u.s. global investors detail on factors that could cause actual results to differ materially from...
TRANSCRIPT
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U.S. Global InvestorsSearching for Opportunities, Managing Risk
Frank E. HolmesCEO and CIO
Susan McGeePresident and General Counsel
Catherine RademacherCFO
Terry BadgerDirector of Communications November 7, 2008
08-758
GROW First Quarter 2009 Earnings
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Forward-Looking StatementsDuring this webcast we may make forward-looking statements about our relative business outlook. Any forward-looking statements and all other statements made during this webcast that don’t pertain to historical facts are subject to risks and uncertainties that may materially affect actual results. Please refer to our press release and the corresponding Form 10-Q filing for more detail on factors that could cause actual results to differ materially from any described today in forward-looking statements. Any such statements are made as of today, and U.S. Global Investors accepts no obligation to update them in the future.
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Strengths and Weaknesses
GROW is debt-free and has a strong balance sheet
No toxic derivatives in funds
Significant corporate events to position company for better markets
But company and funds both negatively impacted by massive global deleveraging
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Assets Under Management
Mutual Funds (Billions) Offshore Clients (Millions)
*On November 6, 2008, U.S. Global Investors terminated its advisory agreement with Endeavour Financial Corporation. As of September 30, 2008, the Endeavour portfolio was $177.5 million.
*
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$0.16$(0.12)EPS (diluted)
$2.4M$(1.8M)Net Income
$12.9M$8.9MRevenue
20072008
Quarter ended September 30
Financial Snapshots
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-12.1%Industry Peers*
-38.3%U.S. Global Investors (GROW)
1Q09 vs 1Q08
* Latest quarterly results filed by Affiliated Managers, Alliance Bernstein, BlackRock, CalamosAsset Mgmt, Cohen & Steers, Federated Investors, Franklin Resources, Invesco, Janus Capital Group, Legg Mason, Pzena Investment Mgmt, T. Rowe Price and Waddell & Reed.
Source: Bloomberg
AUM Growth
As of 9/30/08
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-48.2%-55.4%Industry Peers*
-175%-177%U.S. Global Investors (GROW)
EPSNet Income
* Latest quarterly results filed by Affiliated Managers, Alliance Bernstein, BlackRock, CalamosAsset Mgmt, Cohen & Steers, Federated Investors, Franklin Resources, Invesco, Janus Capital Group, Legg Mason, Pzena Investment Mgmt, T. Rowe Price and Waddell & Reed.
Source: Bloomberg
Earnings
Calendar 3Q08 vs 3Q07
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20%23%Industry Peers*
44%19%U.S. Global Investors (GROW)
3-Year CAGR**1-Year
* Latest quarterly results filed by Affiliated Managers, Alliance Bernstein, BlackRock, CalamosAsset Mgmt, Cohen & Steers, Federated Investors, Franklin Resources, Invesco, Janus Capital Group, Legg Mason, Pzena Investment Mgmt, T. Rowe Price and Waddell & Reed.
** Compounded Annual Growth RateTrailing twelve months, quarter ending September 30, 2008
Source: Bloomberg
Return on Equity
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Significant Event: Trust Merger and New Fees
Combining two fund trusts into one trust for efficiencyUpdating management fees on some fundsPerformance fees to align interestsNew distribution plan
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Significant Event: Subadvisory Changes
Assumed day-to-day management of Eastern European Fund and Global Emerging Markets Fund
Ended advisory relationship with Endeavour Financial
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Navigating the Turmoil
Frequent communication with shareholders about markets and factors affecting the funds
Loyal shareholders – voted for new contract during volatile market
Higher cash positions to help manage extreme volatility
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Our Strategy for Enduring a Credit Crisis
Goal: Stabilize volatility of funds
Reasons: Massive headwinds from billions of dollars of hedge fund redemptionsGovernment response has yet to generate sustained confidence in the planCredit contraction has gone global
Tactics: Raise cash levels, utilize covered writing until our proprietary macro indicators turn positive
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What is a Financial Crisis?
