GROW 2018 Fiscal Year Results Webcast

Transcription

1 GROW 2018 Fiscal Year Results Webcast Frank Holmes, CEO and Chief Investment Officer Lisa Callicotte, Chief Financial Officer Holly Schoenfeldt, Marketing and Public Relations Manager US.FUNDS September

2 Today s Presenters Frank Holmes Lisa Callicotte Holly Schoenfeldt 2

3 Forward-Looking Statements During 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-K 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. 3

4 About U.S. Global Investors (GROW) U.S. Global Investors, Inc. is an innovative investment manager with vast experience in global markets and specialized sectors. Founded as an investment club, the company became a registered investment adviser in 1968 and has a longstanding history of global investing and launching first-of-their kind investment products, including the first no-load gold fund. U.S. Global Investors is well known for expertise in gold and precious metals, natural resources and emerging markets. 4

5 GROW Strengths Strive to be the go-to stock for exposure to emerging markets, resources and digital currencies Debt-free, strong balance sheet with a reflexive cost structure Monthly dividend and return on equity discipline 5

6 Top Institutional Holders of GROW 1. Royce and Associates 8.25% 2. Financial & Investment 4.85% Management Group 3. The Vanguard Group 3.54% 5. Blackrock Institutional 2.44% Trust Company 6. Perritt Capital Management 1.09% Percentage of shares outstanding Source: NASDAQ, Data as of June

7 GROW Dividends Paid Monthly Consistently paid for more than 10 years Current yield at share price of $1.61 as of 08/21/ % Monthly dividend payment of $ Approved through September 2018 Reviewed by the Board quarterly 7

8 Share Repurchase Program in Motion The board approved a repurchase of up to $2.75 million of its outstanding common stock on the open market through calendar year 2018 For the quarter ended June 30, 2018, the Company repurchased 1,000 class A shares using cash of approximately $2,000 May be suspended or discontinued at any time 8

9 Balance Sheet Strength No Debt Started investing in higher earning securities Investment in HIVE Blockchain Technologies * 9

10 Earnings Per Share Quarterly CORPORATE EVENTS IMPACTING EARNINGS Transition to Atlantic Fund Services Mainly due to indirect investment in HIVE accounted for under 8 equity method of accounting Closed Money Market Funds 14 10

11 Quarterly Average Assets Under Management 11

12 Follow The Money 12

13 Industry Concentration Rising BlackRock, Vanguard and State Street capture more than 70 percent of the mutual fund and ETF market. Source: Deloitte

14 Did You Know? For More Than a Decade, Gold Has Outperformed the Stock Market Nearly 2:1 14

15 Sharing Insights With Financial Media, Usually Means Defending Gold and Now Cryptocurrencies Too 15

16 Gold Demand: Fear Trade vs Love Trade 16

17 Gold s Love Trade: Cultural Celebrations Prompting the Purchase of Gold Indian wedding season spans from September through year-end. 17

18 Driver: The Fear Trade Jerome Powell, Chairman of the Federal Reserve President Donald Trump 18

19 Is The Gold Market Being Suppressed? 19

20 Precious Metals Price Manipulation 20

21 Inflation Strikes Back Suppression? 21

22 Peak Gold: Exploration Budgets Have Collapsed As seen on our Investor Alert on October 27, 2017 visit 22

23 A Tool For Contrarian Investing: The U.S. Global Sentiment Indicator 23

24 ETF Trends Webcasts Reach Valuable Institutional Audience Randy Smallwood of Wheaton Precious Metals recently joined ETF Trends Tom Lydon and Frank Holmes to co-host a presentation on the gold royalty industry. Institutional investors can visit to download the slides. Tom Lydon Frank Holmes Randy Smallwood Editor & Publisher CEO and Chief Investment Officer CEO ETF Trends U.S. Global Investors Wheaton Precious Metals 24

25 The Magic Behind the Math: Understanding Oscillators TO LEARN MORE, DOWNLOAD OUR MANAGING EXPECTATIONS WHITEPAPER 25

26 Managing Expectations See Our Managing Expectations Whitepaper at Understanding Volatility of Asset Classes Standard deviation based on 10-year daily data as of 06/30/2018 NYSE Arca Exchange Gold BUGS Index Daily Rolling 1 Year ±3% ±40% MSCI Emerging Markets (HUI) ±1% ±27% S&P 500 Index (SPX) ±1% ±18% Gold Bullion ±1% ±17% WTI Crude Oil ±2% ±35% Source: Bloomberg, U.S. Global Investors 26

