------------------------- Gazprom OAO, Sponsored ADR 3,000 159,600 Hess Corp. 5,700 605,340 ----------- 764,940 OIL & GAS DRILLING 2.79% - -------------------------------------------------------------------------------------- Transocean, Inc. 5,699 840,374* OIL & GAS EXPLORATION & PRODUCTION 0.19% - -------------------------------------------------------------------------------------- Pacific Rubiales Energy Corp. 40,000 58,780* OIL & GAS EXTRACTION & SERVICES 4.09% - -------------------------------------------------------------------------------------- Apache Corp. 1,800 242,424 Baker Hughes, Inc. 3,800 307,344 Denbury Resources, Inc. 9,200 281,152* Schlumberger Ltd. 4,000 402,200 ----------- 1,233,120 OIL & GAS FIELD MACHINERY 1.59% - -------------------------------------------------------------------------------------- National Oilwell Varco, Inc. 7,000 479,150* STEEL MANUFACTURING 8.98% - -------------------------------------------------------------------------------------- Companhia Siderurgica Nacional S.A., Sponsored ADR 18,000 776,700 Evras Group S.A., GDR 2,500 259,375 Gerdau S.A., Sponsored ADR 8,000 309,840 Mechel OAO, ADR 8,000 1,166,400 POSCO, ADR 300 37,020
See notes to portfolios of investments and notes to financial statements. 38 GLOBAL MEGATRENDS FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
COMMON STOCKS SHARES VALUE STEEL MANUFACTURING (CONT'D) - -------------------------------------------------------------------------------------- United States Steel Corp. 1,000 $ 153,950 ----------- 2,703,285 TRANSPORT & STORAGE 1.10% - -------------------------------------------------------------------------------------- Westshore Terminals Income Fund 20,000 331,430 TRANSPORTATION 4.97% - -------------------------------------------------------------------------------------- Burlington Northern Santa Fe Corp. 5,000 512,750 CSX Corp. 8,000 503,600 Golar LNG Ltd. 6,000 120,360 J.B. Hunt Transport Services, Inc. 6,000 203,820 Landstar System, Inc. 3,000 155,880 ----------- 1,496,410 UTILITIES 4.47% - -------------------------------------------------------------------------------------- Exelon Corp. 8,000 683,840 FPL Group, Inc. 10,000 662,900 ----------- 1,346,740 - -------------------------------------------------------------------------------------- TOTAL COMMON STOCKS 24,703,462 - -------------------------------------------------------------------------------------- (cost $20,603,350) EXCHANGE-TRADED FUND 1.27% streetTRACKS Gold Trust (cost $279,796) 4,400 381,876* PURCHASED OPTIONS 0.04% CONTRACTS FINANCIAL SERVICES 0.04% - -------------------------------------------------------------------------------------- Citigroup, Inc., Strike Price 30, Call, Expiration June 2008 (premium $29,834) 60 1,080 Citigroup, Inc., Strike Price 30, Call, Expiration Jan. 2009 (premium $13,621) 50 6,600 Merrill Lynch, Strike Price 60, Call, Expiration Jan. 2009 (premium $14,840) 20 4,860 - -------------------------------------------------------------------------------------- TOTAL PURCHASED OPTIONS 12,540 - -------------------------------------------------------------------------------------- (cost $58,295) - -------------------------------------------------------------------------------------- TOTAL SECURITIES 25,097,878 - -------------------------------------------------------------------------------------- (cost $20,941,441)
See notes to portfolios of investments and notes to financial statements. 39 GLOBAL MEGATRENDS FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
PRINCIPAL REPURCHASE AGREEMENT 15.78% AMOUNT VALUE Joint Tri-Party Repurchase Agreement, Credit Suisse First Boston, 4/30/08, 1.92%, due 05/01/08, repurchase price $4,753,516, collateralized by U.S. Treasury securities held in a joint tri-party account (cost $4,753,262) $4,753,262 $ 4,753,262 - -------------------------------------------------------------------------------------- TOTAL INVESTMENTS 99.13% 29,851,140 - -------------------------------------------------------------------------------------- (cost $25,694,703) Other assets and liabilities, net 0.87% 261,134 ----------- NET ASSETS 100% $30,112,274 -----------
See notes to portfolios of investments and notes to financial statements. 40 EASTERN EUROPEAN FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
COMMON STOCKS 94.80% SHARES VALUE BROADCASTING & CABLE TV 0.64% - ----------------------------------------------------------------------------------------- Cyfrowy Polsat, S.A. 1,477,340 $ 8,353,539*@ COMMODITY CHEMICALS 0.98% - ----------------------------------------------------------------------------------------- Uralkali, Sponsored GDR 238,411 12,707,306* COMMUNICATIONS 10.87% - ----------------------------------------------------------------------------------------- Mobile TeleSystems 2,573,685 30,626,851 Mobile TeleSystems, Sponsored ADR 351,102 27,238,493 Telekomunikacja Polska S.A. 20,693 208,741 Telekomunikacja Polska S.A., GDR 2,560,990 25,835,267@ VimpelCom, Sponsored ADR 1,912,849 57,691,526 -------------- 141,600,878 CONSTRUCTION & ENGINEERING 0.66% - ----------------------------------------------------------------------------------------- Strabag SE 122,254 8,589,383* DIVERSIFIED BANKS 19.43% - ----------------------------------------------------------------------------------------- Alliance Bank Jsc, GDR 793,177 3,846,908* OTP Bank Nyrt. 858,313 36,896,709 OTP Bank Nyrt., GDR 187,873 16,908,570 Raiffeisen International Bank Holding AG 316,731 51,478,710 Sberbank RF 24,786,171 80,678,987 Turkiye Garanti Bankasi a.s. 9,757,159 52,416,704 Turkiye Halk Bankasi a.s. 1,880,175 10,837,806* -------------- 253,064,394 DIVERSIFIED METALS & MINING 8.75% - ----------------------------------------------------------------------------------------- JSC MMC Norilsk Nickel, ADR 4,222,924 114,018,948 ELECTRIC UTILITIES 4.05% - ----------------------------------------------------------------------------------------- CEZ a.s. 709,847 52,703,258 FINANCIAL SERVICES 0.47% - ----------------------------------------------------------------------------------------- Finans Finansal Kiralama a.s. 3,284,040 6,129,727* FOOD DISTRIBUTORS 2.05% - ----------------------------------------------------------------------------------------- Central European Distribution Corp. 438,085 26,688,138* GOLD MINING 0.98% - ----------------------------------------------------------------------------------------- KazakhGold Group Ltd., GDR 574,361 12,750,814*
See notes to portfolios of investments and notes to financial statements. 41 EASTERN EUROPEAN FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
COMMON STOCKS SHARES VALUE INSURANCE 1.92% - ----------------------------------------------------------------------------------------- Aksigorta a.s. 4,997,285 $ 25,082,444 MULTI-SECTOR HOLDINGS 3.06% - ----------------------------------------------------------------------------------------- Haci Omer Sabanci Holding a.s. 10,675,506 39,852,097 OIL & GAS - INTEGRATED 28.56% - ----------------------------------------------------------------------------------------- Gazprom OAO, Sponsored ADR 4,237,861 225,454,205 LUKOIL, Sponsored ADR 896,376 80,942,753 Rosneft Oil Co. OAO, GDR 6,696,528 65,625,974* -------------- 372,022,932 OIL & GAS EQUIPMENT & SERVICES 1.34% - ----------------------------------------------------------------------------------------- Eurasia Drilling Co., Ltd., GDR 750,279 17,406,473* OIL & GAS EXPLORATION & PRODUCTION 4.77% - ----------------------------------------------------------------------------------------- KazMunaiGas Exploration Production, GDR 458,398 13,476,901 NovaTek OAO, Sponsored GDR 265,493 20,097,820@ Surgutneftegaz 18,321,005 17,862,980 Surgutneftegaz, Sponsored ADR 1,104,055 10,764,536 -------------- 62,202,237 PACKAGED FOODS & MEATS 1.01% - ----------------------------------------------------------------------------------------- Wimm-Bill-Dann Foods 163,108 13,173,418@ REAL ESTATE INVESTMENT TRUSTS 1.06% - ----------------------------------------------------------------------------------------- MirLand Development Corp. plc 1,514,507 13,851,605* REAL ESTATE MANAGEMENT & DEVELOPMENT 4.20% - ----------------------------------------------------------------------------------------- AFI Development plc, GDR 248,096 1,793,734* Dolphin Capital Investors Ltd. 7,492,530 19,664,070* Open Investments 41,404 10,361,351* Open Investments, GDR 84,316 2,655,954* Plaza Centers N.V. 1,647,161 6,181,502* RGI International Ltd. 1,772,781 14,022,698* -------------- 54,679,309 - ----------------------------------------------------------------------------------------- TOTAL COMMON STOCKS 1,234,876,900 - ----------------------------------------------------------------------------------------- (cost $1,068,994,499)
