During 2013, commodities experienced a turbulent year, with gold posting its first annual decline since 2000 and gold equities declining for a third year in a row.“In the last three decades, a losing streak of three years has only happened three times for the Philadelphia Gold & Silver Index,” says Holmes. “This most recent three-year decline has negatively affected GROW’s revenues.” In addition, in the continued low interest rate environment, mutual fund companies have been hurt by voluntary money market fund fee waivers. According to Ignites, in 2013, fee waivers for the industry rose to a record high of $5.8 billion. “By converting the U.S. Government Securities Savings Fund from a money market fund to an ultra-short government bond fund, the cash drain from the fund’s fee waivers has significantly improved,” says Holmes. “We’re pleased shareholders approved the conversion. Investors are thirsty for higher yields but do not want the risk of a long-term bond fund,” says Holmes. “The U.S. Government Securities Ultra-Short Bond Fund is designed as an investment that takes advantage of the security of U.S. Government bonds and obligations, while simultaneously pursuing a higher level of income compared to money market funds. And a distinctive feature of the fund is the floating $2 share price, which reduces the penny-move volatility in a portfolio.” Additional Investment in Galileo Global Equity Advisors On January 17, Toronto-based Galileo Global Equity Advisors, of which U.S. Global owns 50 percent, agreed to sell an additional 15 percent of the company. U.S. Global plans to proceed with the purchase in the third fiscal quarter. After this purchase, the company will own 65 percent of the outstanding shares of Galileo. “I’m pleased with the partnership that’s developed between U.S. Global and Galileo and I’m looking forward to Galileo’s continued growth,” says Holmes. “Its flagship fund continues to be highly rated by Morningstar and pays dividends, both of which are very attractive to Canadian investors.”
Share Repurchase Program, Continued Strong Balance Sheet, and Monthly DividendsThe company continued repurchasing outstanding stock in the second fiscal quarter totaling 28,227 class A shares using cash of $72,528. The company is using an algorithm to purchase shares on down days, following the rules and regulations that restrict the amounts and times when shares can be purchased on any given day, such as at the opening of the day and in the last half-hour of trading. The share repurchase plan is set to expire at the end of calendar year 2014 but may be suspended or discontinued at any time. As of December 31, 2013, the company had net working capital of approximately $23.5 million. Cash and cash equivalents totaled $4.6 million and marketable securities totaled $26.0 million as of the end of the quarter. The change in cash and cash equivalents compared to last quarter was due to the company’s investment in the U.S. Government Securities Ultra-Short Bond Fund. This is the fund that converted in December from a money market fund to an ultra-short bond fund. Therefore, on the balance sheet, the amount invested in this fund in December 2013, approximately $14 million, was transferred from cash and cash equivalents to trading securities. In addition, the company has had no long-term debt since 2004 and owns its headquarters building. Market Commentary The global synchronized easing cycle continues, particularly in China, Japan and the U.S., which bodes well for global equities. “Throughout my travels, I often tell investors to follow where the money is going. Too often people get caught up in their political allegiance or parties, focus on the negative and lose confidence in stocks,” says Holmes. “One example from 2013 is all the pessimism surrounding Obamacare, yet S&P 500 health care companies benefited, as the sector was the second-best performer.
