GLOSSARY OF MUNICIPAL BOND TERMS

The following glossary of municipal bond industry terms

Accrued interest. Coupon interest accumulated on a bond or note since the
last interest payment or, for a new issue, from the dated date to the date
of delivery. Since interest on municipal bonds is payable semi-annually,
every six months, when you buy a bond in mid-term you are only entitled to
the interest the bond earns after you buy it. The interest earned
previously, the accrued interest, belongs to the seller. Some first-time
bond buyers think this payment is a hidden charge or fee, not realizing that
they will get it back in full at the next interest payment date as tax-free
interest.

Ad Valorem Tax. (It actually means "according to its value.") A state or
local government tax based on the value of real property as determined by
the county tax assessor.

Advanced Refunded Bonds. A municipality may sell a second bond issue at a
lower interest rate cost, placing the proceeds of the issue in an escrow
account from which the first issue's principal and interest will be repaid
when due. See also ETM bonds.

AMBAC. AMBAC Indemnity Corp. The number two-ranked municipal bond insurance
company.

Amortization of Debt. The annual reduction of principal through the use of
serial bonds or term bonds with a sinking fund.

Arbitrage. The interest rate differential that exists when proceeds from a
municipal bond - which is tax-free and carries a lower yield - are invested
in taxable securities with a yield that is higher. The 1986 Tax Reform Act
made this practice by municipalities illegal solely as a borrowing tactic,
except under certain safe-harbor conditions..

Assessed Valuation. A municipality's worth in dollars based on real estate
and/or other property for the purpose of taxation, sometimes expressed as a
percent of the full market value of the community.

Authority or Agency. A state or local unit of government created to perform
a single activity or a limited group of functions and authorized by the
state legislature to issue bonded debt.

Authorizing Ordinance. A law that when enacted allows the unit of government
to sell a specific bond issue or finance a specific project.

Average Life. The average length of time an issue of serial bonds and/or
term bonds with mandatory sinking funds and/or estimated prepayments is
expected to be outstanding. It also can be the average maturity of a bond
portfolio.

Balloon Maturity. An inordinately large amount of bond principal maturing in
any single year. Also called a Term Bond.

B.A.N. (Bond Anticipation Note). A short-term security, one year or less,
used for interim financing to be repaid from the proceeds of a planned
long-term bond issue.

Base Point (or Basis Point). One one-hundreth of one percent ( 1/100 % or
0.01 percent). Thus 25 basis points equal one-quarter of one percent, 100
basis points equal one percent. This is typical in-group, professional bond
talk.

Bearer Bond. A bond that has no identification of the owner of the security.
It is presumed to be owned by the bearer or the person who holds it. It was
much sought after because of the ease of transferring or gifting. All bonds
issued prior to June 1983 were bearer bonds; since then, they have been
issued in Registered Bond form.

Bid. An offer to buy at a fixed price or yield. As opposed to Ask, which is
an offering to sell.

Bond or note. A security whereby an issuer borrows money from an investor
and agrees and promises, by written contract, to pay a fixed principal sum
on a specified date ( maturity date) and at a specified rate of interest.

A Bond. A unit of debt, $1000 of principal or par amount. For 200 years
municipal bonds were sold in $1000 denominations. Since the mid-1970s the
minimum bond denomination has been $5000; nevertheless, "A Bond" is bought,
sold, referred to and priced as if it were $1000.

Bond Counsel or Bond Approving Attorney. A lawyer who writes an opinion on
the bond or note as to its tax exempt status and the authenticity of its
issuance. In theory their opinion is meant to assure the bond investor, but
they are paid by the issuer so it is not clear who their real client is.

Bond Fund (Tax-Exempt). A portfolio of municipal bonds sponsored by
registered investment companies that offer shares to investors either
through (1) closed-end funds or unit investment trusts, which offer shares
of a fixed portfolio of municipal bonds; or (2) open-end or managed funds,
which offer shares in a managed portfolio of municipal bonds whose size will
vary as shares are purchased or redeemed.

Bond Insurance. Insurance issued by a private insurance company for either
an entire issue or specific maturities that guarantees to pay principal and
interest when due. This will provide a credit rating of triple-A and thus a
lower borrowing cost for the issuer. The four largest monoline bond insurers
are AMBAC, FGIC, FSA and MBIA, which see.

