Accrued Interest
Interest that has accumulated between the last interest payment and the purchase date of a bond. When you purchase a bond, you pay the interestaccrued from the last payment date up to, but not including, the settlementdate. You are reimbursed when you receive your first scheduled interestpayment.

Alternative Minimum Tax
The alternative minimum tax (AMT), created by the Tax Act of 1986,is a method for figuring an individual's additional Federal income taxliability. The AMT calculation takes away certain deductions availableto non-AMT filers and adds them back to taxable income. In addition, certain"preference items" are added back into taxable income for thepurposes of figuring ATM. The municipal market is affected by the existenceof the AMT because interest income derived from some municipal bonds isconsidered a "preference item" when doing this calculation.

Annual Exclusion
An amount up to $10,000 per year that every person is allowed to giveanother person without incurring Federal gift tax. There is no limit onthe number of these gifts you can make to different people in a year. Toqualify for this exclusion, a gift must be of a "present interest,"meaning that the recipient can enjoy the gift immediately, and the donormust not have any control over the asset. This can present problems whenmaking gifts to trusts.

Asset Allocation
Using a mix of assets (stocks, bonds, cash) to invest in order to achievevarious goals which include risk level, income and appreciation potential.

Balanced Investments
Balanced investments blend one or more of the investment categories.For example, you may have a balanced fund, which blends stocks, bonds andmoney-market instruments. These blended choices will have different levelsof risk based on how they are balanced.

Bearer Bonds
Bearer bonds (being replaced by registered bonds) contain detachablecoupons, with each one representing a scheduled interest payment, and anyonethat possesses, or bears, the bonds is the owner. Interest is claimed byclipping off the coupons and presenting them for payment to an agent ofthe issuing corporation or government agency.

Beneficiary of a Trust
A person or organization who has any present or future interest, vestedor contingent, in the assets of a trust.

Bequest
Personal property transferred under a will.

Blue-Chip Stocks
Blue chips are high-quality stocks of major companies which generallyhave long and unbroken records of earnings and dividend payments.

Bonds
Bonds are debt instruments issued by a company or government to financea certain aspect of its operation. When you buy bonds, you essentiallyare lending money to the institution issuing the bond and you are entitledto receive interest on that loan. Depending on the bonds' coupon interestrates, bonds can become more or less attractive to buyers and, as a result,may rise and fall in market value.

Buy-Sell Agreements
Buy-sell agreements provide for the sale and purchase of a deceasedbusiness owner's interest at a predetermined price or at a price accordingto a predetermined formula.

Call Feature
A predetermined date and price at which the issuer can redeem the bondprior to its stated maturity. Bonds can be called for many reasons, buta call typically occurs when interest rates drop and issuers are able toobtain lower interest rates to finance their debt. Some bonds are issuedas non-callable and subsequently remain in the marketplace until they mature.Knowing all of the possible call or redemption features associated withyour bond can help guard against an unexpected return of principal.

Call Risk
When interest rates are falling, many home owners will refinance theirmortgages to take advantage of the new lower rates. Generally, when interestrates decline, prepayments accelerate beyond the initial pricing assumptions,which causes the average life and maturity of the security to shorten.In many instances, prepayment risk can cause reinvestment risk, which occurswhen the funds returned to you must be reinvested at new, lower interestrates. Call risk is also known as prepayment risk.

Capital Gain
A capital gain is the appreciation in price of an investment.

Capital Loss
A capital loss is the depreciation in price of an investment.

Cash Equivalents
Cash equivalents are short-term, highly liquid securities. These instrumentsinclude short-term certificates of deposit, which allow investors to lockin interest rates for a fixed period of time and are insured by the FDICup to $100,000 per institution; money-market funds, which offer a floatinginterest rate and unlimited access to funds; and Treasury bills, whichare sold by the U.S. Government to finance its short-term cash needs.

Certificates of Deposit
Certificates of Deposit (CDs) offer a fixed rate of return and aregenerally FDIC (Federal Deposit Insurance Corporation) insured up to $100,000.CDs can be issued by various depository institutions consisting of commercialand savings banks and Federal savings and loans.

Certificates of Participation (COPs)
Much like lease-backed revenue bonds, COPs represent a share in a leaseagreement made by a municipal or governmental entity. COPs are usuallyused to finance capital improvement projects or to purchase essential equipment.The security on a COP is provided by the lease payments made by the municipalityor governmental entity. These payments are subject to annual legislativeappropriation.