27 For One-Day and Ten-Day Periods, Ethereum and Bitcoin Are More Volatile Than The Stock Market Standard Deviation For One Year, as of 06/30/18 One Day Ten Day S&P 500 Index (S&P) 1% 1% Gold Bullion 1% 2% Bitcoin 6% 22% Ethereum 6% 22% 27

28 Major Events Suppressing The Price of Bitcoin 28

29 The Fed Begins Tracking Cryptos In June 2018, the Federal Reserve Bank of St. Louis added cryptocurrency to its popular Federal Reserve Economic Data (FRED) database. This signals crypto s continued maturation. 29

30 Crypto & Blockchain Continue Widespread Adoption CFA Institute adds topics on crypto and blockchain to its curriculum 42% of the top 50 universities offer one or more courses on crypto 18% of U.S. students now own cryptocurrency 30

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32 In September 2017, U.S. Global Announced Strategic Investment in HIVE Blockchain Technologies Ltd. with Frank Holmes Becoming Chairman of Board Frank Holmes has been appointed non-executive chairman of the Board of Directors of HIVE Blockchain Technologies. Both Mr. Holmes and U.S. Global Investors own shares of HIVE, directly and indirectly. Effective 8/31/2018, Frank Holmes will serve as the interim executive chairman of HIVE. 32

33 HIVE Development Plan Data is based on coins at the following prices: Bitcoin = US$10,349 and Ethereum = US$868 Cryptocurrencies are volatile assets, resulting in their revenue and cash flow being volatile as well. Past performance is no guarantee of future results. Cryptocurrencies are volatile assets, resulting in their revenue and cash flow being volatile as well. Past performance is no guarantee of future results

34 HIVE Blockchain Technologies: Latest News May 22, 2018: HIVE Completes Acquisition of Kolos Norway AS. Aug 15, 2018: HIVE Announces Upcoming Launch of Cloud Based ASIC Mining Power. Effective 8/31/2018, Frank Holmes will serve as the interim executive chairman of HIVE. 34

35 April 2018: Iceland Trip to Tour Mining Facilities 35

36 Product Growth Continues In Canada Sept 2017 GOGO ETF launches on the Toronto Stock Exchange 36

37 Product Growth Continues In Canada June 2017 Galileo Partners Fund (now closed to new investors) Nov 2017 Galileo Technology & Blockchain Fund (for accredited Canadian investors only) Past performance is no guarantee of future results. 37

38 JETS ETF Has Continued Its Path of Success Please consider carefully a fund s investment objectives, risks, charges and expenses. For this and other important information, obtain a statutory and summary prospectus by visiting Read it carefully before investing. Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the fund. Brokerage commissions will reduce returns. Because the fund concentrates its investments in specific industries, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries. The fund is non-diversified, meaning it may concentrate more of its assets in a smaller number of issuers than a diversified fund. The fund invests in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. These risks are greater for investments in emerging markets. The fund may invest in the securities of smaller-capitalization companies, which may be more volatile than funds that invest in larger, more established companies. The performance of the fund may diverge from that of the index. Because the fund may employ a representative sampling strategy and may also invest in securities that are not included in the index, the fund may experience tracking error to a greater extent than a fund that seeks to replicate an index. The fund is not actively managed and may be affected by a general decline in market segments related to the index. Airline Companies may be adversely affected by a downturn in economic conditions that can result in decreased demand for air travel and may also be significantly affected by changes in fuel prices, labor relations and insurance costs. Distributed by Quasar Distributors, LLC. 38

39 Total Annualized Returns as of 06/30/2018 Fund One-Year Five-Year Ten-Year U.S. Global Jets ETF NAV -6.72% n/a n/a U.S. Global Jets ETF Market Price -6.92% n/a n/a Cumulative Since Inception 18.35% (4/28/2015) 18.25% (4/28/2015) Annualized Since Inception 5.45% (4/28/2015) 5.42% (4/28/2015) Expense Ratio: 0.60% The 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 sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. For performance data current to the most recent month-end please visit 39

40 GOAU Index Has Shown Outperformance The U.S. Global GO GOLD and Precious Metal Miners Index uses a robust, dynamic, rules-based smart-factor model to select precious minerals companies that earn over 50% of their aggregate revenue from precious minerals through active (mining or production) or passive (royalties or streams) means. The index uses fundamental screens to identify companies with favorable valuation, profitability, quality and operating efficiency. The index consists of 28 common stocks or related ADRs. The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver. The index benchmark value was at the close of trading on December 20, It is not possible to invest in an index. Index performance is not indicative of a fund s performance. Past performance does not guarantee future results. Current performance of the fund can be obtained by visiting usglobaletfs.com. 40

