[GRAPHIC: U.S. GLOBAL INVESTORS, INC. LOGO ON RIGHT-HAND SIDE]
SHAREHOLDER REPORT
Published for the fund shareholders of U.S. Global Investors' 1st Quarter 1997
REACHING NEW HEIGHTS
IN FUND PERFORMANCE
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Frank Holmes Take a closer Look for our It's IRA time.
discusses new look at our new name page 10
directions for award-winning and logo. page 9 --------------
investing. money market -----------------
page 2 fund. page 6
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[GRAPHIC: PICTURE OF AN ANTIQUE COMPASS]
MESSAGE FROM THE PRESIDENT
1996 was an exceptional year for U.S. Global Investors and for shareholders
of our funds. As entrepreneurs around the world flourished competitively and
creatively to deliver superior products at great prices, we brought the
performance of our company and of our funds to new heights. With a new name
embodying our dynamic new corporate structure and culture, we reached the
milestone of guiding more Funds than ever before to 4- and 5-star rankings from
Morningstar.(3) Our U.S. Government Securities Savings Fund, the Bonnel Growth
Fund, the tax-free funds, the U.S. All American Equity Fund, the U.S. Global
Resources Fund and the U.S. World Gold Fund all rewarded shareholders with
superior performance.
The Bonnel Growth Fund, according to Investor's Business Daily, ranked in
the top 2% of all growth funds in the past two years.(2) That is like a mark of
98% in school. Now that is superior performance!
After seven consecutive years of high yields, our U.S. Government
Securities Savings Fund continues to be #1 for 5-year performance, according to
Lipper Analytical Services.(1) With the extra benefit of no state income tax on
dividends, the Fund is one of the highest yielding of all government money
market funds, especially in states with high income tax rates such as California
and New York.
As I discussed with you last quarter, U.S. Global Investors is inspired to
deliver both superior and consistent performance. We have restructured the whole
Portfolio Team so that when they deliver you superior performance, they are
rewarded monthly, quarterly and annually. If they stay in the top of their peer
group for several years, they receive a compounded bonus for their consistency.
They win when you win because your success is what is most important.
A frustration and disappointment has been the U.S. Gold Shares Fund. The
devaluation of the Rand by 30% last year took the wind out of the sails of the
Fund, which in Rand terms actually increased in value. In the latter part of
1996, we expanded the Fund's focus to include more non-South African senior
mining companies and we will continue to do so in 1997, since we cannot control
the destiny of South Africa. We can, however, control our ability to be superior
stock pickers in the gold market and will always seek out new opportunities
worldwide.
Our performance successes have come thanks to our disciplined and dynamic
global investment strategy. Economic expansion and the global adoption of
capitalism and American culture have created world class opportunities for
adventurous investors. As fast-growing foreign economies align with the goals
and principles of the United States, global opportunists like us will expand
investments to capture new prospects for growth and the overall risk reduction
which diversification can provide. Global opportunism will be the chief way, I
believe, to generate maximum returns and provide the greatest stability in
equity investments over the long term. And our performance in 1996 is a
testament to our ability to make global opportunism work for shareholders.
A unique combination of factors has emerged to create a wonderful window of
opportunity for you to participate in this exceptional era of growth and
prosperity. As economic growth is rising in America, Eastern Europe, Latin
America and Asia, political and economic risks are falling, and output and
investment are surging as nations compete for economic market share rather than
political market share. And in spite of high growth rates, we are happy to see
that wages remain stable, inflation is under control and excellent opportunities
exist in American growth stocks, China, global resources and REITS.
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A macro-concept investors should capitalize on is that the four largest
economies of the world--America, Japan, Germany and China--are all net oil
importers. Even though Japan and Germany have lagged behind the robust growth
and restructuring of America and China, their demand for oil has driven the
price to $25 per barrel. China's oil imports for last year were up a net 32%.
This is a big reason why I believe that over the long term our U.S. Global
Resources Fund will participate in the explosive growth of oil and drilling
companies.
The tremendous growth rates which created such high oil demand in China are
why I believe the China Region Opportunity Fund will also generate great
long-term returns. At the same time, the volatility of the China Region market
demands a careful approach. After oscillating in a broad trading range in the
first six months, the Fund roared at the end of the year. That price variation
rewarded most of all those shareholders who used the ABC Investment Plan(R) to
build their wealth with this Fund. The time for you to invest in global
opportunities like China is now, and the best technique is active and automatic
monthly investing in our specialized funds.(2)
India is also coming to the fore as one of emerging Asia's richest
environments for investment. The second-largest country in the world, it too is
embracing American capitalism and is striving to catch up to China's economic
prosperity. India is also competing politically as a nuclear power which can
play a key balancing role in the region. India's stature was made clear recently
when India's prime minister and China's president reconciled their differences
to work together on issues facing their region and the world.