“One opportunity we are seeing for 2014 is in gold stocks. Following three years of straight losses in the gold mining industry, miners are approaching the historical limits of multi-year declines,” says Holmes.“Ralph Aldis, portfolio manager of the Gold and Precious Metals Fund and World Precious Minerals Fund, believes the best time to buy gold is when the market hates it. Pessimism has reached a maximum level and historically, when consensus is this strong, it has been a turning point in the market,” says Holmes. “We have always advocated that shareholders allocate 5 to 10 percent of an overall portfolio to gold and gold stocks and rebalance annually. “Investors have seen significant gains in domestic markets, and while there may be short-term corrections, we continue to see opportunities in U.S. stocks,” says Holmes. “For the remainder of 2014, we believe the market will continue to favor high-quality, growth-at-a-reasonable price stocks. This trend bodes well for U.S. Global’s domestic equity funds.” In 2013, the All American Equity Fund (GBTFX) outperformed its benchmark S&P 500 Index, climbing 35.6 percent while the index rose 32.4 percent. The fund commits a portion of its assets to stocks with superior shareholder yield metrics, seeking companies that pay cash dividends, repurchase stock and reduce their debt. In the last calendar year, the Holmes Macro Trends Fund (ACBGX) also outperformed its benchmark, rising 39.4 percent, while the S&P 1500 Composite Index returned 32.8 percent. “We believe the Holmes Macro Trends Fund has a recipe for success for shareholders. It combines a bottom-up approach to find great, fast-growing and shareholder-focused companies while seeking the best stocks in the sectors experiencing positive momentum,” says Holmes. Earnings Webcast Information The company has scheduled a webcast for 7:30 a.m. Central time on Monday, February 10, 2014, to discuss the company’s key financial results for the quarter. Frank Holmes will be accompanied on the webcast by Susan McGee, president and general counsel, and Lisa Callicotte, chief financial officer. Click here to register or visit www.usfunds.com. The earnings presentation can also be accessed by dialing 1 (855) 282-0375. The confirmation number is 53325727. Please dial in at least 5 minutes prior to the start of the call.
|Selected financial data (unaudited):|
|Three months ended|
|Operating Income (Loss)||(1,464,732||)||162,055|
|Income (Loss) from Continuing Operations Before Income Taxes||(1,424,086||)||323,042|
|Tax Expense (Benefit)||(466,412||)||145,310|
|Income (Loss) from Continuing Operations||(957,674||)||177,732|
|Loss on Discontinued Operations (net of tax)||(207,533||)||(11,747||)|
|Net Income (Loss)||$||(1,165,207||)||$||165,985|
|Net income (loss) per share from continuing operations (basic and diluted)||$||(0.06||)||$||0.01|
|Net income (loss) per share from discontinued operations (basic and diluted)||(0.02||)||$||0.00|
|Net income (loss) per share||$||(0.08||)||$||0.01|
|Avg. common shares outstanding (basic)||15,472,370||15,487,207|
|Avg. common shares outstanding (diluted)||15,472,370||15,487,207|
|Avg. assets under management (billions)||$||1.11||$||1.68|
Forward-Looking Statements and DisclosureThis news release and other statements by U.S. Global Investors may include certain “forward-looking statements” including statements relating to revenues, expenses and expectations regarding market conditions. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “opportunity,” “seeks,” “anticipates” or other comparable words. Such statements involve certain risks and uncertainties and should be read with corporate filings and other important information on the company’s website, www.usfunds.com, or the Securities and Exchange Commission’s website at www.sec.gov. These filings, such as the company’s annual report and Form 10-Q, should be read in conjunction with the other cautionary statements that are included in this release. Future events could differ materially from those anticipated in such statements and there can be no assurance that such statements will prove accurate and actual results may vary. The company undertakes no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise.
|Total Annualized Returns as of 12/31/13|
|One-Year||Five-Year||Ten-Year||Gross Expense Ratio||Expense Ratio After Waivers|
|Holmes Macro Trends Fund||39.38%||15.69%||6.89%||1.86%||NA|
|S&P 1500 Composite Index||32.79%||18.37%||7.77%||NA||NA|
|All American Equity Fund||35.55%||14.87%||7.16%||2.72%||2.20%|
|S&P 500 Index||32.39%||17.94%||7.41%||NA||NA|
Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local income taxes, and if applicable, may subject certain investors to the Alternative Minimum Tax as well. The Near-Term Tax Free Fund may invest up to 20% of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes. The Near-Term Tax Free Fund may be exposed to risks related to a concentration of investments in a particular state or geographic area. These investments present risks resulting from changes in economic conditions of the region or issuer. Bond funds are subject to interest-rate risk; their value declines as interest rates rise. Though the Near-Term Tax Free and U.S. Government Securities Ultra-Short Bond Funds seek minimal fluctuations in share price, they are subject to the risk that a decline in the credit quality of a portfolio holding could cause a fund’s share price to decline.The Galileo Mutual Funds are not offered for sale in the United States. They are represented across Canada by independent financial advisors. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. 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 1500 Composite is a broad-based capitalization-weighted index of 1500 U.S. companies and is comprised of the S&P 400, S&P 500, and the S&P 600. 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.