Bond Premium. The amount at which a bond or note is bought or sold above its
par value or face value without including accrued interest.

Bonded Debt. The portion of an issuer's debt structure represented by
outstanding bonds, sometimes limited by constitutional or legislative
restraints.

Book Entry. A system of security ownership in which the ownership is held as
a computer entry on the records of a central company for its owner. The bond
owner gets a computer printout as proof of ownership.

Broker. Technically a broker is a bond trader in the secondary market buying
from and selling to bond dealers. Its most common usage is as a description
of a bond salesperson.

Callable Bond. A bond or note that is subject to redemption at the option of
the issuer prior to its stated maturity. The call date and call premium, if
any, is stated in the offering statement or broker's confirmation.

Certificates of Participation (COPs). A form of lease revenue bond that
permits the investor to participate in a stream of lease payments,
installment payments or loan payments relating to the acquisition or
construction of specific equipment, land or facilities. In theory the
certificate holder could foreclose on the equipment or facility financed in
the event of default, but so far no investor has ended up owning a piece of
a school house or a storm drainage system. A very popular financing device
in California since Proposition 13 because COP issuance does not require
voter approval. COPs are not viewed legally as "debt" because payment is
tied to an annual appropriation by the government body. As a result, COPs
are seen by investors as providing weaker security and often carry ratings
that are a notch or two below an agency's general obligation rating.

CFD. Community Facilities District. If a bond issue name has CFD in it you
know it is a Mello-Roos Bond. The name refers to the taxing District that is
set up to authorize the issuance of bonds, that will benefit from the
financing, and from which special taxes will be collected for the bonds'
repayment.

Closed End Fund. A mutual fund of a fixed-dollar amount of issues traded on
one of the exchanges not at its NAV, but priced based on perception and
supply and demand. These funds can sell at a substantial discount or premium
to their net asset value.

Conduit Bonds. Bonds whose repayment is the responsibility of the business
or developer who benefits from the financing, rather than the issuer who
only collects the taxes, fees or revenues and passes them on to the
bondholder.

Coupon. The detachable part of a bond that evidences the rate of interest
due and the interest payment date. In the good old days of bearer bonds,
coupons were detached from the bonds and presented to the paying agent for
payment just as one might cash a government check. Thus the reference to
wealthy persons as "coupon clippers."

Coupon Rate. The specified annual interest rate payable to the bond or note
holder as printed on the bond. This term is still used even though there are
no coupon bonds anymore.

Covenant. A legally binding commitment by the issuer of municipal bonds to
the bondholder. An impairment of a covenant can lead to a Technical Default.

Coverage. This is the margin of safety for payment of debt service on a
revenue bond that reflects the number of times the actual and/or estimated
project earnings or income for a 12-month period of time exceeds debt
service that is payable.

Current Yield. The ratio of the coupon rate on a bond to the dollar purchase
price expressed as a percentage. Thus if you pay par or 100 cents on the
dollar for your bond and the coupon rate is 6%, the current yield is 6%;
however, if you paid 97 for your 6% discount bond the current yield is
6.186%. ( .06 divided by 97). If you paid 102 for a 6% bond the current
yield is 5.88% (.06 divided by 102).

Cushion Bonds. Bonds selling at a premium are called "cushion" bonds because
they cushion the price volatility in an up and down market. By definition, a
premium bond has a higher-than-market coupon interest rate. The dollar price
movement of a high interest rate bond is less than that of a lower interest
rate bond of the same maturity when general interest rates move up or down a
few basis points.

Dated Date. (dtd.) The date carried on the face of a bond or note from which
interest normally begins to accrue.

Dealer. A corporation or partnership that buys and sells and maintains an
ongoing position in bonds and/or notes. They are also authorized to
underwrite new issues. Some large commercial banks are licensed to act as
bond dealers.

Debt Limited. The maximum statutory or constitutional amount of debt that
the general obligation bond issuer can either issue or have outstanding at
any time.

Debt Ratio. The ratio of the issuer's general obligation debt to a measure
of value, such as real property valuations, personal income, general fund
resources, or population.

Debt Service. Required payments for principal and interest.

