US Global Investors Inc (GROW) 2016 Q4 法說會逐字稿

Good morning. Thank you for joining us for our webcast announcing US Global [Investors, Inc.] results for the FY16. I'm Lisa Aston. If you have any questions during the webcast, you can enter them in the questions area of the control panel sidebar, which is normally to the right of your screen. Also, we will send a copy of the slides to attendees after the completion of today's event. The presenters for today's program are Frank Holmes, US Global Investors CEO and Chief and Investment Officer; Susan McGee, President and General Counsel; and Lisa Callicotte, Chief Financial Officer.

During this webcast, we may make forward-looking statements about our relative business outlook. Any forward-looking statements and all other statements made during this webcast that don't pertain to historical fact are subject to risks and uncertainties that may materially affect actual results. Please refer to our press release and corresponding Form 10-K filing for more detail on factors that could cause actual results to differ materially from any described today in forward-looking statements. Any such statements are made as of today and US Global Investors accepts no obligation to update them in the future.

Now let's go to Frank Holmes, CEO and CIO for an overview of the period. Frank?

Thank you, Lisa. Let's go to slide number 5. We continue to strive to be the Go-to stock for exposure to emerging markets resources. We remain debt-free, with a strong balance sheet which reflects a cost structure; Lisa Callicotte, our CFO, will go into more detail on. And we've been able to maintain that monthly dividend return on equity discipline, even through these challenging times, which we believe that the light at the end of the tunnel is sunshine; it's not a train still coming at us. It seems that we've had a balance in the assets, and we'll talk more about that, which is positive, in particular, going into the summer quarter after Brexit.

I want to thank, on slide number 6, all our top shareholders, FIM Group, for being loyal through this whole process. TheRoyceFunds, Vanguard, which is an index, but Sentry, which is much more of an active mindset. The larger shareholders are very active, and the newest addition to the group is the Newberg Family Trust, which acquired 5%, and we thank them all for being loyal and insight and information, questions some have asked us. So thank you all.

Slide number 7, GROW dividends paid monthly, consistently paid for more than nine years. The current yield is 1.71%, and so the monthly dividend is a modest $0.025 (sic -- see slide presentation, "$0.0025"), but it's paid monthly for that discipline.

The share repurchase program remains in motion. The Board has approved a repurchase of up to $2.75 million of its outstanding common stock in the open market through the calendar year 2016. During the fourth quarter of 2016, the Company repurchased 25,493 class A shares using a cash of $44,000. During the FY16, the Company repurchased 177,998 class A shares using cash of $313,000 which is slightly over 1% of these shares outstanding.

We use an algorithm to buy back shares on down days, only on down days, and of course, with all the applicable rules and regulations that restrict the amounts and times of repurchases, this may be suspended or discontinued at any time. And as evidenced by regulatory filings, myself, Frank Holmes, is purchasing shares at GROW pursuant to a Regulation 10b-18 plan.

Balance sheet strength, as I mentioned earlier, there is no debt. Cash has been in a decline, as we've wrestled with the restructuring cost and we've gone through this in previous presentations in detail. But it's just not as -- what you would think is fast and readily to say shut down a product, get rid of a product. The process is very long and arduous and much more expensive from that 40F mutual fund arena. So I will try to comment on it later. The difference between separate account business and ETFs and mutual funds, the barriers or the ability to open and close product, move around, they're very, very different in their overall cost structure and timelines.

On slide number 10, I tried to highlight the transition. The peak in gold at [$1900] was in September of 2011. But the stocks themselves that's already peaked and were declining, and that affects our asset base. We still correlate pretty strongly with the gold stock indexes.

As you can see in this visual here, we shut down -- closed the money market funds. We did that because at zero interest rates, the cost of maintaining a $1 NAV and the cost of regulations are continuing to grow; every year is something new. It's just unending, this process. So we found that we had to get rid of our money funds, because it was going to cost us millions of dollars a year. We show that that hit of getting rid of them and partnering with US Bancorp in that transition.

And then the assets and resources in the emerging markets continued another great decline in 2014 and 2015. And it appears in December of 2015 when we had our transition to Atlantic Fund Services, it also put the gold market and gold performances start to put on a spectacular move, which we commented in our weekly Investor Alert.

So this is a good recap of where the transitions were, just cost of closing money funds and transition, they always cost much more. And with that, you lose great employees. People who have been loyal to the Company a long period of time, but you no longer need those services, and so there's that cost of severance, that's an additional cost that impacts when you close and go through those transitions.