See notes to portfolios of investments and notes to financial statements. 42 EASTERN EUROPEAN FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
PREFERRED STOCKS 1.15% SHARES VALUE OIL & GAS EXPLORATION & PRODUCTION 1.15% - ----------------------------------------------------------------------------------------- Surgutneftegaz, Preferred Stock 13,529,631 $ 6,548,341@ Surgutneftegaz, Preferred Stock, Sponsored ADR 1,744,980 8,449,193@ - ----------------------------------------------------------------------------------------- TOTAL PREFERRED STOCKS 14,997,534 - ----------------------------------------------------------------------------------------- (cost $27,395,396) - ----------------------------------------------------------------------------------------- TOTAL SECURITIES 1,249,874,434 - ----------------------------------------------------------------------------------------- (cost $1,096,389,895) PRINCIPAL REPURCHASE AGREEMENT 4.09% AMOUNT Joint Tri-Party Repurchase Agreement, Credit Suisse First Boston, 4/30/08, 1.92%, due 05/01/08, repurchase price $53,271,417 collateralized by U.S. Treasury securities held in a joint tri-party account (cost $53,268,576) $53,268,576 53,268,576 - ----------------------------------------------------------------------------------------- TOTAL INVESTMENTS 100.04% 1,303,143,010 - ----------------------------------------------------------------------------------------- (cost $1,149,658,471) Other assets and liabilities, net (0.04)% (470,815) -------------- NET ASSETS 100% $1,302,672,195 --------------
See notes to portfolios of investments and notes to financial statements. 43 GLOBAL EMERGING MARKETS FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
COMMON STOCKS 86.44% SHARES VALUE AGRICULTURAL PRODUCTS 0.97% - -------------------------------------------------------------------------------------- Golden Agri-Resources Ltd. 676,000 $ 423,715 AIR FREIGHT & LOGISTICS 1.03% - -------------------------------------------------------------------------------------- Shenzhen International Holdings Ltd. 4,239,500 446,083 APPAREL 1.87% - -------------------------------------------------------------------------------------- China Hongxing Sports Ltd. 922,000 462,326 Tak Sing Alliance Holdings Ltd. 2,151,000 350,535 ----------- 812,861 BROADCASTING & CABLE TV 1.02% - -------------------------------------------------------------------------------------- Naspers Ltd., N shares 20,329 441,675 COMMODITY CHEMICALS 1.00% - -------------------------------------------------------------------------------------- Uralkali, Sponsored GDR 8,181 436,047* COMMUNICATIONS 4.51% - -------------------------------------------------------------------------------------- America Movil SAB de C.V., ADR, Series L 11,000 637,560 China Mobile Ltd. 77,000 1,323,983 ----------- 1,961,543 COMPUTER HARDWARE 3.57% - -------------------------------------------------------------------------------------- Positivo Informatica SA 31,180 408,930 Wistron Corp. 661,636 1,143,019 ----------- 1,551,949 COMPUTER STORAGE & PERIPHERALS 1.06% - -------------------------------------------------------------------------------------- KYE Systems Corp. 310,841 459,409 CONSTRUCTION & ENGINEERING 3.31% - -------------------------------------------------------------------------------------- Daelim Industrial Co., Ltd. 4,294 579,952 Era Infra Engineering Ltd. 27,010 405,517 Strabag SE 6,451 453,238* ----------- 1,438,707 CONSTRUCTION MATERIALS 1.69% - -------------------------------------------------------------------------------------- China National Building Material Co., Ltd., H shares 298,000 734,948 DEPARTMENT STORES 1.14% - -------------------------------------------------------------------------------------- Lojas Renner S.A. 20,969 494,516
See notes to portfolios of investments and notes to financial statements. 44 GLOBAL EMERGING MARKETS FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
COMMON STOCKS SHARES VALUE DIVERSIFIED BANKS 8.83% - -------------------------------------------------------------------------------------- African Bank Investments Ltd. 129,097 $ 453,352 Industrial and Commercial Bank of China, H shares 961,000 762,077 Kookmin Bank, Sponsored ADR 7,153 498,922 Korea Exchange Bank 33,402 507,730 Raiffeisen International Bank Holding AG 2,959 480,930 Shinhan Financial Group Co. Ltd. 8,397 484,611 Turkiye Garanti Bankasi a.s. 121,315 651,720 ----------- 3,839,342 DIVERSIFIED METALS & MINING 7.32% - -------------------------------------------------------------------------------------- Companhia Vale do Rio Doce, Sponsored ADR 54,000 1,719,360 Grupo Mexico SAB de C.V., Series B 58,400 425,942 JSC MMC Norilsk Nickel, ADR 22,156 598,212 Raspadskaya 52,103 440,270 ----------- 3,183,784 ELECTRONIC MANUFACTURERS & SERVICES 0.89% - -------------------------------------------------------------------------------------- Suntech Power Holdings Co., Ltd., ADR 8,614 385,304* FOOD DISTRIBUTORS 1.37% - -------------------------------------------------------------------------------------- Central European Distribution Corp. 9,746 593,726* FOREST PRODUCTS 1.52% - -------------------------------------------------------------------------------------- China Grand Forestry Resources Group Ltd. 5,608,000 662,038* GOLD MINING 2.17% - -------------------------------------------------------------------------------------- KazakhGold Group Ltd., GDR 37,526 833,077* Lero Gold Corp. 128,000 110,570* ----------- 943,647 HEALTHCARE EQUIPMENT & SERVICES 1.83% - -------------------------------------------------------------------------------------- Opto Circuits India Ltd. 89,391 795,790 HOMEBUILDING 1.60% - -------------------------------------------------------------------------------------- Ansal Properties & Infrastructure Ltd. 72,715 320,881 Urbi, Desarrollos Urbanos, S.A. de C.V. 116,800 374,718* ----------- 695,599 HOUSEHOLD APPLIANCES 0.35% - -------------------------------------------------------------------------------------- Shell Electric Manufacturing Co., Ltd. 197,000 152,936
See notes to portfolios of investments and notes to financial statements. 45 GLOBAL EMERGING MARKETS FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
