Summary of U S GLOBAL INVESTORS INC

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
U.S. Global has made forward-looking statements concerning the Company's performance, financial condition, and operations in this report. The Company from time to time may also make forward-looking statements in its public filings and press releases. Such forward-looking statements are subject to various known and unknown risks and uncertainties and do not guarantee future performance. Actual results could differ materially from those anticipated in such forward-looking statements due to a number of factors, some of which are beyond the Company's control, including: (i) the volatile and competitive nature of the investment management industry, (ii) changes in domestic and foreign economic conditions, (iii) the effect of government regulation on the Company's business, and (iv) market, credit, and liquidity risks associated with the Company's investment management activities. Due to such risks, uncertainties, and other factors, the Company cautions each person receiving such forward-looking information not to place undue reliance on such statements. All such forward-looking statements are current only as of the date on which such statements were made.
Recent Trends and Continuing Disruptions in Worldwide Financial Markets Due to the consequences of the meltdown in the subprime mortgage market beginning in 2007, the worldwide financial markets have encountered intense volatility due to uncertainty and disruption within the credit markets. This disruption moved into 2008 causing global equities to decline worldwide. The Company's investment advisory fees and operating revenue primarily depend on the value of our assets under management, and continued global market fluctuations impact the funds' asset levels, thereby affecting income and results of operations.
This global strain has resulted in a seizing of the international credit markets resulting in unprecedented worldwide governmental actions. For instance, on September 7, 2008, the U.S. Government moved to guarantee the outstanding debt of Fannie Mae and Freddie Mac. On September 19, 2008, the U.S. Treasury Department (the "Treasury") announced a temporary guarantee program (Temporary Guarantee Program for Money Market Funds) for publicly available money market funds which elected to participate in the program.
Furthermore, on October 3, 2008, the U.S. Congress enacted the Emergency Economic Stabilization Act of 2008, which sanctioned the Treasury Secretary to create the Troubled Assets Relief Program and authorize the purchase of up to $700 billion of troubled assets. Despite these aggressive governmental programs and actions, the global financial markets continue to remain extremely volatile. In early 2009, returns on many major equity indices have continued to decline from year-end 2008 and has had a dramatic effect on returns and assets under management.
This unsettled financial environment has had an impact on the Company's assets under management. Total assets under management at June 30, 2008, were $5.753 billion versus $1.981 billion at December 31, 2008, and $1.933 billion at March 31, 2009. Total assets under management at March 31, 2009, were $1.933 billion versus $5.314 billion at March 31, 2008.
BUSINESS SEGMENTS
The Company, with principal operations located in San Antonio, Texas, manages two business segments: (1) the Company offers a broad range of investment management products and services to meet the needs of individual and institutional investors; and (2) the Company invests for its own account in an effort to add growth and value to its cash position. Although the Company generates the majority of its revenues from its investment advisory segment, the Company holds a significant amount of its total assets in investments. The following is a brief discussion of the Company's two business segments. Investment Management Products and Services The Company generates substantially all of its operating revenues from managing and servicing USGIF and other advisory clients. These revenues are largely dependent on the total value and composition of assets under its management. Fluctuations in the markets and investor sentiment directly impact the funds' asset levels, thereby affecting income and results of operations.
The Company continues to provide advisory services for two offshore clients and receives monthly advisory fees based on the net asset values of the clients and performance fees, if any, based on the overall increase in net asset values. The Company recorded fees from these clients totaling $190,579 and $383,733 for the nine months ended March 31, 2009, and March 31, 2008, respectively. The performance fees for these clients are calculated and recorded quarterly in accordance with the terms of the advisory agreements. These fees may fluctuate significantly from year to year based on factors that may be out of the Company's control.

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U.S. Global Investors, Inc.
March 31, 2009, Quarterly Report on Form 10-Q Page 13 of 24

At March 31, 2009, total assets under management as of period end, including both SEC-registered funds and offshore clients, were $1.933 billion versus $5.314 billion at March 31, 2008. During the nine months ended March 31, 2009, average assets under management were $2.670 billion versus $5.382 billion for the same period ended March 31, 2008. This decrease was primarily due to a decrease in the natural resources and foreign equity funds under management. Total assets under management at June 30, 2008, were $5.753 billion versus $1.933 billion at March 31, 2009.
Investment Activities
Management believes it can more effectively manage the Company's cash position by broadening the types of investments used in cash management and continues to believe that such activities are in the best interest of the Company. Company compliance and operational personnel review and monitor these activities, and various reports are provided to investment advisory clients. Investment income (loss) from the Company's investments includes:
• realized gains and losses on sales of securities;

• unrealized gains and losses on trading securities;

• realized foreign currency gains and losses;

• other-than-temporary impairments on available-for-sale securities; and

• dividend and interest income.