[GRAPHIC: FULL-LENGTH PHOTOGRAPH OF FRANK HOLMES]
The economic situation in India holds all the elements of future success.
While the annual per capita income is presently only $350 and the illiteracy
rate is 48%, 300 million people living below the poverty line provides huge
upside opportunities. At the same time, the country is producing 50,000
information technology professionals and sending between 12,000 and 15,000
programmers to the USA each year for education and training, according to
Coopers and Lybrand. It has the second largest population of English-speaking
engineers in the world. The combination of talented IT professionals and
substantially low labor costs has made India an attractive place to manufacture
U.S.-designed software and components and then ship them back to the U.S. for
sale. This is the future of how the world's firms will win market share in a
very competitive global arena. As soon as enough attractive companies appear on
the Indian market to fill a mutual fund portfolio and when various legal and
trading issues are resolved on Indian stock exchanges, U.S. Global Investors
will consider opening an India Region fund.
Here at home in the U.S., new information tools, such as the Internet,
magnify the benefits of democracy, capitalism and the American securities
markets. The rise of the Internet as a medium of dispersing information provides
global opportunities for technology companies in the U.S. Our great stock picker
Art Bonnel, portfolio manager of the Bonnel Growth Fund, is rigorously searching
for those companies which are leaders in technology and generate consistent high
growth and earnings.
Investment opportunities exist around the world, including in the United
States. Bull and bear markets make little difference when your strategy is to
find the best and fastest-growing companies anywhere and buy their stock for
shareholders. As the new millennium approaches, the strategy of U.S. Global
Investors is to maximize the opportunities which the new era of global economic
expansion has opened up to us. We invite you to join us as we explore globally
for superior performance. 1996 was an exceptional year for U.S. Global Investors
and for shareholders of our funds. As entrepreneurs around the world flourished
competitively and creatively to deliver superior products at great prices, we
brought the performance of our company and of our funds to new heights. With a
new name embodying our dynamic new corporate structure and culture, we reached
the milestone of guiding more Funds than ever before to 4- and 5-star rankings
from Morningstar.(3) Our U.S. Government Securities Savings Fund, the Bonnel
Growth Fund, the tax-free funds, the U.S. All American Equity Fund, the U.S.
Global Resources Fund and the U.S. World Gold Fund all rewarded shareholders
with superior performance.
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FUND FOCUS
Q: IN EVERY YEAR THAT YOU HAVE MANAGED THE U.S. GOVERNMENT SECURITIES SAVINGS
FUND, LIPPER HAS AWARDED YOUR FUND THE NUMBER 1 RANKING FOR FIVE-YEAR
PERFORMANCE.(1,2) HOW DO YOU CONSISTENTLY OFFER SUPERIOR YIELDS FOR
SHAREHOLDERS?
A: The main advantage of our Fund is our demonstrated ability to buy money
market instruments at low prices. My background gives me an edge over some of my
counterparts in that I have worked on the sell side of the business, which is
finance slang for investment banking and trading. As a fund manager with trading
experience, I understand the motivations of bond salesmen and how they operate.
After working a year on a trading desk, I learned never to say yes to the first
price. And my persistence usually gets a better deal. What does that mean for
the shareholder? It means that the shareholder gets a lower price and a higher
yield. I'm constantly working to increase their returns. At the same time, our
firm guarantees that fund expenses will be low, and we consistently keep
expenses lower than the guaranteed cap.
Q: HOW DOES YOUR MANAGEMENT STYLE SEPARATE OUR MONEY MARKET FUNDS FROM THE
COMPETITION?
A: In our shop, the manager actually gets onto the trading desk and hammers
things out with the salesman, whereas at other firms the managers assume more of
an analytical role. Other managers decide what to buy after just looking at a
computer terminal, and then give an order to a trader who actually does the
negotiating. The trader executes the trade but without the incentive the manager
has to achieve great performance. As a result, traders often buy securities
without making the effort to get a better price. It's like walking into a car
dealership and paying sticker price without even making a counteroffer. Because
I stay on the telephone and in contact with Wall Street, I am more in tune with
market changes and can react more quickly. That kind of second effort to make
more money for shareholders is what makes U.S. Global Investors a unique force
in the mutual fund business.
[GRAPHIC: FULL-LENGTH PHOTO OF CRESTON KING]
Creston King, CFA, manages the fixed-income and money market funds at U.S.
Global Investors. A municipal bond specialist, he worked in borkerage,
investment banking and retail sales before joining the company in 1993.
Q: HOW HAS YOUR INVESTMENT STRATEGY ENHANCED THE PERFORMANCE OF THE U.S.
GOVERNMENT SECURITIES SAVINGS FUND?
