u.s. global investors€¦ · in gold, natural resources, ... dr. marc faber . may 2012 12-318 10...

www.usfunds.com 1.800.US.FUNDS

U.S. Global Investors Searching for Opportunities, Managing Risk

May 2012 12-318

Goldwatcher — $2,400/oz? $5,479/oz? $46,000/oz?

Frank Holmes, CEO and Chief Investment Officer

www.usfunds.com May 2012 12-318

About U.S. Global Investors (GROW)

A boutique publicly listed investment adviser specializing in gold, natural resources, emerging markets and infrastructure opportunities around the world.

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www.usfunds.com May 2012 12-318 3

“Performance and Results Oriented”

Winner of 29 Lipper performance awards, certificates and top rankings since 2000

(Four out of 13 U.S. Global Investors Funds received Lipper performance awards from 2005 to 2008, six out of 13 received certificates from 2000 to 2007,

and two out of 13 received top rankings from 2009 to 2010.)

Investment leadership results in performance


Focus on Education

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28 MFEA STAR Awards for Excellence in Education


Fund Recognition: Three Funds Rank in Top 25 for 10 Years

  The Global Resources Fund (PSPFX) ranked #12

  World Precious Minerals Fund (UNWPX) ranked #13

  Gold & Precious Metals Fund (USERX) ranked #24

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Rankings were provided to The Wall Street Journal and Barron’s by Lipper and include all mutual funds and ETFs tracked by Lipper. Lipper ranked the funds based on 10-year performance data including share prices and reinvested dividends. For funds with multiple share classes, only the largest share class was included. Rankings are based on total annualized return as of 3/31/2012. Past performance is no guarantee of future results.


U.S. Global Investors is Mobile

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Get Investor Alert and Frank Talk On the Go

Visit www.usfunds.com/apps


The S-Curve – Big Question is Where Are We On The Curve?

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The S-Curve is a type of curve that shows a rapid, exponential increase in growth for a period of time, followed by a tapering or leveling off.


7 Billion People — Tipping Point


Oil Consumption per capita:

1 to 25

1 to 16

1 to 15

1 to 2

0.9

U.S.

S. Korea Japan

Oil Consumption and Industrialization, 1900 to present

Lower U.S. labor costs versus Europe and the U.K. drive American industrialization, enrichment and energy consumption

Lower Japanese labor costs do the same to the U.S.

Lower Korean labor costs do the same to Japan

Oil per capita rises rapidly during early industrialization, then levels to rapid real income growth. Rising world trade actually stimulates the industrialization phase.

China & India

Super Shift – Energy

Source: Dr. Marc Faber


Power consumption has been growing faster than the rate of GDP growth. Source: BHPB

Intensity of electricity consumption

Super Shift – Electricity


Huge Pent-Up Demand for Automotive Transportation in the Developing World

BYD (Build Your Dreams) president Wang Chuanfu sits inside the BYD E6 Electric Car during the North American International Auto Show in Detroit, Michigan January 12, 2009. Source: REUTERS/Mark Blinch


Tipping Points, Melting Points

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Ice Turns to Water at 32º


Chindia – Rising Middle Class

Source: padanisaa.blogspot.com


Rising Incomes in Emerging Markets Sustain Demand – “Love Trade”

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Healthy Demand Capacity in Emerging Markets – Lower Levels of Debt

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Bubble — Negative Press on China

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China’s GDP Growth Tends to Stabilize in Fifth Year of Leadership Transition Cycle

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Stay Tuned to the Big S-Curve

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2009 1966


China Market Strategy: “As long as the government’s intentions for policy adjustment are confirmed, we believe we are going to see economic growth to bottom out in the near future.”

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Government Policy Model — Precursor for Change

President Barack Obama Ben Bernanke, Chairman of the Federal Reserve


E7 and G7 Population vs GDP


Compare E7 vs G7 Money Supply Growth

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Majority of G7 and E7 Countries Have Negative Real Interest Rates

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Gold “Fear Trade” for Gold Investors Developed Countries Must Rollover a Massive $8 Trillion in 2012 (Below Inflation Rate)

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Trend is Your Friend — 1 Year

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Gold Demand Drivers

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It’s Not the Political Party, It’s the Political Policies


Great Super Cycle Debt Bust – Contagion

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History Repeats Itself with Currency Debasement

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Declining Value of the U.S. Dollar (USD)

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Fiscal 2010 U.S. Government Revenues & Expenses at a Glance

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58%


U.S. Government Debt in Household Terms

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Place the debt situation in terms we all can understand by removing eight zeros.


