U.S. Global Investors family of funds Mutual Fund Forms 1099 Guide for Tax Year 2008

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U.S. Global Investors Family of Mutual Funds U.S. Global Investors family of funds Mutual Fund Forms 1099 Guide for Tax Year 2008 U.S. Global Investors family of funds is committed to providing accuracy in reporting tax information related to your mutual fund account(s) and help in understanding how it is used.

1 U.S. Global Investors Family of Mutual Funds U.S. Global Investors family of funds Mutual Fund Forms 1099 Guide for Tax Year 2008 U.S. Global Investors family of funds is committed to providing accuracy in reporting tax information related to your mutual fund account(s) and help in understanding how it is used. In this guide you will find: A general overview of tax reporting requirements. The way the IRS treats income on your investments. Descriptions and explanations of tax forms related to your investments. If applicable to your U.S. Global Investors family of funds account, you may have received Form(s) 1099-DIV, 1099-INT and 1099-B. The information provided here is not legal or tax advice. We recommend that you consult your legal and tax advisor if you need advice regarding your specific situation. REMINDER FOR THIS YEAR If you sold shares in 2008, your Form 1099-B may show cost basis information. U.S. Global Investors is not required to determine cost basis. We are offering this information as a courtesy on certain accounts. Not all accounts will have the necessary information needed to provide average cost basis. Please consult with your tax advisor or financial advisor to help determine your basis. Neither the Near-Term Tax Free Fund nor the Tax Free Fund held any bonds that are subject to the Alternative Minimum Tax (AMT). The Global Emerging Markets Fund and Global Megatrends Fund paid distributions in the form of return of capital. This reduction to your cost basis will be reflected on box 3 of the Form 1099-DIV. This is for informational purposes and should be saved with your investment records to assist your tax advisor in determining a new cost basis, in the event you sell your shares.

2 Form 1099-DIV What is it? Form 1099-DIV shows the taxable dividends, capital gain distributions and section 1250 gains earned during It separately reflects the dividend amount that may qualify for capital gain rates. Note that some U.S. Global funds did not produce a 1099-DIV for 2008 because they did not have any federally reportable distributions for Funds that did not receive a 1099-DIV include: China Region Fund Holmes Growth Fund Eastern European Fund Who receives it? A form 1099-DIV will be generated for all non-retirement accounts to which federally reportable dividends were paid, except for some business accounts. Where is it reported? Generally the shareholder will use 1040 or 1040A and related schedules to report distributions shown on form 1099-DIV, as illustrated on the next page. Ordinary Dividends Box 1a Ordinary dividends primarily are dividends from individual securities and the net interest earned from securities in a mutual fund s portfolio. These dividends may include net shortterm capital gain distributions, which generally are taxable as ordinary income and are combined with ordinary dividends on the form 1099-DIV. The amount is shown in box 1a. Note: Box 1a reflects the total amount of ordinary dividends distributed and is the amount for which you may owe tax, although it may be greater than the amount you actually received. The difference is due to federal and foreign income taxes withheld (shown in box 6).

The amount in box 1a on the 1099- DIV should be reported on line 9a of IRS Form 1040 or 1040A, and on schedule B (Form 1040) or Schedule 1 (Form 1040A) as appropriate.

3 The amount in box 1a on the DIV should be reported on line 9a of IRS Form 1040 or 1040A, and on schedule B (Form 1040) or Schedule 1 (Form 1040A) as appropriate. Form 1040 Refer to the IRS instruction book for the IRS Form 1040 for more information Schedule B You must file this schedule if the ordinary dividends that you received totaled over $1,500.

4 Form 1040 Qualified Dividend Income Box 1b The amount in box 1a also includes dividends that may qualify for long-term capital gains tax rates. This is known as qualified dividend income. Box 1b on your Form 1099-DIV separately shows the portion of the amount in box 1a that may be eligible for the lower tax rates. Report the eligible amount on line 9b of Form 1040 or 1040A. Tax law specifically prohibits applying the reduced tax rate to certain dividends, such as dividend distributions from money market or bond mutual funds. These dividends are NOT included in box 1b. See IRS Publication 550 (Investment Income and Expense). For more information about restrictions and exclusions. Box 1b reports the amount of dividends that may qualify for a lower tax rate assuming that the holding period requirements are met. The shareholder is responsible for determining if the holding period requirements are met and for adjusting the amount accordingly. Please see the instructions for IRS form 1040 for more information.

