U.s. Global Investors, Inc. · NASDAQ:GROW
U.s. Global Investors — Investor Presentation (February 2005)
43 slides from U.s. Global Investors's investor presentation, Feb 24, 2005
Slide 1: Opportunities in Global Emerging Markets
Opportunities in Global Emerging Markets Charlemagne Capital Julian Mayo, Director of Investments February 24, 2005
Slide 2: Global Emerging Markets Fund
Global Emerging Markets Fund Inception Date: February 24, 2005 Investment Objective: The fund seeks long-term growth of capital by investing in global emerging markets. General Account: $5,000 minimum IRA Account: No Minimum Business Account: $5,000 minimum Trust Account: $5,000 minimum UGMA/UTMA: $
Slide 3: The Subadviser: Charlemagne Capital
The Subadviser Charlemagne Capital
Slide 4: The Subadviser: Charlemagne Capital
The Subadviser: Charlemagne Capital Independent emerging markets investment management group Entrepreneurial, with significant institutional backing Funds under management approx. $2.0 billion* Strong debt-free balance sheet Subadviser to US Global Investors Accolade Eastern Europe Fund (ticker: EUR
Slide 5: Assets under management
The Subadviser : Charlemagne Capital Assets under management US$ m US$ 2016 2000 1500 1000 940 500 446 334 0 2001 2002 2003 2004 Dynamic growth: all in emerging markets Charlemagne Capital 5 Specialists in Emerging Markets Source: Charlemagne Capital
Slide 6: Diversified institutional client base
The Subadviser : Charlemagne Capital Charlemagne Capital Institutional mandates Long only funds Hedge funds Private equity $ 1019m $ 626m $ 154m $ 217m Segregated accounts Magna range / Private equity OCCO range Offshore funds portfolios Diversified institutional client base Charlemagne Capital 6 Sp
Slide 7: Investment team
The Subadviser : Charlemagne Capital Investment team High quality, dedicated professionals Significant emerging market experience Alignment of interest with investors Blue chip, institutional backgrounds Strong internal performance driven culture Charlemagne Capital 7 Specialists in Emerging Markets
Slide 8: Investment Process
Investment Process Exploit inefficiencies in emerging markets via a disciplined bottom-up process + focused, low risk portfolios = consistent returns The goal low volatility Charlemagne Capital 8 Specialists in Emerging Markets
Slide 9: Investing in Emerging Markets
Investing in Emerging Markets The Investment Process: How we invest in emerging markets The Investment Case: Global emerging markets Did you know: Over 80% of people in the world live in emerging markets! Only 10% of Indians have even seen a telephone! Charlemagne Capital 9 Specialists in Emerging M
Slide 10: Investment Process
U.S. Global Investors QM Charlemagne Capital a Investment Process
Slide 11: Investment Process: Ownership Structure
OCCO Eastern European Fund Investment Process Clear Ownership Structure - Cover (4 Eyes Principle) Stefan Böttcher Andrew Wiles Julian Mayo Lead Manager Manager Manager EMEA Asia 17 years experience 10 years experience 20 years experience Yvonne Yeoh Samir Patel Stefan Herz Manager Manager Head of R
Slide 12: Investment Process
Investment Process Emerging Markets Universe Listed companies 80% of market cap Charlemagne Capital Universe Best opportunities Special situation Detailed analysis Focus Stock List Quarterly management meetings Propriety database Macro Overlay Risk management Low volatility Portfolio High tracking e
Slide 13: Process: Qualitative Checklist
Investment Process: Qualitative Checklist Check List What it means Checklist What it means Management Corporate governance, track record, quality strategy, shareholder value focus Top line growth Market leadership, innovative products Earnings Lean cost management, consistent growth/quality operatin
Slide 14: Process: Company Research
Investment Process: Company Research Focus stock list: Detailed corporate database Forecast periods Short term cyclical Normalised / Sustainable Valuation analysis Rigorous stock analysis Charlemagne Capital 14 Specialists in Emerging Markets
Slide 15: Process: Valuation Analysis
Investment Process: Valuation Analysis Relative value Absolute value Traditional ratio analysis DCF / DDM vs. Sector Sum of the parts vs. Market Price target Price-driven valuation analysis Charlemagne Capital 15 Specialists in Emerging Markets
Slide 16: Process: Macroeconomic risk overlay
