10-K405 1 0001.txt ANNUAL REPORT ON FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended June 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ______ Commission File Number 0-13928 U.S. GLOBAL INVESTORS, INC. (Exact name of registrant as specified in its charter) Texas (State or other jurisdiction of incorporation or organization) 74-1598370 (I.R.S. Employer Identification No.) 7900 Callaghan Road, San Antonio, Texas 78229 (Address of Principal Executive Offices) (Zip Code) 210-308-1234 (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of Each Class: Class A Common Stock, par value $0.05 per share Name of Each Exchange on Which Registered: Nasdaq Small Cap Issues Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the 4,109,064 shares of non-voting class A common stock held by non-affiliates of the registrant on September 19, 2000 (based on the last sale price on the Nasdaq as of such date), was $6,422,467. Registrant's only voting stock is its class C common stock, par value of $0.05 per share, for which there is no active market. The aggregate value of the 104,589 shares of the class C common stock held by non-affiliates of the registrant on September 19, 2000 (based on the last sale price of the class C common stock in a private transaction) was $52,294. For purposes of this disclosure only, the registrant has assumed that its directors, executive officers and beneficial owners of 5% or more of the registrant's common stock are affiliates of the registrant. On September 19, 2000, there were 6,299,474 shares of Registrant's class A common stock issued and 6,034,794 shares of Registrant's class A common stock issued and outstanding, no shares of Registrant's class B non-voting common shares outstanding, and 1,496,800 shares of Registrant's class C common stock outstanding, . DOCUMENTS INCORPORATED BY REFERENCE Portions of the Annual Report To Shareholders for the fiscal year ended June 30, 2000, are incorporated by reference in Part I, Item 1 and Part II, Items 6, 7, 7A, 8 and Part III, Item 13 of this Form 10-K. U.S. Global Investors, Inc. Annual Report on Form 10-K 2000 Page 2 of 47 TABLE OF CONTENTS Page PART I Item 1. Business........................................................3 Item 2. Properties......................................................3 Item 3. Legal Proceedings...............................................3 Item 4. Submission of Matters to a Vote of Security Holders.............3 PART II Item 5. Market for Company's Common Equity and Related Shareholder Matters.......................................................4 Item 6. Selected Financial Data.........................................5 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.....................................5 Item 7A. Market Risk Disclosures........................................5 Item 8. Financial Statements and Supplementary Data.....................5 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......................................5 PART III Item 10. Directors and Executive Officers of the Company................6 Item 11. Executive Compensation.........................................7 Item 12. Security Ownership of Certain Beneficial Owners and Management..................................................11 Item 13. Certain Relationships and Related Transactions................12 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....................................................13 SIGNATURES..................................................................16 EXHIBIT 11--SCHEDULE OF COMPUTATION OF NET EARNINGS PER SHARE...............17 EXHIBIT 13--ANNUAL REPORT...................................................18 EXHIBIT 21--SUBSIDIARIES OF THE COMPANY, JURISDICTION OF INCORPORATION, AND PERCENTAGE OF OWNERSHIP...........................................45 EXHIBIT 23.1--CONSENT OF INDEPENDENT ACCOUNTANT, ERNST & YOUNG LLP..........46 EXHIBIT 23.2--CONSENT OF INDEPENDENT ACCOUNTANT, PRICEWATERHOUSECOOPERS LLP............................................47 U.S. Global Investors, Inc. Annual Report on Form 10-K 2000 Page 3 of 47 PART I ITEM 1. BUSINESS There is incorporated in this Item 1 by reference that portion of the U.S. Global Investors, Inc. (U.S. Global or Company) Annual Report to Shareholders, attached to this Form 10-K as Exhibit 13, appearing under the caption "The Company." ITEM 2. PROPERTIES The Company presently occupies an office building as its headquarters in San Antonio, Texas. The office building is approximately 46,000 square feet on approximately 2.5 acres of land. The Company and its subsidiaries, United Shareholder Services, Inc. (USSI), A&B Mailers, Inc., Security Trust & Financial Company (STFC), U.S. Global Brokerage, Inc. (USGB), and U.S. Global Administrators, Inc. (USGA) occupy approximately 95% of the building. ITEM 3. LEGAL PROCEEDINGS Except as described in the following paragraph, there is no material legal proceeding to which the Company is involved. There are no material legal proceedings to which any director, officer or affiliate of the Company or any associate of any such director or officer is a party or has a material interest, adverse to the company or any of its subsidiaries. In August 2000, a suit was filed against U. S. Global Investors, Inc. (USGI) and other defendants in state court alleging negligence, breach of contract and fraud with regard to processing of certain checks drawn on plaintiff's accounts held in U.S. Global Investors Funds. USGI denies all allegations and the suit is in the discovery stage. