Frank Holmes - CEO and CIO Susan McGee - President and General Counsel Lisa Callicotte - CFO

Good afternoon. Thank you for joining us today for our webcast announcing U.S. Global Investors' Results for the First Quarter of Fiscal 2017. I'm Lisa Aston. You may download a PDF of today slides by clicking on the red hand dot button. The presenters for today's program are Frank Holmes, U.S. Global Investors' CEO and Chief 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 facts are subject to risks and uncertainties that may materially affect actual results. Please refer to our press release and corresponding Form 10-Q filings 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 U.S. Global Investors accept 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, and thank you everyone for late on a Friday, which is very unusual for us to be doing a presentation especially with -- as we are trying to get our investor alert out. But, it's just a timeline, next week I will be in Australia and it was just faster to get it done this way, but I apologize for late Friday going through this Q&A opportunity, but more importantly just quickly give you an update that as our pattern -- comments regarding U.S. Global, we welcome all new investors and exist investors we thank you for your loyalty. U.S. Global Investors is an innovative investment manager with a vast experience in global markets and specialized sectors. Known as an investment corp., the company became a registered investment advisor in 1968 and as a longstanding history of Global Investing are launching first of their kind investment products including, the personal local fund. U.S. Global is well-known for its expertise in global and precious metals, natural resources in emerging markets and I will let that opportunity to get a tacit knowledge going down under to the country great of Australia, which has been a boom -- been a great gold stocks for our funds. They have had spectacular runs, have you visit our Web site, you can learn more about what's been driving those factors for Australian gold stocks. The next visual is showing our strengths, so we strive to be that go-to-stock exposure to emerging markets and resources. We are debt-free. We still have this great -- I think strong balance sheet with a very reflective cost structure. We maintain this multi-dividend and return equity discipline, it's been very challenging. We are happy to say that we've had a quarter that finally turned that we show that we need assets, or rebound an assets, or realignment of costs, less employees et cetera, which we commented on previous presentations. I think all have been helpful and they turn to being profitable. I think also that we are highly correlate to the price of gold, gold as a big rally, we rise with it and then gold goes to a correction and immediately our stock comes off with the correction, but I don't think the world of gold is the only thing we offer in particular we have other great products. I also want to go on to the next visual to thank all the investors, particularly FIM Group, The Royce Funds, Newberg Family Trust, the Vanguard Group and Sentry Investment management out of Canada for being an investors in GROW. We have consistently paid more than 9 years, and the yield is modest at 1.63 monthly dividend, the payment is tiny, but the point is as far as the discipline for us to make sure that we get our act together and adopting quickly and faster to maintain that dividend and hopefully, I think when assets go over $1 billion, we can only sit down and consider increasing it. But, we will need a real strong turn in these emerging markets and resources because we can show that rising assets are coming from great fund performance, by getting and attracting new assets is going to be a continuous process, but this rebound is so important to recognize what we've done and I want to thank particularly Lisa Callicotte and Susan McGee and the rest of the team, how they have streamlined costs down to that lower asset level, so that when we bounced, we do show a boom in that cash flow. The share repurchase program is in motion, the Board approved to repurchase up to 2.75 million of the Australian common stock and during the fiscal year, company repurchased -- it looks like a small number of 14,957 Class A shares using 30,000. But, we use an algorithm and the algorithm is to buyback shares in down days in accordance with all the applicable rules and regulations, there is trick amounts and times to repurchase this. We did earlier two years ago, cut back on the dividend and [allowed to] [ph] maintain the stock buyback, As evidenced by regulatory filings myself, purchasing growth pursuant to rule 10b-18 plan, which means I buy along with GROW and a certain allocation, so the prices are aligned. And it's totally remote for me giving an order and three strict rules that you must comply with to be able to buyback stock both as an individual as a corporation. Now, we are happy to go over our balance sheet. The little green dot there shows you that, you started investing in higher earning securities that's why looks at our cash drop, but really hasn't. We are just trying to earn higher interest income, dividend income on our cash. It's a strategic decision to enjoy higher returns on our invested capital especially in a low interest rate environment. And you can see, we are highlighting for you since 2011, when gold peak did 1900 and our assets had that massive surge over the 2008 meltdown. It's been a slow decline. And our decline as a lot do with falling resources around the world, emerging market trade, China, rising strong dollar, it had a big impact along with that was just raising regulatory costs that are just much more punitive for small fund groups. Any small fund group just feels that burden, and it's been a restructuring mode that we have been in. Susan can comment more about that restructuring and the final restructuring was a transition to [lending] [ph] services. The next visual is basically highlighting which I discussed earlier. There has been a rebound in assets both in Galileo and Canada and U.S. Global and Galileo's fund performance has improved in addition to the assets rising there and was good at that. We also turned the corner in positive cash flow and so did Galileo. So that we've had a double win. So, the next one is looking at the asset breakdown, the U.S. Global Investors funds. We have gone from a pie diagram to a triangle. I think it's just really easy to quickly see that the 30% of domestic and equity and fixed income funds and 70% of the emerging market not resources funds. So the higher fees are always associated with the 70%, which is important, which is a pillar and that's what's key about the raising assets is getting our equity assets back to a $1 billion and that really truly gives us the stable free cash flow. The other thing is interesting is that we still have the strong direct relationship through our investor alert, which has won many awards again this year, and overall, education marketing program and that's allowed us to enjoy a direct relationship with 75% of the customers, which are retail. Unlike most other investment advisors most of the money is through a third-party platform and they really don't know who the customer is, or as we have a strong emotional relationship because we published all the time and people feel that they are safe in respect of understanding why markets are going up or down and that's why we published the investor alert every Friday. The next one is just so important to investors to recognize; I always give this like I talk about gold, only have 10% gold and rebalance every quarter. If you are very active for once a year, but it is really appreciating, life is what managing expectations and different asset classes have different degrees of volatility. So, when we look at the gold stocks, they have -- it's a non-event over any rolling 12-month period that go plus and minus 40% in a year and 3% in a day. GROW can go plus or minus 4% that means 70% of the time, it is a non-event for GROW to go up or down 4% end of day plus or minus 80% over a year. And Gold Bullion is a lot less so you can see that the Gold Index is 3:1 to Bullion and GROW is more aligned and more leveraged to cash flow to rising gold standards and allow the gold stocks we invest in. And the S&P and Bullion are both the same in volatility over any short-term period or long-term period. And oil is much more like emerging markets, very volatile and the dollars you can see has clearly evolved so the -- it is the same is Gold Bullion and the S&P but over a one-year period it's least of volatility. But it does set-off volatility emerging markets, it's sort of a double factor that takes place, like a multiplying effect rather than two plus three is like two times three, so often it happens. So rather than growing at 5, you get 6. And I think it's important for investors to recognize that currency volatility does have a multiplying effect in other countries currencies and they could affect fund performance greatly. The three key drivers for our fund regulatory costs because we do have small funds and we are a small fund company and small shareholder accounts because we advocated 10% position in gold, so the average mutual fund customer is 50,000 that's only $5000 but legal accounting disclosure cost continued to raise and that basically says you are going to have a higher expense ratio and to be able to give the opportunity for small investors to have exposure to gold to understand why. It really is not something that benefits us directly. It is just the cost of having small accounts in a very regulated world. Our approach fund building performance, the managing cost is continuing, streamline, stability and growth, build capability ETF and realize potential as you know we filed for gold equity ETF and then just going to that process of making sausage and hopefully it comes off quickly. And so I feel, that will be a very unique and interesting product for us to be able to help investors when they go to take a look at the only one that own gold equity ETFs. We have noticed that went with GDX and GDXJ, gold funds are active funds, which received award recently. They all performed the GDX and as an active manager. But the psychology of the marketplace is just want to go to ETF. So I'm really [excited] [ph], when we finally get this product out there, we will have something to deal with the offer that person which is more focused on the ETF as a delivery of a product. Focused on core competencies, money management and marketing and sales but really our marketing, I think is so important and respect -- it's education. It's very much content marketing and making sure that investors are informed and have a balance perspective of the world. I would like to ask Susan to comment a little bit more on the relationship with U.S. Bancorp and Glazer, Atlantic and [indiscernible].