Investment Process Political risk Currency risk Risk: Significant valuation shift Avoid Macroeconomic risk overlay Charlemagne Capital 16 Specialists in Emerging Markets
Slide 17: Process: Special Situations
Investment Process: Special Situations Corporate Private Equity Local Offices Local Contacts Events Special situations qualitative screening by fund managers Company visit by fund manager Risk adjusted return target Portfolio (Max. 25% of NAV) Delivering alpha Charlemagne Capital 17 Specialists in E
Slide 18: Process: Portfolio Construction
Investment Process - Portfolio Construction Country, sector and cash limits determined by a maximum tracking error of 15% Special situations + illiquid stocks maximum 25% of NAV Stock positions: Core: 3% Max: 9% Min: 1% Large positions: indication of conviction Focused, concentrated portfolios manag
Slide 19: Process: Risk management
Investment Process Risk management Administrative risk Markets must meet criteria such as security of ownership, currency convertibility, custody, taxation, liquidity Market risk ‘Four-eyes’ principle – each decision is seconded Constant price screening by dedicated dealer Weekly stock/sector review
Slide 20: Process: Sell discipline
Investment Process Sell discipline Sell triggers: Price change Change of fundamental assessment Superior alternative investment opportunity Instant implementation Charlemagne Capital 20 Specialists in Emerging Markets
Slide 21: Best Team Ideas: OTP
Investment Process: Best Team Ideas The strategy: example OTP Hungary Gross Loans/ GDP 2002 120% OTP: well placed for convergence 100% 80% Banking sector penetration will increase towards EU levels as interest rates decline 60% 40% OTP is the market leader in all products 20% Expect a further $2bn i
Slide 22: Best Team Ideas: Dongkuk Steel
Investment Process: Best Team Ideas The strategy: example Dongkuk Steel Korean steel mill, dominant domestic steel plate producer Strong core product demand from shipbuilding and construction Management addressing corporate governance discount Stock trading at 3x2004 earnings, 5% dividend yield 18 K
Slide 23: Best Team Ideas: URBI
Investment Process: Best Team Ideas The strategy: example URBI Leading Mexican home builder Large and growing housing deficit in Mexico Management enhancing margins through better working capital and better revenue mix Strong cash flow generation due to low capex Valuations justified by its better g
Slide 24: Process Summary
Investment Process Summary Fundamental bottom-up approach Lean decision making Disciplined portfolio construction Rigid sell discipline Informed risk management Charlemagne Capital 24 Specialists in Emerging Markets
Slide 25: Investment Case
Investment Case Global Emerging Markets Politics: better economic management Economics Valuations
Slide 26: Investment Case: International reserves exceed external debt
Investment Case: Global Emerging Markets 1600 C u m C h g in G ro s s E x te rn a l D e b t C u m C h g in In te rn a tio n a l R e s e rv e s 1400 C u m C h g in S h o rt T e rm D e b t 1200 1000 U$bn 800 600 400 200 0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04E 05E International reserves now exc
Slide 27: Investment Case: Exchange rates undervalued
Investment Case: Global Emerging Markets 4.0% 110.0 3.0% 105.0 100.0 2.0% 95.0 1.0% 90.0 0.0% 85.0 -1.0% 80.0 -2.0% 75.0 -3.0% 70.0 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 Current Account + FDI % GDP Current Account % GDP REER (rhs) Exchange rates seem undervalued Charlemagne Cap
Slide 28: Investment Case: Spreads narrowed
Investment Case: Global Emerging Markets 14.0 12.0 GEMs vs Developed mkt cap weighted sovereign yields 10.0 8.0 6.0 4.0 2.0 0.0 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 EM Market Cap Weighted Bond Yield US 10 Year T-Bill Yield Spreads narrowed but still room to fall Charlemagne Capital 28 So
Slide 29: Investment Case: High GDP Growth
Investment Case: Global Emerging Markets Real GDP Growth Current Account (% GDP) 04E 05E 04E 05E Latin Average 4.6 3.9 0.3 -0.4 EMEA Ave. 5.7 4.7 0.8 -0.8 Asian Average 7.4 6.2 2.6 3.0 GEM 6.4 5.3 1.6 1.3 High GDP Growth Charlemagne Capital Source: UBS 29 Specialists in Emerging Markets
Slide 30: Investment Case: Sound fundamentals
Investment Case: Global Emerging Markets Current account + FDI: surpluses across the board 250.0 EMEA LatAm Asia ex China China GEM 200.0 150.0 $bn 100.0 50.0 0.0 -50.0 E E 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 Sound fundamentals Charlemagne Capital 30 Specialists in E
