Horizon Kinetics Holding

Okay, yes, all right, we're here. All right, so good afternoon, everyone. Thank you for joining us on this call. My name is Mark Ernden, Chief Financial Officer of Horizon Kinetics. We are pleased that you have joined us for our call, where we will cover our results for the first quarter of 2025. First, a reminder that today's presentation may include forward-looking statements. Reliance on forward-looking statements involves certain risks and uncertainties, including but not limited to uncertainty about the future security valuations or our performance. During the course of today's call, Words such as expect, anticipate, believe, and intend may be used in our discussion of our goals, events, and the future. Management cannot provide any assurance that future results will be as described in our forward-looking statements. Furthermore, the statements made on this call apply only as of today, and the information on this call should not be construed to be a recommendation to purchase or sell any particular security or investment fund. The opinions referenced on this call today are not intended to be a forecast of future events or a guarantee of future results. It should not be assumed that any of the security transactions referenced today have been or will be profitable, or that future investment decisions will be profitable or will equal or exceed past performance of the investments. We encourage you to read our filings with the SEC on our Form 10-K as well as our more recent 10-Q and other filings which describe the risks and uncertainties associated with managing our business. The company does not assume any obligation to update any forward-looking statements made today. These filings can also be found at the OTC Markets website, and our press releases or other information is at our corporate website at www.hkholdingpro.com. Today's discussion will be led by Murray Stahl, Horizons Kinetics Chairman and Chief Executive Officer. I will also be available to answer applicable questions and will moderate the questions. If you would like to ask a question, you will need to be logged into the GoToMeeting platform. So those of you on the telephone connection will be in listen-only mode. And again, so for those of you on the GoToMeeting platform, you can submit the question via the chat function. Please direct those questions to the presenters, where I will summarize and relay as best I can so that we can address as many questions as possible today. That's the end of our opening statements, and you wanted to say a couple words, and then I'll come back.

Yes, okay. So what we're doing, this is the format for today. So what's going to happen is I'm going to let Mark tell you the highlights of the quarter. Then I'm going to build on the highlights of the quarter. I'm going to talk about what I would call strategic highlights, or better yet, strategic points, what direction we're going in, the meaning of various efforts. the resources we're devoting into it, and so on and so forth. And after having covered that, we're going to do questions and answers. We're going to answer every question that is posed. So with that, Mark, if you could give the highlights of the quarter, what you regard as highlights of the quarter, we'd greatly appreciate.

Sure, sure. And so this will be a little bit historical, and it's been only a relatively short period of time since our year-end update. We were just discussing that it's been about 18 days, and that had a variety of complex information. on that call, so I'll again provide a short recap of what we filed recently and why. This form 10 updates continues our required GAAP presentation that includes certain proprietary funds as consolidated entities, and our press release continues the presentation of both our GAAP presentation as well as a supplement that presents our financial statements excluding those funds, essentially the advisor-only entity. And we think that is important for investors to look at and understand. Consistent with what we have previously reported, this is a presentational matter that does not impact the company's earnings that are available to HKHC shareholders or the shareholders' equity of HKHC. It does result in higher total assets, as we have included the assets of those funds that have been consolidated on our balance sheet. as well as a new line item called redeemable non-controlling interest. And that line item essentially represents our clients' account balances that are supported by the assets of those funds, which you'll see identified in our financial statements as consolidated investment products. The other notable change is the treatment of management fees charged to those consolidated investment products. Under GAAP, those revenues are eliminated for consolidation since that fund is presented within the financial statements. It is akin to an intercompany transaction. However, the economic benefit resulting to the HKHC shareholders remains, and you can see that, or that economic benefit is reflected through a smaller allocation of the investment returns of the consolidated investment products to the redeemable non-controlling interest than they would otherwise have received. You can also see the impact of those items in the table within our NB&A of our 10Q file. Our results for the quarter continue to be favorable for our HKHC shareholders. The company recorded revenues of $19.8 million for the quarter, which is a meaningful increase from the $12.1 million in the first quarter of 2024. And this increase is primarily the result of the overall increase in asset vendor management across the portfolio of investment products and client accounts. As our supplementary schedule indicated, the annual revenues based on the advisor-only model this is without the consolidation of the investment products, resulting in quarterly revenues of $22 million, which was a similarly meaningful increase from the $14 million in the first quarter of 2024. The results of the consolidated entity were also favorably impacted by the consolidation of the funds, which had $70 million in investment returns during the quarter, of which approximately $59 million was allocated to our client accounts and the redeemable non-controlling interest line item. From a balance sheet perspective, the company has substantial cash and investments, including amounts outside of those consolidated investment products, and we have no third-party debt outside of our office spaces. The company's cash position was significantly bolstered during the quarter as a result of the collection of incentive fees in 2025 that were earned in 2024. Some of those fees were also paid to the company in securities, which we used to settle certain pre-acquisition legacy debts to affiliates, as well as to make an additional investment in a non-consolidated but affiliated other investment item. So those were my highlights for the quarter, Murray, and we can get into whatever level of detail you'd like after that.