Charitable Remainder Annuity Trust
This trust pays the income beneficiary an annual fixed dollar amountequal to a percentage, selected by you, of the initial value of the assetstransferred into the trust.

Charitable Remainder Trust
The donation of property or money to a charity where the donor reservesthe right to use the property or receive income from it for a specifiednumber of years (or for life, or for the duration of the life of a secondperson such as a spouse). When the agreed period ends, the property belongsto the charitable organization. The trust can be an annuity trust (whichpays a fixed amount each year) or a unitrust (which pays an amount basedon a percentage of asset values held by the charity).

Collateralized Mortgage Obligations (CMOs)
CMOs, or Real Estate Mortgage Investment Conduits (REMICs), are multi-classbonds backed by a pool of mortgage pass-throughs or mortgage loans.

Commercial Paper
Commercial paper are certificates for very short-term loans. The loanperiod ranges from one day to 270 days. Such notes are issued by financialand industrial corporations. Round lots for commercial paper are usually$1 million or more, though smaller units called odd lots are available.

Common Stocks
Common stocks represent ownership in corporations. "Blue chip"stocks are issued by the largest, most stable corporations. Though smallercompany stocks may not be as stable, they frequently offer higher returns.

Conservator
A guardian or protector appointed by a court to manage the affairsof an incapacitated or incompetent person. A conservator's authority ceasesimmediately upon the death of the incapacitated person.

Corporate Bond
Debt issued by corporations as a means of raising capital.

Corporate Fiduciary
A trust institution serving in a fiduciary capacity, such as executor,administrator, trustee or guardian.

Coupon
The rate of interest on a bond, expressed as a percentage of par. Thecoupon is established at the time of issue and is determined by the thenprevailing level of interest rates in the marketplace. If, after creditquality, your most important objective is income, then you will want tochoose a bond with the highest coupon available. If growth is important,you may want to consider a zero-coupon bond.

Credit Ratings
Bonds are generally rated by one or both of the two major credit ratingagencies accepted in the industry: Moody's Investor Service and the Standard& Poor's Corporation. They assign ratings to a bond issue based onthe issuer's ability to make the scheduled interest and principal payments.These ratings are reviewed periodically and may be revised at any time.

Moody's   S&P    Description--------------------------------------------------------------------------------------------------------Aaa       AAA    Strongest capacity to pay interest and repay principal.Aa        AA     Very strong capacity to pay interest and repay principal.A         A      Strong capacity to pay interest and repay principal.Baa       BBB    Adequate capacity to pay interest and repay principal.Ba        BB     Lowest degree of speculation with respect to capacity                 to pay interest and repay principal.B         B      Greater vulnerability to default but currently has the                 capacity to meet interest and principal payment.Caa       CCC    Currently vulnerable to default -- dependent on favorable                 conditions.Ca        CC     Highly speculative.C         C/CI   Highest degree of speculation -- no interest is paid.-         D      In payment default.

Standard & Poor's attaches a plus or minus sign to ratings to indicatethat a credit is considered to be in the upper or lower segment of therating category. Moody's breaks down its ratings by using numerical modifiers1, 2 and 3. Note that both rating services may not respond in a timelymanner to information with respect to an issuer, which could result ina change of rating.

Currency Risk
By investing internationally, you face the risk of currency fluctuations.Even in the short term such as one month, one week or even one day, theseshifts can add or detract percentage points to or from the total returnof your international securities.

Current Income
This is the periodic receipt of interest, or dividend payments, paidto investors from the issuer.

Current Yield
The ratio of annual interest income earned on a bond to its marketprice, stated as a percentage. Mathematically, it is the coupon rate dividedby the market value of the bond.

CUSIP Number
A universal identification code or number assigned to securities, similarto your social security number, used to keep track of the issues boughtand sold.

Custodian
A custodian is an agent that stores a customer's investments.

Custody Account
An account for which the main duties of the agent are to safekeep,preserve and administer the property as directed by the principal. Theagent has no investment or managerial responsibilities. (Not to be confusedwith UGMA custodial accounts.)

Cyclical Stocks
Cyclical stocks are those of companies whose earnings are tied to thebusiness cycle. When business conditions are good, the company is profitableand the common stock price usually rises. When business conditions decline,the company's earnings and stock prices usually fall. Steel, cement, machinetools and automobile stocks are considered cyclical stocks.