A: After I came on with the company, I restructured the Fund in order to achieve
high yield at a lower risk. We invest in larger blocks of securities than in the
past, which saves money on brokerage fees, and we invest with the intention of
holding to maturity. All of the positions in the Fund will mature within one
year, which offers us several advantages. First, it gives greater security to
shareholders, because if there is any market volatility, the positions in the
Fund will not be greatly affected. And also our portfolio is laddered, that is,
positions in the Fund mature in short intervals, so we always have money to take
advantage of new opportunities in the market. Since I have the cash to move
immediately, I can provide great deals for our shareholders on a consistent
basis.
Q: BESIDES TOP PERFORMANCE, WHAT ELSE DO THE MONEY MARKET FUNDS OFFER
SHAREHOLDERS OF U.S. GLOBAL INVESTORS' FUNDS?
A: One of the greatest advantages is instant liquidity. You can write checks for
free on accounts in both Funds and you can have money wired to your bank account
with just a phone call. When you want to take money out of one of our stock
funds, you can exchange into or out of the money market funds anytime. One of my
favorite benefits of the Funds, and I use this all the time for my own finances,
is the automatic bill paying which the Funds offer for free. For all your
regular payments, such as your mortgage, insurance, rent or loans of any kind,
you just set up the service and you never have to remember to write a check.
Your payment is made automatically, as long as you have sufficient funds in your
account, and you don't have to worry about the Postal Service getting the check
there on time.
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Q: SO YOU WOULD RECOMMEND THIS FUND OVER USING BANK ACCOUNTS ALONE?
A: Absolutely. The U.S. Treasury Securities Cash Fund is great for people who
write a lot of checks for amounts less than $500. I use my account in the Fund
instead of a checking account, since checkwriting is free with a $1,000 balance.
You can write as many checks as you want and at the end of the month I actually
make money with the dividends the Fund pays out. The U.S. Government Securities
Savings Fund is where I keep money saved for emergencies and for my larger
bills. I also keep some money in there to diversify my assets and to reduce the
overall volatility of my personal investments in our family of funds.
Q: WHO SHOULD INVEST IN THESE FUNDS, OTHER THAN THOSE LOOKING FOR CASH
MANAGEMENT TOOLS FOR THEIR PERSONAL FINANCES?
A: Anyone who wants a low-risk investment which they can have instant access to
whenever they need cash should consider our funds. The U.S. Treasury Securities
Cash Fund is made up of Treasury notes which have less than one year to maturity
and is the safest fund in our collection. The U.S. Government Securities Savings
Fund focuses more on getting a higher yield with triple-A rated government
agency securities, which are issued by the Federal Home Loan Bank, Student Loan
Marketing Association and the Federal Farm Credit Bank. By offering the safety
and yield which these securities provide, our money market funds can enhance any
investor's portfolio.
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U.S. GOVERNMENT SECURITIES U.S. Treasury Securities
SAVINGS FUND Cash Fund
5.13% 4.26%
7-day simple yield 7-day simple yield
5.27% 4.35%
7-day compound yield 7-day compound yield
As of 2/6/97(1,2) As of 2/6/97(1,2)
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For a free investor's guide to our money market funds, call 1-800-US-FUNDS or
1-800-873-8637 today. If you have yet to open a money market account, call us
now to learn more about how our funds can enhance your investment portfolio and
make your personal finances easier.
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GLOBAL IQ QUIZ, PART II
You can win a free U.S. Global Investors t-shirt by being among the
first 50 shareholders to correctly answer these global trivia questions. To test
your global IQ, call an investor representative at 1-800-US-FUNDS, or
1-800-873-8637.
[GRAPHIC: PICTURE OF A DESKTOP GLOBE]
1 What was the top performing China fund in the U.S. during the fourth quarter
of 1996?
2 A major stock market index of what Eastern European country rose 127.6% in
1996?
3 If you had invested $10,000 in the Bonnel Growth Fund on the 10/17/94
inception date, how much would it have been worth on 1/1/97?
4 Investors around the world can read about U.S. Global Investors' funds on the
World Wide Web. What is the address for our Web site?
5 Congress has increased the contribution limit for spousal IRAs from $250 in
1996 to a new, much higher limit, in 1997. How much can investors now
contribute to spousal IRAs?
[ ] $500 [ ] $1,000 [ ] $1,500 [ ] $2,000
5
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FUND NOTES
[GRAPHIC: MAGNIFYING GLASS OVERLOOKING A CIRCUIT BOARD]
BONNEL GROWTH FUND
Portfolio manager Art Bonnel believes that short-term stock market dips in
1997 will present an excellent buying opportunity for investors who use an
automatic monthly investment plan. While corrections are possible along the way,
the positive reaction of the market to the re-election of President Clinton
supports Art's expectation of another good year for stocks. By focusing on
companies with high current growth, the Fund posted excellent returns in
1996.(4) Much of this success came in the Fund's technology, health care and
retail holdings. These will continue to play a strong role in the portfolio as
we look for opportunities for growth in other industries as well.
