FRMO Corporation Annual Meeting of Shareholders

Tuesday, August 27, 2013

There’s a company called the Texas Pacific Land Trust, which you might not have heard of. It is a
company—it’s actually, technically speaking, a trust that owns land in Texas, which is why they call it
Texas Pacific Land Trust. It’s in West Texas. To give you an idea of where the land is, you can imagine
in your mind a map of Western Texas. If you put a chessboard over Western Texas, that’s more or
less where their land is. It actually looks like that. Basically the story of the company is that it owns
two assets. It owns the land and it owns some mineral rights under the land. As far as the mineral rights
go, it’s mostly oil. Various companies pay them a certain amount of money in exchange for access to
the mineral rights. The land is largely used for grazing cattle. Occasionally they sell a few acres, but not
very frequently. What the company has done over the years is use roughly 40% of the cash flow to buy
back the stock. They’ve been doing it since, I believe, 1932. In 1932, there were 500 million shares
outstanding. Now, I think there are 8.6 million shares outstanding. If you like calculus, this is a stock
for you because, every time they buy back a share, the next share purchase is a greater proportion of the
remaining shares.

But there’s more going on than just that, because it turns out, now with the evolution of fracking,
you can access minerals that, in principle, you could never access before. It turns out that a lot of
the land they own—leaving aside the mineral rights that lie under the ground—they use the
surface rights on the land just for cattle grazing, and that land has no mineral rights whatsoever.
However, for other parties who wish to extract mineral rights in that area, whether on Texas
Pacific Land Trust property or on someone else’s, they can’t get to the minerals unless they go
over Texas Pacific’s land, which means they have to pay them some rent. So, de facto, that cattle
grazing acreage has mineral rights.

Once you extract the minerals, you can’t get anywhere unless you build a pipeline. The pipeline
is a long-term asset, which means the Trust will take in rent from the pipeline, which could go on
for a very, very long period of time. If you follow the company, what you will observe is the
category that they call the rent from land to access the minerals, as opposed to actual mineral
rights. They call that “sundries.” And that “sundries” column has been growing very rapidly.
Of course, when it grows very rapidly, it throws off revenue. It has no associated cost, because
they’re not building rigs; they’re not renting rigs. The Trust is merely signing a document that
gives an exploration and production company permission to operate on its land—it’s an
easement, essentially. It gives them permission to operate for a limited time period on their land.
That’s all it is. So, the incremental revenue is really incremental profit. But what’s much more
important is they use that money to continue buying in shares. So, eventually, if they kept buying
in shares at the current rate, I estimate that, in somewhere between 25 and 30 years, there will be
one share left. And that share will be very valuable. If you owned the last share, that would be a
lot.

Now, by the way, I’ll tell you two things about the company apart from that. Number one, it’s
from them that I got the idea for the FRMO revenue share, because I saw what they were doing.
So, it’s not an entirely original idea. Now, when did the idea originate? Well, long before there
was a Horizon Asset Management and Kinetics Asset Management, I was an analyst over at
Bankers Trust Company. I would try to regularly to go the analyst meetings that the New York
Society for Security Analysts held. Now it’s located on Sixth Avenue, but in those days it was
located downtown.

So, I’d go to the luncheon. There was one day I was a little preoccupied. And you got off on a
certain floor. And, as I recall, you had to turn to the left to go to the Society. I turned to the right.
I had been on that floor many, many times. But I went to the right and walked to the end of a
long corridor, and I realized I was in the wrong place. But I saw a sign that said, “Texas Pacific
Land Trust.” So I went the other way and I sat down and heard a company presentation at the
luncheon; I kept wondering, “What is the Texas Pacific Land Trust?” So, at the end of the luncheon, I
went down to the end of the corridor and I asked them what they are. They gave me an annual report,
and I found it very interesting, so I actually became an investor back then.
Now, the first research report that Horizon Kinetics wrote in its inception year was on Texas
Pacific Land Trust. In that report, we postulated that if they bought back shares at a certain rate,
assuming no inflation whatsoever—and you would think the land value would grow by the
inflation rate—but assuming no inflation whatsoever, what would the value be in 10, 15, or 20
years hence. We’re now in the 19th year since the formation of Horizon. When we wrote that
report, we postulated where the stock might be, almost two decades hence, and it has turned out
to be a much more interesting report to read today than it was then. So, Steve, do you have
anything to say about the report?

STEVEN BREGMAN: Yes. As you said, it was our first report, and it didn’t look like the reports
we write today. The reports today are kind of heavy, and they have a nice facing page, and they
have a preface and a conclusion and so forth. We didn’t know how to write research reports for
commercial publication then. It looked kind of like a four-page college essay. When we showed
it to the company that markets our research, the guy weighed it in his hand and said, “You need
more. And, on the front, you need to say how high it’s going and when.” We said, “We already
say that in the back.” He said, “I know, but you need it in the front also.”

So, just as a series of asides, we were always interested that the volume of oil and gas that
various producers would take out of the Trust’s land over the decades never seemed to go down.
We thought that was interesting. We didn’t know exactly what it implied, but we thought it was
interesting.

Another observation is that, as Murray mentioned, even on the land in which the trust doesn’t
have mineral rights, it is actually getting income now in exchange for the right of other
companies to cross its property to get to the land with mineral rights. But for most of its land, for
the greatest bulk of it, its highest use is grazing. It gets grazing fees. And periodically it would
sell some acreage here and there. It might get $500, $600, $700-or $800 an acre for it. But
they’re finding now that the rental income they’re getting from commercial interests crossing
their land is actually about as great as they would get from selling it. So they’ve actually
curtailed selling any acreage, because they’re getting the same amount of revenues just by
renting it. Accordingly, they keep the land and they continue buying back shares. It’s actually
better now than it was 19 years ago.