Dated Date
The date a bond is issued and the day from which interest begins toaccrue.

Decedent
The person who died.

Defensive Stocks
These are stocks of companies which provide necessary services (suchas electric and gas), essentials (such as food), or staples (such as softdrinks). Because of the nature of these products, the stocks potentiallyprovide a degree of stability during periods when the economy is declining.

Direct Rollover
Your employer must provide you with the option to directly transfereligible rollover distributions from a qualified pension plan, 401(k) or403(b) plan, to an IRA or another qualified plan. The employer mails thedistribution check directly to the IRA recipient or plan or gives you thecheck for delivery to the recipient plan or IRA. In either case, the checkmust be made payable to the trustee or custodian of the new IRA or plan.This approach avoids the 20% withholding requirement.

Discount Bond
If a bond is selling at less than its par or face value, it is saidto be selling at a discount.

Diversification
Spreading your assets among different types of investments to reducerisk.

Dividend
A portion of a company's earnings paid to investors on a per-sharebasis.

Dollar-Cost Averaging
Purchasing the same dollar amount of an investment at fixed intervals.More shares are bought when prices are down and fewer when prices are up.Dollar-cost averaging does not assure a profitor protect against loss in declining markets. Because such a strategy involvesperiodic investment, you should consider your financial ability and willingnessto continue purchases through market downturns.

Donee
A person who receives a gift. Gifts can be made to trusts as well asto individuals.

Donor
A person who makes a gift.

Durable Power of Attorney
A document in which you grant another person (the attorney-in-fact)the authority to act on your behalf, which will remain valid even if youbecome disabled. A plain (not durable) power of attorney will not be validin the event of disability. A general power of attorney authorizes theattorney-in-fact to act for the principal in all matters, while a specialpower of attorney is limited to certain specified matters.

Estate
Assets owned by an individual at death.

Estate Tax
An excise tax that the Federal Government assesses on the transferof assets at death.

Executive Indemnity Insurance
Insurance policies that protect deferred compensation payments in theevent of a corporate bankruptcy.

Executor
An individual or institution nominated in a will and appointed by acourt to settle the estate of an individual. If a woman is appointed, shemay be called an executrix. In some states, such individual or institutionmay be called a personal representative.

Extension Risk
When interest rates rise, mortgage prepayments slow down beyond theinitial pricing assumptions and cause the average life and expected maturityof securities to extend, causing the market value to decline.

Federal Home Loan Mortgage Corporation (FHLMC)
Also referred to as "Freddie Mac," this government-sponsoredenterprise is chartered by Congress and owned by stockholders. This agencybuys qualified mortgage loans from the financial institutions that originatethem, securitizes the loans, and distributes the securities through thedealer community.

Freddie Mac guarantees timely payment of both principal and intereston its Gold Participation Certificates (PCs). Some older series of FreddieMac PCs guarantee timely payment of interest and eventual payment of principal.These securities are not backed by the full faith and credit of the U.S.Government. The market value of these securities prior to maturity is notguaranteed and will fluctuate.

Federal National Mortgage Association (FNMA)
Also referred to as "Fannie Mae," this government-sponsoredenterprise is chartered by Congress and owned by stockholders. This agencybuys qualified mortgage loans from the financial institutions that originatethem, securitizes the loans, and distributes the securities through thedealer community.

Fannie Mae guarantees timely payment of both principal and intereston its mortgage securities, whether or not the payments have been collectedfrom the borrower. These securities are not backed by the full faith andcredit of the U.S. Government. The market value of these securities priorto maturity is not guaranteed and will fluctuate.

Fiduciary
A person having a duty to act primarily for another's benefit. A personor institution who manages money or property for another and who must exercisecare in such management activity imposed by law or contract.

401(k) Plan
A 401(k) plan is a tax-qualified retirement plan funded all or in partby employees' pre-tax contributions. With this type of plan, contributionsreduce employees' current taxable income, and the assets in the plan growfree from taxes. Withdrawals from 401(k) plans prior to age 59 1/2 aresubject to a penalty tax of ten percent. Withdrawals are subject to incometax in the year they are made. A 401(k) plan can provide significant long-termbenefits to employees, while helping the employer to control employee benefitcosts and to reduce the fiduciary responsibility associated with retirementplans. Generally, employer contributions (e.g., matching or profit-sharing)are optional.