As we reported in previous quarters starting in December of last year, we initiated a restructuring with Atlantic Fund Services to better position our company to focus on strategic activity, which include portfolio management and marketing and sales activity. Due to this transition, the company is no longer recording certain distribution and shareholders servicing related revenues and expenses and we are hoping and planning and we have things on cost reductions, the ability of the funds to realize the common interest scale and we believe that this will be a win-win for both U.S. Global Investors fund shareholders and GROW shareholders.

Lisa?

Thank you, Frank. Good afternoon. I would like to summarize our results of operations for the quarter ending September 30, 2016. Beginning on Page 19, we reported total operating revenue of $1.98 million for the quarter. This was a 58% increase from the 1.25 million we reported the same quarter last year. The increase is primarily due to an increase in average assets under management and the U.S. Global Investors funds mainly due to appreciation and net purchases in gold and natural resource funds. It was somewhat offset by the decrease in administrative fees due to change in the administrative agreement with USGIF due to the [Technical Difficulty] certain services and other service providers as discussed by Susan. Our operating expenses for the quarter were $1.95 million; this is a decrease of $695,000 or 26%. The decrease is primarily due to strategic changes including the following. Employee compensation and benefits decreased $389,000 a 28% as a result of a reduction in work force; general and administrative expenses decreased $209,000 or 19% primarily due to strategic cost cutting measures and advertising expenses decreased $81,000 or 74% due to higher cost in the prior period related to the ETF that was launched in April of 2015. We see our operating income is $31,000 for the quarter ended September 30, 2016 versus a loss of $1.395 million for the same quarter in the prior year. On page 20, our other income which is income related to our investments is $253,000 compared to 534,000 for the quarter ending September 30, 2015. Net income attributable to USGI after taxes for the quarter was $263,000, this is an improvement over the same quarter in the previous year, which was a net loss of $286,800. As you can see on Page 21, this equates to $0.02 per share versus a loss of $0.06 per share for the previous quarter. Moving on to Page 22, we see, we still had a strong balance sheet, we owned our own building. We have cash and marketable securities of approximately $17.7 million that combine to make up 65% of our total assets. As you can see on Page 23, we still have no long-term debt. The company has a networking capital of $16.3 million and a current ratio of 14.1:1. With that, I will turn it over to Susan McGee.