MURRAY STAHL: Right. Now, I’ll tell you that another interesting thing is that Horizon
Kinetics, as an investment advisor, give or take a little bit, owns nearly 16% of the company. It’s
taken us almost two decades to build that position. Some of it is from buying more shares, but
some of it is merely from the company buying back shares which de facto gives us a higher stake
in the company. So, even if we were never to buy another share—and maybe we won’t buy any
more shares—our stake in the company is going to grow. Every now and then, we get offers to sell the
whole stake. So, we know what it’s worth. and that’s a comment a little bit beyond performance. We
get offers to sell the whole stake to someone at a price of X, and we don’t want to do it. We look at our
investment performance, which we’re, I think, proud of, and we say, “Well, if we took that deal, we’d
have higher investment performance. But is that really the best use?” We could make our performance
higher if we really wanted to, but it tells us something about the meaning of investment performance.
It’s a market value. It’s a guide to what investors think it’s worth, but what investors think it’s
worth is not always the best guide. I think it’s also a validation of the idea of long-term investing.

FRMO Corporation Annual Meeting of Shareholders

Tuesday, August 26, 2014
Steven Bregman: As for a stock recommendation, I will update one that Murray spoke to last
year at this time: Texas Pacific Land Trust. This company is interesting to us for a number of
reasons, not least of which is that the very first report we ever wrote at Horizon. To describe this
company, I’ll use the term ‘unique,’ a word that is typically improperly used and overused, but in
this case is an accurate assessment.

Texas Pacific Land Trust is a unique company. It is a trust that was created in the 1880s out of a
bankrupt railroad and endowed with assets, which consisted of land along the railroad. It has its
trustees and not very many employees. They were charged with and they are required to buy
back shares over time using revenues earned from grazing fees and the odd sale of a parcel here
or there and from certain mineral rights on which they collect royalties from entities that drill or
dig on their land. They have been buying back shares for over a century. I think there were only
one or two years during that time in which they have not bought back shares. As a result, the
share base has been shrinking.

Because of that, on an acre-per-share basis, they buy back shares at a more rapid rate than they
sell land. It is an internal compounding machine subject to very little of the exogenous risk that a
typical business faces. They do not have to invent a new product. They do not have to defend a
patent. They do not have to worry about government regulations the same way. The power of
compounding is such, if you look over most of the last century from the 1900s onward, the stock
has appreciated by something on the order of 14% a year. It is not well-known, nor is it in any
indexes.

There is a story of a certificate that was lost in 1907 when it was worth about $300. I believe it
was certificate number 390. That certificate was recovered 72 years later and I think the figures
were it ended up being worth more than $5.7 million. That’s the power of compounding.
Since Murray covered Texas Pacific Land Trust at the last meeting, the stock has appreciated
from about $85 per share to about $200. It is more interesting to me as to why it has appreciated.
Shortly after the 2013 FRMO Annual Meeting, Chevron and Cimarex, two energy exploration
companies, announced a joint venture. They each own land in that area and they combined their
land holdings to do some drilling. There are a number of different shale deposits in that area that
are said to be very rich and these two companies plan to engage in a major production effort
there. In fact, the first phase of it could end up being $7 billion worth of capital expenditures to
drill wells, and some portion of that—we just do not know which portion—is on property in
which Texas Pacific Land Trust has a 1/16th royalty interest. The stock was flat for months. The
announcement was made and the stock was flat.

Then it went up to $100 after a 10Q was issued and people could see that Texas Pacific Land Trust’s
revenues were rising, not from land sales, but from royalty interests and from easements. They get paid
for access through their land.
Then the stock was flat for months. After they filed their 10K, people saw more income so the
stock went to $140. Then it was flat for months. After the next 10Q, it went up some more. It
rose to the $165 range and it hung around there. Then a publication called Business Insider
Report published a very long, very informative report all about Texas Pacific Land Trust and
people must have read it, because now the stock is trading at around $200. Sometimes the market
is efficient. People read something, they buy it and the price goes up. In one sense, there is
nothing new about the company. Nothing has changed, but they needed confirmation.
Regarding diversification within the assets that Horizon Kinetics manages and upon which we
receive our fees, which translate into revenues for FRMO Corp., two of the largest three
positions we hold are land companies: Texas Pacific Land Trust and Howard Hughes Corp.
These are uncorrelated assets or assets that do not move with the market, but move with specific
information. They might be inflation hedges. There is statistical evidence going back just about a
century that shows land is a much better inflation hedge, or at least it better mirrors inflation in
terms of its price behavior than gold, for instance.

FRMO Corporation Annual Meeting of Shareholders

Wednesday, September 12, 2018

Questioner 3
Murray and Steve, on occasion, you like to update us on a couple of your larger positions. Would
you care to comment on Texas Pacific Land Trust and Civeo?

Murray Stahl – Chairman & Chief Executive Officer

Texas Pacific Land Trust (TPL) is very easy. For those who don’t know what it is, it’s just a trust.
It’s been around since 1888. It was a result of the bankruptcy of the Texas and Pacific Railroad.
Basically, over more than a century, they’ve taken their cash flow and used it to buy back stock.
Since that time, they’ve bought back about 97% of all the original shares outstanding. If you like
calculus, this is a stock for you because every time they buy back a share, the next share they buy
back is a greater proportion of the remaining shares, which is the denominator in the float
calculation.
In theory, the per-share net asset value, assuming it were a constant, should increase at an
accelerating rate. But, fortunately, there are many other interesting developments in the area in
which they operate, which is West Texas. It’s called the Delaware Basin. It’s an area where
everyone knew hydrocarbons existed, but no one believed they were extractable. The hydro
fracking revolution made these deposits extractable, and it’s only just starting.

