U.S. Global Investors, Inc. | Family of No-Load Mutual Funds

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Funding a College Education

Pop Quiz:
What is one of the most effective and tax-efficient ways to save for a child’s college education? (Think carefully before answering; your child’s or grandchild’s college education may ride on your answer.)

Answer:
The Uniform Gift to Minors Act (UGMA) and the Uniform Transfer to Minors Act (UTMA)!

Introduction to financing a college education

College costs increase annually by approximately double the amount of inflation. This staggering fact means that a bank savings account – paying 2-3% — is a totally inadequate vehicle for achieving the goal of paying for your child’s college education.

Source: The College Board

According to the College Board, for the 1999-00 academic year the average total cost of a four-year public college education is $43,636 while a four-year private college education is $94,604. That means, for a child born today, in 18 years a four-year public college education is expected to cost $113,157.

Among the best of the college savings investment vehicles permissible under Internal Revenue Service (IRS) regulations are the Uniform Gift to Minors Act (UGMA) and the Uniform Transfer to Minors Act (UTMA).

What the UGMA and UTMA provide

UGMAs allow the donor, often parents or grandparents, to give savings and securities including mutual funds, to a minor child without going to the trouble and expense of establishing a trust. UTMA accounts are similar and allow for the transfer of any personal property, including real estate, antiques, collectibles, etc.

Custodians and account ownership

A custodian – usually a parent or guardian – is named to exercise control of the account, including collecting, holding, investing and reinvesting the assets, until the minor-owner reaches the age of majority. Gifts to both UGMA and UTMA custodial accounts are irrevocable.

Taxes on custodial accounts

Taxation of custodial account earnings is dependent upon the minor’s age and the amount of income earned.* For children under 18 years of age in tax year 2006, the first $850 in investment income received in a single tax year is offset by the child’s standard deduction, while the next $850 is taxed at the child’s tax rate. Beyond that, earnings are taxed at the parents'/guardian’s tax rate. All investment income above $1,700 is taxed at the parents' tax rate.

Time and compounding – an investment’s greatest allies

Amount	5 Years	10 Years	20 Years
$30	$2,323	$6,145	$22,781
$50	$3,872	$10,242	$37,968
$100	$7,744	$20,484	$75,937
$250	$19,359	$51,211	$189,849
$500	$38,719	$102,422	$379,684
$1,000	$77,437	$204,845	$759,369

This hypothetical example assumes a 10% annual return compounded monthly. Your actual return may be more or less than these amounts.

Compounding and regular investing can enhance the effectiveness of your overall UGMA/UTMA investment. Time is critical. The sooner you begin contributing – even small amounts – the sooner your investment can begin growing and reinvesting earnings. As the chart indicates, even a few more years of saving and reinvesting can make a sizable difference in the growth of your investment.

Starting is as easy as A-B-C

In fact, with just a $50 initial investment and a $30 monthly contribution, you can begin building a position in most of our funds using the ABC Investment Plan.^® A dollar-cost averaging strategy, the ABC Investment Plan^® is an investment technique that lets you invest a fixed amount in a specific investment at regular intervals. It also eliminates the guesswork involved in market timing and assures that you have a position in the market at all times.**

Please consider carefully the fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

For more information about UGMA and UTMA accounts, and the ABC Investment Plan,^® call 1-800-US-FUNDS to speak with an investor representative. You can also download a custodial account kit (which includes an application and a prospectus) from our website. Click here to download a prospectus or call 1-800-US-FUNDS.

*Investors should know that the rules for UGMA/UTMA accounts and the legal age of each minor will vary by state. UGMA/UTMA accounts may affect a child’s eligibility for college financial aid. **No investment plan can guarantee a profit or protect against a loss in a declining market. You should evaluate your ability to continue in such a program in view of the possibility that you may have to redeem fund shares in periods of declining share prices as well as in periods of rising prices. You may want to consult a tax professional regarding your specific financial situation.