Thank you, Lisa. Our investment team was honored recently about a Mining Journal. Susan and Frank Holmes and Portfolio Manager, Ralph Aldis with Best Americas Based-Fund Manager award for 2016. We are very proud of this latest recognition for our active management in gold and natural resources play. This award actually follows Frank Mining Fund Manager of year award for the Mining Journal in 2006 and Frank's recognition as a U.S. metals and mining top-gun by Brendan Wood International. Ralph is also named a top-gun in 2011, and again, in 2015. In addition, we have received 29 Lipper performance awards, certificates and top ranking since 2000. We are very pleased to offer this expertise to our fund shareholders. Our sales and marketing efforts have continued to focus on our gold and natural resources funds, our municipal bond fund and the U.S. global Jets ETF. Investors can find more information about our funds on our Web site, www.usfunds.com. The company and our funds continue to receive an invaluable amount of viral publicity which is gained through media interviews, through recommendations by influential financial newsletter writers and the sharing and syndication of our award-winning original content by third-party publishers. For example, our articles on the top 10 gold producing lines in the world was featured by Business Insider and it received over 89,000 views. And Frank Holmes commentary is often featured by prominent publications, including Forbes, SeekingAlpha, ValueWalk, and Business Insider; these sites have millions of monthly visitors. We do call Frank our globetrotter, because he along with others on our investment team, are traveling all around the world to share our thought leadership. We interact frequently with followers through Facebook, Twitter, LinkedIn, Instagram, Pinterest. Kitco News, which is the biggest gold Web site in the world that has an audience of around 10 million monthly visitors, features the Gold Game Film Shows with Frank's weekly gold market analysis. Kitco has a partnership with The Street and has broadened the show's exposure and viewership. Since the shows beginning in 2014, we have filmed 120 video episodes and those have aired and are available on the Kitco Web site. All of this coverage helps us leverage our ground by reaching millions of readers, viewers and potential investors. Our Web site has been visited over 446,000 times since the beginning of the year. From visitors and investors from all over the world. Our U.S. Global Investors is well-known for timely and balanced market insights and our thought leadership. The company has presented several awards recently at this year's STAR Awards by The Mutual Fund Education Alliance which recognizes excellence in investor education. The awards we received included best overall communication to retail and advisor audiences within the small funds category. Our weekly free investor alert newsletter was again awarded the best electronic newsletter. And today, we have earned a total of 80 STAR awards. Investors can sign us at usfunds.com and join over 30,000 subscribers who are receiving the award winning investor alert and our advisor alert eNewsletters and our CEO blog Frank Talk. And with that Frank, I will turn it back over to you.

Okay. I don't think there is much more insider what you said inside the net subscriber to the investor alert, we highly recommend you do. There is a lot of work that's written, put together by the investment team, they create a slot analysis of strengths and weaknesses of the past weekend, what economic data point could be an opportunity and threat next week and I think it's just so helpful for investors to better get a feel for different asset classes in a very timely balanced way. So, with that I would like to open to Q&A.

[Operator Instructions] We do have one question and the question is can we -- would we comment in a little bit more detail on our investments in Galileo? Frank, can you take that one?

Sure. Galileo is unique opportunity. We put up capital to give us a bigger balance sheet. And we now have an analyst that's working forward and reporting to us. That's up there because Toronto is the financial capital of the world when it comes to resource and mining. When we were receiving the award for mining fund manager of the year, I thought was interesting to set over 60% of all financings past year from mining took place in Toronto. There are more listed mining companies in Toronto than all the other exchanges of the world combined. So, it is a truly important place to have an office, to have analyst to be able to go across the street everyday, meetings are coming in. And when I'm in their office, the meetings are all day along. So, I think from gathering research, it give us a foothold into Canada and we are working on, launching products through that platform and it's just have to go through that regulatory process making sure that it's unique and different and sustainable and scalable of a great benefit to investors. So, I think from that end, they were losing money with the meltdown of resources at this time at last year. And it’s the rebound and I think they have now modestly profitable nothing spectacular, but any rise in assets in their shop from these past quarter with average level and the same thing with ourselves, any rise above the average asset base can have a big impact in our free cash flow. That's it. And that's a wrap. And I'm getting ready to fly to Australia, down under. Thank you.

All right. Thank you. This concludes U.S. Global Investors webcast for the first quarter of 2017. And this presentation will be available on our Web site at usfunds.com. Thank you all for your participation.