This source of revenue does not remain consistent and is dependent on market fluctuations, the Company's ability to participate in investment opportunities, and timing of transactions.
As of March 31, 2009, the Company held investments with a market value of approximately $5.9 million and a cost basis of approximately $8.0 million. The market value of these investments is approximately 16.5 percent of the Company's total assets. The Company currently has no investments in debt securities or mortgage-backed securities.
The following summarizes investment income (loss) reflected in earnings for the periods discussed:

                                                                            Nine Months Ended March 31,
Investment Income (Loss)                                                     2009                   2008
Realized gains (losses) on sales of available-for-sale securities      $              -         $     96,774
Realized gains (losses) on sales of trading securities                                -             (264,413 )
Unrealized gains (losses) on trading securities                              (2,798,736 )             24,868
Realized foreign currency losses                                                (53,295 )            (21,045 )
Other-than-temporary declines in available-for-sale securities               (2,456,618 )                  -
Dividend and interest income                                                    340,419           1 ,086,520

Total Investment Income (Loss)                                         $     (4,968,230 )       $    922,704




                                                                            Three Months Ended March 31,
Investment Income (Loss)                                                   2009                    2008
Realized gains (losses) on sales of available-for-sale securities      $           -         $         62,253
Realized gains (losses) on sales of trading securities                             -                   (1,907 )
Unrealized gains (losses) on trading securities                               37,910                 (530,534 )
Realized foreign currency losses                                              (4,500 )                (21,228 )
Other-than-temporary declines in available-for-sale securities                     -                        -
Dividend and interest income                                                  59,384                  265,578

Total Investment Income (Loss)                                         $      92,794         $       (225,838 )

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U.S. Global Investors, Inc.
March 31, 2009, Quarterly Report on Form 10-Q Page 14 of 24

RESULTS OF OPERATIONS - NINE MONTHS ENDED MARCH 31, 2009, AND 2008
The Company posted a net after-tax loss of $3,200,500 ($0.21 loss per share) for the nine months ended March 31, 2009, compared with a net after-tax income of $6,996,097 ($0.46 income per share) for the nine months ended March 31, 2008. Revenues
Total consolidated revenues for the nine months ended March 31, 2009, decreased $22,413,574, or 57 percent, compared with the nine months ended March 31, 2008. This decrease was primarily attributable to the following:
• Investment advisory fees decreased by approximately $17,514,000 primarily as a result of decreased assets under management in the natural resources and emerging markets funds; and

• Investment income decreased by approximately $5,891,000 primarily as a result of declines in the market value of trading securities in the natural resources and emerging markets sectors as well as an other-than-temporary impairment as a result of declines in the market value of available-for-sale securities.

Expenses
Total consolidated expenses for the nine months ended March 31, 2009, decreased $7,085,440, or 25 percent, compared with the nine months ended March 31, 2008. This was largely attributable to the following:
• Subadvisory fees decreased by $4,696,000 due to decreased assets in the funds being subadvised and changes in the subadvisory contracts discussed in Note 5;

• Employee compensation decreased by $2,160,000 primarily due to fewer employees and lower bonuses resulting from decreased assets under management as well as lower relative performance in certain of the funds;

• Platform fees decreased by $2,783,000 due to decreased assets under management; and

• These decreases in expenses were somewhat offset by an increase in general and administrative expenses of $2,603,000 primarily due to proxy-related costs associated with the merger of the USGIF and USGAF trusts.

RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2009, AND 2008 The Company posted a net after-tax income of $327,809 ($0.02 income per share) for the three months ended March 31, 2009, compared with a net after-tax income of $2,122,662 ($0.14 income per share) for the three months ended March 31, 2008.
Revenues
Total consolidated revenues for the three months ended March 31, 2009, decreased $7,272,612, or 59 percent, compared with the three months ended March 31, 2008. This decrease was primarily attributable to the following:
• Investment advisory fees decreased by approximately $7,843,000 primarily as a result of decreased assets under management in the natural resources and emerging markets funds;

• Transfer agency fees decreased by approximately $947,000 primarily as a result of decreases in assets through the platforms; and

• These decreases in revenues were somewhat offset by an increase in distribution and administrative service fees of $1,228,000 due to the new fee agreements.

Expenses
Total consolidated expenses for the three months ended March 31, 2009, decreased $4,502,263, or 49 percent, compared with the three months ended March 31, 2008. This was largely attributable to the following:
• Subadvisory fees decreased by $2,059,000 due to decreased assets in the funds being subadvised and changes in the subadvisory contracts discussed in Note 5;

• Platform fees decreased by $1,527,000 due to decreased assets under management; and

• Employee compensation decreased by $756,000 primarily due to fewer employees and lower bonuses resulting from decreased assets under management as well as lower relative performance in certain of the funds.