As you can see, the quarterly average assets under management, they've had a modest uptick, which is most important because it takes us above where we're no longer losing money like we were doing on a daily basis. It's very modest, but we feel better that we've finally started to climb out of that deep hole that was impacting resources' emerging markets. The asset breakdown, we're very fortunate that we still have a very loyal shareholder base that deal directly with us, and that's the significance of the Investor Alert and communicating with those investors.

Slide number 13 is a great risk management. It's a tool that all the quants use. I was recently at the ETF conference of MorningStar, and it was interesting hearing how the quants that are behind a lot of the smart-beta ETFs et cetera, use this volatility factor. And if you're looking -- if you want to forecast the next four years or next five years or next two years, you look back and say, what is the sigma over one year, two years, three years, four years, for an asset class. And the worse it's been, then the probability for the next time period, odds favor that they will rally.

So I was thrilled to see this thought process, that different securities have different sigmas or different volatility, and then I come back just to help investors and remind them it's a risk-management tool in addition to an opportunity. But GROW's rolling one-year volatility is plus or minus100%. It's really difficult to recognize, but that's what this stock can do. And the daily volatility is plus or minus 4%. The New York Stock Exchange Gold Miner's Index is plus or minus 3%, and the [rolling] is 35%. That is 70% of the time, approximately that the gold stocks can go up or down 35%.

Bullion is lot less and more comparable to the S&P 500, whereas oil is substantially greater than the price of gold in its volatility, both on a daily basis and on an annual basis. I think it's just really important for investors to recognize another data point that came out that six of the top eight hedge funds were quants, and the bulk of the money, where to the data world that follows data, like understanding there's a volatility of an asset class.

Three key drivers on slide number 14 for fund regulatory expenses. And this continual pressure is on fund expenses, but the creep with regulatory cost, of legal bills that go up with them, the cost for an audit when I go back from 25 years ago, that audit bill for GROW is up 500%, even though we have less assets, less employees, substantially less employees and complexity.

But the overall cost -- so when you have a small fund family or you have small shareholder accounts and small funds, you will have higher fund expenses. And that's something that is important to communicate, and that's where our fund shareholders to recognize this, especially with the new rules coming out with fiduciary, which says basically it's the cheapest, not the best that supersedes decision-making is what I hear when I go around at investment conferences is the concern.

But we'll see how that unravels and unfolds, but it's another one of those very expensive regulatory costs that are impacting the financial industry. And we're navigating with it. The best part is we're quickly adapting, we have this adaptive process, and our approach to building performance and managing costs is continuous on slide number 15. And I think it's important, as I just wish we could do it faster, but it is a very thoughtful and meticulous process we have to go through.

Now I'd like to turn it over to Susan McGee, our President and General Counsel, on slide number 16.

Starting in December of last year the shareholders of US Global Investors Funds held a special meeting and approved the election of a new slate of trustees for the fund. This action resulted in the funds becoming a part of the family of funds that receive administrative fund accounting and transfer agency services from Atlantic Fund Services.

The primary reason for this initiative was to streamline costs; that would positively impact both mutual fund shareholders and the GROW shareholders. When this transition is completed in December of 2017, we believe the fund shareholders and GROW shareholder should fully realize the economies of scale, as a result of this transition to a larger fund complex.

Atlantic Fund Services provides a full range of services to various investment vehicles, and we do believe that this transition will continue to be beneficial to the fund shareholders and GROW shareholders.

Anything else Susan? You like to comment on slide 17 or 18?

No.

Slide number 20 is building for future growth. GROW has 65% ownership in Galileo Global Equity Advisors, a Canadian asset management. We were earning a valuable brand awareness in over 170 countries through our publishing of our own financial commentary and other original content, and we continued to develop an innovative and dynamic ETF.

It's been filed that we're working on one particular smart-beta gold equity. And one of the things I just share with investors, when you launch this, you really have to make sure you put in the thousands and thousands of hours of regressional analysis, because once it goes out in the marketplace, it has to be able to show its resiliency, both in rising gold prices, falling gold prices, rising currency, falling currency, changes around the world. So we feel that we have done the -- it's probably pushing 4,000 hours of quantitative research and making sure that we get this product launched and through the regulatory process, it will have tremendous survivorship and exceptionally competitive versus the other gold ETFs that are out there, particular the gold equity ETFs.