Debt Service Reserve Fund. A bank trustee account established by the trust
indenture and used as a backup security for an issuer's bonds. It usually
amounts to one year's debt service, and can be drawn on by the Trustee in
the event of an impairment of the Trust indenture.

Default. Failure to pay in a timely manner principal and/or interest when
due, or a Technical Default, the occurrence of an event as stipulated in the
Indenture of Trust resulting in an abrogation of that agreement. A Technical
Default can be a warning sign that a default on debt service is coming, but
in reality actual debt service interruption does not always occur if the
problems are resolved in time. A Technical Default will almost always drive
down the price of a bond in secondary market trading.

Defeased Bonds. Refunded bonds for which the payment of principal and
interest has been assured through the structuring of a portfolio of
government securities, the principal and interest on which will be
sufficient to pay debt service on the refunded, outstanding bonds. When a
bond issue is defeased, the claim on the revenues of the issuer is usually
eliminated. See also ETM bonds

Delinquent Taxes. Property taxes that have been levied but remain unpaid on
and after the due date. When tax delinquencies exceed 5% the Bond Advisor
places the issue on its internal Bond Watch.

Delivery. For bonds bought or sold in the secondary market, delivery - and
payment - must be in three business days. For new issues, the time when
payment is made to, and the executed bonds and notes are received from, the
issuer. New-issue delivery takes place several weeks after the sale to allow
the bonds and notes to be printed and signed.

Denomination. The face or par amount - nominally $1000 or $5000 but can be
$100,000 or more in the case of a note - that the issuer promises to pay at
a specific bond or note maturity.

Direct Debt. In general obligation bond analysis, the amount of debt that a
particular local unit of government has incurred in its own name or assumed
through annexation.

Discount. The amount of dollars by which market value of a bond is less than
par value or face value.

Discount Bonds. Bonds which sell at a dollar price below par in which case
the yield would exceed the coupon rate. The difference between the discount
price and the maturity price is subject to federal capital gains tax except
in the case of Original Issue Discount Bonds, which see.

Discount Note. Non-interest-bearing note sold at a discount and maturing at
par. A U.S.Treasury Bill is a discount note.

Dollar Bond. Generally a term bond that is quoted and traded in dollars
rather than in yield-to-maturity. They are well known issues of well known
names in the market.

Double-barreled Bond. A bond with two distinct pledged sources of revenue,
such as earmarked monies from a specific enterprise or aid payment, as well
as the general obligation taxing powers of the issuer. A California GO Water
Resources Bond would be a good example.

Escrow Fund. A fund that contains monies that only can be used to pay debt
service.

ETM. Escrowed to Maturity. An Advanced Refunded bond. When interest rates
fall, an issuer may chose to sell a new issue called a refunding issue and
use the proceeds of the second issue to pay off the original issue, much the
same as a home owner refinancing a mortgage in an effort to save interest
costs. The proceeds of the refunding issue are used to structure a portfolio
of U.S. government securities, the principal and interest payments of which
exactly match the principal and interest payments of the refunded bonds. The
portfolio is placed in escrow at the paying agent and the bond issue is said
to be fully defeased and escrowed to maturity. In actual practice the bonds
are usually called on the first call date. Because of the U.S. Treasury
backing, ETM bonds are considered the safest municipal bonds available and
trade on the market as a rich triple-A.

Feasibility Study. A financial study provide by the issuer of a revenue bond
that estimates service needs, construction schedules, and most importantly,
future project revenues and expenses used to determine the financial
feasibility and creditworthiness of the project to be financed.

FGIC. Financial Guaranty Insurance Co. The number three-ranked municipal
bond insurer.

Financial Advisor. Generally a bank, investment-banking company or
independent consulting firm that advises the issuer on all financial matters
pertaining to a proposed issue and is not part of the underwriting
syndicate.

Fiscal Agent. Also known as the Paying Agent, the bank, designated by the
issuer, to pay interest and principal to the bondholder.

Fiscal Year. A 12-month time horizon by which state and local governments
annually budget their respective revenues and expenditures. Usually not the
calendar year, January to December, but often July to June.

Flow of Funds. The annual legal sequence by which enterprise revenues are
paid out for operating and maintenance costs, debt service, sinking fund
payments, and so on.

FSA. Financial Security Assurance Inc. The number four-ranked municipal bond
insurer.