COMMON STOCKS SHARES VALUE INDUSTRIAL CONGLOMERATES 0.96% - -------------------------------------------------------------------------------------- UEM World Bhd 404,800 $ 417,742 INDUSTRIAL MACHINERY 2.13% - -------------------------------------------------------------------------------------- Lupatech S.A. 24,600 924,979 INSURANCE 2.14% - -------------------------------------------------------------------------------------- Cathay Financial Holding Co., Ltd. 160,655 451,137 China Life Insurance Co., Ltd., H shares 110,000 477,791 ----------- 928,928 INVESTMENT BANKING & BROKERAGE 0.85% - -------------------------------------------------------------------------------------- KIWOOM Securities Co., Ltd. 7,776 371,651 METAL & MINERAL MINING 1.38% - -------------------------------------------------------------------------------------- Eastern Platinum Ltd. 208,323 599,848* OIL & GAS - INTEGRATED 14.98% - -------------------------------------------------------------------------------------- Gazprom OAO, Sponsored ADR 55,960 2,977,072 PetroChina Co., Ltd., ADR 4,400 665,016 PetroChina Co., Ltd., H shares 74,000 110,148 Petroleo Brasileiro S.A., ADR 22,844 2,309,528 Sasol Ltd. 7,972 453,410 ----------- 6,515,174 OIL & GAS EXPLORATION & PRODUCTION 0.99% - -------------------------------------------------------------------------------------- KazMunaiGas Exploration Production, GDR 14,642 430,475 PAPER PRODUCTS 1.10% - -------------------------------------------------------------------------------------- Shandong Chenming Paper Holdings Ltd., Class B, H shares 457,118 479,223 PRECIOUS METALS & MINERALS 0.74% - -------------------------------------------------------------------------------------- European Minerals Corp. 361,736 323,251* REAL ESTATE MANAGEMENT & DEVELOPMENT 3.69% - -------------------------------------------------------------------------------------- Construtora Tenda S.A. 72,500 388,190* Dolphin Capital Investors Ltd. 153,634 403,211* Inpar S.A. 63,393 381,380* RGI International Ltd. 54,527 431,309* ----------- 1,604,090
See notes to portfolios of investments and notes to financial statements. 46 GLOBAL EMERGING MARKETS FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
COMMON STOCKS SHARES VALUE RETAIL 1.03% - -------------------------------------------------------------------------------------- Shinsegae Co., Ltd. 693 $ 448,991 SEMICONDUCTORS 7.26% - -------------------------------------------------------------------------------------- Samsung Electronics Co., Ltd. 2,016 1,428,733 Samsung Electronics Co., Ltd., GDR, 144A 1,208 430,048 Siliconware Precision Industries Co. 363,472 629,115 Taiwan Semiconductor Manufacturing Co., Ltd. 23,000 50,385 Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR 54,942 617,548 ----------- 3,155,829 STEEL 1.15% - -------------------------------------------------------------------------------------- Usinas Siderurgicas de Minas Gerais S.A. 9,750 498,586 WATER UTILITIES 0.99% - -------------------------------------------------------------------------------------- China Water Affairs Group Ltd. 1,296,000 430,717* - -------------------------------------------------------------------------------------- TOTAL COMMON STOCKS 37,583,103 - -------------------------------------------------------------------------------------- (cost $35,639,294) CLOSED-END FUNDS 4.89% Advance Developing Markets Trust plc 54,573 500,207 Metage Special Emerging Markets Fund Ltd. 8,713 1,625,236*@ - -------------------------------------------------------------------------------------- TOTAL CLOSED-END FUNDS 2,125,443 - -------------------------------------------------------------------------------------- (cost $1,547,568) EQUITY-LINKED SECURITIES 5.70% APPLICATION SOFTWARE 2.17% - -------------------------------------------------------------------------------------- Tanla Solutions Ltd. (January 2010) 67,371 945,080@ CONSTRUCTION & ENGINEERING 0.19% - -------------------------------------------------------------------------------------- Era Infra Engineering Ltd. (January 2010) 5,500 82,302@ HEALTHCARE EQUIPMENT & SERVICES 0.13% - -------------------------------------------------------------------------------------- Opto Circuits India Ltd., Warrants (May 2009) 6,227 55,364*@
See notes to portfolios of investments and notes to financial statements. 47 GLOBAL EMERGING MARKETS FUND PORTFOLIO OF INVESTMENTS (UNAUDITED) April 30, 2008
EQUITY-LINKED SECURITIES SHARES VALUE HOMEBUILDING 0.43% - -------------------------------------------------------------------------------------- Ansal Properties and Infrastructure, Ltd., Warrants (February 2009) 17,100 $ 75,462*@ Ansal Properties and Infrastructure, Ltd., Warrants (July 2010) 17,587 77,612@ Ansal Properties and Infrastructure, Ltd., Warrants (October 2012) 7,676 33,882*@ ----------- 186,956 IT CONSULTING & OTHER SERVICES 1.16% - -------------------------------------------------------------------------------------- Mastek Ltd., 144A (October 2009) 63,723 505,833*@ SPECIALIZED FINANCE 1.62% - -------------------------------------------------------------------------------------- IFCI Ltd. (July 2008) 251,192 351,669*@ IFCI Ltd., 144A (January 2012) 250,864 351,210*@ ----------- 702,879 - -------------------------------------------------------------------------------------- TOTAL EQUITY-LINKED SECURITIES 2,478,414 - -------------------------------------------------------------------------------------- (cost $2,038,354) WARRANTS 0.02% PRECIOUS METALS & MINERALS 0.02% - -------------------------------------------------------------------------------------- European Minerals Corp., Warrants (March 2011) 25,813 7,945* (cost $0) UNITS 1.11% DIVERSIFIED BANKS 1.11% - -------------------------------------------------------------------------------------- Unibanco, Units (cost $442,628) 32,500 484,313 - -------------------------------------------------------------------------------------- TOTAL INVESTMENTS 98.16% 42,679,218 - -------------------------------------------------------------------------------------- (cost $39,667,844) Other assets and liabilities, net 1.84% 798,164 ----------- NET ASSETS 100% $43,477,382 -----------
See notes to portfolios of investments and notes to financial statements. 48 NOTES TO PORTFOLIOS OF INVESTMENTS (UNAUDITED) April 30, 2008 LEGEND * Non-income producing security ADR American Depositary Receipt GDR Global Depositary Receipt @ Security was fair valued at April 30, 2008, by U.S. Global Investors, Inc. (Adviser) in accordance with valuation procedures approved by the Board of Trustees. Fair valued securities, as a percentage of net assets at April 30, 2008 were 6.33% of Eastern European and 9.53% of Global Emerging Markets. See also Note 1B in the notes to financial statements for further discussion of fair valued securities. Securities with a 144A designation are exempt from registration under Rule 144A of the Securities Act of 1933. Equity-linked securities are derivative securities that are linked to the performance of an underlying foreign security. This type of investment allows the fund to have market exposure to foreign securities without trading directly in the local market. This type of security may also be known as a participatory note or certificate. JOINT TRI-PARTY REPURCHASE AGREEMENT The terms of the joint tri-party repurchase agreement and the securities held as collateral at April 30, 2008, were: Credit Suisse First Boston repurchase agreement, 04/30/08, 1.92%, due 05/01/08: Total principal amount: $344,771,435; Total repurchase value: $344,789,823 Collateral: $109,355,000 U.S. Treasury Note, 4.750%, 01/31/12 $233,470,000 U.S. Treasury Note, 3.125%, 04/30/13 (total collateral market value, including accrued interest, of $351,669,391) Other mutual funds managed by U.S. Global Investors, Inc. participate in the joint tri-party repurchase agreement. Each owns an undivided interest in the account. See notes to portfolios of investments and notes to financial statements. 