GROW FIRST QUARTER 2019 Results Webcast · During this webcast we may make forward-looking...

usfunds.com 1.800.US.FUNDS November 2018 • 18-512

GROW FIRST QUARTER 2019 Results Webcast Frank Holmes, CEO and Chief Investment Officer

Lisa Callicotte, Chief Financial Officer

Holly Schoenfeldt, Marketing and Public Relations Manager

usfunds.com November 2018 | 18-512

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Today’s Presenters

Frank Holmes Lisa Callicotte Holly Schoenfeldt


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Forward-Looking Statements

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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-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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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.

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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

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Top Institutional Holders of GROW

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1. Royce and Associates 8.75%

2. Financial & Investment 4.72% Management Group

3. The Vanguard Group 3.68%

5. Blackrock Institutional 2.59% Trust Company

6. Perritt Capital Management 1.73%

Percentage of shares outstanding

Source: NASDAQ, Data as of September 2018


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GROW Dividends — Paid Monthly

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Consistently paid for more than

10 years Current yield at share price of $1.39 as of 10/26/2018

2.16% Monthly dividend payment of $0.0025 Approved through December 2018 Reviewed by the Board quarterly


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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 September 30, 2018, the Company repurchased 1,000 class A shares using cash of approximately $2,000

May be suspended or discontinued at any time

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Balance Sheet Strength – No Debt

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Started investing in higher earning securities

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Investment in HIVE Blockchain Technologies


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Earnings Per Share Quarterly

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Closed Money Market Funds

Transition to Atlantic Fund Services

CORPORATE EVENTS IMPACTING EARNINGS

6¢

14¢

2¢ 2¢

2¢

5¢

8¢ Mainly due to indirect investment

in HIVE accounted for using the new equity method of accounting 5¢

7¢

2¢

8¢


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Quarterly Average Assets Under Management

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Follow the Money

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Are We Headed for a Passive Index Meltdown?

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In the Race to the Bottom, Everyone Ends Up Last

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• The seismic shift into indexing has come with some unexpected consequences, including price distortion.

• Buying cheap often comes

with a high price in the long run.

• “There is no free lunch.”


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“ Investors Should Not Discount Actively Managed Funds

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Late cycle market characteristics could present many opportunities for investors who hold quality, actively managed funds.

~Wells Fargo, Monthly Market Advisor Report

2018


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Remain Cautious Of Rebalance Risk

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Sharing Insights With Financial Media and Industry Experts on a Range of Topics

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Mining & Investment Latin America Summit


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

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Gold Demand: Fear Trade vs Love Trade

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HAPPY DIWALI 2018!


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Gold’s Love Trade: Cultural Celebrations Prompting the Purchase of Gold

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Indian wedding season spans from September through year-end.


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Driver: The Fear Trade

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President Donald Trump Jerome Powell, Chairman of the Federal Reserve

Rising Interest Rates Unwinding QE

Trade Wars Lower Corporate Taxes


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Negative Real Rates Make Gold Look Attractive

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Managing Expectations

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Daily Rolling 1 Year

NYSE Arca Exchange Gold BUGS Index

±3%

±40%

MSCI Emerging Markets (HUI) ±1% ±27%

S&P 500 Index (SPX) ±1% ±17%

Gold Bullion ±1% ±17%

WTI Crude Oil ±2% ±34% Source: Bloomberg, U.S. Global Investors

Understanding Volatility of Asset Classes Standard deviation based on 10-year daily data as of 09/30/2018

See Our Managing Expectations

Whitepaper at usfunds.com


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For One-Day and Ten-Day Periods, Ethereum and Bitcoin Are More Volatile Than The Stock Market

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Standard Deviation For One Year, as of 09/30/18

One Day Ten Day

S&P 500 Index (S&P) 1% 1%

Gold Bullion 1% 2%

Bitcoin 6% 22%

Ethereum 6% 22%


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Major Events Suppressing The Price of Bitcoin

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Fidelity Launches a Crypto Trading Platform – Oct 2018

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“Our goal is to make digitally native

assets, such as bitcoin, more

accessible to investors.”

Fidelity Investments Chairman and CEO Abigail Johnson

~


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Crypto & Blockchain Continue Widespread Adoption

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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


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The Fed Begins Tracking Cryptos

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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.


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In September 2017, U.S. Global Announced Strategic Investment in HIVE Blockchain Technologies Ltd. with Frank Holmes Becoming Chairman of Board

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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 serves as the interim executive chairman of HIVE.

https://youtu.be/nUW_frdqb7o


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HIVE Shares React To Digital Coin Prices & Mining Costs

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As volatility stabilizes, a bottom may be near for cryptos


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HIVE Blockchain Technologies: Latest News

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Effective Aug. 31, 2018: Frank Holmes begins serving as interim executive chairman of HIVE Sept. 18, 2018: HIVE Blockchain Grants Stock Options


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U.S. Global Investors, Inc. (GROW) Income Statement – Financial Analysis

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Lisa Callicotte CFO


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Evolution of Mark-to-Market: New Accounting Rule Contributes to Earnings Volatility

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• Starting in fiscal 2019, some of our corporate investments are 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

• Changes in equity investments’ fair value will be reported through earnings as investment income (loss), potentially increasing earnings volatility

• The impact to earnings of this change in the quarter ended September 30, 2018, was an investment loss of $954,000

• This loss related to declines in unrealized gains on securities formerly classified as AFS, previously would have reduced other comprehensive income

• Of that amount, $987,000 relates to a decline in market value of our investment in HIVE Blockchain Technologies Ltd. (“HIVE”)