If you use Google Earth to look at a map of the applicable counties, including Loving County,
Culberson County, and Reeves County, and compare the amount of infrastructure, such as roads,
pipelines, gas-gathering systems, and electric cable, among other necessities, to what’s in Midland
County, which is in the center of Texas and has been producing oil for a long time, you’ll see that
the TPL counties look empty compared with Midland County. And I would argue that the TPL
land is better and that the hydrocarbon reserves there are more prolific.

To extract the hydrocarbons, the exploration and production companies need water, and TPL has
water. They’ll need a gas-gathering system; they’ll need pipelines. All this activity is just starting.
Eventually, as in Midland, some people will choose to make that area their home, and they will be
developing those areas for probably the next 60 years.

In my opinion—and it’s just an opinion; I could be wrong—I believe the revenue is likely to go
up and go up a lot. But, unlike your typical company involved in hydrocarbon extraction, TPL
doesn’t really have a lot of costs. It has a small staff so, when revenue goes up, the costs don’t rise
proportionately as in a normal corporation. That’s what makes it such an interesting investment.
By the way, it’s also not included in any index, and they keep buying back their stock, so there
aren’t that many owners. That’s kind of the way we like it. And I expect TPL will continue to do
very wonderful things.
Steven Bregman – President & Chief Financial Officer

As Murray suggested, look at Google Earth, and start way high up. Zoom in slowly over Midland
County in Texas, where the older oil fields are. If you go slowly enough, at a certain point you’ll
see what looks like some interesting looking dots in a grid pattern. It looks like someone took pins
and stuck them on the surface. At first, you can’t tell what they are. But, as you zoom in closer,
you’ll see that they’re little squares. If you get closer, you’ll realize that each of those squares are
concrete drilling pads. And you’ll see how dense that pincushion is when you get down there.
Then, if you pan back out and move westward over to the Texas Pacific Land Trust acreage, you’ll
see that there’s hardly anything there. That’s a really high-impact visual representation of the
difference in the intensity of the land usage.
Midland County…
Loving County….
Murray Stahl – Chairman & Chief Executive Officer

Two more points: first, if you happen to fly over that area at night on your way from the West
Coast to the East Coast, or vice-versa, you’ll observe that there are fires burning. You can see them
flaring off the gas. They’re flaring off the gas because there’s no gas-gathering system—I mean
there is some system there, but it’s not extensive.

In about in nine months, there will be the first significant gas-gathering system. They will no longer
be flaring off the gas; they’ll be selling it. Same expenses, more revenue: a really great situation
to be in, which is why we have money invested in that security.

FRMO Corp. Q3 2018 Conference Call

Tuesday, April 17, 2018
Question 5
Texas Pacific Land Trust (TPL) is a large and long-term holding for Horizon Kinetics. You
have previously discussed that some of the large energy companies plan to spend billions
in the region where TPL's land is located. Why wouldn't one of these large energy
companies try to buy TPL outright?
Murray Stahl – Chairman & Chief Executive Officer
Well, it’s not as easy as you think, because Texas Pacific Land Trust (TPL) is a trust. The
three trustees have a great deal of power, and they might not be interested in selling it. If it
turns out that their posture is not to sell, I for one—because we own about 23% of the
company, or the trust, I should say—we’d be right on board with that.

Why would we want to sell to a big energy company for the X% premium in return they
would give us? All you have to do is look at the map and see where TPL’s property is
located, which is in the Delaware Basin, which itself is located in the western area of the
Permian Basin. There’s very little you can do in that area without either trying to exploit
the Trust’s hydrocarbons or crossing their land in some way and paying an easement, or
drawing brackish water for fracking—they own the water rights—or using their sand,
which is known as caliche. There’s very little you can do without having to pay some kind
of fee to TPL.

Look at what’s happened in construction in that area so far. Look at the various large
energy companies’ websites and read how many billions they plan to spend. And the
operative word there is “plan” to spend. They haven’t spent it yet.
Steven Bregman – President & Chief Financial Officer
I looked at a satellite view today of portions of Texas where they have had oil wells for
generations. If you start with a satellite view from afar, then zoom in, it looks like there are
little white dots arranged in a square matrix. As you zoom in further and further, you see
that those dots are concrete drilling pads. It looks like a pincushion in that area. Across
whole areas, you have all these densely placed oil wells and the pipelines connecting the
wells. Then zoom out and go westward to the counties in which TPL’s properties lie, and
you see there’s nothing there.

Murray Stahl – Chairman & Chief Executive Officer

Like Reeves and Culberson and Lubbock.

Steven Bregman – President & Chief Financial Officer
Yes. And you can just imagine how much structural intensity there will be one day.

Murray Stahl – Chairman & Chief Executive Officer

That’s right. So, I’ll mention a couple things about it. You can’t get a large amount
hydrocarbon material out of that area yet, because they don’t have gas-gathering and
pipeline systems to speak of yet. There’s a little bit, but it still has to be built. That’s a very
significant limitation on production volumes. And there are other issues, such as the issue
of gas. If you fly over the area at night, you’ll see that, to the extent they are producing, a
lot of the gas is being flared, because there’s no way to gather it. Even not considering
what would happen if gas prices went up, just think of what would happen if they didn’t
flare it and could transport it. And, by the way, a lot of the gas is wet gas, the best kind.
I could go on and on but suffice it to say that I have no desire to accept a control premium
of X% for selling it to anybody.