Okay, fabulous. Okay, thanks, Mark. So the first takeaway is that we're required by decanting protocol to to consolidate. And the consolidation, however interesting it is, and it is indeed interesting, it's a lot better, in my view, to look at the various aspects of the company separated. So separated, the table I like the most, I think it's the most revealing, is the table which appears in the Form 10-Q on page 23, which shows you the asset management business. and a standalone basis. And that's really the major operating asset. According to that table, there is $4.6 million of operating income. That's pre-tax, of course. That's the operating part of the business. Really, there is a consumer products business that's really small, which is a legacy asset. We inherited it. trying to build it up. So there's an operating loss for the quarter, but we fully expect we're going to eliminate that in very, very short order, meaning a couple of months. So we'll see how much we can add to business from that. But that's a better representation, in my opinion. Now, the reason for highlighting that area is so you can see the margins of the business itself. And that margin we'd like to make, of course, as high as possible. So what are the problems in making it high? Well, if you're an asset manager, you have several. And one of the problems is what we're called in the industry, the platform fees. As you go through the various tables, you'll see, and I'm going to cover it in a minute, you'll see how much of our revenue, the asset management business, came from SEC-registered funds. They can be mutual funds or ETFs. And generally speaking, and there are some small exceptions, your assets and management from that sphere are coming through platforms. Meaning a potential client has their capital at some big, to you it might look like a brokerage house, and they decide to invest in one or more of our funds, we are obligated by the rules to pay platform fees to the firm that holds the client asset. And all they're really doing is holding the client money market fund, meaning the withdrawal from the money market fund from their money market fund, which going to our funds is paying for the allocation to us. We owe a platform fee. Different platforms have different fees. So it's, a big reduction of our profit margin. It's very, very difficult to get around that in the world of SEC-registered funds. So we've spent a lot of time and effort thinking through that problem, and we have some approaches to it, which we'll share with you in a few minutes. And the other issue is taxes. So we all want to pay our taxes, but we're not a business that has... capital assets like plant equipment and machinery, we don't have depreciation expense that's meaningful. So there's no tax shelter from that sort of position. So we're paying essentially the maximum taxes that we'll be obligated to pay under the law. Here and there, there might be some tiny exceptions, but they're really tiny. And that brings me to how we came to get into cryptocurrency. So when we're looking at cryptocurrency apart from the return characteristics of cryptocurrency, which everyone focuses on, it's possible to build a cryptocurrency business and avoid the platforms. And because cryptocurrency is itself classified by the various authorities as property, not security, there can be some tax advantages to going that route. That was the origin of our interest in cryptocurrency as a generalization. It was an effort to increase our profitability. It opens up an entirely new channel of distribution. Increasing the profitability through that methodology There are no textbooks, there are no rules ahead of cryptocurrency. So everybody's inventing it as they go. And so did we. So some number of years ago, we took some of our cryptocurrency partnerships and we rolled them into a corporation called Consensus Mining, which incidentally, in give or take a day in about 10 days, is going to be quoted and traded on OTC markets. You can see a quote to it. And that's really important because there's only so much we can say right now about that effort. But it's important to invest in managing effort once it's actually publicly quoted. We can say a lot more of that. And we found ways of making cryptocurrency mining lot more um profitable than other people would have it a lot of work went into it there's a lot of um tax advantage uh for doing it uh now we still have legacy mining assets and we have not that we didn't make money on legacy mining assets we still have them um when we hear more about crypto we hear more about consensus mining cryptocurrency mining um You'll understand those are good things, not bad things. So we have the legacy assets. The reason they're good things in brief is when you buy these cryptocurrency-mining devices, you want them to last as long as possible, obviously. And in a lot of cases, we were able to have them last and access a depreciable life. So that's an important part of our future profitability or increase in future profitability. We're leaving that for now. I'm leaving you with the idea that we're going to talk about that and not do this in future, but we will be talking about it in the appropriate venue. So stay tuned. And there is some disclosure about it. It isn't very much, but it's in the financials and I call your attention to it. You should read them very carefully. Now, as I said earlier, about two thirds of our revenue comes from the SEC registered funds. These are mutual funds. or ETFs. And we made an effort recently to create some what I think are interesting ETFs. So one of the other problems that I guess every manager has had since roughly 2007, and we're no different, is the rise of indexation. So indexation, it poses to the active manager a very serious issue, which is The way you maximize profitability in investment management once indexes came about is to have economy of scale. So the index has the virtue of it can raise a tremendous amount of money. It's all buying liquid stocks. I would argue that the indexes actually distort the price of the stocks in some instances. That's just my personal opinion, so don't pay a lot of attention to it. The more important thing is the indexes don't charge a lot of fees. have to compete with that and the indexes have created a lot of fee compression