U.S. WORLD GOLD FUND & U.S. GOLD SHARES FUND
Demand for gold may have reached record levels in 1996, thanks to lower
prices for the metal. While stronger investment demand and renewed speculative
interest will be required to push gold back above $400, the supply and demand
fundamentals for gold remain good. The gold market should also improve as
investors recognize that they have exaggerated their concerns regarding central
bank sales.
The weakness in gold stocks at the end of November and in early January can
be directly attributed to the depressed gold price, although the exploration
stocks and junior gold miners suffered more due to year-end tax-loss selling.
The correction in those issues has produced a number of interesting buying
opportunities as share prices have fallen in line with fundamentals.
U.S. GLOBAL RESOURCES FUND
Offshore energy development in the Gulf of Mexico is embarking on a new
era, according to the investment team of the U.S. Global Resources Fund.
Reduction of royalty fees in economically marginal deep-water tracts and the
record-breaking sale of tracts in the central Gulf earlier this year should
result in increased profits and production for the oil drilling and service
companies the Fund invests in.
[GRAPHIC: PICTURE OF STACKS OF GOLD: MEDALLIONS, BARS, INGOTS.]
As Peter Lynch wrote in the October issue of Worth, our competitors' equity
mutual funds underweight oil stocks, in spite of the fact that the spread
between the dividend yields of the major oil stocks and the S&P 500 is the
widest it has been in 45 years. Also, rapid economic development in China, India
and the former Soviet Union is strengthening the fundamentals for natural
resources and has contributed to the acceleration of the annual increase in oil
demand from 1.5% for the last ten years to 2.5% projected for the next two
years. To take advantage of this global boom in the oil and energy market, the
Fund's portfolio holds a high weighting in oil and gas stocks throughout the
world.
U.S. REAL ESTATE FUND
[GRAPHIC: PARTIAL FACADE OF GOVERNMENT BUILDING]
Significant money flows into the real estate sector drove up share prices
of many issues and produced excellent total returns this quarter for the U.S.
Real Estate Fund.(4) The public is becoming increasingly aware of the advantages
of investing in real estate, an equity asset class independent of the stock
market. Institutional investors such as pension funds and insurance companies
are also looking to real estate investment trusts as an easier way to derive the
benefits of real estate than direct ownership of property. The influx of capital
has allowed REITs to grow their assets and their cash flows. In the current
economic climate of moderate growth, we expect more solid returns for the Fund
in the coming year.
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U.S. INCOME FUND
After the November election preserved the status quo in the White House and
Congress, a sharp rise in the enthusiastic markets boosted many stocks in the
U.S. Income Fund's portfolio. Late in the quarter, beleaguered telephone stocks
staged a strong rally, and utilities profited from the increase in consumption
of energy, especially natural gas, as the cold winter took hold. 1997 should
bring a moderate inflation and interest rate climate which will be beneficial to
the large, financially sound and conservatively valued stocks we focus on.
CHINA REGION OPPORTUNITY FUND
The China Region Opportunity Fund's excellent performance ranked the Fund
number 12 among all stock funds in America for the fourth quarter. As Hong Kong
companies increasingly match gears with the Chinese economy, they will sustain
their earnings growth and take better advantage of the huge market they border.
Since early 1996, we have concentrated the Fund's portfolio in China and Hong
Kong and have been well rewarded.(4) We expect that our success there in 1996
will continue in 1997 as we maintain the Fund's overweighting of these markets.
U.S. ALL AMERICAN EQUITY FUND
We believe that fundamentals in the U.S. stock market indicate further
growth. Interest rates are low and stable, and the economy, while slowing,
remains healthy. At the same time, we believe shareholders should take advantage
of the ABC Investment Plan(R) to invest gradually in the market, since
short-term corrections are likely.(2) The U.S. All American Equity Fund achieved
a close correlation to the S&P 500 in 1996, while seeking out even better growth
prospects such as those available in technology and health care. We expect these
sectors will outperform in coming quarters.
FIXED INCOME AND MONEY MARKET FUNDS
We anticipate that inflationary pressures will persist in coming months,
triggering gradually rising interest rates this year. We expect upward movements
to be slight, since the Fed will seek only to fine tune the economy. And we
believe that the bond market will consequently fare better in 1997 than in 1996.
