VICE FUND Q1 2026 COMMENTARY LETTER
The Vice Fund ended Q1 2026 up +0.83%.
Against a backdrop of mostly down equity indices in Q1 2026, the USA Mutuals Vice Fund delivered a solid first-quarter performance, buoyed by its core “vice” sectors, which benefited from resilient demand and persistent geopolitical and macroeconomic themes. Overall results reflected the Fund’s strategy of targeting industries with durable cash flows and strong pricing power, even in the face of higher interest rates and uneven global growth. While short‑term volatility remained, the Fund’s exposure to military defense, alcohol, casinos, and tobacco helped provide a measure of defensiveness and income, consistent with its long‑standing investment philosophy.
Military defense was a notable contributor as ongoing geopolitical tensions and elevated defense budgets in the U.S. and Europe supported the sector. BAE Systems, in particular, stood out as a strong performer. The company continued to benefit from multi‑year procurement programs, growing order backlogs, and heightened demand for advanced defense systems across NATO member countries. Investor recognition of BAE’s robust balance sheet, visible revenue streams, and potential for dividend growth helped drive the stock higher during the quarter, making it one of the Fund’s key contributors to relative performance within the defense allocation.
The alcohol segment also provided steady gains, reflecting the sector’s historically stable consumption patterns and its ability to pass through higher costs. Within this group, Heineken added positively to returns as the company demonstrated progress in premiumization and emerging‑market expansion, even amid pockets of consumer caution. Heineken’s global brand portfolio, disciplined cost management, and continued focus on higher‑margin offerings supported earnings expectations, which in turn underpinned the stock’s performance in the quarter and validated the Fund’s ongoing conviction in the name.
Tobacco and casinos both continued to play their roles as income and diversification pillars for the Fund. Tobacco holdings generated attractive dividend income and held up relatively well amid market rotations, although the sector continued to face regulatory and volume headwinds. Philip Morris remained a central position, with its transition toward smoke‑free products and strong IQOS adoption providing a counterbalance to declining traditional cigarette volumes and supporting long‑term earnings visibility. Casino holdings, meanwhile, showed mixed but generally constructive results as travel and leisure trends remained supportive, particularly in regions benefiting from post‑pandemic normalization. Together, these vice sectors—anchored by positions such as BAE Systems, Philip Morris, and Heineken—underpinned the Fund’s first‑quarter results and illustrated the resilience of its specialized investment universe.
As always, we thank you for your continued trust and investment in the Vice Fund.
Sincerely yours,
Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call 1-800-MUTUALS or visit our website at www.USAMutuals.com. Read the prospectus or summary prospectus carefully before investing.
Standardized performance as of 3/31/2026 Fund Inception (8/30/2002)
Investor Class performance data quoted represents past performance; past performance does not guarantee future results. The 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. Current performance of the fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-866-264-8783. Returns over one year are annualized. The Gross and Net expenses are 2.15% and 1.73%. The Fund’s adviser, USA Mutuals Advisors, Inc. (the “Adviser”), has contractually agreed to reduce its fees and/or absorb expenses of the Fund, until July 31, 2026, to ensure that total annual fund operating expenses after fee waiver and reimbursement will not exceed 1.48% of the Fund’s average daily net assets for each share class.
Top 10 Holdings as of 3/31/2026
SECURITY NAME % OF NET ASSETS OR MARKET VALUE
BAE SYSTEMS PLC 9.22%
RTX CORPORATION 7.00%
PHILLIP MORRIS INTERNATIONAL, INC 6.99%
BRITISH AMERICAN TOBACCO PLC 6.10%
NORTHROP GRUMMMAN CORP 5.37%
ANHEUSER-BUSCH INDEV SA 4.78%
ALTRIA GROUP, INC 4.54%
HEINEKEN NV 4.52%
CARLSBERG A/S 3.67%
DIAGEO PLC 3.59%
Holdings subject to change.
DEFINITIONS:
The MSCI All Country World Index Total Return (“MSCI ACWI TR”): Captures large and mid-cap representation across 23 Developed Markets (DM) and 26 Emerging Markets (EM) countries.