for managers in general so since 2007 for every manager that's on the active side it led to a decompression issue we're no different just a question of degree however what it's also done is it's almost forced the investment world which is really fighting its battle with the largest capitalization stocks to ignore all sorts of interesting opportunities because these are not eligible for the indexes or they are eligible for the indexes, but they're never going to have a lot of waiting. So I invite you to the following thing. If you were just to look at the index like the Russell 2000, it makes me, the Russell 1000, the Russell 2000, and the S&P 500. So normally the protocol is to look at the biggest holdings and work your way down and about name 20. Stop looking because that represents the bulk of the weight. I invite you to turn the page upside down and start looking at the smallest holdings. And you'll be astonished when you see A tremendous number of holdings in the indexes have a weighting of, believe it or not, 0.0. You might say, how can a stock have a 0.0% weight in the index? It really doesn't. The rounding protocol is the one decimal point. So if you were to have a weight of, let's say, 0.03, you round to 0. So it's 0.0. If you were to have a weight of 0.06... the rounding convention is to round to 0.1. So you'll see the bulk of the money is clearly concentrated on a handful of names. There's a major investment opportunity waiting to happen. And I don't even think it's waiting to happen. I think it's already started. So it's pretty exciting. And I think, it's just my personal opinion, so feel free to disagree with me. I think it's already reflected in investment results. And I invite you to look at them and study them and our results are what our results are. And I personally think there is something to be proud of, but others can have their own ideas. So I encourage you to look at our investment results, which are on our websites, and hopefully you'll be impressed with them. Another thing you might want to pay attention to in the various deconstruction, deconsolidations in this statement is the issue of private placements. We own, on behalf of our clients and for ourselves, a variety of private securities or private placements. The amount of money contained in that is roughly $194 million. You'll find that in the notes. That value is already much above the cost. If those companies were to come public, we probably collect a big performance fee at that valuation. And it's not inconceivable it'll come public at a far more robust valuation. The inputs that are used in diving this set of securities at $194 million, they're included in the financial statements. So you might want to look at that. So I can't say that all the private placements are subject to performance fees that we haven't recognized yet, but a lot of it is. So I would pay a lot of attention to that set of charts. Another thing you'll observe is our cash balance, which is now $34 million. So that's related to the prior point. At the end of the year, we were carrying a much lower cash balance. and ended up being a problem. It was a problem, a nice problem to have. We collected last year, 2024, the biggest performance fee we ever collected in the history of Horizon. So that, of course, we all agree is very good. But like everything, even if I had a problem, the problem was that in our current corporate configuration, we were required to pay the taxes on that performance fee before we actually collect. Matter of fact, before we actually even legally recognize it. So we need to do on December 15th is we needed to estimate what the performance fee would be. And then we had to calculate the tax that would do be due on those fees. If indeed we were to realize them and we have to pay them and we didn't get had, we hadn't kept a cash balance large enough to to deal with that contingency. So there's a lot of scrambling in December to figure out how to do it. Of course, we never lacked liquidity. We were always in a position because we would have had the money. We could have sold securities and we would have paid the bill. The problem was we don't want to sell securities. One, they're going to appreciate further in our view. But secondly, why sell security at a profit to pay the tax? And by realizing a profit, you can even increase your tax liability. so we really didn't want to do it. So you'll see $34 million in cash. It's a higher cash balance than we ordinarily run with, but we felt it's appropriate for that reason to build up a more sizable cash balance than we had historically as a private company. And then my last point before we go to questions and answers is when you look at these deconsolidations and deconstructions, you'll see that Horizon itself has over $400 million of its own capital, its own investments, commingled with the clients, in other words, we eat our own cooking, and we have substantial profits in that. So there is, on the balance sheet, almost $100 million in deferred tax liability. Now, it's a liability. It reduces an asset value. We're going to do everything we can not to sell the securities and not pay the taxes. So we're getting float on the basis of money that technically speaking doesn't exist in our assets, but in point of fact does. So the way accounting works is we're recording the net number, but the appreciation is on the gross number until such time as we have occasion to recognize the gain and pay the taxes. And that is part of our return for the quarter. It's now a number that is much higher than our operating income. The point I want to leave you with is being a patient long-term investor has enormous advantages. We're not a small asset management company. We're pushing $11 billion in assets management, but our earnings from our investments are very, very substantial. There is a real benefit for looking at things on a long-term basis. That's the way we've always practiced. Therefore, the 10Q is really a document of how we always thought money should be managed. There you see it in an orderly fashion. A lot of wealth has been created over the years. through that, and we hope that will continue. So that concludes my prepared remarks. And now I'd like, if I can, to turn it over to whatever questions there are, and we'll do our best to answer the questions.