Full Faith and Credit. The pledge of "the full faith and credit and taxing
power without limitation as to rate or amount." A phrase used primarily in
conjunction with General Obligation bonds to convey the pledge of utilizing
all taxing powers and resources, if necessary, to pay the bond holders.

General Obligation Bond. (G.O.) A bond secured by a pledge of the issuer's
taxing powers (limited or unlimited). More commonly the general obligation
bonds of local governments are paid from ad valorem property taxes and other
general revenues. Considered the most secure of all municipal debt. Limited
in California by Proposition 13 to debt authorized by a vote of two thirds
of voters in the case of local governments or a simple majority for state
issuance.

General Property Tax. A tax levied on real estate and personal property.

Gross Debt. The sum total of a state's or local government's debt
obligations.

Gross Revenues. Generally, all annual receipts of a revenue bond issuer
prior to the payment of all expenses. Normally only Net Revenues are pledged
to the repayment of bonds.

Indenture of Trust. A legal document describing in specific detail the terms
and conditions of a bond offering, the rights of the bondholder, and the
obligations of the issuer to the bondholder; such document is alternatively
referred to as a bond resolution.

Industrial Development Bonds. (IDBs) also called Industrial Revenue Bonds
(IRBs). Used to finance facilities for private enterprises, water and air
pollution control, ports, airports, resource-recovery plants, and housing,
among others. The bonds are backed by the credit of the private corporation
borrower rather than by the credit of the issuer. Also known as Conduit
Bonds. Private purpose bonds are limited by federal law to $50 times the
state's population on an annual basis.

Interim Borrowing. (1) Short-term loans to be repaid from general revenues
or tax collections during the current fiscal year (TRANs or RANs); (2)
short-term loans in anticipation of bond issuance or grant receipts (BANs).

Intermediate Range. Bonds maturing in 5 to 15 years.

Investment Banker. A firm engaged in raising capital for an issuer.
Participates as the middleman in purchasing securities from the issuer and
in selling the same securities to investors.

Issuer. A state or local unit of government that borrows money through the
sale of bonds and/or notes.

Investment Grade. Bond issues that the three major bond rating agencies,
Moody's, Standard & Poor's, and Fitch rate BBB or Baa or better. Many
fiduciaries, trustees, some mutual fund managers can only invest in
securities with an investment grade rating.

Junk Bonds. Most non-rated bonds and bonds rated below investment grade.

Joint Powers Authority (JPA). A JPA is formed when it is to the advantage of
two or more public entities with common powers to consolidate their forces
to acquire or construct a joint-use facility. Their bonding authority and
taxing ability is the same as their powers as separate units.

Lease-Rental Bond. Bonds whose principal and interest are payable
exclusively from rental payments from a lessee. Rental payments are often
derived from earnings of an enterprise that may be operated by the lessee or
the lessor. Rental payments may also be derived from taxes levied by the
lessee. Also see Certificates of Participation.

Legal Opinion. A written opinion from bond counsel that an issue of bonds
was duly authorized and issued. The opinion usually includes the statement,
"interest received thereon is exempt from federal taxes and, in certain
circumstances, from state and local taxes."

Letter of Credit. A form of supplement or, in some cases, direct security
for a municipal bond under which a commercial bank or private corporation
guarantees payment on the bond under certain specified conditions.

Level Debt Service. Principal and interest payments that, together,
represent more or less equal annual payments over the life of the loan.
Principal may be serial maturities or sinking fund installments.

Lien. A claim on revenues, assessments or taxes made for a specific issue of
bonds.

Limited Tax Bond. A bond secured by a pledge of a tax that is limited as to
rate or amount.

Marks-Roos Bonds. The State Legislature enacted the Marks-Roos (named after
its legislative sponsors) Local Bond Pooling Act of 1985 to facilitate the
financing of local government facilities by bond bank pools funded by bond
proceeds. The pool, formed under a Joint Powers Authority, can buy any type
of legally issued debt instrument within or without its geographic area. The
idea was to save money through economies of scale by selling one large bond
issue to finance several small projects. This in fact has not always
happened. Many issues were high yielding, unrated, junk bonds that benefited
no one but the bond underwriter. Several Marks-Roos issues have defaulted
and are under investigation by the Securities and Exchange Commission.
Prospective investors should find out what sort of loans the pooled fund
will make before buying such deals.