403(b) Plan
A 403(b) retirement program is a tax-saving opportunity available exclusivelyto employees of certain tax-exempt organizations or public educationalinstitutions. It is a voluntary tax-deferred savings plan that enablesyou to save a portion of your salary on a pre-tax basis through payrolldeduction. With the exception of death, disability or financial hardship,you cannot withdraw any money prior to age 59 1/2 or termination of employmentwithout a tax penalty. The general rule is that you must start taking distributionsby April 1 of the calendar year in which you reach 70 1/2.

General Obligation Bonds
General obligation bonds, or GOs as they are commonly called, are backedby a pledge of the issuer's full faith and credit with the timely paymentof principal and interest secured by the taxing power of the issuer.

Generation-Skipping Transfer Tax (GST Tax)
A tax assessed on transfers in excess of $1 million to grandchildren,great-grandchildren and anyone at least two generations below the donor.When a trust is used, this $1 million exclusion must be allocated verycarefully if the entire value of a trust is to remain exempt.

Gift Tax
A tax assessed against a person who gives money or an asset to anotherperson without receiving fair compensation.

Government National Mortgage Association (GNMA)
Also referred to as "Ginnie Mae," this government agencyguarantees the timely payment of principal and interest on all of its pass-throughsecurities, and its guarantee is backed in turn by the full faith and creditof the U.S. Government.

This means that holders of bonds and certificates issued by GinnieMae will receive their payments promptly each month, whether or not mortgagepayments are collected, and they will receive full repayment of principaleven if the mortgages in the pool default.

Grantor
A person who establishes the trust. Also may be called a settlor ortrustor.

Gross Estate
The total value of a person's assets before any deductions for taxes,funeral expenses, attorney fees or administration costs.

Growth Stocks
Growth stock companies are those whose sales, earnings and market shareare expanding faster than the industry average and the economy in general.These companies usually retain most of their earnings to finance expansionand pay little, if any, dividends to shareholders.

Guaranteed Investment Contract (GIC)
GICs are essentially loans to an insurance company, paid back withinterest.

Guardian
A person lawfully invested with the power and charged with the dutyof taking care of another person and managing the property and rights ofthat individual.

Guardianship
The process of having a court appoint a person to be responsible fora disabled person or minor.

Heirs
The persons who receive your assets following your death.

Income Stocks
Income stocks, such as public utilities, usually pay high dividendsin relation to their market price, providing shareholders with greaterquarterly income. These stocks are generally attractive to people who buystocks for current income, particularly the elderly and retired.

Individual Retirement Account (IRA)
Employed persons make annual contributions of up to $2,000 into thistax-deferred account, from which withdrawals will be made to the ownerwithout a penalty after age 59 1/2.

Inflation
Inflation simply means that the cost of goods and services rises overtime. One popular measure of inflation is the Consumer Price Index (CPI).This measurement of inflation is stated as a yearly percentage and, accordingto the Department of Labor, has averaged approximately 5.4% from 1965 through1994.

For example, a loaf of bread costing $1.00 today would cost $1.05 ayear from now. In 20 years, that same loaf of bread would cost about $2.86,assuming that inflation continues to average 5.4%. In other words, thesame amount will not go as far in the future as it does today.

Insurance Trust
(See Life Insurance Trust.)

Insured Municipal Bonds
In an age when investment safety is key, municipalities, when issuingmunicipal bonds, will purchase insurance from a recognized municipal-bondinsurance company to enhance the safety of the principal and interest payments.However, such insurance does not protect against fluctuations in marketvalue prior to maturity.

Interest Payment Dates
The dates, usually set at semiannual intervals, on which interest isdue to the owner of the bond.

Inter Vivos Trust
Also called a living trust, this type of trust is created during thegrantor's lifetime into which property is placed with instructions forits management and distribution upon disability or death.

Investment Objectives
The goals that an investor sets for his or her portfolio.

Investment Return
The amount by which your investment gains or loses (capital appreciation/depreciationand dividend or coupon income) over a given period of time. Usually expressedas a percentage of the original amount invested. A five-percent returnmeans you earned five dollars for every $100 you invested in the statedtime period.