Okay, great. So for those of you that, again, that are on the telephone, you are in listen-only mode. So we would ask you, if you have a question, you would need to be on the GoToMeeting platform. If you're on that platform, you can submit the questions via the chat function and just direct those questions to the presenters, and we'll put them up there. And I did get a question about if there's a video feed. There is a slide up on the GoToMeeting site, but it's just a single slide. There's no other presentational materials. All right, so Marisa, the first question I have, you talked a little bit about ETF offerings. Can you describe the marketing effort behind our current ETF offerings, and how do you judge the success of our team's focus on the smaller offerings like BCDF that may not have the same scale as something like INFL?

Okay, well, INFL is now over $1.2 billion in AUM, as you can see on our website. And that's largely marketed um through our historical channels distribution by our marketing team blockchain development what you referred to as bcdf which is ticker symbol um we really didn't assign the markers to it in the traditional channels we took a different approach the idea was to go direct and the reason for going direct uh was as follows. We want to see if we can build up a fund and avoid as many of the platform Bs as possible. So platform Bs, and for a lot of firms, it can be very substantial. So without going into, because there are too many platforms around, like there are a lot of platforms around. And in various cases, just to be on a platform, even if you don't have $1 in assets and management, is a set rate you have to pay. So to be on a platform, it puts you in a lost position until you raise enough assets on a platform just to break even. So the idea was that yours truly would simply approach people that friends, acquaintances, business associates, and just describe the fund. If this was a marketing call, I would describe that fund, but it's not a marketing call, so I don't want to make it a marketing call. A BCDF, other than to say, I really like that fund. If you look at the volume, you'll see the volume is a lot less than the inflation ETF. All of the volume happens to be growing. The idea was, I tell A, A tells B, B tells C and D, and so on and so forth. And it's working. So that fund is, at least as of yesterday, reached over $16 million of assets, just that way. And I think yesterday it traded over 8,000 shares. Now, trading is not really an interesting statistic from our point of view in a stock. It is interesting from the point of view of an ETF. The reason it's interesting from the point of view of an ETF is Money can only go into fund in the ETF in increments of 25,000 shares. So if I personally want to buy 100 shares of BCDF, the only way I can get it is I can either find somebody who wants me to sell me the shares. So if somebody sells me 100 shares, ETF doesn't get any new AUM. The other way to do it is a market maker can sell short 100 shares to me if I want to buy it. Market maker has a short position. which are obligated, I think, within four days to cover. So what happens is if a lot of little trades happen and there are no sellers, a series of market makers build up short positions, which they have to cover. When they cover them, they create another unit. So if you don't see any trading, it means we're not likely to get new AUM in the foreseeable future. If you see some thousands of shares traded every day, that's a sign we're going to get new units created. The new unit created, of course, means new asset center management. So we didn't do television or print or all the other things. We're going direct. It takes longer, but in the long run, it's more profitable. Now on the way out. So if somebody wants to dispose of shares, if you're selling shares in unit increments, 25,000 shares, same thing, redemption can only be in the increment of 25,000 shares. Somebody wanted, for whatever reason, liquidated 100 shares. The way it gets liquidated, money doesn't come out of the fund. It's just 100 shares are sold to whoever wants to buy it. So you have to create an echo trading system that's big enough so that it supports a stable degree of assets under management. So if we go the traditional marketing route, and raise a great deal of money, the risk is if for whatever reason somebody wants to take their profit from another fund, we might be faced with redemptions. And that's what happens in ETFs all the time. So you're trying to build it a really different way. And of course, those big contributions are on the platforms that are going to charge us the fees. So I hope that gives you an idea of how comparing and contrasting those two funds two entirely different efforts. One last thing I'll point to is we just launched a Japan fund a couple of days ago. This is called the Japan Owner Operator Fund. So people on this call probably have heard me talk about owner operators. Owner operator means management that has the bulk of their capital invested with the company. meaning they own the company and they run the company. And my investment thesis has always been those kind of investments are really extraordinary investments for the most part. The reason they're extraordinary is people are well-incentivized and the management is totally and completely aligned with the shareholders. So I like those kinds of investments. The owner-operator phenomenon exists in the United States because the United States was built on that. When you go around the world, it doesn't exist anywhere else except for here and there, except, and this is a singular exception, in the nation of Japan. Japan also has the characteristic that the Japanese market is heavily indexed and all the attention is paid to the top market capitalizations and very little attention is paid to the smaller ones. So in the world of Japanese ETFs, The money is in the big capitalization stocks. The big capitalization stocks are Japanese stocks that are multinational, meaning they do their business all over the world. So in a sense, they're not really Japanese stocks. The Japanese stocks that are owner-operator are really Japanese stocks, meaning they confine their business activity largely to the nation of Japan. So you're going to invest internationally and you want to be internationally diversified. Are you really internationally diversified if you buy multinational companies that do business in a range of nations not dissimilar from the range of nations that the American competitors do business in? Or, if you want diversification, are you better advised by the owner-operators that confine largely their business interests to the nation of Japan? It's really different. Plus, they actually have higher rates of return. I think the latter is the right way to go. I'm very confident that that will intrigue people. call your attention to that as well. And that's the marketing approach. To tell people that the same way we're doing blockchain development, present the investment thesis on a one-on-one basis. So that's what we're doing.

