A Glossary of Terms

501(c)(3) ORGANIZATION – An organization recognized by the Internal Revenue Service as a not-for-profit organization. A 501(c)(3) organization can borrow funds to finance projects on a tax-exempt basis through a conduit issuer. Examples include not-for-profit hospitals, retirement communities, colleges and universities, and museums.

AFFILIATION AGREEMENT – An agreement (usually formal) between two or more otherwise independent entities that defines how they will relate to each other. Affiliation agreements between hospitals may specify procedures for referring or transferring patients from one facility to another, joint faculty and/or medical staff appointments, teaching relationships, sharing of records or services, or provision of consultation between programs. Academic Affiliation Agreements define how Schools of Medicine will rely on funds from affiliated hospitals to support their academic mission, and/or how Teaching Hospitals will rely on the services of faculty and staff to serve their patients, manage their residency programs, and provide medical direction for hospital units and services.

ACCREDITED INVESTOR – An investor to whom a security otherwise required to be registered under the Securities Act of 1933 may be sold in a limited offering without registration under the SEC’s Regulation D and who does not count against the maximum limit of 35 investors. In addition to a variety of categories of institutional investors (including banks, insurance companies, investment companies, business development companies and employee benefit plans, as well as certain 501(c)(3) organizations, corporations, business trusts and partnerships), an accredited investor includes high net worth or high income individuals. Municipal securities generally are not subject to registration under the Securities Act of 1933 but sometimes their sales are restricted to accredited investors to ensure that they are sold only to persons who are capable of understanding the risk and bearing the potential loss of an investment in the securities.

ASSET-LIABILITY MANAGEMENT – The practice of matching the term structure and cash flows of an organization’s asset and liability portfolios in order to maximize returns and minimize interest rate risk.

BANK QUALIFIED – Designation given to a public purpose bond offering by the issuer if it reasonably expects to issue in the calendar year of such offering no more than $10 million par amount of bonds of the type required to be included in making such calculation under the Internal Revenue Code. When purchased by a commercial bank for its portfolio, the bank may receive an 80% tax deduction for the interest cost of carry for the issue. A bond that is bank qualified is also known as a “qualified tax-exempt obligation.”

BENCHMARKING –Comparing business processes and performance metrics to peers, industry standards and/or best practices from other industries.

BONDHOLDER – The person or entity having a true and legal ownership interest in a municipal bond. In the case of book-entry only bonds, the beneficial owner will often be treated as the bondholder under the bond contract, although for certain purposes the entity holding the global certificates representing the entire issue will retain the rights of the bondholder under the bond contract.”

BOND INSURANCE – A guarantee by a bond insurer of the payment of the principal of and interest on municipal bonds as they become due should the issuer fail to make required payments. Bond insurance typically is acquired in conjunction with a new issue of municipal securities, although insurance also is available for outstanding bonds trading in the secondary market. In the case of insurance obtained at the time of issuance, the issuer of the policy typically is provided extensive rights under the bond contract to control remedies in the event of a default.

BOND PURCHASE AGREEMENT (BPA) – The contract between the underwriter and the issuer setting forth the final terms, prices and conditions upon which the underwriter purchases a new issue of municipal securities in a negotiated sale. A conduit borrower also is frequently a party to the bond purchase agreement in a conduit financing. The bond purchase agreement is sometimes referred to as the “purchase contract” or, less commonly, the “underwriting agreement.”

BROKER-DEALER – A general term for a securities firm that is engaged in both buying and selling securities for customers (i.e., agency trades) and also buying and selling for its own account (i.e., principal trades). The term generally would not be used (except in this Glossary) to refer to a dealer bank or a broker’s broker. For purposes of this Glossary, the term broker-dealer is used as a collective term for any firm that is a broker (including a broker’s broker) and/or a dealer (including a dealer bank).

CHINESE WALL – Process designed to restrict the flow of information between various parts of a securities firm to ensure that material, non-public information regarding a security is not inappropriately shared. Chinese walls are sometimes referred to as “information barriers” or “ethical walls.”

CHURNING – A practice, in violation of MSRB and SEC rules, in which a salesperson effects a series of transactions in a customer’s account that are excessive in size and/or frequency in relation to the size and investment objectives of the account. A salesperson churning an account is normally seeking to maximize the income (in commissions, sales credits or mark-ups) derived from the account.