Financial crisis can be divided into:Banking crisisCurrency crisisTwin crises
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Derivatives-Weapons of Mass Destruction (WMDs)-Proliferate
5 Times Bigger In Five YearsTrillions
Source: U.S. Global Research
Warren Buffett 2002
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Derivatives-Weapons of Mass Destruction (WMDs)-Proliferate
Trillions
Source: Bank for International Settlements
35x U.S. GDP
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Market Performance During Recessions
Source: Credit Suisse Portfolio & Derivatives Strategy
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Positive Factors in Emerging Markets
China cuts mortgage rates
India lowers interest rates
Huge foreign exchange reserves
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Gross expense ratio as stated in the most recent prospectus. The Adviser has contractually limited total fund operating expenses (as a percentage of net assets) to not exceed 1.50% (exclusive of acquired fund fees and expenses of 0.04%) for the Gold and Precious Metals Fund, 1.50% (exclusive of acquired fund fees and expenses of 0.02%) for the World Precious Minerals Fund, and 1.50% for the Global Resources Fund, through September 30, 2009, or until such later date as the Adviser determines. Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and otherearnings. Current performance may be higher or lower than the performance data quoted. The principal value and investment returnof an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any direct fees described in the fund’s prospectus (e.g., short-term trading fees if applicable, of up to 0.50%) which, if applicable, would lower your total returns. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.
1.50%1.71%11.04%15.83%7.89%(37.34%)World Precious Minerals (UNWPX)
1.50%
1.50%
Capped Expense
Ratio
1.79%13.56%17.19%15.45%(18.84%)Gold and Precious Metals (USERX)
1.57%
Gross Expense
Ratio
17.95%23.43%2.88%(32.22%)Global Resources (PSPFX)
10-Year (annualized)
5-Year (annualized)
3-Year (annualized)1-YearAs of 9/30/08
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. Gold funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The price of gold is subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in gold or gold stocks. 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. Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.
Fund Performance
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Gross expense ratio as stated in the most recent prospectus. The Adviser has contractually limited total fund operating expenses (as a percentage of net assets) to not exceed 2.00% (exclusive of acquired fund fees and expenses of 0.01%) for the China Region Fund, 2.50% (exclusive of acquired fund fees and expenses of 0.06%) for the Global Emerging Markets Fund, and 2.25% for the Eastern European Fund, through September 30, 2009, or until such later date as the Adviser determines. Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any direct fees described in the fund’s prospectus (e.g., short-term trading fees if applicable, of up to 2.00%) which, if applicable, would lower your total returns. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.
2.00%2.29%10.64%12.96%6.58%(47.78%)China Region (USCOX)
2.50%
--
Capped Expense
Ratio
2.93%N/AN/A1.64%(44.71%)Global Emerging Markets (GEMFX)
2.14%
Gross Expense
Ratio
21.20%21.21%2.46%(35.08%)Eastern European (EUROX)
10-Year (annualized)
5-Year (annualized)
3-Year (annualized)1-YearAs of 9/30/08
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 Eastern European Fund invests more than 25% of its investments in companies principally engaged in the oil & gas and banking industries. In particular, thefund will invest at least 25% of its net assets in the following industries: energy equipment and services; oil, gas and consumable fuels; and commercial
banking. However, the fund will not invest more than 50% of its net assets in any one of those industries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.
Fund Performance
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1.75%1.92%5.25%7.00%(0.75%)(26.90%)Holmes Growth (ACBGX)
1.85%
1.75%
Capped Expense
Ratio
2.56%4.34%5.82%(1.17%)(24.15%)Global MegaTrends (MEGAX)
2.31%
Gross Expense Ratio
0.63%7.10%2.18%(21.60%)All American Equity (GBTFX)
10-Year (annualized)
5-Year (annualized)
3-Year (annualized)1-YearAs of 9/30/08
Gross expense ratio as stated in the most recent prospectus. The Adviser has contractually limited total fund operating expenses (as a percentage of net assets) to not exceed 1.75% (exclusive of acquired fund fees and expenses of 0.01%) for the All American Equity Fund, , 1.85% (exclusive of acquired fund fees and expenses of 0.01%) for the Global MegaTrends Fund, and 1.75% (exclusive of acquired fund fees and expenses of 0.01%) for the Holmes Growth Fund, through September 30, 2009, or until such later date as the Adviser determines. Performance data quoted above is historical. Past performance is no guarantee of future results. Results reflect the reinvestment of dividends and other earnings. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Performance does not include the effect of any direct fees described in the fund’s prospectus (e.g., short-term trading fees, if applicable, of up to 1.00%) which, if applicable, would lower your total returns. Obtain performance data current to the most recent month-end at www.usfunds.com or 1-800-US-FUNDS.
Fund Performance
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.
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Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
The Russell 2000 Index is a U.S. equity index measuring the performance of the 2,000 smallest companies in the Russell 3000. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. 08-758
Disclosures