Okay. And then we've got another question on the same train of thought here with the blockchain development. Can you share your thoughts on Galaxy Digital, which I believe is just Question says, is the holding of blockchain development ETF now listed on the exchange, NASDAQ exchange, and maybe in particular touch on the Galaxy's Helios data center initiatives relative to what you've talked about in terms of data centers, energy and water infrastructure.

Okay, well, I don't want to turn this meeting into a stock picking meeting, which is another kind of meeting. I just want to make it about But I will say, there was a time that we didn't know if cryptocurrency as an asset class was even here to stay. Now I think it's clearly evolving into a major asset class. And therefore, if it's a major asset class, there are all sorts of business opportunities that are in the course of being created. We identified that Horizon Galaxy Digital was as a holding a number of years ago. And we thought it was well positioned to be a business that profits from cryptocurrency. That can be cryptocurrency asset management, and it can be things that are tangential to cryptocurrency asset management, like data centers. The data center opportunity, just in general terms, whoever is pursuing it, is It's staggering how big it is. The reason it's staggering is that although people call it artificial intelligence, it's not really artificial intelligence. It's high order computation. It's going to require enormous amounts of data. And because there are enormous amounts of data required, it's going to require a tremendous amount of electric power. And because it requires a tremendous amount of electric power, it has to be on 24-7. You can't have intermittent power with a data center. So, that being the case, you have to have power plants. In many cases, the power plants are dedicated to serving data centers. The only power that's continuous, it's what's called thermal power. So, even though people think about these modalities for generating power is different, it'd be coal and natural gas, nuclear power, They're similar, matter of fact, they're identical in the sense that they all boil water and that turn into steam that drive a turbine. Much of that water can be recondensed and used again. Inevitably, some of it is evaporated. So if you measure the amount of electric power that's likely to be needed, you can calculate how much water is likely to be needed and take 10% of that figure, that's likely to be evaporated. The numbers are, I won't even quote them to you. They're unbelievable. I will say, however, I just wrote a paper on this subject, which I finished a couple of days ago. So when it's out, hopefully it'll be out in a couple of weeks, I invite you to read that, and you can get a lot of facts and figures from that. It's just unbelievable. what's about to happen and therefore there's investment banking opportunities there's money management opportunities and it's in one sense the outgrowth of cryptocurrency because cryptocurrency mining occurs in data centers but just so much bigger and a lot of firms got their first exposure the operation of a data center we're operating a data center small scale of course cryptocurrency mining this is just enormous so it's an important holding for us it's not as big as our holdings of bitcoin but it's not small either and i think i might be you know i'm doing some memories so forgive me i think horizon owns something like 1.3 million shares somewhere in its various funds of galaxy digital something like that um should be able to look it up in our 13F. I'm doing it from memory. I obviously can't memorize all these numbers, but as best I can, I think we own about 1.3 million shares. So it's important to hold it.

Okay. If I could turn your attention back to HKHC for a second. We've had a question come in. Can you touch on Horizon's Bitcoin holdings at 131 and the inclusion of the Top 55 on a top corporate huddle list. And just as a supplement, as a reminder for everyone, there's 131 Bitcoin that's held directly by Horizon, and then there's additional digital assets that are held within the consolidated funds. And this question is specific to the 131 Bitcoin held by Horizon.