CLOSING – The exchange of securities for payment in a new issue. This generally involves participation of representatives of the issuer, bond counsel, the underwriter and other relevant parties on the date of delivery of a new issue of municipal securities. On the closing date, the issuer delivers the securities and the requisite legal documents in exchange for the purchase price. In the case of book-entry securities, global certificates typically are delivered to a registered clearing agency in advance of closing, with the registered clearing agency effecting final delivery of the securities to the underwriter on the closing date by means of book entries. Sometimes a “pre-closing” is held before delivery, typically on the day preceding closing, to review the adequacy of the closing procedures and documents.

COMMERCIAL PAPER (CP) – Short-term, unsecured promissory notes, usually backed by a line of credit with a bank, that mature within 270 days. The issuer typically pays maturing principal of outstanding commercial paper with newly issued commercial paper, referred to as a “roll over,” thereby borrowing funds on a short-term basis for an extended period of time. Rate reset periods may vary from one to 270 days and different portions of a single issue of commercial paper may simultaneously have different reset periods.

COMPETITIVE SALE – A method of sale where underwriters submit proposals for the purchase of a new issue of municipal securities and the securities are awarded to the underwriter or underwriting syndicate presenting the best bid according to stipulated criteria set forth in the notice of sale. The underwriting of securities in this manner is also referred to as a “public sale” or “competitive bid.”

CONDUIT BORROWER – A borrower of bond proceeds in a conduit financing.

CONDUIT FINANCING – The issuance of municipal securities by a governmental unit (referred to as the “conduit issuer”) to finance a project to be used primarily by a third party, usually a for-profit entity engaged in private enterprise or a 501(c)(3) organization (referred to as the “conduit borrower”). The security for this type of issue is customarily the credit of the conduit borrower or pledged revenues from the project financed, rather than the credit of the conduit issuer. Such securities do not constitute general obligations of the conduit issuer because the conduit borrower is liable for generating the pledged revenues. Industrial development bonds, multi-family housing revenue bonds and qualified 501(c)(3) bonds are common types of conduit financings.

CONDUIT ISSUER – An issuer of municipal securities in a conduit financing.

CONTINUING DISCLOSURE – Disclosure of material information relating to municipal securities provided to the marketplace from time to time by the issuer of the securities or any other entity obligated with respect to the securities. Such disclosures include, but are not necessarily limited to, annual financial information and material event notices provided by the issuer or obligor to various information repositories for the benefit of holders of the issuer’s securities under Rule 15c2-12.

CONTINUING DISCLOSURE AGREEMENT or UNDERTAKING – The agreement or undertaking by the issuer of municipal securities or an obligated person with respect to such securities to disseminate annual financial information and material event disclosures to the nationally recognized municipal securities information repositories, state information depositories and/or the MSRB as provided for under Rule 15c2-12. A continuing disclosure agreement may also provide for more frequent or additional disclosures beyond that required by Rule 15c2-12.

COSTS OF ISSUANCE – The expenses associated with the sale of a new issue of municipal securities, including such items as printing, legal, rating agency and other fees. In certain cases, the underwriter’s discount may be considered one of the costs of issuance. The Internal Revenue Code restricts the use of bond proceeds to pay costs of issuance for certain types of tax-exempt bonds, such as private activity bonds.

COVENANT or BOND COVENANT – The issuer’s enforceable promise to perform or refrain from performing certain actions. With respect to municipal securities, covenants are generally stated in the bond contract. Covenants commonly made in connection with a bond issue may include covenants to charge fees sufficient to provide required pledged revenues (called a “rate covenant”); to maintain casualty insurance on the project; to complete, maintain and operate the project; not to sell or encumber the project; not to issue parity bonds unless certain tests are met (called an “additional bonds covenant”); and not to take actions that would cause the bonds to be arbitrage bonds. A covenant whereby the issuer is affirmatively obligated to undertake a duty in order to protect the interests of bondholders (e.g., to maintain insurance) is called a “protective covenant.” A covenant whereby the issuer obligates itself to refrain from performing certain actions (e.g., not to sell the project) is called a “negative covenant.”

CREDIT ENHANCEMENT – The use of the credit of an entity other than the issuer or obligor to provide additional security in a bond or note financing. This term typically is used in the context of bond insurance, bank letters of credit and other facilities, state school guarantees and credit programs of federal or state governments or federal agencies, but also may refer more broadly to the use of any form of guaranty, secondary source of payment or similar additional credit-improving instruments.

CREDIT FACILITY – An instrument that provides credit enhancement.

DEBT SERVICE COVERAGE – The ratio of pledged revenues available annually to pay debt service to the annual debt service requirement. This ratio is one indication of the availability of revenues for payment of debt service.