49 STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) HOLMES GROWTH FUND Investments, at identified cost $47,557,821 =========== ASSETS - ---------------------------------------------------------------------------- Investments, at value: Securities $53,207,820 Repurchase agreements 5,675,561 Cash -- Foreign currencies (Cost $0, $0, $109 and $666,112) -- Receivables: Investments sold 2,536,157 Dividends 62,455 Interest 303 Capital shares sold 84,939 Other assets 14,587 - ---------------------------------------------------------------------------- TOTAL ASSETS 61,581,822 - ---------------------------------------------------------------------------- LIABILITIES - ---------------------------------------------------------------------------- Payables: Investments purchased 672,845 Capital shares redeemed 111,889 Adviser and affiliates 63,172 Accounts payable and accrued expenses 73,823 Due to custodian -- Unrealized depreciation on foreign currency exchange contracts - Note 1G -- - ---------------------------------------------------------------------------- TOTAL LIABILITIES 921,729 - ---------------------------------------------------------------------------- NET ASSETS $60,660,093 =========== NET ASSETS CONSIST OF: - ---------------------------------------------------------------------------- Paid-in capital $73,194,637 Distributions in excess of net investment income (255,396) Accumulated net realized gain (loss) on investments and foreign currencies (23,604,786) Net unrealized appreciation of investments and other assets and liabilities denominated in foreign currencies 11,325,638 ----------- Net assets applicable to capital shares outstanding $60,660,093 =========== Capital shares outstanding; an unlimited number of no par shares authorized 2,726,964 =========== NET ASSET VALUE, PUBLIC OFFERING PRICE, REDEMPTION PRICE, PER SHARE $ 22.24 =========== See accompanying notes to financial statements. 50 April 30, 2008
GLOBAL MEGATRENDS EASTERN GLOBAL EMERGING FUND EUROPEAN FUND MARKETS FUND Investments, at identified cost $25,694,703 $1,149,658,471 $39,667,844 =========== ============== =========== ASSETS - ----------------------------------------------------------------------------------------------------------------------- Investments, at value: Securities $25,097,878 $1,249,874,434 $42,679,218 Repurchase agreements 4,753,262 53,268,576 -- Cash 2 -- -- Foreign currencies (Cost $0, $0, $109 and $666,112) -- 109 665,282 Receivables: Investments sold -- 9,485,304 1,502,895 Dividends 59,869 1,829,835 22,659 Interest 254 2,841 -- Capital shares sold 436,816 1,211,681 41,133 Other assets 8,159 101,054 3,137 - ----------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 30,356,240 1,315,773,834 44,914,324 - ----------------------------------------------------------------------------------------------------------------------- LIABILITIES - ----------------------------------------------------------------------------------------------------------------------- Payables: Investments purchased 182,198 9,261,362 476,810 Capital shares redeemed 2,907 707,138 52,592 Adviser and affiliates 30,899 1,627,971 50,404 Accounts payable and accrued expenses 27,962 1,505,168 85,346 Due to custodian -- -- 771,710 Unrealized depreciation on foreign currency exchange contracts - Note 1G -- -- 80 - ----------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 243,966 13,101,639 1,436,942 - ----------------------------------------------------------------------------------------------------------------------- NET ASSETS $30,112,274 $1,302,672,195 $43,477,382 =========== ============== =========== NET ASSETS CONSIST OF: - ----------------------------------------------------------------------------------------------------------------------- Paid-in capital $25,656,778 $1,017,373,479 $39,256,420 Distributions in excess of net investment income (44,542) (7,437,180) (1,968,634) Accumulated net realized gain (loss) on investments and foreign currencies 343,557 139,184,110 3,148,926 Net unrealized appreciation of investments and other assets and liabilities denominated in foreign currencies 4,156,481 153,551,786 3,040,670 ----------- -------------- ----------- Net assets applicable to capital shares outstanding $30,112,274 $1,302,672,195 $43,477,382 =========== ============== =========== Capital shares outstanding; an unlimited number of no par shares authorized 2,586,241 87,751,098 2,910,686 =========== ============== =========== NET ASSET VALUE, PUBLIC OFFERING PRICE, REDEMPTION PRICE, PER SHARE $ 11.64 $ 14.85 $ 14.94 =========== ============== ===========
51 STATEMENTS OF OPERATIONS (UNAUDITED) HOLMES GROWTH FUND NET INVESTMENT INCOME INCOME: - ---------------------------------------------------------------------------- Dividends $ 227,362 Foreign taxes withheld on dividends (18,539) ----------- Net dividends 208,823 Interest and other 103,724 ----------- TOTAL INCOME 312,547 EXPENSES: - ---------------------------------------------------------------------------- Management fees 301,583 Transfer agent fees and expenses 65,953 Accounting service fees and expenses 24,602 Professional fees 28,378 Distribution plan expenses 40,272 Custodian fees 26,242 Shareholder reporting expenses 10,425 Registration fees 9,676 Trustees' fees and expenses 9,987 Miscellaneous expenses 11,396 ----------- Total expenses before reductions 528,514 Expenses offset - Note 1J (867) Expenses reimbursed - Note 2 -- ----------- NET EXPENSES 527,647 - ---------------------------------------------------------------------------- NET INVESTMENT LOSS (215,100) - ---------------------------------------------------------------------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS Realized gain (loss) from: Securities 1,722,662 Foreign currency transactions (2,113) ----------- NET REALIZED GAIN 1,720,549 ----------- Net change in unrealized appreciation (depreciation) of: Investments (8,530,408) Other assets and liabilities denominated in foreign currencies (26) ----------- NET UNREALIZED DEPRECIATION (8,530,434) ----------- - ---------------------------------------------------------------------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (6,809,885) - ---------------------------------------------------------------------------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(7,024,985) =========== See accompanying notes to financial statements. 52
For the Six Months Ended April 30, 2008 GLOBAL MEGATRENDS EASTERN GLOBAL EMERGING FUND EUROPEAN FUND MARKETS FUND NET INVESTMENT INCOME INCOME: - ------------------------------------------------------------------------------------------------------------------------- Dividends $ 146,284 $ 6,555,050 $ 247,147 Foreign taxes withheld on dividends (6,307) (949,203) (34,313) --------- ------------- ------------ Net dividends 139,977 5,605,847 212,834 Interest and other 54,516 863,518 20,735 --------- ------------- ------------ TOTAL INCOME 194,493 6,469,365 233,569 EXPENSES: - ------------------------------------------------------------------------------------------------------------------------- Management fees 105,121 8,684,118 326,552 Transfer agent fees and expenses 31,436 1,009,611 61,855 Accounting service fees and expenses 13,701 319,775 31,930 Professional fees 24,138 63,201 29,193 Distribution plan expenses 26,542 1,714,727 60,334 Custodian fees 9,720 1,781,648 88,586 Shareholder reporting expenses 3,501 99,646 7,813 Registration fees 8,437 22,843 9,785 Trustees' fees and expenses 9,987 9,909 10,421 Miscellaneous expenses 6,670 62,206 3,792 --------- ------------- ------------ Total expenses before reductions 239,253 13,767,684 630,261 Expenses offset - Note 1J (218) (48,017) (350) Expenses reimbursed - Note 2 -- -- (26,571) --------- ------------- ------------ NET EXPENSES 239,035 13,719,667 603,340 - ------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT LOSS (44,542) (7,250,302) (369,771) - ------------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS Realized gain (loss) from: Securities 339,534 142,413,198 3,418,795 Foreign currency transactions 4,409 (942,848) (36,058) --------- ------------- ------------ NET REALIZED GAIN 343,943 141,470,350 3,382,737 --------- ------------- ------------ Net change in unrealized appreciation (depreciation) of: Investments (363,080) (292,399,904) (13,402,123) Other assets and liabilities denominated in foreign currencies 3,074 (243,299) 25,531 --------- ------------- ------------ NET UNREALIZED DEPRECIATION (360,006) (292,643,203) (13,376,592) --------- ------------- ------------ - ------------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (16,063) (151,172,853) (9,993,855) - ------------------------------------------------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (60,605) $(158,423,155) $(10,363,626) ========= ============= ============