IRA Rollover
If you take a distribution from your employer's qualified pension plan,401(k) or 403(b) plan and the check is made out directly to you, you have60 days to deposit those assets in either an IRA or another qualified plan.However, your employer is generally required to withhold 20% of those assetsfor tax purposes. In order to defer taxes on the entire distribution, youmust replace the 20% that was withheld from other personal resources androll that amount into the IRA or other qualified plan within 60 days ofthe distribution. If you do not have the funds to replace the 20% withheld,you will have to pay ordinary income tax on the 20% not rolled over. Ifyou are younger than age 59 1/2, a ten percent excise tax for early withdrawalalso may be imposed.

IRA-to-IRA Rollover
This type of rollover occurs when you are moving assets from an IRAheld at one custodian to another custodian. You take actual receipt ofthe IRA assets and have 60 days to complete the rollover to the new custodian.A direct rollover can be arranged whereby all assets are transferred directlybetween the custodians. Generally, the types of distributions that arenot eligible for an IRA rollover include:

• Required minimum distributions starting at age 70 1/2.
• Substantially equal periodic payments based on single or joint lifeexpectancy.
• Substantially equal periodic payments over a specified period of tenor more years.
• Distributions from qualified plans representing voluntary after-taxcontributions.

Irrevocable Trust
A trust which cannot be changed (modified) or canceled (revoked) onceit is set up.

Junk Bonds
Issued by corporations, junk bonds are of less than investment-graderatings (i.e., below a Baa rating by Moody's or BBB by Standard & Poor's).Because the credit risk in owning them is greater than higher-quality bonds,their yields are often higher. These bonds came into prominence as a financingmechanism for the mergers and acquisitions that have taken place. The moneythat a company gets from selling junk bonds is normally used to retirethe debt incurred in an acquisition.

Laddered Portfolio
When you build a laddered portfolio, you spreadthe total dollar amount of your investment among securities with differentmaturities. Some of your money is invested in short-term maturities, whilethe rest is invested in intermediate- and long-term maturities.

Legacy
Personal property transferred by a will. The person receiving it iscalled the legatee.

Life Insurance Trust
A trust intended primarily to own life insurance. It is almost alwaysan irrevocable trust formed to keep insurance proceeds out of the taxableestate of the insured.

Living Trust
(See Inter Vivos Trust.)

Living Will
A document in which you can specify which life-prolonging measuresyou do, and do not, want to be taken on your behalf in the event you areterminally ill. This instrument is often used in conjunction with a health-carepower of attorney, which appoints someone to make health-care decisionson your behalf.

Market Risk
The risk an investor takes when holding a security. For any security,its price in the secondary market can be greater or less than the initialmarket price. Current interest rates at the time the security is sold,supply and demand, the characteristics of the security being sold and otherfactors affect the market price and risk. Fixed-income securities soldbefore their maturity are subject to market risk.

Maturity Date
The date on which the bond will be redeemed at face value by the issuer.The maturity date is an important factor in your overall return and canbe chosen to coincide with an expected financial need in the future. Generally,the longer the maturity, the higher the return.

Money-Market Instruments
Money-market instruments provide investors with maximum current incomeconsistent with maintaining stability of capital and liquidity. These instrumentsinclude short-term U.S. Government and agency securities, certificatesof deposit, guaranteed investment contracts and so on.

Money Purchase Plans
Money purchase plans are qualified retirement plans requiring mandatoryemployer contributions suitable for a "C" corporation, "S"corporation, partnership or sole proprietorship.

Mortgage-Backed Securities
Mortgage-backed securities represent an ownership interest in mortgageloans made by financial institutions, such as savings and loans, commercialbanks or mortgage companies, to finance the borrower's purchase of a homeor other real estate. The most basic mortgage securities, known as "pass-throughs,"or participation certificates, represent a direct ownership interest ina trust composed of a pool of mortgage loans. The majority of mortgagesecurities are issued and/or guaranteed by the Government National MortgageAssociation (Ginnie Mae), the Federal National Mortgage Association (FannieMae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

Municipal Bonds
Municipal bonds generally are tax-exempt debt obligations of states,cities, towns, municipalities, municipal authorities and governmental entities.They are issued to build schools, tunnels and bridges or to finance infrastructurerepairs or improvements. Like most debt obligations, they function likepromissory notes. The issuer of these bonds agrees to make scheduled interestpayments, at a specified rate, for a fixed period of time, and return theprincipal at maturity.

Investors buy municipal bonds because the interest earned is free ofFederal income taxes and also may be free of state and/or local incometaxes if purchased by residents of the issuing state. Income for some investorsmay be subject to the Federal Alternative Minimum Tax (AMT).