DEFAULT – A failure to pay principal of or interest on a bond when due or a failure to comply with any other covenant, promise or duty imposed by the bond contract. The most serious event of default, sometimes referred to as a “monetary” default, occurs when the issuer fails to pay principal, interest, or both, when due. Other defaults, sometimes referred to as “technical” defaults, result when specifically defined events of default occur, such as failure to maintain covenants. Technical defaults may include failing to charge rates sufficient to meet rate covenants, failing to maintain insurance on the project or failing to fund various reserves. If the issuer defaults in the payment of principal, interest, or both, or if a technical default is not cured within a specified period of time, the bondholders or trustee may exercise legally available rights and remedies for enforcement of the bond contract.

DERIVATIVE – A product, whose value is derived from an underlying security, structured to deliver varying benefits to different market segments and participants. The term encompasses a wide range of products offered in the marketplace including interest rate swaps, caps, floors, collars and other synthetic products.

DIVERSIFICATION – The practice of including in a portfolio different types of assets (e.g., securities that differ by type or location of issuer, maturity, or credit quality) in an effort to minimize risks or improve overall portfolio performance. Diversifying a securities portfolio by type or location of issuer, for example, might protect the portfolio against adverse conditions in a particular industry or region of the country, while diversifying by credit quality might permit the acquisition of lower-rated, higher-yielding securities while protecting most of the portfolio’s capital in higher quality securities.

DUE DILIGENCE – The process by which a party to a new issue (typically an underwriter, usually assisted by counsel) investigates an issuer or other party obligated to make payments with respect to a bond issue or the enterprise or revenue stream providing security for such issue. Such inquiry is customarily made by an underwriter to promote the accuracy and completeness of the official statement and to provide the underwriter with a reasonable basis for belief in the accuracy and completeness of the document. Further inquiry may be required if the investigation reveals facts that are incomplete or inconsistent, either on their face or in light of other known facts.

ESCROW DEPOSIT AGREEMENT – An agreement that typically provides for the deposit of moneys or securities in an escrow account to refund an outstanding issue of municipal securities. The agreement sets forth the manner in which funds are to be invested (generally in eligible securities) pending their expenditure and the schedule on which on-going debt service payments are to be made and early redemptions, if any, of securities are to occur.

FAIRNESS LETTER or FAIRNESS OPINION – A letter or opinion prepared by a financial advisor, pricing advisor or similarly qualified person opining on the fairness of the price paid by the underwriters to the issuer in connection with a new issue of municipal securities or paid by purchasers of assets. The term also sometimes refers to similar letters delivered by an investment banker, financial advisor or similarly qualified person regarding the fairness of the price being paid by an issuer or conduit borrower for assets being purchased with bond proceeds.

FEASIBILITY STUDY –
A report detailing the economic practicality of and the need for a proposed capital program. It frequently analyzes demand for the product or service being sold and forecasts financial statements or other operating statistics. The feasibility study may include a user or other rate analysis to provide an estimate of revenues that will be generated for the purpose of substantiating that debt service can be met from pledged revenues. In addition, the feasibility study may provide details of the physical, operating, economic or engineering aspects of the proposed project, including estimates of construction costs, completion dates and drawdown schedules.

FHA MORTGAGE INSURANCE –
Section 242 (mortgage insurance for hospitals) and Section 232 (mortgage insurance for long-term care facilities) of the National Housing Act enable the affordable financing of health care facility projects by reducing the cost of capital. The programs improve access to quality health care, reduce the cost of health care, and support HUD’s community development mission. Since the Section 242 program’s inception, 367 mortgage insurance commitments (totaling $14.9 billion) have been issued for hospitals in 42 states and Puerto Rico. Since 1934, 4,000 mortgage insurance commitments (totaling $16 billion) have been issued in all 50 states through the Section 232 program.

FINANCIAL ADVISOR –
With respect to a new issue of municipal securities, a consultant who advises the issuer on matters pertinent to the issue, such as structure, timing, marketing, fairness of pricing, terms and bond ratings. A financial advisor may also be employed to provide advice on subjects unrelated to a new issue of municipal securities, such as advising on cash flow and investment matters. The financial advisor is sometimes referred to as a “fiscal consultant” or “fiscal agent.” A broker-dealer that acts as a financial advisor is subject to MSRB rules.