Okay, so 131 Bitcoin owned by Horizon. We mine those, and that's very important. So there are two ways you can own Bitcoin, basically. You can buy it, you can buy it directly, you can buy an ETF to hold Bitcoin, obviously, or you can mine it, meaning you're creating your own Bitcoin. So using the example of a million dollars, if I had a million dollars, I can buy a certain amount of Bitcoin, You can divide that million dollars by the current price of Bitcoin. You can see how many coins I can buy. And what will happen is, unless I put more money into Bitcoin, that's how many Bitcoin I have. So I could have bought 131, and I got 131 for all eternity, and the price is going to be what it's going to be. That's one way of doing it. The other way of doing it, what I find much more interesting, is mining it. You're creating your Bitcoins. So the idea is once you start mining it, do it in such a way that you mine coins and at the same time throw off cash. The reason it's important to throw off cash, this is a really important point, so I'll go really slow, is you want to mine, which is building up coins. Obviously, you're starting with zero coins. And you want to throw off cash because whatever mining devices you have, At the end of the day, it's just a device. Sooner or later, it's going to wear out. And or sooner or later, it's going to get obsolete. It's going to get a new one. But assuming you can navigate those two challenges, what's happening? Your number of Bitcoin is growing. So coming back to the example, if you had 131 Bitcoin and it is what it is, Or you have 131 Bitcoin and you have a mining business and you're able to A, keep increasing the number of Bitcoin you have and B, as a direct consequence of Bitcoin mining operations, throw off more than sufficient cash to replenish your ultimately to be depleted mining assets. Well, how can that not be better than just buying Bitcoin and holding it? Because Bitcoin is either going up or down. If it goes up, not only do you get all the appreciation, but you have more coins. And if it goes down, well, you can get all the depreciation, of course, but that depreciation is going to be mitigated by the fact that you have more coins. So in other words, if I had 100 Bitcoin and it went up 100%, well, I got depreciation. So Bitcoin doubles and my Bitcoin doubles. If I had 100 Bitcoin and I was able to mine another 100 Bitcoin, well, I not only have the appreciation of the original 100 Bitcoin, I now have another 100 Bitcoin, which I also appreciate. Clearly, I have more money. Or Bitcoin is going to go down. So 100 Bitcoin and whatever quantity, whatever percent declines, you're going to take those losses. Or you have 100 Bitcoin. It goes down, whatever it goes down. And then you create another 100 Bitcoin. Of course, you're going to suffer some depreciation at Bitcoin. But in the end, you have 200 Bitcoin. Either way, that's a much better set of circumstances. That's the problem that we're solving for. And we think we have a great solution. And that's why, incidentally, we created Consensus Mining to solve for that problem, which I must tell you is not an easy problem to solve for. There are other publicly traded mining companies, and you can see by studying them, it's not an easy problem to deal with. And you don't solve a problem like that in a day or two. We believe we've done something really unique. And also, I'll call your attention back to our sister company. FRMO has done the same thing with another company called Winland. So the time will be coming pretty soon. We can talk in a lot more fulsome manner. what we're doing in that regard, and I'm confident that you're going to like what you hear. But until that time, just kind of leave it there. So I'm sorry for not going into every detail, but it is what it is.