---------------------------------------------
TOP 6 PERFORMERS FOR 1996 1 year(2,4)
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U.S. Global Resources Fund +34.11%
U.S. Real Estate Fund +31.56%
Bonnel Growth Fund +27.93%
China Region Opportunity Fund +27.85%
U.S. All American Equity Fund +22.28%
U.S. World Gold Fund +19.52%
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MORNINGSTAR RANKINGS 1 year(3)
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U.S. Real Estate Fund *****
U.S. Global Resources Fund *****
United Services Near-Term Tax Free Fund *****
U.S. Tax Free Fund ****
U.S. All American Equity Fund ****
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DISCLOSURE INFORMATION For a free Fact Kit containing more complete information,
including charges and expenses, call 1-800-US-FUNDS. Read the prospectus
carefully before investing.(1) IN REGARDS TO THE U.S. GOVERNMENT SECURITIES
SAVINGS FUND AND THE U.S. TREASURY SECURITIES CASH FUND: Like all other mutual
funds, Fund shares are not backed by the U.S. government or its agencies, though
the securities they invest in are; nor are they a deposit of or endorsed by a
bank; nor are they insured by the FDIC. The Funds are managed to maintain a
stable $1 per share value, though there is no assurance that they will be able
to do so. According to SEC guidelines, capital gains or losses are excluded from
yield calculations. Lipper Analytical Services ranked the U.S. Government
Securities Savings Fund #5 and #1 for the 1- and 5-year periods ended 12/31/96
(out of 115 and 78 government money market funds, respectively). (2) IN REGARDS
TO ALL OF U.S. GLOBAL INVESTORS' FUNDS: Past performance is no guarantee of
future results. "U.S." stands for United Services. The advisor's opinion does
not guarantee a profit. Investing in emerging markets or in gold involves
special risks which are detailed in the prospectus. Investment principal and
returns will fluctuate. Using the ABC Investment Plan(R) does not guarantee a
profit. If you sell at the bottom, no system will give you a gain. (3)
Morningstar rankings as of 12/31/96. Morningstar, a nationally recognized mutual
fund rating service, awards ratings which reflect historical risk-adjusted
performance. It awards five stars to funds in the top 10% of their category,
four stars to funds in the next 22.5%, three stars to the next 35%, two stars to
the next 22.5% and one star to funds in the bottom 10%. The U.S. Real Estate
Fund received 5 stars out of 2959 funds for 1 year and 1 star out of 1058 funds
for 5 years. The U.S. Global Resources Fund received 5 stars out of 2959 funds
for 1 year, 2 stars out of 1058 funds for 5 years and 1 star out of 598 funds
for 10 years. The United Services Near-Term Tax Free Fund received 5 stars out
of 1739 funds for 1 year and 4 stars out of 580 funds for 5 years. The U.S. Tax
Free Fund received 4 stars out of 1739 funds for 1 year, 3 stars out of 1058
funds for 5 years and 1 star out of 589 funds for 10 years. The U.S. All
American Equity Fund received 4 stars out of 2959 funds for 1 year, 3 stars out
of 1058 funds for 5 years and 1 star out of 589 funds for 10 years. Total
operating expenses for the United Services Near-Term Tax Free Fund and U.S. Tax
Free Fund were either capped our subsidized by the advisor. This benefited
shareholders and improved fund performance. (4) Fund performance: U.S. Global
Resources Fund, 8.75%, 5 years, 6.08% 10 years. U.S. Real Estate Fund, 7.72% 5
years, 6.95% since inception (7/2/87). Bonnel Growth Fund, 33.02% since
inception (10/17/97). China Region Opportunity Fund, -7.57% since inception
(2/10/97). U.S. All American Equity Fund, 11.98% 5 years, 8.46% 10 years. U.S.
World Gold Fund, 15.79% 5 years, 6.05% 10 years.
7
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NEWS & NOTES FROM SHAREHOLDER SERVICES
[GRAPHIC: PHOTO OF A HOME MAILBOX]
WE HAVE MADE YOUR TAX PREPARATION EASIER
Along with your tax information for 1996, we have sent you your average
cost basis on your redemptions and the amount of any tax-exempt dividends paid
to you during the year. If you have not received tax forms from us or if you
have a question about your tax information, please call an investor
representative at 1-800-873-8637 for assistance.
FOR FASTER ACCESS TO YOUR ACCOUNT, CALL 1-800-873-8637
Our automated system can save you valuable time. With it you can obtain
account balances, review cleared checks and confirm deposits--all without
holding for a representative.
BUSINESS & CORPORATE MONEY MARKET FUND ACCOUNT BENEFITS
While corporations may not use interest-bearing checking accounts, U.S.
Global Investors offers a profitable alternative. Business accounts in our money
market funds earn income dividends and enjoy the convenience of checkwriting.
With a minimum balance of $1,000 in one of our high-yield funds, YOUR COMPANY
COULD MAKE MONEY ON YOUR OPERATING CASH. Plus, you can now have the IRS
automatically debit your account in the U.S. Treasury Securities Cash Fund for
pre-payment of taxes.
HOW TO GET THE MOST FROM YOUR IRA
Have you invested the maximum in your IRA for 1996? If not, do so before
April 15 so you can get the greatest benefit from tax-deferred growth. If you
have, consider making a contribution to your IRA for 1997. By investing now,
your investment enjoys tax deferral all year, which could mean more money for
your retirement. And with the new $2,000 limit on contributions to spousal IRAs,
you can enjoy IRA advantages on even more of your money.