FIXED INCOME SECURITY – An investment representing an indebtedness on the part of the obligor and having the basic characteristic of providing for periodic payments of investment return and repayment on a specified date of the principal amount of the investment. Certain forms of indebtedness that do not provide for periodic payments of a fixed amount of interest income (e.g., variable rate demand obligations, zero coupon bonds) nonetheless generally are considered to be fixed income securities.

FIXED RATE – An interest rate on a security that does not change for the remaining life of the security.

FIXED-TO-FLOATING RATE SWAP –
An agreement whereby an issuer synthetically converts fixed rate debt into variable rate debt through an interest rate swap.

FLOATING-TO-FIXED RATE SWAP –
An agreement whereby an issuer synthetically converts variable rate debt to fixed rate debt through an interest rate swap.

FORWARD – A contract (variously known as a “forward contract,” forward delivery agreement” or “forward purchase contract”) wherein the buyer and seller agree to settle their respective obligations at some specified future date based upon the current market price at the time the contract is executed. Forward contracts are generally entered into in the over-the-counter markets. A forward may be used for any number of purposes. For example, a forward may provide for the delivery of specific types of securities on specified future dates at fixed yields for the purpose of optimizing the investment of a debt service reserve fund. A forward also may provide for an issuer to issue and an underwriter to purchase an issue of bonds on a specified date in the future for the purpose of effecting a refunding of an outstanding issue that cannot be advance refunded.

FULL DISCLOSURE –
The principle that accurate and complete information material to a securities transaction that a potential investor would be likely to consider important in making investment decisions must be made available to purchasers or prospective purchasers. Material facts may include descriptions of the issuer and the conduit borrower in a conduit financing, including operating statistics and financial statements, as well as the structure of and security for the issue. Full disclosure enables the investor to evaluate the credit quality of an issue. The material facts pertinent to a new issue of municipal securities are generally disclosed in the official statement.

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) – Rules adopted by the Financial Accounting Standards Board that establish standards for preparing financial statements of an enterprise.

GUARANTEED INVESTMENT CONTRACT (GIC) – An investment, secured by a contract with a financial institution, that guarantees a fixed rate of return and a fixed maturity.

HIGH-YIELD BOND – A bond with unfavorable credit characteristics that is typically non-rated or rated below investment grade. A high-yield bond trades at yields substantially higher than bonds with more favorable credit characteristics and often suffers from lack of liquidity and marketability.

INSTITUTIONAL INVESTOR – A term that generally refers to banks, financial institutions, bond funds, insurance companies or other business organizations that possess or control considerable assets for large scale investing.

INTERIM PERIOD FINANCIAL STATEMENTS –
Unaudited financial statements, sometimes known as “stub period financials,” covering the interim period since the most recent audited financial statement for the issuer or conduit borrower.

INTERNAL REVENUE CODE (CODE) – The Internal Revenue Code of 1986, as amended from time to time. The exclusion of interest on municipal securities from gross income for federal income tax purposes derives from Section 103 of the Code and is subject to certain conditions set forth in Sections 141 through 150, and certain other provisions, of the Code.

INVESTMENT GRADE – A credit designation given municipal securities that have a high probability of being paid. Bonds rated “BBB” or higher by Standard & Poor’s or Fitch Ratings or “Baa” or higher by Moody’s Investors Service, Inc., are generally deemed to be investment grade. Notes and other short term obligations rated “F3” or higher by Fitch Ratings, “MIG 3” or “VMIG 3” or higher by Moody’s Investors Services, Inc., or “SP-2” or higher by Standard & Poor’s are also deemed to be investment grade.

INVESTOR LETTER –
A letter signed by an investor acknowledging the risks associated with the securities being purchased and usually containing one or more representations of the investor as to its financial ability to take such risks, its access to information on the securities, its intent to hold the securities for investment purposes (i.e., not for resale), and/or such other matters determined by the issuer or underwriter of the securities. Typically, an issuer or underwriter will establish such standards in connection with more risky securities that it believes should be held only by investors with sufficient resources and market sophistication to understand and bear the risks involved in such investment. This letter is sometimes referred to as a “big boy letter” or “sophisticated investor letter.” When used in a private placement, this letter may be referred to as a “private placement letter.” Some letters may be said to “travel” if they include a representation on the part of the investor to the effect that, if the investor resells the securities, it will require the purchaser to sign an identical letter. Such a letter is often referred to as a “traveling letter.”

INVESTOR RELATIONS – Complete, clear and timely disclosure is imperative as investors are independently reviewing underlying borrower credits and may decline to participate in a new issue sale or remarketing for obligors with incomplete, outdated, or confusing disclosure. There are essential elements and disciplines to be maintained with regard to an effective investor relations program.