Okay. Staying with the internal workings of Horizon Kinetics, we have a question about the asset classes that earn performance fees. The questioner is indicating that ETFs and mutual funds do not earn performance fees, and I'll confirm that. The incentive fees come directly from the proprietary fund group. I'll just ask you, Murray, is there anything else that you'd like to add around performance fees or their sources?

Yeah. So, see, this is the problem. Nothing is without a problem. So I think we've done very well. But when you're a long-term investor, a consequence of being a long-term investor is that your securities that you own, even if they're all great, they're going to be normally distributed. Even if every security is a positive rate of return, even if it's normally positive, they're going to be normally distributed. And therefore, something is going to be your best security. When you leave a loan, whatever your highest rate of return, i.e. your best security, that's going to be your biggest position. So when you do that and you have really great returns, it creates a marketing dilemma for you. And the reason is, it's one thing for a potential client to invest at fund inception and when you have what looks like a well-diversified portfolio, but eventually under-diversifies itself. So some people, matter of fact, not just some people, a lot of people, be very reluctant to invest in that kind of fund because it's concentrated and they regard it as a risk. So now, of course, you can alleviate that risk in a day because all you have to do is sell the concentrations put in something else. But now, it's not just for us. You can see what taxes we would pay. Every client in that fund would pay proportionately the same tax rate that we would. And there's no reason to because it's a perfectly good security. That's a problem. Some people solve the problem with leveraging. We're not going to do that, so that's out. But it It hurts the marketing effort. So what's the solution? The solution is that we have a number of securities in these funds that pay periodically and usually high dividends. And unlike a mutual fund, which has to pay its dividends out to the customer base because that's required by law, the partnerships can hang on to the dividends. We use the dividends to re-diversify the funds as we find new securities. So the partnerships have a certain flexibility that the mutual funds don't have. Now, when the mutual fund, when you sell securities, you have to distribute not only the income, but also all the capital gains. So if you made $100 million in profits, you have to distribute $100 million to your clientele. So when you trade aggressively, And I should tell you, parenthetically, that virtually every SEC registered fund trades aggressively. The normal turnover in SEC registered fund that are active is rarely less than 100%. And 200% turnover a year or more is not uncommon. We don't do that sort of thing. So I think that our SEC registered funds, from that point of view, are far, far more tax efficient. And to the degree we diversify, we take our time at that, thereby taking the care and the time to manage the potential tax liability. So that's kind of how it works. We just don't respond instantaneously. So it's got its disadvantage in that it makes it harder to market But on the other hand, it makes it easier to market. You have, I think, a more robust return in the long run. And the results are all on our website. And I invite you to look at them. And only you can be the judge of that. So I hope that answers that question.

Okay, great. You mentioned a few minutes ago, FRMO is a sister company. So I thought maybe you could touch on that relationship a little bit. The question is specific to Is FRMO entitled to a portion of the carry revenue? And just for other listeners, we have disclosed in one of the footnotes, and this has been out there a while, that FRMO does have a right to a 4.2% share of the company's gross revenue prior to any commission sharing arrangements.