The next visual on 21 is to show you that we continue to this growth in ETF products. And probably more important on slide number 22 is US domestic active managed funds are seeing -- are witnessing a decline and assets are being stripped away; it's not so much buy one mutual fund, sell this one to buy another mutual fund. They're slowly being stripped away with ETFs, and so it's just going to continue.

I do think there's some tremendous benefits where ETFs can [deal with], and they can't deal with where we've been able to generate alpha, in particular, near term. That ability to manage cash levels, not have to react every day to fund flows, how you build your cash and how you look for odd lots, et cetera. I think that will continue to be an important venue for active managers. The ability to hedge a country's currency and take off a country's currency. When ETFs go to hedge a country's currency, it's always -- that's basically standardized in that system. It's a great system, but it doesn't have the dynamics. I think the active mutual fund is going to have to become much more quantitative driven.

The other thing is I've noticed is we've always had macro themes at US Global and they show every week in our Investor Alert. Every morning, our investment team meets at 7:30 to go through what impact at the fund holdings and talk about macro issues around the world. We publish why we look at PMI as a precursor to change, both positive, negative that impact resources, et cetera. Well, more active managers now listening to Bloomberg in the morning are using macro themes.

I recently went on a trip from Vancouver to Toronto, New York, visiting all the sell-side gold analysts from independent brokers and bankers, and what was interesting is who's been buying all these gold stocks. And most of them think it's the normal gold fund. And what's really come out is that in that space, the average mutual fund or the average pension fund that is domestic is not buying the gold stock. They are way underweight. Canada is about 8% as an overall stock exchange, and the Commonfund is probably only about 2% weighted in gold.

And so, one asks, well, how did they go up 150% and what's been driving that? And some of the quant shops out of CIBC were able to articulate to me that it's macro funds. It is the large macro funds that have been players on gold when you've gone to a negative interest rate scenario. And it's the quant funds that see rising gross returns on capital, they see rising profit margins. We wrote about it last week, the comment that the best-performing stocks out of the 88 gold producers we look at globally, but we selected up only those with more than $200 million market cap. One of the stocks with the biggest surge had the lowest G&A to revenue, but if you ask the gold analysts on the sell side, they would never recommend the stock because of that. But they were the best-performing stocks.

It's -- the world has changed, and the significance of quantitative approach into the thesis of the mosaic of the CFA is so critical to be competitive. And we're doing that, and I just wish -- that we are able to do it faster and attract more assets for that. But I think that this is going to be a key growth sector.

Now we take a look at the Jets ETF, which is another classic example, where we went back and looked over 10 -- 40 quarters, 10 years of data, and looked at rolling 12-month periods, rolling 36-month periods. We wanted to know how robust our factors were in catching upcycles and down cycles, bankruptcies, et cetera that took place in the airlines and launched our product.

And we're happy with it. It's interesting to see that we had a big run up in the assets and it curtailed since March. But the average trading volume is around 50,000 shares. And I think, (inaudible) 49,000 to be explicit, but that's for a very short time period. At times, it's run up to 100,000 when [Wisalco creates]. We were able to get stock options because of the daily volume is great enough, and the asset size is great enough. So it's been able to garner tremendous amount of media attention to this particular asset. So we're happy with it and hope that the success of our gold equity ETF is just as great and much greater.

Now let's go on to US Bancorp, successful first year of ETF strategy, ongoing relationship with US Bancorp fund services ETF Series Solutions, of which Jets is a member. One-year anniversary of our first smart-beta ETF, focus on the global airlines industry, and leveraged expertise. So it's coming back as this importance of looking at that quant world.

There's another visual, reminiscing of a year ago of launching our Jets ETF. A big part of that success has been the media, the journalists that we have and the people with strong writing skills and analytical skills that attend our morning meetings and research meetings. So they're very, very caught up with understanding capital markets and what are the drivers. So media coverage of Jets is over 100 million views through earned media exposure, which is a lot less expensive than buying advertising. It's becoming a fact that we can provide knowledge, we can have insight, we can have an opinion. And as always, we are balanced in that spot approach of talking about both the good and the bad of what's driving that industry.

And last, before I end with it, is it's interesting, it still has been a challenged industry, even though when you run these quant models, it has the lowest cash-flow multiples in the marketplace, highest free cash flow. So, therefore, the lowest free cash-flow multiples, and the industry continues to buy back their stock and increase their dividend at a rate substantially greater than the S&P 500.