LEGAL OPINION – The written conclusions of bond counsel that the issuance of municipal securities and the proceedings taken in connection therewith comply with applicable laws, that the municipal securities are legal, valid and enforceable obligations of the issuer and that, in the case of tax-exempt bonds, interest on the bonds is excluded from gross income of the holders thereof for federal income tax purposes and, where applicable, from state and local taxation. Bond counsel’s legal opinion is often referred to as the “approving opinion” or “bond
counsel opinion.”

LETTER OF CREDIT (LOC) –
A commitment, usually made by a commercial bank, to honor demands for payment of a debt upon compliance with conditions and/or the occurrence of certain events specified under the terms of the commitment. In municipal financings, bank letters of credit are sometimes used as additional sources of security for issues of municipal notes, commercial paper or bonds, with the bank issuing the letter of credit committing to pay principal of and interest on the securities in the event that the issuer is unable to do so. A letter of credit may also be used to provide liquidity for commercial paper, variable rate demand obligations and other types of securities.

LIBOR – A benchmark interest rate upon which many transactions are based. Obligations of parties to such transactions are typically expressed as a spread to LIBOR. The term is an acronym for “London Inter-Bank Offered Rate.”

LIMITED OFFERING – An offering of a new issue of municipal securities sold to a limited number of investors that meet certain established standards for qualifying as a purchaser of the securities. The term typically refers to an offering exempt from the provisions of Rule 15c2-12 as a primary offering of municipal securities in authorized denominations of $100,000 that are sold to no more than 35 persons each of whom the underwriters reasonably believe: (A) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment; and (B) is not purchasing for more than one account or with a view to distributing the securities.

LIQUIDITY FACILITY – A letter of credit, standby bond purchase agreement or other arrangement used to provide liquidity to purchase securities that have been tendered to the issuer or its agent but which cannot be immediately remarketed to new investors. The provider of the liquidity facility, typically a bank, purchases the securities (or provides funds to the issuer or its agent to purchase the securities) until such time as they can be remarketed.

MANAGER – The member (or members) of an underwriting syndicate charged with primary responsibility for conducting the affairs of the syndicate. The manager generally takes the largest underwriting commitment.

Lead Manager, Senior Manager or Bookrunning Manager – The underwriter serving as head of the syndicate. The lead manager generally handles negotiations in a negotiated underwriting of a new issue of municipal securities or directs the processes by which a bid is determined for a competitive underwriting. The lead manager also is charged with allocating securities among the members of the syndicate according to the terms of the agreement among underwriters and the orders received.

Joint Manager or Co-Manager – Any member of the management group (although the term is often used to refer to a member other than the lead manager).

Sole Manager – The underwriter of a new issue where no underwriting syndicate is formed.

MARKETABILITY –
The ease or difficulty with which securities can be sold in the market. An issue’s marketability depends upon many factors, including its coupon,security provisions, maturity, credit quality and the existence of ratings. In the case of a new issue, marketability also depends upon the size of the issue, the timing of its issuance, and the volume of comparable issues being sold.

MARK-TO-MARKET –
A process whereby the carrying value of a security is adjusted to reflect its current market value. Certain regulatory requirements mandate that broker-dealers carry positions at prices that reflect current market values. Issuers or their agents also must generally adjust the value of securities held in a debt service reserve fund or other bond-related fund, or of investments held in a local government investment pool, to reflect current market value.

MATERIAL EVENT DISCLOSURE –
Disclosure of certain enumerated events affecting a municipal security required to be made under a continuing disclosure agreement meeting the requirements of Rule 15c2-12. These events include the following, if material: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax-exempt status of the security; (7) modifications to rights of securities holders; (8) bond calls; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the securities; (11) rating changes; and (12) failure to provide annual financial information as required.

MERGERS AND ACQUISITIONS –
Although the phrase often combines these two concepts, the terms “merger” and “acquisition” mean entirely different things. When one entity takes over another and establishes itself in control, the purchase is technically an acquisition or an asset purchase. In a pure sense, a merger (or joint venture) happens when two entities – often about the same size – agree to move forward as a single, new entity rather than remain separate and distinct entities.

MONEY MARKET ELIGIBLE SECURITIES – Securities that are permissible investments for money market funds. Such securities are generally highly liquid with short-term maturities, causing them to be viewed as near-cash equivalents.

MOODY’S INVESTORS SERVICE, INC. – A nationally recognized statistical rating organization that provides ratings for municipal securities and other financial information to market participants.