Maximum Annual Debt Service. The maximum amount of principal and interest
due by a revenue bond issuer on its outstanding bonds in any future fiscal
year. This is sometimes the amount to be maintained in the Debt Service
Reserve Fund.

MBIA. MBIA Insurance Corp. The first-ranked municipal bond insurer, based on
insurance in force and market penetration.

Mortgage Revenue Bond. A bond backed by a lien on the monthly payments of a
large pool of mortgages, usually issued by a state or local housing
authority.

Municipal Bond. Bonds issued by any of the 50 states, the territories and
their subdivisions, counties, cities, towns, villages and school districts,
agencies, such as authorities and special districts created by the states,
and certain federally sponsored agencies such as local housing authorities.
Historically, the interest paid on theses bonds has been exempt from federal
income taxes and is generally exempt from state and local taxes in the state
of issuance. There are approximately $1.3 trillion municipal bonds
outstanding and they generate about $50 billion tax-free interest income
each year.

Municipal Futures. A municipal index futures contract that has been traded
at the Chicago Board of Trade since June 11, 1985. The futures contract is
based on an index, known as The Bond Buyer Municipal Bond Index, composed of
40 bonds which are priced at the close of trading each day. This is no
market for amateur speculators; it is used primarily by professional money
managers to hedge their municipal portfolios.

Municipal Notes. Short-term municipal obligations, generally maturing in one
year or less. The most common types are (1) bond anticipation notes (BANs),
(2) revenue anticipation notes (RANs), (3) tax anticipation notes (TANs),
(4) grant anticipation notes, (5) project notes, and (6) construction loan
notes. Also see TRANs.

Municipal Securities Rulemaking Board (MSRB). An independent self-regulatory
organization established by Congress in 1975 which is charged with primary
rulemaking authority - under the SEC - over dealers, dealer banks, and
brokers in municipal securities. Its board is stacked against individual
investors and it is little more than a sweetheart union for the municipal
bond industry.

Net Asset Value (NAV). The market value of all the bonds in a mutual fund
portfolio divided by all the outstanding shares.

Net Bonded Debt. Gross general obligation debt less self-supporting general
obligation debt, housing bonds, water revenue bonds, etc..

Net Interest Cost (NIC). Generally speaking, issuers award competitive bond
sales to the underwriter bidding the lowest NIC. It represents the average
coupon rate weighted to reflect the time until repayment of principal and
adjusted for the premium or discount.

Net Revenue Available for Debt Service. Usually, gross operating revenues of
an enterprise less operating and maintenance expenses but exclusive of
depreciation and bond principal and interest. Net revenue as thus defined is
used to determine coverage on revenue bond issues.

Official Statement (OS) or Offering Circular (OC). A document (prospectus)
circulated for an issuer prior to a bond sale with salient facts regarding
the proposed financing. There are two OSs, the first known as the
preliminary, or "red herring" - so named not because it smells but because
some of the type on its cover is printed in red - and it is supposed to be
available to the investor before the sale. The final OS must be sent to the
purchaser before delivery of the bonds.

Open-End Fund. This is the standard municipal bond fund. It has no fixed
number of bonds in its portfolio. Rather it buys issues as investors buy
shares in the fund, sells issues as investors redeem shares. The tax-free
dividend is dependent on a pro-rata share of the interest earned, and this
varies as the income of the portfolio varies. The fund managers guarantee to
buy back shares at their Net Asset Value, the market value of all the bonds
in their portfolio as determined at the close of each business day. This NAV
per share can be more or less than the original purchase price. Open-end
funds have no maturity date so ultimately they must be sold to return
principal.

Original Issue Discount. Some maturities of a new bond issue that have an
offering price substantially below par; the appreciation from the original
price to par over the life of the bonds is treated as tax-exempt income and
is not subject to capital gains tax. See also Zero Coupon Bond.

O.T.C. Over The Counter. The buying and selling method used in the secondary
market for municipal bonds (and unlisted stocks). Not on an exchange.

Overlapping Debt. The proportionate share of the general obligation bonds of
local governments located wholly or in part within the limits of the
reporting unit of government that must be borne by property owners within
the unit.