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during fiscal year 2000. U.S. Global Investors, Inc. Annual Report on Form 10-K 2000 Page 4 of 47 PART II ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Market Information The Company has three classes of common equity: Class A, class B and class C common stock, par value $0.05 per share. There is no established public trading market for the Company's class B and class C common stock. The Company's class A common stock is traded over-the-counter and is quoted daily under the Nasdaq Small Cap Issues. Trades are reported under the symbol "GROW." The following table sets forth the range of high and low closing bid quotations from Nasdaq for the fiscal years ended June 30, 2000 and 1999. The quotations represent prices between dealers and do not include any retail markup, markdown or commission and may not necessarily represent actual transactions. BID PRICE ($) ------------------------------------ 2000 1999 ---------------- ---------------- HIGH LOW HIGH LOW ------ ------ ------ ------ First Quarter (9/30) $1.625 $1.000 $1.875 $1.375 Second Quarter (12/31) $1.563 $1.313 $1.750 $1.313 Third Quarter (3/31) $2.500 $1.375 $2.906 $1.500 Fourth Quarter (6/30) $1.750 $1.438 $1.688 $1.250 HOLDERS On September 19, 2000, there were 299 holders of record of the class A common stock, no holders of record of class B common stock, and 71 holders of record of class C common stock. Many of the class A common shares are held of record by nominees, and management believes that as of September 19, 2000, there were approximately 1,000 beneficial owners of the Company's class A common stock. DIVIDENDS The Company has not paid cash dividends on its class C common stock during the last fourteen fiscal years, and has never paid cash dividends on its class A common stock. Payment of cash dividends is within the discretion of the Company's board of directors and is dependent upon earnings, operations, capital requirements, general financial condition of the Company and general business conditions. Holders of the outstanding shares of the Company's class A common stock are entitled to receive, when and as declared by the Company's board of directors, a non-cumulative cash dividend equal in the aggregate to 5% of the Company's after-tax net earnings for its prior fiscal year. After such dividend has been paid, the holders of the outstanding shares of class B common stock are entitled to receive, when and as declared by the Company's board of directors, cash dividends per share equal to the cash dividends per share paid to the holders of the class A common stock. Holders of the outstanding shares of class C common stock are entitled to receive when and as declared by the Company's board of directors, cash dividends per share equal to the cash dividends per share paid to the holders of the class A and class B common stock. Thereafter, if the board of directors determines to pay additional cash dividends, such dividends will be paid simultaneously on a prorated basis to holders of class A, B and C common stock. The holders of the class A common stock are protected in certain instances against dilution of the dividend amount payable to such holders. U.S. Global Investors, Inc. Annual Report on Form 10-K 2000 Page 5 of 47 ITEM 6. SELECTED FINANCIAL DATA There is incorporated by reference in this Item 6 that portion of the Company's Annual Report to Shareholders appearing under the caption "Selected Financial Data." ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS There is incorporated by reference in this Item 7 that portion of the Company's Annual Report to Shareholders appearing under the caption "Annual Status Report." ITEM 7A. MARKET RISK DISCLOSURES There is incorporated by reference in this Item 7A that portion of the Company's Annual Report to Shareholders appearing under the caption "Annual Status Report." ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements and notes thereto located in the Company's Annual Report to Shareholders are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Within twenty-four months prior to the date of Company's most recent financial statement, no Form 8-K recording a change of accountants due to a disagreement on any matter of accounting principles or practices or financial statement disclosure has been filed with the Commission. U.S. Global Investors, Inc. Annual Report on Form 10-K 2000 Page 6 of 47 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The directors and executive officers of the Company are as follows: NAME AGE POSITION ------------------- --- --------------------------------------------------- David J. Clark 39 Chief Financial Officer of the Company since May 1997 and Chief Operating Officer since December 1997. Since May 1997 Mr. Clark has served and continues to serve in various positions with the Company, its subsidiaries, and the investment companies it sponsors. Mr. Clark served as a Foreign Service Officer with U.S. Agency for International Development in the U.S. Embassy, Bonn, West Germany from May 1992 to May 1997. Frank E. Holmes 45 Chairman of the Board of Directors and Chief Executive Officer of the Company since October 27, 1989, and Chief Investment Officer since June 4, 1999. Since October 1989 Mr. Holmes has served and continues to serve in various positions with the Company, its subsidiaries, and the investment companies it sponsors. Mr. Holmes has also served as Director of 71316 Ontario, Inc. since April 1987. Director, President, and Secretary of F.E. Holmes Organization, Inc. since July 1978. Director of USACI since February 1995, Director