Gold as a Percent of Global Financial Assets

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e denotes estimate.


Low Real Interest Rates Historically Fuel Gold, Silver and Oil

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Tipping Point for Gold 2%

Gold & silver perform well in low or negative real interest rate environments


Fear Trade: Potential Gold Demand

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Source: CIBC


Driver: The Love Trade

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Holidays Drive Gold Demand

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China’s Increasing Jewelry Demand

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Gold “Love Trade” Strong Correlation Between Rising Incomes and Gold Price

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“American Dream Trade” Massive Urbanization Trend in India and China


Tipping Point Impact is About to Be Felt Quite Soon

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High Speed Train, China


Emerging High-Speed Rail Hub Cities

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Frank Holmes High Speed Train, China


China/India Share of World GDP Increased Substantially

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No Bubble in Gold

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Past performance is no guarantee of future results. It is not possible to invest in an index.


Gold Undervalued Compared to Rise in Other Areas of U.S. Economy

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Inflation-Adjusted Gold Prices in 2009 Dollars


Gold Would Need to Be Much Higher to Cover U.S. Money Supply

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Fear Trade: Aligning Gold Price to Bretton Woods II

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Managing Expectations — The Math

View the presentation “Anticipate Before You Participate” at www.usfunds.com/investor-resources/publications/research

Rolling 1 Year NYSE Arca Gold BUGS Index (HUI) 38.1%

WTI Crude Oil 35.0%

MSCI Emerging Markets 30.7%

S&P 500 Index 19.1%

Gold Bullion 13.2%

12-month rolling volatility of price action over 10-year period

Standard Deviation (as of 3/31/12) based on 10-Year Data

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Managing Expectations — Gold Seasonality

Past performance is no guarantee of future results.


Managing Expectations — 60 Day Rolling Oscillator

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Warren Buffett vs. Gold

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Warren Buffett


Three Price Levels When Valuing Companies

1.  Wholesale Price 2.  Retail Price 3.  Fairytale Price

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The Five M’s for Gold Miners

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  Management

  Mine Lifecycle

  Market Cap

  Money (Burn Rate)

  Minerals

Frank Holmes, Mauritania

Weight of Truck: 423 tons Load Capacity: 240 tons


Life Cycle of a Mining Share

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Value Drivers for Superior Performance


Multiple Compression: How Long Before Revival?

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Gold Stocks Are Getting Cheaper

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Gold Equities are Undervalued Relative to Gold Bullion

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The stocks today are almost as cheap as they were during the depths of the credit crisis.


Cash Flow Multiple Collapse And Bottom In Late 1970s

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World Gold Production Is Flat

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BHP Exploration Offices and Explorationists

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Exploration Spending Has Skyrocketed Without True Success

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At $9 billion/year plus replacement requirements of 90 Million oz/year a discovery cost of $100/oz is needed. This is low.


Managing Expectations: Few Discoveries Get Developed

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+3 Million Ounce Discoveries Becoming Scarce

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What Has Been The Success Of Mine Reserve Replacement?

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Managing Expectations: Rising Cash Costs Should Not Be A Surprise

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Managing Expectations: Promises Versus Delivery

Tom Cruise, Jerry Maguire


Delays and Disappointments: M&A Deals Days In The Dog House – 18 Months

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Managing Expectations: Show Me the Money On a Per Share Basis

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Tom Cruise, Jerry Maguire


Gold Stock Costs Rise

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Gold Grades Fall

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Changes For Cash Taxes Per Ounce Of Production Over Time

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Source: CIBC


The Replacement Cost For An Ounce Of Gold Is $1500 With $1700 As A Sustainable Number (2012)

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Seasonality Fluctuations Signal A Weak Few Months – XAU Gold Stock Index

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Philadelphia Stock Exchange Gold and Silver Index (XAU)

Source: CIBC


That Has Been Reinforced By What Is Traditionally A Weak Year – XAU Gold Stock Index

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Barack Obama Mitt Romney

VS. Philadelphia Stock Exchange Gold and Silver Index (XAU) Federal Election Years


But 2013 Should Post Better Comebacks – XAU Gold Stock Index

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Philadelphia Stock Exchange Gold and Silver Index (XAU) Post Federal Election Years


Are You Underweight?