Municipal Notes
Notes are short-term municipal bonds with a maturity of one year orless. Notes usually pay interest at maturity and are issued mostly forthe purposes of meeting cash-flow requirements. Bond anticipation notes(BANs), revenue anticipation notes (RANs), and tax and revenue anticipationnotes (TRANs) are the more common notes in today's marketplace.

Mutual Fund
A fund operated by an investment company that raises money from shareholdersand invests in a group of stocks, bonds or other investments. It is professionallymanaged for the benefit of the shareholders. Each share in the fund representspart ownership of many different stocks, bonds and so on.

Original-Issue Discount (OID)
If a long-term bond is originally issued at a price that is less thanits maturity value, OID is equal to the amount of that difference. Theholder of an OID bond must include a portion of the OID in interest incomeannually. You should add the amount of OID recognized for tax purposesto your basis in the bond. This will increase your basis and decrease theamount of any gain you may recognize when you dispose of the investment.

Over the Counter (OTC)
This is the market for securities that are not listed on one of themajor exchanges.

Par Bond
If a bond sells at an amount equal to its nominal or face value, itis said to be selling at par.

Par Value
The face amount of the bond or the amount the issuer promises to payat maturity. With municipal bonds, the par value is usually $1,000.

Participation Certificates (PCs)
Participation certificates, also known as "pass-throughs,"are a basic type of mortgage security. They represent a direct ownershipinterest in a trust composed of a pool of mortgage loans.

Pour-Over Will
A provision under a will stating that certain assets are to be transferred("poured over") to a trust. The will is said to contain a pour-overclause, and the trust is said to be a pour-over trust. This technique iscommonly used when a living trust is formed to hold all assets in an effortto avoid (or at least minimize) the impact of probate.

Preferred Stock
Issued after common stock has been issued, preferred stockholders receivedividends prior to common stockholders. Should a company go out of business,and its assets are liquidated, preferred stockholders are entitled to distributionsahead of common stockholders.

Premium Bond
If a bond sells for more than its par or face value, it is said tobe selling at a premium.

Prepayment Risk
When interest rates are falling, many debt issuers will refinance theirmortgages to take advantage of the new lower rates. Generally, when interestrates decline, prepayments accelerate beyond the initial pricing assumptions,which causes the average life and maturity of the security to shorten.In many instances, prepayment risk can cause reinvestment risk, which occurswhen the funds returned to you must be reinvested at new, lower interestrates. Prepayment risk is also known as call risk.

Pre-Refunded Bonds
Pre-refunded bonds are high-coupon bonds (that pay coupon interestthat is higher than current market rates) that have been refinanced bythe proceeds of a second bond issue. The proceeds of this second bond issueare used to call the original issue out of the marketplace on the firstpossible call date. Until that time, the monies are held in escrow andare usually invested in U.S. Treasury or Agency securities.

Pre-Tax Savings
Saving in your company's retirement plan means you are taking advantageof two powerful tax benefits. The first major tax benefit is that yourcontributions are conveniently deducted from your paycheck before you aretaxed; since your reportable income is reduced, you end up paying lessin current Federal income taxes. Second, your savings accumulate tax-deferreduntil you withdraw.

For example, Kelly earns $2,000 per month and contributes $200 a monthto her employer's plan (ten percent). She would pay income tax on only$1,800 ($2,000 - $200), instead of the entire $2,000 that she earned. (Kelly'sentire $2,000 monthly earnings will be taxed for Social Security tax purposes,so her future Social Security benefit will not be reduced.) At an assumedtax rate of 35%, that's a $70 monthly tax savings, or $840 per year. Yourtax savings will vary according to your tax bracket and contribution rate.

Private-Label Mortgage Securities
Private-label mortgage securities, whether pass-throughs or collateralizedmortgage obligations (CMOs), are the sole obligations of their issuer andare not guaranteed by any governmental entity. However, many private-labelCMOs are backed by pass-through securities issued or guaranteed by GinnieMae, Fannie Mae or Freddie Mac, meaning that the collateral backing thesesecurities carries the respective agency's or government-sponsored enterprise'sguarantees.

Probate
The process or act of "proving" a will before the appropriatecourt; also the court-related proceedings in the administration of a decedent'sestate.

Profit Sharing Plans
Profit sharing plans are qualified retirement plans allowing discretionaryemployer contributions suitable for a "C" corporation, "S"corporation, partnership or sole proprietorship.