and President from February 1995 to June 1997. Mr. Holmes has served as director of Franc-Or Resources Corporation since June 2000 and Broadband Collaborative Solutions since May 2000. Thomas F. Lydon, Jr. 40 Director of the Company since June 1997. Chairman of the Board and President of Global Trends Investments since April 1996. President, Vice President and Account Manager with Fabian Financial Services, Inc. from April 1984 to March 1996. Member of the Advisory Board for Schwab Institutional from 1989 to 1991 and from 1995 to 1996. Member of the Advisory Board of Rydex Series Trust since January 1999. Fund Relations Chair for SAAFTI since 1994. Susan B. McGee 41 President of the Company since February 1998, General Counsel since March 1997. Since September 1992 Ms. McGee has served and continues to serve in various positions with the Company, its subsidiaries, and the investment companies it sponsors. J. Stephen Penner 59 Director since May 1997. Senior Vice President of LCG Associates, and since March 1982 has held various positions with that Company. Senior Vice President of LCG Holdings, Inc. since November 1992. Mr. Penner currently serves as President and CEO of Fiduciary Advisory and Management Co., Inc. Jerold H. Rubinstein 62 Director of the Company since October 1989. Chairman and Chief Executive Officer of Xtra Music since July 1997. Chairman of the Board of Directors and Chief Executive Officer of DMX Inc. from May 1986 to July 1997. Roy D. Terracina 54 Director of the Company since December 1994 and Vice Chairman of the Board of Directors since May 1997. Director of STFC since August 1992. Owner of Sunshine Ventures, Inc., an investment company, since January 1994. None of the directors or executive officers of the Company has a family relationship with any of the other directors or executive officers. U.S. Global Investors, Inc. Annual Report on Form 10-K 2000 Page 7 of 47 The members of the board of directors are elected for one-year terms or until their successors are elected and qualified. The board of directors appoints the executive officers of the Company. The Company's Compensation Committee consists of Messrs. Holmes, Terracina and Rubinstein. The Company's Audit Committee consists of Messrs. Rubinstein and Terracina. The Stock Option Committee consists of Messrs. Rubinstein and Terracina. The Company does not have a Nominating Committee. COMPLIANCE WITH SECTION 16(A) OF THE 1934 ACT Section 16(a) of the 1934 Act requires directors and officers of the Company, and persons who own more than 10% of the Company's class A common stock, to file with the Securities and Exchange Commission (SEC) initial reports of ownership and reports of changes in ownership of the stock. Directors, officers and more than 10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the year ended June 30, 2000, all Section 16(a) filing requirements applicable to its directors, officers and more than 10% beneficial owners were met. ITEM 11. EXECUTIVE COMPENSATION

LONG-TERM COMPENSATION ANNUAL COMPENSATION AWARDS ------------------------------------------------------------------------- -------------------------- (a) (b) (c) (d) (e) (f) (g) ------------------- ---- ---------- -------- -------------- ----------- ----------- OTHER NAME AND ANNUAL RESTRICTED NUMBER OF PRINCIPAL POSITION COMPEN- STOCK OPTIONS/ DURING FY 2000 YEAR SALARY BONUS SATION(1) AWARDS SARS(2) ------------------- ---- ---------- -------- -------------- ----------- ----------- Frank E. Holmes 2000 $318,280 $ 58,602 $48,640(3) $50,000 (4) __ Chairman, Chief 1999 318,280 92,054 41,780 338 __ Executive Officer 1998 315,917 164,902 37,405 __ __ Susan B. McGee 2000 135,886 55,857 __ -- 15,000 President, 1999 132,408 43,491 __ 338 __ General Counsel 1998 104,786 5,439 __ 1,328 __ The Company has intentionally omitted columns (h) and (i) as they are not applicable. Includes amounts identified for 401(k) contributions (calculable through the end of June 30, 2000, fiscal year) and amounts for Company savings plans (calculable through the end of the June 30, 2000, fiscal year). ------------------------ (1) The Company believes that the aggregate amounts of such omitted personal benefits do not exceed the lesser of $50,000 or 10% of the total of annual salary and bonus reported in columns (c) and (d) for the named executive officers. (2) All options pertain to Company class A common stock. (3) Includes directors fees of $32,000 paid by the Company. (4) Includes the board's issuance, in June 1999, of 1,000,000 shares of class C common stock to be vested over a ten-year period beginning with fiscal year 1998, with an annual compensation value of $50,000. Mr. Holmes will be fully vested on June 30, 2008. Issuance was in part to compensate him for his efforts and upon cancellation of Mr. Holmes' warrants and option to acquire 986,122 shares of class C common stock.

