U.S. Global Investors Searching for Opportunities, Managing Risk Commodities: Reasons to be a Bull when Everyone s a Bear Frank E. Holmes CEO and Chief Investment Officer Brian Hicks, CFA Portfolio Manager Evan Smith, CFA Portfolio Manager April 2009 09-239 www.usfunds.com
Fund Recognition Investment leadership results in performance Winner of 26 Lipper Fund Awards and certificates since 2000 2
Government Policy Model Precursor for Change 3
Avoiding Another Great Depression 4
World Economic Growth 5
G7 Countries 6
E7 Countries 7
U.S. M2 Money Supply Biggest Economy in the World Source: U.S. Global Research 8
China M2 Money Supply Most Populated Country in the World Source: U.S. Global Research 9
Money Supply and Emerging Markets 10
Deleveraging Undermines Global Growth 11
Unprecedented Destruction of Wealth 12
S&P 500 Equity Index Bottoms 4 to 6 Months Prior to End of Recession 13
World Industrial Production Outlook 14
Top 20 Oil Producing Countries 15
World Oil Demand by Quarter 16
China, South Asia, Middle East Support Long-Term Oil Demand 17
Developing Nations Demand Set to Grow Rapidly 18
World Oil Supply Growth 19
Gasoline is Cheap Once Again 20
Many Factors Could Disrupt Supply 21
Crude Oil Spare Capacity History 22
Capacity Still Below 1970 s Capacity OPEC 10 Capacity 23
World Depends On Increased Middle East Supply Middle East has nearly two-thirds of world s proved crude oil reserves* and one-third of current crude oil production Spare capacity was largely eliminated by underinvestment and strong oil demand growth Easy production from mega-fields achieved; future production more technically challenging and higher cost I.O.C. s play minor role Commitment to and timing of capacity expansions given market uncertainties and conservative decision making Countries pressured to democratize; how to achieve without instability * Excluding Canadian tar sands 24
World Depends On Increased Middle East Supply Presence of violent radical groups Sunni vs. Shiite divide 54 percent of middle east oil exporting countries population is under 25 years old Palestinian-Israeli conflict hostile to western interests U.N. sanctions on Iran A nuclear Iran becomes a regional power 25
OPEC Supply Capacity Disruptions Unpredictable But Certain 26
High Replacement Cost for Oil 27
Increased Operating Costs for Supply 28
Global E&P Expenditure Growth vs. Non-OPEC Production Growth 29
Financial Investment and Oil Supply/Demand Support Oil Prices 30
China s Strong Balance Sheet 31
Loan Growth Expands in China 32
Bank Lending Drives Recovery 33
Real Estate Recovery in China 34
Recovery In Exports 35
China s New Construction Boom 36
2009 Buying Spree for Copper 37
Copper Demand Returns 38
Dr. Copper 39
Infrastructure Drives Steel Demand 40
China Stockpiling Iron Ore 41
China Coal Restocking on the Horizon 42
Coal Imports Picking Up 43
Oil Seasonality 44
Gold Seasonality 45
Silver Seasonality 46
Copper Seasonality 47
Platinum Seasonality 48
What s Driving Energy? We have a situation where all the critical drivers for oil are pointing in the same direction. Source: U.S. Global Research 49
What s Driving Gold? The critical drivers for gold are pointing in the same direction. 50
Rotation of Commodities Sources: Steele and U.S. Global Research 51
Disclosures 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. Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. 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. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The Dow Jones - AIG Commodity Index (DJ-AIGCI) is designed to be a highly liquid and diversified benchmark for the commodity futures market. The DJ-AIGCI is composed of futures contracts on 19 physical commodities. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The MSCI Emerging Markets Eastern European Index (Russia at 30 percent market-cap weighted) is a capitalization-weighted index that monitors the performance of emerging market stocks from all countries that make up the Eastern European Region. The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar. The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry. The Baltic Dry Freight Index is an economic indicator that portrays an assessed price of moving major raw materials by sea as compiled by the London-based Baltic Exchange. 52