Prospectus
A detailed brochure explaining the investment objectives, type of investments,management style, fees and risks and other essential data associated witha mutual fund or other investment.

Put Bonds
Put bonds are bonds that carry an added feature that allows the investorto "put back" or return the bonds to the issuer on a predetermineddate at a predetermined price, usually par. There are variable rate, optionaland mandatory put bonds.

Rabbi Trusts
Rabbi trusts secure deferred compensation benefits in the event of a hostiletakeover, management change of heart or change of management. The corporationestablishes a trust to hold the contributions. (The first rabbi trust wasset up by a congregation to provide assurances to its rabbi; hence, thename.)

Real Estate Mortgage Investment Conduits (REMICs)
Mortgage securities may be pooled to create collateral for a more complextype of mortgage security known as a Real Estate Mortgage Investment Conduit.These securities allow cash flows to be split so that different classesof securities with different maturities and coupons may be created.

Registered Bonds
Replacing bearer bonds, these bonds are registered in the holder'sname and contain no physical coupons. The issuer of the bonds sends couponpayments directly to the holder of the bonds that is listed on its records.When the bond is sold, it must be sent to the issuer for a transfer oftitle.

Return
The measure of how much money an investment makes.

Revenue Bonds
Revenue bonds are bonds with interest that is payable from a specificsource of revenue. They are generally issued to finance public projectssuch as bridges, tunnels and water treatment facilities. The interest paymentson a revenue bond are typically derived from the revenues produced by thefacility.

Revocable Trust
A trust in which the person establishing it retains the power to change(amend) or cancel (revoke) the trust during his/her lifetime.

Risk
Risk is the possibility that the actual outcome (or return) of an investmentwill be less than what's expected. The greater the uncertainty, the greaterthe risk. Types of risk include currency, market, interest-rate, politicaland event risk.

Salary Reduction Simplified Employee Pension Plan (SARSEP)
A Salary Reduction Simplified Employee Pension Plan, or SARSEP, isa "simplified" alternative to a 401(k) plan, which gives employeesthe opportunity to make contributions to their SEP accounts with pre-taxdollars and reduce their current year's net income. The employer's business,and its employees, receive distinct benefits.

Seasonal Stocks
The performance of these stocks fluctuates with the seasons. For example,retail companies' sales and profits normally increase at Christmas andthe opening of the school year.

Secondary Market
Once securities have been issued to investors, they are free to betraded to other investors in the secondary market. Secondary markets cantake the form of listed exchanges, such as the New York Stock Exchange,or the over-the-counter markets.

Secular Trusts
An irrevocable trust holds the assets of the plan and pays them inthe event of bankruptcy or change of control. This form of trust is veryseldom used.

Securities Investor Protection Corporation (SIPC)
The SIPC is a private, government-sponsored agency whose purpose isto provide insurance to brokerage accounts. The SIPC protects each customerof its member firms up to a maximum of $500,000 of which $100,000 may bepaid to satisfy claims for cash. However, it does not insure against market-valuefluctuations.

Short Selling
While an investor's mindset is usually to buy a stock first and thensell it later, short selling actually is just the opposite; sell now andthen buy it back later. The short seller borrows the shares from a securitiesfirm with the anticipation that they will decline in value. If the investoris correct, the shares can be bought back at a lower price and the investorrealizes a gain. However, if the shares are bought back at a higher price,a loss will be realized.

The firm effectively borrows the shares from another client's accountor from the firm's own account. The firm then lends the shares to the shortseller; no stock certificates are issued, stock certificates don't changehands and lenders of the stock are not identified by name.

Short Squeeze
A short squeeze results when the price of the stock rises and investorswho short-sold the stock rush to buy it to cover their short position.As the price of the stock increases, more short sellers feel driven tocover their positions.

Simplified Employee Pension Plan (SEP)
A SEP is a simplified alternative to a profit-sharing plan that allowsan employer to establish a SEP-IRA account for each eligible employee andmake contributions to his or her account.

Standard and Poor's 500
An unmanaged index of 500 of the most commonly-held stocks. The indexis used as an indicator of stock market trends.

Stocks
Stocks represent part ownership in a company. When you own stock ina company, you are a shareholder and may be entitled to receive dividendsif the company is profitable. The value of a stock rises or falls accordingto how attractive it is to buyers and based on the general conditions ofthe broad stock market. Stocks offer long-term growth potential, but mayfluctuate more and provide less current income than other investments.