53 STATEMENTS OF CHANGES IN NET ASSETS
HOLMES GROWTH FUND --------------------------------------- SIX MONTHS ENDED YEAR ENDED APRIL 30, 2008) OCTOBER 31, 2007 (UNAUDITED INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: - ------------------------------------------------------------------------------------------- Net investment loss $ (215,100) $ (389,550) Net realized gain 1,720,549 5,122,087 Net unrealized appreciation (depreciation) (8,530,434) 14,431,854 ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (7,024,985) 19,164,391 DISTRIBUTIONS TO SHAREHOLDERS: - ------------------------------------------------------------------------------------------- From net investment income -- -- From net capital gains -- -- ----------- ----------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS -- -- FROM CAPITAL SHARE TRANSACTIONS: - ------------------------------------------------------------------------------------------- Proceeds from shares sold 3,061,828 5,258,754 Distributions reinvested -- -- Proceeds from short-term trading fees - Note 1K 294 250 ----------- ----------- 3,062,122 5,259,004 Cost of shares redeemed (4,258,167) (17,352,136) ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (1,196,045) (12,093,132) - ------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (8,221,030) 7,071,259 - ------------------------------------------------------------------------------------------- NET ASSETS Beginning of period 68,881,123 61,809,864 - ------------------------------------------------------------------------------------------- END OF PERIOD $60,660,093 $68,881,123 - ------------------------------------------------------------------------------------------- Distributions in excess of net investment income, end of period $ (255,396) $ (40,296) =========== =========== CAPITAL SHARE ACTIVITY - ------------------------------------------------------------------------------------------- Shares sold 137,138 261,279 Shares reinvested -- -- Shares redeemed (190,417) (851,885) ----------- ----------- NET SHARE ACTIVITY (53,279) (590,606) =========== =========== See accompanying notes to financial statements.
54
EASTERN GLOBAL MEGATRENDS FUND EUROPEAN FUND ------------------------------------ ------------------------------------- SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED APRIL 30, 2008 OCTOBER 31, 2007 APRIL 30, 2008 OCTOBER 31, 2007 (UNAUDITED) (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: - ---------------------------------------------------------------------------------------------------------------------------------- Net investment loss $ (44,542) $ (151,391) $ (7,250,302) $ (8,564,082) Net realized gain 343,943 1,314,908 141,470,350 282,693,981 Net unrealized appreciation (depreciation) (360,006) 2,392,655 (292,643,203) 285,436,753 ----------- ----------- -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (60,605) 3,556,172 (158,423,155) 559,566,652 DISTRIBUTIONS TO SHAREHOLDERS: - ---------------------------------------------------------------------------------------------------------------------------------- From net investment income -- -- -- (25,188,053) From net capital gains (1,317,151) (1,261,684) (273,627,367) (170,169,454) ----------- ----------- -------------- -------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,317,151) (1,261,684) (273,627,367) (195,357,507) FROM CAPITAL SHARE TRANSACTIONS: - ---------------------------------------------------------------------------------------------------------------------------------- Proceeds from shares sold 15,021,697 3,021,763 174,774,139 330,290,055 Distributions reinvested 1,265,576 1,206,946 266,926,394 190,987,756 Proceeds from short-term trading fees - Note 1K 1,415 566 840,829 1,180,568 ----------- ----------- -------------- -------------- 16,288,688 4,229,275 442,541,362 522,458,379 Cost of shares redeemed (2,521,982) (5,877,311) (290,525,216) (651,110,037) ----------- ----------- -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS 13,766,706 (1,648,036) 152,016,146 (128,651,658) - ---------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS 12,388,950 646,452 (280,034,376) 235,557,487 - ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Beginning of period 17,723,324 17,076,872 1,582,706,571 1,347,149,084 - ---------------------------------------------------------------------------------------------------------------------------------- END OF PERIOD $30,112,274 $17,723,324 $1,302,672,195 $1,582,706,571 - ---------------------------------------------------------------------------------------------------------------------------------- Distributions in excess of net investment income, end of period $ (44,542) $ -- $ (7,437,180) $ (186,878) =========== =========== ============== ============== CAPITAL SHARE ACTIVITY - ---------------------------------------------------------------------------------------------------------------------------------- Shares sold 1,308,395 259,412 10,722,792 20,278,182 Shares reinvested 107,984 116,164 16,352,442 12,852,474 Shares redeemed (220,712) (527,010) (18,797,382) (40,900,278) ----------- ----------- -------------- -------------- NET SHARE ACTIVITY 1,195,667 (151,434) 8,277,852 (7,769,622) =========== =========== ============== ==============
55 STATEMENTS OF CHANGES IN NET ASSETS
GLOBAL EMERGING MARKETS FUND ------------------------------------------ SIX MONTHS ENDED YEAR ENDED APRIL 30, 2008 OCTOBER 31, 2007 (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: - --------------------------------------------------------------------------------------------- Net investment loss $ (369,771) $ (364,142) Net realized gain 3,382,737 8,311,640 Net unrealized appreciation (depreciation) (13,376,592) 13,963,701 ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (10,363,626) 21,911,199 DISTRIBUTIONS TO SHAREHOLDERS: - --------------------------------------------------------------------------------------------- From net investment income (1,235,838) -- From net capital gains (8,418,305) (2,463,937) ----------- ----------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (9,654,143) (2,463,937) FROM CAPITAL SHARE TRANSACTIONS: - --------------------------------------------------------------------------------------------- Proceeds from shares sold 9,203,541 27,400,995 Distributions reinvested 9,156,240 2,307,884 Proceeds from short-term trading fees - Note 1K 92,661 62,030 ----------- ----------- 18,452,442 29,770,909 Cost of shares redeemed (14,578,215) (18,626,085) ----------- ----------- NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS 3,874,227 11,144,824 - --------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (16,143,542) 30,592,086 - --------------------------------------------------------------------------------------------- NET ASSETS Beginning of period 59,620,924 29,028,838 - --------------------------------------------------------------------------------------------- END OF PERIOD $43,477,382 $59,620,924 - --------------------------------------------------------------------------------------------- Distributions in excess of net investment income, end of period $(1,968,634) $ (314,610) =========== =========== CAPITAL SHARE ACTIVITY - --------------------------------------------------------------------------------------------- Shares sold 563,718 1,643,572 Shares reinvested 570,838 161,843 Shares redeemed (948,818) (1,165,080) ----------- ----------- NET SHARE ACTIVITY 185,738 640,335 =========== =========== See accompanying notes to financial statements.