MUNICIPAL FINANCE PROFESSIONAL (MFP) – An associated person of a broker-dealer who (i) is primarily engaged in municipal securities representative activities (other than retail sales to individuals), (ii) solicits municipal securities business or (iii) generally is in the supervisory chain above MFPs described in (i) or (ii) above, including certain senior officials of the broker-dealer, or is an executive or management committee member of the broker-dealer. Political contributions made by an MFP to issuer officials (other than de minimis contributions) are required to be reported to the MSRB and may trigger restrictions on engaging in municipal securities business under MSRB Rule G-37. In addition, payments made by an MFP to a state or local political party (other than de minimis payments) are required to be reported to the MSRB.

MUNICIPAL SECURITIES – A general term referring to securities issued by local governmental subdivisions such as cities, towns, villages, counties or special districts, as well as securities issued by states and political subdivisions or agencies of states. A prime feature of these securities is that interest or other investment earnings on them usually are excluded from gross income of the holder for federal income tax purposes. Issuers of municipal securities are exempt from most federal securities laws.

MUNICIPAL SECURITIES RULEMAKING BOARD (MSRB) – The Municipal Securities Rulemaking Board is an independent self-regulatory organization, consisting of representatives of securities firms, dealer banks and the public, that is charged with primary rulemaking authority over dealers, dealer banks and brokers in connection with their municipal securities activities. MSRB rules are approved by the SEC and enforced by NASD for broker-dealers other than dealer banks and by the appropriate regulatory agencies for dealer banks.

NATIONALLY RECOGNIZED MUNICIPAL SECURITIES INFORMATION REPOSITORY
(NRMSIR) –
An entity designated by the SEC to receive final official statements, material event notices and annual financial information under Rule 15c2-12.

NEGOTIATED SALE – The sale of a new issue of municipal securities by an issuer directly to an underwriter or underwriting syndicate selected by the issuer. A negotiated sale is distinguished from a sale by competitive bid, which requires public bidding by the underwriters. Among the primary points of negotiation for an issuer are the interest rate, call features and purchase price of the issue. The sale of a new issue of securities in this manner is also known as a negotiated underwriting.

NET REVENUES – The amount of money available after subtracting from gross revenues such costs and expenses as may be provided for in the bond contract. The costs and expenses most often deducted are operations and maintenance expenses.

NEW ISSUE MUNICIPAL SECURITIES or NEW ISSUE –
Municipal securities sold during the initial distribution of the issue in a primary offering by the underwriter or underwriting syndicate. For purposes of MSRB rules, new issue municipal securities are municipal securities (other than commercial paper) that are sold by a broker-dealer during the issue’s underwriting period. All broker-dealers selling a new issue of municipal securities to customers or to other broker-dealers must meet certain requirements regarding delivery of official statements and certain other information. This obligation is not limited to broker-dealers acting as underwriters or selling group members.

NON-RATED SECURITY – A security that has not been rated by any of the nationally recognized statistical rating organizations.

OFFICE OF INSURED HEALTH CARE FACILITIES – The Office of Insured Health Care Facilities (OIHCF) administers the Section 242 program (mortgage insurance for hospitals) and the Section 232 program (mortgage insurance for long-term care facilities). The Director of OIHCF is responsible for overall program management, including policy development, loan origination, and asset management.

OFFICIAL STATEMENT (O.S.) – A document or documents prepared by or on behalf of the issuer of municipal securities in connection with a primary offering that discloses material information on the offering of such securities. For primary offerings subject to Rule 15c2-12, the “final official statement” must include, at a minimum, information on the terms of the securities, financial information or operating data concerning the issuer and other entities, enterprises, funds, accounts or other persons material to an evaluation of the offering, and a description of the continuing disclosure undertaking made in connection with the offering (including an indication of any failures to comply with such undertaking during the past 5 years). Official statements typically also include information regarding the purposes of the issue, how the securities will be repaid, and the financial and economic characteristics of the issuer or obligor with respect to the offered securities. Investors may use this information to evaluate the credit quality of the securities. Although functionally equivalent to the prospectus used in connection with registered securities, an official statement for municipal securities is exempt from the prospectus requirements of the Securities Act of 1933.

PAR VALUE – The amount of principal that must be paid at maturity. The par value is also referred to as the “face amount” of a security.

PAYABLES CONTINUUM –A focus on paperless invoices and fully automated workflows enabling healthcare systems to seamlessly transition through each step in the accounts payable automation continuum.