Here’s a follow-up to that question.

Question 6
Horizon Kinetics owns approximately 23% of TPL. If for some reason you want to
significantly reduce your TPL position, is that something that can be done in an efficient
manner?

Murray Stahl – Chairman & Chief Executive Officer

I’m sure there are plenty of people who would buy it, but we don’t have any intention of
selling it.

Steven Bregman – President & Chief Financial Officer

Well, first of all, we’d have to change direction from increasing what we own before we
would decide to sell it.

Murray Stahl – Chairman & Chief Executive Officer

Right. It has appreciated mightily. We buy shares on most days, and the proof of that is in
our 13D filings. You can see all these back-and-forth transactions—both purchases and
sales. For the most part, the sales come from people for whom the position size became too
large, or because they want to gift some shares. They’re selling some shares, and we, in
one of our incarnations, are buying shares.
Like Steve said, we’re increasing our holdings, not decreasing. That’s our posture. I don’t
doubt that, if we had to, we could sell all of our shares but, thankfully, we have the money,
and we’re buyers, at least for the time being. Maybe we’re wrong, but that’s what we’re
doing.

FRMO Corp.
2019 Shareholder Letter
D. Investment Funds
For the fiscal year May 2018 – May 2019, the investment funds performed reasonably well, given
the lack, in our view, of very many alluring investment opportunities. The Multi-Strategy Fund
advanced 13.7%, CDK appreciated by 14.9%, and the Polestar Fund returned 15.4%.
It should be noted that Texas Pacific Land Trust is a very large position in all three funds […]
H. Horizon Kinetics Hard Assets LLC
One of the problems with the labyrinthine approach to corporate organization is that it is difficult
to obtain information if one follows GAAP. In accordance with GAAP, it is disclosed in Note 2
on page 7 of our annual report that FRMO owned 15.49% of Horizon Kinetics Hard Assets LLC.
Of course, the reader really needs to know the market value of the investment. On July 31, 2019,
this value was roughly $11.235 million. Of course, the primary investment is in shares of the Texas
Pacific Land Trust.

Texas Pacific Land Trust is a unique enterprise that was formed as a result of the bankruptcy of
the Texas Pacific Railroad in 1888. Much of the land holdings are located in the Delaware Basin,
which forms a part of the Permian Basin in West Texas. In our view, it is an irreplaceable asset
that simply could not be recreated in this form, even by a very large company with huge resources.
Its developmental possibilities are beginning to be exploited.

However, the area lacks pipeline capacity, which will probably require years to adequately
provide. As a consequence, natural gas is being flared and brings no revenue in cases of flaring.
Adequate pipeline capacity will solve this problem. The area contains extremely valuable water
rights that could become royalty income, as well as surface rights that can provide easement
income. This is in addition to conventional oil and gas royalties. It is also important to observe that
hydrocarbons have been in a bear market for the past five years. The price of West Texas
Intermediate oil has declined by about 50% in the past five years.

Essentially, Texas Pacific Land Trust is a royalty income stream with free infinite call options on
the price of energy as well as advances in drilling technology. In a royalty situation, price increases
simply increase revenue and net profit with no concomitant increase in cost. Similarly,
improvements in technology by other firms result in enhanced production, which increases revenue
and net profit with no concomitant cost. Consequently, it is not difficult to understand our
enthusiasm for this investment.

Of course, an issue with this investment is the 19th century governance structure of the enterprise,
which we believe should be updated in accordance with the modern conception of corporate
governance. Toward that end, Horizon Kinetics engaged in a proxy contest and ultimately in some
litigation as well. At the end of July 2019, the various parties agreed to establish a Conversion
Exploration Committee consisting of seven members.

Since we are committed to confidentiality under the terms of the agreement, we are not at liberty
to comment on the work of the committee. However, civil discourse can be surprisingly
productive. In any case, when one views the progress of Texas Pacific Land Trust in the context
of the energy bear market of the past five years, one finds it difficult to restrain one’s optimism as
to what might happen in a better environment.

FRMO Corporation Annual Meeting of Shareholders

Tuesday, September 10, 2019
Questioner 3
How are you coming along with your discussions with the trustees of the Texas Pacific Land Trust?

Murray Stahl – Chairman & Chief Executive Officer

Okay, well, that’s a very good question but, unfortunately, because there is a confidentiality
agreement in place, I can’t discuss it without getting myself in a lot of trouble.
Questioner 3 (cont.)
We’ll wait then. Thank you.

Murray Stahl – Chairman & Chief Executive Officer

We’ll all have to wait because, of course, the outcome of any discussion cannot be known until
the end of the discussion.

Steven Bregman – President & Chief Financial Officer

A follow-up question that I think you should be able to answer regarding Texas Pacific Land Trust
is that in the announcement between the various parties to this conversion committee, there was
agreement that there would be interim reports to shareholders on the progress of the committee. Is
there anything you can tell us about the intended frequency, or when the next one might be, or the
level of detail? Probably not, but I’m interested to hear your response.

Murray Stahl – Chairman & Chief Executive Officer

I think your assumption is correct that progress reports can be expected when there is progress to
report.
Questioner 4
Back to Texas Pacific Land Trust: Do you feel that the right-of-way, or whatever property they
sold, reduced the economic value of the company?

Murray Stahl – Chairman & Chief Executive Officer

Well, let’s put it this way: I’m not a big fan of trading, just philosophically. So, I don’t think it’s
such a great idea to trade any asset, generally speaking. Philosophically, I think leaving it alone is
better than trading it.