So the industry is robust and healthy and strong, but the stock prices are not demonstrating that negative sentiment, but I think that will turn. And when it turns, Jets can go to $1 billion as a smart-beta ETF. Now I'd like to turn it over to the brains; I'm known as the brawn, and then, the brains is Lisa Callicotte, our CFO.

Thank you, Frank. Good morning. Before I summarize our results of operations, I wanted to note that 2016 was another transition year for us. During the year, the Company endorsed the proposal for US GIF to elect new trustees and become a part of the family of funds that receives services from Atlantic Fund Services, as discussed earlier. The proposal was approved, and as anticipated, effective December 2015, the Company ceased to be the distributor of US GIF and no longer receives distribution fees and shareholder servicing fees from US GIF.

The Company-sponsored change also resulted in the Company no longer being responsible for paying certain distribution and shareholder-servicing-related expenses, and is now reimbursed for certain distribution expenses from the new distributor of US GIF. The operations associated with providing these services are considered discontinued operations, and the revenues and expenses have been reclassified as discontinued operations in the current and prior years.

Now I will summarize the results of operations for fiscal year June 30, 2016. Beginning on page 28, we recorded total operating revenue of $5.5 million for the year. This is down $1.8 million, or 25%, from the $7.3 million in 2015, primarily due to lower assets under management related to market appreciation and shareholder redemption.

Moving on to page 29, operating expenses for the year were $9.6 million, a decrease of $1.2 million, or 11%, primarily for the following reasons: employee compensation and benefits decreased $481,000, or 9%, as a result of fewer employees and lower performance-based bonuses. General and administrative expenses decreased $396,000, or 10%, mainly due to strategic cost-cutting measures, but was also somewhat offset by costs related to the transition of US GIF to third-party service providers. Platform fees decreased $348,000, or 41%, due to a decrease in assets held through broker/dealer platforms.

On page 30, we see our operating loss for the FY16 was $4.2 million, and this was slightly offset by our other income, which is income related to our investments. Other income was $485,000, and this is an increase from prior year of $51,000, or 12%. The increase was attributable to lower unrealized losses on trading securities somewhat offset by the increase in other than temporary impairment losses and decreases in dividend and interest income.

Loss attributable to discontinued operations for the distributor for the year ending June 30, 2016 declined $63,000, or 78% compared to the year ended June 30, 2015. The prior-year loss reflects a full year of distribution operations, while the current year reflects operations until the transition to the new distributor in December 2015. Net loss attributable to US GIF after taxes for the year was $3.7 million, or a loss of $0.24 per share.

Moving on to page 32, we see that we still have a strong balance sheet. It includes a high level of cash and securities that combine to make up 67% of our total assets. As you see on page 33, we still have no long-term debt. The Company has a net working capital of $16.9 million and a current ratio of 14 to 1. With that, I'd like to turn it over to Susan McGee.

Thank you, Lisa. The majority of our sales and marketing efforts over the past few months have been focused on our gold equity funds. Our long-standing top performer, the Near-Term Tax Free Fund, and our newest product, the US Global Jets ETF, which is the only airline ETF on the market at this point. As Frank mentioned earlier, Jets celebrated its 12-month anniversary in May, and it has received extensive financial media coverage and interest from the investment community. Jets utilizes a dynamic rules-based index strategy, and it provides investors with a diversified exposure to the global airline industry.

We believe performance-based results are important to our investors, and we share with investors that it's actually easier or the odds are better to become a professional NBA player than for a fund to deliver 21 consecutive years of positive performance. We are proud that our Near-Term Tax-Free Fund is 1 of only 39 equity and bond mutual funds out of more than 31,000 funds that had delivered a consecutive, positive annual return for the past 21 years. We find this remarkable.

Our Near-term Tax Free Fund continues to provide investors a calming solution, because it has consistent positive performance, and we find investors appreciate the monthly tax-free income that the fund can provide. The fund strategy uses a portfolio of high-quality municipal bonds with relatively short maturities. When investors look at NEARX against the S&P 500 index over the past 15 years, you can see that the fund's history of -- has no drama.

Also the Company's gold equity mutual funds have benefited from the strong gold market in 2016. In particular, the World Precious Minerals Fund has been beating its benchmark by a very significant amount for both the one-year and the three-year periods. Investor's Business Daily recently featured both the Gold and Precious Metals Fund and World Precious Minerals Fund earlier in September.