41 U.S. Global Investors, Inc. (GROW) Income Statement Financial Analysis Lisa Callicotte CFO 41

42 USGI s Investment in HIVE Direct Investment USGI (Canada) owns 10 Million Shares, or 3.2 percent as of June 30, 2018 Investment Securities - Available-for-Sale Investments as of June 30,

43 New Accounting Rules for Investments Starting in fiscal 2019, some of our corporate investments will be accounted for differently 1 No longer an available-for-sale ( AFS ) classification for equity securities At adoption, $3.1 million in unrealized gains on former AFS investments was reclassified from other comprehensive income to retained earnings All future changes in equity investments fair value will be reported through earnings as investment income (loss) GAAP Quarterly earnings could be more volatile 1 USGI adopted ASU Recognition and Measurement of Financial Assets and Financial Liabilities (ASU ), effective July 1,

44 Consolidated Statements of Operations (dollars in thousands, except per share data) Operating Revenues Year Ended June 30, Advisory fees $ 6,013 $ 6,479 Administrative service fees $ 6,261 $ 6,763 Operating Expenses Employee compensation and benefits $ 4,270 $ 3,754 General and administrative 3,866 3,494 Advertising Depreciation and amortization $ 8,549 $ 7,636 Operating Income (Loss) (2,288) (873) 44

45 Consolidated Statements of Operations (dollars in thousands, except per share amounts) Year Ended June 30, Operating Income (Loss) $ (2,288) $ (873) Other Income Investment income 1, Income from equity method investments 1,624 - Other income 46-3, Income (Loss) Before Income Taxes 886 (527) Provision for Income Taxes Tax expense Net Income (Loss) 689 (544) Less: Net Income (Loss) Attributable to Non-Controlling Interest 42 (31) Net Income (Loss) Attributable to U.S. Global Investors, Inc. $ 647 $ (513) Earnings Per Share Attributable to U.S. Global Investors, Inc. Basic $ 0.04 (0.03) Diluted $ 0.04 $ (0.03) Basic weighted average number of common shares outstanding 15,158,067 15,212,008 Diluted weighted average number of common shares outstanding 15,158,067 15,212,008 45

46 Consolidated Balance Sheets (dollars in thousands) Assets June 30, 2018 June 30, 2017 Current Assets Cash and cash equivalents $ 6,364 $ 3,958 Restricted cash 1,000 1,000 Investment securities trading, at fair value 8,179 9,720 Accounts and other receivables 1, Note receivable 35 1,952 Prepaid expenses Total Current Assets 17,122 17,465 Net Property and Equipment 1,970 2,212 Other Assets Investment securities available-for-sale, at fair value 7,086 3,401 Other investments 2,207 2,130 Equity method investments Note receivable, long term Other assets, long term Total Other Assets 9,840 5,843 Total Assets $ 28,932 $ 25,520 46

47 Consolidated Balance Sheets (dollars in thousands) Liabilities June 30, 2018 June 30, 2017 Current Liabilities Accounts payable $ 198 $ 118 Accrued compensation and related costs Dividends payable Other accrued expenses Total Current Liabilities 1,773 1,166 Long-Term Liabilities Deferred tax liability 1,099 - Total Long-Term Liabilities 1,099 - Total Liabilities 2,872 1,166 Commitments and Contingencies (Note 17) 47

48 Consolidated Balance Sheets (dollars in thousands) Shareholders Equity June 30, 2018 June 30, 2017 Shareholders Equity Common stock (class A) - $0.025 par value; nonvoting; authorized, 28,000,000 shares; issued, 13,866,691 shares and 13,866,601 shares at June 30, 2018, and June 30, 2017, respectively Common stock (class B) - $0.025 par value; nonvoting; authorized, 4,500,000 shares; no shares issued Convertible common stock (class C) - $0.025 par value; voting; authorized, 3,500,000 shares; issued, 2,068,857 shares and 2,068,947 at June 30, 2018, and June 30, 2017, respectively Additional paid-in-capital 15,650 15,646 Treasury stock, class A shares at cost; 790,445 and 751,303 shares at June 30, 2018, and June 30, 2017, respectively (1,878) (1,760) Accumulated other comprehensive income, net of tax 1, Retained Earnings 9,513 9,321 Total U.S. Global Investors Inc. Shareholders Equity 25,542 23,870 Non-Controlling Interest in Subsidiary Total Shareholders Equity 26,060 24,354 Total Liabilities and Shareholders Equity $ 28,932 $ 25,520 48