U.S. Global Investors, Inc. Annual Report on Form 10-K 2000 Page 8 of 47 INCENTIVE COMPENSATION Executive officers, except Mr. Holmes, participate in a team performance pay program based on each employee's annual salary to recognize monthly completion of departmental goals. Additionally, key executive officers are compensated based on individual performance pay arrangements. PROFIT SHARING PLAN In June 1983, the Company adopted a profit sharing plan in which all qualified employees who have completed one year of employment with the Company are included. Subject to board action, the Company may contribute up to 15% of its net income before taxes during each fiscal year, limited to 15% of qualifying salaries, to a profit sharing plan, the beneficiaries of which are the eligible employees of the Company. The Company's contribution to the plan is then apportioned to each employee's account in the plan in an amount equal to the percentage of the total basic compensation paid to all eligible employees, which each employee's individual basic compensation represents. For the fiscal year ended June 30, 2000, the Company did not contribute to the profit sharing plan. There have been no recent material changes to the plan. 401(k) PLAN The Company adopted a 401(k) plan in October 1990 for the benefit of all employees. The Company will match a certain percentage of a participating employee's pay deferment. The Company will make contributions to participants' accounts subsequent to the end of each plan year if the employee is still employed at the end of the plan year. SAVINGS PLANS The Company has continued the program pursuant to which it offers employees, including its executive officers, an opportunity to participate in savings programs using managed investment companies, which essentially all such employees accepted. Limited employee contributions to an Individual Retirement Account are matched by the Company. Similarly, certain employees may contribute monthly to the Tax Free Fund, and the Company will match these contributions on a limited basis. Beginning in fiscal year 1997, a similar savings plan utilizing UGMA accounts has been offered to employees to save for their children's education. STOCK OPTION PLANS In March 1985, the board of directors of the Company adopted an Incentive Stock Option Plan (1985 Plan), giving certain executives and key salaried employees of the Company and its subsidiaries options to purchase shares of the Company's class A common stock. The 1985 Plan was amended on November 7, 1989 and December 6, 1991. In December 1991, it was amended to provide provisions to cause the plan and future grants under the plan to qualify under 1934 Act Rule 16b-3. As of June 30, 2000, under this plan, 202,500 options were granted, 88,000 options had been exercised, 110,500 options had expired and 4,000 options remained outstanding. The 1985 Plan, as amended, terminated on December 31, 1994. In November 1989 the board of directors adopted the 1989 Non-Qualified Stock Option Plan (1989 Plan) which provides for the granting of options to purchase shares of the Company's class A common stock to directors, officers and employees of the Company and its subsidiaries. On December 6, 1991, shareholders approved and amended the 1989 Plan to provide provisions to cause the plan and future grants under the plan to qualify under 1934 Act Rule 16b-3. The 1989 Plan is administered by a committee consisting of two outside members of the board of directors. The maximum number of shares of class A common stock initially approved for issuance under the 1989 Plan is 800,000 shares. During the fiscal year ended June 30, 2000, there were no grants. As of June 30, 2000, under this amended plan, 876,700 options had been granted, 393,000 options had been exercised, 265,900 options had expired and 217,800 options remained outstanding. The board of directors, at a meeting held on July 14, 1992, amended the Stock Option Agreement for stock options granted during November 1989 to provide for an option period of ten years. All optionees accepted the amendment. U.S. Global Investors, Inc. Annual Report on Form 10-K 2000 Page 9 of 47 In April 1997, the board of directors adopted the 1997 Non-Qualified Stock Option Plan (1997 Plan), which shareholders approved on April 25, 1997. It provides for the granting of stock appreciation rights (SARs) and/or options to purchase shares of the Company's class A common stock to directors, officers and employees of the Company and its subsidiaries. The 1997 Plan expressly requires that all grants under the plan qualify under 1934 Act Rule 16b-3. The 1997 Plan is administered by a committee consisting of two outside members of the board of directors. The maximum number of shares of class A common stock initially approved for issuance under the 1997 Plan is 200,000 shares. During the fiscal year ended June 30, 2000, there were 72,000 options granted. As of September 19, 2000, grants covering 6,000 shares have been exercised under the 1997 Plan, and grants covering 75,500 shares have expired and 159,000 remained outstanding. Shares available for stock option grants under the 1989 Plan and the 1997 Plan aggregate to approximately 189,200 and 29,000 shares, respectively, on September 19, 2000. The following table shows, as to each officer of the Company listed in the cash compensation table, grants of stock options and freestanding stock appreciation rights made during the last fiscal year.

OPTION/SAR GRANTS IN LAST FISCAL YEAR ---------------------------------------------------------------------------------------------------------- POTENTIAL REALIZED VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION INDIVIDUAL GRANTS FOR OPTION TERM --------------------------------------------------------------------------------- ------------------- (a) (b) (c) (d) (e) (f) (g) --------------- -------- ----------- ------ ---------- ------- ------- NUMBER OF % OF TOTAL SECURITIES OPTIONS/SARS UNDERLYING GRANTED TO EXERCISE OF OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION NAME GRANTED FISCAL YEAR ($/SH) DATE 5% ($) 10% ($) --------------- -------- ----------- ------ ---------- ------- ------- Frank E. Holmes 0/0 0/0 $0 -- $0 $0 Susan B. McGee 15,000/0 15.95% $1.50 12-03-2009 $12,630 $33,435