PUBLIC OFFERING PRICE – The price at which a new issue of municipal securities is offered to the public at the time of original issuance. This price, sometimes referred to as the “initial offering price,” is equal to the par value less original issue discount or the par value plus original issue premium, as appropriate, usually expressed as a percentage of par.

PRESENT VALUE SAVINGS – Difference expressed in terms of current dollars between the debt service on a refunded bond issue and the debt service on a refunding bond issue for an issuer. It is calculated by discounting the difference in the future debt service payments on the two issues at a given rate.

PRIVATE PLACEMENT – A negotiated offering in which a new issue of municipal securities is sold on an agency basis by a placement agent (in our case, Melio Securities LLC) directly to institutional or private investors rather than through an offering to the general investing public. Investors purchasing privately placed securities often are required to agree to restrictions as to resale and are sometimes requested or required to provide a private placement letter to that effect.

QUALIFIED INSTITUTIONAL BUYER (QIB) – An entity to whom a security otherwise required to be registered under the Securities Act of 1933 may be sold without such registration under SEC Rule 144A. In general, a QIB must own and invest on a discretionary basis at least $100 million in securities and must be an insurance company, investment company, employee benefit plan, trust fund, business development company, 501(c)(3) organization, corporation (other than a bank with net worth less than $25 million), partnership, business trust or investment adviser.

RATE LOCK AGREEMENT – An agreement whereby an issuer who anticipates issuing bonds at a future date can lock in a specified interest rate. At the time of issue, the counter-party will make a payment to the issuer if interest rates have increased from the specified interest rate or the issuer will make a payment to the counter-party if interest rates have decreased from the specified interest rate.

RATING AGENCY – A company that provides ratings that indicate the relative credit quality or liquidity characteristics of securities.

REAL ESTATE INVESTMENT TRUST (“REIT”) – A corporation or trust that uses the pooled capital of various investors to purchase and manage income property (equity REIT) and/or mortgage loans (mortgage REIT). REITs are traded on major exchanges just like stocks. They are also granted special tax considerations. REITs offer several benefits over actually owning properties.

RECOMMENDATION – A communication or other course of action on the part of a broker-dealer with respect to a municipal securities transaction that, depending upon the facts and circumstances, directly or indirectly suggests that an investor should engage in such transaction. A recommendation by a broker-dealer of a municipal securities transaction gives rise to certain duties regarding the suitability of such transaction for a particular investor under MSRB Rule G-19.

REMARKETING – The process of reselling securities to the public that have been tendered for purchase by the previous owners thereof.

REMARKETING AGENT – A broker-dealer responsible for reselling to new investors securities (such as variable rate demand obligations and other tender option bonds) that have been tendered for purchase by their owner. The remarketing agent also typically is responsible for resetting the interest rate for a variable rate issue and also may act as tender agent.

REQUEST FOR PROPOSALS (RFP) – A formal process by which an issuer gathers written information from professionals for the purpose of selecting underwriters, financial advisors, attorneys, architects, and providers of other services.

REVENUE CYCLE –All administrative and clinical functions that contribute to the capture, management and collection of patient service revenue.

RISK MANAGEMENT – Control and limitation of the risks faced by an organization due to its exposure to changes in financial market variables, such as foreign exchange and interest rates, equity and commodity prices or counterparty creditworthiness. This may be because of the financial impact of an adverse move in the market variable (market risk), because the organization is ill-prepared to respond to such a move (operational risk), because a counterparty defaults (credit risk), or because a specific contract is not enforceable (legal risk).

RULE 15c2-12 – An SEC rule under the Securities Exchange Act of 1934 setting forth certain obligations of (i) underwriters to receive, review and disseminate official statements prepared by issuers of most primary offerings of municipal securities, (ii) underwriters to obtain continuing disclosure agreements from issuers and other obligated persons to provide material event disclosures and annual financial information on a continuing basis, and (iii) broker-dealers to have access to such continuing disclosure in order to make recommendations of municipal securities in the secondary market.

RULE 10b-5 – An SEC rule under the Securities Exchange Act of 1934 that makes it unlawful for any person, in connection with the purchase or sale of any security, to employ any device, scheme, or artifice to defraud; to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

SELF-LIQUIDITY – A term used in connection with tender option bonds whereby the issuer or conduit borrower agrees to repurchase bonds that have been tendered but not yet remarketed without procuring a third-party liquidity facility.

SHADOW RATING – Credit assessment by a rating agency that is not published. An issuer typically uses the rating when negotiating with an insurer or other credit enhancer.