49 Significant Events Holly Schoenfeldt Marketing and Public Relations Manager 49

50 Asset Breakdown U.S. Global Investors Funds Data for SEC-registered mutual funds as of June 30,

51 51

52 Viral Publicity Gained Through Media Interviews 52

53 Newsletter Recommendations for U.S. Global Investors Funds No-Load Mutual Fund Selections & Timing Newsletter 53

54 Branding and Marketing of GROW 25 TV/Radio/Podcasts 39 Total Interviews 573 Web Mentions 26 Frank Talk Blog Entries 95 Newsletter Recommendations Data from April 2018 June

55 Thought Leadership Speaking Engagements and Research Around the World 55

56 New Video Series Expand Viewership A Trader s Perspective 56

57 Gold Game Film Continues Success on Kitco News 147 episodes Kitco audience >30 million monthly visitors TheStreet audience 7.8 million monthly visitors 57

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60 Recognition As an Industry Leader in Investor Education MFEA 83 Mutual Fund Education Alliance STAR Awards The Mutual Fund Education Alliance (MFEA) is a national industry association committed to investor education, and its STAR Awards program recognizes marketing communications efforts in the mutual fund industry. The awards competition is judged by industry professionals, and based on criteria including educational value, content, design and functionality. American Marketing Association Award for the Gold Love Trade Whitepaper 60

61 Frank Talk Blog Turns Eleven Years Old! 61

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63 Q&A 63

64 Disclosures All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The NYSE Arca Gold BUGS (Basket of Unhedged Gold Stocks) Index (HUI) is a modified equal dollar weighted index of companies involved in gold mining. The HUI Index was designed to provide significant exposure to near term movements in gold prices by including companies that do not hedge their gold production beyond 1.5 years. The Purchasing Manager s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar. Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility. The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals. The weights of components are based on consumer spending patterns. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. Cash Flow is a measure of the amount of cash generated by a company s normal business operations. There is no guarantee that the issuers of any securities will declare dividends in the future or that, if declared, will remain at current levels or increase over time. Note that stocks and Treasury bonds differ in investment objectives, costs and expenses, liquidity, safety, guarantees or insurance, fluctuation of principal or return, and tax features. None of U.S. Global Investors Funds held any of the securities mentioned in this presentation as of 06/30/2018. Frank Holmes has been appointed non-executive chairman of the Board of Directors of HIVE Blockchain Technologies. Both Mr. Holmes and U.S. Global Investors own shares of HIVE, directly and indirectly. Effective 8/31/2018, Frank Holmes will serve as the interim executive chairman of HIVE. 64

65 Disclosures Please consider carefully a fund s investment objectives, risks, charges and expenses. For this and other important information, obtain a statutory and summary prospectus for JETS here and for GOAU here. Read it carefully before investing. Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the funds. Brokerage commissions will reduce returns. Because the funds concentrate their investments in specific industries, the funds may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries. The funds are non-diversified, meaning they may concentrate more of their assets in a smaller number of issuers than diversified funds. The funds invest in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. These risks are greater for investments in emerging markets. The funds may invest in the securities of smaller-capitalization companies, which may be more volatile than funds that invest in larger, more established companies. The performance of the funds may diverge from that of the index. Because the funds may employ a representative sampling strategy and may also invest in securities that are not included in the index, the funds may experience tracking error to a greater extent than funds that seek to replicate an index. The funds are not actively managed and may be affected by a general decline in market segments related to the index. Airline Companies may be adversely affected by a downturn in economic conditions that can result in decreased demand for air travel and may also be significantly affected by changes in fuel prices, labor relations and insurance costs. Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors. Distributed by Quasar Distributors, LLC. U.S. Global Investors is the investment advisor to JETS and GOAU. The U.S. Global GO GOLD and Precious Metal Miners Index uses a robust, dynamic, rules-based smart-factor model to select precious minerals companies that earn over 50% of their aggregate revenue from precious minerals through active (mining or production) or passive (royalties or streams) means. The index uses fundamental screens to identify companies with favorable valuation, profitability, quality and operating efficiency. The index consists of 28 common stocks or related ADRs. 65