Judging one parcel of X acres of land versus some other parcel is an extraordinarily difficult
endeavor because, for each acre of land, you have to make an assessment of what some operator
is likely to do with it. If they plan to drill, will it be a drilled but uncompleted well, or will it
actually pump? If they pump, what is the gas gathering system going to be like? Should it depend
on another company? If they need water, how much water will they need? That’s dependent on
how many wells they actually drill, and it depends on something called the lateral, which is the
horizontal distance drilled—how far they’re drilling. It’s not uncommon now to have 1.5-mile
laterals, which will obviously use more water than a 1-mile lateral.

There are many variables, and I’m not able to assess exactly which are better and which are worse.
For me, I just like to leave things alone, because there are so many variables. From my point of
view, and I think from everybody’s point of view, they are largely imponderable, because they’re
in the hands of somebody else. I wouldn’t undertake to make a judgment on whether to sell Acre
A to buy Acre B, even if it were in my power to do so. You don’t know if selling Acre A to buy
Acre B will improve or diminish your value; you wouldn’t know for years.

Probably a better analogy would be that some years ago, in 2014, before the discoveries in Reeves
County were announced, there were people trading Texas Pacific Land Trust shares. They had no
idea how big the fields were, just in Reeves County alone. No one knew. Everyone knew there
was oil in that area, but they didn’t know about future improvements in technology that would
make it possible to access those fields. Some people sold shares back then, and they shouldn’t
have.

All I’m saying is that they didn’t have the information, nor could they have had the information,
to properly assess the valuation. The same applies to today, because the technology of what can
be done in these fields is moving rapidly. If you visit an oilfield today, it’s like visiting a high
tech company. In many ways it’s more high-tech than the conventional high-tech companies. There
are discoveries being made—I don’t mean discoveries in oil—I mean discoveries in technology,
literally, on a weekly basis. So, how can one assess properties? That’s the issue. I would prefer to
say the truth, which is that I can’t really assess; I can only make conjectures, which might be
reasonable, but they probably wouldn’t be accurate.
Questioner 6
Two quick questions: With regard to Texas Pacific Land Trust, I realize you can’t speak about it,
but has it occurred to you that the legendary strength of you and Horizon Kinetics is more as
visionaries. You’re known for original insights, but not for being a tough streetfighter in an activist
fight. If you get into a situation with some unsavory folks, have you considered that you might
want somebody else to be the bad cop? That’s the Texas Pacific Land Trust question.

[…]
Now, back to the streetfighter part of your question. First, there’s a presumption in your question
that I won’t take it in a pejorative sense; rather, I’ll take it in a complimentary sense.

If I can choose to have alternative phrasing, though, the presumption is, you’re basically a nice guy, but
there occasionally comes a time when you just have to punch somebody in the face. And maybe you’ll
have to do more than punch them in the face.

Maybe you’ll have to punch them in the face, knock them down, and stomp on them a few times so
they get the message that you’re not kidding around. From an activist point of view—and maybe it is a
pejorative thing to say about myself—I’m capable of it. I can do it, but I don’t think it’s such a great
idea to do it, because it causes a lot of collateral damage along the way. The library is replete with case
studies of people who waged this fight, this street fight in the courts. That altercation takes however
many months and, at the end of the day, I’ve never really seen a long-term result that’s desirable.
Usually it is just a question of the streetfighter saying, “I want you to engage in a certain transaction. If
you do it, the stock will be X percent higher, I’ll sell it, then move on.” That’s what the streetfighter
does. But if, instead, you recognize an extraordinary asset that needs to be developed over the course of
many years, or maybe many decades, I don’t know what you can accomplish using the streetfighter
approach. Because there’s no one transaction, even if you could force somebody into undertaking
it, that would radically change the value of the asset.

You could debate one particular change or another if you want to, but at the end of the day, what will
increase the value is the development of the asset. In the case of Texas Pacific Land Trust,
development of that asset is not entirely up to the trustees. Pipeline companies make decisions about
where the pipelines will be built.

The oil and gas exploration companies must decide on the kind of technology they’ll use, how deep and
how long the lateral will be, whether they will have pads or not. The other companies will decide
whether they want drilled but uncompleted wells, as many of the wells currently are, which means they
drill the, but they don’t yet pump the hydrocarbon.

Let’s just explore one of those items. There are a lot of drilled but uncompleted wells on the Texas
Pacific Land Trust (TPL) property. That means some oil company drilled the well, they paid the
easement charges, but they’re not pumping. At that point, TPL can’t collect its share of the royalty.
The easement is a very small part of it. If the wells were pumping, which means they’re fracking,
then they would be using a lot of water, too. But if the well is drilled but not completed, TPL won’t
be selling a lot of water, because the oil company is not yet fracking. Those circumstances are not
within one’s control.

The streetfighter has a role in that sometimes there are companies where management is acting in
a manner completely adverse to the shareholders’ interest, and they must be confronted. I don’t
think TPL is in that situation; that’s not my assessment of it. If I thought that was the circumstance,
maybe I’d be a little bit less of a nice fellow than I am right now. I try to be diplomatic and nice to
everyone. Maybe it’s a deficiency in character, I don’t know. But for the time being, I’ll keep being
like this.

FRMO Corp. Q2 2019 Conference Call

Thursday, January 17, 2019

Question 6
As an investment thesis either receives confirming or non-confirming information,
how does this change FRMO's portfolio allocation (or not), such as with Texas Pacific
Land Trust (TPL) or bitcoin?
Steven Bregman – President & Chief Financial Officer
If I may, I’ll be the guy to warm up the audience for you on that question. This question is
one that in more general terms we’re receiving from all corners now. Why? It’s not unusual,
because stocks were down in December. In addition, it was year-end, which means investors
received urgent calls from their accountants telling them about a loss they could take to offset
a gain and so forth. As a result, clients were asking us: “What are you doing? Are you
reallocating? Are you selling?” Or they told us: “You should sell and take losses,” and so
forth and so on. It happens every year.