Par Value. The face value or principal amount of a bond, usually $5,000 due
the holder at maturity. It has no relation to the market value. For pricing
purposes it is considered 100.

Parity Bonds. Revenue bonds that have an equal lien on the revenues of the
issuer.

Paying Agent. Also Fiscal Agent. Generally a bank that performs the function
of paying interest and principal for the issuing body.

Premium. The amount, if any, by which the price exceeds the principal amount
(par value) of a bond. Its current yield will be less than its coupon rate.

Price to Call. The yield of a bond priced to the first call date rather than
maturity.

Primary Market. The new issue market

Principal. The face value of a bond, exclusive of interest.

Put Bond. A bond that can be redeemed on a date or dates prior to the stated
maturity date by the bondholder. Also known as an option tender bond.

Qualified Legal Opinion. Conditional affirmation of the legal basis for the
bond or note issue. The average investor should avoid any but the strongest
opinion by the most recognized bond approving attorneys.

RANs. Revenue anticipation notes.

Rate Covenant. A legal commitment by a revenue bond issuer to maintain rates
at levels to generate a specified debt-service coverage.

Ratings. Various alphabetical and numerical designations used by
institutional investors, Wall Street underwriters, and commercial rating
companies to give relative indications of bond and note creditworthiness.
Standard & Poor's and Fitch Investors Service Inc. use the same system,
starting with their highest rating of AAA, AA, A, BBB, BB, B, CCC, CC, C,
and D for default. Moody's Investors Services uses Aaa, Aa, A, Baa, Ba, B,
Caa, Ca, C, and D . Each of the services use + or - or +1 to indicate half
steps in between. The top four grades are considered Investment Grade
Ratings

Red Herring. A preliminary offering statement, subject to final change and
update upon completion of sale of bonds. The name comes not from the smell
but from the red type along the side on the cover.

Redemption. Process of retiring existing bonds prior to maturity from excess
earnings or proceeds of refunding bonds. It also refers to redeeming shares
in a mutual fund by selling the shares back to the sponsor.

Redevelopment Agency (Redev.). A legislatively established subdivision of
government established to revitalize blighted and economically depressed
areas of a community and to promote economic growth. Tax Allocation Bonds
are issued to pay the cost of land and building acquisition and their
redevelopment and are repaid by the incremental increase in tax revenues
produced by the increase assessed value of the area after redevelopment.
Redev. Agencies may also sell Housing Mortgage Revenue Bonds to finance
housing units within the area, a fixed percentage of which must be for
low-cost housing.

Refunding Bond. The issuance of a new bond for the purpose of retiring an
already outstanding bond issue.

Registered Bond. A non-negotiable instrument in the name of the holder
either registered as to principal or as to principal and interest.

Repo. A financial transaction in which one party "purchases" securities
(primarily U.S. Government bonds) for cash and simultaneously the other
party agrees to "buy" them back at some future time according to specified
terms. Municipal bond and note issuers have used repos to manage cash on a
short term basis. (Known formally as repurchase agreements.)

Revenue Bond. A municipal bond whose debt service is payable solely from the
revenues derived from operating the facilities acquired or constructed with
the proceeds of the bonds.

Secondary Market. The trading market for outstanding bonds and notes. This
is an O.T.C. market, a free form negotiated method of buying and selling,
usually conducted by telephone or computer. Traders buy and sell for their
own inventory. As many as $2 billion of issues trade each day.

Security. The legally available revenues and assets that are used to pay the
bond holders. The key component that supports debt service.

Self Supporting Bonds. Bonds payable from the earnings of a municipal
utility enterprise.

Serial Bond. A bond of an issue that features maturities every year,
annually or semiannually over a period of years, as opposed to a Term Bond,
which is a large block of bonds maturing in a single year.

Short Term. Bonds or notes sold on an interim basis with tax-exempt
securities for a period of from one to five years.

Sinking Fund. Money set aside on a periodic basis to retire term bonds at or
prior to maturity.

Sinking Fund Schedule. A schedule of payments required under the original
revenue bond resolutions to be placed each year into a special fund, called
the sinking fund, and to be used for retiring a specified portion of a term
bond issue prior to maturity.

Special Assessment Bond. A bond secured by a compulsory levy of special
assessments, as opposed to property taxes, made by a local unit of
government on certain properties to defray the cost of local improvements
and/or services that represents the specific benefit to the property owner
derived from the improvement.