NEARX has earned the MorningStar four-star rating for overall performance in the municipal national short-term funds category, and our precious metals fund has earned the four-star rating in the equity precious metals fund category. The World Precious Minerals Fund has earned a five-star rating in the three-year period. We're also pleased that two of our mutual funds hold the top Lipper Leader rating. This rating is based on investor-centered criteria. And on a scale of one to five, Lipper Leader funds that rate a five are in the top 20% of their category. The Near-term Tax Free Fund and US Government Securities Ultra-Short Bond Fund both rate a five for preservation.

The Company and our funds continue to receive an invaluable amount of viral publicity gained through media interviews, as Frank mentioned earlier. We have recommendations by influential financial newsletter writers and the sharing and syndication of our award-winning original content by third-party publishers. For example, our article on the top 10 gold producing mines in the world was featured by Business Insider, and it received over 86,000 views. And Frank Holmes' commentary is often featured by prominent publications, including Forbes, Seeking Alpha, ValueWalk, Business Insider, and all of these sites have millions of monthly visitors.

We call Frank our globetrotter because he, along with others on our investment team, travel around the world to share our thought leadership. We interact frequently with loyal followers through Facebook, Twitter, LinkedIn, Instagram. The financial newsletter community also features recommendations for our funds. All of this coverage helps us leverage our brand, because we can reach millions of readers, viewers, and potential investors throughout these relationships.

Kitco News, the biggest gold website in the world, that has an audience of over 2 million monthly visitors, features the Gold Game Film show, with Frank Holmes' weekly gold market analysis. Kitco's partnership with The Street has broadened the show's exposure and viewership. Since the show's beginning in 2014, over 110 video episodes of Gold Game Film have aired.

US Global is well-known for timely and balanced market insights and thought leadership. The Company has earned a total of 69 star awards from the Mutual Fund Education Alliance, recognizing excellence in investor education. Investors can sign up at USFunds.com and join over 30,000 subscribers who are receiving our award-winning investor alert and advisor alert weekly e-newsletters and our CEO blog, Frank Talk. And now I'd like to turn it back over to Frank who will share some of our recent insights.

Thank you, Susan. You can see on slide 54, read more about this topic, Frank Talk. This is a periodic table of commodity returns, and what we've tried to show, I said earlier is that every asset class will revert back to the mean. And it shows you, basically, no one commodity stays at the very top forever.

And usually, they've been down at the bottom for a year or two, then the rise to the top, which is a basically the dynamics of supply and demand. If there's additional supply, they go to the bottom until either supply is restricted or the demand picks up dramatically. And usually what happens is there is a lag. Supply gets cut; demand picks up. It takes a while in the commodity world for supply to come back onstream, and you have these commodities go through these incredible runs. And that's why I think you need active management when it comes to resources. This is the most popular page on our website for people downloading and sharing. We see it showing up in many different publications, and newsletter writers use that in talking about the theme of turns in the commodity world.

The next slide is the rise of the middle class, and I think this is so important to recognize the significance of this. It's not just myself, but it's also McKinsey Consultants have commented on it. We've written extensively on the GDP per capita shift, on the importance of Chindia, which is 40% of the world's population. That the GDP per capita of China last year surpassed the US, but only because of sheer size. When you have 1.4 billion people and you just have to have 8% of them, not 50% but 8%, are now making what 50% of America's middle class makes. That is a big tipping point because it's the rise of the middle class that drives discretionary good sales that drives tourism.

Last week I was driving up to Austin, and I stopped at the outlet mall and there was once again photos of two different credit card providers in Chinese for all of the Chinese tourists that are going there. Whereas 10 years ago, it was predominantly in Spanish for all the Mexicans or wealthy nationals that were coming up to San Antonio to do shopping at the premium outlet mall. This is the transition, and you see the same thing if you go to the Grand Canyon, you'll see the signage now is also in Chinese. For a while it was Japanese, but the big travel DNA is the Chinese, and they all want to come to America. They all love America. They all love American products.

And America, a couple years back passed a visa, tourist visa that allowed the Chinese to come for 10 years. It's the most liberal of all of these; it's even stronger than Europe. And that was to attract these tourist dollars. So I think it's important to follow this theme of the rise of the middle class, which then also drives sales for Apple and it drives the success of fast food companies et cetera. And Starbucks has talked about their tremendous growth taking place.

So if you visit our website Investor Alert and sign up, you'll see on a regular basis, you can go back to read previous articles. We've highlighted the significance of the rise of the middle class.

And then we get more micro and we talked about the life cycle of gold, and every year, there's a seasonal pattern to gold. It goes through this transition, and a lot of -- we've commented on this, the fear trade and the love trade. And whenever the fear trade and the love trade show up at the door at the same time, you get a tremendous surge in the price of gold like we had in September of 2011 when gold hit $1900.