• As of September 30, 2018, the market value of the Company’s investment in HIVE is $2.2 million higher than our cost

1 USGI adopted ASU 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities” (ASU 2016-01), effective July 1, 2018

GAAP


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USGI’s Investment in HIVE

Investments in securities at fair value, non-current 10 million shares 3 percent of outstanding shares Cost $2.4 million Market value $4.6 million as of September 30, 2018

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Investments as of September 30, 2018


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Consolidated Statements of Operations (Unaudited) (dollars in thousands, except per share data)

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Operating Revenues Quarter Ended September 30, 2018 2017

Advisory fees $ 1,170 $ 1,433 Administrative service fees 53 57

$ 1,223 $ 1,490 Operating Expenses

Employee compensation and benefits $ 798 $ 901

General and administrative 1,010 948 Advertising 40 59 Depreciation and amortization 58 61

$ 1,906 $ 1,969 Operating Loss (683) (479)


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Consolidated Statements of Operations (Unaudited) (dollars in thousands, except per share amounts)

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Quarter Ended September 30,

2018 2017

Operating Loss $ (683) $ (479)

Other Income (Loss)

Investment income (loss) (907) 209

Income (loss) from equity method investments (7) 1,513

Other income 9 3

(905) 1,725

Income (Loss) Before Income Taxes (1,588) 1,246

Provision for Income Taxes

Tax expense (benefit) (356) 10

Net Income (Loss) (1,232) 1,236

Less: Net Loss Attributable to Non-Controlling Interest (83) (34)

Net Income (Loss) Attributable to U.S. Global Investors, Inc. $ (1,149) $ 1,270

Earnings Per Share Attributable to U.S. Global Investors, Inc.

Basic $ (0.08) 0.08

Diluted $ (0.08) $ 0.08

Basic weighted average number of common shares outstanding 15,144,884 15,182,651

Diluted weighted average number of common shares outstanding 15,144,884 15,182,651


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Consolidated Balance Sheets (dollars in thousands)

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Assets September 30, 2018 (Unaudited) June 30, 2018

Current Assets

Cash and cash equivalents $ 5,996 $ 6,364

Restricted cash 1,000 1,000

Investments in securities at fair value 8,790 8,179

Accounts and other receivables 606 1,216

Note receivable 53 35

Prepaid expenses 282 328

Total Current Assets 16,727 17,122

Net Property and Equipment 1,914 1,970

Other Assets

Investments in securities at fair value, non-current 5,525 7,086

Other investments 2,168 2,207

Equity method investments 281 283

Note receivable, non-current 181 199

Other assets, non-current 62 65

Total Other Assets 8,217 9,840

Total Assets $ 26,858 $ 28,932


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Liabilities September 30, 2018 (Unaudited) June 30, 2018

Current Liabilities

Accounts payable $ 107

$ 198

Accrued compensation and related costs 288 645

Dividends payable - 113

Other accrued expenses 866 817

Total Current Liabilities 1,261 1,773

Long-Term Liabilities

Deferred tax liability 739 1,099

Total Long-Term Liabilities 739 1,099

Total Liabilities 2,000 2,872

Commitments and Contingencies (Note 12)


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Shareholders’ Equity September 30, 2018 (Unaudited) June 30, 2018

Shareholders’ Equity

Common stock (class A) - $0.025 par value; nonvoting; authorized, 28,000,000 shares; issued, 13,866,691 shares at September 30, 2018, and June 30, 2018 347 347

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 at September 30, 2018, and June 30, 2018 52 52

Additional paid-in-capital 15,651 15,650

Treasury stock, class A shares at cost; 789,917 and 790,445 shares at September 30, 2018, and June 30, 2018, respectively (1,876) (1,878)

Accumulated other comprehensive income (loss), net of tax (212) 1,858

Retained Earnings 10,453 9,513

Total U.S. Global Investors Inc. Shareholders’ Equity 24,415 25,542

Non-Controlling Interest in Subsidiary 443 518

Total Shareholders’ Equity 24,858 26,060

Total Liabilities and Shareholders’ Equity $ 26,858 $ 28,932


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Significant Events

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Holly Schoenfeldt Marketing and Public Relations Manager


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Asset Breakdown — U.S. Global Investors Funds

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Data for SEC-registered mutual funds as of September 30, 2018


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Viral Publicity Gained Through Media Interviews

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Newsletter Recommendations for U.S. Global Investors Funds

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No-Load Mutual Fund Selections & Timing Newsletter


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Branding and Marketing of GROW

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25 TV/Radio/Podcasts 31 Total Interviews 427 Web Mentions

23 Frank Talk Blog Entries 67 Newsletter

Recommendations Data from July – September 2018

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Thought Leadership Speaking Engagements and Research Around the World


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New Video Series Expand Viewership

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A Trader’s Perspective


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Gold Game Film Continues Success on Kitco News

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152 episodes Kitco audience >30 million monthly visitors

TheStreet audience 7.8 million monthly visitors


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Recognition As an Industry Leader in Investor Education

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85 STAR Awards, the education awards for the investment management industry The Investment Management Education Alliance (IMEA) 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.


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Our Loyal Subscriber Base Continues To Grow Organically

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There are over 43,000 subscribers receiving our award-winning content today.

FLASH FACTS


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We Want To Hear From You!

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Send us a note at [email protected] following today’s webcast and we’ll send you a free Enjoy Capitalism t-shirt!

mailto:[email protected]

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Q&A


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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 09/30/2018. 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 serves as the interim executive chairman of HIVE.

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