Right. So what you'll see is if you look at the FRMO financials, you'll see a line item. What's called the revenue share. We're obligated to value it. and we create a value and we never change it because it's a very debatable subject. What is a revenue share worth? I guess it depends on how much revenue you're sharing. We don't really want to change it every quarter. But in any event, yes, the number is 4.2%. So FMO gets 4.2% of the revenue of Horizon off the top. So how did it come to get that? You might well ask. Years ago, when Horizon was a smaller company and FMO was a smaller company, Horizon and Kenix were separate firms. So FMO was, which had financed some business activities. We didn't want to have to register FMO as a investment advisor, which it really wasn't. It's bad enough we had two investment advisors. make three investment advisors, all run by the same people. It was really confusing. So what we basically did is we surrendered to Horizon all of the asset management products, everything, in exchange for a revenue share. So we gave up all the income, and the quid pro quo was we didn't want to sell it for cash because it would have been a tax. So we got the revenue share. And that's the origin of it. It stays that way to this day. So that's how that happened. I think that covers it.

Yeah, I think so. Maybe this would be a good question to round it out. Do you have a question just overall about the Horizon Kinetics stock itself, and do we have any plans, near-term plans, to uplift the stock?

We're... Looking at all kinds of issues, we've been pretty busy these last couple of months with a number of things, like paying the taxes on performance fee, like doing the consolidated financials of Horizon, like getting the quotation on OTC markets for consensus mining. So we haven't pursued, we've just been too busy to pursue it. In order to get an uplisting, right now, Horizon wouldn't qualify. We don't have enough volume. So one of two things, to get an uplisting, we have to do one of two things. Number one possibility, some shareholders are going to have to sell some stock. And depending on how much stock they sell, we didn't qualify and we would be delighted if you could do an up listing. Possibility number one. Possibility number two, we could do an offering of stock and that would trade and we don't really need any money. So that would solve the listing problem. We have no problem listing. If we did that up listing, that'd be no problem. But then again, Would an offering like that be dilutive, given a lot of the things I talked about today? Is it fair to shareholders just get an up listing to do an equity offering to get cash that we really don't need, which has the possibility of diluting everybody to get some trading? And I suppose people can debate it. And we debated. So no decision has been made yet. And if you have... feeling on one way or another um doesn't hesitate to contact us your shareholders and you know we have a right to hear your point of view and you have a right to express your point of view so we look forward to hearing your point of view but as i said no decisions have been made it's possible that some shares will come on the market and maybe that'll solve the problem but nobody seems to be too eager to sell the volume is what you see it's pretty low volume so the The necessary prior step to an up listing is we got to get more volume. And I described the two methods by which we might do that. So we have that. There's one more possibility. If we found some company that had a publicly traded stock that had a lot of or an adequate amount of volume or had a listing, we could merge into that, reverse merger. The same way we merged into Scott's Liquid Gold. That's a third possibility. And it's possible you found something that's really undervalued. We might be able to do that without deluding anybody. Those are the possibilities. So don't be shy about expressing your point of view. And we're thinking about that subject. So I just have to leave it there. So any other questions, Mark?

No, there are no other questions, but on that point, I will remind everyone that the annual meeting is June 17th, if I have my calendar correct. So that is coming up, and then I'll just ask if there's anything else kind of looking forward you want to direct people's attention to or have any closing remarks? This would be the time to do it.

No, I think I covered all the highlights and introductions, so it just remains for me to thank everybody for their attention. I thought questions were pretty good. And of course, apart from the annual meeting, which is coming up, we're going to reprise this meeting format in about 90 days. In the interim, I know it always happens. The minute you hang up the phone, you think of a question you should have asked, but you didn't ask. If you want to have a question asked, don't hesitate to contact us. We will get you an answer. So we want to be as open... as we possibly can, given the laws. And there really aren't a lot of secrets at Horizon. So with that, I thank you very much for your attendance today. And hopefully we can see you all on the 17th of June in our annual meeting.

Great. Great. That concludes the call. Thank you very much, everyone.

Okay. Thank you, everybody. Good afternoon.