Taxable Equivalent Yield
The yield needed on a taxable investment in order to match the tax-freereturn offered on a municipal bond. This calculation is an important resourcefor determining which investments -- taxable or tax-exempt -- would yieldmore for you. The taxable equivalent yield calculation can help you determinewhich investment offers the best return when all taxes -- Federal, stateand local -- are taken into consideration.

For example, a six percent yield to maturity on a AAA-rated, 20-yearmunicipal bond has a taxable equivalent yield of 9.375% for an investorin the 36% Federal tax bracket. This individual would need to earn a 9.375%yield on a taxable bond with a similar rating and maturity in order tomatch the tax-exempt return of six percent from the municipal bond. Whenstate and local taxes are taken into consideration for bonds issued inyour state, the taxable equivalent yield is higher, making the tax-exemptinvestment even more appealing.

Mathematically, the taxable equivalent yield is expressed as the yieldon the municipal bond divided by one minus the Federal tax bracket.

Tax-Deferred Compounding
When you save in a regular savings account, interest you earn is taxableannually as ordinary income. Year after year, this taxation can take ahuge bite out of your potential earnings.

In a retirement savings plan or IRA, your earnings grow tax-deferreduntil you withdraw the money. Keep in mind there may be a ten percent Federalpenalty for withdrawal prior to age 59 1/2. Tax-deferred compounding meansyour account balance grows much faster because all of your earnings arereinvested without being reduced by current taxes.

Testamentary Trust
A trust created within a will that does not take effect until the deathof the grantor.

Treasury Bills
Treasury bills (T-bills), which are guaranteed by the full faith andcredit of the U.S. Government, are issued at a discount; they pay no interest,but receive full face value if held until maturity. If you pay $9,000 fora $10,000 T-bill, you're paying ten percent less (your "interest")than you'll be paid back. Exempt from state and local taxes, T-bills areissued in minimum denominations of $10,000, and in multiples of $1,000thereafter. With the shortest maturities -- three and six months, and oneyear at issue -- T-bills are considered the least volatile of all Treasuries.

Treasury Bonds
Treasury bonds, which are guaranteed by the full faith and credit ofthe U.S. Government, are coupon-bearing securities with initial maturitiesthat extend from 10 to 30 years. Like notes, they pay interest semiannuallyand repay principal at maturity. T-bonds are also exempt from state andlocal taxes; they're available for a minimum and multiple of $1,000. Treasurybonds usually offer higher yields than notes due to their longer maturities.

Treasury Notes
Treasury notes, which are guaranteed by the full faith and credit ofthe U.S. Government, are coupon-bearing securities exempt from state andlocal taxes, with initial maturities ranging between one and ten years.They pay accrued interest twice a year and repay principal at maturity.You can buy notes with two- and three-year maturities for a minimum of$5,000 and in multiples of $1,000 thereafter. Notes with four- to ten-yearmaturities are sold for a minimum and multiple of $1,000.

Trust
A relationship established by agreement between a grantor and a trusteeto manage assets or property for another's benefit.

Trustee
A person or institution holding property in trust. The trustee managesand invests the assets and makes distributions according to the terms ofthe trust.

Trustor
(See Grantor.)

Unearned Income
Unearned income is income such as dividends, interest payments, orother income that is not earned through salaries or wages.

Volatility
The tendency of an investment to experience price swings (ups and downs)over periods of time.

Yield to Maturity
Yield to maturity is the overall rate of return on a bond investmentif held until maturity. The actual yield-to-maturity calculation takesinto account the coupon rate, the maturity date, the price and the timevalue of money. It is important to have a basic understanding of this conceptsince most bonds are sold on the basis of yield to maturity.

Zero-Coupon Bonds
Zero-coupon bonds are fixed-income securities that are sold at a deepdiscount. They pay principal and interest upon maturity, not periodicallylike coupon bonds. The difference between the amount you pay for the bondsand the amount you receive on maturity equals the return on your investment.If the zero-coupon bonds are municipal obligations, or municipal zero-couponbonds, they generally are tax-exempt from Federal and state taxes for residentsof the issuing state. The market value of zero-coupon bonds fluctuate moreto changes in market conditions than regular coupon bonds and thereforemay not be suitable for all investors. Interest on some municipal bondsmay subject certain taxpayers to the alternative minimum tax (AMT).