The following table shows, as to each of the officers of the Company listed in the cash compensation table, aggregated option exercises during the last fiscal year and fiscal year-end option values.

(a) (b) (c) (d) (e) --------------- ----------- -------- --------------- -------------- NUMBER OF SECURITIES VALUE OF UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS/SARS OPTIONS/SARS NUMBER OF AT FY END AT FY END ($) SHARES --------------- -------------- ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/ NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE --------------- ----------- -------- --------------- -------------- Frank E. Holmes 0 0 101,000/0 $0/$0 Susan B. McGee 0 0 51,000/0 $0/$0

COMPENSATION OF DIRECTORS The Company may grant non-employee directors options under the Company's 1989 and 1997 Stock Option Plans. Their compensation is subject to a minimum of $3,000 in any quarter paid in advance. During the fiscal year ended June 30, 2000, the non-employee directors each received cash compensation of $12,000. Mr. Terracina is also a director of STFC for which he received cash compensation of $3,600. Directors are reimbursed for reasonable travel expenses incurred in attending the meetings held by the board of directors. U.S. Global Investors, Inc. Annual Report on Form 10-K 2000 Page 10 of 47 REPORT ON EXECUTIVE COMPENSATION The board appointed Messrs. Holmes, Terracina, and Rubinstein as members of the Executive Compensation Committee during fiscal year 1997, and they continue to serve on the committee. There are no compensation committee interlocks to report. Mr. Holmes served as an employee and officer of the Company. The board of directors reviews Mr. Holmes' compensation annually to determine an acceptable base compensation, reflecting an amount competitive with industry peers and taking into account the relative cost of living in San Antonio, Texas. The board of directors also reviews Mr. Holmes' performance in managing the Company's securities portfolio with respect to which he is paid a cash bonus, which bonus is paid periodically throughout the year. During fiscal year 1999, Mr. Holmes, in addition to his other duties, became the Company's chief investment officer responsible for supervising management of clients' portfolios. In June 1999, in part to compensate him for these efforts and upon cancellation of Mr. Holmes' warrants and option to acquire 986,122 shares of class C common stock, the board approved the issuance of 1,000,000 shares of class C common stock to Mr. Holmes to be vested over a ten-year period beginning with fiscal year 1998, with an annual compensation value of $50,000. Mr. Holmes will be fully vested on June 30, 2008. The base pay of the executives is relatively fixed, but the executive has the opportunity to increase his/her compensation by (1) participating in team building programs to enhance operational and fiscal efficiencies throughout the Company with a percent of resulting savings flowing to the executive and (2) participating directly in retirement and savings programs whereby the Company will contribute amounts relative to the executive's contribution. The Company has utilized option grants under the 1985 Plan, the 1989 Plan, and the 1997 Plan to induce qualified individuals to join the Company with a base pay consistent with the foregoing, thereby providing the individual with an opportunity to benefit if there is significant Company growth. Similarly, options have been utilized to reward existing employees for long and faithful service and to encourage them to stay with the Company. Messrs. Penner, Rubinstein, and Terracina constitute the Stock Option Committee of the board of directors. This committee acts upon recommendations of the Chief Executive Officer and President. COMPANY PERFORMANCE PRESENTATION The graph below compares the cumulative total return for the Company's class A common stock to the cumulative total return for the Financial Times Gold Mines Index, S&P 500 Composite Index, and Russell 2000 Index for the Company's last five fiscal years. The graph assumes an investment of $10,000 in the class A common stock and in each index as of June 30, 1995, and that all dividends are reinvested. [GRAPHIC:Linear chart plotted from data in table below.] U.S. GLOBAL INVESTORS FT GOLD CLASS A S&P 500 RUSSELL MINES COMMON COMPOSITE 2000 DATE INDEX STOCK INDEX INDEX --------- ----------- ----- ----------- ----------- 30-Jun-93 100 100 100 100 30-Jul-93 106.3136446 112.5 99.46729408 101.3327619 31-Aug-93 98.74168255 95 102.8921492 105.5024641 30-Sep-93 88.09430028 80 101.8644707 108.3994 29-Oct-93 103.6168749 95 103.8399219 111.0692093 30-Nov-93 101.3397195 97.5 102.4992786 107.3109064 31-Dec-93 116.8701717 112.5 103.533616 110.8163703 31-Jan-94 113.6750117 115 106.8985417 114.214699 28-Feb-94 106.2474726 105 103.6867689 113.7904435 31-Mar-94 106.8960628 107.5 98.94346658 107.5894579 29-Apr-94 99.59561585 87.5 100.0843451 108.2279837 31-May-94 102.6432019 97.5 101.3273256 106.8266552 30-Jun-94 100.3046011 92.5 98.61052538 102.9740733 29-Jul-94 103.0108238 85 101.715757 104.5896722 31-Aug-94 109.3607054 85 105.5423612 110.2721234 30-Sep-94 122.0641448 92.5 102.7034826 109.7578744 31-Oct-94 113.2228367 82.5 104.8431847 109.2864795 30-Nov-94 99.22431767 75 100.7013961 104.6710949 30-Dec-94 103.7633985 65 101.9399374 107.2894793 31-Jan-95 86.01881174 67.5 104.4148003 105.785301 28-Feb-95 90.88192508 67.5 108.1814752 109.9507178 31-Mar-95 101.3491726 67.5 111.137993 111.7505892 28-Apr-95 101.3260649 67.5 114.2454443 114.0647097 31-May-95 99.84087221 55 118.3938916 