We really want to do what’s best for our clients. We really do have their best interests at
heart, but it’s very difficult to say: “Calm down. Don’t get excited.” to someone who is anxious and
tense, whose eyes are fixated on the red exit sign above the door, or to help them
to think about it in higher, more subtle terms.
I’ll read you something from an email response I wrote to a client on December 20, 2018,
who was asking me: “What about Texas Pacific Land Trust (TPL)? If we have any high tax
cost lots, should we take the benefit of it?” Without context and sufficient information,
investors typically resort to price as the front-and-center investment variable. That’s what
they can focus on, so all their attention and their higher cognitive powers contract into a
singularity around something they can readily understand like the exit door or a single metric
like a stock price. It’s instant, effortless analysis.

My response was: “Look, I’m going to give you two facts. Here’s Fact A. The Shares of
TPL are down about 45% from their high earlier this year. If price behavior carries
information content, then it suggests that the distillation of all investor knowledge is that
TPL’s business must be worth less. Not worthless, but worth less. And that must be why the
market sold the stock down. And, moreover, we know that the price of West Texas
Intermediate oil is down about 40% from its high this year (2018). Yeah, that must be it. Not
a good stock.

“Now, here’s Fact B: TPL is up 2% from the start of the year, and the S&P 500 is down
about 6%. Yep, it must be a pretty good stock.”

Which is it? What should we do?

Another client asked me a generally related question some weeks later. This client wanted
me to take tax losses across the board, wherever they were found. I said, “Look, if you
have—let’s say, as a general case—a 50% mark-to-market loss in a stock and your
accountant tells you, ‘Look, you could take the benefit,’ What really happens? Okay, so you
get a 20% tax benefit on that 50% loss; that’s 10% of the stock price. What’s happening,
though, is that in the second and third week of December, everybody’s doing the same thing.
They’re all focused on that exit door.”

I took something like a half dozen stocks that we own in various entities, including
companies like Civeo, Texas Pacific Land Trust, Lionsgate Entertainment, and Royce
Micro-Cap Trust, and I showed them the prices as of December 3rd and also the prices as of
the end of the second week of December and, more or less at the end of the third week of
December. They were going down, then down some more, and down some more. Then, by
the first week of January, they all were more or less exactly where they had started before
the decline in December.

Anybody who started selling along with the crowd in the middle and end of the month
basically took a loss of market value of 20% to 30%. They can’t buy it back, because of the
31-day wash sale rule for tax loss recognition. They got a 10% tax benefit on a price that was 30%
lower. That’s what happens. There’s a reason for the phenomenon called the January effect.

I know that this question was a lot better informed than that, because there’s been a lot of
price action in TPL. But TPL finished the month of December not far from where it started.
Murray may have a different view, but I’m not inclined to make major changes in a security
nonspecific manner without being more informed just because prices go topsy-turvy. And
they didn’t even go that topsy-turvy. It’s not even such a big deal, but people feel that way,
so I try to help them.
Murray Stahl – Chairman & Chief Executive Officer
I have some similar things to say, but I’ll express them differently. I’ll talk about TPL first,
then we’ll get into bitcoin. To give you specific examples, because you’re asking a specific
question, I’ve been in TPL stock since 1984 in one incarnation or another. At the end of the
year, the price of oil went down 40-odd percent and, from its then higher price, TPL went
down by a relatively similar amount. From 1984, this decline might be the 16th or 17th time
I’ve endured a price drop of that magnitude, though the numbers might be a few percent
higher or lower on different occasions. I’ve lived through that many times, but I didn’t react.
Let’s go into the prior time so we can get a little more historical perspective on what
happened.

In the latter half of 2014, you might recall that oil went from $114 a barrel all the way down
to the low $40s. There might have even been a day—I don’t remember anymore—when it
traded even lower than $40, but let’s call it the low forties because I think that was the trading
range. TPL’s stock price might’ve gone down 40-odd percent; I don’t remember the exact
number, but it was something like that. If you look at that time period—and that was also
near the end of the year—TPL might’ve ended up—I’m going to be a few dollars off, but
let’s say $110 a share.

Oil is a little bit higher now than it was back then, though not that much higher, but TPL is
six times higher. I completely get it, that in a relatively brief period of time, the price of oil
is clearly the dominant variable, maybe to the virtual exclusion of everything else, because
oil can go down a lot in a few weeks, and there’s very little an oil-related business can do to
materially improve its operations. Maybe there are some ways to make it marginally better,
but there’s very little that can be done in a matter of weeks.

Maybe the TPL share price will decline a bit less than the price of oil, maybe it won’t, but
that’s what it is. You shouldn’t forget the key fact that with TPL you’re sitting on what we
believe to be the greatest hydrocarbon property in North America, maybe even in the world.
The technology keeps improving, and pipelines are being constructed so that in 11 months,
much of the gas that is currently being flared will no longer be wasted. There are the land
leases, and there is the water that is being sold. There are all kinds of things happening, but those
variables don’t change in any appreciable way in a matter of weeks because of momentary changes in
oil prices.