56 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) April 30, 2008 NOTE 1: SIGNIFICANT ACCOUNTING POLICIES U.S. Global Accolade Funds (Trust), consisting of four separate funds (Funds), is organized as a Massachusetts business trust. Each Fund is an open-end management investment company registered under the Investment Company Act of 1940, as amended. The Holmes Growth and Global MegaTrends Funds are diversified; the Eastern European and Global Emerging Markets Funds are non-diversified. 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 bid and ask 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. 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 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. 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 57 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) April 30, 2008 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 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 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. 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. OPTIONS Some Funds may write or purchase options on securities to manage their exposure to stock or commodity markets as well as fluctuations in interest and currency conversion rates. Written options include a risk of loss in excess of the option premium. 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. The option premium is the basis for recognition of unrealized or realized gain or loss on the option. The cost of securities acquired or the proceeds from securities sold through the exercise of the option is adjusted by the amount of the premium. There was no activity in written call options during the six months ended April 30, 2008. F. 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. 58 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) April 30, 2008 G. FORWARD FOREIGN CURRENCY CONTRACTS The Funds may 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 April 30, 2008, were:
FOREIGN IN EXCHANGE SETTLEMENT UNREALIZED UNREALIZED FUND CONTRACT CURRENCY FOR USD DATE VALUE APPRECIATION (DEPRECIATION) ------------------------------------------------------------------------------------------------------------- Global Emerging Markets Fund SALES: South African Rand 360,469 $47,505 05/08/08 $47,585 $80 $--
H. 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. I. 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. J. 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. 59 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) April 30, 2008 K. SHORT-TERM TRADING (REDEMPTION) FEES Shares held in the Holmes Growth and Global MegaTrends 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 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. These fees, which are retained by the Funds, are accounted for as an addition to paid-in capital. L. 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 and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. M. NEW ACCOUNTING PRONOUNCEMENTS In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 sets forth a recognition threshold and measurement method for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. FIN 48 is effective on the last business day of the semi-annual reporting period for fiscal years beginning after December 15, 2006, and will be applied to all open tax years as of the effective date. As a result, FIN 48 was adopted effective April 30, 2008, for the Funds. Management evaluated the application of FIN 48 to the Funds and did not identify an impact on the financial statements. Open tax years are fiscal 2004 through 2007. In addition, in September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Funds' financial statement disclosures. NOTE 2: RELATED PARTY TRANSACTIONS U.S. Global Investors, Inc. (Adviser), under an investment advisory agreement with the Trust in effect through May 31, 2009, 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. 60 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) April 30, 2008 For the services of the Adviser, each Fund pays a management fee at an annual rate of 1.00% for the Holmes Growth Fund and Global MegaTrends Fund, 1.25% for the Eastern European Fund, and 1.375% for the Global Emerging Markets Fund based on their average net assets. Fees are accrued daily and paid monthly. The Adviser had contractually limited total operating expenses of the Global Emerging Markets Fund to not exceed 2.00% of average net assets on an annualized basis through February 28, 2007. The contract was amended on February 28, 2007, to not exceed 2.50% of average net assets on an annualized basis through February 28, 2009, and until such later date as the Adviser determines. Effective May 12, 2008, the Adviser has contractually limited total fund operating expenses of the Global MegaTrends Fund to not exceed 1.85% of average net assets on an annualized basis through October 31, 2008, or such later date as the Adviser determines. For the Eastern European Fund and Global Emerging Markets Fund, the Adviser has contracted with and compensates subadviser Charlemagne Capital (IOM) Limited to serve in the execution of the Adviser's investment responsibilities. Prior to October 1, 2007, Leeb Capital Management, Inc. provided subadvisory services to the MegaTrends Fund. On October 1, 2007, the Adviser assumed management of the Fund, which was renamed Global MegaTrends Fund. 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. The Adviser was reimbursed for in-house legal, compliance and internal administration services pertaining to the Funds during the six months ended April 30, 2008, in the amounts of $19,656, $21,433 and $8,461, respectively. Brown Brothers Harriman & Co. (BBH) serves as the custodian, fund accounting and administration service agent with a fee structure based primarily on average net assets of the Funds. Each Fund has adopted a distribution plan pursuant to Rule 12b-1 of the Investment Company Act of 1940 that allows an annual fee of up to 0.25% of its average net assets to be used for, or to reimburse the Adviser for, expenditures in connection with sales and promotional services related to the distribution of each Fund's shares. A portion of this fee may be reallowed to securities dealers, banks and other financial institutions for the distribution of shares and providing shareholder support services. Distribution expenses paid by the Adviser or other third parties in prior periods that exceeded 0.25% of net assets may be paid by the Fund with distribution expenses accrued in current or future periods, so long as the 61 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) April 30, 2008 0.25% limitation is never exceeded. The amount of unreimbursed expenditures which will be carried over to future periods is $0, $45,015, $0 and $85,329 for the Holmes Growth, Global MegaTrends, Eastern European and Global Emerging Markets Funds, respectively, as of April 30, 2008. The Funds are not legally obligated to pay any unreimbursed expenses if the distribution plan is terminated or not renewed. The three independent Trustees receive compensation for serving on the Board. The Chairman of the Audit Committee receives 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. NOTE 3: INVESTMENTS Cost of purchases and proceeds from sales of long-term securities for the six months ended April 30, 2008, are summarized as follows:
FUND PURCHASES SALES ---------------------------------------------------------------------- Holmes Growth $ 30,754,279 $ 35,740,468 Global MegaTrends 14,988,619 6,208,619 Eastern European 461,492,198 525,615,931 Global Emerging Markets 19,381,054 22,554,210
The Global MegaTrends, 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. 62 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) April 30, 2008 NOTE 4: TAX INFORMATION The following table presents the income tax basis of securities owned at April 30, 2008, and the tax basis components of net unrealized appreciation:
GROSS GROSS NET UNREALIZED AGGREGATE UNREALIZED UNREALIZED APPRECIATION/ FUND TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ----------------------------------------------------------------------------------------- Holmes Growth $ 47,557,821 $12,609,155 $(1,283,595) $ 11,325,560 Global MegaTrends 25,694,703 4,745,299 (588,862) 4,156,437 Eastern European 1,149,658,471 222,676,483 (69,191,944) 153,484,539 Global Emerging Markets 39,667,844 6,918,653 (3,907,279) 3,011,374
As of October 31, 2007, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED NET UNREALIZED ORDINARY LONG-TERM APPRECIATION/ FUND INCOME CAPITAL GAINS (DEPRECIATION) ------------------------------------------------------------------------------------- Holmes Growth $ -- $ -- $ 19,823,369 Global MegaTrends -- 1,316,765 4,516,487 Eastern European 55,222,977 218,398,602 443,727,898 Global Emerging Markets 5,730,234 3,921,266 14,587,230
The differences between book-basis and tax-basis unrealized appreciation (depreciation) for Holmes Growth, Eastern European and Global Emerging Markets Funds are attributable primarily to the tax deferral of losses on wash sales, unreversed return of capital from Canadian trusts and the investment in passive foreign investment companies (PFIC). The tax character of distributions paid during the six months ended April 30, 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
63 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) April 30, 2008 The tax character of distributions paid during the fiscal year ended October 31, 2007, were as follows:
ORDINARY LONG-TERM FUND INCOME CAPITAL GAINS TOTAL ------------------------------------------------------------------------------------- Holmes Growth $ -- $ -- $ -- Global MegaTrends 85,614 1,176,070 1,261,684 Eastern European 124,453,568 70,903,939 195,357,507 Global Emerging Markets 1,164,374 1,299,563 2,463,937
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. At October 31, 2007, Global MegaTrends, Eastern European and Global Emerging Markets Funds had no capital loss carryforwards. Holmes Growth Fund had capital loss carryforwards of $24,292,865 and $1,040,063 expiring fiscal year 2009 and fiscal year 2010, respectively, for a total of $25,332,928. NOTE 5: CREDIT ARRANGEMENTS Each Fund within the Trust, 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 Funds' custodian up to the amount of the borrowing. Interest on borrowings is charged at the current overnight Federal Funds Rate plus 2%. Each Fund of the Trust 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 six months ended April 30, 2008. The Trust paid BBH $11,438 in commitment fees during the six months ended April 30, 2008, under this arrangement. NOTE 6: SHARES OF BENEFICIAL INTEREST At April 30, 2008, individual shareholders holding more than 5% of outstanding shares comprised 12.4% of the Global MegaTrends Fund. NOTE 7: EASTERN EUROPEAN FUND STOCK SPLIT Effective as of May 27, 2008, the Eastern European Fund instituted a 3-for-1 stock split. All capital share activity and per share data for Eastern European Fund for the previous periods presented in these financial statements has been adjusted to reflect the stock split. 64 FINANCIAL HIGHLIGHTS HOLMES GROWTH FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE:
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 2008 ----------------------------------------------- (UNAUDITED) 2007 2006 2005 2004** 2003 NET ASSET VALUE, BEGINNING OF PERIOD $24.78 $18.34 $16.56 $14.38 $13.55 $11.59 - ---------------------------------------------------------------------------------------------- Investment Activities Net investment loss (.08) (.14) (.14) (.18) (.19) (.14) Net realized and unrealized gain (loss) (2.46) 6.58 1.92 2.36 1.01 2.10 ------- ------- ------- ------- ------- ------- Total from investment activities (2.54) 6.44 1.78 2.18 .82 1.96 ------- ------- ------- ------- ------- ------- Distributions -- -- -- -- -- -- Short-Term Trading Fees* --(a) --(a) --(a) --(a) .01 --(a) - ---------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $22.24 $24.78 $18.34 $16.56 $14.38 $13.55 - ---------------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (b) (10.25)% 35.11% 10.75% 15.16% 6.13% 16.91% Ratios to Average Net Assets (c): Net investment loss (.70)% (.62)% (.69)% (.98)% (1.15)% (1.12)% Expenses (d) 1.72% 1.72% 1.74% 1.83% 1.82% 1.78% Portfolio Turnover Rate 56% 98% 290% 268% 192% 545% NET ASSETS, END OF PERIOD (IN THOUSANDS) $60,660 $68,881 $61,810 $65,065 $67,074 $82,417 * Based on average monthly shares outstanding ** Effective June 1, 2004, U.S. Global Investors, Inc. assumed management of Holmes Growth 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) The expense ratios shown above 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 ENDED APRIL 30, YEAR ENDED OCTOBER 31, 2008 ------------------------------------------------ (UNAUDITED) 2007 2006 2005 2004 2003 Ratios to Average Net Assets (c): Expenses offset --(e) --(e) (0.01)% --(e) --(e) --(e) (e) Effect on the expense ratios was not greater than 0.005%.
See accompanying notes to financial statements. 65 FINANCIAL HIGHLIGHTS GLOBAL MEGATRENDS FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE:
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 2008 ----------------------------------------------- (UNAUDITED) 2007** 2006 2005 2004 2003 NET ASSET VALUE, BEGINNING OF PERIOD $12.75 $11.07 $10.30 $9.20 $8.25 $6.62 - ---------------------------------------------------------------------------------------------- Investment Activities Net investment loss (.02) (.11) (.10) (.14) (.17) (.18) Net realized and unrealized gain (loss) (.24) 2.63 1.18 1.24 1.24 1.85 ------- ------- ------- ------- ------- ------- Total from investment activities (.26) 2.52 1.08 1.10 1.07 1.67 ------- ------- ------- ------- ------- ------- Distributions From net investment income -- -- -- -- (.12) (.04) From net realized gains (.85) (.84) (.31) -- -- -- ------- ------- ------- ------- ------- ------- Total distributions (.85) (.84) (.31) -- (.12) (.04) ------- ------- ------- ------- ------- ------- Short-Term Trading Fees* (a) -- -- -- -- -- -- - ---------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $11.64 $12.75 $11.07 $10.30 $9.20 $8.25 - ---------------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (b) (2.12)% 24.49% 10.53% 11.96% 13.01% 25.38% Ratios to Average Net Assets (c): Net investment loss (.42)% (.93)% (.89)% (1.37)% (1.77)% (2.12)% Expenses (d) 2.25% 2.49% 2.55% 2.83% 2.83% 3.07% Portfolio Turnover Rate 34% 65% 75% 54% 64% 96% NET ASSETS, END OF PERIOD (IN THOUSANDS) $30,112 $17,723 $17,077 $14,276 $13,239 $12,377 * 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) The expense ratios shown above 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 ENDED APRIL 30, YEAR ENDED OCTOBER 31, 2008 ----------------------------------------------- (UNAUDITED) 2007 2006 2005 2004 2003 Ratios to Average Net Assets (c): Expenses offset (e) -- -- -- -- -- -- (e) Effect on the expense ratios was not greater than 0.005%.