115.8131562 30-Jun-95 10000 10000 10000 10000 31-Jul-95 10116.88595 10000 10317.76044 10567.28837 31-Aug-95 10233.72001 9523.809524 10314.45617 10764.37612 29-Sep-95 10301.99427 10000 10728.04039 10943.13013 31-Oct-95 8938.584295 8095.238095 10674.62139 10444.94588 30-Nov-95 9791.649373 7142.857143 11112.80404 10879.66717 29-Dec-95 9927.056529 6190.47619 11306.65443 11140.21789 31-Jan-96 11962.21051 11428.57143 11675.44745 11119.41614 29-Feb-96 12141.04134 10952.38095 11756.40202 11456.12241 29-Mar-96 12108.92753 10415.2381 11849.47223 11662.02447 30-Apr-96 12070.79563 10476.19048 12008.62781 12279.37806 31-May-96 12331.70084 12857.14286 12283.06563 12757.81828 28-Jun-96 10462.61517 10952.38095 12310.78476 12220.49854 31-Jul-96 10353.92629 9047.619048 11747.59064 11141.27561 30-Aug-96 10539.08649 9523.809524 11968.60945 11771.67436 30-Sep-96 9607.37113 10240 12616.98027 12212.74195 31-Oct-96 9741.844443 9047.619048 12946.67279 12007.54504 29-Nov-96 9728.822528 9047.619048 13896.64984 12484.92755 31-Dec-96 9460.602225 9047.619048 13597.79715 12784.61376 31-Jan-97 8810.95916 10476.19048 14431.57412 13025.77301 28-Feb-97 9896.084087 9047.619048 14517.11794 12694.35532 31-Mar-97 8492.415124 7859.047619 13898.48554 12077.70687 30-Apr-97 7619.116793 6666.666667 14710.23405 12093.22004 30-May-97 8144.610691 6906.666667 15571.91372 13424.53196 30-Jun-97 7226.072881 7619.047619 16248.55438 13974.89687 31-Jul-97 7336.629451 9047.619048 17517.94401 14613.40479 29-Aug-97 7325.112061 9287.619048 16511.61083 14928.95674 30-Sep-97 7911.980161 8335.238095 17389.26113 16000.42309 31-Oct-97 6441.593343 8335.238095 16789.72006 15275.53503 28-Nov-97 5071.905869 8571.428571 17538.32033 15157.77598 31-Dec-97 5490.059766 7142.857143 17814.22671 15408.1021 30-Jan-98 5799.317257 7619.047619 17995.0436 15162.35941 27-Feb-98 5587.957583 9047.619048 19262.78109 16282.83327 31-Mar-98 5940.898149 10000 20224.8738 16947.43151 30-Apr-98 6736.272516 9763.809524 20408.44424 17025.34993 29-May-98 5639.993359 8571.428571 20024.2313 16099.14325 30-Jun-98 5156.15921 7619.047619 20813.95135 16126.29129 31-Jul-98 4672.480701 6190.47619 20572.18908 14799.21024 31-Aug-98 3639.806591 5478.095238 17572.83157 11915.17117 30-Sep-98 5711.639827 5954.285714 18669.29784 12819.16581 30-Oct-98 5774.829833 5001.904762 20168.3341 13332.86324 30-Nov-98 5474.028804 5954.285714 21360.80771 14023.55181 31-Dec-98 4848.146842 5954.285714 22565.02983 14877.12865 29-Jan-99 4836.00689 6190.47619 23490.40844 15062.58153 26-Feb-99 4520.990703 7859.047619 22732.07894 13829.98978 31-Mar-99 4508.38383 5714.285714 23613.95135 14019.32095 30-Apr-99 5281.345978 5238.095238 24509.9587 15259.66929 31-May-99 4297.335436 5478.095238 23897.93483 15466.62906 30-Jun-99 4591.651448 4761.904762 25198.89858 16136.51588 30-Jul-99 4381.848178 5238.095238 24391.37219 15681.34541 31-Aug-99 4658.888105 5478.095238 24238.82515 15084.08843 30-Sep-99 5858.771893 5714.285714 23546.76457 15065.40211 29-Oct-99 5082.593177 6190.47619 25019.36668 15112.64676 30-Nov-99 4856.292023 5714.285714 25496.2827 16009.58996 31-Dec-99 4815.981157 5714.285714 26971.08765 17796.07235 31-Jan-00 4250.020752 6190.47619 25598.1643 17495.68099 29-Feb-00 4384.182784 8335.238095 25083.43277 20368.43775 31-Mar-00 4055.418361 6190.47619 27509.49977 19006.80464 28-Apr-00 3923.746576 5714.285714 26662.32217 17848.95815 31-May-00 4042.240807 6430.47619 26078.01744 16788.77411 30-Jun-00 4189.113472 6666.666667 26702.15695 18236.08222 U.S. Global Investors, Inc. Annual Report on Form 10-K 2000 Page 11 of 47 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS Class C Common Stock (Voting Stock). At September 19, 2000, there were 1,496,800 shares of the Company's class C common stock outstanding. The following table sets forth, as of such date, information regarding the beneficial ownership of the Company's class C common stock by each person known by the Company to own 5% or more of the outstanding shares of class C common stock. PERCENT OF SHARES NAME AND ADDRESS OF BENEFICIALLY OWNED ISSUED OUTSTANDING BENEFICIAL OWNER CLASS C COMMON SHARES -------------------- ------------------ ------------------ Frank E. Holmes 7900 Callaghan Road San Antonio, TX 78229 1,392,211(1) 93.01% ------------------------ (1) Includes 1,000,000 shares of class C common stock issued to Mr. Holmes that will be vested in equal amounts over a ten-year period and will be fully vested on June 30, 2008; 102,280 shares owned by F. E. Holmes Organization Inc.; 285,000 shares owned directly by Mr. Holmes; and 4,931 shares owned by Mr. Holmes in an IRA. CLASS A COMMON STOCK (NON-VOTING STOCK). At September 19, 2000, there were 6,034,794 shares of the Company's class A common stock issued and outstanding. The following table sets forth, as of such date, information regarding the beneficial ownership of the Company's class A common stock by each person known by the Company to own 5% or more of the outstanding shares of class A common stock. CLASS A NAME AND ADDRESS OF BENEFICIALLY COMMON SHARES BENEFICIAL OWNER OWNED PERCENT OF CLASS ------------------------------------ ------------ ---------------- Frank E. Holmes - San Antonio, TX 286,966(1) 4.75%(5) Mason Hill Asset Management, Inc. - New York, NY 409,000(2) 6.77% Royce & Associates, Inc. - New York, NY 386,205(3) 6.39% Heartland Advisors, Inc. - Milwaukee, WI 600,000(4) 9.94% ------------------------ (1) Detail of beneficial ownership set forth below under "Security Ownership of Management." (2) Mason Hill Asset Management, Inc. owns 250,500 shares or 4.15%. Equinox Partners, LP owns 158,500 shares or 2.62%. Mason