MAKE YOUR INVESTMENT WORK FOR YOU
Please be sure to write your investment checks to the name of the fund you
wish to invest in. Include in your deposit the tear-off stub from the bottom of
your statements. SENDING INVESTMENT CHECKS TO A FUND WITH A STUB FOR ANOTHER
FUND, OR FOR ANOTHER ACCOUNT IN THE SAME FUND, CAN CAUSE DELAYS IN MAKING YOUR
INVESTMENT. Be sure the fund and the account named on the stub are those you
wish to invest in. If they are not, call 1-800-873-8637 for free deposit slips
for your account.
PO BOX 659 IS NOW CLOSED
The Postal Service will no longer forward mail to us if addressed to PO Box
659. When sending investment checks or correspondence, please be sure to use our
new address: PO Box 781234, San Antonio, TX 78278-1234. If you would like to
receive free envelopes addressed to us, please call 1-800-873-8637 to request
them.
PORTFOLIO DIRECT
U.S. Global Investors portfolio managers give you the news you need about
your investments on our automated telephone system. Every six weeks, each fund
manager updates his comments on the markets, the funds' performance and his
outlook for the coming weeks. The perfect complement to the Shareholder Report,
Portfolio Direct is absolutely free and available 24 hours a day at
1-800-US-FUNDS, or 1-800-873-8637. Just select option 6 from the automated menu
and hear the latest information about your investments with U.S. Global
Investors.
A NEW FUND JOINS OUR FAMILY
Shareholders have easy access to a new fund managed by a well-known
financial newsletter editor. To learn more about this fund which seeks long-term
capital appreciation, call 1-800-US-FUNDS.
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A NEW LOOK & A NEW NAME
[GRAPHIC: U.S. GLOBAL INVESTORS, INC. LOGO]
Your investments in the funds are managed by U.S. Global Investors, Inc., a
publicly-traded, registered investment advisor founded in San Antonio in 1968.
Since changing our name from United Services Advisors to U.S. Global Investors
in July 1996, we have been introducing our new name and logo on your account
statements and investment literature. Now that this transition is almost
complete, you will be able to find the newspaper listings for the funds under
U.S. Global beginning March 1. If you do receive anything from us with our
former name or an old logo, it is part of our effort to maximize your investment
dollars by using materials already printed rather than throwing them away
unused.
U.S. GLOBAL INVESTORS IN THE NEWS
L.A. TIMES, 1/7/97
"Among money managers, Art Bonnel is one of the sharpest shooters and
quickest draws in the West. From his home office in Reno, he has guided [the
Bonnel Growth Fund] to one of the best records of any mutual fund over that
stretch."
THE WALL STREET JOURNAL, 1/9/97
The China Region Opportunity Fund is the #1 Asia ex-Pacific fund for the
4th quarter of 1996.
THE WALL STREET JOURNAL, 1/9/97
The U.S. Real Estate Fund is among the "Fourth-Quarter Best Performers."
MONEY, November 1996
U.S. Government Securities Savings Fund--"The Best Savings Yield in the
U.S." among government money market funds.
EMPLOYEE SPOTLIGHT: Kevin Trevor-Wilson
[GRAPHIC: PHOTO OF KEVIN TREVOR-WILSON]
As an Investor Representative in the U.S. Global Investment Center, Kevin
Trevor-Wilson serves the needs of the public and our shareholders on a
one-on-one basis. A walk-in atrium on the first floor of our office building,
the Investment Center provides local and visiting investors the opportunity to
do business personally with U.S. Global Investors.
Shareholders and others can come to the Investment Center to learn about
our funds in depth and to transact on their accounts with investor
representatives who can provide the highest level of service possible. "At U.S.
Global Investors, you're not just a Social Security number," says Kevin. "We see
many shareholders on a regular basis and know them by name. They often say that
meeting the people who invest and protect their money gives them more confidence
in their investment with us and enhances their experience overall."
As part of the U.S. Global Investors team traveling to investment
conferences throughout the country, Kevin takes his personal touch on the road.
We invite all shareholders to attend these conferences, and we hope to see you
soon.
[GRAPHIC: "ADMIT ONE" TICKET STUB]
INVESTMENT CONFERENCE SCHEDULE
April 29-May 1 May 28-29
Las Vegas Money Show Conference Northeast Investment in Mining
Bally's Resort New York Marriott Marquis
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The Shareholder Report is published four times a year by U.S. Global Investors
as a service to shareholders of our funds. Please send any comments, suggestions
or questions to:
Editor, Shareholder Report Susan Filyk, Editor
U.S. Global Investors Mark Talbot-Kelly, Creative Director
P.O. Box 781234 Stephanie Linkous, Associate Editor
San Antonio, TX 78278-1234 Chris Smith, Associate Editor
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9
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HAPPY NEW YEAR AND WELCOME TO IRA SEASON!
[GRAPHIC: HOUR-GLASS]
[GRAPHIC: PHOTO OF LISA KOTTLER]
LISA KOTTLER, Retirement Specialist and Vice President of Security Trust &
Financial Co.