It’s completely understandable that people react as they do, but those who choose to react to
the share price are ignoring all the other aspects of this company. Think of how many times
we could’ve done that trade since 1984. And if we had sold it because we thought the price
of oil was going to decline, think of how many times it went down 5% and then went right
back up? How many times would we have we missed the rebound? To do that presumes a
certain talent that I don’t have. If the shares go down 2% or 3%, is that the signal for a 45%
decline, or is it just a 2% or 3% deviation before they go higher? I don’t really know, and I
can’t know. Imagine if it had been a different scenario. Imagine if something horrendous
had happened in Saudi Arabia and, immediately after a 10% decline, the price of oil went
up 100%. In addition, if you sell, then you have to pay the gains taxes. I don’t think it’s a
profitable undertaking. I think the best thing to do is to leave it alone.

FRMO Corp. Q3 2019 Conference Call

Thursday, April 25, 2019
Murray Stahl – Chairman & Chief Executive Officer

Thank you, Steve, for disclosing that. Following on what Steve said, I’ll give you an idea
of how to read these documents, because the way this company has grown, it’s getting
difficult for someone outside to really understand what these things mean. Texas Pacific
Land Trust (TPL) is a significant position, and you might be aware that we’re involved in a
little bit of a proxy contest. If you read the notes in our quarterly filings, you’ll see that
TPL represented almost 21% of our shareholders’ equity. It’s a big position, and it has
appreciated even subsequent to that date. You can draw the appropriate conclusions of
what that appreciation is. If you look at the line on the balance sheet that says Equity
Securities of $61 million and change, just be aware that the bulk of that is TPL.

You might ask how it can possibly be the bulk of that shareholders’ equity and still be only
20-odd percent of your assets? The reason is that we control this partnership called
Horizon Kinetics Hard Assets (“HK Hard Assets”), and something close to 99% of its
holdings are in TPL, which is, as you know, essentially an interest in some oil and gas
participations.

Just be aware that this line is not a diversified collection of equity securities. And even
when you get to the funds, for example—I’ll do it for you just to give you a sense of how
to read this thing—it would be on Page 8, Note 4. Let’s use the Polestar Fund as an
example which, as of February 28, 2019, was worth something over $18 million. It’s
probably worth more now. This isn’t exact, but it gives you a sense of what it is. I would
say more or less 50% of that fund’s market value is represented by TPL, so TPL is
important to what we do.
….
And now, we’ll answer the questions we received, but before we do that, let me make a
verbal note. A couple of the questions pertain to Texas Pacific Land Trust (TPL). Even
though they’re good questions, I won’t be answering them. The reason I won’t be
answering them is because we’re involved in a proxy contest with the company. According
to the rules, when you say something about the proxy contest, you have to incorporate this
information into another proxy filing. You can go to the SEC’s website, or the Horizon
Kinetics website, to see everything that we’ve done. There’s a lot of material there, and it
tells you a lot about us. I’d just rather not do a proxy filing every day if I can avoid it. I just
encourage you to read this information. Read it twice. You’ll learn a lot about us. The day
will come when we can say more in this forum, but we said a great deal in the filings, and
we’ll let the filings speak for us at this time. Normally, I like to answer every question, but
in this case, I’m going to punt it, and I’ll go to other questions that are non-TPL related

FRMO Corp. Q2 2020 Conference Call

Thursday, January 23, 2020
Questioner 4
Regarding Texas Pacific Land Trust, I wonder if the flared gas could be used to power
generators to run a mining operation rather than being wasted.
Murray Stahl—Chairman & Chief Executive Officer
Well, theoretically, anything is possible. Various people have thought of that and, at the
moment, there are some firms talking to other firms. I don’t think it’s happening anywhere
that I’m involved, but some miners are talking of buying flared gas. The problem with it is
that three pipelines have just opened in the last couple of months. They are Cactus II, the
ECL pipeline, and Gray Oak. They’re taking a lot of gas away to the Gulf Coast. And I
believe there are three others that are in the planning/execution stages.

The amount of pipeline takeaway capacity is only going to go up, and it’s going to go up a
lot. So, I don’t know how many companies will be willing to just swap flared gas at a zero
price. When you own a royalty, you have the right to ask for the gas in kind. You don’t have
to take cash. So, if it’s being flared, theoretically, you could ask for the gas in kind, and you
could turn it over to a miner that could burn it and drive a turbine. I think there are some
people doing it on a limited basis. But if you think about it from the point of view of a
producer, you’re betting on how much crypto is worth. What is mining profitability going to
be? They know the gas price is X per MCF. I shouldn’t speak for all the people who produce
natural gas in the State of Texas, but I think a lot of them will want to take the price of that
royalty and take the cash, rather than take the gas. But who knows what’s going to happen?
It’s very early in the process.
….
Questioner 12
Are you able to work with the present trustees of TPL, and will the corporate conversion
happen?

Murray Stahl—Chairman & Chief Executive Officer

As to the latter, you might have observed the SEC filing on TPL. I believe it was filed
yesterday, and you can read it for yourselves, but the committee recommended the
conversion, and you can see what’s going on there. I think that document also answers the
first question.

FRMO Corp. Q3 2020 Conference Call

Thursday, April 23, 2020
TPL is not the only asset in HK Hard Assets, even though it’s the largest part of it. There are
others, and they all have a similar characteristic. The idea is to invest in royalty companies
that basically don’t have a lot of operations, but receive a royalty on some other parties’
assets and operations. When the price of that item goes up, the royalty company earns a lot
more revenue, but the operational expenses don’t increase proportionately. That’s the basic
idea of it. Whether that proves to be a sensible investment or not, we will see, but I’ll say
this for TPL: Roughly five years ago, when we started HK Hard Assets, the price of oil, if
memory serves, was about $110 a barrel. Two days ago, you would have been paid to take
oil at negative $36 a barrel, meaning they would have paid you $36 a barrel to take the oil
that was scheduled for delivery. That’s a pretty big collapse in oil prices. Maybe it could be
bigger, but that’s pretty dramatic. Five years ago, TPL was roughly $100 a share; now it’s
roughly $500 a share. If that’s what happens when the price of oil collapses, can you imagine
what might happen if oil actually goes up in value. So, now you get the idea of what we’re
trying to accomplish.
….