Street Name. The registration of bonds in the name of a dealer or other
third party instead of the owner, usually for custodial or safe keeping
purposes. This also facilitates buying and selling from the account. The
bond holder gets a monthly statement of the bonds in the account.

Super Sinker. A term maturity in a housing mortgage bond issue. These will
be the first bonds to be called, on any interest payment date, from the
proceeds of prepaid mortgages. The average mortgage is prepaid though
refinancing or sale in 6.8 years. While it is likely, it cannot be
guaranteed that a super sinker will be called; as a result they are priced
as a long-term bond but are most likely to be a short-term maturity. It is a
way to get a higher yield for a short term bond.

Swap. The exchange of one bond for another. Generally, the act of selling a
bond to establish an income tax loss and replacing the bond with a new item
of comparable value.

TAN. Tax Anticipation Note.

Tax Base. The total resource of the community that is legally available for
taxation.

Taxable Equivalent Yield. The yield an investor would have to obtain on a
taxable corporate or U.S. government bond to match the same after-tax yield
on a municipal bond. This emuni.com site has a taxable equivalent yield
table for California residents.

Tax Allocation Bond. Bonds issued in conjunction with a redevelopment
project. The taxes pledged to their repayment come from the increase of
assessed value over and above a pre-established base. The redevelopment
creates this added value, known as the tax increment.

Tax-exempt Bond. Bonds exempt from federal income, state income, or state
tax and local personal property taxes. This tax exemption results from the
theory of reciprocal immunity: States do not tax instruments of the federal
government and the federal government does not tax interest of securities of
state and local governments.

Technical Default. Failure by the issuer to meet the requirements of a bond
covenant. These defaults do not necessarily result in losses to the bond
holder. The default may be cured by simple changes of policy or actions by
the issuer.

Tender. The act of offering bonds to a sinking fund.

Term Bond. A large block of bonds of long maturity. They may be part of a
serial Bond issue; there may be more than one term bond in an issue or a
single maturity. Some are subject to a sinking fund redemption.

Territorial Bonds. Issued by Puerto Rico, the Virgin Islands, etc. Interest
on this debt is exempt from state income taxes because of Congressional
action that provides these territories with such benefits.

Thin Market. The scarcity of secondary market supply or few bid or offer
quotes for a particular security.

Tombstone. An advertisement placed for information purposes, after bonds or
notes are sold, that describes certain details of the issue and lists the
managing underwriters and the members of the underwriting syndicate.

TRAN. Tax and Revenue Anticipation Note.

Trading Position. The holding of bonds in inventory by the dealer for
purposes of buying or selling.

Trustee. A bank designated as the custodian of funds and official
representative of bondholders. Trustees are appointed to insure compliance
with the trust indenture and represents bondholders to enforce their
contract with the issuer.

Underlying Debt. The general obligation bonds of smaller units of local
government within a given issuer's jurisdiction.

Underwrite. An agreement to purchase an issuer's unsold securities at a set
price, thereby guaranteeing the issuer proceeds and a fixed borrowing cost.

Unit Investment Trust (UIT). A mutual fund of a fixed number (20 to 30) of
different issues in a portfolio placed in a trust. Units or shares are sold
in the trust and each unit receives a proportionate amount of the tax-exempt
interest earned by the bonds. As the bonds mature or are called, principal
is returned to the investor. UITs, unlike other mutual funds, have a finite
life.

Variable Rate Bond. A bond whose yield is not fixed but is adjusted
periodically according to a prescribed formula.

Yield Curve. Graph depicting the relationship between yields and current
maturity for securities with identical default risk.

Yield-to-call. Return available to call date taking into consideration the
current value of the call premium, if any.

Yield-to-maturity. (YTM) Return available taking into account the interest
rate, length of time to maturity, and price paid. It is assumed that the
coupon reinvestment rate for the life of the bonds will be the same as the
yield-to-maturity.

Zero-coupon Bonds. A deep discount municipal bond on which no current
interest is paid. Instead, at bond maturity, the investor receives
compounded interest at a specified rate. The difference between the discount
price at purchase and the accreted value at maturity is not taxed as a
capital gain but is considered tax-exempt interest. Widely used for college
savings bonds.

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