See accompanying notes to financial statements. 66 FINANCIAL HIGHLIGHTS EASTERN EUROPEAN FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE:
SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 2008* ------------------------------------------------------- (UNAUDITED) 2007* 2006* 2005* 2004* 2003* NET ASSET VALUE, BEGINNING OF PERIOD $19.91 $15.44 $12.88 $9.47 $6.48 $14.24 - ------------------------------------------------------------------------------------------------------ Investment Activities Net investment income (loss) (.08) (.10) .13 (.03)** (.01) .02 Net realized and unrealized gain (loss) (1.53) 6.83 3.60 3.81** 3.31 2.19 ---------- ---------- ---------- -------- -------- ------- Total from investment activities (1.61) 6.73 3.73 3.78 3.30 2.21 ---------- ---------- ---------- -------- -------- ------- Distributions From net investment income -- (.29) -- (.09) (.02) -- From net realized gains (3.46) (1.98) (1.22) (.31) (.35) -- ---------- ---------- ---------- -------- -------- ------- Total distributions (3.46) (2.27) (1.22) (.40) (.37) -- ---------- ---------- ---------- -------- -------- ------- Short-Term Trading Fees** .01 .01 .05 .03 .06 .03 - ------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD $14.85 $19.91 $15.44 $12.88 $9.47 $6.48 - ------------------------------------------------------------------------------------------------------ TOTAL RETURN (excluding account fees) (a) (9.66)% 48.74% 31.03% 41.43% 54.12% 52.71% Ratios to Average Net Assets (b): Net investment income (loss) (1.03)% (.61)% .71% (.31)% (.23)% .81% Expenses (c) 1.95% 1.98% 1.95% 2.00% 2.08% 2.90% Portfolio Turnover Rate 35% 54% 68% 95% 89% 109% NET ASSETS, END OF PERIOD (IN THOUSANDS) $1,302,672 $1,582,707 $1,347,149 $903,855 $279,545 $50,948 * 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 (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) 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 reduce 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: SIX MONTHS ENDED APRIL 30, YEAR ENDED OCTOBER 31, 2008 -------------------------------------------------- (UNAUDITED) 2007 2006 2005 2004 2003 Ratios to Average Net Assets (b): Expenses offset (0.01)% (0.01)% (0.01)% (0.01)% --(d) --(d) Expenses rebated by subadviser n/a n/a (0.01)% (0.02)% (0.05)% n/a (d) Effect on the expense ratios was not greater than 0.005%.
See accompanying notes to financial statements. 67 FINANCIAL HIGHLIGHTS GLOBAL EMERGING MARKETS FUND FOR A CAPITAL SHARE OUTSTANDING DURING THE:
SIX MONTHS ENDED APRIL 30, YEAR ENDED YEAR ENDED PERIOD ENDED 2008 OCTOBER 31, OCTOBER 31, OCTOBER 31, (UNAUDITED) 2007 2006 2005 (a) NET ASSET VALUE, BEGINNING OF PERIOD $21.88 $13.93 $10.65 $10.00 - ---------------------------------------------------------------------------------------- Investment Activities Net investment income (loss) (.10) (.13) .02 .06 Net realized and unrealized gain (loss) (3.30) 9.18 3.50 .56 ------- ------- ------- ------- Total from investment activities (3.40) 9.05 3.52 .62 ------- ------- ------- ------- Distributions From net investment income (.46) -- (.05) -- From net realized gains (3.11) (1.13) (.26) -- ------- ------- ------- ------- Total distributions (3.57) (1.13) (.31) -- ------- ------- ------- ------- Short-Term Trading Fees* .03 .03 .07 .03 - ---------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $14.94 $21.88 $13.93 $10.65 - ---------------------------------------------------------------------------------------- TOTAL RETURN (excluding account fees) (b) (16.52)% 69.52% 34.16% 6.50% Ratios to Average Net Assets (c): Net investment income (loss) (1.53)% (.92)% .13% 1.08% Total expenses 2.61% 2.75% 3.07% 4.16% Expenses reimbursed (d) (.11)% (.39)% (1.05)% (2.16)% Net expenses (e) 2.50% 2.36% 2.02% 2.00% Portfolio Turnover Rate 41% 125% 136% 93% NET ASSETS, END OF PERIOD (IN THOUSANDS) $43,477 $59,621 $29,029 $16,157 * Based on average monthly shares outstanding (a) From February 24, 2005, commencement of operations. (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 reimbursed from the Adviser 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 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 reduce 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: SIX MONTHS ENDED APRIL 30, YEAR ENDED YEAR ENDED PERIOD ENDED 2008 OCTOBER 31, OCTOBER 31, OCTOBER 31, (UNAUDITED) 2007 2006 2005 (a) Ratios to Average Net Assets (c): Expenses offset --(f) n/a n/a n/a Expenses rebated by subadviser n/a n/a (0.02)% --(f) (f) Effect on the expense ratios was not greater than 0.005%.
See accompanying notes to financial statements. 68 ADDITIONAL INFORMATION (UNAUDITED) 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. 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 request plus 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. 69 NOTES - ---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- - 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---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- - ---------------------------------------------------------------- ITEM 2. CODE OF ETHICS. Required only in annual report on Form N-CSR. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Required only in annual report on Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Required only in annual report on Form N-CSR. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS Required only in annual report on Form N-CSR. ITEM 6. SCHEDULE OF INVESTMENTS Included in Item 1. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to the registrant. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to the registrant. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable to the registrant. 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 were no changes in the registrant's internal control over financial reporting that occurred in 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. ITEM 12. EXHIBITS. (a)(1) Required only in annual report on Form N-CSR. (a)(2) Certifications of principal executive officer and principal financial officer pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17CFR 270.30a-2(a)) and Section 302 of the Sarbanes-Oxley Act of 2002. (b) Certifications of principal executive officer and principal financial officer pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17CFR 270.30a-2(b)) and 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 ACCOLADE FUNDS By: /s/ Frank E. Holmes ----------------------------------- Frank E. Holmes President, Chief Executive Officer Date: July 1, 2008 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: July 1, 2008 By: /s/ Catherine A. Rademacher ----------------------------------- Catherine A. Rademacher Treasurer Date: July 1, 2008 EX-99.CERT 2 ex99a1.txt EXHIBIT (a) (2) CERTIFICATION OF PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 30a-2(a) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Frank E. Holmes, certify that: 1. I have reviewed this report on Form N-CSR of U.S. Global Accolade 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 circumstance 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(s) 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: July 1, 2008 /s/ Frank E. Holmes - ------------------------------------- Frank E. Holmes Chief Executive Officer EX-99.CERT 3 ex99a2.txt EXHIBIT (a) (2) CERTIFICATION OF PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 30a-2(a) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Catherine A. Rademacher, certify that: 1. I have reviewed this report on Form N-CSR of U.S. Global Accolade 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 circumstance 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(s) 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 (a) 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: July 1, 2008 /s/ Catherine A. Rademacher - -------------------------------- Catherine A. Rademacher Treasurer EX-99.906 CERT 4 ex99b.txt EXHIBIT (b) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 30a-2(b) UNDER THE 1940 ACT AND SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with this semi-annual report on Form N-CSR for U.S. Global Accolade Funds (the Registrant) for the period ended April 30, 2008, 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: July 1, 2008 By: /s/ Catherine A. Rademacher ----------------------------------- Catherine A. Rademacher Treasurer Date: July 1, 2008 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-----