U.S. Global Investors, Inc. (NASDAQ:
GROW),
a boutique registered investment advisory firm specializing in natural
resources, emerging markets, and domestic equities and municipal bonds,
recorded a net loss of $1,165,207, or $0.08 per share loss, on operating
revenues of $2.74 million for the quarter ended December 31, 2013.
Net income for the same quarter of the previous year was $165,985, or
$0.01 per share, on operating revenues of $4.97 million.
Average assets under management were $1.11 billion for the quarter ended
December 31, 2013, compared to an average of $1.68 billion for the same
quarter a year ago, a decrease of about 34 percent. Period-end assets
under management stood at $0.97 billion as of December 31, 2013, versus
$1.61 billion under management as of December 31, 2012.
“A big external pressure affecting assets under management has been the
fact that global gold equities declined three years in a row,” says
Frank Holmes, U.S. Global Investors CEO. “Additionally, the
close-to-zero federal funds rate created an industry-wide financial
burden to support the yield of money market funds.”
In this challenging environment, the company has been focused on
reducing costs and streamlining its products and services in the second
fiscal quarter of 2014. Changes included converting a money market fund
to an ultra-short government bond fund, closing the U.S. Treasury
Securities Cash Fund and the Global Emerging Markets Fund, merging the
Tax Free Fund into the Near-Term Tax Free Fund, reorganizing the
MegaTrends Fund into the Holmes Growth Fund, and partnering with U.S.
Bancorp for transfer agency services.
“Accomplishing these strategic changes was expensive and time-consuming.
Time is money and the length of time associated with the legal and
regulatory processes increased one-time costs,” says Holmes. “Moving
forward from our period of transitioning, general and administrative
expenses have been decreasing significantly in January 2014. The
organization is leaner, now with less than 50 employees, and in a
stronger financial position, especially as gold and resources look to
rebound.”
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
Dividends
The 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.
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Selected financial data (unaudited):
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Three months ended
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12/31/2013
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12/31/2012
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Operating Revenues
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$
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2,739,744
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$
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4,973,223
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Operating Expenses
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4,204,476
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4,811,168
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Operating Income (Loss)
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(1,464,732
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)
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162,055
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Other Income
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40,646
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160,987
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Income (Loss) from Continuing Operations Before Income Taxes
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(1,424,086
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)
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323,042
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Tax Expense (Benefit)
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(466,412
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)
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145,310
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Income (Loss) from Continuing Operations
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(957,674
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)
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177,732
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Loss on Discontinued Operations (net of tax)
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(207,533
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)
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(11,747
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)
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Net Income (Loss)
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$
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(1,165,207
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)
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$
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165,985
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Net income (loss) per share from continuing operations (basic and
diluted)
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$
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(0.06
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)
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$
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0.01
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Net income (loss) per share from discontinued operations (basic and
diluted)
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(0.02
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)
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$
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0.00
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Net income (loss) per share
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$
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(0.08
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)
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$
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0.01
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Avg. common shares outstanding (basic)
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15,472,370
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15,487,207
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Avg. common shares outstanding (diluted)
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15,472,370
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15,487,207
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Avg. assets under management (billions)
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$
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1.11
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$
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1.68
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About U.S. Global Investors, Inc.
U.S. Global Investors, Inc. (www.usfunds.com)
is a boutique registered investment adviser specializing in actively
managed equity and bond strategies. The company has a longstanding
history as experts in gold and precious metals, natural resources and
emerging markets. Headquartered in San Antonio, Texas, the company
provides advisory and other services to U.S. Global Investors Funds and
other clients.
With an average of $1.11 billion in assets under management in the
quarter ended December 31, 2013, U.S. Global Investors manages domestic
and offshore funds offering a variety of investment options, from
emerging markets to fixed income.
Forward-Looking Statements and Disclosure
This 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.
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Total Annualized Returns as of 12/31/13
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One-Year
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Five-Year
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Ten-Year
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Gross Expense Ratio
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Expense Ratio After Waivers
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Holmes Macro Trends Fund
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39.38%
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15.69%
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6.89%
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1.86%
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NA
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S&P 1500 Composite Index
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32.79%
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18.37%
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7.77%
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NA
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NA
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All American Equity Fund
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35.55%
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14.87%
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7.16%
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2.72%
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2.20%
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S&P 500 Index
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32.39%
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17.94%
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7.41%
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NA
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NA
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Expense ratios as stated in the most recent prospectus. The expense
ratio after waivers is a voluntary limit on total fund operating
expenses (exclusive of any acquired fund fees and expenses, performance
fees, taxes, brokerage commissions and interest) that U.S. Global
Investors, Inc. can modify or terminate at any time, which may lower a
fund's yield or return. Performance data quoted above is historical.
Past performance is no guarantee of future results. Results reflect the
reinvestment of dividends and other earnings. Current performance may be
higher or lower than the performance data quoted. The principal value
and investment return of an investment will fluctuate so that your
shares, when redeemed, may be worth more or less than their original
cost. Performance does not include the effect of any direct fees
described in the fund's prospectus (e.g., short-term trading fees of
0.05%) which, if applicable, would lower your total returns. Performance
quoted for periods of one year or less is cumulative and not annualized.
Obtain performance data current to the most recent month-end at www.usfunds.com
or 1-800-US-FUNDS.
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.
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.
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.
Copyright Business Wire 2014