We had the Indian wedding season at that time, and we also had negative interest rates of 10-year government bond was minus 3%, as it went to by 2015, it went to plus 2%. Even though we were all full because Fed funds remained basically zero, real interest rates, that is the CPI number takeaway -- is deducted from whatever the government is going to pay you on a 5-year or a 10-year government bond, gives you the real rate of return.

So inflation is running at 3% and the government is only paying you 1% for a 5-year government bond, you're losing money by buying that bond. And what we saw is that the CPI number fell, and that impact is so that the government is all of the sudden paying you positive grow rates because rates slightly went up, but inflation went down, the dollar soared, gold fell. It's an inverse relationship; we've written about it so often. It's so important; it drives the DNA of the volatility of the asset class.

But in that other component of fear is love. Love is so important because it relates to the rise of the middle class of Chindia. And why do I say that? It's because there's a cultural affinity. I'm working on a book that's coming out on the great love trade. It's just recognizing the importance culturally of these countries of giving gold in the event that something happens. We have life insurance; they have gold.

They have -- if there's a currency crisis, they have gold. If government had poor policies, they have gold. If the government was to try to confiscate the assets, like they did in Cyprus because of mismanagment, or Greece, they halted it last summer, how fast people forget. The equity markets were seven, eight weeks. Your bank accounts were frozen. Only those that had access -- they couldn't use your ATM machine, so if you didn't have cash and you didn't have gold, then you were in tough, tough straits on feeding your family and doing things.

These other countries, they've seen a lot of these tragedies coming back and going forward, so they give their families, their loved ones gold. And it's very important, and the same thing when it comes to India for the Indian wedding season and the concept of the dowry. This goes back thousands of years of protecting the family and protecting the woman, the mother of the family with the gift of gold. I think it's important to recognize that, and it always drives the price of gold. Now a factor that can drive even more so are monsoon rains, because monsoon rains impact the agriculture society of India, who are the big gold buyers. From that end, it's important. We write about it. You can learn more, visit the website.

Gold has outperformed most asset classes, as this visual is trying to show you. As you can see, it's had a massive surge. So has the price of oil had a bounce this year as the dollar came off. A big move in gold, really started to have two big legs to it. The first took place in January, when we started seeing the rest of the world going to negative interest rates. When all of a sudden it went to $5 trillion, $7 trillion, $8 trillion, over $10 trillion of government bonds were offering you negative interest rates.

And an amazing part is the monetization of debt. Recently, the EU announced $80 billion a month and they're going to buy one third of it. And then what are they going to do with that money? So in Europe, you're finding that -- in Switzerland, places like that, they're buying their own stock market. South Korea, they are buying their stock market. Japan, they're buying shares. In fact, they own close to 15% of the public companies in their countries because they can get dividends that have higher yields. So the Swiss are buying Nestles, because the yield is higher than what they're offering. The 50-year Swiss government bond after Brexit this summer went negative, 50 years, went negative. This created a big surge in the price of gold.

Now, short term, every time there is a sentiment talk that rates are going rise in the US and rates should rise, then we see this backup, the price of gold comes off because the 5-year and 10-year government bond yields here start to go up. I've written about this. We saw a 2% decline in the price of bullion, with an 8% rise in five-year government bonds. It's just the inverse relationship and mostly today, we're dealing with negative rates.

The G20 get together; it's not about fiscal trade, it's not about deregulation. It's about synchronized global taxation of regulation. And I think that's what's a real key part, because it relies on -- in the monetary, there's two levers that drives economies: it's fiscal policies, which is tax and regulations, and regulations are always an in-form of taxation. Either it's when you streamline regulations, you open up the spigot of capital, you increase regulations, you slow down the movement of money. And where there is no abatement in regulations, so you have to have low interest rates and you have to have negative interest rates, otherwise you'll have a global recession. So this makes gold even more attractive.

And I think the other rhetoric, which is picking up is getting rid of credit cards -- I'm sorry, getting rid of cash. That cash component, so that, therefore, every time that comes up, we see gold sales and silver sales, talking to dealers, surge. People are buying safes in Germany and stocking it with cash and stocking it with silver and gold coins.