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U.S. Global Investors, Inc.
March 31, 2009, Quarterly Report on Form 10-Q Page 15 of 24

LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2009, the Company had net working capital (current assets minus current liabilities) of approximately $26.0 million and a current ratio (current assets divided by current liabilities) of 15.8 to 1. With approximately $20.5 million in cash and cash equivalents and approximately $5.9 million in marketable securities, the Company has adequate liquidity to meet its current obligations. Total shareholders' equity was approximately $34.1 million, with cash, cash equivalents, and marketable securities comprising 73.6 percent of total assets.
As of March 31, 2009, the Company has no long-term liabilities. The Company has access to a $1 million credit facility with a one-year maturity for working capital purposes. The credit agreement requires the Company to maintain certain quarterly financial covenants to access the line of credit. As of March 31, 2009, this credit facility remained unutilized by the Company.
Management believes current cash reserves, financing obtained and/or available, and potential cash flow from operations will be sufficient to meet foreseeable cash needs or capital necessary for the above-mentioned activities and allow the Company to take advantage of opportunities for growth whenever available. Market volatility may cause the price of the Company's publicly traded class A shares to fluctuate, which in turn may allow the Company an opportunity to buy back stock at favorable prices.
The investment advisory and related contracts between the Company and USGIF will expire September 30, 2009. Management anticipates the board of trustees of USGIF will renew the contracts. The Company provides advisory services to two offshore clients. The Company generally receives a monthly advisory fee and a quarterly performance fee, if any, based on agreed-upon performance measurements. The contracts between the Company and these offshore clients expire periodically, and management anticipates that its offshore clients will renew the contracts. The Company receives additional revenue from several sources including custodial fee revenues, revenues from mailroom operations, and investment income.

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U.S. Global Investors, Inc.
March 31, 2009, Quarterly Report on Form 10-Q Page 16 of 24

ACCOUNTING PRONOUNCEMENTS
The Company is subject to extensive and often complex, overlapping and frequently changing governmental regulation and accounting oversight. Moreover, financial reporting requirements, such as those listed below, and the processes, controls and procedures that have been put in place to address them, are comprehensive and complex. While management has focused considerable attention and resources on meeting these reporting requirements, interpretations by regulatory or accounting agencies that differ from those of the Company could negatively impact financial results.
In September 2006, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements because the FASB had previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS 157 does not require any new fair value measurements. In February 2008, the FASB issued an FSP to defer the effective date of SFAS 157 for one year for nonfinancial assets and liabilities recognized or disclosed at fair value on a non-recurring basis. Management adopted the provisions of SFAS 157 related to all financial assets and liabilities and nonfinancial assets and liabilities recognized or disclosed at fair value on a recurring basis on July 1, 2008. Management continues to evaluate the impact this statement will have on the Consolidated Financial Statements once its provisions are adopted for nonfinancial assets and liabilities recognized or disclosed at fair value on a non-recurring basis. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115. SFAS 159 allows entities to voluntarily choose to measure many financial assets and liabilities at fair value. The election is made on an instrument-by-instrument basis and is irrevocable. Once the election is made for the instrument, all subsequent changes in fair value for that instrument must be reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We have not elected to apply the provisions of SFAS 159 to any of our financial instruments; therefore, the adoption of SFAS 159 effective July 1, 2008, has not affected our financial position or results of operations. In June 2007, the Emerging Issues Task Force ("EITF") issued EITF Issue No. 06-11, Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards, ("EITF 06-11"). Under the provisions of EITF 06-11, a realized income tax benefit from dividends or dividend equivalents that are charged to retained earnings and are paid to employees for equity classified nonvested equity shares, nonvested equity share units, and outstanding equity share options should be recognized as an increase to additional paid-in capital. The amount recognized in additional paid-in capital for the realized income tax benefit from dividends on those awards should be included in the pool of excess tax benefits available to absorb tax deficiencies on share-based payment awards. EITF 06-11 should be applied prospectively to the income tax benefits that result from dividends on equity-classified employee share-based payment awards that are declared in fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. Accordingly, the Company adopted EITF 06-11 on July 1, 2008. The adoption of EITF 06-11 did not have a material effect on the Company's financial position or results of operations for the quarter ended March 31, 2009.
On October 10, 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is not Active ("FSP FAS 157-3"). FSP FAS 157-3 clarifies the application of FAS 157 in a market that is not active and illustrates key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP FAS 157-3 was effective upon issuance, including prior periods for which financial statements have not been issued. Revisions resulting from a change in the valuation technique or its application should be accounted for as a change in accounting estimate. The disclosure provisions of SFAS No. 154, Accounting Changes and Error Corrections for a change in accounting estimate are not required for revisions resulting from a change in valuation technique or its application. The adoption of FSP FAS 157-3 did not have a material impact on the Company's results of operations, financial condition, or cash flows. In April 2009, the FASB issued FSP FAS 157-4, Determining Whether a Market Is Not Active and a Transaction Is Not Distressed ("FSP FAS 157-4"). FSP FAS 157-4 provides additional guidance on factors to consider in estimating fair value when there has been a significant decrease in market activity for a financial asset. FSP FAS 157-4 is effective for interim and annual periods ending after June 15, 2009. The implementation of this standard will not have a material impact on our consolidated financial position and results of operations. FSP 107-1 and APB 28-1 amends FAS No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures in the body or in the accompanying notes to financial statements for interim reporting periods and in financial statements for annual reporting periods for the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the balance sheet. This FSP also amends APB opinion No. 28, "Interim Financial Reporting," to require entities to disclose the methods and significant assumptions used to estimate the fair value of financial instruments and describe changes in methods and significant assumptions in both interim and annual financial statements. FSP 107-1 and APB 28-1 is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009 only if an entity also elects to early adopt FSP 157-4 and FSP 115-2 and 124-2. The Company did not elect early adoption of this FSP for the quarter