Hill Asset Management, Inc. and Equinox Partners, L.P. may be deemed to be under the common control of William W. Strong. Information is from Schedule 13D filed with the SEC on March 18, 1996. (3) Information is from Schedule 13G, dated March 9, 2000, filed with the SEC. (4) Information is from Schedule 13G, dated January 18, 2000, filed with the SEC. (5) Prior to their expiration in November 1999, Mr. Holmes owned an additional 100,000 exercisable options. Prior to their expiration, Mr. Holmes' beneficial ownership was approximately 6.41%. SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth, as of September 19, 2000, information regarding the beneficial ownership of the Company's class A and class C common stock by each director and by all directors and executive officers as a group. Except as otherwise indicated in the notes below, each director owns directly the number of shares indicated in the table and has sole voting power and investment power with respect to all such shares. U.S. Global Investors, Inc. Annual Report on Form 10-K 2000 Page 12 of 47 CLASS C COMMON STOCK CLASS A COMMON STOCK -------------------- -------------------- NUMBER OF NUMBER OF BENEFICIAL OWNER SHARES % SHARES % ---------------- ------------ ----- ------------ ---- Frank E. Holmes 1,392,211(1) 93.01 286,966(2) 4.75 Thomas F. Lydon, Jr. -- -- 10,000(3) .16 Susan B. McGee -- -- 67,035(3) 1.11 J. Stephen Penner -- -- 10,000(3) .16 Jerold H. Rubinstein -- -- 50,000(3) .82 Roy D. Terracina -- -- 89,100(3) 1.47 All directors and executive officers as a group (7 persons) 1,392,211 93.01 530,343(4) 8.79 ------------------------ (1) Includes 1,000,000 shares of class C common stock issued to Mr. Holmes that will be vested in equal amounts over a period of ten years and will be fully vested on June 30, 2008; 102,280 shares owned by F. E. Holmes Organization Inc.; 285,000 shares owned directly by Mr. Holmes; and 4,931 shares owned by Mr. Holmes in an IRA. (2) Includes 85,966 shares and options to obtain 101,000 shares of class A common stock as well as 100,000 shares of class A common stock held by F.E. Holmes Organization, Inc., a corporation wholly owned by Mr. Holmes. Mr. Holmes' 85,966 shares also include 1,300 shares of class A common stock owned separately by Mr. Holmes' wife. Mr. Holmes disclaims beneficial ownership of these 1,300 shares of class A common stock. (3) Includes shares of class A common stock underlying presently exercisable options held directly by each individual as follows: Mr. Holmes - 101,000 shares; Mr. Lydon - 10,000 shares; Ms. McGee - 51,500 shares; Mr. Penner - 10,000 shares; Mr. Rubinstein - 40,000 shares; and Mr. Terracina - 51,000 shares. (4) Includes the shares underlying presently exercisable options held by the directors and officers listed above and beneficial ownership of an additional 17,242 of class A common stock or its underlying presently exercisable options held by officers other than those listed above. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS U.S. Global is invested in several of the mutual funds it manages. There is incorporated in this Item 13 by reference that portion of the U.S. Global Investors, Inc. Annual Report to Shareholders, attached to this Form 10-K as Exhibit 13, appearing under Note 13 to the Consolidated Financial Statements. Frank E. Holmes, director and Chief Executive Officer of the registrant, has, throughout the year, received loans from the registrant. In November 1999 these loans had an accumulated balance of $121,234. As of September 22, 2000, these loans had an accumulated balance of $18,081. These loans were made against bonuses owned to Mr. Holmes. No interest was charged on these loans. U.S. Global Investors, Inc. Annual Report on Form 10-K 2000 Page 13 of 47 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: 1. Financial Statements The Consolidated Financial Statements are incorporated herein by reference to the Company's Annual Report to Shareholders as an exhibit hereto (see Item 8): o Reports of Independent Accountants o Consolidated Balance Sheets at June 30, 2000 and 1999 o Consolidated Statements of Operations for the three years ended June 30, 2000 o Consolidated Statements for Cash Flows for the three years ended June 30, 2000 o Consolidated Statements of Shareholders' Equity for the three years ended June 30, 2000 o Notes to Consolidated Financial Statements 2. Financial Statement Schedules None. 3. Exhibits 3.1 Third Restated and Amended Articles of Incorporation of Company, incorporated by reference in the Company's Form 10-K for the fiscal year ended June 30, 1996 (EDGAR Accession Number 0000754811-96- 000025). 3.2 By-Laws of Company, incorporated by reference to Exhibit D of the Company's Registration Statement No. 33- 33012 filed on Form S-8 with the Commission on January 30, 1990, as amended, included herein for purposes of entering into EDGAR date base. 10.1 Advisory Agreement dated October 27, 1989, by and between Company and United Services Funds (USF), incorporated by reference to Exhibit (4)(b) to the Company's Form 10-K for fiscal year ended June 30, 1990 (EDGAR Accession No. 0000101507-99-000019). 10.2 Advisory Agreement dated September 21, 1994, by and between Company and Accolade Funds, incorporated by reference to Exhibit 10.2 to Company's Form 10-K for fiscal year ended June 30, 1995 (EDGAR Accession Number 0000754811-95-000002). 10.3 Sub-Advisory Agreement dated September 21, 1994, by and between Company and Accolade Funds/Bonnel Growth Fund and Bonnel, Inc., incorporated by reference to Exhibit 10.3 to Company's Form 10-K for fiscal year ended June 30, 1995 (EDGAR Accession Number 0000754811-95-000002). 