These are other factors drive that the idea that only credit cards, that only ATM is only place. Those countries that have gone to that, they've also pushed to tax every transaction, every time you spend money. So you need to spend $3 to buy a cup of coffee at Starbucks, they want to have, even on your after-tax dollars, there wants to be a transaction tax. This has been pushed around. So these things really help gold. They just help. It's amazing to see and try to understand it, but there's been many articles written regarding it. In Germany, people buying their own safes and stocking them with cash.

The next is talking about average income tax by state, and as you can see, the state of Texas is extremely attractive. The state of Texas is much more organized, I think, when it comes to tax and regulation. A classic would be the road tax. We have the best roads, I think, in the country, and I travel by car all over. I've driven back and forth to Toronto many times, especially with my sons who are studying up there, and we used to do these road trips together. And you could really tell the difference as you drove up to Illinois and Michigan how bad the roads became. Well why? It's because you're supposed to pay at the gas pump X pennies that go towards the service of the state roads. Well what's happened in these other northern states is that it's being usurped for other social benefits, especially in election cycles, and it doesn't go back to maintaining the roads. Whereas Texas is very linear; it creates jobs and we have the best roads.

I think it's important, I've written a book, the growth -- there are many reasons that Texas so attractive. In talking to our chairman who is chairman of Carl's Jr., and they were commenting one reason why they looked at Texas is just the bureaucracy and pain of opening up food chains here and workman's comp and all the regs is so much more attractive in the state of Texas than California. And so Texas is seeing this resurgence, and even with the price of oil coming off, the economy is so big and resilient. And the things that shocked me was that we have twice the number of roads as California. That really shocked me, (inaudible).

Besides winning 60% of the gold medals that we highlighted. So I take a look at this and see where the flows are, and people will flow to where -- businesses will flow, people will flow where it's the best taxes for them, where they have a lifestyle and have an after-tax income, unlike the state of Illinois. I mentioned earlier I was at the -- at the ETF conference for Morningstar. Talking to locals there and they say they're taxing their cell phones. They're taxing everything, and I said, but why? And they said, it's all because of government pension plans, that they basically are underfunded for what was obligated and it's bankrupting them, the state and the city in particular, just like Detroit.

So I think that you'll see that migration of people and you see that globally what is taking place where money is respected and there's better transparency by governments and where they're spending the money and people feel they're getting a bang for the buck.

So it's not just a global event; it also happens in our great nation. And I think it's helping because it creates competition, and that's what you need for near term is actually looking at these states. When we look at a state, it's not just a short-term muni. We're looking at the overall state structure, what the issues are and when you have an imbalance of fiscal and monetary policies within that state and you have excessive taxation, then you chase people away. The economic base -- then those short-term munis become unattractive. And we overlay that with our quant models. Susan mentioned earlier, you get 21 years of performance. It is a quant approach of looking at the volatility of government bonds over the various time periods versus Feds.

Now I want to hop back to the macro theme; I've gone from micro back to macro. This is a very important theme. This little visual is showing you China and India. Chindia is important to recognize, it's actually known as China/India, is 40% of the world's population. And when you include Southeast Asia, where the recent meetings were taking place for the G20 and also ASEAN nations, you have more than 50% of the population of the world is in that area.

What's really important to recognize is it that that area, a lot of it is embracing America, American concepts. And so you have two city states there, Hong Kong and Singapore, with flat taxes. Incredible infrastructure to grow Singapore is reclaiming from the ocean and building incredible infrastructure, subway systems, etc, reclaiming from the ocean. How they do that with a low flat tax and how are they dealing with modernization of all that whole area? They're all looking, they're sending their best brains to American schools, watching Bloomberg in the morning, you'll see more and more Indian professors that have come over here and earned their PhD, and they're talking about economics, they're talking about healthcare.

There's an interesting trade between the intellectual capital of this area and America. We're exporting this individuality that's taking place. And there's a wonderful book written years go by John Nesbitt on Asia's mega-trends. He wrote one about China. But more important is what he wrote in the 90s on Asia's mega-trends. And what he wrote about in the early 90s is really unfolding in front of us today. I think we have to really -- it's important for investors to look at this and focus on this as an important theme for our great companies like Apple, et cetera. Now connect with us for Q&A.

Thank you, Frank. So we're ready for some questions. Again, you can enter them in the questions area of the control panel. We do have a couple of questions that have come in. First, has US Global Investors turned a quarter to profitability?

It is so easy in this world today to track what our assets are every day. I know a couple of investors download and they create their own financial model. And so in the event that there's no major new expenses that we would incur and the asset level is back to where they were in September 2014.