As we ring in the new year, most of us reflect on the past year and charge
forward with renewed hope and optimism. We usually make resolutions to spend
more time with our family or to improve our health with exercise and a good
diet.
But did you add any financial goals to your list of resolutions? Did you
resolve to improve your financial health and get your financial future on track?
A top priority for 1997 should be making and sticking to a disciplined
investment strategy so that your future can be as bright as the optimism of a
new year.
SAVING TODAY MEANS MORE GROWTH FOR TOMORROW
If one of your goals is to have a prosperous retirement, you must build
adequate savings today. Let's face it, retirement is more a function of money
than of age. No longer do workers automatically retire at age 65 to collect a
pension and Social Security. These days, our retirement begins once we have
accumulated enough money to quit work.
Though it may seem daunting at first, this is great news. Why? Because it
means each of us controls our own destiny and, if we plan properly, we can
retire sooner than we initially expected and with a higher standard of living
than any pension or government benefits can provide.
How can you accumulate more money for retirement? One of the easiest,
smartest and quickest ways to save for your retirement is with an Individual
Retirement Account (IRA) for you and your spouse. Virtually anyone with earned
income can fund an IRA. Even if you participate in an employer-sponsored plan,
you can still put away up to $2,000 a year in an IRA. And the tax advantages of
IRAs mean that your savings can grow significantly faster than through a
conventional taxable savings account. Since all dividends and capital gains
accumulate on a tax-deferred basis in an IRA, your investment is not reduced by
the taxes you would otherwise have to pay on your returns each year.
Did you realize you can have over half a million dollars in thirty years
just by contributing to your IRA? You can, if you are committed to saving and
investing today. By investing $166 on a monthly basis (that's $2,000 annually)
in a fund earning an average of 12% per year, you will have over half a million
dollars in thirty years. Of course, not all investments earn 12% per year on
average, and any investment may appreciate or depreciate in value over time. We
recommend that you review all of our funds and choose those which offer the
right balance of risk and reward for you.
Our ABC Investment Plan(R) makes it easy and affordable to schedule a
regular and rewarding financial workout for your finances. With our program, you
choose the investment amount ($30 minimum) which we will automatically transfer
from your checking account each month. It takes only $100 to start investing in
most of our funds. By paying yourself first each month, you can assure that you
stick to your goals.
[GRAPHIC: ABC BLOCKS]
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INVEST $2,000 A YEAR IN AN IRA (ONLY $166 A MONTH) AND YOUR SAVINGS COULD GROW
TO MORE THAN $500,000 IN THIRTY YEARS.
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10
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MAXIMIZE THE BENEFITS OF IRA INVESTING
The only way to ensure that you have a comfortable and prosperous
retirement is to start saving today. So ring in the new year by contributing to
your IRA. If you have not yet made the maximum contribution for 1996, do so
before the April 15 deadline. And if you can, make your full 1997 contribution
as early in the year as possible. By investing at the beginning of the year,
your money enjoys tax-deferred accumulation longer, so your money can grow even
faster. If you make the full contribution of $2,000 in any calendar year, we
will waive the annual custodial fee for that year.
What better way to start the new year, than by jump-starting your financial
future? Resolve today to make 1997 the year you began making your financial
dreams come true.
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SEE HOW YOUR MONTHLY INVESTMENT COULD GROW OVER TIME.
Monthly Investment 5 Years 10 Years 20 Years 30 Years
$ 50 $ 4,055 $ 11,202 $ 45,993 $ 154,049
$ 100 $ 8,110 $ 22,404 $ 91,986 $ 308,097
$ 166 $13,463 $ 37,190 $152,696 $ 511,442
$ 250 $20,276 $ 56,009 $229,964 $ 770,243
$ 500 $40,552 $112,018 $459,929 $1,540,487
$1,000 $81,104 $224,036 $919,857 $3,080,973
This hypothetical example assumes a 12% annual return. Your actual return may be
more or less than this amount. No investment program can guarantee a profit.
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THE FLEXIBILITY OF IRAS GIVES YOU MANY OPTIONS
SEP-IRAS are ideal for entrepreneurs, professional corporations and sole
proprietors. If you have any self-employed income, you are eligible to open a
Simplified Employee Pension plan (or SEP-IRA), which allows you to make
tax-deductible contributions of up to 15% of compensation or $22,500, whichever
is less. Can you think of another way to shelter up to $22,500 a year?
CONDUIT/ROLLOVER IRAS allow those of you changing jobs or retiring to
transfer 401(k) or 403(b) assets directly into a U.S. Global Investors IRA and
avoid the 20% withholding requirement. This tax-free transfer keeps your money
growing on a tax-deferred basis and is available for all of U.S. Global
Investors' funds. AND IF YOU TRANSFER $10,000 OR MORE TO A U.S. GLOBAL INVESTORS
IRA ACCOUNT, YOU'LL NEVER PAY AN ANNUAL FEE FOR THE LIFE OF YOUR ACCOUNT.