10.4 Transfer Agency Agreement dated September 21, 1994, by and between United Shareholder Services , Inc. (USSI) and Accolade Funds/Bonnel Growth Fund, incorporated by reference to Exhibit 10.4 to Company's Form 10-K for fiscal year ended June 30, 1995 (EDGAR Accession Number 0000754811-95-000002). 10.5 Transfer Agent Agreement by and between USSI and USF, incorporated by reference to Exhibit 10(b) to the Company's Form 10-K for the fiscal year ended June 30, 1989; Transfer Agency Agreement, as amended, between U.S. Global Investors Funds and United Shareholder Services, Inc. dated November 1, 1988, incorporated by reference to Post Effective Amendment No. 79 filed September 3, 1996 (EDGAR Accession No. 0000101507-96-000065). U.S. Global Investors, Inc. Annual Report on Form 10-K 2000 Page 14 of 47 10.6 Loan Agreement between Company and Bank One, dated April 12, 1994, and Modification Agreement, dated February 28, 1995, for $1,385,000 for refinancing new building, incorporated by reference to Exhibit 10.8 to Company's Form 10-K for fiscal year ended June 30, 1995 (EDGAR Accession Number 0000754811-95- 000002). 10.6 United Services Advisors, Inc. 1985 Incentive Stock Option Plan as amended November 1989 and December 1991, incorporated by reference to Exhibit 4(b) of the Company's Registration Statement No. 33-3012, Post- Effective Amendment No. 2, filed on Form S-8 with the Commission on April 23, 1997 (EDGAR Accession No.754811-97-000004). 10.7 United Services Advisors, Inc. 1989 Non-Qualified Stock Option Plan, incorporated by reference to Exhibit 4(a) to the Company's Registration Statement No. 33-3012, Post-Effective Amendment No. 2, filed on Form S-8 with the Commission on April 23, 1997 (EDGAR Accession No. 754811-97-000004). 10.8 U.S. Global Investors, Inc. 1997 Non-Qualified Stock Option Plan, incorporated by reference to Exhibit 4 to the Company's Registration Statement No. 333-25699 filed on Form S-8 with the Commission on April 23, 1997 (EDGAR Accession No. 7548111-97-000003). 10.9 Custodian Agreement dated November 1, 1997, between U.S. Global Investors Funds and Brown Brothers Harriman & Co. of Massachusetts incorporated by reference to Post-Effective Amendment No. 82 dated September 2, 1998 (EDGAR Accession No. 0000101507-98-000031). 10.10 Custodian Agreement dated November 1, 1997, between U.S. Global Accolade Funds and Brown Brothers Harriman & Co. of Massachusetts incorporated by reference to Post-Effective Amendment No. 13 dated January 29, 1998 (EDGAR Accession No. 0000902042-98-000006). 10.11 Amendment dated May 14, 1999, to Custodian Agreement dated November 1, 1997, between U.S. Global Accolade Funds and Brown Brothers Harriman & Co. of Massachusetts incorporated by reference to Post- Effective Amendment No. 16 dated February 29, 1999 (EDGAR Accession No. 0000902042-99-000004). 10.12 Distribution Agreement by and between USGB and U.S. Global Accolade Funds dated September 3, 1998, incorporated by reference to Exhibit 10.12 to Company's Form 10-K for fiscal year ended June 30, 1998 (EDGAR Accession Number 0000754811-98-000009). 10.13 Distribution Agreement by and between USGB and U.S. Global Investors Funds dated September 3, 1998, incorporated by reference to Exhibit 10.13 to Company's Form 10-K for fiscal year ended June 30, 1998 (EDGAR Accession Number 0000754811-98-000009). 10.14 Statement re: Computation of Per Share Earnings, filed herein. 13 Annual Report to Shareholders, filed herein. 21 List of Subsidiaries of the Company, filed herein. 23.1 Consent of Independent Accountant, Ernst & Young LLP, filed herein. 23.2 Consent of Independent Accountant, PricewaterhouseCoopers LLP, filed herein. 24.1 Power of Attorney, incorporated by reference to Exhibit 24.1 to Company's Form 10-K for fiscal year ended June 30, 1998 (EDGAR Accession Number 0000754811-98-000009). 24.2 Power of Attorney, incorporated by reference to Exhibit 24.2 to Company's Form 10-K for fiscal year ended June 30, 1998 (EDGAR Accession Number 0000754811-98-000009). U.S. Global Investors, Inc. Annual Report on Form 10-K 2000 Page 15 of 47 27 Financial Data Schedule, filed herein. (b) Reports on Form 8-K None. U.S. Global Investors, Inc. Annual Report on Form 10-K 2000 Page 16 of 47 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. U.S. GLOBAL INVESTORS, INC. By: /s/ Susan B. McGee ------------------------------ SUSAN B. MC GEE Date: September 29, 2000 President, General Counsel Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURE CAPACITY IN WHICH SIGN DATE /s/ Frank E. Holmes ------------------------------- FRANK E. HOLMES Chairman of the Board September 29, 2000 of Directors Chief Executive Officer Chief Investment Officer * /s/ Thomas F. Lydon, Jr. ------------------------------- THOMAS F. LYDON, JR. Director September 29, 2000 * /s/ J. Stephen Penner ------------------------------- J. STEPHEN PENNER Director September 29, 2000 * /s/ Jerold H. Rubinstein ------------------------------- JEROLD H. RUBINSTEIN Director September 29, 2000 * /s/ Roy D. Terracina ------------------------------- ROY D. TERRACINA Director September 29, 2000 /s/ David J. Clark ------------------------------- DAVID J. CLARK Chief Financial Officer September 29, 2000 Chief Operating Officer Tracy C. Peterson ------------------------------- TRACY C. PETERSON Chief Accounting Officer September 29, 2000 *BY: /s/ Susan B. McGee ------------------------------- SUSAN B. MCGEE September 29, 2000 Attorney -in-Fact under Powers of Attorney dated June 30, 1998