Energy & Basic Materials

15% of S&P 500

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Global Resources Fund Outperformed – 3 year

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Global Resources Fund Outperformed – 10 year

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Silver Wheaton — Case Study

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Fund Performance

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Trying to Stop a Bull Market Has Risks


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Investor Alert: www.usfunds.com/alert


Disclosures

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Please consider carefully a 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. Diversification does not protect an investor from market risks and does not assure a profit.

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.

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. 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.

Although Lipper makes reasonable efforts to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Lipper. Users acknowledge that they have not relied upon any warranty, condition, guarantee, or representation made by Lipper. Any use of the data for analyzing, managing, or trading financial instruments is at the user's own risk. This is not an offer to buy or sell securities.

M1 Money Supply includes funds that are readily accessible for spending. M2 Money Supply is a broad measure of money supply that includes M1 in addition to all time-related deposits, savings deposits, and non-institutional money-market funds. 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.


Disclosures

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Morningstar Ratings are based on risk-adjusted return. The Morningstar Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics. Past performance does not guarantee future results. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.)

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 J.P. Morgan Global Purchasing Manager’s Index is an indicator of the economic health of the global manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. 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. The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks. 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 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 500.0 at the close of trading on December 20, 2002. The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The S&P/TSX Global Gold Index is an international benchmark tracking the world's leading gold companies with the intent to provide an investable representative index of publicly-traded international gold companies. The Shanghai Composite Index (SSE) is an index of all stocks that trade on the Shanghai Stock Exchange.


Disclosures

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Holdings in the Global Resources Fund, World Precious Minerals Fund and Gold and Precious Metals Fund as a percentage of net assets as of 3/31/2012: Barrick Gold Corp (Gold and Precious Metals Fund 3.89%, World Precious Minerals Fund 0.81%); Berkshire Hathaway 0.00%; BHP 0.00%; BYD Auto 0.00%; Eldorado Gold Corp (Gold and Precious Metals Fund 1.10%, World Precious Minerals Fund 0.81%); Gold Corp (Gold and Precious Metals Fund 4.89%, World Precious Minerals Fund 2.19%); Iamgold Corp 0.00%; Kinross Gold (Gold and Precious Metals Fund 1.27%, World Precious Minerals Fund 1.05%); Silver Wheaton (Gold and Precious Metals Fund 2.37%, World Precious Minerals Fund 2.10%); Yamana Gold (Gold and Precious Metals Fund 2.76%, World Precious Minerals Fund 2.44%).

Investment Objective: The Global Resources Fund is an actively managed fund that takes a diversified approach to the natural resources sector by investing in energy and basic materials. The fund invests in companies involved in the exploration, production and processing of petroleum, natural gas, coal, alternative energies, chemicals, mining, iron and steel, and paper and forest products, and can invest in any part of the world.

The Select Sector SPDR ETFs are passively managed funds that seek to replicate as closely as possible, before fees and expenses, the performance of the S&P 500 Index. Each Select Sector SPDR is an “index fund” that invests in a particular sector or group of industries represented by a specified Select Sector Index. The companies included in each Select Sector Index are selected on the basis of general industry classification from a universe of companies defined by the S&P 500 Index.


Disclosures

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Liquidity: The Global Resources Fund can be purchased or sold at a net asset value (NAV) determined at the end of each trading day. The Select Sector SPDR ETFs can be purchased or sold intraday. These purchases and redemptions may generate brokerage commissions and other charges not reflected in the ETF’s published expense ratio.

Safety/Fluctuations of principal/return: Loss of money is a risk of investing in the Global Resources Fund and the Select Sector SPDR ETFs. Shares of the three securities are subject to sudden fluctuations in value. The Energy Select Sector and Materials Select Sector SPDR Funds may also be subject to bid-ask premiums or discounts to net asset value (NAV) that could adversely affect a shareholder’s actual returns.

Tax features: The Global Resources Fund may make distributions that may be taxed as ordinary income or capital gains. Under current federal law, long-term capital gains for individual investors in the fund are taxed at a maximum rate of 15%. For the Energy Select Sector and Materials Select Sector SPDR Funds, long-term capital gain distributions will result from gains on the sale or exchange of capital assets held by a Fund for more than one year. Any long-term capital gains distributions you receive from a Fund are taxable as long-term capital gain regardless of how long you have owned your Shares. Long-term capital gains are currently taxed at a maximum of 15%. Information provided here is neither tax nor legal advice and is general in nature. Federal and state laws and regulations are subject to change.

u.s. global investors€¦ · in gold, natural resources, ... dr. marc faber . may 2012 12-318 10...

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