FAIR VALUE DISCLOSURES

Accounting Standards Codification (ASC) 820, Fair Value Measurement and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value and requires companies to disclose the fair value of their financial instruments according to a fair value hierarchy (i.e., Levels 1, 2, and 3 inputs, as defined below). The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities at the reporting date. Since valuations are based on quoted prices that are readily and regularly available in an active market, value of these products does not entail a significant degree of judgment.

Level 2 – Valuations based on quoted prices in markets for which not all significant inputs are observable, directly or indirectly. Corporate debt securities valued in accordance with the evaluated price supplied by an independent service are categorized as Level 2 in the hierarchy. Other securities categorized as Level 2 include securities valued at the mean between the last reported bid and ask quotation.

Level 3 – Valuations based on inputs that are unobservable and significant to the fair value measurement.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with the investing in those securities. Because of the inherent uncertainties of valuation, the values reflected may materially differ from the values received upon actual sale of those investments.

For actively traded securities, the Company values investments using the closing price of the securities on the exchange or market on which the securities principally trade. If the security is not traded on the last business day of the quarter, it is generally valued at the mean between the last bid and ask quotation. Mutual funds, which include open- and closed-end funds, exchange-traded funds, and offshore funds, are valued at net asset value or closing price, as applicable. Certain corporate debt securities are valued by an independent pricing service using an evaluated quote based on such factors as institutional-size trading in similar groups of securities, yield, quality maturity, coupon rate, type of issuance and individual trading characteristics and other market data. As part of its independent price verification process, the Company reviews the fair value provided by the pricing service using information such as transactions in these investments, broker quotes, market transactions in comparable investments, general market conditions and the issuer's financial condition. Debt securities that are not valued by an independent pricing service are valued based on review of similarly structured issuances in similar jurisdictions, when possible, or based on other traded debt securities issued by the issuer. The Company also takes into consideration numerous other factors that could affect valuation such as overall market conditions, liquidity of the security and bond structure. Securities for which market quotations are not readily available are valued at their fair value as determined by the portfolio management team. The portfolio management team includes representatives from the investment, accounting and legal/compliance departments. The portfolio management team meets periodically to consider a number of factors in determining a security’s fair value, including the security’s trading volume, market values of similar class issuances, investment personnel’s judgment regarding the market experience of the issuer, financial status of the issuer, the issuer’s management, and back testing, as appropriate. The fair values may differ from what may have been used had a broader market for these securities existed. The portfolio management team reviews inputs and assumptions and reports material items to the board of directors.

Prior to March 31, 2014, the Company classified investments that were valued using the mean between the last reported bid ask quotation as Level 1 investments. The Company has determined that it is reasonable to classify these securities as Level 2 investments. This reclassification does not affect balance sheet presentation, net income or earnings per share.

The following presents fair value measurements, as of March 31, 2015, and June 30, 2014, for the major categories of U.S. Global’s investments measured at fair value on a recurring basis:



	Fair Value Measurement using
	March 31, 2015
(dollars in thousands)	Quoted Prices (Level 1)		Significant Other Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Trading securities
Offshore fund	$	—	$	465	$	—	$	465
Mutual funds - Fixed income	15,580		—		—		15,580
Mutual funds - Domestic equity	398		—		—		398
Other	—		—		—		—
Total trading securities	15,978		465		—		16,443

Available-for-sale securities
Common stock - Domestic	929		—		—		929
Common stock - International	839		1		—		840
Corporate debt	—		97		574		671
Mutual funds - Fixed income	1,229		—		—		1,229
Mutual funds - Domestic equity	467		—		—		467
Other	167		—		—		167
Total available-for-sale securities	3,631		98		574		4,303
Total Investments Measured at Fair Value on a Recurring Basis	$	19,609	$	563	$	574	$	20,746



	Fair Value Measurement using
	June 30, 2014
(dollars in thousands)	Quoted Prices (Level 1)		Significant Other Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Trading securities
Offshore fund	$	—	$	998	$	—	$	998
Mutual funds - Fixed income	16,333		—		—		16,333
Mutual funds - Domestic equity	459		—		—		459
Other	27		—		—		27
Total trading securities	16,819		998		—		17,817

Available-for-sale securities
Common stock - Domestic	1,118		—		—		1,118
Common stock - International	1,406		3		—		1,409
Corporate debt	292		1,090		250		1,632
Mutual funds - Fixed income	1,247		—		—		1,247
Mutual funds - Domestic equity	550		—		—		550
Other	240		—		—		240
Total available-for-sale securities	4,853		1,093		250		6,196
Total Investments Measured at Fair Value on a Recurring Basis	$	21,672	$	2,091	$	250	$	24,013

As of March 31, 2015, approximately 94 percent of the Company’s financial assets measured at fair value are derived from Level 1 inputs, three percent of the Company’s financial assets measured at fair value are derived from Level 2 inputs, and the remaining three percent are Level 3 inputs. As of June 30, 2014, approximately 90 percent of the Company’s financial assets measured at fair value are derived from Level 1 inputs, nine percent of the Company’s financial assets measured at fair value are derived from Level 2 inputs, and the remaining one percent are Level 3 inputs. The Company had transfers from Level 1 to Level 2 in the amount of $82,000 due to securities valued at the mean between bid and ask quotations at March 31, 2015, and which were valued at a quoted price at the prior period end. The Company had transfers from Level 2 to Level 3 in the amount of $343,000 due to securities being valued based on similarly structured issuances at March 31, 2015, and which were valued at a price supplied by an independent pricing service at the prior period end. The Company recognizes transfers between levels at the end of each quarter.

In Level 2, the Company has an investment in an affiliated offshore fund, classified as trading, with a fair value of $465,000 as of March 31, 2015, based on the net asset value per share, which invests in companies in the energy and natural resources sectors. The Company may redeem this investment on the first business day of each month after providing a redemption notice at least forty-five days prior to the proposed redemption date.

In addition, the Company has investments in corporate debt securities of $97,000 as of March 31, 2015, categorized as Level 2, which the Company valued in accordance with the evaluated price supplied by an independent pricing service or valued using the mean between the last reported bid ask quotation.

The corporate debt in Level 3 is valued based on review of similarly structured issuances in similar jurisdictions. At March 31, 2015, the Level 3 corporate debt is valued at cost, which approximates fair value as a result of the Company’s review of similar structured issuances in similar jurisdictions or valued based on traded issuances from the issuer.

The following table is a reconciliation of investments for which unobservable inputs (Level 3) were used in determining fair value during the nine months ended March 31, 2015, and March 31, 2014:



	Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis
	March 31, 2015			March 31, 2014
(dollars in thousands)	Corporate Debt			Common Stock - International			Corporate Debt		Other
Beginning Balance	$	250		$	95		$	—	$	163
Return of capital/principal payments received	(19		)	—			—		(43		)
Total gains or losses (realized/unrealized)
Included in earnings (investment income)	—			—			—		—
Included in other comprehensive income	—			5			—		5
Purchases	—			—			250		160
Sales	—			—			—		—
Transfers into Level 3	343			—			—		—
Transfers out of Level 3	—			(100		)	—		(285		)
Ending Balance	$	574		$	—		$	250	$	—