SPOUSAL IRAS. Surprisingly, the federal government actually made a change
that will encourage IRA investing. Before 1997, a working spouse and non-working
spouse could collectively contribute up to $2,250 annually, with no more than
$2,000 to either account. Understanding the importance of saving for retirement,
Congress increased the $2,250 limit to $4,000 annually, still with no more than
$2,000 in either account.
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(MOUNTAIN GRAPH PLOTTED FROM DATA IN TABLE BELOW)
12%
Year $166
---- --------------
0 $ 0.00
1 $ 2,119.24
2 $ 4,492.79
3 $ 7,151.16
4 $ 10,128.54
5 $ 13,463.20
6 $ 17,198.02
7 $ 21,381.02
8 $ 26,065.99
9 $ 31,313.14
10 $ 37,189.96
11 $ 43,771.99
12 $ 51,143.87
13 $ 59,400.37
14 $ 68,647.66
15 $ 79,004.61
16 $ 90,604.40
17 $ 103,596.17
18 $ 118,146.95
19 $ 134,443.82
20 $ 152,696.32
21 $ 173,139.12
22 $ 196,035.05
23 $ 221,678.50
24 $ 250,399.15
25 $ 282,566.29
26 $ 318,593.48
27 $ 358,943.94
28 $ 404,136.45
29 $ 454,752.07
30 $ 511,441.55
11
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EXPERT MARKET INSIGHTS
The U.S stock market is at record levels and, many believe, overvalued. But
investors do not want to sit in cash and miss out on gains. What to do? The
answer may be to move some money into international markets--for
diversification, better values and higher profits.
The U.S. has been one of the top-performing stock markets in this decade,
but that's not typical on a longer-term basis. Indeed, over that quarter
century, the U.S. stock market was not often in the top half of markets around
the world.
It is not surprising that the U.S. typically underperforms. It is a mature
economy and market and so, typically, one would not expect the market as a whole
to see the kind of growth that smaller and more dynamic companies can produce.
Indeed, notwithstanding the very fine growth companies that exist in the U.S.,
the opportunity to experience dynamic growth is one reason that many investors
look overseas.
FOREIGN COUNTRIES ARE GAINING GROUND
This growth becomes clear when we look at the relative decline in the U.S.
Twenty-five years ago, the U.S. stock market represented 80% of total world
stock market capitalization. That is, four out of every five dollars in stock
markets around the world was in a single market, the United States. With that
kind of dominance, there was perhaps no need for U.S. investors to look
overseas.
That's no longer the case. Today, the U.S., still the world's largest
market, represents only one-third of total world capitalization. Individual
sectors reflect the growth of foreign economies. There is not one U.S. bank
among the world's largest 20 banks. All 10 of the world's largest utility
companies are outside the U.S., as are the 10 largest appliance companies.
[GRAPHIC: FULL-LENGTH PHOTO OF ADRIAN DAY]
ADRIAN DAY, a well-known newsletter editor, has been managing global equity
accounts for several years. He is offering a free issue of his newsletter Adrian
Day's Investment Analyst to shareholders of our funds. Please call us at
1-800-873-8637 for your complimentary copy.
LOOK AT THESE GREAT COMPANIES, AND THEY'RE INEXPENSIVE TOO!
One can hardly afford to ignore the rest of the world! Many of these
"foreign" companies are names perfectly well known to us: Shell, an Anglo-Dutch
company, with operations around the world; British Petroleum, the largest oil
producer in North America; Nestle, a Swiss company whose products are on every
U.S. household's shelves; and so on. There are other companies less well-known
to investors, but which dominate their own local markets or regions.
Right now, after the U.S. stock market has experienced its strongest run in
history, many of these foreign companies are undervalued compared with U.S.
counterparts, particularly when considering their relative growth prospects.
Telefonica de Espana, Spain's dominant phone and cable company which has rapidly
growing operations throughout Latin America, is selling at 14 times earnings and
yielding nearly 3%. Singapore Airlines, one of the fastest growing major
airlines in the world with a top-notch balance sheet, sells at only 10 times
earnings and less than book. Portugal's growing financial powerhouse, Espirito
Santo (trading on the NYSE), sells at only 12 times depressed earnings, at less
than book value, and yields 4.5%. New Zealand has one of the best-run economies
in the world. Brierley Investment, a $2.5 billion regional conglomerate, rapidly
expanding in joint ventures throughout Southeast Asia, sells at only 8 times
earnings, sells for book and yields over 6%. You just don't find values like
that in the mature U.S. economy.
Much of the world has lagged the U.S. the last few years. Many global
economies are starting to turn around as the impact of lower domestic interest
rates and currencies take effect. The better values available abroad will
attract investment capital from investors concerned about the high U.S. market.
This is a good time to put some money to work in growing overseas markets.