In September 2014 two years ago, with our assets at these level, we're losing about $4,000 a day. And I would share with you with all the restructuring and dropping costs that we're modestly making money, and that's what's really important. There has been a swing, and it's really simple line as you take a look at how the expenses dropped in the past quarter, where the assets are today.

I think as we have turned, we show you the visual, we will know more at quarter end exactly, we'll report those. But it is, as you can see, rising assets, in particular, when they are gold, global resources, emerging Europe or China, have a significant impact in both revenue and profit margin in our complex.

Thank you. Another question. One of the slides noted that assets under management increased in the third and fourth quarters. But the loss per share was $0.02 per share for both periods. Can you explain why loss per share was consistent when AUM and revenues increased?

Yes. It is difficult sometimes to actually see improvement and movement in a per-share number, just mainly due to rounding. But if you look in our 10-K and our quarterly information, we had a net loss in the third quarter of approximately $350,000. And in the fourth quarter, that improved and was $245,000. That is approximately $100,000 improvement and about 30%.

But when you're calculating the per share due to rounding, the third quarter was a little bit above $0.02 loss per share. And then the fourth quarter was approximately, I think it's $0.17 per share, which rounds to $0.02. So we are seeing the improvement as AUM goes up, we are seeing that hit our net income line.

We have kept and maintained the same discipline, I think is important for investors on expenses and bonuses, until we are able to show profits. We cut all bonuses dramatically for all employees, how we function. And I have a great team of 23 people here that are amazing.

It's like now, we've gone to a Navy Seals mindset. Everyone is doing two to three duties. And we go to outsource with Atlantic a lot of other bureaucratic work, and we stay focused on the core issues we have to deal with money management.

And the money management did improve. I think that's another important factor is the swing on that fulcrum fee. The fulcrum fee allows us that when we beat -- when any fund beats its benchmark by more than 5% over a rolling 12-month period, we get a bonus of 2 basis points that month. However, if it lags by 5%, we have to give back.

So some of the part of that restructuring with Atlantic, et cetera, was also restructuring of the money managers and duties and processes that we have internally and applying a much more rich and data-quantitative approach overlay, and that's improved the fund performance.

We have seen bonuses, and it's wonderful to see that our World Precious Minerals Fund is just killing it. It's beating up (technical difficulties). And it's a regulatory world; we can't share with you, only if you're an RIA, how we have outperformed the GDX and GDXJ for one and three years and they've garnered most of the assets.

One of the biggest, more spooky things that I've seen in this fund business is that I've never had such great fund performance in the gold space and seen such a little fund flows. The last time we ripped it open with these types of numbers, actively beating every category, we had millions of dollars a day coming in. Millions. And so, now you're talking about $50,000, $100,000 rather than millions. So at one time, it went up to, for a couple days, was $50 million a day was coming into the complex.

And so what we're seeing is that people really have not woken up to the significance of active management. And what we're happy about with our gold funds is their sharp ratio is much better than buying the GDX or GDXJ. The volatility is a lot less, and in this rising market, particular gold shares, has outperformed the GDXJ, and World Precious Minerals has, I meant.

That's important but the fund flows when you look at the calculations. And other funds that were beating us a couple years back before we improved this discipline of quant, we're only beating them by 70%. Not 7%, but 70%, other active gold funds. And that is the rotation.

It's even more difficult now from a marketing point of view is to market them. The regulatory scrub that takes place on articulating that if you're a four or five star, if you -- you're number one in your category, all of these things are basically being dominated with disclaimers that you really -- it's more difficult to articulate. And the cost of placing an ad or doing this stuff to get noticed is just more challenging.

But I really am pleased with our marketing team of how they're able to educate investors and articulate this, and how we do our webcast and communicate with our shareholders. How we're using technology rather than having a bunch of wholesales on the road that try to drive traffic to our own webcast.

We had a very successful one early this year on gold where we had the CEO of the World Gold Council participate, and which was a great traction around the world. We've had people listen to this, hundreds of people. So that's going to be the new marketing theme of how creative we are using webcasts like we're doing right now.

And the cost of this webcast right now has been dropping. So the cost of doing press releases is also dropping by finding new venues of distributing information. So that's what we're challenged with, and I'm really proud that our marketing department and legal compliance department is thinking this way and driving it down. Being innovative in trying to connect with the public.

Thank you, Frank. Thank you to our attendees for listening this morning and thank you for your questions. This concludes the US Global Investors webcast for the FY16, and this presentation will be available on our website at www.USFunds.com. Thank you.