5 Total Capital Gains Box 2a The amount in box 2a reflects the total long-term capital gain that was paid and it should be reported on line 13 of Form 1040, or line 13 of Schedule D (Form 1040). Short -Term Capital Gains Short-term capital gains from mutual funds are net gains from the sale of securities held by the fund for ONE YEAR OR LESS and generally will be subject to ordinary tax rates. The amount is combined with ordinary dividends in box 1a. Long-Term Capital Gains Long-term capital gains are net gains from the sale of securities held by the fund MORE THAN ONE YEAR. Long-term capital gains are shown in box 2a, and they should be reported on line 13 of Form 1040 (line 10 of Form 1040A), or line 13 of Schedule D (Form 1040).

6 Schedule D Shareholders must use this schedule to report capital gains and losses not reported directly on IRS Form 1040, line 13. For additional information see Schedule D instructions.

Return of Capital - Box 3 A return of capital (ROC) distribution is paid to fund shareholders in excess of a fund s current and accumulated earnings and profits.

7 Return of Capital - Box 3 A return of capital (ROC) distribution is paid to fund shareholders in excess of a fund s current and accumulated earnings and profits. A ROC distribution is generally nontaxable and reduces a shareholder s cost basis in the fund. If a ROC distribution exceeds a shareholder s cost basis, any additional amount is treated as a capital gain. Global Emerging Markets Fund and Global Megatrends Fund paid distributions in the form of return of capital. This reduction to your cost basis will be reflected on box 3 of the Form 1099-DIV. This information should be saved with your investment records to assist your tax advisor in determining a new cost basis, in the event you sell your shares. This reporting is for informational purposes only.

1099-INT Form 1099-INT What is it? This form shows the tax-exempt interest earned throughout the year, including exemptinterest dividends from a mutual fund. Who receives it?

8 1099-INT Form 1099-INT What is it? This form shows the tax-exempt interest earned throughout the year, including exemptinterest dividends from a mutual fund. Who receives it? A Form 1099-INT will be generated for all non-retirement accounts to which tax-exempt interest was paid, except for business accounts and accounts with interest totaling less than $10 that have no tax withholdings. Shareholders are required to report all interest income taxable or tax-exempt even if they do not receive a Form 1099-INT. Where is it reported? Tax-exempt interest is shown in box 8, and shareholders should report it on line 8b of Form 1040 or 1040A.

9 1099-B Form 1099-B What is it? Form 1099-B serves as a record of any redemption(s) you made from a U.S. Global Investors family of funds mutual fund account(s) in 2008, including those made under a systematic withdrawal plan or in connection with an exchange into another U.S. Global Investors family of funds account. Who receives it? Shareholders with non-retirement accounts that had redemptions, except for money market funds, retirement plans and certain business accounts (e.g., some corporations, institutional trusts, etc.), will receive a 1099-B. Where is it reported? Generally, you will use Schedule D or Schedule D-1 of Form 1040 to report the redemption amounts.

1099-B Gains or Losses from Redemption of Shares You will need to report each redemption amount in box 2 separately on Schedule D or Schedule D-1 (Form 1040), completing all applicable columns in the

10 1099-B Gains or Losses from Redemption of Shares You will need to report each redemption amount in box 2 separately on Schedule D or Schedule D-1 (Form 1040), completing all applicable columns in the rows for each transaction. Part I of Schedule D is used to report gains and losses on the sale of securities held one year or less. Part II of Schedule D reports gains and losses on the sale of securities held more than one year. Cost Basis If you sold shares in 2008, your Form 1099-B may show cost basis information. U.S. Global Investors is not required to determine cost basis. We are offering this information as a courtesy on certain accounts. Not all accounts will have the necessary information needed to provide average cost basis. The dollar amount basis of your redeemed shares is calculated by the Average Cost Single Category accounting method. Please consult with your tax advisor or financial advisor to determine whether this is the most tax advantageous method for you.

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