SOURCES AND USES – Generally, a table set forth in an official statement identifying the source from which funds are derived (generally including, but not always limited to, bond proceeds) and the application of funds in connection with a new issue of municipal securities.

SPREAD – (1) With respect to a new issue of municipal securities, the differential between the price paid to the issuer for the new issue and the prices at which the securities are initially offered to the investing public; this is also termed the “gross spread,” “gross underwriting spread” or “production.” To the extent that the initial offering prices are subsequently lowered by the syndicate, the full amount of the spread may not be realized by the syndicate. The spread is usually expressed in dollars or points per bond. Historically, the spread has consisted of four components, although one or more components may not be present in any particular offering:Expenses – The costs of operating the syndicate for which the senior manager may be reimbursed. Management Fee – The amount paid to the senior manager and/or co-managers for handling the affairs of the syndicate. Takedown – Normally the largest component of the spread, similar to a commission, which represents the income derived from the sale of the securities. If bonds are sold by a member of the syndicate, the seller is entitled to the full takedown (also called the “total takedown”). If bonds are sold by a broker-dealer that is not a member of the syndicate, such seller receives only that portion of the takedown known as the concession or dealer’s allowance, with the balance (often termed the “additional takedown”) retained by the syndicate.Risk or Residual – The amount of profit or spread left in a syndicate account after meeting all other expenses or deductions. A portion of the residual is paid to each underwriter within a syndicate on a pro rata basis according to the number of bonds each broker-dealer has committed to sell without regard to the actual sales by each member.

STANDARD & POOR’S (S&P) – A nationally recognized statistical rating organization that provides ratings for municipal securities and other financial information to market participants.

STANDBY BOND PURCHASE AGREEMENT – An agreement with a third party, typically a bank, in which the third party agrees to purchase tender option bonds (typically variable rate demand obligations) tendered for purchase in the event that they cannot be remarketed. Unlike a letter of credit, a standby bond purchase agreement does not guarantee the payment of principal and interest by the issuer and is not an unconditional obligation to purchase the tender option bonds.

SUITABILITY – The appropriateness of a particular security as an investment for a particular investor, taking into account the specific features of the security and the investor’s financial capabilities and sophistication, tax status, investment objectives and other relevant considerations. A security that seems appropriate for the investor in light of these factors is said to be “suitable,” whereas one that does not seem appropriate may be “unsuitable.” Broker-dealers are required under MSRB rules to make suitability determinations before recommending particular investment strategies to customers.

TAXABLE SECURITY – A bond or other security that does not qualify for an exclusion from gross income under federal tax law. Corporate, U.S. government and agency debt generally is federally taxable. In some cases, municipal securities also are taxable under federal tax law.

TAX-EXEMPT BOND – Another term for a municipal bond, other than taxable municipal bonds. Interest on most municipal securities is excluded from gross income for federal income tax purposes and may or may not be exempt from state income or personal property taxation in the jurisdiction where issued or in other jurisdictions. If the bond is exempt from state income tax, it possesses “double exemption” status. “Triple exemption” bonds are exempt from municipal, local income or other special taxes, as well as from federal and state income tax.

TENDER – The surrender of a security to the issuer or its agent (e.g., a tender agent) for purchase. A tender may be mandatory or optional.

UNDERWRITER – A broker-dealer that purchases a new issue of municipal securities from the issuer for resale in a primary offering. The underwriter may acquire the securities either by negotiation with the issuer or by award on the basis of competitive bidding.

VALUATION – The process of determining the value of an asset or entity. There are many techniques for valuation, and it is often partially objective and partially subjective.

VARIABLE RATE DEMAND OBLIGATION (VRDO) – Floating rate obligations that have a nominal long-term maturity but have a coupon rate that is reset periodically (e.g., daily or weekly). The investor has the option to put the issue back to the trustee or tender agent at any time with specified (e.g., seven days’) notice. The put price is par plus accrued interest.

WORKOUT – An orchestrated attempt to resolve an extremely difficult and tenuous situation such as a payment or technical default.

YIELD – The annual rate of return on an investment, based on the purchase price of the investment, its coupon rate and the length of time the investment is held.

Sources

The majority of these definitions came from the following sources:

Municipal Securities Rulemaking Board, available at http://www.msrb.org/glossary.aspx

Risk Magazine © Incisive Media Ltd. 2008, available at http://www.risk.net

U.S. Department of Housing and Urban Development, available at http://www.hud.gov