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U.S. Global Investors, Inc.
March 31, 2009, Quarterly Report on Form 10-Q Page 17 of 24

ended March 31, 2009 and does not expect that its adoption during the quarter ending June 30, 2009 will have a material impact on its consolidated financial statements.
The objective of an other-than-temporary impairment analysis under existing GAAP is to determine whether the holder of an investment in a debt or equity security, for which changes in fair value are not regularly recognized in earnings (such as for securities classified as held-to-maturity or available-for-sale), should recognize a loss in earnings when the investment is impaired. An investment is impaired if the fair value of the investment is less than its amortized cost basis. The objective of FSP 115-2 and 124-2, which amends exiting other-than-temporary impairment guidance for debt securities, is to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. Specifically, the recognition guidance contained in FSP 115-2 and 124-2 applies to debt securities classified as available-for-sale and held-to-maturity that are subject to other-than-temporary impairment guidance within FAS 115, FSP 115-1 and 124-1, FSP EITF 99-20-1 and American Institute of Certified Public Accountants Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer.
Among other provisions, FSP 115-2 and 124-2 requires entities to: (1) split other-than-temporary impairment charges between credit losses (i.e., the loss based on the entity's estimate of the decrease in cash flows, including those that result from expected voluntary prepayments), which are charged to earnings, and the remainder of the impairment charge (non-credit component) to other comprehensive income, net of applicable income taxes; (2) disclose information for interim and annual periods that enables financial statement users to understand the types of available-for-sale and held-to-maturity debt and equity securities held, including information about investments in an unrealized loss position for which an other-than-temporary impairment has or has not been recognized, and (3) disclose for interim and annual periods information that enables users of financial statements to understand the reasons that a portion of an other-than-temporary impairment of a debt security was not recognized in earnings and the methodology and significant inputs used to calculate the portion of the total other-than-temporary impairment that was recognized in earnings.
FSP 115-2 and 124-2 is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. If an entity elects to adopt early either FSP FAS 157-4 or FSP FAS 107-1 and APB 28-1, it would also be required to adopt early this FSP 115-2 and 124-2. Additionally, if an entity elects to early adopt FSP 115-2 and 124-2, it is required to adopt FSP 157-4 and FSP 107-1 and APB 28-1. For debt securities held at the beginning of the interim period of adoption for which an other-than-temporary impairment was previously recognized, if an entity does not intend to sell and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, the entity shall recognize the cumulative effect of initially applying this FSP as an adjustment to the opening balance of retained earnings with a corresponding adjustment to accumulated other comprehensive income and the impact of adoption accounted for as a change in accounting principles, with applicable disclosures provided. The Company did not elect early adoption of FSP 115-2 and 124-2 during the quarter ended March 31, 2009 and does not expect that its adoption during the quarter ending June 30, 2009 will have a material impact on its consolidated financial statements.
CRITICAL ACCOUNTING POLICIES
For a discussion of critical accounting policies that the Company follows, please refer to the notes to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended June 30, 2008.

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U.S. Global Investors, Inc.
March 31, 2009, Quarterly Report on Form 10-Q Page 18 of 24