I dare say that if you were to look for any publicly traded company in the world, and look
for the exposures that FRMO Corp has—TPL as an example. TPL is just a stock ticker, and
you think it’s an oil company. But, as Murray has referred to it, it’s a royalty pass-through
vehicle. That’s an entirely different business. Take the water complication out of it, and TPL
has no meaningful operating expenses. It can be just hugely profitable on so many levels.
The same will be true for bitcoin if it comes to be accepted as an alternative currency. As
Murray might’ve said a week or so ago, it was invented specifically for an eventuality like
the one we’re in now.
…
Questioner 4 (cont.)
Texas Pacific Land Trust (TPL) states on page 8 of its recent Investor Presentation that it
has existing relationships with 85% of the top exploration and production (E&P) companies
and also blue-chip midstream companies, and “High Margin, Fixed-fee Revenue Streams”
that it notes are “Resistant to Commodity Price Fluctuations.” Would you clarify what this
means for us? Specifically, what is meant by high margin, fixed fee, resistant to commodity
price fluctuations? How is this so? How does this work exactly?
Murray Stahl—Chairman & Chief Executive Officer
I will answer this but with the qualification that I am certainly not speaking for TPL. I’m
only speaking for myself and what this means to me.

It’s important to understand that TPL is a royalty company in a variety of ways, one of which
is that it receives easements for allowing people to cross its land. In some cases, even when
there is no activity on TPL’s land, if operators are active on land not owned by TPL, those operators
must traverse TPL’s property. They might have to, as an example, bring water to
the property.
In those cases, just for the privilege of letting someone run a water hose across the property—
which, incidentally, is called a lay flat and looks very much like a firehose—TPL receives a
payment. It’s like a ground lease or rent. It’s not commodity sensitive; it’s just a number.
It’s a lease that goes on for five years and it’s renewable. In my personal opinion—and this
is nothing other than my personal opinion—those leases have a very high propensity to be
renewed and probably at higher prices. Why would they be renewed at higher prices?
Because, in my opinion, in TPL’s geographic area, which is the Delaware Basin and the
western reaches of the Permian Basin, the development activity there is just starting and it’s
going to go on for many, many decades. But, again, that’s just my opinion.
Questioner 4 (cont.)

How much of the royalty revenue from oil is from fixed fees in dollars and percentage of the
total in years past, and how much is expected looking forward?

Murray Stahl—Chairman & Chief Executive Officer

That information is in the financial statements, so I’ll refer the questioner to the TPL
financial statements. It’s all there; anyone can look at it.

Questioner 4 (cont.)
What rights do the lessees have in terms of capping the wells they have drilled? Are they
able to leave them capped for long periods of time without any penalties? How does it work?

Murray Stahl—Chairman & Chief Executive Officer

The royalties are based on land that was disposed of by TPL many, many decades ago.
Somebody else owns the land, and that land owner has contracted with some entity to drill
a well. TPL retained the royalty rights to any hydrocarbon produced on that property.

TPL has no ability to control what the landowner does; it’s just that TPL retains the royalty
interest. If hydrocarbon is produced on that property, TPL gets the appropriate royalties. The
landowner works with the company that does the drilling. That’s basically how the royalty
interests work.
….

Questioner 4 (cont.)
We have observed that there has been a hiatus for quite a while now in the 13-D filings of
new purchases of TPL and affiliates, such as FRMO, despite its recent price decline and
recovery. Why have you stopped buying virtually daily?”

Murray Stahl—Chairman & Chief Executive Officer

All I can do to answer that question is to direct you to another part of the SEC website. There
is a daily filing of a Form 4. There are certain SEC rules that determine what you need to
put in a 13-D filing, and there are other SEC rules that determine what you put in Form 4. If
you go to the SEC website and key in the Form 4s that pertain to us, I think all your questions
will be answered succinctly.

…
Questioner 10 (cont.)
What effect will the low oil prices have on the drilling activity on TPL lands? We think the Permian
Basin has some of the most attractive cost per barrel economics in North America, but surely the
devastating drop in the oil price must have some impact. Is there a way to quantify this?

Murray Stahl—Chairman & Chief Executive Officer

Yes, there are two ways to quantify it. The first is to visit the Baker Hughes website and look at
the Baker Hughes Rig Count, where you can see how many rigs are committed to every region.
You’ll see the obvious contraction in drilling activity resulting in fewer rigs being employed, but
that the Permian Basin has the lion’s share of the rigs that remain and it has had the smallest
contraction.

The second way to quantify it, if you want more detail on different sectors of Texas, is to visit the
website of the Texas Railroad Commission. That information is provided by district numbers.
There’s a legend so you can look up where the Delaware Basin is and then see not only how many rigs
are there but how much oil is being produced on a monthly basis. Between the Baker Hughes website
and the Texas Railroad Commission website, I think you can get a very good idea of exactly what’s
happening on a month by month basis.
That was the last question, so thanks everybody for the questions and the attention. We’ll reprise
this at the annual meeting and hope that we can do this from our offices because COVID-19 will
not be as much of a problem as it is today. We hope that everything will be a lot better. Thanks
everybody for the call and for your support.