Slide 31: Investment Case: Cheap relative to world
Investment Case: Global Emerging Markets 30 GEMs vs global 12 month forward consensus P/Es 25 20 15 10 5 0 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 MSCI EMF 12 month forward P/E MSCI World 12 month forward P/E Cheap relative to w
Slide 32: Investment Case: Earnings yield gap
Investment Case: Global Emerging Markets 15% GEMs: Earnings yield gap Earnings Yield Gap Bond Yield Earnings Yield 10% 5% Yield 0% -5% -10% Jan 99 Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Equities more attractive than bonds Charlemagne Capital Source: Charlemagne 32 Specialists in Emerging Markets
Slide 33: Investment Case: Price to book
Investment Case: Global Emerging Markets GEMs vs Developed P/BV GEM P/BV 4.5 4.0 World P/BV 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1989 1991 1993 1995 1997 1999 2001 2003 Charlemagne Capital Equities look cheap on price to book 33 Specialists in Emerging Markets Source: UBS
Slide 34: Investment Case: Country vs sector volatility
Investment Case: Global Emerging Markets Standard deviation of country vs sector 60% 50% countries 40% 30% 20% 10% sectors 0% Jan 96 Jan 97 Jan 98 Jan 99 Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Charlemagne Capital Country and sector volatility falls – stock selection counts! 34 Specialists in Emerging Ma
Slide 35: Investment Case: Stock selection matters
Investment Case: Global Emerging Markets Stock selection matters – yearly performance 2003 Top 5 Worst 5 +188% 200% 150% 100% 50% 0% -50% -13% o il e PN l l. N a s nk so ov ic nc Te in ko O Ba ex Sa ch M ia Yu as as SK M l tro Re ica in br br s m Pe tro tro er no ok Am Pe Pe fo Ko le Charlemagne Cap
Slide 36: Investment Case: Valuation multiples
Investment Case: Global Emerging Markets P/E P/BV EV/EBITDA 05E 06E 05E 06E 05E 06E Latin America 9.2x 8.4x 1.8x 1.6x 4.8x 4.5x EMEA 9.4x 9.5x 1.51x 1.36x 5.0x 4.8x Asia 10.1x 9.6x 1.68x 1.50x 5.5x 5.1x GEM 9.7x 9.3x 1.65x 1.47x 5.2x 4.9x US 16.7x 15.5x 2.66x 2.58x 9.1x 8.7x Global 14.4x 13.2x 2.08x
Slide 37: Model Portfolio
Model Portfolio Global Emerging Markets
Slide 38: Model Portfolio: Geographic allocation overweights
Model Portfolio Geographic allocation Geographic Allocation: Top 5 overweights Magna GEMs MSCI EM Free Total Net Return Index 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Other Colombia Russia Thailand Hungary Actively managed portfolios Charlemagne Capital Source: Charlemagne Capital
Slide 39: Model Portfolio: Geographic allocation underweights
Model Portfolio Geographic allocation Sector Allocation: Top 5 Underweights Magna GEMs MSCI EM Free Total Net Return Index 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Indonesia China Turkey Taiwan Malaysia Actively managed portfolios Charlemagne Capital Source: Charlemagne Capital / Bloomberg
Slide 40: Model Portfolio: Sector allocation overweights
Model Portfolio Sector allocation Overweight Sector Allocation - Top 5 Overweights Financials Magna GEMs MSCI EM Free Total Net Return Index 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Energy Banks Insurance Property Telecoms Actively managed portfolios Charlemagne Capital Sourc
Slide 41: Model Portfolio: Sector allocation underweights
Model Portfolio Sector allocation Underweight Sector Allocation - Top 5 Underweights Materials 14.00% Magna GEMs MSCI EM Free Total Net Return Index 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Materials Food & Capital Goods Transportation IT Beverage Actively managed portfolios Charlemagne Capital S
Slide 42: Thank You!
Thank You! For more complete information about the Global Emerging Markets Fund and/or Eastern European Fund (EUROX) or any U.S. Global fund, obtain a prospectus by visiting us at www.usfunds.com or call 1-800-US-FUNDS. Please consider carefully the fund’s investment objectives, risks, charges and e
Slide 43: The Disclaimer
The Disclaimer This document is issued by Charlemagne Capital (UK) Limited which is authorised and regulated by the Financial Services Authority (“FSA”). 'Magna Umbrella Fund plc is an open ended investment company authorised by the Irish Financial Services Regulatory Authority as a UCITS. It is rec
U.S. Global Investors — Investor Presentation (February 2005) on 6ix